24 Equity

The subscribed capital of Volkswagen AG is composed of no-par value bearer shares with a notional value of €2.56. As well as ordinary shares, there are preferred shares that entitle the bearer to a €0.06 higher dividend than ordinary shares, but do not carry voting rights.

The Annual General Meeting on May 14, 2019 resolved to create authorized capital of up to €179 million, expiring on May 13, 2024, to issue new preferred bearer shares.

In June 2018, Volkswagen AG placed unsecured subordinated hybrid notes with an aggregate principal amount of €2.8 billion via a subsidiary, Volkswagen International Finance N.V., Amsterdam, the Netherlands (VIF). The perpetual hybrid notes were issued in two tranches and can be called by VIF. The first call date for the first tranche (€1.3 billion and a coupon of 3.375%) is after 6 years, and the first call date for the second tranche (€1.5 billion and a coupon of 4.625%) is after 10 years.

Interest may be accumulated depending on whether a dividend is paid to Volkswagen AG shareholders. Under IAS 32, these hybrid notes must be classified in their entirety as equity. The capital raised was recognized in equity, less a discount and transaction costs and net of deferred taxes. The interest payments payable to the noteholders will be recognized directly in equity. IAS 32 only allows these hybrid notes to be classified as debt once the respective hybrid note was called.

In July 2018, Volkswagen AG called the first tranche of hybrid notes with an aggregate principal amount of €1.3 billion placed in 2013 via VIF (issuer). In addition, other effects of €14 million had to be recognized in equity.

The expiry of the put options granted to noncontrolling interest shareholders of MAN SE on March 4, 2019 resulted in an increase in equity of €0.7 billion. See the “Key Events” section for more information.

The capital reserves comprise the share premium totaling €14,225 million (previous year: €14,225 million) from capital increases, the share premium of €219 million from the issuance of bonds with warrants and an amount of €107 million appropriated on the basis of the capital reduction implemented in 2006. No amounts were withdrawn from the capital reserves.

DIVIDEND PROPOSAL

In accordance with section 58(2) of the Aktiengesetz (AktG – German Stock Corporation Act), the dividend payment by Volkswagen AG is based on the net retained profits reported in the annual financial statements of Volkswagen AG prepared in accordance with the German Commercial Code. Based on these annual financial statements of Volkswagen AG, net retained profits of €3,273 million are eligible for distribution following the transfer of €1,685 million to the revenue reserves. The Board of Management and Supervisory Board will propose to the Annual General Meeting that a total dividend of €3,271 million, i.e. €6.50 per ordinary share and €6.56 per preferred share, be paid from the net retained profits. Shareholders are not entitled to a dividend payment until it has been resolved by the Annual General Meeting.

A dividend of €4.80 per ordinary share and €4.86 per preferred share was distributed in fiscal year 2019.

NONCONTROLLING INTERESTS

As of December 31, 2019, noncontrolling interests amounted to €1,870 million (previous year: €225 million). Most of the noncontrolling interests in equity arose as a result of the IPO of the TRATON GROUP. See the “Key Events” section for further details.

The table below shows summarized financial information of the TRATON GROUP, including goodwill and fair value adjustments at the acquisition date: