Corporate Governance Report

Good practice and responsible corporate governance reinforce the trust of our customers and investors, thereby laying the foundation for a sustainable increase in the value of our Company. This is why the Board of Management and the Supervisory Board comply with all recommendations of the current German Corporate Governance Code as issued on June 12, 2006.

RECOMMENDATIONS OF THE GERMAN CORPORATE GOVERNANCE CODE AS THE GUIDING PRINCIPLES OF CORPORATE GOVERNANCE
The recommendations of the German Corporate Governance Code are an important basis for the activities of the Board of Management and Supervisory Board of Volkswagen AG. The Code incorporates the most important statutory provisions, together with internationally and nationally recognized standards of corporate governance elaborated and revised by the responsible Government Commission. Compliance with the recommendations and suggestions set out in the Code will ensure good corporate governance and supervision.

In order to meet the steadily increasing demand for information from different interest groups, we create transparency and build trust in responsible corporate governance. In doing so, we act in the interests of national and international investors and thus achieve sustainable increases in the value of our Company.

DECLARATION OF CONFORMITY
On November 17, 2006, the Board of Management and Supervisory Board of Volkswagen AG issued their declaration of conformity with the German Corporate Governance Code as required by section 161 of the German Stock Corporation Act. They declared that they had complied with the recommendations of the Government Commission on the German Corporate Governance Code as issued on June 2, 2005 until the release of the revised version on July 24, 2006.

With the current declaration of conformity, the Board of Management and Supervisory Board of Volkswagen AG also declare that they complied and continue to comply with the recommendations of the Government Commission on the German Corporate Governance Code as revised and issued on June 12, 2006.

The current joint declaration of conformity by the Board of Management and the Supervisory Board under section 161 of the German Stock Corporation Act has been published on our website at www.volkswagen-ir.com.

In addition, the Volkswagen Group will largely comply with the suggestions of the Code. However, it still has no plans to implement the suggestion made in the Code to the effect that one-time variable components tied to business performance should be taken into account in setting the remuneration of the Board of Management (article 4.2.3, clause 3 of the Code) and that long-term performance should be taken into account in setting the remuneration of the Supervisory Board (article 5.4.7, clause 5 of the Code). It intends to await the debate on this matter in professional circles and the emergence of a consensus.

In their declaration of conformity on December 6, 2006, the Board of Management and Supervisory Board of AUDI AG declared that they complied with the recommendations of the Code as issued on June 2, 2005, and largely complied and would continue to comply with the recommendations of the Code as issued on June 12, 2006. However, they included and continue to include the reservation that the remuneration paid to members of the Supervisory Board (article 5.4.7, subsection 3, sentence 1 of the Code) is not disclosed individually and the reservation that members are not elected to the Supervisory Board on an individual basis (article 5.4.3, sentence 1 of the Code). Furthermore, the information on remuneration received by individual members of the Board of Management required by section 285 sentence 1 no. 9a sentences 5 to 9 of the German Commercial Code (HGB) will not be disclosed for five years. A resolution to this effect was adopted by the Annual General Meeting in Ingolstadt on May 17, 2006.

With regard to the suggestions contained in the Code, the following reservations apply at AUDI AG: The Annual General Meeting of AUDI AG is not broadcast on the Internet (article 2.3.4 of the Code). There is therefore no need to enable absent shareholders to contact the company’s proxies (article 2.3.3, clause 3, sub-clause 2 of the Code) during the Annual General Meeting. Furthermore, all reservations stated above with regard to Volkswagen AG also apply to AUDI AG. The declaration of conformity is published at www.audi.de.

COOPERATION BETWEEN THE BOARD OF MANAGEMENT AND THE SUPERVISORY BOARD
The Board of Management provided the Supervisory Board with regular, complete and timely verbal and written reports on all issues relevant to the development of business and corporate planning, including the risk situation and risk management. Further information on this subject can be found in the Report of the Supervisory Board.

REMUNERATION REPORT
In 2006, as in 2005, we complied fully with the recommendation of the German Corporate Governance Code that the remuneration paid to all members of the Board of Management and the Supervisory Board be disclosed individually. We are thus increasing transparency on components of remuneration in line with the aims of the German Corporate Governance Code, and are implementing the Act on Disclosure of Executive Board Remuneration (VorstOG) that entered into force in August 2005. The individualized remuneration is disclosed and broken down into components in the Notes to the 2006 Consolidated Financial Statements. In addition, information on the main elements of the remuneration system for the Board of Management and the structure of the stock option program can also be found there. All disclosures were included in the audit by the auditors as part of the consolidated financial statements.

RISK MANAGEMENT
We also pay particular attention to managing potential risks to the Company. Risks are identified and risk positions optimized through systematic risk management. In a dynamic process, we are continually adapting the Volkswagen Group’s risk management system to reflect the changing environment. Further details on risk management can be found in the Risk Report chapter.

The Supervisory Board has established an Audit Committee, which deals in particular with matters relating to financial reports and risk management. As recommended by the German Corporate Governance Code, the Chairman of the Audit Committee, Mr. Holger P. Härter, member of the Executive Board of Dr. Ing. h. c. F. Porsche AG responsible for Finance and Controlling, has particular expertise and experience in applying accounting standards and internal control systems.

COMMUNICATION AND TRANSPARENCY
The Volkswagen Group publishes a financial calendar in its Annual Report, in the interim reports and on its website at www.volkswagen-ir.com that also lists all important dates for our shareholders. At the Annual General Meeting, we offer shareholders the option of exercising their voting rights in person, or of doing so either through an authorized Company proxy or a third-party proxy of their choice. Furthermore, on May 3, 2006, our shareholders had the option of following the entire AGM on the Internet for the first time.

The Company’s ad hoc releases are also published on our Investor Relations website at www.volkswagen-ir.com, where we also provide further information relating to Volkswagen. All releases and other information are published in both English and German. A detailed list of all releases from 2006 relating to the capital markets is included in the annual document required by section 10 of the Wertpapierprospektgesetz (WpPG – German Securities Prospectus Act), which can also be accessed on our website.

In fiscal year 2006, there were no releases regarding directors’ dealings (section 15a WpHG). The notifications filed in accordance with sections 21 ff. of the WpHG in 2006 (Notices and Disclosure of Changes Regarding the Ownership of Voting Rights in Volkswagen AG) are published on our website at www.volkswagen-ir.com.

The Appointments of Board of Management members and Supervisory Board members to supervisory bodies can be found in the Executive Bodies chapter of this Annual Report.

In January 2006, Volkswagen AG introduced an anti-corruption system worldwide. In this connection, independent lawyers were also appointed as ombudsmen and an internal officer was appointed in charge of anti-corruption measures. They can also be contacted by persons wishing to provide information on suspected instances of corruption within the Group. In addition, a company directive for avoiding conflicts of interest and corruption has been added to the internal guidelines.