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Porsche International Financing Group Directors' report and consolidated financial statements for the year ended 31 December 2012

PORSCHE INTERNATIONAL FINANCING GROUP

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DIRECTORS’ REPORT AND CONSOLIDATED FINANCIAL STATEM ENTS

for the year ended 31 December 2012

TABLE OF CONTENTS PAGE GROUP INFORMATION 2 DIRECTORS’ REPORT 3 INDEPENDENT AUDITOR’S REPORT 8 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME 10 CONSOLIDATED STATEMENT OF FINANCIAL POSITION 11 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY 12 CONSOLIDATED STATEMENT OF CASH FLOWS 13 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 14


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GROUP INFORMATION DIRECTORS John Gilsenan Frank Mueller (German) - resigned 27 November 2012 Christian Nicklis (German) Dr. Johannes Lattwein (German) - appointed 27

November 2012 SECRETARY Wilton Secretarial Ltd., Fitzwilton House, Wilton Place, Dublin 2 REGISTERED OFFICE 1 Exchange Place, IFSC, Dublin 1. SOLICITORS William Fry, Fitzwilton House, Wilton Place, Dublin 2. BANKERS Deutsche Bank AG, Theodor-Heuss-Strasse 3, 70174 Stuttgart, Germany. Barclays Bank Ireland plc Two Park Place, Hatch Street, Dublin 2 AUDITORS Ernst & Young, Chartered Accountants, Ernst & Young Building, Harcourt Centre, Harcourt Street, Dublin 2.


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DIRECTORS’ REPORT for the year ended 31 December 2012 The directors present herewith their report and audited consolidated financial statements for the year ended 31 December 2012. Comparatives included in the financial statements relate to the year ended 31 December 2011. Porsche International Financing plc (the parent) and Porsche International Reinsurance Limited (the subsidiary) are collectively known as Porsche International Financing Group (referred to as “Group”). Volkswagen AG is the ultimate parent company. Dr. Ing. h.c.F. Porsche AG is the immediate parent company.

PRINCIPAL ACTIVITIES, FUTURE DEVELOPMENTS AND KEY PERFORMANCE INDICATORS The principal activities of the parent company, Porsche International Financing plc, are the provision of financial and treasury services to other corporate entities within the Dr. Ing. h.c.F. Porsche AG Group (“group”). The principal activity of the subsidiary, Porsche International Reinsurance Limited, is the provision of warranty reinsurance cover on pre-owned Porsche cars sold in Europe. There has been no change in the nature of this activity during the year under review and the subsidiary intends to continue to reinsure warranty contracts on pre-owned Porsche cars in the European market through its fronting insurer, Allianz Versicherung AG. In August 2012, the parent redeemed in full the USD 1,000,000,000 7.2% Undated Subordinated Fixed Rate Securities of 2006. The redemption was financed by proceeds from loan repayment by Dr. Ing. h.c.F. Porsche AG. During the year the subsidiary carried out an independent actuarial review of its technical reserves and determined that it had not accounted for its unearned premium reserves in accordance with its accounting policy. Accordingly, the subsidiary has retrospectively accounted for unearned premium reserves based on its accounting policy and made prior year adjustments to retained profit for the year ended 31 December 2011. Further details regarding the prior year adjustments are given in note 2(s) to the consolidated financial statements. Net earned premiums have increased significantly on the previous year’s amount, due to an increase in the number of warranty contracts written. Claims incurred net of reinsurance have marginally decreased reflecting good claims management and an improvement in loss ratios. The subsidiary continues to monitor its loss ratios very closely in conjunction with the parent company, Porsche AG. Key non−financial indicators include the terms of the Reinsurance contract between the company and Allianz Versicherung AG, the fronting insurer. The monitoring of the split between, and the pricing of, one and two year contracts on pre−owned Porsche cars in Europe is also a key performance indicator. The Group intends to continue to provide funding and deposit services to and from group companies, ensuring the prudent investment of the bond proceeds and the maintenance of a sufficient interest margin. Liquidity is maintained by ensuring sufficient deposit and borrowing base to meet group lending requirements. The investment return from the proceeds of bonds exceeds bond interest payable. The interest margin is 3.95% (31 December 2011: 2.89%).


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DIRECTORS’ REPORT for the year ended 31 December 2012 (Continued) Besides the above financial and non-financial key performance indicators for the subsidiary, the directors see the interest margin and the maintenance of sufficient liquidity to meet group funding requirements as the key performance indicators. The key non-financial performance indicators are compliance with group and regulatory requirements. FINANCIAL RISK MANAGEMENT Further details regarding financial risk factors and exposure of the Group to price risk, credit risk and liquidity risk and accounting policies are provided in the notes to the consolidated financial statements. RESULTS AND DIVIDENDS The consolidated profit on ordinary activities before taxation amounted to €13,372,922 (31 December 2011 restated: €7,560,895). After deducting corporation tax of €1,723,438 (31 December 2011 restated: €937,288), an amount of €11,649,484 (31 December 2011 restated: €6,623,607) is available for dividend and retention. No dividend has been paid or is proposed for the year (31 December 2011: €Nil). DIRECTORS’ AND SECRETARY’S INTERESTS IN SHARES The following directors held office during the financial year and, unless otherwise stated, were in office for the entire year: • John Gilsenan • Christian Nicklis (German) • Frank Mueller (German) resigned 27 November 2012 • Dr. Johannes Lattwein (German) appointed 27 November 2012 The secretary who held office during the year was: • Wilton Secretarial Limited In accordance with the Articles of Association, there is no requirement for the directors to retire by rotation. None of the directors nor the secretary held any interest in the shares of the parent company or any other group companies in the year.

BOOKS OF ACCOUNT The directors are responsible for ensuring that proper books and accounting records, as outlined in Section 202 of the Companies Act 1990, are kept by the Group. The directors believe that they have complied with the requirements of Section 202 of the Companies Act 1990 with regard to the books of account by employing a professionally qualified and experienced financial controller and by providing adequate resources to the finance function. The books of account of the Group are maintained at Porsche International Financing plc, 1 Exchange Place, IFSC, Dublin 1. POLITICAL DONATIONS The Group did not make any political donations during the year (31 December 2011: €Nil). TRANSACTIONS INVOLVING DIRECTORS There were no contracts or arrangements of any significance in relation to the business of the company in which the Directors had any interests, as defined by the Companies Act, 1990, at any time during the year.


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DIRECTORS’ REPORT for the year ended 31 December 2012 (Continued) IMPORTANT EVENTS AFTER THE YEAR END There were no important events after the year end. CORPORATE GOVERNANCE STATEMENT The Group’s financial reporting is based on International Financial Reporting Standards (IFRSs) as adopted by the European Union. The Directors are responsible for the system of internal control relating to the parent and the subsidiary. Such internal control system is designed to manage, rather than eliminate, the risk of failure to achieve business objectives and can only provide reasonable and not absolute assurance against material misstatement or loss. In respect of the financial reporting process, the parent and the subsidiary have in place appropriate practices to ensure that:

• Business transactions are properly authorised and executed • Financial reporting is accurate and complies with the financial reporting framework • Systems are in place to achieve high standards of compliance with regulatory

requirements The Board of Directors has the responsibility to ensure compliance with internal controls and risk management programmes by regularly reviewing the effectiveness of the compliance and control systems.


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DIRECTORS’ REPORT for the year ended 31 December 2012 (Continued) STATEMENT OF DIRECTORS’ RESPONSIBILITIES IN RESPECT OF THE CONSOLIDATED FINANCIAL STATEMENTS The directors are responsible for preparing the Directors’ Report and the consolidated financial statements in accordance with Irish law and regulations. Irish company law requires the directors to prepare consolidated financial statements giving a true and fair view of the state of affairs of the Group and the profit or loss of the Group for each financial year. Under that law the directors have elected to prepare the financial statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union. In preparing these financial statements, the directors are required to:

• Select suitable accounting policies and then apply them consistently; • Make judgements and accounting estimates that are reasonable and prudent; • State that the consolidated financial statements comply with IFRSs as adopted by the

European Union; and • Prepare the consolidated financial statements on the going concern basis unless it is

inappropriate to presume that the company will continue in business. The directors are responsible for keeping proper books of account that disclose with reasonable accuracy at any time the financial position of the company and enable them to ensure that the financial statements comply with the Companies Acts 1963 to 2012. They are also responsible for safeguarding the assets of the company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. The Directors confirm to the best of their knowledge and belief:

(i) the financial statements, prepared in accordance with IFRSs as adopted by European Union, give a true and fair view of the assets, liabilities, financial position and profit of the Group, and

(ii) the directors’ report includes a fair review of the development and performance of the business and the position of the Group together with a description of the principal risks and uncertainties that they face.


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CONSOLIDATED STATEMENT OF CHANGES IN EQUITY for the year ended 31 December 2012 Called-up Retained share capital earnings Total € € € At 1 January 2011 511,292 57,960,655 58,471,947 Restatement - (1,083,363) (1,083,363) ________ _________ __________ At 1 January 2011 as restated 511,292 56,877,292 57,388,584 Profit for the year - restated - 6,623,607 6,623,607 ________ _________ __________ At 31 December 2011 as restated 511,292 63,500,899 64,012,191 ========= =========== ========== At 1 January 2012 511,292 63,500,899 64,012,191 Profit for the year - 11,649,484 11,649,484 ________ _________ __________ At 31 December 2012 511,292 75,150,383 75,661,675 ========= =========== ========== Porsche International Financing plc holds 100% (31 December 2011: 100%) equity ownership interest in Porsche International Reinsurance Limited.


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CONSOLIDATED STATEMENT OF CASH FLOWS for the year ended 31 December 2012 Restated 31 December 31 December 2012 2011 Notes € € Operating activities Profit or ordinary activities before tax 13,372,922 7,560,895 (Increase) in financial assets (55,504) - Decrease in loans and receivables 1,040,621,673 749,906,270 Increase in deposits due to customers 43,128,299 191,776,153 Decrease in interest payable on bonds (9,264,288) (31,621,187) (Decrease)/ increase in trade and other payables (47,357,768) 39,561,605 Movement in deferred acquisition costs (138,769) (109,669) Increase in insurance receivables (9,572,819) (3,243,039) Increase in insurance contract liabilities 12,283,969 21,233,641 Taxation paid (1,386,428) (1,036,515) Amortisation of transaction costs on interest bearing loans and borrowings 7,622,860 4,541,277 (Decrease)/ increase in due to related parties (467,971) 777,591 Unrealised foreign exchange gain 1,536,874 473,100 ____________ ____________

Net cash flow from operating activities 1,050,323,049 979,820,123 ____________ ____________ Investing activities Purchase of investments (257,760,037) (14,021,204) Proceeds from sale of investments - 3,143,330 ____________ ____________

Net cash flow (used in)/ from investing activities (257,760,037) (10,877,874) ____________ ____________

Financing Interest bearing loans and borrowings (773,006,763) (969,769,445) ____________ ____________

Net cash used in financing activities (773,006,763) (969,769,445) ____________ ____________

Net increase/ (decrease) in cash and cash equivalen ts 19,556,249 (827,196) Cash and cash equivalents at the beginning of the year 76,150,498 77,450,794 Unrealised foreign exchange (loss)/ gain (989,429) (473,100) ___________ ___________

Cash and cash equivalents at the end of year 10 94,717,318 76,150,498 ============= ============ Interest received as cash during the year amounted to €93,130,647 (31 December 2011: €105,165,355), while interest paid as cash amounted to €92,582,120 (31 December 2011: €125,221,814) Interest received and paid relates to operating activities.


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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2012 1. CORPORATE INFORMATION AND BASIS OF PREPARATION

These consolidated financial statements cover Porsche International Financing plc (the parent company) and Porsche International Reinsurance Limited (the subsidiary) collectively known as Porsche International Financing Group (“the Group”). The registered office for both companies is Porsche International Financing plc, 1 Exchange Place, IFSC, Dublin 1. The consolidated financial statements of the Group for the year ended 31 December 2012 were authorised and approved for issue in accordance with a resolution of the Board of Directors on 30 April 2013. The parent company is a limited company domiciled in the Republic of Ireland. The ultimate parent of the parent company is Volkswagen AG which is incorporated in Germany. The consolidated financial statements have been prepared under the historical cost convention, except for financial instruments classified at fair value through profit or loss and derivative financial instruments that have been measured at fair value. The reporting currency used in these consolidated financial statements is euro, which is denoted by the symbol '€'. Amounts are rounded to the nearest euro except where otherwise indicated.

The consolidated statement of financial position shows assets and liabilities in order of their liquidity, which the directors consider to be more relevant to the Group’s business than a current/non-current classification.

2. ACCOUNTING POLICIES The following accounting policies have been applied consistently in dealing with items

which are considered material in relation to the Group’s consolidated financial statements.

(a) Basis of consolidation

The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRSs”) as adopted by the European Union (EU) and with those parts of the Companies Acts 1963 to 2012 applicable to companies reporting under IFRS. The subsidiary is fully consolidated from the date of acquisition, being the date on which the Group obtains control, and continues to be consolidated until the date that such control ceases. The financial statements of the subsidiary are prepared for the same reporting year as the parent company, using consistent accounting policies. All intra-Group balances, income and expenses are eliminated in full. Porsche International Financing plc holds 100% of the shares in Porsche International Reinsurance Limited and hence there is no minority interest arising on consolidation. There is no goodwill or negative goodwill arising on acquisition of Porsche International Reinsurance Limited as the fair value of the net assets of the subsidiary is equal to the purchase consideration paid by Porsche International Financing plc.


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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2012 (Continued) 2. ACCOUNTING POLICIES (Continued) (b) Foreign currencies

The functional and presentation currency is euro. Transactions in foreign currencies are initially translated at the rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currency are retranslated at the rate ruling at the reporting date. Non-monetary items that are measured in terms of historical cost in a foreign currency rate are translated using the exchange rate as at the date of initial transaction. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rate at the date when the fair value was determined. Translation differences arising from the application of year-end exchange rates are recognised in the statement of comprehensive income.

(c) Revenue and interest recognition

Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and revenue can be reliably measured. Interest income and expense are recognised in the statement of comprehensive income for all instruments measured at amortised cost using the effective interest method. This is a method of calculating the amortised cost of a financial asset or liability and of allocating the interest income or expense over the relevant year. The effective interest rate is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial instrument or, when appropriate, a shorter period to the net carrying amount of the financial asset or liability. Fees and commissions which represent a return for services provided or risk borne are credited to income over the period during which the service is performed or the risk is borne as appropriate.

(d) Financial assets Financial assets within the scope of IAS 39 are classified as financial assets at fair

value through profit or loss; loans and receivables; available-for-sale financial assets; or as held-to-maturity investments, as appropriate. The classification depends on the purpose for which the assets were acquired. The Group determines the classification of its financial assets at initial recognition and re-evaluates this designation at each financial year-end. Financial instruments are used by the Group, mainly for the provision of inter-group financial and treasury services and for trading purposes. Derivative financial instruments are mainly used to economic hedge the currency and interest risk exposure of the Group. Derivatives are not entered into for trading purposes. Purchases and sales of financial assets are recognised on the trade date. Loans are recognised when cash is advanced to borrowers. The subsequent measurement of financial assets depends on their classification as follows:


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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2012 (Continued) 2. ACCOUNTING POLICIES (Continued) (d) Financial assets (continued) Financial assets at fair value through profit or loss

Financial assets classified as held for trading and other assets designated as such on inception are included in this category. Financial assets are classified as held for trading if they are acquired for sale in the short term. Financial assets are carried in the statement of financial position at fair value, with gains or losses on financial assets at fair value through profit or loss recognised in the statement of comprehensive income. Financial assets designated at fair value through profit or loss (FVPL) are designated by management on initial recognition when the following criteria are met: (i) The designation eliminates or significantly reduces the inconsistent treatment

that would otherwise arise from measuring the assets or liabilities or recognising gains or losses on them on a different basis; or

(ii) The assets and liabilities are part of a group of financial assets, financial liabilities or both which are managed and their performance evaluated on a fair value basis, in accordance with a documented risk management or investment strategy; or

(iii) The financial instrument contains an embedded derivative, unless the embedded derivative does not significantly modify the cash flows or it is clear, with little or no analysis, that it would not be separately recorded.

The Group believes that FVPL assets meet criteria (ii) as the Group uses fair value of investments in cash funds as a key performance indicator. Held-to-maturity investments Non-derivative financial assets with fixed or determinable payments and fixed maturity are classified as held-to-maturity when the Group has the positive intention and ability to hold to maturity. The Group did not have any held-to-maturity financial asset at year end. Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market, do not qualify as trading assets and have not been designated at either fair value through profit or loss or available-for-sale. Such assets are carried at amortised cost. Gains and losses are recognised in the statement of comprehensive income when the loans and receivables are derecognised or impaired, as well as through the amortisation process.

Available-for-sale financial assets Available-for-sale financial assets are those non-derivative financial assets that are designated as such or are not classified in any of the three preceding categories. After initial recognition, available-for-sale financial assets are measured at fair value, with gains or losses being recognised as a separate component of equity, the available-for-sale reserve, until the investment is derecognised or until the investment are determined to be impaired. At this time, the cumulative gain or loss previously reported in equity is included in the statement of comprehensive income. The Group did not have any available-for-sale financial assets at year end.


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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2012 (Continued) 2. ACCOUNTING POLICIES (Continued) (d) Financial assets (continued)

Fair value

The fair values of money market fund investments held by the Group are their quoted current bid prices at statement of financial position date.

(e) Financial liabilities

Financial liabilities include interest bearing loans and borrowings, deposits due to customers and bank overdrafts. Interest bearing loans and borrowings and deposits due to customers are measured initially at fair value plus directly attributable transaction costs. After initial recognition, interest bearing loans and borrowings and deposits due to customers are measured in the statement of financial position at amortised cost. Deposits due to customers represent balances payable to group undertakings in relation to the provision of treasury services. Bank overdrafts are stated at fair value. When the estimates of cash flows relating to interest bearing loans and borrowings are revised, the carrying value of interest bearing loans and borrowings is recalculated by computing the present value of the estimated future cash flows at the original effective interest rate of the interest bearing borrowings. The adjustment is recognised in the statement of comprehensive income and included within amortisation of transaction costs on interest bearing loans and borrowings.

(f) Impairment of financial assets The Group assesses at each statement of financial position date whether a financial asset or group of financial assets is impaired. Assets carried at amortised cost If there is objective evidence that an impairment loss on loans and receivables carried at amortised cost has been incurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset’s original effective interest rate. The carrying amount of the asset is reduced, with the amount of the loss recognised in the statement of comprehensive income. If, in a subsequent year, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed. Any subsequent reversal of an impairment loss is recognised in the statement of comprehensive income, to the extent that the carrying value of the asset does not exceed its amortised cost at the reversal date.


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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2012 (Continued) 2. ACCOUNTING POLICIES (Continued) (g) Derivatives

The Group uses derivative financial instruments to economic hedge its exposure to interest rate risks and risks of changes in foreign exchange rates.

Derivative financial instruments are recognised initially at the fair value on the date a derivative contract is entered into. Subsequent to initial recognition, derivative financial instruments are remeasured to fair value. The fair value of derivative financial instruments is the estimated amount that the Group would receive or pay to terminate the instrument at the statement of financial position date. Interest rate swaps are valued by calculating the net present value of the cash flows over the life of the swap.

The gain or loss on remeasurement to fair value is recognised in the statement of comprehensive income.

(h) Cash and cash equivalents Cash and cash equivalents in the statement of financial position comprise cash at bank and in hand and short-term deposits with an original maturity of three months or less. For the purpose of the statement of cash flows, cash and cash equivalents consist of cash and cash equivalents as defined above, net of bank outstanding overdraft.

(i) Provisions

Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event; it is probable that an outflow of economic resources will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.

(j) Financial guarantees In the ordinary course of business the Group gives financial guarantees. Financial

guarantees are initially recognised in the consolidated financial statements (within ‘Due to group undertakings’) at fair value, being the premium received. Subsequent to initial recognition, the Group’s liability under each guarantee is measured at the higher of the amount initially recognised less, when appropriate, cumulative amortisation recognised in the statement of comprehensive income, and the best estimate of expenditure required to settle any financial obligation arising as a result of the guarantee.


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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2012 (Continued) 2. ACCOUNTING POLICIES (Continued) (k) Income taxes

Corporation tax is calculated at current attributable rates. Current income tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities, based on tax rates and laws that are enacted or substantially enacted by the statement of financial position date. Deferred income tax is provided using the liability method on temporary differences at the statement of financial position date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. Deferred income tax assets and liabilities are measured on an undiscounted basis at the tax rates that are expected to apply when the related asset is realised or liability is settled, based on tax rates and laws that are enacted or substantively enacted by the statement of financial position date. Income tax is charged or credited directly to equity if it relates to items that are credited or charged to equity. Otherwise income tax is recognised in the statement of comprehensive income.

(l) Derecognition of financial assets and liabilities Financial assets

A financial asset is derecognised where: � the rights to receive cash flows from the assets have expired; � the Group retains the right to receive cash flows from the asset, but has assumed an obligation to pay them in full without material delay to a third party under a ‘pass-through’ arrangement; or � the Group has transferred its rights to receive cash flows from the asset and either (a) has transferred substantially all the risks and rewards of the asset, or (b) has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.

Financial liabilities

A financial liability is derecognised when the obligation under the liability is discharged, cancelled or expires.

(m) Gross premiums and unearned premiums

Gross written premiums comprise the total premiums receivable for the whole period of cover provided by contracts entered into during the accounting period and are recognised on the date on which the policy commences. Premiums include any adjustments arising in the accounting period for premiums receivable in respect of business written in prior accounting periods. Premiums collected by intermediaries, but not yet received, are assessed based on estimates from underwriting or past experience and are included in premiums written.


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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

31 December 2012 (Continued)

2. ACCOUNTING POLICIES (Continued) (m) Gross premiums and unearned premiums (continued)

Unearned premiums are those proportions of premiums written in a year that relate to periods of risk after the statement of financial position date. Gross premium written are accounted for in the period in which the risk commences. Written premiums are recognised as earned income over the period of the policy on a time apportionment basis, having regard where appropriate to the incidence of risk. Unearned premiums are calculated on a monthly pro rata basis. The proportion attributable to subsequent periods is deferred as a provision for unearned premiums.

(n) Gross benefits and claims

Gross benefits and claims incurred comprise amounts paid or provided for in respect of claims occurring during the current year, together with adjustments to claims outstanding from previous years. Provision is made at the period end for the estimated cost of claims incurred but not settled at the statement of financial position date, including the cost of claims incurred but not yet reported to the subsidiary. The estimated cost of claims includes expenses to be incurred in settling claims and is an estimate, based on analysis of historical experience.

(o) Deferred acquisition costs

Commission relating to unearned premiums is deferred and charged in the accounting period in which those premiums are earned. Such deferred acquisition costs are carried forward at the statement of financial position date to the extent that these are considered to be recoverable.

(p) Reinsurance contracts

Reinsurance contracts are those contracts that transfer significant insurance risk at the inception of the contract. Insurance risk is transferred when the company agrees to compensate the policyholder if a specified uncertain future event (other than a change in a financial variable) adversely affects the policyholder. All contracts meet the definition of insurance contracts under IFRS 4: Insurance Contracts.

Contracts entered into with insurers that meet the classification requirements for insurance contracts under IFRS 4 are classified as reinsurance contracts held. Contracts that do not meet these classification requirements are classified as financial assets in accordance with IAS 39: Financial Instruments – Recognition and Measurement. The benefits under the reinsurance contracts held are recognised as insurance assets. Amounts recoverable from or due to reinsurers are measured consistently with the amounts associated with the insured insurance contracts and in accordance with the terms of each reinsurance contract.

(q) Insurance receivables Insurance receivables are recognised when due and measured on initial recognition at the fair value of the consideration received or receivable. Subsequent to initial recognition, insurance receivables are measured at amortised cost, using the effective interest rate method. The carrying value of insurance receivables is reviewed for impairment whenever events or circumstances indicate that the carrying amount may not be recoverable, with the impairment loss recorded in the statement of comprehensive income. Insurance receivables are derecognised when the derecognition criteria for financial assets, as described in Note 2 (l), have been met.


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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2012 (Continued) 2. ACCOUNTING POLICIES (Continued) (r) Insurance contract liabilities Insurance contract liabilities are recognised when contracts are entered into and

premiums are charged. These liabilities are collectively known as the outstanding claims provision, and are based on the estimated ultimate cost of all claims incurred but not settled at the date of statement of financial position, whether reported or not, together with related claims handling costs and reduction for the expected value of salvage and other recoveries. Delays can be experienced in the notification and settlement of certain types of claims, therefore the ultimate cost of these cannot be known with certainty at the date of the statement of financial position. The liabilities are calculated at the reporting date using a range of standard actuarial claim projection techniques, based on empirical data and current assumptions that may include a margin for adverse deviation. The liabilities are not discounted for the time value of money. No provision for equalisation or catastrophe reserves is recognised.

The liabilities are derecognised when the contract expires, is discharged or is

cancelled. The provision for unearned premiums represents premiums received for risks that have not yet expired. Generally the reserve is released over the term of the contract and is recognised as premium income.

At each reporting date, the subsidiary, Porsche International Reinsurance Limited,

reviews its unexpired risk and a liability adequacy test is performed as laid out under IFRS to determine whether there is any overall excess of expected claims and deferred acquisition costs over unearned premiums. This calculation uses current estimates of future contractual cash flows after taking account of the investment return expected to arise on assets relating to the relevant insurance technical provisions. If these estimates show that the carrying amount of the unearned premiums (less related deferred acquisition costs) is inadequate, the deficiency is recognised in the statement of comprehensive income by setting up a provision for liability adequacy.

(s) Prior year restatement The subsidiary has in the past been accounting for unearned premium reserves on

the basis of when warranty reinsurance contracts are written, regardless of whether or not they had actually commenced as stated in its accounting policies. However, following an independent actuarial review, the subsidiary determined that unearned premium reserves were not accounted for in line with accounting policy and should be accounted for on the basis of when warranty reinsurance contracts commenced. Accordingly, the subsidiary has retrospectively accounted for unearned premium reserves based on when warranty reinsurance contracts commenced and has decided to make a prior year adjustment. The impact of the prior year adjustment is shown in the table below.


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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2012 (Continued) 2. ACCOUNTING POLICIES (Continued)

(s) Prior year restatement (Continued)

Impact of the prior year adjustment on the statement of comprehensive income is as follows:

31 Dec 2011 €

31 Dec 2010 €

Gross change in provision for unearned premiums (6,164,932) (4,197,107)

Gross change in insurance contract liabilities 4,585,718 2,958,974

Profit before taxation (1,579,214) (1,238,133)

Corporation tax expense 197,401 154,770

Net impact on retained earnings after tax – decrease (1,381,813) (1,083,363)

Impact of the prior year adjustment on the statement of financial position 31 December 2011

As previously stated

€ Adjustment

€ As restated

€ Insurance contracts liabilities (51,186,479) (2,817,347) (54,003,826) Corporation tax receivable 336,890 352,171 689,061 Retained profit for the year ( 8,005,420) 1,381,813 (6,623,607) Retained profit brought forward (57,960,655) 1,083,363 (56,877,292)

1 January 2011

As previously stated

€ Adjustment

€ As restated

€ Insurance contract liabilities (31,532,052) (1,238,133) (32,770,185) Corporation tax liability (376,509) 154,770 (221,739) Retained profit for the financial year (6,730,922) 1,083,363 (5,647,559)

(t) Adoption of IFRS during the year

The following new and revised standards and interpretations have been adopted during the year and the impact is described below. IAS 12: 'Income Taxes' on Deferred Tax (Amendment) This amendment introduces an exception to the existing principle for the measurement of deferred tax assets or liabilities arising on investment property measured at fair value. The amendment became effective for annual periods beginning on or after 1 January 2012. The adoption of amendments to IAS 12 had no impact on the financial statements of the Group.


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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2012 (Continued) 2. ACCOUNTING POLICIES (Continued) (t) Adoption of IFRS during the year (continued)

IFRS 7 Financial Instruments: Disclosures - Enhanced Derecognition Disclosure Requirements The amendment requires additional disclosure about financial assets that have been transferred but not derecognised to enable the user of the Group’s financial statements to understand the relationship with those assets that have not been derecognised and their associated liabilities. In addition, the amendment requires disclosures about continuing involvement in derecognised assets to enable the user to evaluate the nature of, and risks associated with, the entity’s continuing involvement in those derecognised assets. The amendment became effective for annual periods beginning on or after 1 July 2011. The amendment affects disclosure only and had no impact on the Group’s financial position or performance.

Standards issued but not yet effective The standards and interpretations that are issued, but not yet effective, up to the date of issuance of the Group’s financial statements are disclosed below. The Group intends to adopt these standards, if applicable, when they become effective. Standards and Interpretations Effective date IAS 1 Financial Statements Presentation – Presentation of 1 July 2012 Items of Other Comprehensive Income IAS 19 Employee Benefits (Revised) 1 January 2013 IAS 27 Separate Financial Statements (as revised in 2012) 1 January 2013 IAS 28 Investments in Associates and Joint Ventures 1 January 2013 (as revised in 2011) IAS 32 Financial instruments: Presentation 1 January 2014 IFRS 7 Financial instruments: Disclosures 1 January 2013 IFRS 9 Financial Instruments: Classification and Measurement 1 January 2015 IFRS 10 Consolidated Financial Statements 1 January 2014 IFRS 11 Joint Arrangements 1 January 2014 IFRS 12 Disclosure of Interests in Other Entities 1 January 2014 IFRS 13 Fair Value Measurement 1 January 2014 Annual Improvements May 2012 1 January 2014

IAS 1 Financial Statements Presentation – Presentation of Items of Other Comprehensive Income The amendment becomes effective for annual periods beginning on or after 1 July 2012. The amendments to IAS 1 change the grouping of items presented in the statement of comprehensive income. Items that could be reclassified (or ‘recycled’) to profit or loss at a future point in time (for example, upon derecognition or settlement) would be presented separately from items that will never be reclassified. The amendment affects presentation only and is deemed to have no impact on the Group’s financial position or performance.


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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2012 (Continued) 2. ACCOUNTING POLICIES (Continued) (t) Adoption of IFRS during the year (continued)

IAS 19 Employee Benefits (Revised) The IASB has issued numerous amendments to IAS 19. These range from fundamental changes such as removing the corridor mechanism and the concept of expected returns on plan assets to simple clarifications and re-wording. The amendment will have no impact on the Group’s financial statements. The amendment becomes effective for annual periods beginning on or after 1 January 2013. IAS 27 Separate Financial Statements (as revised in 2012) The amendment becomes effective for annual periods beginning on or after 1 January 2013. As a consequence of the new IFRS 10 and IFRS 12, what remains of IAS 27 is limited to accounting for subsidiaries, jointly controlled entities, and associates in separate financial statements. The amendment will have no impact on the Group’s financial statements. The amendment becomes effective for annual periods beginning on or after 1 January 2013. IAS 28 Investments in Associates and Joint Ventures (as revised in 2011) As a consequence of the new IFRS 11 Joint Arrangements, and IFRS 12 Disclosure of Interests in Other Entities, IAS 28 Investments in Associates, has been renamed IAS 28 Investments in Associates and Joint Ventures, and describes the application of the equity method to investments in joint ventures in addition to associates. The Group has no investments in associates or joint arrangements, as such, the adoption of this revised standard is expected to have no impact on the financial statement of the Group. The revised standard becomes effective for annual periods beginning on or after 1 January 2013. IAS 32: Financial instruments: presentation (Amendment) These amendments clarify the meaning of “currently has a legally enforceable right to set-off”. The amendments also clarify the application of the IAS 32 offsetting criteria to settlement systems (such as central clearing house systems) which apply gross settlement mechanisms that are not simultaneous. These amendments are not expected to impact the Group’s financial position or performance and become effective for annual periods beginning on or after 1 January 2014. IFRS 7: Financial instruments: disclosures (Amendments) These amendments require an entity to disclose information about rights to set-off and related arrangements (e.g., collateral agreements). The disclosures would provide users with information that is useful in evaluating the effect of netting arrangements on an entity’s financial position. The new disclosures are required for all recognised financial instruments that are set off in accordance with IAS 32 Financial Instruments: Presentation. The disclosures also apply to recognised financial instruments that are subject to an enforceable master netting arrangement or similar agreement, irrespective of whether they are set off in accordance with IAS 32. These amendments will not impact the Group’s financial position or performance and become effective for annual periods beginning on or after 1 January 2013.


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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2012 (Continued) 2. ACCOUNTING POLICIES (Continued) (s) Adoption of IFRS during the year (continued)

IFRS 9 Financial Instruments: Classification and Measurement IFRS 9 as issued reflects the first phase of the IASBs work on the replacement of IAS 39 and applies to classification and measurement of financial assets and financial liabilities as defined in IAS 39. The standard is effective for annual periods beginning on or after 1 January 2015. IFRS 9 replaces the multiple classification models in IAS 39 with a single model that has only two classification categories: amortised cost and fair value. Classification under IFRS 9 is driven by the entity's business model for managing financial assets and the contractual characteristics of the financial assets. This will impact on the classification of the financial assets of the Group when adopted. IFRS 10 Consolidated Financial Statements IFRS 10 replaces the portion of IAS 27 Consolidated and Separate Financial Statements that addresses the accounting for consolidated financial statements. It also addresses the issues raised in SIC-12 Consolidation — Special Purpose Entities. IFRS 10 establishes a single control model that applies to all entities including special purpose entities. The changes introduced by IFRS 10 will require management to exercise significant judgement to determine which entities are controlled and therefore are required to be consolidated by a parent, compared with the requirements that were in IAS 27. Based on the preliminary analyses performed, IFRS 10 is not expected to have any impact on the currently held investment of the Group. This standard becomes effective for annual periods beginning on or after 1 January 2014. IFRS 11 Joint Arrangements IFRS 11 replaces IAS 31 Interests in Joint Ventures and SIC-13 Jointly-controlled Entities — Non-monetary Contributions by Venturers. IFRS 11 removes the option to account for jointly controlled entities (JCEs) using proportionate consolidation. Instead, JCEs that meet the definition of a joint venture must be accounted for using the equity method. The effective date of this standard is 1 January 2014. The Group has no joint arrangements, as such, the adoption of this standard is expected to have no impact on the financial statement of the Group. IFRS 12 Disclosure of Interests in Other Entities IFRS 12 includes all of the disclosures that were previously in IAS 27 related to consolidated financial statements, as well as all of the disclosures that were previously included in IAS 31 and IAS 28. These disclosures relate to an entity’s interests in subsidiaries, joint arrangements, associates and structured entities. IFRS 12 is a disclosure only standard and therefore will have no effect on profit or loss or the equity of the Group. This standard becomes effective for annual periods beginning on or after 1 January 2014.


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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2012 (Continued) 2. ACCOUNTING POLICIES (Continued) (s) Adoption of IFRS during the year (continued)

IFRS 13 Fair Value Measurement The standard becomes effective for annual periods beginning on or after 1 January 2014. It aims to improve consistency and reduce complexity by providing a precise definition of fair value and a single source of fair value measurement and disclosure requirements for use across IFRSs. The requirements, which are largely aligned between IFRS and US GAAP do not extend the use of fair value accounting but provide guidance on how it should be applied where its use is already required or permitted by other standards within IFRSs or US GAAP. The Group is currently assessing the impact that this standard will have on the financial position and performance but based on the preliminary analyses, no material impact is expected.

Annual Improvements May 2012 These improvements will not have an impact on the Group, but include: IFRS 1 First-time Adoption of International Financial Reporting Standards This improvement clarifies that an entity that stopped applying IFRS in the past and chooses, or is required, to apply IFRS, has the option to re-apply IFRS 1. If IFRS 1 is not re-applied, an entity must retrospectively restate its financial statements as if it had never stopped applying IFRS. IAS 1 Presentation of Financial Statements This improvement clarifies the difference between voluntary additional comparative information and the minimum required comparative information. Generally, the minimum required comparative information is the previous period. IAS 16 Property Plant and Equipment This improvement clarifies that major spare parts and servicing equipment that meet the definition of property, plant and equipment are not inventory. IAS 32 Financial Instruments, Presentation This improvement clarifies that income taxes arising from distributions to equity holders are accounted for in accordance with IAS 12 Income Taxes. IAS 34 Interim Financial Reporting The amendment aligns the disclosure requirements for total segment assets with total segment liabilities in interim financial statements. This clarification also ensures that interim disclosures are aligned with annual disclosures. These improvements are effective for annual periods beginning on or after 1 January 2013.


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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2012 (Continued) 3 RISK MANAGEMENT 3.1 Risk factors

The Group’s activities expose it to a variety of financial risks: market risk (which includes currency risk, price risk and interest rate risk), credit risk, liquidity risk, insurance risk and non financial risks: operational risk and regulatory risk. The Group’s overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Group’s financial performance. The Group uses derivative financial instruments to economic hedge certain risk exposures. Risk management is carried out by management under policies approved by the Board of Directors.

(a) Market risk Market risk is the potential adverse change in income or the value of net worth arising from movements in interest rates, exchange rates or other market prices. Market risk arises from the structure of the statement of financial position, the execution of interbank business and proprietary trading. The Group recognises that the effective management of market risk is essential to the maintenance of stable earnings, the preservation of shareholder value and the achievement of the Group’s objectives. The Group has an effective hedging program in place to mitigate the exposure arising from movement in interest rates and exchange rates. The Group’s exposure to market risk is governed by a policy approved by the Board of Directors and the immediate parent company, Dr. Ing.h.c.F.Porsche AG. This sets out the types of financial instruments which may be used to increase or reduce risk and the way in which risk is controlled. The principles established by these standards are implemented in order to be consistent with the global risk management systems of the group. The Group economic hedges interest rate risk and exchange rate risk on certain fixed interest rate investments using swaps, and forward exchange contracts. See Note 11 for more details.

Currency risk

The Group’s reporting currency is euro. Loans to and deposits from group companies are denominated in the local currency of the counterparty. The currency exposure arising is reduced through the use of forward foreign currency contracts. At the year end, the Group’s exposure to other currencies arising from group loans and deposits has been partially mitigated by the use of foreign currency forward contracts. The Group’s exposure to other currencies has decreased during the year due to decrease in deposits from other group companies and redemption of Interest bearing loans and borrowings. Financial instruments (cash and cash equivalents, financial assets at fair value through profit or loss and loans and advances to related parties) include amounts denominated in foreign currencies. The Group attempts to reduce foreign exchange risk by holding assets and liabilities in currencies used by the intra-group entities with which it trades.


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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2012 (Continued) 3 RISK MANAGEMENT (Continued) 3.1 Risk factors (continued) Currency risk (continued)

Porsche International Reinsurance Limited’s reporting currency is euro and the company’s funding is denominated in this currency. The company’s principal transactions are carried out in euro and its exposure to foreign exchange risk arises with respect to Sterling and the Swiss Franc. Its financial assets are denominated in the same currencies as its insurance and investment liabilities, which significantly mitigate the foreign currency exchange rate risk. The main foreign exchange risk arises from receipt of net premium in Sterling and Swiss Francs. An analysis of the currency denomination of assets and liabilities of the Group is included in note 24.

Interest rate risk Interest rate risk is the risk that the future cash flows of a financial instrument will fluctuate because of a change in market interest rates. The Group takes on exposure to the effects of fluctuations in the prevailing levels of market interest rates on both its fair value and cash flow risks. The Group monitors positions on a daily basis and hedging strategies are used to ensure positions are maintained within the established limits.

The table in note 23 summarises the Group’s exposure to interest rate risks. Included in the table are the Group’s assets and liabilities at carrying amount, categorised by the earlier of the contractual repricing or maturity date.

(b) Credit risk

Credit risk is the risk that an issuer or counterparty will be unable to meet a commitment that it has entered into with the Group. The Group trades only with recognised group entities. Therefore, the Group does not expect to incur material credit losses on its financial instruments. Credit risk is managed and monitored by lending to group companies only. Prior approval from the parent company is required before issuing a loan and payments relating to principal and interest are closely traced and monitored. In addition, the Group obtains regular updates from the immediate parent company regarding trading ability and ongoing profitability of the subsidiaries. The Group has no related credit derivatives or similar instruments to mitigate this minimal exposure at the reporting date. Receivables are measured on an ongoing basis with the result that the Group’s exposure to bad debts is not significant. A geographical concentration of assets and liabilities is included in note 27. The Group’s maximum exposure to credit risk in the event that counterparties fail to perform their obligations as of 31 December 2012 in relation to each class of recognised financial assets is the carrying amount of those assets as indicated in the statement of financial position.


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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2012 (Continued) 3 RISK MANAGEMENT (Continued) 3.1 Risk factors (continued) (b) Credit risk (continued)

The Group monitors the financial strength and credit rating of its fronting insurer, Allianz Versicherung AG, as this is the main underwriting credit risk it faces. Allianz has a credit rating of A (31 December 2011: A). Financial assets at fair value have a credit rating of AAA (31 December 2011: A+) while Group deposits with Deutsche Bank AG have a credit rating of A+ (31 December 2011: A+) and deposits with Barclays Bank have a credit rating of A+ (31 December 2011: A+). Loans and receivables advanced to parent have no credit rating available (31 December 2011: no credit rating available). However, these loans are approved by the immediate parent. The Group does not lend outside the group. The Group is satisfied with the quality of its financial assets and has identified the credit risks associated with the cash, deposits and investments it has placed with third party financial institutions.

(c) Liquidity risk Liquidity risk is the risk that the Group has insufficient funds to continue its operations.

It is the Group’s policy to ensure that resources are available at all times to enable the Group meet its liquidity risk obligations. The development and implementation of this policy and day-to-day management of liquidity is the responsibility of the Group’s management. The Group manages liquidity risk by ensuring that almost all its funds are invested in highly liquid interest bearing investments and at rates in excess of its funding cost and operating expenses. A liquidity analysis is included in note 25.

(d) Operational risk

Operational risk represents the risk that failed or inadequately processed or systems, human error or exposure to external events could result in unexpected losses. The risk is associated with human error, systems failure and inadequate controls and procedures.

The Group operates such measures of monitoring and management as are

necessary to ensure that operational risk management is consistent with the approach, aims and strategic goals of the group.

(e) Regulatory risk The Group is required to comply with the solvency and other requirements of the

Reinsurance Regulations in accordance with the European Communities (Reinsurance) Regulations, 2006. The Group also complies with the Corporate Governance Code for Captive Insurance and Captive Reinsurance Undertakings issued by the Central Bank of Ireland on 1 September 2011. The directors regularly review regulatory and other compliance risks.


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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2012 (Continued) 3 RISK MANAGEMENT (Continued) 3.1 Risk factors (continued) (f) Insurance risk

The principal risks and uncertainties that the company faces are, by the very nature of the business, those for which it provides or has provided warranty reinsurance cover. The Group seeks to ensure that it collects sufficient premium income to meet the cost of potential claims over time, but the uncertainty surrounding the severity and frequency of claims can lead to significant variation in the company’s performance in the short term. Whilst considerable judgement is involved, the directors adopt a prudent approach to the provision and valuation of adequate insurance reserves. The risk under the reinsurance contract between the Group and the reinsured is that reinsured events occur and the uncertainty of the amount of the resulting claims. By the very nature of insurance contracts, this risk is random and therefore unpredictable. As the theory of probability is applied to both the pricing (when premiums are written) and provisioning, the principal risk that the Group faces under its reinsurance contracts is that the actual claims experience shall exceed the amount of the insurance liabilities that have been accrued at the statement of financial position date. This could occur if the frequency and/or severity of the claims are greater than estimated. Insurance events are random and the actual number and amount of claims will vary from year to year from estimates established using statistical techniques. The cost of outstanding claims and unexpired risk reserves is determined using standard actuarial techniques to project the net ultimate claims that the company shall be liable for. These include estimated loss ratios, development method (paid claims) and benchmarking against other external data.

3.2 Accounting for derivative financial instruments

Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently remeasured at fair value. The method of recognising the resulting gain or loss depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged. The Group designates all derivatives as held for trading.

The fair value of financial instruments traded in active markets (such as publicly traded derivatives) is based on quoted market prices at the statement of financial position date. The fair value of financial instruments that are not traded in an active market (such as over the counter derivatives) is determined by using valuation techniques. The Group uses a variety of methods and makes assumptions that are based on market conditions existing at each statement of financial position date. The fair value of interest rate swaps and foreign currency forwards is calculated as the present value of the estimated future cash flows.


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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2012 (Continued)

4. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS

The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

Investments in unit trusts and cash funds comprise investments in money market

funds. Valuations at each reporting date are based on the net asset value of the fund as notified by the trustee. The value is readily convertible into cash.

The method used to estimate the fair value of currency forwards is to calculate an

interpolated rate using the spot rate as at the statement of financial position date and the forward points, as provided by the immediate parent company, Dr Ing. h.c. F. Porsche AG, covering the term of the contract and to apply this interpolated rate to the notional value of the forward contracts. The Group has applied assumptions to calculate the fair values of interest rate swaps. The assumptions are taken from observable market data. The following term structure of interest rates was used.

31 December 2012

Maturities EUR USD GBP Up to 6 months .052% .21% .49% > 6 months up to 1 year .22% .51% .67% > 1 year up to 5 years .44% .84% 1.01% > 5 years up to 10 years .78% .84% 1.04% > 10 years up to 15 years

1.58% 1.75% 1.88%

31 December 2011

Maturities EUR USD GBP Up to 6 months 1.56% .81% 1.38% > 6 months up to 1 year 1.90% 1.13% 1.87% > 1 year up to 5 years 1.40% .81% 1.37% > 5 years up to 10 years 1.78% 1.23% 1.57% > 10 years up to 15 years 2.43% 2.03% 2.31%


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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2012 (Continued) 4. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS (Continued)

The Group reviews its customer and other loans and reinsurance receivables at each

reporting date to assess whether an allowance for impairment losses should be recognised in the Statement of comprehensive income. This assessment includes a review of the financial position and cash flow forecasts of the investee company and contacts and discussions with the parent company. No impairment of assets has occurred during the year (31 December 2011: €Nil).

Estimates have to be made both for the expected ultimate cost of claims reported at the statement of financial position date and for the expected ultimate cost of claims incurred but not yet reported (IBNR) at the statement of financial position date. The primary technique adopted by management in estimating the cost of notified and IBNR claims is that of using past claim settlement trends to predict trends. Loss ratios of 81% for Eurozone (31 December 2011: 88%), 69% for Great Britain (31 December 2011: 73%) and 71% for Switzerland (31 December 2011: 67%) are calculated and applied to earned premiums. Loss ratios are calculated by comparing gross written premium and actual claims costs. Gross written premiums are adjusted for minimum profit margin and estimated administration costs. Details of the claims estimated are disclosed in note 21. At each reporting date, prior year claims estimates are reassessed for adequacy and changes are made to the provision. Claims provisions are not discounted for the time value of money as the nature of the business is considered to be short-tail. Interest bearing borrowings comprise bond issues to the corporate bond market and there is no element of estimate or judgement in the value of these in the company’s financial statements. The bond issue costs are amortised over an assumed term of 20 years. This assumption was necessary to calculate an arm’s length interest rate charged by the company to the parent company, Porsche AG. The bonds are classified as liabilities in the financial statements in line with requirements of IAS 32 Financial Instruments: Presentation. There are no indicators of impairment in the value of loans and receivables due to the financial strength of the parent company.


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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2011 (Continued) 5. INTEREST RECEIVABLE AND SIMILAR INCOME 31 December 31 December 2012 2011 € € Interest on cash and bank balances 87,484 404,945 Loans and receivables 86,085,938 104,860,236 _________ __________

86,173,422 105,265,181 =========== ============ 6. INTEREST EXPENSE AND SIMILAR CHARGES 31 December 31 December 2012 2011 € € Bank overdraft 135,566 16,638 Deposits from customers 3,508,191 4,081,401 Interest bearing loans and borrowings 72,051,215 93,583,989 Amortisation of transaction costs on interest bearing loans and borrowings 7,622,860 4,541,277 _________ __________

83,317,832 102,223,305 =========== ============ 7. OPERATING EXPENSES 31 December 31 December 2012 2011 Exchange (gain)/loss (274,883) 483,800 Acquisition costs (note 13) 805,651 691,792 Change in deferred acquisition costs (138,770) (109,668) Administrative expenses 166,120 163,518 ________ ________

558,118 1,229,442 ========= ==========


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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2012 (Continued) 8. PROFIT ON ORDINARY ACTIVITIES BEFORE TAX 31 December 31 December 2012 2011 € € Profit before taxation is stated after charging: Management fee 934,935 885,390 =========== ========= Management fee is included in fees and commissions expense. Auditors’ and directors’ remuneration are discharged by a group company and are

included in management fees (see note 22). The amounts discharged are as follows: 31 December 31 December 2012 2011 € € Auditors’ remuneration (Group) 63,000 41,000 _________ _________

Auditors’ remuneration (Parent) 27,000 27,000 Auditors’ remuneration (Subsidiary) 36,000 14,000 _________ _________

Total auditors’ remuneration exclusive of VAT 63,000 41,000 =========== ========= Directors’ remuneration 278,610 204,425 =========== ========= The Group has no employees (31 December 2011: nil). Directors’ remuneration

comprises directors’ emoluments only. Auditors’ remuneration for the subsidiary comprises €16,000 for audit of the financial statements and €20,000 for an agreed-upon-procedures engagement.


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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2012 (Continued) 9. CORPORATION TAX EXPENSE 31 December 31 December 2012 2011 restated € € (a) Analysis of charge in year Irish corporation tax on profits for the year (see note 9 (b)) 1,526,461 833,721 Prior year under provision in corporation tax 12,378 4,552 Foreign withholding tax 184,599 99,015 _________ _________

Total tax on profit (see note 9 (b)) 1,723,438 937,288 ========== ========= Foreign withholding tax relates to Canadian Dollar and Japanese interest income

earned. (b) Factors affecting tax charge in year The tax assessed for the year is higher than the standard rate of corporation tax in the

Republic of Ireland (12.5%). The differences are explained below: 31 December 31 December 2012 2011 restated € € Profit on ordinary activities before tax 13,372,922 7,560,895 _________ _________

Profit before tax multiplied by standard rate of corporation tax in the Republic of Ireland of 12.5% (31 December 2011: 12.5%) 1,671,615 945,112 Prior year over provision in corporation tax 12,378 4,552 Foreign withholding tax 184,599 99,015 Non admissible expenses 3,611 (12,376) Double taxation relief (148,765) (99,015) _________ _________

Current tax charge for year (note 9 (a)) 1,723,438 937,288 ========== ========= The company expects to continue payment of corporation tax in the future based on

the profits earned from its ordinary activities.


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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2012 (Continued) 10. CASH AND BALANCES AT BANK 31 December 31 December 2012 2011 € €

Cash at bank – Group 94,717,318 77,935,590

Bank overdraft – Parent - (1,785,092) __________ __________

94,717,318 76,150,498 ============ =========== Cash at bank – Subsidiary 62,652,734 49,437,639 =========== =========== Cash at bank – Parent 32,064,584 28,497,951 Bank overdraft – Parent - (1,785,092) __________ _________

32,064,584 26,712,859 ============ =========== Cash and cash equivalent for cash flow statement 94,717,318 76,150,498 ============ ===========

The parent’s overdraft is subject to an interest charge of less than 1% per annum (31 December 2011: 1%). Dr. Ing. h.c.F. Porsche AG has guaranteed the Group’s overdrafts with Deutsche Bank AG for €120,000,000 (31 December 2011: €120,000,000). There are no restrictions on the ability of the subsidiary to transfer funds to the parent company. There is no collateral placed in respect of any amounts outstanding to the bank (31 December 2011: €Nil). Short term deposits are made for varying periods, not exceeding three months, depending on the immediate cash requirements of the Group. The carrying amounts disclosed above reasonably approximate fair value at the statement of financial position date.


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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2012 (Continued) 11. FAIR VALUES OF FINANCIAL ASSETS AND FINANCIAL LIABILITIES

The Company issued securities on 1 February 2006 as follows:

€1,000,000,000 3.875% Bonds of 2006/2016, listed on the Irish and Stuttgart stock exchanges and guaranteed by the parent company. Fair value of the bonds using bid prices per the Stuttgart stock exchange was €1,071,400,000 at 31 December 2012 (31 December 2011: €1,034,900,000) with an effective interest rate of 4.02%. (31 December 2011: 4.02%) Bond interest accrued on the above bonds at 31 December 2012 was €35,362,022 (31 December 2011: €44,626,310). $1,000,000,000 7.20% undated subordinated securities, listed on the Irish stock exchange and guaranteed by the parent company. This bond was redeemed in full on 1 August 2012.

The proceeds of the issue are available to, and were disbersed as, loans to immediate parent company, Dr Ing. h. c. F Porsche AG. The following is an analysis of the carrying value of bonds issued by the company:

31 December 31 December 2012 2011 € € 1,000,000,000 3.875% Bonds 987,844,849 984,349,296 1,000,000,000 7.2% Bonds - 768,879,456 __________ ____________

987,844,849 1,753,228,752 ============ ============


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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2012 (Continued) 11. FAIR VALUES OF FINANCIAL ASSETS AND FINANCIAL LIABILITIES (Continued)

Derivatives

The table below summarises the Group’s derivatives as at 31 December 2012. The derivatives reduce interest rate risk and currency risk related to the loan and deposit contracts.

Contract/ notional amount Assets Liabilities € € € Derivatives held for trading − Interest rate swaps 1,116,327 14,190 (14,190) − Foreign currency forwards 104,217,210 299,356 (1,913,475) __________ _________ __________

Total derivatives held for trading 105,333,537 313,546 (1,927,665) ============ =========== ==========

As at year end, the amounts of derivative assets and liabilities represent gains and losses respectively arising on revaluation of derivative financial instruments i.e. interest rate swaps and foreign currency forwards. The gains on revaluation of derivatives recognised in the statement of comprehensive income amounted to (€2,341,715) (31 December 2011: €219,078). Foreign currency forward contracts have decreased due to decreased foreign currency exposure during the year as a result of decreased lending to group companies. Fair values of all other financial assets and financial liabilities are the same as their book values.

The table below summarises the Group’s derivatives as at 31 December 2011. The derivatives reduce interest rate risk and currency risk related to the loan and deposit contracts and to the interest bearing borrowings.

Contract/

notional amount Assets Liabilities € € € Derivatives held for trading − Interest rate swaps 2,062,070 33,937 (33,937) − Foreign currency forwards 275,474,477 1,000,751 (2,676,055) __________ _________ __________

Total derivatives held for trading 277,536,547 1,034,688 (2,709,992) ============ ========== ==========

There is no security granted or collateral placed in respect of amounts due on derivatives held (31 December 2011: €Nil).


- 39 -


The carrying amounts and fair values of the financial instruments are shown below:

Measurement

category under IAS 39

Carrying amount

31/12/2012 €

Carrying amount

31/12/2011 €

Fair Value 31/12/2012

€

Fair Value 31/12/2011

€

Assets Cash and balances at bank N/A 94,717,318 77,935,590 94,717,318 77,935,590 Financial assets at fair value FVPL 330,702,775 72,887,234 330,702,775 72,887,234 Loans and receivables LAR 1,197,137,643 2,237,770,219 1,197,137,643 2,237,770,219 Insurance receivables FAAC 20,928,007 11,355,189 20,928,007 11,355,189 Derivative assets HFT 313,546 1,034,688 313,546 1,034,688 Liabilities Bank overdraft FLAC - 1,785,092 - 1,785,092 Derivative liabilities HFT 1,927,665 2,709,992 1,927,665 2,709,992 Trade and other payables FLAC 649,469 47,224,910 649,469 47,224,910 Interest payable on bonds FLAC 35,362,022 44,626,310 35,362,022 44,626,310 Amounts due to group undertakings

FLAC 1,461,890 1,929,861 1,461,890 1,929,861

Deposits due to customers FLAC 475,479,680 432,351,381 475,479,680 432,351,381 Insurance contract liabilities N/A 66,287,795 54,003,826 66,287,795 54,003,826 Interest bearing loans and borrowings

FLAC 987,844,849 1,753,228,752 1,071,400,000 1,796,878,362

FVPL: Financial Assets at Fair Value LAR: Loans and Receivables HFT: Held for Trading FLAC: Financial Liabilities at Amortised Cost FAAC: Financial Assets at Amortised Cost


- 40 -


The net gains / (losses) from financial instruments in the valuation categories according to IAS 39 are made as follows:

Net gains / (losses) 31 December 31 December

2012 2011

Designated upon initial recognition (FVPL) 527,895 369,046

Loans and receivables 86,085,938 104,860,236

Financial liabilities at amortised cost (83,317,832) (102,206,667)

Financial assets at amortised cost 184,714 388,307

FVPL - Gains from changes in financial assets at fair value through profit or loss, and realised investment gains/ (losses). Loans and receivables - interest income on loans and advances to customers, interest income on loans and advances to banks and currency translation gains and losses. Financial liabilities at amortised cost - interest expense on deposits from customers, interest expense on loans and borrowing and guarantee fee payable on loans and borrowings and amortisation of transaction costs on interest bearing loans and borrowings.

Financial assets at amortised cost – interest income on cash and bank balances less interest expense on bank overdraft. For investments carried at fair value, the categorisation of the measurement basis into a “fair value hierarchy” is as follows:

Quoted market prices in active markets – Level 1 Inputs to Level 1 fair values are quoted prices (unadjusted) in active markets for identical assets. An active market is one in which transactions for the asset occur with sufficient frequency and volume to provide pricing information on an ongoing basis. Examples are quoted unit trusts in active markets. Modelled with significant observable market inputs –Level 2 Inputs to Level 2 fair values are inputs other than quoted prices included within Level 1 that are observable for the asset, either directly or indirectly. If the asset has a specified (contractual) term, a Level 2 input must be observable for substantially the full term of the asset. Level 2 inputs include the following: Quoted prices for similar (i.e. not identical) assets in active markets; Quoted prices for identical or similar assets in markets that are not active, the prices are not current, or price quotations vary substantially either over time or among market makers, or in which little information is released publicly;


- 41 -


Inputs other than quoted prices that are observable for the asset (for example, interest rates and yield curves observable at commonly quoted intervals, volatilities, prepayment spreads, loss severities, credit risks, and default rates). Examples of these are securities measured using discounted cash flow models based on market observable swap yields. Modelled with significant unobservable market inputs –Level 3 Inputs to Level 3 fair values are unobservable inputs for the asset. Unobservable inputs may have been used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset at the measurement date (or market information for the inputs to any valuation models). As such, unobservable inputs reflect the assumptions which the business unit considers that market participants would use in pricing the asset. There are no Level 3 assets. As at 31 December 2012, financial assets and liabilities are valued as follows: Level 1 Level 2 Level 3 Total Financial assets at fair value Investments in cash funds 330,702,775 330,702,775

Derivative assets Foreign currency forwards - 299,356 - 299,356

Interest rate swaps - 14,190 - 14,190

Total - 313,546 - 313,546

Derivative liabilities

Foreign currency forwards - (1,913,475) - (1,913,475)

Interest rate swaps - (14,190) - (14,190)

Total - (1,927,665) - (1,927,665)

There are no transfers between Level 1 and Level 2 categories.

As at 31 December 2011, financial assets and liabilities are valued as follows: Level 1 Level 2 Level 3 Total Financial assets at fair value Investments in cash funds 72,887,234 - - 72,887,234

Derivative assets Foreign currency forwards - 1,000,751 - 1,000,751

Interest rate swaps - 33,937 - 33,937

Total - 1,034,688 - 1,034,688

Derivative liabilities

Foreign currency forwards - (2,676,055) - (2,676,055)

Interest rate swaps - (33,937) - (33,937)

Total - (2,709,992) - (2,709,992)


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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2011 (Continued) 12. IMPAIRMENT LOSSES ON LOANS AND RECEIVABLES

There were no impairment losses on loans and receivables as at 31 December 2012 (31 December 2011: €Nil).

13. DEFERRED ACQUISITION COSTS Restated 31 December 31 December 2012 2011 € € Opening balance 416,775 307,106 Commission paid for the year (666,882) (582,123) Commission charged to the statement of comprehensive income (note 7) 805,651 691,792 _______ _______

Closing balance 555,544 416,775 ======== =======

Commission charged to the statement of comprehensive income comprises acquisition costs and changes in deferred acquisition costs disclosed in note 7.

14. FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS Financial assets at fair value through profit or loss are made up as follows: 31 December 31 December 2012 2011 € € Due within one year Investments in cash funds 330,702,775 72,887,234 ============ ==========

Investments in cash funds are those investments which are designated as fair value through profit or loss. Fair value for these investments is the bid price provided by the investment manager as at year end.

15. LOANS AND RECEIVABLES

Loans and advances to customers represent loans and receivables advanced to other group companies. As a provider of financial and treasury services to other entities within the group, the Group considers intra-group entities to be its customers. Loans and advances to customers at 31 December 2012 were €1,197,137,643 (31 December 2011: €2,237,770,219). Loans and advances to customers are held at amortised cost and are due within one year.


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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2012 (Continued)

16. CALLED UP SHARE CAPITAL 31 December 31 December 2012 2011 € € Authorised 1,000,000 ordinary shares of par value €0.511292 each 511,292 511,292 ======== ======== Allotted, called up and fully paid 1,000,000 ordinary shares of par value €0.511292 each 511,292 511,292 ======== ======== 17. TRADE AND OTHER PAYABLES 31 December 31 December 2012 2011 € € Trade payables 649,469 47,224,910 ========== ===========

Trade and other payables relate to amounts payable to the company’s parent, Dr. Ing. h.c.F. Porsche AG, for settlement of trades. The corresponding receivables for those trades are included in loans and receivables advanced to customers. These amounts are payable within one year.

18. INTEREST PAYABLE ON BONDS

Interest payable on bonds comprises accrued interest payable on interest bearing borrowings in issue. Interest payable on bonds at 31 December 2012 was €35,362,022 (31 December 2011: €44,626,310).

19. INTEREST BEARING LOANS AND BORROWINGS

Interest bearing loans and borrowings represent the amortised cost of bonds issued by the Group.


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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2012 (Continued) 20. DEPOSITS DUE TO CUSTOMERS

Deposits due to customers represent balances payable to intra-group companies. Deposits due to customers at 31 December 2012 were €475,479,680 (31 December 2011: €432,351,381). These deposits are interest bearing and are due in one year.

21. INSURANCE CONTRACT LIABILITIES

Gross Reinsurance Net € € € 31 December 2012 Notified outstanding claims 7,611,691 - 7,611,691 Provision for claims incurred but not reported 6,229,067 - 6,229,067 Provision for unearned premiums 52,447,037 - 52,447,037 _________ ________ _________

66,287,795 - 66,287,795 =========== ========= ========== Restated Restated Gross Reinsurance Net € € € 31 December 2011 Notified outstanding claims 7,973,250 - 7,973,250 Provision for claims incurred but not reported 7,883,571 - 7,883,571 Provision for unearned premiums 38,147,005 - 38,147,005 _________ ________ _________

54,003,826 - 54,003,826 =========== ========= ========== Restated Restated Gross Reinsurance Net € € € 1 January 2011 Notified outstanding claims 5,179,172 - 5,179,172 Provision for claims incurred but not reported 2,920,620 - 2,920,620 Provision for unearned premiums 24,670,393 - 24,670,393 _________ ________ _________

32,770,185 - 32,770,185 =========== ========= ==========


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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2012 (Continued) 21. INSURANCE CONTRACT LIABILITIES (Continued)

Notified outstanding claims

31 December 31 December 2012 2011 € €

Opening balance as at 1 January 7,973,250 5,179,172 Provision (reversed)/ made during the year (361,559) 2,794,078

_________ _________

Closing balance as at 31 December 7,611,691 7,973,250 ========== ==========

Incurred but not reported claims Restated 31 December 31 December 2012 2011 € € Opening balance as at 1 January 7,883,571 2,920,620 Provision made during the year (1,654,504) 4,962,951 _________ _________

Closing balance as at 31 December 6,229,067 7,883,571 ========== ========== Gross change in insurance contract liabilities comprise movement in notified

outstanding claims and movement in claims incurred but not reported. Movement in notified claims is the sum of claims which arose during the year and claims paid during the year. Unearned Premium Reserve Restated


Opening balance as at 1 January 38,147,005 24,670,393 Movement during the year 14,300,032 13,476,612

_________ _________

Closing balance as at 31 December 52,447,037 38,147,005 ========== ==========


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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2012 (Continued) 21. INSURANCE CONTRACT LIABILITIES (Continued)

PRIOR YEAR CLAIMS DEVELOPMENT TABLE 2012 EURO GBP CHF TOTAL Loss provisions at the beginning of the year re outstanding claims for the year

5,624,899 1,943,258 405,093 7,973,250

Less payments made during FY12 on claims incurred in FY11

(5,956,277) (1,515,254) (364,743) (7,836,274)

Less loss provisions at end of FY12 for such outstanding claims

(5,094,270) (1,934,917) (582,504) (7,611,691)

Movement on prior year claims (5,425,648) (1,506,913) (542,154) (7,474,715)

31 December 2011 EURO GBP CHF TOTAL

Loss provisions at the beginning of the year re outstanding claims for the year

7,205,339 1,379,984 671,719 9,257,042

Less payments made during FY10 on claims incurred in FY11

(6,895,271) (1,278,521) (579,452) (8,753,244)

Less loss provisions at end of FY11 for such outstanding claims

(5,624,899) (1,943,258) (405,093) (7,973,250)

Movement on prior year claims (5,314,831) (1,841,795) (312,826) (7,469,452)

CONCENTRATION FOR INSURANCE CONTRACT LIABILITIES:

31 December 2012 EURO GBP CHF TOTAL

Provision for unearned premiums

20,149,523 21,843,801 10,453,713 52,447,037

Provision for claims incurred but not reported

4,650,948 840,586 737,533 6,229,067

Notified outstanding claims 5,094,270 1,934,917 582,504 7,611,691 Total 29,894,741 24,619,304 11,773,750 66,287,795

31 December 2011 restated EURO GBP CHF TOTAL


17,144,098 15,509,139 5,493,768 38,147,005


5,891,916 1,738,286 253,369 7,883,571

Notified outstanding claims 5,624,899 1,943,258 405,093 7,973,250 Total 28,660,913 19,190,683 6,152,230 54,003,826

1 January 2011 restated EURO GBP CHF TOTAL


14,782,549 8,586,504 1,301,340 24,670,393


2,383,838 120,954 415,828 2,920,620

Notified outstanding claims 4,164,251 759,029 255,892 5,179,172 Total 21,330,638 9,466,487 1,973,060 32,770,185


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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2012 (Continued) 22. RELATED PARTY TRANSACTIONS

Dr. Ing. h.c.F. Porsche AG is the immediate parent of the Group while Volkswagen AG is the ultimate parent.

The Group is provided with a guarantee by Dr. Ing. h.c.F. Porsche AG whereby the

Group’s reinsurance claims payable to the reinsured are underwritten by Dr. Ing. h.c.F. Porsche AG. The Group pays an annual guarantee fee of 0.125% of the accrual warranty claim balance at 31 December each year. For the year ended 31 December 2012, the Group paid €13,806 (31 December 2011: €23,312). An amount of €Nil was outstanding at 31 December 2012 (31 December 2011: €10,000).

At 31 December 2012, an amount of €968,482 (31 December 2011: €1,450,260) was

payable to Porsche Financial Management Services Limited. Refer to note 8 for further details of administrative expenses, including management fees and directors’ remuneration discharged by Porsche Financial Management Services Limited.

A number of transactions are entered into with related parties in the normal course of business. These include loans and receivables, deposits, foreign currency forwards and interest rate swaps.


Loans and receivables advanced to related parties Opening loans and receivables Advanced by parent to ultimate parent 2,157,830,358 2,983,083,351 Advanced by subsidiary to ultimate parent 79,939,861 4,695,826 Movement during the year Payments by parent to ultimate parent (1,033,817,133) (825,252,993) Payments by subsidiary to ultimate parent (6,815,443) 75,244,035

____________ ____________

Closing loans and receivables parent 1,124,013,225 2,157,830,358 subsidiary 73,124,418 79,939,861

____________ ____________

1,197,137,643 2,237,770,219 ============== ============= Interest and similar income from parent 82,892,606 103,779,158

Interest and similar income from other group companies 3,193,332 1,081,078 =========== ===========


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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2012 (Continued) 22. RELATED PARTY TRANSACTIONS (Continued) 31 December 31 December 2012 2011 € € Deposits due including payable to related parties Opening outstanding deposits and payables Received by parent from ultimate parent 48,766,669 14,370,044 Received by subsidiary from ultimate parent 433,519,614 232,037,204 Movement in deposits and payables Received by/(paid to) parent from ultimate parent (48,638,966) 34,396,625 Received by subsidiary from ultimate parent 44,409,497 201,482,410 __________ __________

Closing outstanding deposits and payables parent 127,703 48,766,669 subsidiary 477,929,111 433,519,614 __________ __________

478,056,814 482,286,283 ============ ============ Interest and similar charges to parent 1,814,199 2,245,697 Interest and similar charges to other group companies 1,693,992 1,832,932 =========== ========== Interest rate swaps from related parties Opening contracts outstanding (nominal value) 2,062,070 4,761,320 Contracts sold/matured during the year (945,743) (2,699,250) ________ _________

Closing contracts outstanding 1,116,327 2,062,070 ========== ==========

Fees and commissions income from/to related parties Guarantee fee The Group acts as joint guarantor with Dr. Ing. h.c.F. Porsche AG for the following loan notes issued by fellow group company, Porsche Financial Services Inc.:

US$150,000,000 4.98% Series A Guaranteed Senior Notes due 9 March 2014; US$75,000,000 5.13% Series A Guaranteed Senior Notes due 9 March 2016; US$200,000,000 5.33% Series A Guaranteed Senior Notes due 9 March 2019. The Group earns an annual guarantee fee of 0.125% on the outstanding nominal

amount of the issue from its affiliate, Porsche Financial Services Inc.. For the year ended 31 December 2012, the Group earned €405,396 (31 December 2011: €416,079) under this arrangement.

In the worst case scenario, the company will be liable to pay the nominal values of guarantees mentioned above. The Group has support from group available, in case these guarantees are called and become payable. The Group is party to the guarantee as the bondholders of Porsche Financial Services Inc. demanded a guarantee from Dr. Ing. h.c.F. Porsche AG and Porsche International Financing plc in order to subscribe for the bonds issued by Porsche Financial Services Inc..


- 49 -

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2012 (Continued) 22. RELATED PARTY TRANSACTIONS (Continued)

Commitment fee The Group agreed to make available a credit facility of €1,890,000,000 to Dr. Ing. h.c.F. Porsche AG. The credit facility fee was based on the relevant undrawn portion of the credit facility. For the year ended 31 December 2012, the Group earned €Nil (31 December 2011: €Nil) from this credit facility fee.

Other fees and commissions 31 December 31 December 2012 2011

€ € Collection fee 350,000 350,000 Service fee 7,274 2,772 ======== ========

Fees and commissions expense due to related parties Guarantee fee The Group is provided with a guarantee from Dr. Ing. h.c.F. Porsche AG, for the following bond issued:

€1,000,000,000 3.875% Bonds of 2006/2016, listed on the Irish and Stuttgart stock exchanges and guaranteed by Dr. Ing. h.c.F. Porsche AG. The company pays an annual guarantee fee of 0.125% on the outstanding nominal amount of the issue to the parent company, Dr. Ing. h.c.F. Porsche AG. For the year ended 31 December 2012, the company paid €1,814,199 (31 December 2011: €2,245,697) under this arrangement.

Terms and conditions of transactions with related parties The loans to and deposits from related parties are at arm’s length rates. Outstanding

balances at the year end are unsecured and settlement occurs in cash. There have been no guarantees provided or received for any related party receivables or payables.

For the year ended 31 December 2012, the Group has not recorded any impairment

of receivables relating to amounts owed by related parties (31 December 2011: €Nil). This assessment is undertaken each financial year through examining the financial position of the related party and the market in which the related party operates.


- 50 -

NOTES TO THE FINANCIAL STATEMENTS 31 December 2012 (Continued) 23. INTEREST RATE CONCENTRATION

Weighted average Interest Non-interest rate of interest bearing bearing Total 31 December 2012 (%) € € € Assets Cash and balances at bank 0.15 94,717,318 - 94,717,318 Financial assets at fair value - 330,702,775 330,702,775 Loans and receivables 4.86 1,197,137,643 - 1,197,137,643 Insurance receivables - 20,928,007 20,928,007 Derivative assets 2.75 14,190 299,356 313,546 ____________ __________ ____________

1,291,861,151 351,930,138 1,643,799,289 ============== ============ ============= Liabilities Interest payable on bonds - 35,362,022 35,362,022 Derivative liabilities - 1,927,665 1,927,665 Deposits due to customers 0.72 475,479,680 - 475,479,680 Trade and other payables - 649,469 649,469 Insurance contract liabilities - 66,287,795 66,287,795 Due to related parties - 1,461,890 1,461,890 Loans and borrowings 5.54 987,844,849 - 987,844,849 ____________ __________ ____________

1,463,324,529 105,688,841 1,569,013,370 ============== ============ ============= Weighted average Interest Non-interest rate of interest bearing bearing Total 31 December 2011 restated (%) € € € Assets Cash and balances at bank 0.69 73,533,951 4,401,639 77,935,590 Financial assets at fair value - 72,887,234 72,887,234 Loans and receivables 4.85 2,193,386,172 44,384,047 2,237,770,219 Insurance receivables - 11,355,189 11,355,189 Derivative assets 2.75 33,937 1,000,751 1,034,688 ____________ __________ ____________

2,266,954,060 134,033,860 2,400,982,920 ============== =========== ============= Liabilities Bank overdraft 0.48 1,785,092 - 1,785,092 Derivative liabilities - 2,709,992 2,709,992 Interest payable on bonds - 44,626,310 44,626,310 Deposits due to customers 1.18 432,351,381 - 432,351,381 Trade and other payables - 47,224,910 47,224,910 Insurance contract liabilities - 54,003,826 54,003,826 Due to related parties - 1,929,861 1,929,861 Loans and borrowings 5.52 1,753,228,752 - 1,753,228,752 ____________ __________ ____________

2,187,365,225 150,494,899 2,337,860,124 ============== ============ =============



31 December 2012 (Continued) 24. CURRENCY DENOMINATION ANALYSIS 31 December 2012

RUB AUD CAD EUR GBP JPY USD Other Total

Assets: Cash and balances at bank - 401,109 269,874 81,954,977 1,148 606,539 11,323,767 160,144 94,717,318 Financial assets at fair value - - - 27,583,717 54,960,941 - 248,158,117 - 330,702,775 Loans and receivables 12,724,033 41,753,132 5,515 1,142,163,931 - 3,743 330,639 156,650 1,197,137,643 Derivative assets - - - 313,546 - - - - 313,546 Insurance receivables - - - (2,696,290) 16,100,579 - - 7,523,718 20,928,007 Deferred acquisition costs - - - 285,311 169,596 - - 100,637 555,544

__________ _________ _________ ____________ _________ _________ __________ _________ ____________

Total assets 12,724,033 42,154,241 275,389 1,249,605,192 71,232,264 610,282 259,812,523 7,941,149 1,644,355,073 =========== =========== ========== ============== =========== =========== ============ ========== =============

Liabilities: Bank overdraft - - - - - - - - - Derivative liabilities - - - 1,927,665 - - - - 1,927,665 Interest payable on bonds - - - 35,362,022 - - - - 35,362,022 Deposits due to customers - - - 109,817,066 54,704,656 44,269,247 262,776,567 3,912,144 475,479,680 Trade and other payables - - - 513,883 - - (1,669) 137,255 649,469 Interest bearing loans and borrowings - - - 987,844,849 - - - - 987,844,849 Insurance contract liabilities - - - 29,894,741 24,619,304 - - 11,773,750 66,287,795 Due to related parties - - - 1,461,890 - - - - 1,461,890 ______ _________ ________ ____________ _________ _________ __________ _________ ____________

Total liabilities - - - 1,166,322,116 79,323,960 44,269,247 262,774,898 15,823,149 1,569,013,370 ======== ========== ========== ============== ============ =========== ============ =========== =============

- 51 -



31 December 2012 (Continued) 24. CURRENCY DENOMINATION ANALYSIS (Continued) 31 December 2011

RUB AUD CAD EUR GBP JPY USD Other Total Assets: Cash and balances at bank - 354,765 235,449 48,210,149 45,983 8,832,020 18,980,724 1,276,500 77,935,590 Financial assets at fair value - - - 21,566,282 18,861,847 - 32,459,105 - 72,887,234 Loans and receivables 11,663,147 23,422,135 6,591,136 1,397,705,505 3,086,991 4,733,095 788,235,631 2,332,579 2,237,770,219 Insurance receivables - - - 6,270,454 3,398,741 - - 1,685,994 11,355,189 Derivative assets 513,755 486,996 - 33,937 - - - 1,034,688 Deferred acquisition costs - - - 217,177 143,910 - - 55,688 416,775

__________ _________ _________ ____________ _________ _________ __________ _________ ____________

Total assets 12,176,902 24,263,896 6,826,585 1,474,003,504 25,537,472 13,565,115 839,675,460 5,350,761 2,401,399,695 =========== =========== ========== ============== =========== =========== ============ ========== ==============

Liabilities - restated: Bank overdraft 12 - - 1,785,080 - - - - 1,785,092 Derivative liabilities - - - 2,709,992 - - - - 2,709,992 Interest payable on bonds - - - 35,352,740 - - 9,273,570 - 44,626,310 Deposits due to customers - - - 106,435,180 84,405,121 61,561,246 171,911,653 8,038,181 432,351,381 Trade and other payables - 3,980,642 6,583,259 17,143,729 3,086,549 1,482,440 13,015,094 1,933,197 47,224,910 Insurance contract liabilities - - - 28,660,913 19,190,683 - - 6,152,230 54,003,826 Interest bearing loans and borrowings - - - 984,349,296 - - 768,879,456 - 1,753,228,752 Due to related parties - - - 1,929,861 - - - - 1,929,861

_______ ________ _________ ____________ __________ _________ __________ _________ ____________

Total liabilities 12 3,980,642 6,583,259 1,178,366,791 106,682,353 63,043,686 963,079,773 16,123,608 2,337,860,124 ======== ========== ========== ============== ============ =========== ============ =========== ==============

Loans and advances to customers comprise Swiss Franc denominated assets amounting to €11,111 (31 December 2011: €1.986,618), Hong Kong Dollar denominated assets amounting to €143,592 (31 December 2011: €3,046) and Singapore Dollar denominated assets of €1,947 (31 December 2011: €342,915). Trade and other payables comprise Swiss Franc denominated liabilities amounting to €Nil (31 December 2011: €1,239,962), Hong Kong Dollar denominated liabilities amounting to €137,255 (31 December 2011: €350,864) and Singapore Dollar denominated assets of €Nil (31 December 2011: €342,371).

- 52 -



31 December 2012 (Continued) 24. CURRENCY DENOMINATION ANALYSIS (Continued) Cash and balances at bank comprise Hong Kong Dollar denominated assets amounting to €56,963 (31 December 2011: €39,718), Swiss Franc denominated assets amounting to €93,140 (31 December 2011: €1,233,808) and Singapore Dollar denominated assets of €10,041 (31 December 2011: €2,973). Insurance contract liabilities comprise Swiss Franc denominated liabilities of €11,773,748 (31 December 2011: €5,251,857). Deposits due to customers comprise Hong Kong Dollar denominated liabilities of €3,912,144 (31 December 2011: €6,406,715) and Swiss Franc denominated liabilities of €Nil (31 December 2011: €1,631,466). The foreign exchange risk profile is reduced compared to last year due to the redemption of the USD 1,000,000,000 Bond during the year. Any other changes in risk profile are due to normal changes in the business of the Group as a result of the lending and borrowing requirements of its fellow subsidiaries. 25. LIQUIDITY RISK DISCLOSURES FOR FINANCIAL LIABILITIES 31 December 2012 3 months 1 year or or less but less but 5 years or 1 month over over 3 less but over Over 5 or less 1 month months 1 year years Total

€ € € € € € Liabilities: Trade and other payables 649,469 - - - - 649,469 Derivative liabilities - 1,927,665 - - - 1,927,665 Due to related parties 1,461,890 - - - - 1,461,890 Interest payable on bonds - 35,362,022 - - - 35,362,022 Deposits due to customers 416,156,503 47,948,503 11,374,675 - - 475,479,680 Insurance contract liabilities 66,287,795 - - - - 66,287,795 Interest on bonds from statement of financial position date to maturity - 38,750,000 - 116,250,000 - 155,000,000 Interest bearing loans and borrowings - - - 1,000,000,000 - 1,000,000,000

__________ ___________ _________ ____________ __________ ____________

Total liabilities 484,555,657 123,988,190 11,374,675 1,116,250,000 - 1,736,168,522 ============ ============= =========== ============= =========== =============

- 53 -


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2012 (Continued) 25. LIQUIDITY RISK DISCLOSURES FOR FINANCIAL LIABILITIES (Continued) 31 December 2011 restated 3 months 1 year or Restated or less but less but 5 years or 1 month over over 3 less but over Over 5 Restated or less 1 month months 1 year years Total

€ € € € € €

Liabilities: Bank overdrafts 1,785,092 - - - - 1,785,092 Derivative liabilities - 2,709,992 - - - 2,709,992 Trade and other payables 47,224,910 - - - - 47,224,910 Due to related parties 1,929,861 - - - - 1,929,861 Interest payable on bonds - 44,626,310 - - - 44,626,310 Deposits due to customers 432,351,381 - - - - 432,351,381 Insurance contract liabilities 54,003,826 - - - - 54,003,826 Interest on bonds from statement of financial position date to maturity - 52,969,474 42,349,304 267,828,439 - 363,147,218 Interest bearing loans and borrowings - - - 1,772,797,527 - 1,772,797,527

__________ __________ _________ ____________ __________ ____________

Total liabilities 537,295,070 100,305,776 42,349,304 2,040,625,966 - 2,720,576,116 ============ ============ =========== ============== =========== ============

Interest payable amounting to €35,362,022 (31 December 2011: €44,626,310) is to be paid out of interest receivable on loans and

receivables. Deposits due to customers will be repaid from the proceeds of loans and receivables from other group companies. All interest amounts payable after balance sheet date will be paid out of interest receivable on loans and receivables. The timing of payments

of interest receivable and interest payable are not significantly different. The Group has provided joint guarantee to Porsche Financial Services Inc, amounting in aggregate to USD $425,000,000 (31 December 2011: USD $425,000,000), see note 22 above.

- 54 -


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2012 (Continued) 26. SENSITIVITY ANALYSIS

The sensitivity analysis shows the effect on profit or loss of possible changes in the relevant risk variable (e.g. prevailing market interest rates, currency rates, equity prices or commodity prices). The effects on profit or loss at the statement of financial position date, assuming that a possible change in the relevant risk variable had occurred at the statement of financial position date and had been applied to the risk exposure in existence at that date, are as follows:

Interest rate risks The Group has one interest rate swap with Dr. Ing. h.c.F. Porsche AG, having notional value of €1,116,327 (31 December 2011: €2,062,070). The effect on the statement of comprehensive income of a 1% change in the interest rate on interest rate swaps would amount to €5,645 (31 December 2011: €21,459) for the year. All other financial assets and liabilities bear fixed rates of interest. Hence, interest rate sensitivity for other financial assets and liabilities is not disclosed. Foreign currency risks At 31 December 2012, the Group had currency forward contracts with a notional value amounting to €104,217,210 (31 December 2011: €275,474,477) at settlement. The effect on the statement of comprehensive income of a 10% change in foreign exchange rates would be as follows: 31 December 2012 FX Rate − 10% FX Rate + 10% € € JPY 2,810,226 (6,014,552) AUD (3,877,072) 4,475,784 HKD 382,805 (399,599) GBP 403,814 330,394 RUB (1,582,186) 976,356 CHF 92,844 75,964

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2012 (Continued) 26. SENSITIVITY ANALYSIS (Contd/..)

FX Rate − 10% FX Rate + 10% € € 31 December 2011 JPY 6,980,231 (3,109,541)

AUD (2,676,262) 1,305,161 HKD 778,769 (524,490) US$ 14,679,299 (10,142,575)

GBP 8,454,739 (4,845,273) RUB (1,869,382) 592,807 CHF 714,822 358,468

Price risk The increase in unrealised gain on revaluation of investments at fair value through profit and loss would be €1,758,367 (31 December 2011: €5,535,906) in response to +10% change in fair value (i.e. net asset values for each cash fund) and vice versa. Insurance risk The increase in claims incurred but not reported would be €6,135,384 (31 December 2011: €3,333,113) in response to +10% change in loss ratios and vice versa.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2011 (Continued) 27. SEGMENT REPORTING

For management purposes, the Group is organised into two business units based on the services provided and has two reportable operating segments:

• Porsche International Financing plc (PIF plc) - Treasury and Cash Management • Porsche International Reinsurance Ltd (PIRL) - Captive Reinsurance.

Management monitors the operating results of these business units separately for the purpose of making decisions about resource allocation and performance assessment. Segment assets for PIF plc include an investment in PIRL as PIRL is a 100% subsidiary of PIF plc. Segment revenue for the parent comprises gross interest earned by the parent on loans and the related fee income. For the subsidiary, segment revenue comprises gross premium written by the subsidiary. Segment results represent profit before tax for the Group. Segment performance is evaluated based on operating profit or loss as set out in the table below:

Treasury and cash Captive management reinsurance Total € € € 31 December 2012 Assets 1,542,775,872 101,899,173 1,644,675,045 Liabilities 1,501,263,685 67,749,685 1,569,013,370 Revenues 86,117,918 39,410,007 125,527,925

Operating profit 1,190,121 12,182,801 13,372,922 Tax expense 196,976 1,526,462 1,723,438

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NOTES TO THE FINANCIAL STATEMENTS 31 December 2011 (Continued) 27. SEGMENT REPORTING (Continued) Restated Treasury and cash Captive Restated management reinsurance Total € € € 31 December 2011 restated Assets 2,322,661,920 79,426,836 2,402,088,756 Liabilities 2,282,142,878 55,933,687 2,338,076,565 Revenues 104,895,670 32,642,846 137,538,516 Operating profit 2,622,654 4,938,241 7,560,895 Tax expense 320,008 617,280 937,288

The information provided for operating segments is prepared using a basis consistent with information for operating segments provided to the chief operating decision maker. IFRS 8 also requires disclosure of non-current assets attributable to each geographical area. Since the statement of financial position lists items in order of liquidity and the current/ non-current distinction is not made, the company has disclosed total assets and total liabilities attributable to each geographical area.

Rest of Asia Eurozone Europe America Pacific Total € € € € € 31 December 2012 Assets 1,250,055,718 78,963,722 260,089,582 55,566,023 1,644,675,045 Liabilities 1,170,735,082 91,097,709 189,246,038 117,934,541 1,569,013,370 Revenues 118,645,882 3,393,387 387,167 3,101,489 125,527,925 Profits 6,632,327 6,692,646 5,321 42,628 13,372,922

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NOTES TO THE FINANCIAL STATEMENTS 31 December 2011 (Continued) 27. SEGMENT REPORTING (Continued) Rest of Asia Eurozone Europe America Pacific Total € € € € € 31 December 2011 as restated Assets 2,249,809,607 30,499,580 69,844,088 51,935,481 2,402,088,756 Liabilities 1,209,469,366 111,378,324 922,958,022 94,270,853 2,338,076,565 Revenues 142,343,339 8,801,933 390,399 706,370 152,242,041 Profits 5,008,574 2,524,898 9,761 17,662 7,560,895

Revenues include interest on loans and advances provided to Porsche AG, representing 72% of revenue (31 December 2011: 82%), and gross premiums written from Allianz Versicherungs AG (2011: XL Insurance Company Limited) of 28% of revenue (31 December 2011:18%). Cash flows for geographical segments as at 31 December 2012:

Rest of Asia Eurozone Europe America Pacific Total € € € € € Operating activities 875,384,608 67,161,467 87,534,579 20,242,395 1,050,323,049 Investing activities (218,980,727) (20,256,536) (18,522,774) - (257,760,037) Financing activities (773,006,763) - - - (773,006,763)

Cash flows for geographical segments as at 31 December 2011:

€ € € € € Operating activities 807,213,816 73,215,565 81,336,141 18,054,601 979,820,123 Investing activities 9,106,155 12,475,074 (32,459,105) - (10,877,874) Financing activities (969,769,445) - - - (969,769,445)

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NOTES TO THE FINANCIAL STATEMENTS 31 December 2011 (Continued)

28. CAPITAL MANAGEMENT

The Group has a capital base consisting of initial capital subscribed by Dr. Ing. h.c.F. Porsche AG in 1991, together with its retained earnings since then. It raises debt by way of bond issues as detailed in these financial statements. The proceeds of these issues have been lent to Dr. Ing. h.c.F. Porsche AG on an arm’s length commercial basis. The objective is to be a vehicle for raising funds for Dr. Ing. h.c.F. Porsche AG to help it achieve its own corporate objectives, as detailed in its financial statements.

Porsche International Reinsurance Limited reinsures warranty contracts sold by Porsche dealers throughout Europe on previously-owned Porsche cars. The objective is to administer this business as efficiently as possible and ensure the correct accounting for premiums received and claims paid, resulting in profitable operations. The Group is meeting its objectives for managing capital by ensuring a profitable basis for all its operations, thus increasing retained earnings and preserving its capital base. The Group does not regard its financial liabilities, including its interest bearing loans and borrowings, as capital. The quantitative data relating to the Group’s capital is shown in note 16 and in the statement of changes in equity on page 12. There were no changes in the Group’s objectives or capital from the previous year, other than the increase in retained earnings. Under the EU Reinsurance Directive, the Group is required to, and meets, a Minimum Guarantee Fund of €3,500,000.

29. PARENT UNDERTAKING

The ultimate parent of the Group is Volkswagen AG, which is incorporated in Germany. The smallest and largest group in which the results of the Group are consolidated is that headed by Volkswagen AG. Copies of the financial statements of Volkswagen AG may be obtained from Volkswagen AG, Wolfsburg, Germany.

30. RECLASSIFICATION OF PRIOR YEAR FINANCIAL LIABILITIES

€1,927,665 of the total of €2,577,134 classified as trade and other payables in the 31 December 2011 and 2010 financial statements should have been classified as derivative liabilities. These have been reclassified to derivative liabilities in the Statement of Financial Position. The effect of the restatement on those financial statements is summarised below. There is no effect on the results or financial position in 2012.

31 December 31 December 2011 2010 € € Statement of Financial Position: Increase in derivative liabilities 1,927,665 1,335,017 Decrease in trade and other payables 1,927,665 1,335,017


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NOTES TO THE FINANCIAL STATEMENTS 31 December 2011 (Continued)

31. APPROVAL OF FINANCIAL STATEMENTS

The consolidated financial statements were approved and authorised for issue by the board of directors on 30 April 2013.

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