Audi 2002 Annual Report

Dec 31, 2002 - customers and, significantly, the jury of the “Golden Steering Wheel” award ..... Index (SAX), the Audi A3 1.8 finished first in its class. ..... specially refined for the Audi RS 6. 1 3 5 7 9. 11. 13. 15. 17. 19. 21 ...... The English trans-.
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2002 Annual Repor t

Key Figures

Audi Group

Production

Cars Engines

Vehicle sales Audi Germany Outside Germany

Cars

Lamborghini Other Volkswagen Group brands

31 Dec. 2002

31 Dec. 2001

Change in %

735,913 1,284,488

727,033 1,225,448

1.2 4.8

995,531 742,128 243,650 498,478

991,444 726,134 254,866 471,268

0.4 2.2 –4.4 5.8

424

297

42.8

252,979

265,013

–4.5

Employees

Average

51,198

51,141

0.1

Revenue

EUR million

22,603

22,032

2.6

Profit before tax

EUR million

1,254

1,322

–5.1

Net profit

EUR million

774

769

0.7

Rate of return before tax

Percent

5.6

6.0

Capital investments Capitalised development costs

EUR million

2,410 834

2,151 726

12.0 14.9

Depreciation

EUR million

1,641

1,435

14.4

Cash flow from operating activities

EUR million

2,545

2,452

3.8

Balance sheet total

EUR million

12,787

11,256

13.6

Equity ratio

Percent

38.6

38.6

Success through innovation In 2002, Audi added a further accolade to its long list of sporting achievements: its third win in a row at the Le Mans 24 Hours. Audi has thus finally secured a place in motor sport’s hall of fame – and acquired valuable experience in the process. Motor sport has always provided a crucial test for innovations. Ideas that were first tested out in motor sport range from a new aluminium frame

structure and a new wishbone to a new generation of engines. These developments were perfected in the S and RS models, the most dynamic of Audi vehicles, and are the most vivid example of Audi’s sporting prowess. They reflect the emotionally charged qualities that make Audi something special: power, pleasure and performance.

Success through expertise – our products Every Audi is pioneering as far as technology, design and driving pleasure are concerned. From the innovative A2 to the prestigious A8 – every car is perfected, intelligent and progressive. A fact that we can be proud of.

Success through foresight – technology and environmental protection Nowadays customers expect more of their cars. They not only want a vehicle that will get them and their passengers from A to B but one that is technically perfect, as safe and environmentally compatible as possible. We want every one of our cars to satisfy these requirements.

Success through teamwork – our employees Working in a team is not only easier, it also produces better ideas. All our innovations, whether in the field of technology or new design, are the result of a joint effort. This means that every employee benefits from the experiences and ideas of others.

Success through commitment – markets and customers The name Audi not only stands for a quality car manufacturer. Audi is also behind a number of sports and cultural events in the role of sponsor. In this way it succeeds in forging a link between the brand’s key areas of expertise – design and sports appeal – and other areas that are important to our customers.

AUDI Aktiengesellschaft

Success through diversity – the group companies

AUDI HUNGARIA MOTOR Kft.

COSWORTH TECHNOLOGY LIMITED

Automobili Lamborghini S.p.A.

Automobili Lamborghini Holding S.p.A.

Motori Marini Lamborghini S.p.A.

AUDI DO BRASIL E CIA.

Lamborghini ArtiMarca S.p.A.

quattro GmbH

AUTOGERMA S.p.A.

AUDI SENNA Ltda.

The strength of Audi lies in its diversity. The various group companies pool their expertise under a single name and ensure that the Audi Group is strengthened as a result. This transforms numerous individual achievements into one major success.

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Audi is an internationally renowned manufacturer of high-quality cars. Our success has been achieved through creativity, commitment and the ability to generate enthusiasm. The wishes and emotions of our customers are the guiding principle behind our every action. We strive to lead the way in the field of innovation. We aim to establish new standards to substantiate our brand claim of “Vorsprung durch Technik”.

Foreword Report of the Supervisory Board

2 4

Products

8

Technology and Environmental Protection Audi Wind Tunnel Centre The Accident-Avoiding Car Environmental Protection

24 26 28

Employees

32

Markets and Customers Motor Sport Marketing and Service Market News Sports and Cultural Sponsorship

38 39 42 46

Group Companies

50

Management Report of the Audi Group and AUDI AG

54

Audi Group Finances Audi Shares Corporate Governance Financial Performance Balance Sheet Ratios Income Statement Balance Sheet Development of Equity Cash Flow Statement Notes Development of Fixed Assets Notes to the Income Statement Notes to the Balance Sheet Other Particulars Segment Reports Statement of Interests Independent Auditor’s Report Glossary 10-Year Overview

64 65 66 68 70 71 72 73 74 74 81 86 100 106 109 110 111 113

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Foreword

Members of the Board of Management

Dipl.-Betriebsw. (FH) Rupert Stadler, member without portfolio

Dipl.-Ing. Dipl.-Wirtsch.-Ing. Peter Abele, Finance und Organisation

Dr. jur. Georg Flandorfer, Marketing and Sales

Dr. rer. pol. Jochem Heizmann, Production

Dr. rer. nat. Martin Winterkorn, Chairman of the Board of Management, Technical Development

Dipl.-Ing. Erich Schmitt, Purchasing

Dr. h.c. Andreas Schleef, Chairman of the Board of Management of SEAT S.A.

Dr. rer. pol. Horst Neumann, Human Resources

Dr.-Ing. Werner Mischke, member without portfolio

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If one were to seek a phrase to encapsulate developments at the Audi Group during 2002, it would simply have to include the word “sportiness”. Sportiness, because Audi has assumed responsibility for the sports-oriented brand group within the Volkswagen Group. This group, comprising the three brands SEAT, Lamborghini and Audi, embodies three core skills: technology, design and motor sport. Synergy benefits are exploited above all in the sphere of design and development. Sportiness suitably describes 2002 because Audi clinched its third successive victory in the world’s toughest endurance race, the Le Mans 24 Hours. Audi is now one of only five great brands to have pulled off this feat in Le Mans’ almost 80-year history. FSI petrol direct injection technology was instrumental in this triumph, in which it underwent its baptism of fire. Audi brought FSI versions of its A2 and A4 models onto the market in 2002. Finally, sportiness sums up 2002 for Audi because last year witnessed our successful launch of the Audi A8, the sportiest luxury saloon car on the market. The media, customers and, significantly, the jury of the “Golden Steering Wheel” award have all confirmed the winning qualities of our new top model. The performance of AUDI AG itself in 2002 merits comparison with the world of competitive sport: Audi vehicle sales held up very well, and this despite considerable consumer reticence in a number of important markets. The previous record total from 2001 was bettered by nearly 16,000. We have set ourselves ambitious targets for 2003, which will undoubtedly be a difficult year: we aim to give the brand an even sharper and sportier profile with the new A8 and the next-generation A3. Various pioneering design studies will offer our customers a glimpse of the future shape of the Audi brand. We moreover wish to enhance efficiency throughout the company. We will rise to the challenges that present themselves with our motivated workforce, drive, systematic focus on the customer and a healthy dose of that vital sporting panache. My sincere thanks are due to all those who have contributed towards the continuing worldwide success of Audi. Ingolstadt, February 21, 2003

Dr. rer. nat. Martin Winterkorn

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Report of the Supervisory Board

Dr.-Ing. e.h. Bernd Pischetsrieder, Chairman of the Supervisory Board

Audi completed the 2002 financial year on a successful note despite recessive car markets, and once again enjoyed a year-on-year rise in worldwide vehicle sales. The record-breaking figures are not, however, fully reflected by the earnings figure. Additional burdens as a result of the generally weak state of the market, together with extensive capital expenditure on the technical development of new products that will serve as a basis for future success, resulted in a slight downturn in earnings. Through these capital investments, the Board of Management and Supervisory Board have laid the foundations for continuing success in the years ahead. It is greatly to the credit of management and workforce alike that AUDI AG has yet again been able to achieve record-breaking vehicle sales in the face of difficult market conditions. The Supervisory Board expressly thanks all concerned for their outstanding contribution. Throughout the past year, the Supervisory Board was able to form an impression of the company’s situation, its business progress and developments on its markets at quarterly meetings and by means of detailed reports. The financial, personnel and investment plans for the years 2003 to 2007 were approved at the meeting on December 9, 2002. The Supervisory Board was in addition presented with detailed reports on the business progress of the principal subsidiaries. The Supervisory Board likewise regularly monitored the company’s progress outside the context of its meetings and actively supported the work of the company’s management. The members of the presiding committee held preparatory consultations before each meeting. The Consolidated Financial Statements of the Audi Group and the Annual Financial Statements of AUDI AG, together with the combined Management Report for both the Audi Group and AUDI AG, have been audited by PwC Deutsche Revision Aktiengesellschaft Wirtschaftsprüfungsgesellschaft and have received the unqualified certification of the auditors. The subsequent examination by the Supervisory Board likewise revealed no cause for objections. At its meeting on February 21, 2003 the Supervisory Board ratified both sets of accounts in accordance with Section 172 of German Stock Corporation Law, which are thus established.

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One of the focal aspects of its deliberations in the past year was the need to assure adequate space for the relocating of suppliers to Neckarsulm. In this connection, the Supervisory Board unanimously approved the purchase of a site for development close to the plant. The Supervisory Board in addition considered the matter of corporate governance in considerable depth. The recommendations of the “German Corporate Governance Code” Commission on sound, responsible corporate management and governance were discussed at length. The Supervisory Board passed resolutions to ensure that all recommendations are implemented. Changes were required in particular to ensure that members of the Supervisory Board and committees are remunerated in a differentiated, performancebased manner. The change relating to the remuneration of the Supervisory Board is still to be approved by the Shareholders’ Meeting. The Board of Management and Supervisory Board will propose a corresponding amendment to the articles of incorporation to the Annual General Meeting on May 14, 2003. With effect from July 1, 2002 Dr. Horst Neumann took over responsibility for the Human Resources Division from Dr. h.c. Andreas Schleef. Dr. h.c. Schleef – Chairman of the Board of Management of SEAT S.A. – was assigned the additional responsibility of “Chairman of the Board of SEAT S.A.”, a new division at AUDI AG, with effect from March 7, 2002. Rupert Stadler was appointed to the Board of Management of AUDI AG with effect from January 1, 2003, initially as member without portfolio. He will take over the Finance and Organisation Division from Peter Abele, who is retiring on April 1, 2003. Dr. Werner Mischke was appointed Chairman of the Board of Directors of Automobili Lamborghini S.p.A. with effect from January 1, 2003. He has in addition taken on the post of Chairman of the Advisory Board of quattro GmbH and responsibility for the motor sport activities of Audi and Lamborghini. Likewise with effect from January 1, 2003 Dr. Werner Mischke surrendered his responsibility for the Technical Development Division, by agreement with the Supervisory Board. Since that date, Dr. Martin Winterkorn has been in charge of this division in addition to his duties as Chairman of the Board of Management of AUDI AG. There have been the following changes on the Supervisory Board: Helmut Dotzauer retired, surrendering office on June 30, 2002 after serving on the Supervisory Board for more than nine years. The Supervisory Board would like to thank Mr. Dotzauer for his immense initiative and valued contribution to the work of this

committee. Upon the application of the Board of Management, the Registration Court of Ingolstadt appointed Joachim Dilger as supplementary member with effect from July 1, 2002. There is still no foreseeable improvement in the wider economic picture at the start of 2003. The Audi Group will nevertheless do all in its power this year to win over new customers and build on the success of the Audi brand through innovative products and outstanding service. The Supervisory Board will support the company’s management and employees in attaining these goals. Ingolstadt, February 21, 2003

Dr.-Ing. e.h. Bernd Pischetsrieder Chairman of the Supervisory Board

Supervisory Board 1 Position at December 31, 2002 Dr.-Ing. e.h. Bernd Pischetsrieder

Chairman 2 Shareholders’ representative

Xaver Meier

Deputy Chairman 2,3 Employees’ representative

Dr. rer. pol. h.c. Bruno Adelt

Shareholders’ representative 3

Senator h.c. Helmut Aurenz

Shareholders’ representative

Prof. Dr. Robert Büchelhofer

Shareholders’ representative 2

Joachim Dilger

Employees’ representative

Heinz Eyer

Employees’ representative

Dr. rer. pol. Thomas R. Fischer

Shareholders’ representative

Wolfgang Förster

Employees’ representative

Dr. rer. pol. h.c. Peter Hartz

Shareholders’ representative

Dr. jur. Claus Helbig

Shareholders’ representative

Johann Horn

Employees’ representative

Berthold Huber

Employees’ representative 2

Peter Mosch

Employees’ representative

Dr. jur. Jens Neumann

Shareholders’ representative 3

Dr.-Ing. Franz-Josef Paefgen

Shareholders’ representative

Richard Polzmacher

Employees’ representative

Norbert Rank

Employees’ representative 3

Dr. rer. pol. Axel Freiherr von Ruedorffer

Shareholders’ representative

Max Wäcker

Employees’ representative

Dr. rer. pol. Carl H. Hahn

Honorary Chairman

1

2 3

The profession and company of the members of the Supervisory Board, together with other non-executive directorships, are indicated in the Notes to the Financial Statements of AUDI AG. Member of the presiding committee and the negotiating committee Member of the Audit Committee; the Chairman of the Audit Committee is Dr. rer. pol. h.c. Bruno Adelt.

A compact power pack – the Audi S3 The first encounter with the S range: the Audi S3. With an output of 165 kW, it is uncompromisingly dynamic and even has the ability to show its heels to larger-capacity challengers.

Where others place the emphasis on superficial appearances, the S3 has a charisma that makes it refreshingly different. Its dynamic, sporty exterior eschews any possible overtone of arrogance or aggression.

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Products

Lighter, more agile, more innovative – the Audi A2

Award-winning design The single most outstanding feature of the Audi A2 is its compact, bold, utterly unmistakable shape, concealing a lightweight aluminium body developed by Audi itself. This innovative design with consistently optimised aerodynamics won the Audi A2 a very special distinction: the “2002 Design Award of the Federal Republic of Germany”, the highest national accolade of its kind. High standards of safety As on the Audi A8, the principle of the Audi Space Frame (ASF) aluminium body again constitutes the ideal basis for a high passive safety standard on the Audi A2. This high-strength frame structure protects the occupants like a cocoon and impact energy is reduced particularly effectively. The high standard of safety of the Audi A2 within its vehicle category is reflected by the excellent grading of four stars according to the Euro NCAP (New Car Assessment Programme).

Agile athlete with high-tech core The Audi A2 model series has acquired a new top model, the Audi A2 1.6 FSI. Its engine compartment accommodates a 1.6-litre power unit with FSI petrol direct injection developing 81 kW and 155 Nm torque. With this outfit, it accelerates from 0 to 100 km/h in only 9.8 seconds and goes on to achieve a top speed of 202 km/h. The 1.6-litre FSI engine likewise exhibits considerable potential for economical driving, with a fuel consumption of only 5.9 litres of Super Plus fuel over 100 km (according to 1999/100/EC). This is a remarkably low figure for such a spacious vehicle that can accommodate up to five people.

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The trendsetter in the premium compact class – the Audi A3

The wisest investment in the compact class The award-winning design together with its impressive quality and range of equipment make the Audi A3 the car with the best value retention in the compact category. According to the Eurotax Schwacke Automobile Index (SAX), the Audi A3 1.8 finished first in its class. The resale value of the other model versions likewise confirm our belief that high manufactured quality and stylish design help a vehicle to retain its value in the long term.

Attractive – dynamic – exclusive The Audi A3 is the embodiment of superb design, quality and sports handling. The exclusive materials used on its interior would not be out of place on a car in the luxury class. Since its market launch in 1996, the Audi A3 has captivated almost 870,000 customers worldwide. There are various engine versions available for each of the three equipment lines – Attraction, Ambition and Ambiente – ranging from the 1.6-litre, 75 kW engine to the high-performance 1.8-litre turbo unit. The two 1.9litre TDI versions with pump-injector direct injection technology and outputs of 74 kW and 96 kW combine driving fun with ecological calibre: they provide substantial propulsion across the entire speed range, yet remain remarkably economical. For even better dynamic performance and active driving safety, quattro permanent four-wheel drive is available as an option.

The sportiest car in the compact class The new Audi A3 is making its début at the Geneva Motor Show in March 2003. It has all the vital ingredients for adding a new episode to the unique success story of the Audi A3. The new Audi A3 again redefines the benchmark thanks to its advanced technology and innovative design. Powerful four and six-cylinder engines, optional quattro drive and the dynamic running gear deliver the driving enjoyment that the athletic shape of its body design implies. Coupled with the extensive equipment range, the second-generation Audi A3 lives up to this model’s established reputation for setting new trends in the premium compact segment.

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Products

The quintessence of versatility – the Audi A4

Sheer perfection and dynamism The resoundingly successful Audi A4 saloon and Avant models are available with the ideal engine and transmission combination for every profile of requirements. The tantalising choice starts with an impressive array of engines, comprising seven petrol and four diesel versions, all with one specific thing in common: outstanding traction that makes every journey an experience to savour. The ultra-powerful engine of the Audi A4 1.8 T is new. With an output of 140 kW, the turbo engine with standard-fit six-speed transmission fills the role of top athlete among the four-cylinder models. The Audi A4 2.0 FSI with petrol direct injection, which develops 110 kW in combination with front-wheel drive and a five-speed gearbox, overcomes the ostensible contradiction between sports appeal and efficiency.

Those opting for the multitronic continuously variable automatic transmission benefit from maximum ride comfort coupled with outstanding performance. Another technical highlight, quattro permanent fourwheel drive, is available as an option. Unlimited scope for individualists The array of awards scooped by the Audi A4 suitably reflects its outstanding success. The Audi A4 proves that design can also be highly functional. Both the saloon and the Avant have an unmistakable profile and clear shapes. Over and above the high-grade, practical standard equipment features, there is virtually unlimited scope for customisation, with equipment ranging from the acoustic parking system and navigation to the new light sensor.

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Driving for driving’s sake – the Audi A4 Cabriolet

Freedom for individualists The Audi A4 Cabriolet satisfies the appetite for freedom, individuality and luxury in every respect, radiating unbridled vitality. Its elegantly sporty design exudes strength and poise. The dynamic nose end, the subtle tapered shape and the strikingly contoured tail send out clear signals. The eye-catching use of aluminium on the windscreen frame and along the high shoulder line underscores its aura of elegance. The double radiator grille with chrome surround and the flat clearglass headlights with three-tube design clearly identify the Cabriolet as a member of the Audi A4 model family, while giving this version its very own distinctive look. Whether with the hood open and fully retracted or closed, the design is always harmonious.

Here comes the sun – at the push of a button Room for four people, ample storage space and the exhilaration of open-air driving in less than 30 seconds – that is how long it takes for the electro-hydraulic hood to be retracted fully automatically into the soft-top compartment behind the rear seats, at the push of a button. Nothing now stands in the way of soaking up the sun and revelling in that incomparable sense of freedom. The hood, made from three layers of textile with a scratchproof, heated glass rear window, provides effective protection whenever the weather takes a turn for the worse. There are four sporty engine versions, from the turbocharged 1.8-litre straight-four developing 120 kW to the 162 kW, 3.0-litre V6 unit – with either the multitronic continuously variable transmission or a manual gearbox.

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Products

A car that breaks with convention – the Audi A6

The fun starts with the choice The Audi A6 is an equally attractive proposition whether as a saloon or an Avant. Clear lines and evocative shapes characterise its elegant silhouette. There are numerous exclusive equipment items or packages available for introducing a distinctive note into the interior. The Professional Line style package places the emphasis on comfort and exclusiveness, whereas the Professional Line sports package centres on sports appeal and functionality. The range is further broadened by the S line sports package. As well as the purpose-developed sports suspension, the S line lettering on the door sills along with distinctive inlays in aluminium and seat upholstery inside the car create an air of individuality. As well as driver and front passenger airbags, all Audi A6 models have side airbags at the front and the sideguard head airbag system as standard features.

Superlative performance The 2.5-litre TDI engine is solid proof that dynamic performance can be further enhanced by certain technical refinements. Tuned up to 120 kW, it enables the Audi A6 to sprint from 0 to 100 km/h in 9.3 seconds. But more power does not inevitably mean higher fuel consumption; the 2.5-litre power unit gets by on a modest 6.9 litres of diesel per 100 kilometres (acc. to 1999/100/EC). The multitronic continuously variable automatic transmission has been combined with the 1.9-litre diesel engine for the first time; in combination with the dynamic control program, it assures excellent performance from minimal amounts of fuel. There are nine engine versions in total, with power outputs ranging from 96 kW to 220 kW, some of which can be supplied with quattro drive as an option. All versions offer ample driving fun based on their uninterrupted power flow.

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Mobility unlimited – the Audi allroad quattro

Always at the right height Thanks to its variable ground clearance, the Audi allroad quattro masters the challenges of every type of surface – whether rough terrain or a fast motorway. The special air suspension system incorporates four defined suspension heights ranging from 142 to 208 millimetres. The 4-level air suspension automatically regulates the vehicle body’s ground clearance, depending on speed. Alternatively, the height can be selected manually at the push of a button. The Audi allroad quattro is thus not only ideal for driving in comfort on normal roads, but is also perfectly equipped to tackle open ground.

Where there’s a hill, there’s a way The Audi allroad quattro is a fusion of two worlds: it unites the comfort and dynamic power of the luxury class with the all-terrain capabilities of a fully-fledged off-roader. On ordinary roads it is notable for its agility and impressive ride comfort; it takes on rough terrain with equal confidence. The quattro drive distributes the power variably to all four wheels, with the specially developed tyres enhancing grip. The Audi allroad quattro shrugs off extreme gradients of up to sixty percent almost effortlessly. It is also impressively stable when driving at right-angles to a slope. Perfect technology maintains maximum control even in extreme situations – the driver can rely on the Audi allroad quattro.

Dynamic through and through Even at first glance, the aluminium-look underbody guard with ribbed structure, the boldly shaped bumpers and the flared wheel arches are immediate clues to the Audi allroad quattro’s off-road talents. There is a wide variety of equipment versions with the emphasis on touring and leisure. Comfortable seats for five occupants and a luggage compartment with a capacity of up to 1,590 litres offer wide flexibility. The Audi allroad quattro is available with a choice of 2.5-litre V6 TDI engine with 132 kW engine or a 2.7-litre V6 engine with two turbochargers and an output of 184 kW. Both engines are notable for their decidedly ample torque and performance potential, possessing all the credentials for mobility unlimited.

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Products

A new spor ting dimension in the luxury class – the Audi A8

Harmonious clarity and elegance Having scooped the “Golden Steering Wheel” for the “Best Luxury Class Vehicle”, the new Audi A8 is already an award-winner; it has achieved this in particular through its systematic sportiness. The silhouette with short overhangs, the coupé-like roof line and a heavily contoured rearward structure send out a clear message of dynamism. The emotionally charged design continues on the interior, which glows with elegance and sensuality. Particular importance has been attached to a driver-centred overall design. With an extensive choice of high-calibre materials, the interior can be given a progressive or a subtle emphasis.

Powerful need not mean heavy The latest generation of the Audi Space Frame (ASF) is used in the Audi A8. The body’s rigidity has been boosted by 60 percent, thus achieving maximum stability and safety from minimal weight. Low weight is moreover a vital ingredient of outstanding road behaviour and agile handling. The Audi A8 also sets new standards in the luxury class with the aluminium adaptive air suspension system, fitted as standard, which is capable of adapting to every driving situation. The firmness of the dampers can be varied within a matter of milliseconds across a range that extends from ultra-sporty to ultra-comfortable. adaptive air suspension – sport, the first sports suspension system in the world to be based on pneumatic springs, is a remarkable equipment option.

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More dynamism – more refinement – more fun There is currently a choice of two powerful, spontaneous V8 engines with displacements of 4.2 and 3.7 litres, and developing 246 kW and 206 kW respectively. The engines’ performance is translated into movement by quattro permanent four-wheel drive. Six-speed tiptronic is a new feature of the Audi A8. This transmission always maintains a constantly smooth transition between the various speed stages, producing excellent performance with remarkable refinement. As well as via the selector lever, it is also possible to change gear using the shift paddles behind the steering wheel – a principle adopted from the Le Mans-winning Audi R8. This means that drivers can change gear without having to move their hands away from the steering wheel.

Perfection is the sum of many details The new Audi A8 sets standards with its many technical innovations and extensive standard specification. It is equipped as standard with the MMI – Multi Media Interface – which allows the driver to operate the extensive information and entertainment electronics according to a logical, easily grasped concept without needing to consult any operating instructions. The new adaptive light is an option that illuminates zones that are not otherwise picked up when turning or on tight bends. advanced key is an extra that means the driver need not actively manipulate the key to open and start the car. A sensor in the key releases the central locking when someone carrying this key approaches the car, and the engine can then be started by pressing the starter button on the centre console. The extensive range of innovative details makes driving even safer and more convenient.

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Products

Desire – passion – TT

The allure of the TT The Audi TT holds the power to fascinate. The clarity and precision of its design, combined with innovative technology, set it apart from the mass of production vehicles. With countless new optical details such as 7-arm or 6-arm wing-design alloy wheels and the modified front grille, the Audi TT continues to place the accent on progressive appeal. And there is a wide range of new interior and body colours. The S line sports package represents a special brand of sports appeal. Available as an optional extra for all TT models, it encompasses an even wider range of impressive colours, a dynamically styled interior, 18-inch cast alloy wheels and titanium-coloured trims on the xenon headlights, creating an utterly distinctive look. The 20 millimetres

lower sports suspension paves the way for perfect handling, coupled with even greater driving fun. Engines for every set of preferences Agility is what matters in the Audi TT Coupé. The existing 132 and 165 kW engine versions have now been joined by a sporty 110 kW version. Even this “smallest” engine in the Audi TT family pushes the speedometer needle from 0 to 100 km/h in just 8.6 seconds and achieves a top speed of 220 km/h. The Audi TT has a gutsy, high-torque 1.8-litre four-cylinder engine with five-valve technology and turbocharger. Its output and perfectly matched sports suspension are a recipe for sheer driving pleasure.

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tiptronic – now on the Audi TT Those who prefer to let an automatic system take charge of gearshifts can now opt for a special form of gear-changing on their Audi TT Coupé or Roadster. A version of the 132 kW engine with purpose-designed six-speed tiptronic recently became available. Those who choose this overtly convenient system can also opt for the tiptronic leather sports steering wheel, for thumb-operated gear changes. Living life to the full – the Audi TT Roadster Sports driving with nothing but the sky above you, in a perfectly proportioned car that is every inch as powerful as it looks. Its rounded forms dominate the timeless silhouette. With the hood open, the Audi TT Roadster

reveals its full appeal: the hood vanishes beneath a tonneau cover which lies precisely flush with the shoulder line, and the striking aluminium roll-over hoops come into view. The optionally available power-operated glass wind deflector ensures that the driver and front passenger are shielded from the wind even with the top open. The interior is embellished with an array of perfectly coordinated design details and supplies clearly visible evidence that it is made to appeal to the emotions.

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Products

Supreme – stylish – spor ty – the S models

Vigorous heart and plenty of muscle – the Audi S3 The Audi S3 excels at combining driving enjoyment with practicality. The particularly high-torque 1.8-litre turbo engine with five-valve technology is eminently fun to drive even at low engine speeds. The Audi S3 demonstrates sports car calibre in accelerating from 0 to 100 km/h in 6.6 seconds and reaching a top speed of 243 km/h. The sports suspension, which provides optimum road contact in conjunction with the quattro drive and remains confidently in control even on exhilarating gradients and bends, is another vital ingredient of this car’s appeal. For all its sporty performance, the Audi S3 is also perfect for everyday transport, with a large interior and plenty of space for luggage.

An exclusive strain of dynamism – the Audi S6 The Audi S6 is an experience to be savoured, whether in the form of the saloon or the Avant. The combination of progressive technology, dynamic performance and stylish exclusivity suggests supreme sporting calibre. The striking S badges on the radiator grille and luggage compartment lid disclose the fact that this car conceals a 4.2-litre eight-cylinder engine with immense traction and an output of 250 kW. quattro permanent four-wheel drive and five-speed tiptronic in conjunction with the aluminium sport-tuned suspension pave the way for an incomparable driving experience. This technology moreover assures outstanding directional stability, ride comfort, poise and safety.

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Superlative performance – the Audi RS 6

Exclusively understated With a truly awesome output of 331 kW, the Audi RS 6 represents not just the absolute top model in the A6 range, but also the most powerful production model currently built by Audi. It was developed by quattro GmbH in partnership with AUDI AG. The Audi RS 6 is a super sports car and premium saloon rolled into one, and the only model in this class to be available as both saloon and Avant concepts. This means that no compromises need be tolerated when it comes to practical utility, comfort and spaciousness. The design of the Audi RS 6 makes a clear statement – the subtle differences compared with the body of the regular Audi A6 at the front and rear and around the sills lend it a dynamic flavour. The Audi RS 6 sets new standards not just in the domain of sportiness, but also with its exclusive appeal. Its high-quality standard specification, featuring for instance Recaro leather sports seats, Alcantara headlining and concert radio system with BOSE sound system, demonstrates that dynamism and high performance do not exclude the possibility of luxury and practicality.

Our top performer The high-performance Audi RS 6 sources its power from a V8 biturbo engine. Acceleration from 0 to 100 km/h in 4.7 seconds and to 200 km/h in less than 18 seconds reflects the power of a thoroughbred sports car. Superior calibre and meticulous detail characterise the power unit, with aluminium engine block and two turbochargers, that delivers high torque at low engine speeds, complete with dual intercoolers to enhance the turbochargers’ efficiency still further. The high-traction quattro permanent four-wheel drive efficiently translates the immense output of the V8 biturbo engine into directionally stable propulsion. The Audi RS 6 is the first model to be equipped with the innovative suspension concept Dynamic Ride Control (DRC). A special damping system counteracts rolling and pitching movements while on the move, without the use of electronics. Out-and-out sports driving is even more fun with the five-speed tiptronic with dynamic sport program, an automatic transmission version that has been specially refined for the Audi RS 6.

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Products

Pushing back the automotive frontiers – the Lamborghini Murciélago

More than simply a high-tech sports car This automotive legend has its origins in Ferruccio Lamborghini’s decision to start translating his passion for technology and engineering into unique sports cars in the village of Sant’Agata, near Bologna, in 1963. The blend of tradition and technological perfection remains the hallmark of the Lamborghini Murciélago, which, in common with its predecessors, is named after a bull with remarkable fighting spirit. Challenging, uncompromising, aggressive The Murciélago’s design is stripped down to the bare essentials – purism, efficiency and precision, devoid of any superfluous detail. The unmistakable distinguishing characteristic of the Murciélago are its gullwing

doors. The wedge-shaped body, with its short nose and elongated tail, has been built around the overriding technological feature of this car – the engine. An ultrarigid space frame forms the basis; the outer panels are made from high-strength, lightweight carbon, whereas the doors and roof are of sheet steel. An electronically adjusted rear spoiler maintains balanced aerodynamics at every speed. It is likewise obvious from a mere glance at the interior that this is a super sports car. The driver is surrounded by exclusive materials.

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Adrenaline rush inclusive At the heart of every Murciélago is a high-performance V12 engine. This fascinating all-aluminium engine musters up 426 kW from a swept volume of six litres. It catapults the Murciélago from 0 to 100 km/h in a breathtaking 3.8 seconds, taking it up to a top speed of more than 330 km/h: the fastest and most powerful Lamborghini ever. The position of the engine at the centre of the vehicle is entirely in keeping with Lamborghini tradition: the six-speed gearbox is located ahead of the engine, with the differential integrated into the engine behind. This produces an optimum distribution of weight. The permanent four-wheel drive with central viscous coupling optimises the transmission of power to both axles. Surplus torque at the main drive axle is automatically diverted to the front axle, thus guaranteeing outstanding traction conditions at whatever speed the car is cornering.

The thrill of high performance – the Audi S4 The new Audi S4 places even greater emphasis on sport than its predecessor, and is even safer to drive too: with the newly developed servotronic steering, which gives it better handling, and a perfected, precisionshift transmission that translates engine power into motion even more effectively. Then there is the utterly enthralling engine: this is the only car in its class to

feature a 4.2-litre V8 engine capable of accelerating it from 0 to 100 km/h in 5.6 seconds. With an output of 253 kW and quattro drive as standard, driving pleasure is guaranteed. Both the saloon and the Avant radiate a dynamic, powerful aura, stirring up the thrill of high performance at a mere glance.

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Technology

The Audi Wind Tunnel Centre – technology of the highest calibre

The aeroacoustic wind tunnel – high-tech test bench for world-best results A significant amount of the drag encountered by a car occurs on its underside and around the wheels. Audi specialists have a range of measures at their disposal for further reducing the drag coefficient specifically in these zones without compromising the design. However, the flow of air beneath a car can only be optimised if the actual conditions prevailing when a car is driven can be simulated authentically in a wind tunnel. Simulating road travel with the aid of moving belts In order to reproduce the airflow beneath the vehicle accurately, the vehicle’s movement relative to the road must be simulated. The aerodynamics experts at Audi accomplish this by adopting a technique used in motor racing: a moving belt runs between the wheels, and the wheels themselves are turned by four miniature moving belts. This largely assimilates the airflow with the prevailing conditions out on the road.

The world’s quietest but most powerful automotive wind tunnel When the blower and the entire air ducting were being designed, extreme care was taken to prevent noise from being generated inside the wind tunnel. The Audi aeroacoustic wind tunnel has consequently earned the distinction of being both the quietest and most powerful automotive wind tunnel in the world. Its performance data are impressive: at its reference speed of 140 km/h, the wind tunnel emits just 62 dBA. It is moreover capable of speeds of up to 300 km/h. This gives it a unique international status, serving to emphasise Audi’s proverbial “Vorsprung durch Technik”.

1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49 51 53 55 57 59 61 63 65 67 69 71 73 75 77 79 81 83 85 87 89 91 93 95 97 99 101 103 105 107 109 111 Acoustic pressure level [dB(A)]

120

100

80

60

40

20

0

0

50

100

150

200

250

300

Wind speed [km/h]

Audi

1st-generation acoustic wind tunnels Conventional wind tunnel

Used and esteemed – not just by Audi Not only Audi engineers use the Wind Tunnel Centre for aerodynamic fine-tuning. The wind tunnel is also available to various external partners. The German women’s Alpine ski team, selected ski jumpers such as Sven Hannawald and the Nordic combined skiers of the German Ski Federation (DSV), as well as the Swedish men’s Alpine ski team, regularly conduct tests here as part of their pre-season preparations. Racing teams participating in the American NASCAR series also use the Ingolstadt Wind Tunnel Centre.

The thermal wind tunnel – elaborate cooling for high-performance engines The wide variety of new high-performance engines appearing on the market necessitates significant improvements to the cooling systems. The thermal wind tunnel both perfects and accelerates this development. A special four-wheel roller permits the simulation of driving programs, such as ascents with a trailer in tow. High-speed driving at speeds of up to 275 km/h can also be replicated. In order to simulate realistic ambient conditions, the air temperature can be freely varied across a range of +20° to +50° C. Even the base zone between the rollers can be heated, to represent hot road surfaces. A continuous glass floor provides an unobstructed view of the airflow beneath the “moving” vehicle. These technical details allow the realistic replication of the airflow around the forward structure and through an engine compartment, and make it possible to optimise the cooling systems to be developed.

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Technology

The vision of the car that avoids accidents

Driver assistance functions – high-tech on board Cars bring us all the benefits of virtually unlimited individual mobility. In order to boost the safety of road users even further, Audi will be employing advanced electronics in future. Audi vehicles increasingly incorporate intelligent sensors which scan the vehicle’s immediate environment. Radar sensors at the front and rear of the vehicle identify other vehicles in front of, behind and alongside it. The attainable level of accuracy with which they can for instance measure distances between vehicles even exceeds a human’s powers of perception. Thanks to their measuring principle, laser sensors are moreover also capable of determining the dimensions – particularly the width – of objects. Video cameras in the vehicle supply information on the limits and course of a lane and on the nature of objects in front of the vehicle. Even in the dark, infrared cameras can generate images of poorly lit people or objects.

By using information from such sensors, Audi intends to realise assistance functions that will help the driver to prevent accidents or further reduce the severity of accidents. Examples of developments that fall into the category of “pre-empting” accidents include the following: The lane changing assistant monitors not only the blind spot alongside the vehicle, but also picks up vehicles approaching from further behind, alerting the driver in good time if they are wanting to change lanes. The lane departure warning system constantly measures the vehicle’s position relative to the lane markings and warns the driver as soon as they start to drift out of their lane. The Night Vision System further improves the driver’s vision specifically at night. We have already achieved significant progress in the field of innovative lighting technology with the introduction of adaptive light on the new Audi A8.

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Automatic emergency braking constantly evaluates the rate of approach to objects ahead. If the system detects an impending bumper-to-bumper crash, it automatically applies the brakes hard within a fraction of a second. The deceleration before impact means that the resulting accident will actually be much less severe. The basis on which such functions are realised is a rapidly energised, reliable brake system such as electrohydraulic brakes. These functions will be adopted as standard on future Audi models. Audi adaptive cruise control The first such system will shortly become available as an optional extra for the new Audi A8. It assists the driver by making driving a relaxing affair, however heavy the traffic. Preceding vehicles are detected by a radar sensor. If a vehicle in front is moving more slowly, the target distance between the two vehicles is automatically adjusted by manipulation of the engine, automatic transmission and brakes. Audi adaptive cruise control thus represents an intelligent refinement of the straightforward cruise control system.

Distance

Increase desired speed

Resume

Off/off (standby)/on Set

Decrease desired speed

Auxiliary display

System messages

Desired speed

System status

The driver can use this function across a speed range from 30 km/h to 200 km/h. It is operated via a special lever which is used to preselect the desired speed. All information pertaining to Audi adaptive cruise control is displayed to the driver in the instrument cluster while on the move. In a new departure, basic settings for Audi adaptive cruise control can be defined for individual drivers via the Audi MMI. The choice of several different distance programs is also unique. This enables the driver to vary not only the distance from the vehicle in front, but also the system’s responsiveness when accelerating again, e.g. after changing lanes – a characteristic that fittingly reflects Audi’s sports character.

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Environmental Protection

Audi is an example to many – in environmental protection too

Environmental protection thrives on participation An environmental management system at Audi serves as the basis on which it is steadily improving standards of environmental protection as an industrial enterprise. We first set up a system to comply with the EU EcoAudit and Management Scheme in 1995. In 2000, the Ingolstadt plant in addition received accreditation according to the international standard ISO 14001. According to the requirements of this standard, the environmental management system has to be examined by an external inspector every year. In 2002, too, it was officially acknowledged that Audi has a smoothly functioning environmental management system in place. The principles of our environmental policy include not only the sparing use of resources and minimising the burdens imposed on the environment. Open-handed communication and the involvement of all employees in industrial environmental protection ensure that our environmental goals are systematically implemented. To this end, numerous environmental aspects were integrated into the Audi Production System last year. The Audi Production System – a network of organisational, inter-plant concepts – makes sure that the burden on resources is kept as low as possible and places the focus of production processes on the worker. By incorporating environmental protection into this system, we ensure that every employee is also able to make their contribution towards the implementation of

environmental policies and the attainment of environmental targets. For example, the Audi Production System includes recommendations on how to store waterpolluting substances and how to implement energy and water-saving measures at the workplace. Promoting eco-policies in Bavaria The Environmental Pact for Bavaria was updated in October 2000 with the sealing of the Environmental Pact for Bavaria II. This has the objective of building on the environmental protection partnership between the State of Bavaria and Bavarian industry, and safeguarding and promoting a long-term, environmentally acceptable course of development that also makes economic sense. In the context of its involvement in the “Environmental Pact for Bavaria II – Sustainable Management in the 21st century”, Audi is conducting pilot projects on Integrated Product Policy (IPP) with the support of the Bavarian government. The purpose of IPP is to reduce the environmental impact of products throughout their entire life-cycle, from the recovery of the raw materials, through their production process and useful life, to their eventual disposal. Through these pilot projects, Audi will build on its experience in taking account of the wider aspects of environmental protection and integrating them into its corporate processes.

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Back to nature – natural attenuation The natural attenuation method has been tested for the first time at Neckarsulm for the remediation of soil contaminated with chlorinated hydrocarbons. This remediation technique involves making use of the natural attenuation, or self-cleansing, effect. First, the natural attenuation process in the contaminated area in question is observed with the aid of sampling and analytical measures. The mechanisms of natural attenuation are closely analysed and influenced externally if appropriate. With the aid of the data collected, the natural attenuation processes are then simulated; this permits a prognosis of the degradation process. The natural attenuation method makes it possible to compare technical remediation with natural processes and to avoid unnecessary outlay on remedial measures where these produce no added benefit.

Prevention is better than cure Whenever new projects are being embarked upon, it is important to take account of environmental aspects right from the outset. When a new press shop was being designed for the Ingolstadt plant, we opted for mechanical instead of hydraulic presses, as their energy consumption is lower. The presses were located on special mounts to ensure that only minimal levels of vibration from the presses’ operation were transmitted to surrounding zones. Extensive noise studies were conducted and appropriate noise abatement measures then taken. We in addition built water conservation measures into the final plans for the buildings. In this way, Audi ensures that environmental concerns are lastingly and adequately taken into account, for the sake not only of the environment, but also of our employees.

Spor ting elegance – the Audi S6 saloon The Audi S6 is the perfect combination of powerful urge and stylish travel. The elegant exterior conceals a V8 engine brimming with power and mustering up 420 Nm of torque at 3,400 rpm. The S6 is the only car in its class to have quattro drive as standard. This

provides better traction and superior handling, even close to the limits of sports driving. Its aluminium suspension makes it an eminently agile athlete – ideal for even more driving enjoyment on any road, anywhere.

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Employees

Shaping the future together

Structure of personnel costs (Audi Group) Total, EUR million

Wages and salaries (compensation for services)

2,660.3

55.9 %

Qualification structure of blue-collar workers (AUDI AG) 2,738.9

Average in thousands Blue-collar workers 27.9

29.3

31.7

32.0

31.2

of which skilled workers

17.6

18.9

20.9

21.2

20.9

1998

1999

2000

2001

2002

57.1 % 30

20 Mandatory social security contributions Mandatory benefits and payments for hours not worked Pension contributions Other welfare and supplementary contributions

13.9 %

14.2 %

10.4 % 5.1 %

10.6 % 2.3 %

14.7 %

15.8 %

2001

2002

10

0

Blue-collar workers

of which skilled workers

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Flexible working hours create job security Based on the company agreement “Audi’s Future – Prospects for Company and Workforce”, the management and Works Council of AUDI AG embarked upon the implementation of various ground-breaking personnel policies in 2002. The focal areas of this agreement include promoting training, equality of opportunity, the compatibility of work with family life, and flexible working hours models. Greater flexibility in working hours is designed to give companies more room for manoeuvre and the individual worker greater scope for tailoring working hours to personal preferences and requirements. The company and the employees thus benefit equally from the scheduled measures. They promote the competitiveness and growth of the company, and safeguard jobs in the long term.

Qualification structure of white-collar staff (AUDI AG) Average in thousands White-collar staff

9.0

9.6

10.2

10.7

11.3

of which university graduates

3.4

3.7

3.9

4.3

4.6

1998

1999

2000

2001

2002

10 7,5 5 2,5 0

White-collar staff

of which university graduates

Work and training are inseparable Our business processes are characterised by highly complex products and a great diversity of internal and external networks: development partners, suppliers, logistics partners, dealers and of course the customer need to be integrated into the processes of product development, production and marketing. In order to achieve this, knowledge must constantly be passed on to employees, project teams and all those who are involved in the processes. New knowledge and facts have to be fed into regularly updated databases, to ensure that they are available to all. The successful management of knowledge resources and working in processoriented structures mean that our employees need special qualifications, which are obtained through a combination of traditional learning forms and e-learning. The staging of computer-based online forums to complement traditional face-to-face training permits more focused preparations, more rapid learning periods and

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Employees

a greater practical emphasis to the dissemination of knowledge. Since 2002, employees have been able to use knowledge that is present within the company at any time or place. The employee portal “Audi mynet” enables them to access information and learning programs from home, too. This introduces a new dimension of flexibility into working and learning – a whole life long. Continuous enhancement richly rewarded We understand continuous enhancement to mean that everyone is entitled to question the processes that exist within the company, highlight scope for improvements and put them into practice. There is a wide variety of ways in which employees can participate in

this process. The teamwork principle means that team members manage their tasks independently, and solve problems on the spot. Workshops, zero defect strategies and improvement programmes are implemented as a means of targeting extensive, further-reaching tasks. The Audi suggestions scheme in addition provides our employees with the opportunity to formulate and contribute creative ideas and solutions. During 2002, employees made 63,124 different suggestions on how our products and processes can be optimised. Almost half the total workforce submitted suggestions. Audi is not the only beneficiary of this broad-based acceptance of the suggestions scheme: over five million euros were paid out in awards to employees, in recognition of the economic success of their ideas.

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Our workforce makes a difference Flexible working hours, training and scope for active involvement – the cornerstones of our personnel policy depend critically on the motivation, creativity and initiative of all our employees. Through their personal commitment and dedicated work, they helped lay the foundations for the company’s continuing success throughout the past year. The Board of Management would expressly like to thank the employees’ representatives and the entire workforce for this vital contribution.

Simply more freedom – the Audi S6 Avant The more spacious version of the S6: the Avant. More freedom simply to drive off into the blue – because widening your radius also means broadening your horizons. With its power output of 250 kW, the S6 Avant

ensures that the expectation of dynamic performance is not merely fulfilled, but easily surpassed. Its powerful acceleration can almost make you forget that this is not a sports car.

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Motor Sport

Audi motor spor t in 2002 – a year to go down in history

Audi dominates Le Mans and ALMS The 2002 season marked one of the most successful years in the long history of motor sport at the company. Audi finished the Le Mans 24 Hours with a triple victory, winning the toughest car race in the world for the third time in succession. The superiority of Audi’s development of FSI technology became fully evident over the race distance of more than 5,000 kilometres. The 610 bhp Infineon Audi R8 cars were not merely the fastest competitors, they also needed fewer pit stops for refuelling than their challengers, thanks to the lower petrol consumption of the FSI engines. Audi racing cars were likewise unbeatable in the American Le Mans Series (ALMS), one of the most popular race series in North America. The Audi Sport team clinched victory in the driver, manufacturer and team standings for the third year in succession. Audi customers also benefit from success on the racetrack. Thanks to the intensive technology transfer

between motor sport and production-vehicle development, they too can now enjoy all the benefits of racetested engines with FSI technology: reliability, high performance and low consumption. DTM victory for Abt-Audi TT-R There was no stopping Audi works driver Laurent Aiello and the customer team Abt Sportsline in the 2002 German Touring Car Championship (DTM), Germany’s most prestigious race series. The Frenchman dominated the season’s proceedings in the Abt-Audi TT-R and clinched the championship title before the final race, in the face of stiff competition. The Abt-Audi team thus resumed the success story of the Audi V8 quattro, which won the “old” DTM in 1990 and 1991, and the Audi 80 quattro and Audi A4 quattro, which dominated touring car racing worldwide between 1993 and 1997.

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Marketing and Service

Transforming spor tiness into a palpable experience

Savouring the fun of driving, exploring the limits The Audi driving experience – the name for a very special driver safety training course – has been enjoying growing popularity for 20 years. Events range from halfday courses to one-week programmes, and involve various Audi quattro models. In 2002, Audi welcomed over 14,000 participants, including some 4,200 who attended its winter programmes. Audi driver safety training courses are led by topclass instructors, most of whom are former professional rally drivers. They teach the participants all the essentials of safe driving and how to respond correctly in hazardous situations. The exercises include emergency stops, how to take corrective action for understeering and oversteering, and how to avoid sudden obstacles. The degree of difficulty is graded according to the type of driving surface encountered: dry, wet, snow-covered or veritable sheets of ice. Adequate attention is also paid to the driving enjoyment that goes hand in hand with increased control over the vehicle. The annual highlights of the Audi driving experience are the one-week courses on frozen lakes in northern Finland, inside the Arctic Circle. All those who believe they have not yet explored

the limits of their driving abilities will be able to do so here, and can learn how to handle them in this context. Making a début in Paris Audi took the opportunity at the 2002 Paris Motor Show, the most popular automotive exhibition in the world, to launch its innovative exhibition design scheme and give two models their international début: the new Audi A8 and the new Audi S4. The overriding theme of our exhibition stand was sportiness, a fact further underpinned by the dynamic media concept: the international débuts of the A8 and S4, together with film clips from the 2002 Le Mans 24 Hours, were shown on three large screens and countless video monitors. These sequences were interspersed with “speedfilms” – short films featuring rapidly changing images and graphics, accompanied by a specially composed soundtrack to generate a stand atmosphere charged with speed. This core message was underlined by a special motor sport exhibition specially put together for Paris. The winning racing car from Le Mans, the Infineon Audi R8, and numerous other motor sport exhibits captured the attention of exhibition visitors.

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Marketing and Service

The new Audi A8 – share the excitement

“Now” – the campaign for the new Audi A8 Audi created its most elaborate advertising campaign to date for the new Audi A8 – a journey through time featuring various landmark events in the unique history of a company which dates back to 1899. The major challenge in producing the 45-second commercial was to achieve a blend of historical and newly filmed scenes and images. It was necessary to carry out extensive research in the company’s own archives and into international automotive history. The varying quality of the source materials moreover had to be assimilated with the modern-day advertising footage without the intrinsic charm of the historic film clips being lost. A film team of 50 people and up to 500 extras ensured that every scene could be re-enacted as realistically as possible in the commercial. The costumes and backdrops were not the only aspects to reflect historical authenticity. The film cameras used to shoot the scenes were likewise from the eras in question, the oldest one dating back to 1929. With the aid of blue-screen shots and ultramodern image processing, the presenter in the various individual scenes of the story was then incorporated into the historical original material without the viewer noticing. “Now it is time to take on new challenges.” The closing statement of the commercial encapsulates the challenge of creating a remarkable advertising campaign. The outcome was not merely a highly entertaining commercial for a high-tech vehicle, but also a sophisticated documentary of the company’s history.

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Our goal: satisfied customers

Vorsprung durch Technik www.audi.de

The healing touch.

Electronic diagnostic devices. Now at your Audi partners.

No mechanic is gifted with extrasensory powers. But your Audi partner comes close. At the touch of a button, service specialists probe your Audi with their mobile diagnostic computers. And seconds later they conjure up a comprehensive analysis. That ensures potential problems are pinpointed accurately and eliminated swiftly and effectively. But only at your Audi partner’s. To learn more, call our hotline.

Original Audi Service.

Vorsprung durch Technik www.audi.com

Audi CarLife Plus.

Why can’t the same solemn promise pledged by two people hold true for you and your car? It can now, courtesy of Audi CarLife Plus. A guaranteed insurance policy, it is always at your side, protecting you against unexpected costs. Your premium covers virtually all repair costs above and beyond ordinary wear – even if you drive a pre-owned Audi. Talk to your Audi partner to learn how easy it is to seal the bond for your car’s life. To learn more, visit your nearest Audi partner.

Original Audi Service.

Audi Service: wherever our customers are The Audi Service organisation worldwide recorded around 44,000 customer contacts a day in 2002. Maintaining constant, direct contact with our customers represents both a challenge and an opportunity for us. We need to captivate people day in, day out. Precisely this is the goal of Audi Service. The means by which we can achieve this are innovative workshop technologies, comprehensively qualified employees and intelligent services that benefit our customers.

Exclusive service for exclusive vehicles The new Audi A8 heralds in a new era in design, dynamism, comfort and technology. At Audi Service, we have introduced our own customer care concept in order to live up to these standards. There is an extensive network of well-qualified, expert Audi dealers who are able to maintain and repair the new model to exclusive standards. They are supported by Audi’s own experts at the purpose-built Technical Service Centre, which our dealers can contact on a direct hotline whenever needed.

Reassurances that last a car’s entire life The launch of Audi CarLife Plus in 2002 represented a further milestone in customer satisfaction. Audi CarLife Plus provides the customer with comprehensive guarantee insurance for their vehicle, whether new or previously owned. The extent of the insurance cover depends on the mileage and age of the vehicle. Even after the statutory vehicle warranty has expired, Audi customers have the reassurance of being covered against unforeseen mishaps – for the entire life of the car, if they so desire.

Innovative solutions for innovative products Audi Service has already come up with solutions to some of the tasks that will arise in the future. One example is the development of the Audi Pocket Diagnosis System. The compact, handy diagnostic device will make the checking-in of vehicles a swifter and more efficient affair, and therefore more convenient for the customer. The trade has recognised the potential of this revolutionary device, which was awarded the Innovation Prize at the 2002 Automechanika exhibition in Frankfurt.

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Market News

Audi remains on course for growth

Seventh record year in succession Audi was able to build on the sales successes of recent years in 2002. The previous record from 2001 was just topped again, with unit sales reaching 995,531. Of this total, 742,128 were of the Audi brand and 424 were Lamborghini cars. 252,979 vehicles of other Volkswagen Group brands were delivered via our Italian general importer AUTOGERMA S.p.A. The new Audi A4 Cabriolet enjoyed a highly successful launch in the year under review. Since May, 13,174 customers have purchased the latest version of this classic model. Product events in 2002, however, came to a climax in November when the first of the new Audi A8 were shipped. 2,864 of our new top model had been handed over to their new owners by the end of the year. The company’s export share continued to rise: around two thirds of our cars were sold on markets outside Germany.

Europe Audi’s market share in Western Europe reached 3.8 percent, the highest figure in the company’s history. The market share in Germany held up well at 7.4 percent, in spite of the difficult economic situation. The Audi A4 Avant proved particularly popular in Germany in 2002 – over 60 percent of those buying an Audi A4 opted for this model version. Great Britain was able to consolidate its position as Audi’s largest export market in Europe. Vehicle sales in this market were in excess of 65,500 for the first time last year. This represents a year-on-year increase of around 21 percent. Sales of the Audi TT Coupé in particular are especially healthy, with the sales total for the year having risen to over 7,200 for the first time – around 23 percent up on the previous year’s figure. Great Britain is our largest sales market in Europe for this model. As in the previous year, Italy was Audi’s secondlargest European export market in 2002. Despite the

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almost six percent slump in the overall Italian car market compared with the previous year, Audi enjoyed sales growth of 6.6 percent to over 50,100 vehicles. This is attributable in particular measure to the overwhelming success of our Audi A4, which according to a reader poll by the car magazine “Quattroruote” is the most desirable car in its category. Audi was once again able to boast sales of over 41,000 units last year in Spain. In the face of very stiff competition, we have thus held onto our clear market lead in the premium segment. Audi’s high level of acceptance in the Spanish market for company cars is one of the key reasons behind the success of the Audi brand. One of the highlights of the year there was the opening of the Audi Forum in Madrid’s commercial district in June 2002. The Audi brand is now able to present itself to the public in an exclusive facility covering 4,000 square metres. Audi clearly asserted its position among the leading premium brands in France, with almost 40,800 vehicles sold. Although the overall French market shrank by almost five percent in 2002, we were able to match the previous year’s unit sales and boost our market share to 1.9 percent. North America The overall passenger car market in the USA experienced a downturn, falling by about four percent to 8.1 million vehicles in 2002. On the other hand, the luxury segment enjoyed slight growth. Audi achieved record-breaking sales of 85,700 vehicles for the third year in a row in the USA. As a result of the drive to expand the dealer network, the number of exclusive Audi dealers rose from 45 to 65 in 2002, thus creating a basis for further sales growth and qualitative improvements.

The Audi A4 Cabriolet got off to a successful start in the USA in September, drawing attention to the sporty emphasis of our brand’s positioning, as did the third successive triumph of the Audi R8 racing cars in the American Le Mans Series. In contrast to the USA, the Canadian passenger car market as a whole grew by 7.6 percent last year, to one million vehicles. Sales of luxury passenger cars rose by more than 18.1 percent. Audi was able to capitalise on this positive development by boosting unit sales by over 19 percent to 7,236 vehicles, the best sales figure to date in Canada. Asia-Pacific In Japan, the successful restructuring of the sales network, which now comprises 78 exclusive dealer outlets, paved the way for the highest unit sales in ten years in 2002. With over 11,600 vehicles sold, we were able to improve on the prior-year figure by more than 43 percent in spite of the continuing recession in Japan. Above all, the addition of the Audi A4 Avant to the successful Audi A4 range in February 2002 gave us a further substantial boost in the premium segment. The intensification of activities by the Audi brand in Japan was cemented by the establishment of a sales joint venture with the trading company Yanase, the largest Japanese car importer, in November 2002. In Australia, the joint venture which Audi established in 2001 with Audi Australia Pty. Ltd., which acts as general importer there, has proven highly successful. With an 19 percent increase in sales volume to 4,158 units in 2002, the joint venture achieved double-digit growth rates in only its second year. The growth rate over the past two years is an impressive 36 percent. Over that period, Audi has been able to expand its market share in the luxury segment to 7.6 percent.

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Market News

The systematic expansion of the dealer network has played a key role in our success in Australia. 13 of the total of 26 dealers are already exclusive Audi dealers.

Major markets

Audi, worldwide Germany USA Great Britain Italy Spain (including Canary Islands) France China (including Hong Kong) Belgium Switzerland Austria Netherlands Sweden Japan Brasil Portugal Lamborghini worldwide 1

Foreign brands only

Unit sales 2002

Year-on-year percentage change

742,128 243,650 85,726 65,552 50,107 41,052 40,793 37,034 19,738 17,201 15,710 13,251 12,112 11,648 10,674 7,510

2.2 –4.4 2.9 21.1 6.6 –2.5 0.7 26.1 –1.4 –7.3 –7.2 3.9 8.0 43.3 –14.3 0.5

424

42.8

Market share in 2002 in %

7.4 2.0 1 2.6 2.3 3.2 1.9 2.7 4.3 6.1 5.8 2.2 4.1 4.6 1 0.9 3.3

Year-on-year percentage change, overall market

–2.7 1.6 1 4.3 –5.9 –6.8 –4.9 55.5 –4.3 –7.3 –4.8 –3.7 3.2 0.9 1 –4.9 –11.4

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China In China Audi set a new record of more than 37,000 vehicle sales in 2002, making it the clear market leader in the premium segment. The 26 percent rise in vehicle sales is principally the result of long-standing cooperation with the joint venture FAW-Volkswagen Automotive Company Ltd., the methodical expansion of the exclusive dealer network and successful brand management. Audi is now the best-known car brand in China and is perceived as an international premium manufacturer. The Audi dealer network, which numbers 54 dealerships, continues to be regarded as the benchmark in the car sales trade in China. The 50,000th locally-built Audi A6 was handed over to its proud new owner in June. The Audi A6 is considered the most advanced car ever to have been built in China. Our outstanding position in the premium segment was strengthened mid-way through the year by the launch of the Audi A6 2.8 with multitronic and by the general product update in November.

The Audi exhibition area was voted the best stand at the International Motor Show in Beijing. We unveiled the Audi A4 Cabriolet and the Audi A4 Avant to the Chinese public at this motor show. In order to exploit the potential of the Chinese market and to secure continued growth, a second product range – the Audi A4 saloon – is to be built locally at FAW-Volkswagen. The market launch of the Audi allroad quattro and the long-wheelbase version of the Audi A8 2.8 developed specially for China have further extended the range of products available in China. The top-of-therange Audi A8 has proven especially popular. China is now one of the most important A8 sales markets for Audi worldwide, with sales of this model reaching around 650 last year.

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Sports and Cultural Sponsorship

Spor tiness – a winning formula

Bayern Munich, powered by Audi Football – no other sport in the world enjoys such mass appeal, as was impressively underlined by the 2002 World Cup in Japan and South Korea. AUDI AG became the new automotive partner of Bayern Munich, Germany’s most successful football club, at the start of the 2002/2003 season, marking its first involvement ever in this sport. The Board and players of Germany’s record-breaking league champions and World Club Champions have eagerly adopted the Audi brand. In symbolic terms, at least, one thing is for sure: Bayern Munich will now be able to run “rings” around their opponents.

Audi raring to go, worldwide Audi and winter sport – a successful partnership with a long tradition: AUDI AG has been partnering the German Ski Federation (DSV) for the past 18 years. This lengthy association, almost unique in the world of sport, was extended for a further three years in 2002. The Audi vehicles with quattro technology that are placed at the disposal of the athletes and support crews make sure their occupants always get reliably to their destination – often in difficult road conditions. Germany’s international skiers are not the only ones to appreciate the benefits of the four-ring brand: the Swedish, Finnish and Swiss Alpine ski teams likewise make the most of this technical superiority. AUDI AG is setting further landmarks in the 2002/ 2003 winter sports season in the sphere of winter sports sponsorship: Audi is the title sponsor of the Alpine Ski World Cup for the first time. The “Audi FIS Ski World Cup” consists of 35 events worldwide, in Europe, North America and Asia. Audi was also presenting sponsor of the Alpine World Ski Championships from February 1 to 16, 2003 in St. Moritz, thus further enhancing its worldwide reputation as a sports-oriented brand.

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Cultural sponsorship of the highest calibre

way of thanking its long-standing partner AUDI AG, who has been principal sponsor of the world’s most renowned festival of music and theatre since 1995. “Der Ring des Nibelungen” A new highlight in Audi’s portfolio of cultural sponsorship activities is our involvement as the new principal sponsor of the Bavarian State Opera. Up until 2006, Audi will be providing backing for the new production of Richard Wagner’s tetralogy “Der Ring des Nibelungen”. Following on from the premières of the individual operas in 2002, the Bavarian State Opera will perform the entire “Ring” twice a season, starting in 2003. A concerto performance of the first act of “Walküre” was held in Ingolstadt at the 2002 Summer Concerts. The Summer Concerts – a festival of highlights Since their inception in 1990 the Summer Concerts between Danube and Altmühl, which are staged jointly by AUDI AG and the Bavarian broadcasting corporation Bayerischer Rundfunk, have evolved into one of the most successful festivals in Germany. Leading conductors such as Zubin Mehta and James Levine, renowned soloists such as Giora Feidman, Waltraud Meier and Daniel Barenboim and top ensembles from all over the world once again captivated audiences in 2002. Guest appearance by the Salzburg Festival “Everyman” represented the climax and awe-inspiring finale of last year’s Summer Concerts. As a gesture towards the sponsor, “Everyman” was also brought to the Audi Forum Ingolstadt – only the second time it has been staged away from the Salzburg Festival. The first performance of “Everyman” outside Salzburg was on Rome’s Capitol. The Salzburg Festival’s Board of Directors approved this almost unprecedented move as a

Uncompromisingly spor ty – the Audi RS 6 The Audi RS 6 is the real show-stopper among Audi’s sporty models. It is inspired by the R8, the car that won Le Mans three times and in so doing became a legend in its own time. This car has demonstrated that supreme performance under permanently high loads is genuinely possible. Equipped with this determination

and an unbridled forward urge from its 331 kW engine, every trip in the RS 6 echoes the call of the racetrack. Yet the RS 6 is just as comfortable, elegant and safe as every other Audi. When it comes to dynamism and power, however, it is in a league of its own.

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Group Companies

Group companies

Audi Hungaria continues to grow The 2002 financial year at AUDI HUNGARIA MOTOR Kft. was once again characterised by capital investments and growth. The company with Hungary’s largest export volume continued to consolidate its position throughout the past financial year, strengthening its position both within the Audi and Volkswagen Groups and in Hungarian industry. Engine production rose to 1,280,067 (1,220,217) units in 2002. This represents an increase of 4.9 percent on the previous year. The production total was made up of 986,423 (931,230) four-cylinder engines, 279,555 (273,309) six-cylinder engines and 14,089 (15,678) eight-cylinder engines. The power units built at Györ were shipped to the Volkswagen Group’s production plants worldwide and fitted in various models of the Audi, Volkswagen, SEAT and Škoda brands. On the vehicle production side, AUDI HUNGARIA MOTOR Kft. built 21,488 (22,078) of the Audi TT Coupé and 13,223 (17,271) of the TT Roadster. 18,895 (15,947) of the Audi A3 and S3 models were assembled on behalf of AUDI AG. The official opening of the new eight-cylinder engine production line was attended by the Hungarian Prime Minister, Dr. Peter Medgyessy. Capacity for the production of eight-cylinder engines was boosted from a previous 100 engines a day to 250 engines a day at a cost

of EUR 135 million. A production hall covering 21,600 square metres was erected for this purpose. Volume production of the new ultra-high-performance 4.2-litre eight-cylinder engines started in the first half of 2002. Highly flexible processing plant, interlinked assembly lines, futuristic production processes and highly qualified employees constitute the basis of Audi Hungaria’s outstanding manufactured quality. The four-cylinder product range was widened by the addition of a new engine generation with petrol direct injection (FSI). Volume production of this new 2.0-litre, four-cylinder FSI engine started in mid-2002 and was integrated into the existing four-cylinder engine production operations. The flexible production facilities for machining the cylinder head, the core component of the FSI engine generation, were adapted to the new technology. In order to respond more effectively to market demand, daily capacity for four-cylinder diesel engines with pump-injector fuel injection technology was stepped up from a previous 1,230 to 2,230 units. Audi Hungaria has set itself the goal of increasing the locally sourced content by securing new, competitive Hungarian production suppliers who are in a position to supply their products not simply to Audi Hungaria, but to the entire Volkswagen Group. The intended process of integrating these Hungarian suppliers into the car industry will be implemented in several stages.

Principal companies within the Audi Group

AUDI Aktiengesellschaft

AUDI HUNGARIA MOTOR Kft.

COSWORTH TECHNOLOGY LIMITED

Automobili Lamborghini S.p.A.

Automobili Lamborghini Holding S.p.A.

Motori Marini Lamborghini S.p.A.

AUDI DO BRASIL E CIA.

Lamborghini ArtiMarca S.p.A.

quattro GmbH

AUTOGERMA S.p.A.

AUDI SENNA Ltda.

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The first potential suppliers were audited in the second half of last year. Revenue climbed by 2.5 percent to EUR 3,557 (3,470) million. AUDI HUNGARIA MOTOR Kft. Revenue Profit before tax Investments in property, plant and equipment 1 Employees Production 1

EUR million EUR million EUR million Average Engines Cars

2002 3,557 264 253 4,767 1,280,067 53,606

2001 3,470 251 184 4,857 1,220,217 55,296

Percent +2.5 +5.2 +37.5 –1.9 +4.9 –3.1

Including intangible assets

Improved result at Cosworth Technology The British engine manufacturer based in Northampton, with two further locations in England and one in the USA, offers its customers all-in and partial solutions for the development, casting and production of small-series and special engines, whether for the automotive industry or for use in other sectors. Cosworth Technology’s range of services is rounded off by electronic developments focusing on vehicle information and diagnostic systems. COSWORTH TECHNOLOGY LIMITED recorded revenue of EUR 130 (123) million in 2002. Profit before tax reached EUR –1 (–13) million. The improved figure is attributable to the cost-cutting and restructuring measures that have been implemented, as well as reflecting the initial benefits of the new business strategy. At Northampton, where development activities are based, greater emphasis is being placed on production development projects. During the past financial year, entire engine projects were developed and supervised right up to the start of volume production at external customers. Various concept engines were in addition developed on behalf of the customer. The foundry at Worcester manufactures cylinder heads and blocks both for the Audi Group and for external clients within the car industry. A straight-four cylinder head was added to the existing range of COSWORTH TECHNOLOGY LIMITED Revenue Profit before tax Investments in property, plant and equipment 1 Employees Production 1

Investments for 2002 totalled EUR 253 (184) million. Profit before tax improved to EUR 264 (251) million. AUDI HUNGARIA MOTOR Kft. employed an average of 4,767 (4,857) employees.

Including intangible assets

products in May 2002. The foundry also helped to improve profitability above all through higher production figures . Production of assembled engines at Wellingborough in the year under review was down on the previous year, at 3,979 (4,951) engines. This was attributable to the withdrawal of the RS 4 engine in 2001 and the production start of the RS 6 engine in mid-2002. In addition to manufacturing these RS engines, this plant also machines large numbers of engine components such as cylinder heads and engine blocks. Electronic and engine developments in the USA had a positive impact on the business figures for the past financial year thanks to new projects and the placing of new products on the market. With the successful auditing of the Wellingborough plant in 2002, COSWORTH TECHNOLOGY LIMITED has become the first company in Great Britain to satisfy the stringent requirements of the new Eco-Management and Audit Scheme (EMAS 2001). The Cosworth Technology workforce averaged 786 (748) employees throughout the year.

EUR million EUR million EUR million Average Engines

2002 130 –1 14 786 3,979

2001 123 –13 17 748 4,951

Percent +5.7 – –17.6 +5.1 –19.6

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Group Companies

Lamborghini reports sharp growth The 2002 financial year at Automobili Lamborghini S.p.A. was dominated by the Lamborghini Murciélago, which successfully completed its first full year in production. This ultimate sports car from Sant’Agata Bolognese captivated the public and the automotive world alike with its uncompromising dynamism and unique design. In developing the Murciélago, Lamborghini has established the basis for broadening its product range with the new Lamborghini Gallardo. This second product line, which has been developed in conjunction with Audi, will have an aluminium body and the typical performance and design of a Lamborghini. The car, which will be unveiled to the public in 2003, is intended to convey the fascination of the Lamborghini brand to a broader range of customers. Lamborghini invested a total of EUR 88 million in the period under review, with product development activities for the new model accounting for a large portion of this sum. Another investment measure involved Lamborghini Group Revenue Profit before tax Investments in property, plant and equipment 1 Employees Production 1

the start of work on the “Centro Stile Lamborghini”. Lamborghini’s future design centre will thus build on the lengthy tradition of Italian automotive design. The building will in addition house Customer Service and a restoration shop for historic vehicles. In the 2002 financial year, Lamborghini increased its vehicle sales by a significant 42.8 percent to 424 (297) sports cars. As in the previous year, the principal markets were the USA with 35 percent, followed by Germany with 20 percent, Switzerland and Great Britain with ten percent each, and Japan and Italy with five percent each. The companies that comprise the Lamborghini Group recorded revenue of EUR 93 (65) million, representing an increase of 43 percent. Profit before tax improved to EUR 157 (54) million. The income from investments included in this figure totalled EUR 156 (81) million. Along with higher production output, the number of employees rose by 17.6 percent to 567 (482) as an average for the year.

EUR million EUR million EUR million Average Cars Engines

2002 93 157 88 567 442 442

2001 65 54 38 482 280 280

Percent +43.1 +190.7 +131.6 +17.6 +57.9 +57.9

Including intangible assets

AUTOGERMA S.p.A. boosts revenue AUTOGERMA S.p.A., the Italian general importer for the brands of the Volkswagen Group which has been a subsidiary of Lamborghini Holding S.p.A. since 2000, was confronted with a difficult market context in the year under review. Following a record-breaking year in 2001, the overall car market in Italy slumped by around six percent to just under 2.3 million units. Autogerma nevertheless recorded sales of 303,086 (312,019) vehicles last year. The company’s revenue showed an increase on the previous year, to EUR 4,807 (4,791) million. Profit before tax improved to EUR 110 (88) million. In 2002, Audi was able to continue the positive trend of recent years, selling 50,107 (47,006) vehicles of the Volkswagen Group brands. 40,201 (40,019) SEAT models were delivered to their new owners. Sales of Volkswagen cars fell to 183,626 (190,451) units as a result of the

advanced life-cycle of the current Golf and Passat models, whereas 23,051 (28,643) Škoda vehicles were delivered following the record unit sales of the previous year. Demand for models from Volkswagen Commercial Vehicles increased to 6,101 (5,900) units. Autogerma invested capital in its ultramodern central parts store in 2002. The objective of this investment was to further improve the standard of service in supplying genuine Volkswagen Group parts to Italian customers and other general importers in 15 markets in Eastern Europe, the Near East and North Africa. To safeguard its gradual expansion, Autogerma increased the area of its site in Verona by 30,000 square metres during the period under review; the additional capacity is used predominantly as an external warehouse. In addition the Autogerma Forum, a new training and conference centre, was erected on

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the company’s premises; with over 900 square metres of floor area, it can accommodate up to 650 people.

The average number of employees at Autogerma was up to 695 (666).

AUTOGERMA S.p.A. Revenue Profit before tax Investments in property, plant and equipment 1 Employees Vehicle sales

EUR million EUR million EUR million Average Cars

1

2002 4,807 110 13 695 303,086

2001 4,791 88 7 666 312,019

Percent +0.3 +25.0 +85.7 +4.4 –2.9

Including intangible assets

Distinctive, exclusive and sporty – quattro GmbH The objective of quattro GmbH is to inject even greater passion and distinctive appeal into the individuality, exclusivity and sportiness of the Audi brand. With the RS, S line, Audi exclusive and Audi collection business areas, the Neckarsulm-based company quattro GmbH, which was founded in 1983, complements the product range of AUDI AG. The principal markets of quattro GmbH are Germany, Western Europe and North America. The Audi RS 6, which was successfully launched in July 2002, follows on from the Audi RS 4 as the second independent vehicle to have been created by the company, and developed and built in conjunction with AUDI AG. Around 2,000 of the Audi RS 6 had already been sold by the end of 2002. quattro GmbH is modifying and expanding its customisation range, Audi exclusive, in order to open up new areas of business and access new customers for the Audi brand. In response to increased demand for greater sportiness, quattro GmbH is extending its S line to cover all model series, and is thus underpinning the sportsoriented, dynamic positioning of AUDI AG. Significant year-on-year growth has been achieved in this business area in particular. A prime example of the technological expertise of quattro GmbH during the 2002 financial year was the market launch of the Audi A4 1.8 T, with an output tuned up to 140 kW (190 bhp). Despite the lower number of RS cars built than in 2001 due to the production start of the new model, quattro GmbH was once again able to increase its business volume in 2002. Revenue rose to around EUR 110 million and profit before tax totalled approximately EUR 36 million. The profit was passed on to AUDI AG on the basis of the existing profit transfer agreement.

New addition to the group: AUDI SENNA Ltda. AUDI SENNA Ltda. was fully consolidated into the Audi Group for the first time in the 2002 financial year. AUDI AG owns a 51 percent stake in the joint venture, which was established in 2000; the remaining 49 percent are held by Senna Import Comercial Ltda., a company founded by the three-times Formula 1 World Champion Ayrton Senna. Audi Senna, with its headquarters in São Paulo, is responsible for sales of Audi vehicles in Brazil and for controlling the dealer network, via which exclusively Audi cars are sold. A further major task is to stage marketing and advertising activities on behalf of the Audi brand in Brazil. The country experienced economic difficulties throughout the year under review, reflected by the sharp decline in the regional car market and the extreme devaluation of the Real; with the locally-built Audi A3, AUDI SENNA Ltda. was nevertheless able to hold onto its market lead in this segment. The Audi A4 and Audi A6 were also highly successful in their respective vehicle segments. With these two models, AUDI SENNA Ltda. ranked among the top premium suppliers in Brazil. 10,674 vehicles were sold via AUDI SENNA Ltda. during the period in question. AUDI SENNA Ltda. posted revenue of EUR 34 million. Profit before tax in 2002 reached EUR 13 million. The company employed an average of 105 employees throughout the year.

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Management Report of the Audi Group and AUDI AG

General economy and the sector

Global economic situation Growth in the global economy was very hesitant in 2002. The protracted weakness of the stock markets, the tight labour market in many countries and the uncertain political situation in the Middle East, coupled with a rise in oil prices, unsettled companies and private households around the globe. Initial signs of a recovery in the US economy were not translated into a lasting improvement in spite of an expansive monetary and fiscal policy. The misrepresentation of finances in the accounts of major companies compounded this loss of confidence. Although there has been a slight economic recovery in Western Europe, there is as yet a lack of sustained momentum. This is particularly the case in Germany: in view of the uncertain employment situation and the forthcoming higher tax burden, consumer behaviour is expected to remain reticent. Export sales were the sole cause for satisfaction. In contrast to the sluggish performance of the Western European economy, there is marked buoyancy in overall economic activity in Central and Eastern Europe. Latin America remains in recession, accompanied by further currency devaluations, rising prices and growing political uncertainty. The threshold countries of South-East Asia are currently the most dynamic region in the global economy. Above all China became an even more attractive target for foreign direct investment, having joined the World Trade Organisation at the start of the year. International car market The slackness of the economy worldwide is reflected by the state of international car markets. In Western Europe, around 14.4 million vehicles were registered for the first time, down three percent on the previous year’s figure. Italy and Spain experienced the sharpest downturns in the market by anything up to seven percent. The car markets in France and Germany likewise contracted, albeit by a lesser degree. Amid the negative overall trend, a growth rate of over four percent in Great Britain provided a glimmer of hope. In the USA, first-time registrations of cars slipped particularly in the final quarter, in spite of numerous measures to bolster sales. The total for the year was down around four percent on the prior-year figure, to 8.1 million units.

The South American market once again suffered a severe setback in 2002. New registrations in Argentina were slashed by half for the second year in succession. Brazil too, the most important car market in this region, witnessed a fall in registrations of five percent. Individual Asian markets such as China, which achieved impressive growth of some 56 percent, exhibited rare potential for growth. Japan likewise made good progress, with a slight increase in new-vehicle registrations. German car market The German car market, too, was unable to buck the generally negative market trend. Registrations of new vehicles fell by just under three percent compared with the previous year, to 3.3 million cars. Whereas the domestic market was characterised by consumer reticence, demand from abroad for German cars rose. With vehicle sales totalling 3.6 million, exports by German car manufacturers were approximately on a par with the previous year’s record figure. Just under 71 percent of vehicle production was exported. Above all in the USA, the world’s largest market, German manufacturers were able to increase their market share to about ten percent. The proportion of foreign-brand cars imported into Germany was slightly up on the previous year, at 29 percent (28 percent). Diesel-engined vehicles were once again in particular demand in 2002. A total of 38 percent of vehicles registered for the first time were fitted with a diesel engine, equivalent to an increase of seven percent compared with the previous year. This trend is doubtless attributable to the progress achieved in the development of economical diesel engines and to rising petrol prices. Domestic car production totalled 5.1 million units, falling short of the previous year’s figure by over three percent. Domestic production was underpinned by the stable level of exports.

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Situation of the company

Accounting principles In the 2002 financial year, the consolidated financial statements of AUDI AG were prepared on the basis of the International Accounting Standards (IAS) and the interpretations of the International Financial Reporting Interpretations Committee (IFRIC). Pursuant to Section 292 a of German Commercial Code, AUDI AG is therefore exempted from its duty to prepare consolidated financial statements in accordance with German accounting standards. As in previous years, the separate financial statements of AUDI AG have been prepared in accordance with the German Commercial Code. Revenue, result and equity Revenue rose by 2.6 percent compared with the previous year, to EUR 22,603 (22,032) million. 69.1 (68.0) percent of total revenue was generated abroad. Gross operating profit, in other words revenue less cost of sales, was EUR 2,728 (2,670) million. The profit before tax for the Audi Group fell slightly to EUR 1,254 (1,322) million. The pre-tax rate of return accordingly reached 5.6 (6.0) percent. An amount of EUR 587 million from the consolidated net profit of EUR 774 (769) was allocated to other revenue reserves. The shareholders’ equity of the Audi Group consequently amounted to EUR 4,940 (4,342) million. The equity ratio remained at the previous year’s level, at 38.6 percent. AUDI AG posted revenue of EUR 18,392 (17,724) million. According to the German Commercial Code, its net profit was EUR 210 (418) million. The shareholders’ equity of AUDI AG according to German Commercial Code amounted to EUR 1,513 (1,488) million. This yielded an equity ratio of 18.7 (20.7) percent. On the basis of the profit transfer agreement with the parent company, AUDI AG transferred EUR 185 (209) million to VOLKSWAGEN AG. Outside shareholders in AUDI AG receive a compensatory payment for each individual share certificate. The level of this payment for the 2002 financial year is equivalent to the dividend that is paid on one VOLKSWAGEN AG ordinary share. This dividend payment will be determined by the Annual General Meeting of VOLKSWAGEN AG on April 24, 2003 and subsequently published in the Federal Official Gazette.

Production slightly up Total car production output by the Audi Group in the past financial year showed a slight increase on the previous year, at 735,913 (727,033) vehicles. Of this total, 31,440 (34,990) Audi vehicles were supplied to Audi partners abroad in the form of completely knocked down (CKD) parts sets. Production of vehicles Audi A2 Audi A3 Audi A4 Audi A4 Cabriolet Audi RS 4 Audi RS 6 Audi TT Coupé Audi TT Roadster Audi A6 Audi allroad quattro Audi A8 Total, Audi brand Lamborghini Diablo Lamborghini Murciélago Total, Lamborghini brand Total, group

2002 37,578 115,051 339,562 20,705 – 2,052 21,488 13,223 154,872 19,998 10,942 735,471 – 442 442 735,913

2001 49,369 131,082 305,081 184 3,513 – 22,078 17,271 166,472 19,995 11,708 726,753 215 65 280 727,033

Production of cars at the Ingolstadt plant rose to 435,718 (420,216). The Neckarsulm plant built 223,390 (247,544) of the Audi A2, Audi A6, Audi allroad quattro and Audi A8. quattro GmbH, Neckarsulm, produced an impressive 2,052 of the Audi RS 6 in the year of its market launch. At the Hungarian plant in Györ, AUDI HUNGARIA MOTOR Kft. built the Audi TT Coupé and Audi TT Roadster sports cars and assembled some Audi A3 and, in 2002, all Audi S3 models on behalf of AUDI AG. A total of 53,606 (55,296) Audi vehicles left the production lines there. The new Audi A4 Cabriolet, like its predecessor, is built by Wilhelm Karmann GmbH in Rheine. Thanks to the high level of demand, 20,705 of this model were built there during the year under review. The sports car specialists at Sant’Agata Bolognese produced 442 of the Lamborghini Murciélago, the followup model to the legendary Lamborghini Diablo.

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Management Report of the Audi Group and AUDI AG

Engine production by the Audi Group rose by 4.8 percent, to 1,284,488 (1,225,448) units, in the past financial year. As in previous years, demand for diesel-engined vehicles rose in 2002, boosting the proportion of TDI engines of the overall volume to 46.3 (44.2) percent. This demonstrates the high level of acceptance of Audi direct-injection diesel engines among its customers. First unveiled 13 years ago as a ground-breaking technology, this has meanwhile become one of AUDI AG’s core skills. The largest engine manufacturer within the Audi Group, AUDI HUNGARIA MOTOR Kft., built 1,280,067 (1,220,217) four, six and eight-cylinder engines. COSWORTH TECHNOLOGY LIMITED manufactured 3,979 (4,951) complete engines. 43.8 (45.3) percent of all engines produced by the Audi Group were supplied to other Volkswagen Group companies. Diesel share of Audi engine production in %

50

40

30

20

1998

1999

2000

2001

2002

Vehicle sales continue to rise Despite the difficult overall economic situation, AUDI AG set a new unit sales record for the seventh year in succession. Vehicle sales worldwide rose by 2.2 percent on the previous year, to 742,128 (726,134). The sales total was boosted in virtually all important markets. 67 (65) percent of vehicles with the four-ring badge were supplied to customers outside Germany.

Vehicle sales Audi A2 Audi A3 Audi A4 including RS 4 Audi A4 Cabriolet Audi TT Coupé Audi TT Roadster Audi A6 including RS 6 Audi allroad quattro Audi A8 Total, Audi brand Lamborghini Diablo Lamborghini Murciélago Total, Lamborghini brand Other Volkswagen Group brands Total, group

2002 40,142 126,665 339,153 13,174 21,845 13,910 158,091 18,944 10,204 742,128 – 424 424

2001 52,380 144,949 292,573 184 24,264 19,549 160,498 19,828 11,909 726,134 238 59 297

252,979 995,531

265,013 991,444

The Lamborghini Murciélago proved a resounding success with customers, with 424 (297) of this sports car sold – an increase of 42.8 percent. The Italian subsidiary AUTOGERMA S.p.A in addition supplied 252,979 (265,013) vehicles of the SEAT, Škoda, Volkswagen Passenger Car and Volkswagen Commercial Vehicle brands to customers. New models in 2002 Attractive new models were brought onto the market in 2002. The first to make its début, well timed to coincide with the start of the open-air season, was the Audi A4 Cabriolet. Sports performance on minimal fuel is achieved with the innovative FSI direct injection engines, which were introduced first on the Audi A2 1.6 FSI and shortly afterwards on the Audi A4 2.0 FSI. The Audi RS 6, a high-performance sports car that is nevertheless suitable for everyday driving, has been available for order since May 2002. The new-generation Audi A8 has established new standards in the luxury class since its market launch in November 2002. Various sports models were in addition put on display to the public at various motor shows. AUDI AG exhibited the Audi allroad quattro 4.2 with V8 engine and an output of 220 kW (300 bhp) at the Geneva Motor Show. Both saloon and Avant versions of the new Audi S4 were unveiled at the Paris Motor Show in September.

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Investment The Audi Group invested a total of EUR 2,410 (2,151) million in 2002. This amount included EUR 1,516 million for property, plant and equipment, and capitalised development costs totalling EUR 834 million. Cash flow from operating activities amounted to EUR 2,545 million and was therefore easily in excess of total capital investments. Investment at AUDI AG, which is reported on the basis of the German Commercial Code, totalled EUR 1,306 (1,296) million. Property, plant and equipment accounted for EUR 1,182 (1,155) of this total. Investment within the Audi Group, EUR million 2,422

2,094

2,151

2,452

2,410

2,545

2,500

2,000

Individual pension plans Since 2002, all Audi employees have been able to incorporate a further component into their arrangements to provide for old age. Alongside employer-financed retirement benefits, direct insurance and time bonds, AUDI AG is now offering a new, attractive concept for individual pension plans which involves converting gross or net pay into pension contributions. Whereas the version involving gross payments is managed by Audi itself along the lines of the modular employer-financed pension plans, the net payments version is run by the MetallRente company pension scheme. From now on, employees will have the opportunity to build up personal pension funds either from their regular monthly pay or by earmarking collectively negotiated lump-sum payments for this purpose. Purchasing volume The total purchasing volume of the Audi Group in 2002 was EUR 11.9 (12.4) billion. EUR 9.8 (9.6) billion of this total was spent on direct materials. Investment goods, services and operating materials accounted for EUR 2.1 (2.8) billion of this amount.

1,500

1,000

500

2000 Investment

2001

2002

Cash flow from operating activities

Slight increase in average number of employees throughout year The average number of employees within the Audi Group rose by 57 to 51,198. Of this total, 44,260 (44,374) were employed by AUDI AG at the locations Ingolstadt (30,628, previous year: 30,490) and Neckarsulm (13,632, previous year: 13,884). The workforce of AUDI HUNGARIA MOTOR Kft. was down slightly, from 4,857 in the previous year to 4,767. The average for COSWORTH TECHNOLOGY LIMITED throughout the year was 786 (748) employees. At the Italian subsidiaries there were on average 1,262 (1,148) people under contract, including 567 (482) at the Lamborghini Group and 695 (666) at AUTOGERMA S.p.A. AUDI SENNA Ltda., Brazil, which had an average of 105 employees, was included in the consolidated financial statements for the first time in 2002.

Research and development The development of new products was again a top priority of the Audi Group in 2002. Our guiding principle is our commitment to advanced technology, emotionally charged design and being able to satisfy the wishes of our customers. We strive for supreme standards of functionality, quality and safety. In 2002, the Audi Group spent EUR 1,335 (1,137) million on research and development activities. Of this total, EUR 834 (726) million were capitalised according to IAS principles. Research and development spending according to IAS totalled EUR 900 (684) million. This figure included research costs and other non-capitalised development costs amounting to EUR 501 (411) million, and also depreciation and disposals of capitalised development costs totalling EUR 399 (273) million. At AUDI AG, research and development spending totalled EUR 1,193 (1,107) million.

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Management Report of the Audi Group and AUDI AG

AUDI HUNGARIA MOTOR Kft. AUDI HUNGARIA MOTOR Kft., based in Györ, Hungary, produces, develops and sells motor vehicle engines and components. Both models in the Audi TT range are built there; some Audi A3 cars and all Audi S3 cars are in addition assembled at Györ on behalf of AUDI AG. Following the introduction of the new model, the Audi A3 will be built exclusively at the Ingolstadt plant from June 2003. Key developments in the past financial year were the opening of the new eight-cylinder engine production line and the start of volume production of the new 4.2-litre eight-cylinder engines. The new 2.0-litre, fourcylinder FSI engine was added to the range of petrol direct injection engines.

AUTOGERMA S.p.A. AUTOGERMA S.p.A., based in Verona, is a fully owned subsidiary of Automobili Lamborghini Holding S.p.A and acts as general importer of vehicles of the Audi, SEAT, Škoda, Volkswagen Commercial Vehicle and Volkswagen Passenger Car brands. Autogerma was unable to stave off the impact of a difficult market situation in Italy in the 2002 financial year. Whereas the Italian market as a whole contracted by about six percent, Autogerma’s vehicle sales were down only a marginal 2.9 percent on the previous year’s figures. During the period under review, this company invested above all in its central parts store, the enlargement of its premises and a new training and conference centre.

COSWORTH TECHNOLOGY LIMITED Cosworth Technology, based in Northampton, Great Britain, specialises in the development, engineering and production of advanced engines and their components. This company was able to post higher revenue and improved profit before tax as a result of cost-cutting and restructuring measures.

quattro GmbH quattro GmbH, of Neckarsulm, creates high-performance models in the RS range, and successfully brought the Audi RS 6 onto the market in 2002. quattro GmbH in addition supplies an extensive range of sports-oriented vehicle components and customises vehicles for Audi customers. It also sells a wide range of lifestyle articles. quattro GmbH was fully consolidated in the Audi Group for the first time in 2002.

Lamborghini Group The Lamborghini Group, based in Sant’Agata Bolognese, Italy, includes the sports car manufacturer Automobili Lamborghini S.p.A., the power boat engines manufacturer Motori Marini Lamborghini S.p.A. and the merchandising company Lamborghini ArtiMarca S.p.A. The Lamborghini Group is able to look back on a successful financial year 2002. The Lamborghini Murciélago, which made its market début in 2001, was in considerable demand. Significant sums were invested in the development of the new Lamborghini Gallardo and the construction of a new design centre. Key figures for selected subsidiaries according to IAS 2002 Revenue Profit before tax Investments in property, plant and equipment 1 Employees 1

Including intangible assets

AUDI SENNA Ltda. The Brazilian sales subsidiary AUDI SENNA Ltda. was likewise fully consolidated for the first time in the 2002 financial year. The joint venture, in which AUDI AG holds a 51 percent stake, was established in 2000. AUDI SENNA Ltda. sells Audi vehicles and accessories in Brazil and is also responsible for planning and optimising the national Audi dealer network.

COSWORTH TECHNOLOGY LIMITED 130 –1

Lamborghini Group

AUTOGERMA S.p.A.

EUR million EUR million

AUDI HUNGARIA MOTOR Kft. 3,557 264

93 157

4,807 110

EUR million Average

253 4,767

14 786

88 567

13 695

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Profit transfer agreements Profit transfer agreements have been concluded between the following companies and AUDI AG. These agreements are subject to the approval of the Annual General Meeting of AUDI AG, which is to take place on May 14, 2003 in Ingolstadt. Audi Electronics Venture GmbH, Ingolstadt Audi Electronics Venture GmbH has the purpose of building up further expertise in the field of vehicle functions with a high degree of electronics. It gains access to innovative electronics technologies through partnerships. It in addition acts as a technology service provider along the vehicle electronics process chain for all corporate divisions of AUDI AG. Audi Synko GmbH, Ingolstadt The business purpose of Audi Synko GmbH is to invest in Audi dealerships in strategically important locations. Audi Vertriebsbetreuungsgesellschaft mbH, Ingolstadt The business purpose of Audi Vertriebsbetreuungsgesellschaft mbH is to supervise, advise, train and support sales functions for the Audi brand and to provide associated services. AUTO UNION GmbH, Ingolstadt AUTO UNION GmbH is responsible for upholding the tradition of the Auto Union, Horch, Audi, DKW and Wanderer brands, which were merged within the former company AUTO UNION AG, and for protecting the corresponding trademark rights. NSU GmbH, Neckarsulm This company’s purpose is to uphold the tradition of the former company NSU Motorenwerke AG and to nurture the “NSU” brand.

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Management Report of the Audi Group and AUDI AG

Risk repor t

Risk management within the Audi Group AUDI AG is a group operating internationally and is therefore exposed to a variety of risks in the course of its entrepreneurial activities. To ensure that significant risks which could pose a threat to the company’s survival are identified at an early stage, companies have been obliged by German corporate governance legislation (KonTraG) to implement a risk management system. The Audi Group uses a risk early warning system to identify potential risks to its financial position, financial performance and cash flows. Our risk management system moreover includes all significant subsidiaries. The areas of responsibility and the reporting and documentation duties of the individual corporate divisions and subsidiaries are clearly laid down. First, the potential impact of a loss and the probability of a risk materialising are assessed. The extent of impending losses for selected serious risks is then quantified. By gradually refining our risk management system, we ensure that it will continue to function in the future. New Block Exemption Regulations for motor vehicles The new Block Exemption Regulation for the motor vehicle trade took effect on October 1, 2002. The new regulation is valid until May 31, 2010 and has the objective of creating a uniform European single market for cars, as well as promoting competition. Under the new Block Exemption Regulation, dealers are fundamentally free to sell vehicles of other makes. In future, a qualitatively and quantitatively selective sales approach will only be possible for new cars. All workshops which satisfy the required standards of quality may moreover demand authorisation from a manufacturer. AUDI AG has taken the redrafting of the legal basis as an opportunity to revise the contracts with its dealer partners. AUDI AG believes that the sales and service network it has established on the basis of new arrangements continues to benefit the customer.

German government considering increased lump-sum charge for the use of company cars The German government is considering increasing the lump-sum rate at which the private use of a company car is taxed in 2003. If this tax change becomes law, the German car trade is expected to witness a downturn in demand. Since the legislative procedure has not yet been completed at the time of going to press, the precise impact on AUDI AG cannot as yet be anticipated. EU Directive on end-of-life vehicles The EU Directive on end-of-life vehicles became national law in Germany on July 1, 2002. It has yet to do so in certain EU member states. This directive obliges car manufacturers and importers to accept back, at their own expense, any vehicles manufactured by them and registered after July 1, 2002, or merchandise, and to ensure that they are disposed of in an environmentally acceptable manner. From 2007, this regulation will apply to all end-of-life vehicles. From then on, it will moreover be prohibited to use certain materials for the production of cars. Provisions have been created to cover the costs which the Audi Group would incur as a result of its obligation to accept back, reprocess and recycle vehicles. Price, foreign currency and liquidity risks As a result of increased global business activities, the Audi Group is exposed to risks from developments on international foreign exchange markets. These risks are excluded or minimised by means of intensive observation of the markets and the resulting hedging strategies. Payments in foreign currency from operations, predominantly for goods and services, are hedged. Derivative financial instruments concluded via VOLKSWAGEN AG with national and international banks of top-grade creditworthiness are employed. Potential liquidity risks are countered by means of a regularly updated liquidity forecast.

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Overall situation of the company On the basis of all particulars and circumstances known to us, there are currently no risks to the Audi Group which would have such a significant effect on its financial performance and financial position that they could endanger the company’s survival for the foreseeable future.

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Management Report of the Audi Group and AUDI AG

Outlook

Underlying economic situation The global economy will continue to make only faltering progress over the coming months. The economic and market indicators do not point to any rapid recovery in the global economy. Although a degree of stabilisation appears to be on the cards, there is currently still a preponderance of negative factors such as the persisting bear stock markets, high unemployment and the uncertain situation in the Gulf region. It is possible that the USA could prompt a recovery in the global economy. Neither Japan nor Western Europe are expected to stimulate growth through their intrinsic economic development. The momentum created by lower taxes and interest rates in the USA may have a positive impact on economic growth. However, it remains to be seen whether they will trigger off any sustained dynamic development. In Germany, an economic recovery will only have any substance if export markets experience dynamic growth. In the short term, consumer behaviour in Germany is expected to remain reticent in view of the uncertain employment and economic prospects. A number of South-East Asian markets provide a ray of hope in what is otherwise a somewhat overcast economic outlook. The upswing should gain momentum in 2003 along with rising exports, though the pace of progress will vary from country to country. Whereas the South Korean economy is booming, Hong Kong and Taiwan are suffering from the loss of substantial industrial capacity to China. Outlook for the car industry A slight increase in worldwide car sales is expected for 2003. Progress in the principal car markets – the USA, Western Europe and Japan – is likely to be roughly on a par with the period under review. The main growth markets are in Eastern Europe and Asia, particularly China. Japan is the notable exception in the latter region, as it continues to struggle with a difficult economic situation. Expectations for 2003 on the German car market range from a largely unchanged situation to a slight improvement in registration figures. However, they are not likely to show a pronounced rise until 2004. Such a development could be promoted on the one hand by a backlog of demand for new cars – the average age of the vehicles on Germany’s roads has risen markedly – and on the other hand by the large number of new

models being launched by various manufacturers, providing greater incentive for vehicle purchases. The Audi Group once again set a new record for vehicle sales in the year under review, and in so doing strengthened its market position. In view of the uncertain economic situation, it is difficult to make any firm predictions for 2003 at present. Over the next few years the Audi Group will nevertheless have a healthy basis on which to build further success, in the form of a steadily evolving, attractive model range, increased emphasis on sports appeal and a sound financial position. The Audi brand group AUDI AG has been responsible for the management of the “Audi brand group”, comprising the Lamborghini, SEAT and Audi brands, since January 1, 2002. Synergy benefits already materialised in the course of the past year in the car-design domain and in the use of aluminium in body manufacturing. Particular emphasis is placed on formal idiom in the development of the brand group. AUDI AG will in future differentiate the individual brands to a greater extent in the way they are positioned on the market, while promoting inter-brand ties in order to exploit common resources. Changes in company management With effect from March 1, 2002 the Supervisory Board appointed Dr. Martin Winterkorn, Member of the Board of Management of VOLKSWAGEN AG, as the Chairman of the Board of Management of AUDI AG. He succeeded Dr. Franz-Josef Paefgen, Chairman and Chief Executive of Bentley Motors Ltd., who surrendered office by agreement with the Supervisory Board with effect from February 28, 2002 and has also been in charge of group research and the motor sport activities of all Volkswagen Group brands since March 1, 2002. Dr. h. c. Andreas Schleef – Chairman of the Board of Management of SEAT S.A. – took on the area of responsibility of “Chairman of the Board of SEAT S.A.” on the AUDI AG Board with effect from March 7, 2002. Dr. Horst Neumann took over from Dr. h.c. Andreas Schleef as Head of the Human Resources Division with effect from July 1, 2002. Dr. Werner Mischke was appointed Chairman of the Board of Directors of Automobili Lamborghini S.p.A. with effect from January 1, 2003. He has in addition taken on the post of Chairman of the Advisory Board of quattro GmbH and responsibility for the motor sport activities of Audi and Lamborghini. Likewise with effect

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from January 1, 2003 Dr. Werner Mischke surrendered his responsibility for the Technical Development Division, by agreement with the Supervisory Board. Since that date, Dr. Martin Winterkorn has been in charge of this division in addition to his duties as Chairman of the Board of Management of AUDI AG. Rupert Stadler was appointed to the Board of AUDI AG – initially without portfolio – with effect from January 1, 2003. He will become Head of the Finance and Organisation Division with effect from April 1, 2003, taking over from Peter Abele, who is retiring on March 31, 2003. New models in 2003 A long-wheelbase version of the Audi A8 4.2 quattro was exhibited at the Detroit Motor Show in January 2003. Additions to the range of engines for the Audi A8 will include a V8 unit with diesel direct injection and a 6.0litre, twelve-cylinder engine, the highest-displacement power unit within the Audi Group. The Geneva Motor Show in March 2003 will witness the unveiling of the new Audi A3 and the Audi A4 Cabriolet quattro. The market launch of the Audi TT 3.2 quattro, which has the radically new transmission technology of the Direct Shift Gearbox DSG with double clutch, is scheduled for mid-2003. The Direct Shift Gearbox combines the advantages of a conventional sixspeed manual gearbox with the qualities of a modern automatic. The Lamborghini Gallardo will also make its first public appearance at Geneva. Positioned below the Murciélago, it will be accessible to a wider group of customers. Audi will provide a foretaste of future automotive developments at motor shows throughout 2003. For instance, the “Audi Pikes Peak quattro” concept study was presented at Detroit. This crossover model combines the properties of different types of vehicle, such as offroad capability, variability, dynamic performance and elegance. Capital expenditure to remain high The scheduled investment volume for property, plant and equipment and for financial assets for the period from 2002 to 2007 amounts to some EUR 11.4 billion, which represents around seven percent of total revenue for that planning period. Around 70 percent of investment spending is earmarked for new products, with the German locations Ingolstadt and Neckarsulm to be the recipients of over 80 percent of the total budget.

The purpose of our investment strategy is to boost the international competitiveness of the Audi Group.

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Audi Shares

Audi shares

Audi share price trend Stock markets worldwide exhibited a bear trend in 2002, punctuated by only short-lived periods of respite. A number of factors were behind the falls in all major international indices, in particular the very restrained growth of the global economy and the resulting slump in corporate profits. Various scandals involving the accounts of major companies mid-way through the year and the increasingly tense political situation in the Middle East further unsettled investors. The German Share Index (DAX) proved relatively stable at the start of 2002, reaching its year-high of 5,462.55 points in March. From April, however, the index began to dive sharply, hitting a five-year low of 2,597.88 points in October. The DAX closed the year on 2,892.63 points. The CDAX Automobile – the sector index for German automotive shares – started the year on 377.51 points, rising to 448.52 points by May. The index then fell in line with the general downward trend midway through the year, closing on 262.89 points at the end of December. At the start of the year, the Audi share price rose from EUR 157 to an all-time high of EUR 318. This rise was fuelled by speculation surrounding a cash bid to minority shareholders by the majority shareholder VOLKSWAGEN AG. AUDI AG quashed the rumours of a squeeze-out at its Annual Press Conference at the end of February 2002, causing the share price to ease off gradually in the second quarter of the year. From August until the end of the year, the Audi share price remained virtually stable at just under EUR 200, closing 2002 at EUR 191. Profit transfer and compensatory payment for shareholders VOLKSWAGEN AG controls around 99 percent of the share capital of AUDI AG. The control and profit transfer agreement between AUDI AG and VOLKSWAGEN AG lays down how dividend is to be distributed among the shareholders of AUDI AG. According to this agreement, instead of a dividend payment the shareholders receive a compensatory payment which is equivalent to the dividend paid on one VOLKSWAGEN AG ordinary share for the same financial year. The dividend payable for the 2002 financial year will be determined by the Annual General Meeting of VOLKSWAGEN AG on April 24, 2003.

Audi share price (Munich Stock Exchange) International Securities Identification Number (ISIN): DE0006757008, German Securities Identification Number (WKN): 675700 EUR Highest Lowest Year-end price

2002 318.00 145.00 191.00

2001 165.00 54.00 160.00

Audi share price trend in EUR

350

300

250

200

150

100

50 1998 Highest

1999

2000 Year-end price

2001

2002

Lowest

Ratios per Audi share EUR Net profit Cash flow from operating activities Equity

2002 17.94

2001 17.89

59.19 114.88

57.02 100.98

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Corporate Governance

German Corporate Governance Code – AUDI AG complies with the recommendations Transparency and Publicity Act takes effect In September 2001, the “Government Commission on the German Corporate Governance Code” was commissioned with the task of drawing up rules on the internal and external controlling and monitoring of publicly quoted companies. The recommendations of the Government Commission on the German Corporate Governance Code have now been implemented in the form of the Transparency and Publicity Act, which became law on July 26, 2002. Pursuant to Section 161 of German Stock Corporation Law, the Board of Management and Supervisory Board must declare each year to what extent the company complies with or departs from the recommendations of the German Corporate Governance Code. Implementation of all recommendations agreed In the light of the Declaration of Compliance pursuant to Section 161 of German Stock Corporation Law, the Board of Management and Supervisory Board of AUDI AG considered the recommendations of the Government Commission at length throughout the past financial year. It should be noted that AUDI AG had already largely satisfied the recommendations of the Code in the past. The flow of information between the Board of Management and the Supervisory Board has always been well in excess of the legal minimum, and the Board of Management’s rules of internal procedure already included a detailed list of transactions which may only be conducted with the approval of the Supervisory Board. The purpose of the consultations was to be able to submit an unreserved declaration of compliance based on explicit rules, and thus to comply fully with the recommendations of the government commission. Amendment required to articles of incorporation It has proven necessary to adjust the remuneration of Supervisory Board members to provide for the differentiated, performance-based remuneration of members of the Supervisory Board and committees. An amendment to the articles of incorporation is required to accommodate the rules on remuneration of the Supervisory Board in accordance with Sections 5.4.5 Para. 1 Sentence 3 and 5.4.5 Para. 2 Sentence 1 of the Code. The Supervisory Board has in addition set up an Audit Committee to deal with matters of accounting, risk management and the auditing of the financial state-

ments. Before the Annual General Meeting of AUDI AG, the company will in future provide a proxy for shareholders. Documents being sent to the shareholders in connection with the Annual General Meeting will be published on the Internet together with the Agenda. Internet declaration on the Code The joint declaration of the Board of Management and Supervisory Board of AUDI AG on the recommendations of the German Corporate Governance Code was placed on the Internet on the Audi homepage on December 19, 2002. The declaration includes the note that the Board of Management and Supervisory Board will wait until the forthcoming Annual General Meeting on May 14, 2003 to propose an amendment of Section 16 of the articles of incorporation of AUDI AG. The English translation of the Declaration of Compliance can be found at www.audi.com.

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Financial Performance

Financial performance

Higher revenue than in previous year Despite the difficult overall economic situation, the Audi Group is able to look back on a successful 2002. Business developments were characterised by rising sales figures in virtually all key markets. This trend is reflected by the significantly higher revenue. The record revenue established in the previous year was bettered by 2.6 percent in 2002, the total rising to EUR 22,603 (22,032) million. In the Audi Group’s core area of business – the sale of Audi vehicles – revenue of EUR 16,706 (16,137) million was posted. This represents a year-on-year increase of 3.5 percent. The main pillar of revenue was the Audi A4, bringing in a total of EUR 8,055 (6,708) million, followed by the Audi A6, which generated EUR 4,759 (4,997) million. The Audi A4 Cabriolet, the Audi RS 6 and the new Audi A8 contributed towards the higher business volume for the first time. The cost of sales mirrored the higher revenue, rising by 2.6 percent on the previous year’s figure to EUR 19,875 (19,362) million.

The gross margin was up 2.1 percent to EUR 2,728 (2,670) million. Distribution costs were 11.3 percent higher than in the previous year, at EUR 1,377 (1,237) million. This increase was mainly attributable to the intensification of sales promotion measures. General administrative costs were reduced 4.0 percent to EUR 203 (212) million. The other operating result amounted to EUR 188 (199) million. The operating result fell to EUR 1,336 (1,421) million. The finance result showed a year-on-year improvement of 18.0 percent to EUR –82 (–99) million. The investment result was lower than in the previous year, at EUR 42 (91) million. This is attributable to the full consolidation of quattro GmbH and AUDI SENNA Ltda. for the first time; their contribution towards the result is consequently no longer included in the investment result. The interest result improved to EUR –20 (–62) million. The other financial results likewise showed an improvement in rising to EUR –103 (–128) million, as a result of the reduced expense for the compounding of long-term provisions thanks to lower capital market interest rates.

Development of profit before tax and rate of return before tax

Key earnings data in percent Rate of return before tax Rate of return after tax Equity return after tax Capital turnover

1,500 1,322 1,254

986 1,000

6.0

5.6

4.9 500

0

2000

2001

Profit before tax in EUR million Rate of return before tax in percent

2002

2002 5.6 3.4 16.7 1.8

2001 6.0 3.5 18.9 2.0

1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49 51 53 55 57 59 61 63 65 67 69 71 73 75 77 79 81 83 85 87 89 91 93 95 97 99 101 103 105 107 109 111

Consolidated income before tax was slightly down on the previous year, at EUR 1,254 (1,322) million. One of the key factors behind the marginal fall in income was the higher development expenses resulting from intensified product development activities. Exchangerate changes imposed an additional burden on income. Furthermore, the volume of revenue generated in countries outside the eurozone – particularly Great Britain and the USA – was higher in the year under review. The first-time consolidation of our subsidiaries quattro GmbH and AUDI SENNA Ltda. in the reporting period did not result in higher income at group level, as the results for both companies had already been included in consolidated income in previous years. The slightly lower profit before tax, in conjunction with higher revenue, meant that the rate of return fell accordingly from 6.0 to 5.6 percent. On the other hand, net profit rose to EUR 774 (769) million, the highest-ever level in the company’s history.

Added value Revenue + Other income – Expenses prepaid Added value Distribution Employees Creditors (interest) State Transfer of profits to VOLKSWAGEN AG Profit share of minority shareholders Net profit remaining

AUDI AG transferred a sum of EUR 185 (209) million to VOLKSWAGEN AG on the basis of the control and profit transfer agreement. The net profit for the year of EUR 587 (560) million was allocated to the other revenue reserves.

2002 EUR mill. 22,603 684 19,264 4,023

2001 EUR mill. 22,032 475 18,593 3,914

2002 Percent

2001 Percent

100.0

100.0

2,739 52 457 185 3 587

2,660 117 368 209 – 560

68.1 1.3 11.3 4.6 0.1 14.6

68.0 3.0 9.4 5.3 – 14.3

2 4 6 8 10 12 14 16 18 20 22 24 26 28 30 32 34 36 38 40 42 44 46 48 50 52 54 56 58 60 62 64 66 68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 100 102 104 106 108 110 112

Balance Sheet Ratios

Balance sheet ratios

Healthy balance sheet structure The balance sheet total for the Audi Group rose by 13.6 percent in 2002, to EUR 12,787 (11,256) million. On the assets side, fixed assets rose to EUR 8,238 (7,624) million as a result of the continuing high level of investing activities. The total investment volume was EUR 2,410 (2,151) million, an increase of 12.0 percent on the previous year. Fixed assets represented 64.4 (67.7) percent of total assets. In the year under review, the Audi Group capitalised development costs totalling EUR 834 million. After deduction of depreciation, there remained a net increase in intangible assets to EUR 2,534 (2,095) million. Property, plant and equipment rose to EUR 5,480 (5,307) million. Investments in property, plant and equipment amounting to EUR 1,516 million were made in all

product ranges, with the new Audi A8 accounting for the largest portion. Current assets including deferred taxes and prepaid expenses were up on the previous year, to EUR 4,548 (3,631) million. Inventories climbed to EUR 1,711 (1,463) million. This change was attributable above all to increased vehicle stocks at our subsidiary AUTOGERMA S.p.A. On the equity and liabilities side, the transfer to the revenue reserves boosted shareholder’s equity to EUR 4,940 (4,342) million. The equity ratio remains unchanged at 38.6 percent. Borrowings showed a year-on-year rise to EUR 7,847 (6,913) million. Transfers to provisions for warranty claims and pensions resulted in an increase in provisions to EUR 3,680 (3,361) million. Total liabilities

Balance sheet structure in EUR million

Equity and liabilities

Assets 12,787

12,787

11,256

11,256

10,368

10,368 4,940

4,342 8,238

3,817

Equity

1,274

Long-term borrowings

961

831

Medium-term borrowings

3,792

3,891

Short-term borrowings

726

555

Deferred tax liabilities

7,624 Fixed assets

1,355 6,988 1,435 1,138

1,711

1,450

Receivables and liquid assets

1,801

2,047

129

122

Deferred tax assets

4,566

1,463

Inventories

2,701

788 2000

2001

137 2002

2002

2001

2000

1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49 51 53 55 57 59 61 63 65 67 69 71 73 75 77 79 81 83 85 87 89 91 93 95 97 99 101 103 105 107 109 111

amounted to EUR 3,371 (2,823) million, producing a borrowing and equity capital ratio of 61.4 percent at the balance sheet date. Deferred tax liabilities totalled EUR 788 (726) million at the balance sheet date. Stronger financial position Audi was able to boost its financial strength further in the 2002 financial year. Cash flow from operating activities rose by 3.8 percent to EUR 2,545 (2,452) million. It was thus possible to finance the high volume of investment in the year under review entirely from operating activities. After deduction of investing activities totalling EUR 2,373 (2,087) million, there remained a net cash flow of EUR 173 (365) million. Net liquidity at the balance Cash flow in EUR million Cash flow from operating activities Investing activities Net cash flow Net liquidity

2002

2001

2,545 2,373 173 1,025

2,452 2,087 365 1,093

sheet date amounted to EUR 1,025 (1,093) million, which was on a par with the previous year’s level in spite of the higher level of investment. The detailed cash flow statement is shown in the Notes on page 73.

2 4 6 8 10 12 14 16 18 20 22 24 26 28 30 32 34 36 38 40 42 44 46 48 50 52 54 56 58 60 62 64 66 68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 100 102 104 106 108 110 112

Income Statement

Income statement of the Audi Group for the 2002 financial year EUR ’000 Revenue Cost of sales Gross profit Distribution costs General administrative costs Other operating income Other operating expenses Operating result Investment result Net interest Other financial results Profit before tax Income tax expense Net profit Profit transfer to VOLKSWAGEN AG Profit share of minority shareholders Consolidated net profit for the year EUR Earnings per share Diluted earnings per share

Notes 1 2 3 4 5 6 7 8 9 10 11 12 Notes 13 13

2002 22,602,643 19,874,905 2,727,738 1,376,884 203,167 639,539 451,222 1,336,004 +42,373 –20,403 –103,475 1,254,499 480,142 774,357 185,000 2,801 586,556 2002 17.94 17.94

2001 22,032,300 19,361,838 2,670,462 1,236,540 211,571 529,664 330,742 1,421,273 +91,078 –62,203 –128,290 1,321,858 552,505 769,353 209,000 – 560,353 2001 17.89 17.89

1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49 51 53 55 57 59 61 63 65 67 69 71 73 75 77 79 81 83 85 87 89 91 93 95 97 99 101 103 105 107 109 111

Balance Sheet

Balance sheet of the Audi Group at December 31, 2002

ASSETS EUR ’000 Fixed assets Intangible assets Property, plant and equipment Investments Rented lessor’s assets Current assets Inventories Trade receivables Other receivables and assets Securities Cash Deferred tax assets Prepaid expenses

EQUITY AND LIABILITIES EUR ’000 Equity Issued capital Capital reserves Revenue reserves

Notes

31 Dec. 2002

31 Dec. 2001

14 15 16 17

2,534,115 5,479,735 205,096 19,417 8,238,363

2,095,181 5,307,092 206,889 14,958 7,624,120

18 19, 20 19, 21 22 23

1,710,501 1,106,364 538,233 508,663 540,263 4,404,024 137,025 7,412 12,786,824

1,462,869 613,508 289,050 670,934 462,140 3,498,501 121,904 11,050 11,255,575

Notes

31 Dec. 2002

31 Dec. 2001

26 27 28

110,080 56,730 4,773,105 4,939,915 6,027 3,679,593

110,080 56,730 4,175,517 4,342,327 – 3,361,227

5,703 18,120 1,906,842 1,440,271 3,370,936 787,962 2,391 12,786,824

1,251 51,557 1,605,063 1,164,805 2,822,676 726,009 3,336 11,255,575

24 25

Minority interests Provisions Liabilities Long-term debt Short-term debt Trade payables Other liabilities

29 30 31 32 32 33 34

Deferred tax liabilities Deferred income

35 36

2 4 6 8 10 12 14 16 18 20 22 24 26 28 30 32 34 36 38 40 42 44 46 48 50 52 54 56 58 60 62 64 66 68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 100 102 104 106 108 110 112

Development of Equity

Development of equity

EUR ’000 Position at 31 Dec. 2000 Currency adjustments Consolidated net profit for the year Changes in value not affecting income Result from settled cash-flow hedges Position at 31 Dec. 2001 Currency adjustments Differences from changes in consolidated companies Consolidated net profit for the year Changes in value not affecting income Result from settled cash-flow hedges Position at 31 Dec. 2002

Issued capital

Capital reserve

110,080 – – – – 110,080 –

56,730 – – – – 56,730 –

– – – – 110,080

– – – – 56,730

Equity is explained in further detail under items 26, 27 and 28 in the Notes. Cash flow statement of the Audi Group from January 1 to December 31, 2002 The financial resources in the cash flow statement comprise exclusively the cash as reported in the balance sheet. The cash flow statement explains the streams of payments for both the 2002 financial year and the previous year, categorised according to cash inflows and outflows from current business operations, from investing activities and from financing activities. Effects of changes to the group and to foreign exchange rates on payments are shown separately. The change in cash as a result of changes to the group relates to companies that are consolidated for the first time and were carried on the cost basis in previous years. Investing activities include additions to property, plant and equipment and financial assets, and also additions to capitalised development costs. The change in rented lessor’s assets and the change in receivables from financial services are likewise reported here. Financing activities include cash outflows from the transfer of profit and from distributions, as well as changes in other borrowings.

Revenue reserves Legal Currency Reserve for and other exchange cash-flow revenue reserve hedges reserves 3,609,632 4,976 35,202 –832 2,436 – 560,353 – – – – –22,743 – – –13,507 4,169,153 7,412 –1,048 –1,752 –11,347 – 6,167 586,556 – – 4,760,124

– – – – –3,935

– – 48,408 –30,444 16,916

Total

3,816,620 1,604 560,353 –22,743 –13,507 4,342,327 –13,099 6,167 586,556 48,408 –30,444 4,939,915

1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49 51 53 55 57 59 61 63 65 67 69 71 73 75 77 79 81 83 85 87 89 91 93 95 97 99 101 103 105 107 109 111

Cash Flow Statement

Cash flow statement of the Audi Group from January 1 to December 31, 2002 EUR ’000 Net profit before profit transfer and taxation Tax payments Depreciation on capitalised development costs Depreciation on property, plant and equipment and on intangible assets Depreciation on investments Depreciation on rented lessor’s assets Change in provision Result from asset disposals Other non-cash expenses/income Change in inventories Change in receivables Change in liabilities Cash flow from operating activities Additions for development costs recognised as assets Investments in property, plant and equipment and in intangible assets Acquisition of affiliated and associated companies Investments in other financial assets Investments in rented lessor’s assets Income from asset disposals Investing activities Net cash flow Change in marketable securities Investing activities including investments in securities Profit transfer of which to VOLKSWAGEN AG: EUR 209 million (EUR 90 million) Change in debt Lease payments Change in loans to group companies Financing activities Change in cash from changes in consolidated companies Change in cash from exchange-rate changes Change in cash Cash at start of period Cash at end of period Cash Securities Loans Gross liquidity Total third-party borrowings Net liquidity

2002 1,254,499 –316,680 331,484

2001 1,321,858 –283,343 272,826

1,308,648 – 494 279,997 134,744 36,952 –241,775 –758,791 515,768 2,545,340 –833,711

1,161,290 61 431 220,449 18,074 –45,182 –12,701 –26,692 –175,276 2,451,795 –725,580

–1,555,959 –6,239 –395 –1 23,502 –2,372,803 172,537 155,046 –2,217,757 –213,846

–1,401,243 –15,086 –8,754 –150 64,141 –2,086,672 365,123 170,040 –1,916,632 –89,987

–25,550 –15,250 –61 –254,707 7,887 –2,640 78,123 462,140 540,263

–50,384 –8,162 – –148,533 – –8 386,622 75,518 462,140

540,263 508,663 2 1,048,928 –24,146 1,024,782

462,140 670,934 – 1,133,074 –39,576 1,093,498

2 4 6 8 10 12 14 16 18 20 22 24 26 28 30 32 34 36 38 40 42 44 46 48 50 52 54 56 58 60 62 64 66 68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 100 102 104 106 108 110 112

Notes

Notes to the consolidated financial statements of the Audi Group for the 2002 financial year Fixed assets EUR ’000

Gross carrying values Cost of purchase/ cost of sales 1 Jan. 2002

Changes in consolidated companies

Foreign currency changes

Additions

Transfers

Disposals

Cost of purchase/ cost of sales 31 Dec. 2002

15 –

–13 –

45,977 –

2,408 –

5,019 –

116,110 365,874

16,930



579,323

–444,799

67,048

907,800





254,388

444,799

20,349

2,327,272

– 16,945

– –13

7,790 887,478

– 2,408

– 92,416

7,790 3,724,846

2,676,348 3,329,656

– 181

–1,960 –4,387

97,940 188,631

126,366 171,556

47,402 244,888

2,851,292 3,440,749

5,287,773

1,154

–1,598

687,152

286,243

263,340

5,997,384

812,543 12,106,320

– 1,335

–208 –8,153

541,878 1,515,601

–591,524 –7,359

164,343



–204

6,239



7,164

163,214

39,053









152

38,901

11 3,598 207,005

– – –

– – –204

– 395 6,634

– – –

8 899 8,223

3 3,094 205,212

16,927 15,240,696

– 18,280

– –8,370

1 2,409,714

4,951 –

Intangible assets Concessions, industrial property rights and similar rights and values, as well as licences thereto 72,742 Goodwill 365,874 Capitalised development costs, products currently in development 823,394 Capitalised development costs, products currently in use 1,648,434 Payments on account for intangible assets – 2,910,444 Property, plant and equipment Land, land rights and buildings, including buildings on land owned by others and leased buildings Plant and machinery Other fixtures and fittings, tools and equipment and leased fixtures and fittings, tools and equipment Advances received and construction in progress

Investments Investments in affiliated companies Investments in associated companies Loans to companies linked through participation Other loans

Rented lessor’s assets Total fixed assets

31,218 731,471 586,848 13,020,896

128 21,751 687,615 16,972,705

1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49 51 53 55 57 59 61 63 65 67 69 71 73 75 77 79 81 83 85 87 89 91 93 95 97 99 101 103 105 107 109 111

Allowances Cumulative depreciation

Carrying values

Changes in consolidated companies

Foreign currency changes

Depreciation for current year

Transfers

Disposals

Write-ups

1 Jan. 2002

Cumulative depreciation 31 Dec. 2002

31 Dec. 2002

31 Dec. 2001

35,013 104,530

– –

– –

24,914 44,426

– –

5,007 –

– –

54,920 148,956

61,190 216,918

37,729 261,344

















907,800

823,394

675,720





331,484



20,349



986,855

1,340,417

972,714

– 815,263

– –

– –

– 400,824

– –

– 25,356

– –

– 1,190,731

7,790 2,534,115

– 2,095,181

1,117,769 2,001,630

– 42

–202 –1,900

112,575 326,958

–1,363 –199

38,930 223,463

– –

1,189,849 2,103,068

1,661,443 1,337,681

1,558,579 1,328,026

3,679,115

482

–927

799,775

1,562

232,431



4,247,576

1,749,808

1,608,658

714 6,799,228

– 524

– –3,029

– 1,239,308

– –

46 494,870

– –

668 7,541,161

730,803 5,479,735

811,829 5,307,092

















163,214

164,343

















38,901

39,053

– 116 116

– – –

– – –

– – –

– – –

– – –

– – –

– 116 116

3 2,978 205,096

11 3,482 206,889

1,969 7,616,576

– 524

– –3,029

493 1,640,625

– –

128 520,354

– –

2,334 8,734,342

19,417 8,238,363

14,958 7,624,120

2 4 6 8 10 12 14 16 18 20 22 24 26 28 30 32 34 36 38 40 42 44 46 48 50 52 54 56 58 60 62 64 66 68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 100 102 104 106 108 110 112

Notes

Notes to the consolidated financial statements of the Audi Group for the 2001 financial year Fixed assets EUR ’000

Gross carrying values Cost of purchase/ cost of sales 1 Jan. 2001

Changes in consolidated companies

Foreign currency changes

Additions

Transfers

Disposals

Cost of purchase/ cost of sales 31 Dec. 2001

– –

–3 –

18,711 –

722 –

18,647 –

72,742 365,874





586,170

–240,695



823,394

– –

– –3

139,410 744,291

240,695 722

133,568 152,215

1,648,434 2,910,444

2,499,963 3,171,318

– –

643 1,502

124,613 132,004

75,350 138,627

24,221 113,795

2,676,348 3,329,656

4,761,240



41

515,585

118,681

107,774

5,287,773

557,321 10,989,842

– –

94 2,280

610,330 1,382,532

–350,163 –17,505

160,805 13,289

– –

75 –

9,582 7,977

– –

6,119 21,266

164,343 –

33,549





5,504





39,053

19 14,492 3,932 226,086

– – – –

– – – 75

– – 777 23,840

– – – –

8 14,492 1,111 42,996

11 – 3,598 207,005

– 13,533,577

– –

– 2,352

150 2,150,813

16,783 –

Intangible assets Concessions, industrial property rights and similar rights and values, as well as licences thereto 71,959 Goodwill 365,874 Capitalised development costs, products currently in development 477,919 Capitalised development costs, products currently in use 1,401,897 2,317,649 Property, plant and equipment Land, land rights and buildings, including buildings on land owned by others and leased buildings Plant and machinery Other fixtures and fittings, tools and equipment and leased fixtures and fittings, tools and equipment Advances received and construction in progress

Investments Investments in affiliated companies Loans to affiliated companies Investments in associated companies Loans to companies linked through participation Securities Other loans

Rented lessor’s assets Total fixed assets

5,039 812,543 250,829 12,106,320

6 16,927 446,046 15,240,696

1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49 51 53 55 57 59 61 63 65 67 69 71 73 75 77 79 81 83 85 87 89 91 93 95 97 99 101 103 105 107 109 111

Allowances Cumulative depreciation

Carrying values

Changes in consolidated companies

Foreign currency changes

Depreciation for current year

Transfers

Disposals

Write-ups

1 Jan. 2001

Cumulative depreciation 31 Dec. 2001

31 Dec. 2001

31 Dec. 2000

38,008 60,104

– –

– –

15,630 44,426

– –

18,625 –

– –

35,013 104,530

37,729 261,344

33,951 305,770

















823,394

477,919

536,462 634,574

– –

– –

272,826 332,882

– –

133,568 152,193

– –

675,720 815,263

972,714 2,095,181

865,435 1,683,075

1,029,733 1,790,896

– –

64 538

105,049 307,701

–1,583 84

15,494 97,589

– –

1,117,769 2,001,630

1,558,579 1,328,026

1,470,230 1,380,422

3,089,204



6

688,484

–39

98,540



3,679,115

1,608,658

1,672,036

714 5,910,547

– –

– 608

– 1,101,234

– –1,538

– 211,623

– –

714 6,799,228

811,829 5,307,092

556,607 5,079,295

– –

– –

– –

– –

– –

– –

– –

– –

164,343 –

160,805 13,289

















39,053

33,549

– – 70 70

– – – –

– – – –

– – 61 61

– – – –

– – 15 15

– – – –

– – 116 116

11 – 3,482 206,889

19 14,492 3,862 226,016

– 6,545,191

– –

– 608

431 1,434,608

1,538 –

– 363,831

– –

1,969 7,616,576

14,958 7,624,120

– 6,988,386

2 4 6 8 10 12 14 16 18 20 22 24 26 28 30 32 34 36 38 40 42 44 46 48 50 52 54 56 58 60 62 64 66 68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 100 102 104 106 108 110 112

Notes

Notes to the consolidated financial statements of the Audi Group for the 2002 financial year General information AUDI AG has the legal form of a German share-issuing company (Aktiengesellschaft). Its registered office is in Ettinger Strasse, Ingolstadt, and it is entered in Commercial Register HR B 1 in Ingolstadt. Around 99 percent of the share capital of AUDI AG is held by VOLKSWAGEN AG, Wolfsburg, with which a control and profit transfer agreement exists. The consolidated financial statements of AUDI AG are included in the consolidated financial statements of VOLKSWAGEN AG, which are deposited with the Local Court of Wolfsburg. The object of the company is the development, production and sale of motor vehicles, other vehicles and engines of all kinds, together with their accessories, as well as machinery, tools and other technical articles. Primary accounting basis AUDI AG has prepared its consolidated financial statements on the basis of the International Accounting Standards (IAS) and the interpretations of the International Financial Reporting Interpretations Committee (IFRIC). The representation of trade receivables and payables, which for the first time also include the accounts outstanding with affiliated and associated companies, has been brought more closely in line with the business operations of the Audi Group. In the interests of greater comparability, the prior-year figures have likewise been adjusted to the new system of itemisation. The income statement has been drawn up according to the internationally practised function of expense method. The consolidated financial statements provide a true and fair view of the financial performance and financial position of the Audi Group. The conditions pursuant to Section 292 a of German Commercial Code for exemption from the requirement to prepare consolidated financial statements in accordance with German accounting standards are thus met. The assessment of these conditions is based on German Accounting Standard No. 1 (DRS 1), published by the German Council for Standardisation. To achieve equal value with consolidated financial statements prepared in accordance with German law, additional information pursuant to Section 292 a of German Commercial Code is disclosed.

Notes on accounting policies which differ from German law The substantial differences between IAS and accounting policies in accordance with German law relate to the following points: – Goodwill arising from the consolidation of capital is capitalised as an asset according to IAS 22 and depreciated over its useful life. – Development costs are carried as intangible assets in accordance with IAS 38, provided that the production of the developed products is likely to bring economic benefit to the Audi Group. – The straight-line method of depreciation is applied instead of the diminishing balance method; multilevel depreciation is no longer practised. Depreciation is measured on the basis of useful life expectancy. Special depreciation for tax purposes and simplifications are not permitted in the IAS financial statements. – Rented property, plant and equipment are recognised as assets and the resulting liabilities simultaneously recognised as liabilities, provided the economic interest in the property, plant and equipment can be attributed to the companies of the Audi Group pursuant to IAS 17. – Securities are reported at their fair value, even if this is higher than the cost of purchase. – Derivative financial instruments to hedge against foreign exchange exposure are – according to the same principle as the measurement of securities – likewise reported at their fair value in accordance with IAS 39, even if this is higher than the cost of purchase. The opportunities and risks from the measurement of financial instruments used as a hedge for items on the balance sheet (fair value hedges) are recognised immediately. The changes in value of financial instruments which are used for hedging future payments are handled in a differentiated manner. Whereas the fluctuations in the value of currency option transactions immediately have an effect on the net profit or loss for the period, the changes in value of foreign exchange contracts (cash-flow hedges) are initially booked to a special reserve with no effect on income and only have an impact on the income statement when the hedged payment is realised.

1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49 51 53 55 57 59 61 63 65 67 69 71 73 75 77 79 81 83 85 87 89 91 93 95 97 99 101 103 105 107 109 111

– Provisions are only formed where commitments to third parties exist. – Provisions for pensions are determined pursuant to IAS 19 according to the benefit/years of service method, taking into account future pay and pension increases. Actuarial gains and losses are only shown in the balance sheet and booked to income where they exceed ten percent of the higher of retirement benefit obligations or the fair value of the plan assets on the reporting date. – Medium-term and long-term provisions are reported at their present value. – Pursuant to IAS 12, deferred tax is determined according to the balance sheet oriented liability method. This method specifies that tax deferrals are to be created for all temporary differences between the valuations in the tax balance sheet and the consolidated financial statements (temporary concept). Deferred tax from the carryforward of losses is in addition to be recorded. Consolidated companies In addition to AUDI AG, the consolidated financial statements include all key companies where AUDI AG directly or indirectly has scope for determining the financial and business policy in such a way that group companies benefit from the activities of the companies in question (subsidiaries). Consolidation begins at that point in time from which the Audi Group acquires the opportunity for control, and ends when that opportunity ceases to be available. Pursuant to IAS 27, the financial statements of AUDI AG and the consolidated subsidiaries are included in the consolidated financial statements on the basis of financial statements prepared and audited in accordance with the uniform accounting and consolidation principles for the Audi Group. The Audi Group includes AUDI AG and the companies AUDI HUNGARIA MOTOR Kft., COSWORTH TECHNOLOGY LIMITED, four companies of the Lamborghini Group, AUTOGERMA S.p.A. and AUDI DO BRASIL E CIA. The companies quattro GmbH, Neckarsulm, and AUDI SENNA Ltda., São Paulo, Brazil, are fully consolidated for the first time in the 2002 financial year. The inclusion of these companies does not affect the comparability of the consolidated financial statements for 2002 with the previous year’s accounts.

Audi Japan K.K. is included in the financial statements of VOLKSWAGEN AG as the latter company holds a majority of the voting rights on the board of control. Seven foreign and 16 domestic companies are in addition not consolidated. These companies are of only minor importance for the financial performance and financial position of the group. Subsidiaries and investments are always reported at their cost of purchase, as no active market exists for these companies and no fair value can reliably be determined with a justifiable amount of effort. These subsidiaries are substantially dormant companies or companies with only limited business operations. A statement of interests held by the Audi Group is provided in the Annex to the Notes. Consolidation principles Capital consolidation is performed by offsetting the cost of purchase of an investment against the pro rata remeasured equity of the subsidiary. Differences on the liabilities side resulting from the consolidation of capital of companies being consolidated for the first time are offset against the Audi Group’s revenue reserves. An assets-side difference is capitalised as goodwill. Receivables and liabilities between consolidated companies are offset, and expenditure and income eliminated. Intra-group profits have been eliminated from group inventories and fixed assets. Consolidation processes affecting income are subject to deferrals of income taxes, with deferred tax assets and liabilities offset where the term and tax creditor coincide. The same consolidation principles were applied in the financial statements for both 2001 and 2002. Foreign currency translation The currency of the Audi Group is the euro. Foreign currency transactions in the separate financial statements of AUDI AG and the subsidiaries are translated at the prevailing exchange rate on the date of the transaction. Monetary items in foreign currency are reported at the balance sheet date on the basis of the exchange rate on that date. Exchange differences are booked to the current-period result. The foreign companies belonging to the Audi Group are foreign entities which prepare their financial statements in their local currency. AUDI HUNGARIA MOTOR Kft. is the sole exception, as it already prepares its

2 4 6 8 10 12 14 16 18 20 22 24 26 28 30 32 34 36 38 40 42 44 46 48 50 52 54 56 58 60 62 64 66 68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 100 102 104 106 108 110 112

Notes

annual financial statements in euros. The concept of the “functional currency” is applied when translating financial statements prepared in foreign currency. Assets and liabilities, with the exception of equity, are translated at the closing rate. The effects of foreign currency translation on equity are reported in the reserve for foreign currency translation. The items in the income statement are translated using weighted average monthly rates. Exchange differences resulting from diverging exchange rates used in the balance sheet and the income statement are offset against equity with no effect on income.

EUR 1 = Brazil (BRL) Great Britain (GBP) As all consolidated subsidiaries have their registered offices in countries in which there is currently no hyperinflation, IAS 29 does not apply.

Closing rate 31 Dec. 02 31 Dec. 01 3.7050 2.0469 0.6505 0.6091

Average rate 2002 2.7838 0.6287

2001 2.1054 0.6220

1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49 51 53 55 57 59 61 63 65 67 69 71 73 75 77 79 81 83 85 87 89 91 93 95 97 99 101 103 105 107 109 111

Notes to the consolidated income statement

1 Revenue

3 Distribution costs

Revenue is always recorded at the time of performance of the services or delivery of the goods or products, in other words upon passage of risk. The percentage of completion method is only applied in exceptional cases, as the dates on which a service is commenced and completed regularly fall within the same accounting period.

Distribution costs substantially comprise expenses for marketing and sales promotion, advertising, public relations activities and outward freight, as well as depreciation for the sales sector.

The general administrative costs include labour and materials costs, as well as depreciation for the administrative sector.

Group revenue according to products: EUR ’000 Audi brand Audi A2 Audi A3/Audi TT Audi A4/Cabriolet Audi A6 Audi A8 Lamborghini brand Volkswagen Passenger Cars brand SEAT brand Škoda brand Total revenue for cars Volkswagen Commercial Vehicles brand Other sales Total revenue

4 General administrative costs

2002 16,705,861 535,791 2,810,976 8,055,273 4,759,095 544,726 81,674

2001 16,137,288 603,574 3,246,132 6,707,809 4,997,423 582,350 55,652

2,423,094 428,559 219,660 19,858,848

2,551,304 368,478 303,101 19,415,823

98,144 2,645,651 22,602,643

93,827 2,522,650 22,032,300

Revenue is categorised according to production location and region for the purpose of segment reporting, along the same lines as those used for internal group steering and reporting. The other sales above all constitute goods and services supplied to affiliated companies and other sales to third parties. 2 Cost of sales The cost of sales comprises the costs incurred in generating revenue and cost prices in commercial transactions. This item also includes expenses resulting from the creation of provisions for warranty costs and for development costs which cannot be capitalised.

5 Other operating income EUR ’000 Income from rebilling Income from the reversal of provisions and accruals Income from spot exchange transactions and from the settlement of derivative currency hedging instruments (cash-flow hedges) Income from the sale of promotional materials Income from exchange-rate changes Income from claims for damages Income from asset disposals Income from rented lessor’s assets Income from the liquidation of allowances for liabilities and other assets Income from tenancy agreements Miscellaneous operating income Total other operating income

2002 227,325

2001 191,411

108,936

56,266

73,758

58,373

40,172

32,838

34,911

55,276

13,012

13,933

3,817

6,190

2,638

2,638

1,708

2,755

1,250

766

132,012

109,218

639,539

529,664

Income from exchange-rate changes substantially comprises gains resulting from exchange-rate movements between the dates of output and payment, and exchange-rate gains as a result of valuation at the

2 4 6 8 10 12 14 16 18 20 22 24 26 28 30 32 34 36 38 40 42 44 46 48 50 52 54 56 58 60 62 64 66 68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 100 102 104 106 108 110 112

Notes

average rate on the closing date. In the same way, exchange rate losses are reported under Other operating expenses, item 6. The overall item of currency hedging instruments is shown under Other particulars, item 2.1.

relates above all to a share in the profits of Volkswagen Transport GmbH & Co. OHG and FAW-Volkswagen Automotive Company, Ltd.

6 Other operating expenses

EUR ’000 Income from securities and borrowings Income from the valuation at market value of assets and liabilities marketable securities and long-term borrowings derivative financial instruments Expense from the valuation at market value of assets and liabilities marketable securities and long-term borrowings derivative financial instruments Other interest and similar income of which from affiliated companies Other interest and similar expenses of which to affiliated companies Interest expense included in leasing instalments Total net interest

EUR ’000 Losses on asset disposals Depreciation on goodwill Expense from exchange-rate changes Expense from spot exchange transactions and from the settlement of derivative currency hedging instruments (cash-flow hedges) Allowances for receivables Miscellaneous operating expenses Total other operating expenses

2002 139,800 44,426

2001 24,264 44,426

40,840

44,569

18,462 6,896

40,599 18,425

200,798

158,459

451,222

330,742

The expenses resulting from the disposal of assets include disposals of capitalised development costs as well as property, plant and equipment. The overall item of currency hedging instruments is shown under Other particulars, item 2.1. 7 Investment result EUR ’000 Income from profit transfer agreements Other income from investments of which from affiliated companies associated companies Expense from the transfer of losses Total investment result

2002

2001

3,317

39,485

41,041

51,593

24,250 16,791

28,608 22,985

1,985 42,373

– 91,078

The income from profit transfer agreements in the current year is substantially from Audi Vertriebsbetreuungsgesellschaft mbH; in the previous year, this income was from quattro GmbH. The other income from investments

8 Net interest 2002

2001

379

5,911

14,452 –

4,018 435

3,529

2,591

10,923

992

13,298 2,044

10,823 995

10,754

9,385

500

443

52,597

56,358

22,369

25,639

73,578

116,195

52,204

115,568

955 –20,403

1,472 –62,203

Interest income and expenses are attributed on an accrual basis. The overall item of currency hedging instruments is shown under Other particulars, item 2.1.

1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49 51 53 55 57 59 61 63 65 67 69 71 73 75 77 79 81 83 85 87 89 91 93 95 97 99 101 103 105 107 109 111

9 Other financial result EUR ’000 Compounding of provisions for pensions Compounding of other reserves Total other finance result

2002

2001

–85,689

–84,886

–17,786 –103,475

–43,404 –128,290

10 Income tax expense Income tax expense includes taxes passed on by VOLKSWAGEN AG on the basis of the single-entity relationship between the two companies for tax purposes, along with taxes owed by AUDI AG and its consolidated subsidiaries, as well as deferred taxes. Composition of tax expense: EUR ’000 Current tax expense of which for Germany other countries not relating to the period income from the reversal of tax provisions Deferred tax income/expense of which for Germany other countries Total income tax expense

2002 447,445 361,107 86,338

2001 350,980 313,930 37,050

–3,616

15,450

–92

–4,184

32,697 36,409 –3,712 480,142

201,525 224,154 –22,629 552,505

Of the current tax expense, an amount of EUR 361 million (EUR 314 million) was passed on to VOLKSWAGEN AG. Other taxes totalling EUR 10 million (EUR 17 million) were allocated according to corporate functions. Pursuant to IAS 12, deferred tax is determined according to the balance sheet liability method. This method specifies that tax deferrals are to be created for all temporary differences between the valuations in the tax balance sheet and the consolidated financial statements (temporary concept). Deferred tax from the carryforward of losses is in addition to be recorded. Deferrals amounting to the anticipated tax burden or tax relief in subsequent financial years are created on the basis of the likely tax rate at the time of realisation.

In accordance with IAS 12, the tax consequences of the distribution of profits are not recognised until the resolution on the appropriation of profits is passed. Deferred tax assets include future tax relief resulting from temporary differences between the carrying amounts in the consolidated balance sheet and the valuations in the tax balance sheet. Deferred tax assets on tax loss carryforwards that can be realised in the future are also recorded. Deferred tax assets and deferred tax liabilities are netted, provided there is identity of the tax creditors and maturities. An adjustment of value is performed for deferred tax assets which are unlikely to be realised. Actual and deferred taxes are measured at the tax rate of 38.3 percent (38.3 percent). This represents the sum of the corporate income tax rate of 25 percent, the solidarity surcharge of 5.5 percent and the average trade earnings tax rate for the group. As a result of the new tax reduction and company taxation reform legislation, income from domestic investments and gains on the sale of investments in domestic corporate enterprises has no longer been generally subject to taxation since January 1, 2002. The statutory corporate income tax rate was raised to 26.5 percent (plus the solidarity surcharge of 5.5 percent) as a result of the Flood Relief Act which became law on September 21, 2002 for the 2003 tax assessment period. For domestic group companies, deferred tax being realised in the 2003 financial year is therefore recognised at a tax rate of 39.66 percent (including corporation tax) at 31 December, 2002. This resulted in a deferred tax expense of EUR 2 million in the 2002 financial year. The national income tax rates applicable for foreign companies range from 30 percent to 40 percent. Where the income of subsidiaries is exempt from taxation as a result of special local fiscal arrangements and the tax effects after the ending of temporary tax exemption are not foreseeable, no deferred tax is carried. The realisation of tax losses resulted in a reduction of EUR 1 million (EUR 10 million) in current income tax expense in 2002. There exist outstanding loss carryforwards totalling EUR 11 million (EUR 16 million), which can be used indefinitely. Deferred tax totalling EUR 11 million (EUR 3 million) relates to business transactions (cash-flow hedges) charged directly to equity.

2 4 6 8 10 12 14 16 18 20 22 24 26 28 30 32 34 36 38 40 42 44 46 48 50 52 54 56 58 60 62 64 66 68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 100 102 104 106 108 110 112

Notes

Tax-rate changes produced deferred income tax expense of EUR 2 million. The following deferred tax assets and liabilities carried in the balance sheet are attributable to reporting and valuation differences in the individual balance sheet items:

EUR ’000 Intangible assets Property, plant and equipment Investments Inventories Receivables and other assets Other current assets Provisions for pensions Other provisions Liabilities Loss carryforwards Gross value of which long-term Offsetting measures Consolidation measures Carrying amount

Deferred tax assets 31 Dec. 02 31 Dec. 01 552 1,062 82,405 55,914 35,553 27,871 13,372 10,640 9,746 10,605 75 1,684 116,003 125,738 321,872 313,005 22,868 12,850 3,877 4,784 606,323 564,153 359,141 366,454 –474,993 –450,308 5,695 8,059 137,025 121,904

Deferred tax liabilities 31 Dec. 02 31 Dec. 01 812,306 657,496 401,540 438,662 229 250 2,289 1,408 23,461 5,789 1,424 264 492 – 12,702 65,886 8,512 6,562 – – 1,262,955 1,176,317 1,031,105 1,000,604 –474,993 –450,308 – – 787,962 726,009

1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49 51 53 55 57 59 61 63 65 67 69 71 73 75 77 79 81 83 85 87 89 91 93 95 97 99 101 103 105 107 109 111

Reconciliation of anticipated to actual income tax expense The actual tax expense is slightly higher than the anticipated tax expense. The reasons for the difference between the anticipated and actual tax expense are as follows: EUR ’000 Accounting profit Anticipated income tax expense 38.3 % Reconciliation Divergent foreign tax burden Tax portion for: Tax-exempt earnings Expenses not deductible for tax purposes Temporary differences and losses for which no deferred tax has been recorded Tax income and expense not relating to the period Effects of tax-rate changes Other tax effects Actual income tax expense Effective tax rate in %

2002 1,254,499

2001 1,321,858

480,473

506,272

–98,888

–92,495

–10,895

–13,525

17,460

8,871

46,699

42,015

–3,569 2,220 46,642 480,142 38.3

15,450 65 85,852 552,505 41.8

11 Profit transfer to VOLKSWAGEN AG Pursuant to the profit transfer agreement with AUDI AG, an amount of EUR 185 million (EUR 209 million) was transferred to VOLKSWAGEN AG. 12 Profit share of minority shareholders The profit due to other shareholders is in respect of shareholders of AUDI SENNA Ltda. 13 Earnings per share Basic earnings per share are calculated by dividing the profit share of AUDI AG shareholders by the weighted average number of shares in circulation during the financial year.

In the case of Audi, the diluted earnings per share are the same as the basic earnings per share, as there were no potential shares in AUDI AG in existence at either December 31, 2001 or December 31, 2002.

Profit share of AUDI AG shareholders in EUR thousand Weighted average number of shares (basic and diluted totals are identical) Earnings per share in EUR

2002

2001

771,556

769,353

43,000,000 17.94

43,000,000 17.89

Outside shareholders in AUDI AG receive a compensatory payment for each individual share certificate instead of a dividend for the 2002 financial year. The level of this payment corresponds to the dividend that is paid on one VOLKSWAGEN AG ordinary share. The dividend payment will be determined by the Annual General Meeting of VOLKSWAGEN AG on April 24, 2003.

2 4 6 8 10 12 14 16 18 20 22 24 26 28 30 32 34 36 38 40 42 44 46 48 50 52 54 56 58 60 62 64 66 68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 100 102 104 106 108 110 112

Notes

Notes to the consolidated balance sheet

14 Intangible assets EUR ’000 Concessions, industrial property rights and similar rights and values, as well as licences thereto Goodwill Capitalised development costs for products currently in development products currently in use Payments on account for intangible assets

The depreciation plan is based principally on the following useful lives: 31 Dec. 02

31 Dec. 01 Useful life

61,190 216,918

37,729 261,344

907,800

823,394

1,340,417

972,714

7,790 2,534,115

– 2,095,181

Measurement principles Intangible assets acquired for consideration are reported at cost of purchase, taking account of ancillary costs and cost reductions, and depreciated on a scheduled straight-line basis over their economic life. Concessions, rights and licences relate to purchased computer software and paid subsidies. Goodwill from the consolidation of capital is depreciated on a scheduled straight-line basis over its useful life. Research costs are treated as current expenses in accordance with IAS 38. The development costs of products going into series production are capitalised, provided that the production of these products is likely to bring economic benefit to the Audi Group. If the conditions for capitalisation are not met, the expenses are booked to the current-period result in the year in which they occur. Capitalised development costs comprise all costs directly allocable to the development process, as well as an appropriate portion of the development-related overhead costs. Finance charges are not capitalised. Depreciation is performed on a straight-line basis from the start of production, over the anticipated model life of the developed products.

Concessions, industrial property rights and similar rights and values of which software Goodwill from first-time consolidation Capitalised development costs

3–15 years 3 years 5–10 years 5–9 years

The depreciation for the year is allocated to the corresponding functional areas; the depreciation on capitalised goodwill is included in other operating expenses. In accordance with IAS 36 non-scheduled depreciation is performed on intangible assets where the recoverable amount from the use of the asset in question has fallen below the carrying value. If the reasons for non-scheduled depreciation in previous years cease to apply, the corresponding amounts are written back. There was no need for either depreciation or write-backs in the period under review. Research and development expenses: EUR ’000 Research costs and non-capitalised development costs Depreciation and disposals of capitalised development costs Total research and development expenses

2002

2001

501,199

411,603

398,532

272,826

899,731

684,429

Spending on research and development activities in the 2002 financial year totalled EUR 1,335 million (EUR 1,137 million). Of this total, EUR 834 million (EUR 726 million) satisfy the criteria for capitalisation according to IAS.

1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49 51 53 55 57 59 61 63 65 67 69 71 73 75 77 79 81 83 85 87 89 91 93 95 97 99 101 103 105 107 109 111

15 Property, plant and equipment EUR ’000 31 Dec. 02 Land, land rights and buildings, including buildings on land owned by others 1,661,443 of which leased buildings – Plant and machinery 1,337,681 Other fixtures and fittings, tools and equipment 1,749,808 of which leased fixtures and fittings, tools and equipment 10,039 Advances received and construction in progress 730,803 5,479,735

31 Dec. 01

1,558,579 33,358 1,328,026 1,608,658

6,433 811,829 5,307,092

Measurement principles Property, plant and equipment are measured at cost of purchase or cost of sales, less scheduled straight-line depreciation according to the pro rata temporis method. The cost of purchase includes the purchase price, ancillary costs and cost reductions. In the case of self-constructed fixed assets, the cost of sales includes both the directly allocable cost of materials and cost of labour, and indirect materials and indirect labour, together with pro rata depreciation. Interest on borrowings is not included. The depreciation plan is based principally on the following useful lives:

Buildings Plant fixtures Plant and machinery Tools and equipment, including special tools

Useful life 25–50 years 10–18 years 6–12 years 3–15 years

Minor assets with a cost of purchase of up to 410 euros are fully written off in the year of acquisition. Non-scheduled depreciation of property, plant and equipment pursuant to IAS 36 is performed where the recoverable amount from the use of the asset in question has fallen below the carrying value. Such depreciation in the period under review totalled EUR 97 million. If the reasons for non-scheduled depreciation in previ-

ous years cease to apply, the corresponding amounts are written back. In accordance with IAS 17, property, plant and equipment used on the basis of lease agreements is capitalised if the conditions of a finance lease are met, in other words if the significant risks and opportunities which result from its use have passed to the lessee. Capitalisation is performed at the time of the agreement, at cost of purchase or cost of sales, or at the present value of the minimum lease payments if lower. The straight-line depreciation method is based on economic life, or on the term of the lease contract if shorter. Payment commitments from future lease instalments are recognised as a liability, without future interest costs being taken into account. Payments totalling EUR 51 million (EUR 52 million) for assets rented on the basis of operating lease agreements were recognised as an expense.

2 4 6 8 10 12 14 16 18 20 22 24 26 28 30 32 34 36 38 40 42 44 46 48 50 52 54 56 58 60 62 64 66 68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 100 102 104 106 108 110 112

Notes

16 Investments

EUR ’000 Investments in affiliated companies Investments in associated companies Loans to companies linked through participation Other loans

The change in investments in affiliated companies results largely from the full consolidation of quattro GmbH and AUDI SENNA Ltda. for the first time, as well as from the injection of new capital at Audi Electronics Venture GmbH. Measurement principles Shares in non-consolidated affiliated companies and investments in associated companies are always shown at their respective cost of purchase, as no active market exists for these companies and no fair value can reliably be determined with a justifiable amount of effort. The fair values of medium and long-term loans are determined by discounting at risk-adequate market rates, and deviate from the carrying amounts recognised at amortised cost. In the case of short-term items, the amortised cost corresponds to the fair value. Loans are measured at the amortised cost using the effective interest rate method. The fair values to be indicated in addition in the Notes are determined by discounting future streams of payments at the market rate. Non-scheduled depreciation on investments is performed if the market or stock market value has fallen below the carrying value. If the reasons for non-scheduled depreciation in previous years cease to apply, the corresponding amounts are written back. There was no need for depreciation in the period under review.

Carrying values 31 Dec. 02 31 Dec. 01 163,214 164,343 38,901 39,053 3 11 2,978 3,482 205,096 206,889

Fair values 31 Dec. 02 163,214 38,901 3 2,481 204,599

31 Dec. 01 164,343 39,053 11 2,958 206,365

1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49 51 53 55 57 59 61 63 65 67 69 71 73 75 77 79 81 83 85 87 89 91 93 95 97 99 101 103 105 107 109 111

17 Rented lessor’s assets The fair values of the rented lessor’s assets correspond to the carrying values. Three buildings rented out in the long term are reported as lessor’s assets. Measurement principles Land and buildings held for the purpose of generating rental income (investment property) are measured at amortised cost. Buildings are depreciated on the basis of a useful life of 33 years. 18 Inventories EUR ’000 Raw material and consumables used Work in progress Finished goods and merchandise Payments on account for inventories

31 Dec. 02

31 Dec. 01

311,061 276,514

303,436 284,381

1,112,600

875,052

10,326 1,710,501

– 1,462,869

Of total inventories, EUR 343,264 thousand (EUR 147,345 thousand) are reported at the lower net realisable value. The reduction in value totalled EUR 52,352 thousand (EUR 23,356 thousand). No write-back was performed in the financial year. There are no significant restrictions on ownership or disposal for the reported inventories. Measurement principles Raw materials and consumables used are measured at the updated average cost of purchase or at the lower replacement value. Incidental costs of purchase and purchase cost reductions are taken into account as appropriate. Work in progress and finished goods are valued at cost of sales or at the lower replacement value. The cost of sales includes direct materials and direct labour, as well as an appropriate portion of the indirect materials and indirect labour, production-related depreciation and the expenditure allocable to the products from the depreciation of capitalised developments in series production. Distribution costs, general administrative costs and interest on borrowings are not capitalised.

Merchandise is valued at cost of purchase or at the lower replacement value. Provision has been made for all discernible storage and inventory risks by way of appropriate value adjustments. Individual downward valuation adjustments are made on all inventories as soon as the probable proceeds from their sale or use are lower than the carrying values of the inventories. The amount the inventories are expected to raise less the costs incurred up to their sale is taken as the lower replacement value.

2 4 6 8 10 12 14 16 18 20 22 24 26 28 30 32 34 36 38 40 42 44 46 48 50 52 54 56 58 60 62 64 66 68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 100 102 104 106 108 110 112

Notes

19 Receivables Measurement principles Receivables and other assets are valued at the nominal amount or at the amortised cost. Provision is made for discernible one-off risks and general credit risks in the form of appropriate value adjustments. The fair value is determined by discounting the medium and long-term asset items at market rates. In the case of short-term items, the fair value corresponds to the amortised cost. 20 Trade receivables Time to maturity over 1 year 31 Dec. 02 31 Dec. 01

EUR ’000 Trade receivables from third parties affiliated companies companies linked through participation

15,550 – – 15,550

11,185 – – 11,185

Carrying values 31 Dec. 02

31 Dec. 01

676,112 367,947 62,305 1,106,364

437,378 129,480 46,650 613,508

The fair value of trade receivables amounts to EUR 1,105,828 thousand (EUR 612,893 thousand). 21 Other receivables and assets

EUR ’000 Other receivables from affiliated companies Other receivables from associated companies Other tax claims Other assets Assets from derivative currency hedging instruments

Notes 21 a)

The other receivables and assets have a fair value of EUR 538,171 thousand (EUR 288,909 thousand). There are no significant restrictions on ownership or disposal for the reported receivables and other assets.

21 b)

Time to maturity over 1 year 31 Dec. 02 31 Dec. 01 – – – – 63,680 60,278 8,100 7,943 44 98 71,824 68,319

Carrying values 31 Dec. 02 304,704 1,040 107,870 124,252 367 538,233

31 Dec. 01 84,432 – 128,843 74,404 1,371 289,050

1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49 51 53 55 57 59 61 63 65 67 69 71 73 75 77 79 81 83 85 87 89 91 93 95 97 99 101 103 105 107 109 111

a) Derivative currency hedging instruments included in other items:

EUR ’000 Other receivables from affiliated companies Cash-flow hedges Currency option transactions

Due in over 1 year 31 Dec. 02 31 Dec. 01 42,568 16,065 58,633

5,184 – 5,184

Market values 31 Dec. 02 31 Dec. 01 42,568 16,065 58,633

5,210 – 5,210

The overall item of currency hedging instruments is shown under Other particulars, item 2.1. b) Derivative currency hedging instruments:

EUR ’000 Forward contracts Currency swaps

Derivative currency hedging instruments are measured at market value. The overall item of currency hedging instruments is shown under Other particulars, item 2.1. 22 Securities Marketable securities comprise fixed-interest and variable-interest securities and shares. The rates of return ranged between 4.06 percent and 8.25 percent. Measurement principles Marketable securities are measured at market value, in other words at the stock market prices at the balance sheet date.

Due in over 1 year 31 Dec. 02 31 Dec. 01 43 1,272 – – 43 1,272

Market values 31 Dec. 02 31 Dec. 01 92 1,371 275 – 367 1,371

2 4 6 8 10 12 14 16 18 20 22 24 26 28 30 32 34 36 38 40 42 44 46 48 50 52 54 56 58 60 62 64 66 68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 100 102 104 106 108 110 112

Notes

28 Revenue reserves

23 Cash EUR ’000 Balances with banks and affiliated companies Cheques and cash in hand

31 Dec. 02

31 Dec. 01

540,058 205 540,263

462,031 109 462,140

The rates of return for overnight money ranged between 3.01 percent and 3.31 percent. Balances existed with various banks and in various currencies. Liquid funds that are due at any time were invested with affiliated companies via the cash pooling arrangements.

EUR ’000 Legal reserve Reserve for cash-flow hedges Reserve for foreign exchange differences Other revenue reserves

31 Dec. 02 131

31 Dec. 01 131

16,916

–1,048

–3,935 4,759,993 4,773,105

7,412 4,169,022 4,175,517

The temporary differences between the valuations in the tax balance sheet and the consolidated financial statements are explained in item 10.

The opportunities and risks from foreign exchange contracts serving as hedges for future payments are deferred with no effect on income in the reserve for cash-flow hedges. When the cash-flow hedges fall due, the results from the settlement of the exchange-rate hedging contracts are reported under the other operating result. The consolidated net profit for the year of EUR 586,556 thousand (EUR 560,353 thousand) remaining after the transfer of profit to VOLKSWAGEN AG and after deduction of the profit share of minority shareholders is allocated to the other revenue reserves.

25 Prepaid expenses

29 Minority interests

Prepaid expenses are used for the determination of profit on an accrual basis. Expenditure that does not result in expenses until after the balance-sheet date is shown on the assets side.

Minority interests in the shareholders’ equity relate to AUDI SENNA Ltda., São Paulo.

Measurement principles Cash is measured at nominal value. 24 Deferred tax assets

26 Issued capital The issued capital of AUDI AG totals EUR 110,080,000. Each share represents a mathematical share of EUR 2.56 in the share capital. It is divided into 43,000,000 bearer individual share certificates. 27 Capital reserve The capital reserves contain shareholder contributions from the issue of shares in the company. It remained unchanged at EUR 57 million on December 31, 2002.

1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49 51 53 55 57 59 61 63 65 67 69 71 73 75 77 79 81 83 85 87 89 91 93 95 97 99 101 103 105 107 109 111

30 Provisions Terms of provisions:

EUR ’000 Provisions for pensions Tax provisions Other provisions Total Provisions for pensions Provisions to cover pension obligations are created on the basis of plans to provide retirement, invalidity and surviving dependents’ benefits. They relate exclusively to benefit commitments for employees of AUDI AG, AUTOGERMA S.p.A and COSWORTH TECHNOLOGY LIMITED. The benefits generally depend on the length of service and remuneration of the employees. Within the Audi Group, a distinction is made between benefit systems based on provisions and those financed externally via pension funds. The internal pension fund model introduced at AUDI AG on January 1, 2001 is based on contributionbased retirement benefit commitments, which are classified as benefit commitments pursuant to IAS 19. The remuneration-based annual cost of commitments is invested in funds on a fiduciary basis by Volkswagen Pension Trust e.V. This model offers AUDI AG employees the opportunity to increase their benefit entitlements, while providing full risk cover. As the units administrated on a fiduciary basis satisfy the requirements of IAS 19 as assets, these funds were offset against the retirement benefit obligations derived from them. Obligations for retirement benefits are measured according to the benefit/years of service method pursuant to IAS 19. Here, the future commitments are measured on the basis of benefit entitlements acquired pro rata at the balance sheet date. For purposes of measurement, trend assumptions are used for the relevant quantities which affect the level of benefit.

Time to maturity over 1 year 31 Dec. 02 31 Dec. 01 1,363,970 1,310,304 – – 800,329 835,229 2,164,299 2,145,533

Total 31 Dec. 02 1,413,591 51,796 2,214,206 3,679,593

31 Dec. 01 1,356,804 14,121 1,990,302 3,361,227

The calculation is based on the following individual actuarial assumptions: Percent Remuneration trend Retirement benefit trend Interest rate Fluctuation rate Expected return on plan assets

31 Dec. 02 2.75–3.50 1.50–2.50 5.50–5.75 1.40

31 Dec. 01 3.00–3.50 1.50–4.00 5.70–6.00 1.40

6.75–7.50

6.70–7.00

The biometric mortality was determined using the “1998 Reference Tables” by Dr. K. Heubeck.

2 4 6 8 10 12 14 16 18 20 22 24 26 28 30 32 34 36 38 40 42 44 46 48 50 52 54 56 58 60 62 64 66 68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 100 102 104 106 108 110 112

Notes

Progression from benefit/years of service to provisions for pensions to meet retirement benefit commitments recognised in the balance sheet: EUR ’000 Benefit/years of service of externally financed obligations Fair value of plan assets Surplus Benefit/years of service of non-externally financed obligations Unrecognised actuarial losses Provisions recognised in balance sheet

31 Dec. 02

31 Dec. 01

113,843 –78,383 35,460

64,406 –46,290 18,116

1,495,119

1,387,277

–116,988

–48,589

1,413,591

1,356,804

Actuarial gains and losses result from changes in the number of people participating in the pension scheme and from a deviation in the actual trends (for example, increases in pay or retirement benefit) from the figures assumed for calculation purposes. Such gains and losses are only booked to income where they exceed ten percent of the higher of retirement benefit obligations or the fair value of the plan assets on the reporting date. In accordance with IAS 19, this residual amount is shown in the balance sheet on the basis of the future average remaining working life of the employees and offset against the result.

The amounts recognised in the income statement are as follows: EUR ’000 Current service cost for services rendered by employees in the financial year Interest cost Expected return on plan assets Net actuarial losses recognised in year Currency differences from foreign schemes Total expense and income recognised in the income statement

31 Dec. 02

31 Dec. 01

65,483 85,689

50,111 84,886

–7,230

–2,257

168

48

36

61

144,146

132,849

The interest element in pension costs is shown as interest expense in the other finance result. The actual loss from plan assets totalled EUR 11,938 thousand (EUR 1,231 thousand) in the past financial year.

1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49 51 53 55 57 59 61 63 65 67 69 71 73 75 77 79 81 83 85 87 89 91 93 95 97 99 101 103 105 107 109 111

The provisions for pensions recorded in the balance sheet changed as follows: EUR ’000 Provisions for pensions at January 1 Retirement benefit cost Payment of retirement benefits from company assets Contributions to external pension funds Transfers received from affiliated companies Transfers to affiliated companies Currency differences Provisions for pensions at December 31

2002

2001

1,356,804 144,146

1,294,513 132,784

–46,115

–42,673

–42,980

–27,562

10,452

523

–8,569 –147

–846 65

1,413,591

1,356,804

Tax provisions The tax provisions include obligations for ongoing taxes on income and for other taxes. The deferred tax liabilities are explained separately under items 10 and 35. Other provisions

EUR ’000 Warranties Distribution costs Workforce costs EU Directive on end-of-life vehicles Miscellaneous provisions Total

Consumed

Liquidated 7,033 24,300 1,818

Allocated/ new 727,661 349,708 90,629

Compounded 14,899 1,072 –883

1 Jan. 02 1,149,731 377,780 199,125

577,165 284,191 45,790

31 Dec. 02 1,308,093 420,069 241,263

93,533 170,133 1,990,302

– 71,899 979,045

34,182 13,903 81,236

6,465 91,935 1,266,398

1,779 920 17,787

67,595 177,186 2,214,206

2 4 6 8 10 12 14 16 18 20 22 24 26 28 30 32 34 36 38 40 42 44 46 48 50 52 54 56 58 60 62 64 66 68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 100 102 104 106 108 110 112

Notes

Measurement principles In accordance with IAS 37, provisions are created if an obligation existing towards third parties is likely to lead to future cash outflows and where the amount of the obligation can reliably be estimated. If these criteria are not met, the obligations in question are reported under contingent liabilities. Pursuant to IAS 37, the miscellaneous provisions for all discernible risks and contingent liabilities are reported at their probable cost and not offset against recourse entitlements. Provisions with over one year to maturity are measured at their discounted settlement value at the balance sheet date. Market rates are used as the discount rates. The settlement value also includes the cost increases to be taken into account at the balance sheet date, according to IAS 37. Pursuant to IAS 37, the provision for warranties covers all legal and statutory warranty commitments and goods and services provided to customers on a goodwill basis. The provisions are measured on the basis of anticipated amounts per vehicle, differentiated according to model and country or market area, and calculated using statistical findings. The provisions for distribution costs relate principally to bonus commitments to dealers, as well as cost sharing pledges to importers and dealers for the implementation of investment projects, and for training measures. Commitments to the workforce are substantially in respect of long-service awards, outstanding vacation, accumulated overtime, awards for suggested improvements, ex gratia payments and pre-retirement part-time arrangements. The provision for costs arising from the obligation to dispose of scrap vehicles in accordance with the EU Directive on end-of-life vehicles covers the residual risk within the Audi Group, taking account of national differences in salvaging costs. The miscellaneous provisions relate to a wide range of one-off risks.

1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49 51 53 55 57 59 61 63 65 67 69 71 73 75 77 79 81 83 85 87 89 91 93 95 97 99 101 103 105 107 109 111

31 Liabilities Measurement principles Short-term liabilities are reported at the repayment or settlement value. Medium and long-term liabilities are carried in the balance sheet at amortised cost. The fair values to be indicated in addition are determined by discounting future streams of payments at the market rate. Liabilities from financial lease agreements are carried at the present value of the leasing instalments. 32 Short-term and long-term debt

EUR ’000 Liabilities from financial lease agreements Liabilities from cash pooling

31 Dec. 2002 Time to maturity up to 1 year 4,417 13,703 18,120

Carrying values 1–5 years

over 5 years

5,703 – 5,703

– – –

10,120 13,703 23,823

31 Dec. 2001 Time to maturity over 1 year 1,251 – 1,251

Carrying values

13,815 38,993 52,808

The financial lease agreements are based on an interest of 6.5 percent p. a. in each case. These agreements will incur a finance charge totalling EUR 788 thousand over the next few years. The liabilities from cash pooling have been reclassified as short-term and long-term debt instead of other liabilities. 33 Trade payables

EUR ’000 Trade payables in respect of third parties affiliated companies other companies linked through participation

31 Dec. 2002 Time to maturity up to 1 year

Carrying values

31 Dec. 2001 Time to maturity over 1 year

Carrying values

1–5 years

over 5 years

1,735,863 162,718

8,000 –

– –

1,743,863 162,718

8,000 –

1,366,913 235,666

261 1,898,842

– 8,000

– –

261 1,906,842

– 8,000

2,484 1,605,063

2 4 6 8 10 12 14 16 18 20 22 24 26 28 30 32 34 36 38 40 42 44 46 48 50 52 54 56 58 60 62 64 66 68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 100 102 104 106 108 110 112

Notes

The fair value of trade payables in respect of third parties amounts to EUR 1,743,672 thousand (EUR 1,366,305 thousand). Liabilities to affiliated companies have a fair value of EUR 162,718 thousand (EUR 235,666 thousand). In the case of short-term items, the fair value corresponds to the amortised cost. No interest is calculated on the medium and longterm liabilities. The customary retention of title moreover applies for liabilities from deliveries of goods. 34 Other liabilities

EUR ’000 Advances received for orders Liabilities to affiliated companies of which income taxes Liabilities to companies linked through participation Derivative financial instruments Other liabilities of which taxes in respect of social insurance

Notes

34 a)

34 b)

31 Dec. 2002 Time to maturity up to 1 year

Carrying values

31 Dec. 2001 Time to maturity over 1 year

Carrying values

1–5 years

over 5 years

6,223





6,223



4,628

630,864

189,569

100,000

920,433

225,448

662,634

175,190

182,200

100,000

457,390

223,000

379,099

12





12





71 489,215 125,997

– 15,394 434

– 8,923 –

71 513,532 126,431

– 13,879 –

463 497,080 49,654

89,989 1,126,385

4,540 204,963

1 108,923

94,530 1,440,271

4,089 239,327

88,355 1,164,805

In the case of liabilities to affiliated companies and liabilities to companies linked through participation, the carrying values correspond to the fair values.

1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49 51 53 55 57 59 61 63 65 67 69 71 73 75 77 79 81 83 85 87 89 91 93 95 97 99 101 103 105 107 109 111

a) Negative market values of derivative currency hedging instruments:

EUR ’000 Liabilities to affiliated companies Foreign exchange contracts (cash-flow hedges)

Due in over 1 year 31 Dec. 02 31 Dec. 01 –



Market values 31 Dec. 02 31 Dec. 01 15,172

8,259

b) Derivative currency hedging instruments:

EUR ’000 Foreign exchange contracts (cash-flow hedges) Currency swaps

The derivative currency hedging instruments reported under items a) and b) consist exclusively of cash-flow hedges; they are measured at their market values. The overall item of currency hedging instruments is shown under Other particulars, item 2.1. 35 Deferred tax liabilities The temporary differences between the valuations in the tax balance sheet and the consolidated financial statements are explained in item 10. 36 Deferred income Deferred income is used for the determination of profit on an accrual basis. Receipts that do not result in income until after the balance-sheet date are shown on the liabilities side.

Due in over 1 year 31 Dec. 02 31 Dec. 01 – – – – – –

Market values 31 Dec. 02 31 Dec. 01 71 20 – 443 71 463

2 4 6 8 10 12 14 16 18 20 22 24 26 28 30 32 34 36 38 40 42 44 46 48 50 52 54 56 58 60 62 64 66 68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 100 102 104 106 108 110 112

Notes

Other par ticulars

1 Financial instruments Financial instruments refer to any contract that gives rise to both a financial asset of one enterprise and a financial liability or equity instrument of another enterprise. They include both primary instruments and derivative instruments or obligations. Derivative financial instruments are used as a hedge for items on the balance sheet and for future payments. IAS 39 subdivides financial instruments into four categories: – Financial instruments held for trading – Held-to-maturity investments – Loans and receivables originated by the enterprise – Available-for-sale financial assets The financial instruments used within the Audi Group are generally classified as “available for sale” or “loans and receivables originated by the enterprise”. “Financial instruments held for trading” arise where external hedging transactions are concluded for relationships involving credit between group companies but are eliminated from the consolidated financial statements. No financial instruments in the category of “held-to-maturity investments” are in use. Where financial instruments are purchased or sold in the “customary” manner, they are recognised using settlement date accounting. Financial instruments are reported at amortised cost or at fair value. The amortised cost of a financial asset or financial liability is the amount at which the financial asset or liability was measured at initial recognition minus principal repayments, any non-scheduled depreciation for impairment or uncollectability, and the premium. The premium is distributed over the term of the financial asset or financial liability by means of the effective interest rate method. In the case of short-term receivables and liabilities, the amortised cost corresponds to the notional or repayment value. The fair value generally corresponds to the market or stock market value. If no active market exists, the fair value is determined by means of investment mathematics methods.

1.1 Primary financial instruments “Loans and receivables originated by the enterprise” and liabilities are measured at amortised cost, using the effective interest method, if they have not arisen in connection with hedging transactions. These include in particular – Financial investments – Trade accounts receivable and payable – Other short-term assets and liabilities. In the case of short-term receivables and liabilities, the amortised cost corresponds to the notional or repayment value. “Available-for-sale financial instruments” are always measured at their fair value. In the case of quoted financial instruments, the fair value corresponds to the market value on the balance sheet date. This category substantially comprises long-term and current investments. Investment holdings in subsidiaries and investments in associated companies are generally shown at their respective cost of purchase, as no active market exists for these companies and no fair value can reliably be determined with a justifiable amount of effort. Changes to the fair value are booked to the current-period result. 1.2 Derivative financial instruments Derivative financial instruments are used as a hedge for items on the balance sheet and for future payments. In the case of hedges against the risk of changes in value of balance sheet items (fair-value hedges), both the hedging transaction and the hedged risk portion of the underlying transaction are recognised at fair value. Changes in value are included in the net interest. The carrying value of the hedged underlying transaction is simultaneously adjusted and recognised. As a means of hedging future payments in foreign currency, the Audi Group uses foreign exchange contracts (cash-flow hedges) and currency option transactions. These hedging instruments are likewise recognised at fair value. Whereas the fluctuations in the value of currency option transactions immediately have an effect on the net profit or loss for the period, the changes in value of cash-flow hedges are initially booked to a special reserve with no effect on income and are only recognised as income or expense once the hedged payment is realised.

1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49 51 53 55 57 59 61 63 65 67 69 71 73 75 77 79 81 83 85 87 89 91 93 95 97 99 101 103 105 107 109 111

2 Hedging policy and risk management 2.1 Price and foreign exchange exposure In view of its international business activities, the Audi Group is exposed to price and exchange rate fluctuations. It is the company’s policy to exclude or limit these risks by concluding appropriate hedging transactions. The measures to hedge against foreign exchange exposure are coordinated regularly between AUDI AG and the group treasury of VOLKSWAGEN AG in accordance with the Volkswagen organisational guideline. On the basis of an agency contract, the group treasury of VOLKSWAGEN AG also handles foreign exchange hedging matters for the Audi Group and concludes transactions in the name and for the account of VOLKSWAGEN AG. These transactions relate to the hedging of payments in foreign currency arising from operations (e.g. for goods and services) and to the hedging at matching amounts and maturities of Volkswagen Group financing. Marketable derivative financial instruments (foreign exchange contracts and currency option transactions) are used for this purpose. The hedging transactions performed for Audi by VOLKSWAGEN AG on the basis of the agency agreement are concluded with top-grade national and international banks whose creditworthiness is regularly examined by leading rating agencies. The results from foreign exchange hedging are credited or charged to the Audi Group each month on the basis of the proportion of the Volkswagen Group’s overall hedging volume. In accordance with the Volkswagen organisational guideline, AUDI AG is moreover authorised to conclude hedging transactions of its own to a limited extent, where this helps to simplify current operations. The volumes, currencies and maturities of these transactions are continuously coordinated with VOLKSWAGEN AG. The arrangements for the group-wide foreign exchange hedging policy are based on the “Minimum requirements for the performing of commercial acts by banks” issued by the Federal Supervisory Office for Financial Services. Nominal volume of derivative financial instruments The nominal volumes of the hedging transactions shown represent the total of all buying and selling prices on which the transactions are based.

2 4 6 8 10 12 14 16 18 20 22 24 26 28 30 32 34 36 38 40 42 44 46 48 50 52 54 56 58 60 62 64 66 68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 100 102 104 106 108 110 112

Notes

EUR ’000 Foreign exchange contracts Cash-flow hedges Currency option transactions Currency swaps Fair value hedges Total portfolio

Nominal values Time to maturity 31 Dec. 02 up to 1 year

Market values 31 Dec. 01

up to 1 year

31 Dec. 02

31 Dec. 01

1,521,743 356,806

1,518,861 356,806

725,326 –

724,029 –

27,417 16,065

–1,698 –

24,311 1,902,860

24,311 1,899,978

25,230 750,556

25,230 749,259

275 43,757

–443 –2,141

2.2 Market risk A market risk exists if price changes on financial markets have a negative influence on the value of financial instruments. The market values shown in the table have been calculated on the basis of the market information available at the balance sheet date and represent the redemption (cash-in) values of the derivative financial instruments. The redemption values are calculated on the basis of quoted prices or standardised methods. 2.3 Interest rate risk An interest rate risk, in other words potential fluctuations in the value of financial instruments as a result of changes to market rates, can occur above all in the case of medium and long-term, fixed-interest receivables and liabilities. Fixed-interest loans totalled EUR 3 million (EUR 3 million) on December 31, 2002 (EUR 3 million). In view of the low volume of these financial instruments, no interestrate hedging contracts were taken out. 2.4 Liquidity risk A liquidity forecast based on a definite planning horizon and credit facilities of VOLKSWAGEN AG assure the adequate liquidity of the Audi Group at all times.

1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49 51 53 55 57 59 61 63 65 67 69 71 73 75 77 79 81 83 85 87 89 91 93 95 97 99 101 103 105 107 109 111

2.5 Credit risk The maximum theoretical credit risk from the primary financial instruments corresponds to the value of all receivables after netting against liabilities due to the same business partner. It is assumed that the actual risk is adequately covered by the estimated uncollectable portion of accounts receivable. The credit risk from derivative financial instruments does not exceed the balance of positive market values in the event of default by a counterparty of VOLKSWAGEN AG or the Audi Group companies. The actual credit risk is slight, as VOLKSWAGEN AG and AUDI AG only conclude contracts with top-class business partners and trading limits are defined for each business partner as a risk management measure. 3 Contingencies Contingencies are unrecognised contingent liabilities, the amount of which corresponds to the maximum possible claim at the balance sheet date. On December 31, 2002 there existed a contingent liability amounting to EUR 3 million (EUR 3 million) from the creation of comprehensive land charges for outside liabilities in connection with a warehouse. 4 Litigation settlements Neither AUDI AG nor any of its group companies are involved in ongoing or prospective legal or arbitration proceedings which could have a significant influence on their economic position or have had such an influence during the past two years. Appropriate provisions have been created within each group company, or adequate insurance benefits are anticipated, for possible financial charges resulting from other legal or arbitrational proceedings.

2 4 6 8 10 12 14 16 18 20 22 24 26 28 30 32 34 36 38 40 42 44 46 48 50 52 54 56 58 60 62 64 66 68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 100 102 104 106 108 110 112

Notes

5 Other financial obligations

EUR million Ordering commitments for property, plant and equipment intangible assets Commitments from long-term rental and lease agreements agreed loans

31 Dec. 2002 Due within 1 year

Due in 1–5 years

over 5 years

552 113

368 16

20 36 721

20 – 404

The commitments from rental and lease agreements relate exclusively to rental agreements in which the companies of the Audi Group does not have an economic interest in the rented assets according to the criteria of IAS 17. 6 Discontinuation of operations There are no plans to discontinue operations as defined by IAS 35. 7 Income and expenses not related to the period Income totalling EUR 109 million (EUR 76 million), relates to other financial years. On the other hand, the group incurred expenses relating to other periods totalling EUR 233 million (EUR 166 million). Both this income and these expenses are included for the most part in other operating income and expenses.

Total

31 Dec. 2001 Due in over 1 year

Total

– –

920 129

352 44

881 188

2 – 2

42 36 1,127

22 – 418

44 – 1,113

1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49 51 53 55 57 59 61 63 65 67 69 71 73 75 77 79 81 83 85 87 89 91 93 95 97 99 101 103 105 107 109 111

11 Relationships with related parties

8 Cost of materials EUR ’000 Raw materials and consumables used as well as purchased goods Purchased services

2002

2001

15,480,414 1,245,322 16,725,736

14,844,094 1,016,003 15,860,097

2002 2,271,867

2001 2,147,772

467,040

512,506

67,936 2,738,907

139,150 2,660,278

9 Personnel costs EUR ’000 Wages and salaries Social insurance and expenses for retirement benefits and maintenance payments of which in respect of retirement benefits

From the 2002 financial year, the interest expense for pensions is no longer shown under personnel costs. This adjustment resulted in a fall by EUR 85,689 thousand in personnel costs. 10 Total average employees for the year

Domestic group companies Foreign group companies Total of which apprentices

2002 44,261 6,937 51,198 1,733

2001 44,374 6,767 51,141 1,578

Related parties as defined in IAS 24 are – VOLKSWAGEN AG – Companies which are controlled directly or indirectly by AUDI AG but are not consolidated – Other consolidated and non-consolidated affiliated companies in the Volkswagen Group which supply goods and services to or purchase goods and services from companies of the Audi Group in the context of their business purpose – Members of the Board of Management or Supervisory Board – Companies in which a substantial interest in the voting power is owned by VOLKSWAGEN AG or by members of its management. All business with related parties has been conducted on the basis of international comparable uncontrolled price methods pursuant to IAS 24, according to the terms that customarily apply to outside third parties. The goods and services procured from related parties include primarily supplies for production, as well as development, transport, financial and distribution services and, to a lesser extent, design, training and other services and supplies of parts. Business from related companies comprises for the most part sales of new and used cars, engines and components. Related parties controlled by companies of the Audi Group are listed in the statement of interests held together with details of the level of investment, equity and annual profit. Members of the Board of Management or Supervisory Board of AUDI AG also belong to the supervisory or management boards of other companies with which the Audi Group maintains business relations. All transactions with such companies are likewise conducted according to the terms that customarily apply to outside third parties. Cash management within the Audi Group is centralised at AUDI AG. The group companies invest their liquid funds with AUDI AG or raise liquid funds from it. Residual amounts are equalised via the cash pool of VOLKSWAGEN AG. All transactions are handled on market terms.

2 4 6 8 10 12 14 16 18 20 22 24 26 28 30 32 34 36 38 40 42 44 46 48 50 52 54 56 58 60 62 64 66 68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 100 102 104 106 108 110 112

Notes

Segment repor ts

The Audi Group is structured along the lines of the regional locations of its assets, into the following segments: Germany (AUDI AG, quattro GmbH), Hungary (AUDI HUNGARIA MOTOR Kft.), Great Britain (COSWORTH TECHNOLOGY LIMITED), Italy, and Brazil (AUDI DO BRASIL E CIA, AUDI SENNA Ltda.). The assets in Italy are distributed between the Lamborghini Group, with the companies Automobili Lamborghini Holding S.p.A., Automobili Lamborghini S.p.A., Motori Marini Lamborghini S.p.A. and Lamborghini ArtiMarca S.p.A., and the general importer AUTOGERMA S.p.A. The subdivision of the group into five segments on the basis of the locations of assets reflects the arrangements for internal group steering and reporting. The principal activities of AUDI AG, quattro GmbH and the Lamborghini Group are the development, pro-

duction, assembly and sale of cars and engines. AUDI HUNGARIA MOTOR Kft. manufactures engines and cars. COSWORTH TECHNOLOGY LIMITED develops, manufactures and assembles engines and vehicle components. AUTOGERMA S.p.A. imports and sells models of the Audi, SEAT, Škoda, Volkswagen Commercial Vehicles and Volkswagen Passenger Cars brands as well as parts. AUDI DO BRASIL E CIA holds a dormant equity holding in the Curitiba Business Unit. AUDI SENNA Ltda. sells Audi vehicles in Brazil. Transactions between the segments are conducted on generally accepted market terms, in the way that is customary for transactions with outside third parties.

EUR million Germany Hungary Great Britain Italy Brazil Consolidation measures Audi Group

External revenue 2002 2001 16,532 16,133 1,092 986 45 58 4,900 4,855 34 – – – 22,603 22,032

Internal revenue 2002 2001 1,800 1,591 2,465 2,484 85 65 0 0 – – –4,350 –4,140 – –

Total revenue 2002 18,332 3,557 130 4,900 34 –4,350 22,603

EUR million Germany Hungary Great Britain Italy Brazil Consolidation measures Audi Group

Profit before tax 2002 2001 868 1,044 264 251 –1 –13 114 42 13 0 –4 –2 1,254 1,322

Segment assets 31 Dec. 02 31 Dec. 01 11,620 9,950 2,122 1,882 119 118 1,451 1,154 129 213 –2,791 –2,183 12,650 11,134

Segment liabilities 31 Dec. 02 31 Dec. 01 6,821 5,910 372 396 55 49 877 651 4 1 –1,122 –834 7,007 6,173

Investments in property, plant and equipment 1 2002 2001 2,035 1,881 253 184 14 17 101 45 0 0 2,403 2,127

Investments in financial assets 2002 7 0 7

EUR million Germany Hungary Great Britain Italy Brazil Consolidation measures Audi Group 1

Including intangible assets

2001 17,724 3,470 123 4,855 – –4,140 22,032

2001 24 0 0 24

1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49 51 53 55 57 59 61 63 65 67 69 71 73 75 77 79 81 83 85 87 89 91 93 95 97 99 101 103 105 107 109 111

Depreciation EUR million Germany Hungary Great Britain Italy Brazil Consolidation measures Audi Group

2002 1,418 168 12 44 0 –1 1,641

2001 1,220 147 12 40 0 16 1,435

Share 2002 EUR mill. 6,974 11,248 2,866 1,205 153 157 22,603

Percent 30.9 49.7 12.7 5.3 0.7 0.7 100.0

Other non-cash expenses 2002 1,043 27 8 287 0 –130 1,235

2001 714 44 4 92 0 –204 650

The locations of assets differ fundamentally from the locations of the most important sales markets. Pursuant to IAS 14.71, revenue is therefore broken down according to the geographical locations of customers.

Revenue Germany Europe excluding Germany North America Asia/Oceania Latin America Africa Total Details of the Supervisory Board and Board of Management The remuneration of members of the Board of Management of AUDI AG for the 2002 financial year came to EUR 5,673 thousand (EUR 6,106 thousand). This amount was made up of EUR 2,513 thousand in fixed payments and EUR 3,160 thousand in variable remuneration components. In the context of the fourth tranche of the VOLKSWAGEN AG share options plan, the members of the Audi Board of Management in addition purchased a total of 3,000 convertible bonds at a price of EUR 2.56 each, bearing the right to purchase 30,000 ordinary shares in VOLKSWAGEN AG. No options from the first to third tranches of the share options plan have so far been exercised. At December 31, 2002, the members of the Board of Management consequently held entitlements to purchase 210,000 ordinary shares in VOLKSWAGEN AG. The initial conversion price of the fourth tranche, which reflects the price of Volkswagen shares on Feb-

Share 2001 EUR mill. 7,051 10,734 2,814 1,151 124 158 22,032

Percent 32.0 48.7 12.8 5.2 0.6 0.7 100.0

ruary 27, 2002, was fixed at EUR 51.52 per Volkswagen ordinary share. The conversion price rises by five percentage points in each subsequent year, with the result that ordinary shares can be purchased for the first time after expiry of the qualifying period of 24 months at a price of EUR 56.67. The conversion period is three years; during this period, the conversion price rises by a further five percentage points per year. No staff costs are booked in connection with the issuing of convertible bonds. The provisions for pensions for current members of the Board of Management total EUR 8,740 thousand (EUR 9,198 thousand). Payments to former members of the Board of Management or their surviving dependants amounted to EUR 875 thousand (EUR 835 thousand). The 1,000 convertible bonds held by former members of the Board of Management from the first tranche of the VOLKSWAGEN AG share options plan have since been returned.

2 4 6 8 10 12 14 16 18 20 22 24 26 28 30 32 34 36 38 40 42 44 46 48 50 52 54 56 58 60 62 64 66 68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 100 102 104 106 108 110 112

Notes

Pension commitments to former members of the Board of Management and their surviving dependents are covered by provisions totalling EUR 14,395 thousand (EUR 13,704 thousand). The remuneration of the Supervisory Board of AUDI AG amounted to EUR 149 thousand (EUR 150 thousand). The members of the Board of Management and Supervisory Board, together with their membership of other supervisory boards and regulatory bodies – pursuant to Sections 285 Sentence 1, No. 10 of the German Commercial Code and 125 Para. 1, Sentence 3 of German Stock Corporation Law – are indicated in the Notes to the financial statements of AUDI AG.

mendations of the “Government Commission on the German Corporate Governance Code”. The declaration was placed on AUDI AG’s homepage on December 19, 2002. The English translation of the Declaration of Compliance is to be found at www.audi.com.

Declaration of Compliance Pursuant to Section 161 of German Stock Corporation Law, the Board of Management and Supervisory Board of AUDI AG have submitted a declaration on the recom-

Ingolstadt, January 31, 2003

Events occurring after the balance sheet date No events which must be reported according to IAS 10 occurred after December 31, 2002. Approval of the annual financial statements for 2002 The annual financial statements for 2002 will be approved and released for publication by the Supervisory Board of AUDI AG on February 21, 2003.

The Board of Management

1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49 51 53 55 57 59 61 63 65 67 69 71 73 75 77 79 81 83 85 87 89 91 93 95 97 99 101 103 105 107 109 111

Statement of interests held by the Audi Group at December 31, 2002 Name and registered office of company I. Parent company AUDI AG, Ingolstadt II. Subsidiaries A. Fully consolidated companies: AUDI DO BRASIL E CIA., Curitiba (Brazil) AUDI HUNGARIA MOTOR Kft., Györ (Hungary) Automobili Lamborghini Holding S.p.A., Sant’Agata Bolognese (Italy) 3 Automobili Lamborghini S.p.A., Sant’Agata Bolognese (Italy) 3 Motori Marini Lamborghini S.p.A., Sant’Agata Bolognese (Italy) 3 Lamborghini ArtiMarca S.p.A., Sant’Agata Bolognese (Italy) 3 AUTOGERMA S.p.A., Verona (Italy) 3 COSWORTH TECHNOLOGY LIMITED, Northampton (Great Britain) quattro GmbH, Neckarsulm AUDI SENNA Ltda., São Paulo (Brazil) B. Non-consolidated companies: Audi Electronics Venture GmbH, Ingolstadt Audi Japan K.K., Tokyo (Japan) 5 Audi Synko GmbH, Ingolstadt Audi Vertriebsbetreuungsgesellschaft mbH, Ingolstadt AUTO UNION GmbH, Ingolstadt COSWORTH TECHNOLOGY, INC., Novi (USA) NSU GmbH, Neckarsulm RACING TECHNOLOGY NORFOLK LIMITED, Norfolk (Great Britain) PUTT ESTATES (PROPRIETARY) Ltd., Upington (South Africa) 3/6 ZERAL Verwaltung GmbH & Co. Bissendorf KG, Munich Audi Zentrum Hannover GmbH, Hanover 6 Audi Australia Pty. Ltd., Homebush Bay (Australia) Volkswagen Group Singapore Pte. Ltd. (Singapore) 6 Audi Akademie, Gesellschaft für Personal- und Organisationsentwicklung mbH, Ingolstadt Fahr- und Sicherheitstraining FuS GmbH, Ingolstadt Volkswagen Transport GmbH & Co. OHG, Wolfsburg 6 YANASE Audi Sales Company Ltd., Tokyo (Japan) 3/7 III. Associated companies August Horch Museum Zwickau GmbH, Zwickau 6 LGI Logistikzentrum im Güterverkehrszentrum Ingolstadt Betreibergesellschaft mbH, Ingolstadt PMDtechnologies GmbH, Siegen 7 S-Tec GmbH, Siegen 7 GIF Gewerbe- und Industriepark Bad Friedrichshall GmbH, Bad Friedrichshall 6 PDB – Partnership for Dummy Technology and Biomechanics (GbR), Ingolstadt 7 FAW-Volkswagen Automotive Company, Ltd., Changchun (China) 6 1

2 3 4 5

Based on the separate financial statements in accordance with the legal requirements in each specific country; net profit Before the transfer of profit (EUR 185 million) to VOLKSWAGEN AG Different financial year Before the transfer of profit to AUDI AG The majority of voting rights is held by VOLKSWAGEN AG

6 7

Capital share in percent

Equity 1 EUR ’000

Profit 1 EUR ’000

1,512,899

210,000 2

100.00 100.00

42,437 1,819,034

285 280,867

100.00 100.00 100.00 100.00 100.00 100.00 100.00 51.00

541,322 47,992 2,182 2,631 94,010 72,906 100 8,988

–15,768 –44,008 –518 209 38,232 –905 21,029 4 5,725

100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 95.00 77.00 50.00 49.00

5,500 42,102 7,807 100 354 2,962 327 5,730 –32 26 104 8,614 8,782

101 4 –9,187 –1,241 4 1,590 4 216 4 323 126 4 141 24 1 –1,236 271 0

44.50 27.45 19.00 33.40

433 62 511 –

199 798 119,416 –

50.00

154

128

50.00 50.00 50.00

277 – –

139 – –

30.00

1,296

130

20.00 10.00

– 1,038,733

– 457,483

2001 financial year Information not yet available, as established or purchased in the course of the 2002 financial year

The figures for foreign participations have been translated into euros at the mean of the buying and selling rate on the day of the transaction.

2 4 6 8 10 12 14 16 18 20 22 24 26 28 30 32 34 36 38 40 42 44 46 48 50 52 54 56 58 60 62 64 66 68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 100 102 104 106 108 110 112

Independent Auditor’s Report

Independent Auditor’s Repor t

Provided that the Annual General Meeting will approve and the German commercial register will enter the signed profit and loss absorption agreement with the subsidiaries Audi Electronics Venture GmbH, Ingolstadt, NSU GmbH, Neckarsulm, Audi Synko GmbH, Ingolstadt, Auto Union GmbH, Ingolstadt, and Audi Vertriebsbetreuungsgesellschaft mbH, Ingolstadt, already recognised in the group financial statement, we issue the following auditor’s report: Independent auditor’s report We have audited the consolidated financial statements of AUDI AG, Ingolstadt, consisting of the balance sheet, the income statement and the statement of changes in equity and cash flows as well as the notes to 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, 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, January 31, 2003 PwC Deutsche Revision Aktiengesellschaft Wirtschaftsprüfungsgesellschaft Gadesmann Independent auditor

ppa. Schröder Independent auditor

1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49 51 53 55 57 59 61 63 65 67 69 71 73 75 77 79 81 83 85 87 89 91 93 95 97 99 101 103 105 107 109 111

Glossary

Glossary

acoustic parking system The acoustic parking system assists the driver when manoeuvring into parking spaces by measuring the distance from obstructions with ultrasonic sensors. The driver is informed of the distance remaining between the car and the obstruction by an acoustic signal, the frequency of which increases until it finally becomes a continuous tone. adaptive air suspension adaptive air suspension is an electronically controlled air suspension system which enhances suspension comfort at all four wheels of the new Audi A8 by means of a continuously variable damper system. It serves as a basis for lowering the body’s ride height depending on road speed, producing superior directional stability. adaptive cruise control adaptive cruise control is an advanced version of cruise control; it detects a preceding vehicle by means of radar sensors and ensures that the desired distance is maintained between the two vehicles by regulating the engine, automatic transmission and brake system accordingly. adaptive light The adaptive light system involves an auxiliary headlight, incorporated into the headlight unit, which helps the driver to spot potential hazards earlier. It comes on automatically when the turn indicator is operated or if the driver turns the steering wheel by any significant degree. advanced key advanced key identifies the car’s driver, who need merely have the key about his person, within a range of approx. 1.5 metres and acts as an electronic access and authorisation system. The car is unlocked as soon as the door handle or luggage compartment lid is operated, and the steering and ignition are released by a starter button on the centre console; if this starter button is then pressed down fully, the engine is started automatically.

Audi Space Frame® (ASF) The ASF is a high-strength aluminium frame structure on which each planar component is integrated as part of the structure. This results in extremely high rigidity, better-than-average crash protection and a significant reduction in vehicle weight. biturbo The suffix “biturbo” for Audi V-engines indicates that there are two exhaust-driven turbochargers, one for each cylinder bank. The driver benefits from increased low-end torque, more output at higher engine speeds and greater responsiveness of the engine. Cruise control The cruise control system is an electronic aid which helps to regulate the vehicle’s speed. The system memorises and maintains the speed selected by the driver. It can reduce or increase that speed temporarily and – if desired – restore the speed last specified. Five-valve technology The five-valves-per-cylinder principle means that the engine is supplied more rapidly and effectively with air. Torque and power output are consequently boosted. Fuel consumption and emission levels are in addition improved. FSI® FSI technology increases the torque and output of spark-ignition engines, makes them up to 15 percent more economical and paves the way for lower exhaust emissions. In contrast to conventional spark-ignition engines, FSI technology involves injecting the fuel directly into the combustion chamber. No throttle valve is now necessary. This dethrottles the engine, reduces thermal losses and thus permits both increased power output and lower fuel consumption. MMI (Multi Media Interface) MMI is an integrated operating concept that enables vehicle and infotainment components to be operated intuitively and according to a simple logical principle. MMI essentially comprises two elements: the operating unit, or MMI terminal, on the centre console and the MMI display, a retractable 7-inch colour monitor. The central element of the MMI terminal is a combined rotary control/pushbutton with four control keys arranged

2 4 6 8 10 12 14 16 18 20 22 24 26 28 30 32 34 36 38 40 42 44 46 48 50 52 54 56 58 60 62 64 66 68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 100 102 104 106 108 110 112

Glossary

around it, with the aid of which the user can navigate through all menus and make the desired selection. multitronic® multitronic is a continuously variable transmission. The power is transmitted at a torque of up to 310 Newtonmetres via a steel link-plate chain, for jolt-free, forceful acceleration. In the manual mode, six simulated drive positions can be selected. In the automatic mode, the DRP dynamic control program calculates the optimum transmission ratio for the driver and driving situation, based on load. quattro® quattro permanent four-wheel drive enjoys a lengthy tradition of more than 20 years. This four-wheel-drive principle involves distributing the engine’s power permanently and according to demand to all four wheels. It provides high active safety, reliable traction on virtually all surfaces and optimum directional stability at all times, even in cross-winds; it is easily superior to driveroperated four-wheel-drive systems because its superior safety features are permanently “on standby”. sideguard The sideguard airbag system provides increased headlevel protection for the front and rear occupants of a vehicle in the event of a suitably severe lateral collision, effectively complementing the side airbag and a correctly worn three-point seat belt. sideguard cushions the effect of the head striking interior components or objects outside the vehicle. In crash situations, the load on the neck is reduced thanks to less pronounced movement of the head. In conjunction with designed-in passive safety measures, sideguard provides an outstandingly high level of lateral impact protection. Sports steering wheel with gearshift function The driver can prompt manual gear changes by the tiptronic or multitronic automatic transmission via shift paddles mounted directly on the leather sports steering wheel. This adds to driving fun and introduces a note of individual choice to dynamic driving. The 3-spoke design highlights the sports character; the full-size airbag is integrated into the steering wheel.

TDI® Audi has many years of experience with TDI technology, an area in which it has been one of the pioneers since 1989. At Audi, TDI denotes diesel models with diesel direct injection. The characteristics of TDI engines are economy, low emissions, high traction and an excellent power yield. tiptronic tiptronic is a special form of transmission which unites the convenience of an automatic transmission with the driving enjoyment and dynamic response of a manual gearbox. The driver can switch from the automatic mode to one-touch gearshifts at any time while on the move. Gearshifts take place with uninterrupted traction in both transmission modes. Turbocharger The operating principle is as follows: a turbine uses the energy of the exhaust-gas flow to drive a compressor impeller located on the same shaft (but in the fresh-air flow). It compresses the fresh air as it is drawn in and forces it into the cylinders. The engine thus has more oxygen for the combustion process. Power output, torque and efficiency can all be boosted in this way compared with naturally aspirated engines of the same displacement. The main points in favour of turbochargers are the energy saving, lower emissions and greater torque. 4-level air suspension 4-level air suspension for the front and rear axles is a standard technical feature of the Audi allroad quattro. With ground clearance of up to 208 mm and in conjunction with the standard feature of quattro drive, this vehicle is also capable of tackling difficult terrain. The ground clearance can be adjusted manually or automatically to four different height settings, covering a total range of 66 mm. An automatic mode regulates the ride height in line with road speed. For further technical explanations and informative diagrams, see www.audi.com/glossary.

Important Dates in 2003

Impor tant Dates in 2003

Annual Press Conference

February 25, 2003

Customer Center at Audi Forum Ingolstadt

Annual General Meeting

May 14, 2003

Customer Center at Audi Forum Ingolstadt

Interim Report

August 5, 2003

10-Year Overview

10-Year Overview 1

German Commercial Code Production 2

Success through innovation In 2002, Audi added a further accolade to its long list of sporting achievements: its third win in a row at the Le Mans 24 Hours. Audi has thus finally secured a place in motor sport’s hall of fame – and acquired valuable experience in the process. Motor sport has always provided a crucial test for innovations before they are introduced on production vehicles. Ideas that were first tested out in

Success through teamwork – our employees motor sport range from a new aluminium frame structure and a new wishbone to a new generation of engines. These developments were perfected in the S and RS models, the most dynamic of Audi vehicles, and are the most vivid example of Audi’s sporting prowess. They reflect the emotionally charged qualities that make Audi something special: power, pleasure and performance.

The name Audi not only stands for a quality car manufacturer. Audi is also behind a number of sports and cultural events in the role of sponsor. In this way it succeeds in forging a link between the brand’s key areas of expertise – design and sports appeal – and other areas that are important to our customers.

AUDI Aktiengesellschaft

Nowadays customers expect more of their cars. They not only want a vehicle that will get them and their passengers from A to B, they are also looking for a design that is technically perfect, safe and as environmentally compatible as possible. We want every one of our cars to satisfy these requirements.

AUDI HUNGARIA MOTOR Kft.

COSWORTH TECHNOLOGY LIMITED

Automobili Lamborghini S.p.A.

Automobili Lamborghini Holding S.p.A.

Motori Marini Lamborghini S.p.A.

AUDI DO BRASIL E CIA.

Lamborghini ArtiMarca S.p.A.

quattro GmbH

AUDI SENNA Ltda.

AUTOGERMA S.p.A.

englische graphic folgt!

The strength of Audi lies in its diversity. The various group companies pool their expertise under a single name and ensure that the Audi Group is strengthened as a result. This transforms numerous individual successes into one major triumph.

1997

1998

1999

340,956

352,589

446,808

491,501

557,777

619,030

626,059

544,538

607,175

620,603

763,928

1,241,351

1,266,896

Vehicle sales

Cars

357,521

376,180

447,855

492,046

546,436

599,509

634,973

Audi

Cars

357,521

376,180

447,855

492,046

546,436

599,509

634,708

IAS

2000

Production 2

2001

2002

Cars

650,850

727,033

735,913

Engines

1,187,666

1,225,448

1,284,488

Vehicle sales

Cars

919,621

991,444

995,531

Audi

Cars

653,404

726,134

742,128

Germany

Cars

163,752

160,803

204,138

217,858

238,735

244,127

257,686

Germany

Cars

239,644

254,866

243,250

Outside Germany

Cars

193,769

215,377

243,717

274,188

307,701

355,382

377,287

Export

Cars

413,760

471,268

498,478

Outside Germany

Percent

54.2

57.3

54.4

55.7

56.3

59.3

59.4

Export

Percent

63.3

64.9

67.2

Market share, Germany

Percent

5.3

5.2

6.2

6.1

6.8

6.5

6.8

Market share, Germany

Percent

6.9

7.5

7.4

Lamborghini

Cars













265

Lamborghini

Cars

296

297

424

Other Volkswagen Group brands

Cars















Other Volkswagen Group brands

Cars

265,921

265,013

252,979

Average

34,363

32,215

32,823

34,529

37,761

41,011

45,800

Employees

Average

49,396

51,141

51,198

Revenue

EUR million

6,419

6,880

8,527

9,616

11,458

13,918

15,146

Revenue

EUR million

19,952

22,032

22,603

Cost of materials

EUR million

4,225

4,457

5,620

6,365

7,568

9,578

10,155

Cost of materials

EUR million

14,539

15,860

16,726

Personnel costs

EUR million

1,470

1,342

1,553

1,663

1,973

2,111

2,291

Cost of labour

EUR million

2,542

2,660

2,739

EUR

42,783

41,660

47,311

48,173

52,251

51,485

50,022

Cost of labour per employee

EUR

51,456

52,018

53,496

Depreciation

EUR million

421

467

529

455

556

885

945

Depreciation and amortisation

EUR million

1,199

1,435

1,641

Profit before tax

EUR million

–76

96

301

441

569

861

839

Profit before tax

EUR million

986

1,322

1,254

Net profit

EUR million

–46

11

57

154

188

237

324

Net profit

EUR million

734

769

774

Share price (year-end price) 3

EUR

21.47

24.03

24.29

48.06

70.81

75.16

61.20

Share price (year-end price) 3

EUR

59.59

160.00

191.00

Compensatory payment

EUR

0.10

0.15

0.31

0.46

0.61

0.77

0.77

Compensatory payment

EUR

1.20

1.30

Added value

EUR million

1,417

1,464

1,882

2,157

2,606

3,039

3,198

Added value

EUR million

3,777

4,254

Capital investments

EUR million

401

769

442

739

1,006

1,620

1,516

Capital investments

EUR million

2,422

2,151

2,410

Cash flow

EUR million

485

624

907

765

1,020

1,213

1,163

Übersetzung! Cash-Flow aus der laufenden Geschäftstätigkeit EUR million

2,094

2,452

2,545

X4

Fixed assets

EUR million

1,439

1,835

1,714

1,978

2,412

3,126

3,679

Fixed assets

EUR million

6,988

7,624

8,238

Current assets

EUR million

1,666

1,787

2,562

2,914

3,182

3,359

3,024

Current assets

EUR million

3,379

3,631

4,548

Shareholders’ equity

EUR million

778

910

926

1,014

1,109

1,231

1,441

Shareholders’ equity

EUR million

3,817

4,342

4,940

Liabilities

EUR million

2,328

2,712

3,349

3,878

4,485

5,254

5,262

Liabilities

EUR million

6,551

6,913

7,847

Balance sheet total

EUR million

3,106

3,622

4,275

4,892

5,594

6,485

6,703

Balance sheet total

EUR million

10,368

11,256

12,787

1

Figures for 2001 calculated for the first time according to the International Accounting Standards (IAS); figures for the 2000 financial year reconciled with IAS for purpose of comparison.

2

Excluding 4 (1993), 2,021 (1994) and 875 (1995) Avant RS 2

3

Figures for 1993–1998 adjusted at ratio of 1 :10 following introduction of individual share certificates; year-end price on Munich Stock Exchange

4

In accordance with the resolution to be passed by the Annual General Meeting of VOLKSWAGEN AG on April 24, 2003

Success through diversity – the group companies

Success through foresight – technology and environmental protection

1996

494,436

Person nel costs per employee

Every Audi is pioneering as far as technology, design and driving pleasure are concerned. From the innovative A2 to the prestigious A8 – every car is perfected, intelligent and progressive. A fact that we can be proud of.

1995

Cars

Working in a team is not only easier, it also produces better ideas. All our innovations, whether in the field of technology or new design, are the result of a joint effort. This means that every employee benefits from the experiences and ideas of others.

Success through commitment – markets and customers

1994

Engines

Employees

Success through expertise – our products

1993

10-Year Overview

IAS

2000

2001

2002

Cars

650,850

727,033

735,913

Engines

1,187,666

1,225,448

1,284,488

Vehicle sales

Cars

919,621

991,444

995,531

Audi

Cars

653,404

726,134

742,128

Germany

Cars

239,644

254,866

243,650

Outside Germany

Cars

413,760

471,268

498,478

Outside Germany

Percent

63.3

64.9

67.2

Market share, Germany

Percent

6.9

7.5

7.4

Lamborghini

Cars

296

297

424

Other Volkswagen Group brands

Cars

265,921

265,013

252,979

Production

Average

49,396

51,141

51,198

Revenue

EUR million

19,952

22,032

22,603

Cost of materials

EUR million

14,539

15,860

16,726

Personnel costs

EUR million

2,542

2,660

2,739

EUR

51,456

52,018

53,496

Depreciation

EUR million

1,199

1,435

1,641

Profit before tax

EUR million

986

1,322

1,254

Net profit

EUR million

734

769

774

Share price (year-end price) 3

EUR

59.59

160.00

191.00

Compensatory payment

EUR

1.20

1.30

Added value

EUR million

3,600

3,914

4,023

Capital investments

EUR million

2,422

2,151

2,410

Cash flow from operating activities

EUR million

2,094

2,452

2,545

Employees

Personnel costs per employee

X4

Fixed assets

EUR million

6,988

7,624

8,238

Current assets

EUR million

3,379

3,631

4,548

Equity

EUR million

3,817

4,342

4,940

Liabilities

EUR million

6,551

6,913

7,847

Balance sheet total

EUR million

10,368

11,256

12,787

Vorsprung dur durc ch Technik www www.audi.com .audi.com

AUDI AG AG Finance Analysis and Publications Publications I/FFI/F F-1 12 85045 Ingolstadt Germany German y Telephone +49 (0)8 41 89 - 4 03 00 Telef elefax ax +49 (0)8 41 89 - 3 09 00