Shares and Bonds
Volkswagen AG shares outperform the DAX again in 2007
Volkswagen AG shares more than doubled for a time in 2007. The prolonged favorable sales situation and the systematic continuation of measures to improve our earnings performance gave this positive development even more momentum.
GLOBAL EQUITY MARKETS
2007 was a varied but very positive year for global equity market investors. All key markets were on a steady growth path, with the exception of Japan, despite some turbulence caused primarily by the crisis on the US mortgage market and climbing energy prices. The key reasons for this were healthy corporate results, ongoing takeover speculation and the low level of inflation on the most important financial markets. The DAX ended 2007 at 8,067 points after exceeding the 8,000 point mark several times over the year. This represents a 22.3% year-on-year increase. On December 31, 2007, the DJ Euro STOXX Automobile was up 24.9% as against the 2006 year-end level, at 355 points.
DEVELOPMENT OF THE VOLKSWAGEN SHARE PRICE
Volkswagen’s shares hit record prices in 2007, clearly outperforming the positive trend on the global equity markets. The shares already significantly outperformed the market in the first quarter. This development was primarily driven by the success of the Volkswagen Group's performance enhancement and restructuring measures, as well as better than expected results for fiscal year 2006. The Volkswagen Group’s sales figures in the second quarter exceeded capital market forecasts in some cases and investors were very upbeat about our future business development.
Volkswagen shares bucked the overall market trend in the third quarter to record further price increases. The forecast at the time of the publication of its half-yearly results that Volkswagen would achieve its 2008 earnings target a year earlier, together with the ongoing favorable sales situation, were the key reasons for market players’ optimistic mood. Volkswagen AG ordinary shares were included in the DJ Euro STOXX 50 again effective October 10, 2007, which gave them an extra boost. The possible increase in the share of voting rights held by Dr. Ing. h.c. F. Porsche AG (now Porsche Automobil Holding SE) after the European Court of Justice’s ruling on the VW Law on October 23, 2007 also fueled price speculation.
At the beginning of the fourth quarter, Volkswagen’s ordinary shares at first continued to fly high, reaching their record high for the fiscal year of €199.70 on November 1. Profit taking and increasing fears that growth would weaken in key economies then led to a drop in the share price. For the year as a whole, Volkswagen’s ordinary shares recorded the highest growth of all Western European automobile manufacturers and again outperformed the DAX.
SHARE PRICE DEVELOPMENT FROM DECEMBER 2006 TO DECEMBER 2007
Index based on month-end prices: December 31, 2006 = 100
Volkswagen AG’s ordinary shares reached €197.90 per share on October 31, 2007, not only the highest daily closing price of the fiscal year, but also in the Company’s entire history. The lowest price of the year was €82.60 on January 10, 2007. Volkswagen ordinary shares closed the year at €156.10, up 81.7% year-on-year.
Volkswagen AG preferred shares developed in a similar way in the reporting period: They reached their highest closing price of €131.00 on October 31, 2007, hitting their low of €54.14 on January 10, 2007. Volkswagen AG preferred shares stood at exactly €100.00 at the end of year, an increase of 76.8% over the last trading day of 2006.
DIVIDEND YIELD
Based on the dividend proposal for the reporting period, the dividend yield on Volkswagen AG ordinary shares is 1.2% (1.5%). The dividend yield on preferred shares is 1.9% (2.3%). Details of the current dividend proposal can be found in the chapter entitled Volkswagen AG (condensed, according to German Commercial Code).
EARNINGS PER SHARE
Basic earnings per ordinary share were €10.43 in 2007. In accordance with IAS 33, the calculation is based on the average number of ordinary shares outstanding in the fiscal year (see also note 9 to the Volkswagen Consolidated Financial Statements).
CONVERSION OF STOCK OPTIONS
Volkswagen’s extremely encouraging share price performance in 2007 gave our employees another opportunity to convert previously subscribed convertible bonds into ordinary shares. Over the past year, some 59,000 employees exercised their conversion rights under the convertible bonds subscribed as part of the fourth, fifth, sixth and seventh tranches of the stock option plan. This resulted in the creation of 4,357,200 new ordinary shares, or €11.2 million in subscribed capital. Further details of our stock option plan can be found in the Notes to the Volkswagen Consolidated Financial Statements.
SHAREHOLDER STRUCTURE AT DECEMBER 31, 2007
as a percentage of subscribed capital
SHAREHOLDER STRUCTURE
The shareholder structure of Volkswagen AG as of December 31, 2007, is shown in the chart above.
Due to the excellent share price performance of Volkswagen shares, many bondholders took advantage of the opportunity to convert their bonds from our stock option plan in the reporting period. This resulted in the number of shares increasing significantly. At the end of 2007, the subscribed capital of Volkswagen AG comprised 291,337,267 ordinary shares and 105,238,280 preferred shares.
Dr. Ing. h.c. F. Porsche AG (now Porsche Automobil Holding SE) notified us as of March 28, 2007 that its share of voting rights in Volkswagen AG amounted to 30.93% on this date and thus exceeded the 30% threshold. This triggered a requirement to submit a mandatory bid to acquire the remaining Volkswagen shares.
Following the mandatory bid by Dr. Ing. h.c. F. Porsche AG on April 30, 2007, the Board of Management and Supervisory Board of Volkswagen AG separately issued their statements on this bid in accordance with section 27 of the Wertpapiererwerbs- und Übernahmegesetz (German Securities Acquisition and Takeover Act) on May 11, 2007. On the basis of various financial analyses that they considered, neither executive body could recommend acceptance of the mandatory bid to the shareholders of Volkswagen AG, as the fundamental valuation of Volkswagen shares was higher than the offer prices for Volkswagen AG's ordinary and preferred shares.
On June 4, 2007, Dr. Ing. h.c. F. Porsche AG announced that the offer had been accepted for a total of 172,218 ordinary shares and 68,262 preferred shares. This corresponded to approximately 0.06% of the ordinary shares and voting rights and 0.06% of the preferred shares and thus approximately 0.06% of the share capital.
This means that Porsche Automobil Holding SE is the largest single shareholder.
The State of Lower Saxony held 20.1% of the ordinary shares on December 31, 2007, corresponding to 14.8% of subscribed capital.
In the reporting period, the proportion of Volkswagen shares held by foreign institutional investors increased to 25.6% (previous year: 23.9%). German institutional investors held 6.2% (previous year: 5.8%).
Notifications of changes in voting rights in accordance with the Wertpapierhandelsgesetz (German Securities Trading Act) are published on our website www.volkswagenag.com/ir under the heading “Mandatory Publications”, menu item “Reporting of voting rights according to WpHG”.
VOLKSWAGEN SHARE KEY FIGURES
| 1 | Figures for the years 2003 to 2006 relate to dividends paid in the following year. For 2007, the figures relate to the proposed dividend. |
| 2 | Xetra prices. |
| 3 | See note 9 to the Consolidated Financial Statements (Earnings per share) for the calculation. |
| 4 | For 2006 from continuing and discontinued operations. |
| 5 | Based on the weighted average number of ordinary and preferred shares outstanding (basic). |
| 6 | Based on the total number of ordinary and preferred shares on December 31. |
| 7 | Using closing prices of the ordinary shares. |
| 8 | Order book turnover on German exchanges. |
ANNUAL GENERAL MEETING
Volkswagen AG's 47th Ordinary General Meeting was held in the Congress Center Hamburg on April 19, 2007. In total, 61.0% of voting capital was represented. Shareholders approved an amendment to the Articles of Association to ensure alignment with the Transparenzrichtlinie-Umsetzungsgesetz (German Transparency Directive Implementation Act), among other items. As in the previous year, shareholders were able to follow the entire AGM and issue instructions online. Many shareholders also took advantage of the opportunity to exercise their voting rights through an authorized proxy of Volkswagen AG. This service will also be offered to shareholders for the 48th Annual General Meeting on April 24, 2008. All shareholders of Volkswagen AG will receive further information together with their invitation to the AGM.
VOLKSWAGEN IN SUSTAINABILITY INDICES
The Volkswagen Group's shares are represented in the London FTSE4Good sustainability index, which evaluates corporate social and ecological responsibility in particular. Furthermore, Volkswagen shares are listed in the Advanced Sustainable Performance Index (ASPI), which reflects corporate sustainability performance.
Following a reassessment by Swiss asset management company SAM on behalf of Dow Jones, Volkswagen has been included again in the Dow Jones Sustainability World Index since September 24, 2007. Volkswagen is rated highly in all 20 criteria of the Corporate Sustainability Assessment, which evaluated such topics as environmental protection, working conditions and social responsibility. In particular the Company's activities in the areas of efficient diesel technology, fuel and drivetrain strategy, supplier relationships and corporate citizenship were positively rated. The latest information on sustainability ratings can be found on our website at www.volkswagenag.com/nachhaltigkeit.
ANNUAL DOCUMENT IN ACCORDANCE WITH SECTION 10 OF THE WPPG
The publications from fiscal year 2007 (and other years) in accordance with section 10(1) of the Wertpapierprospektgesetz (WpPG – German Securities Prospectus Act), can be accessed on our website at www.volkswagenag.com/ir. If it is not possible to access the document, a document in printed form can be requested.
VOLKSWAGEN SHARE DATA
* Traded in the form of "sponsored unlisted American Depositary Receipts" (ADRs).
Five ADRs correspond to one underlying Volkswagen ordinary share.
INVESTOR RELATIONS ACTIVITIES
In 2007, our Investor Relations team again informed analysts and investors in all the major global financial centers about the business development and progress of the Volkswagen Group and its individual brands in a timely manner. In addition to the scheduled conference calls used to explain the quarterly results, which were also broadcast on the Internet, our Investor Relations department organized a total of around 500 roadshows, conferences, presentations and one-on-one discussions worldwide. Some events were held together with Group Treasury.
Some of the most important events of 2007 were our appearances at motor shows in Detroit, Geneva and Frankfurt, as well as the International Investor Conference in the Autostadt in Wolfsburg in the spring.
In 2007, our Investor Relations team also further expanded its activities with private investors: at numerous events, the team answered questions on issues relating to the Volkswagen Group and Volkswagen shares.
HIGHLIGHTS IN THE INVESTOR RELATIONS CALENDAR
The high points of the Investor Relations calendar for 2007 were the strategy and product presentation at Lamborghini in Italy and the analyst and investor conference as part of the 62nd International Motor Show in Frankfurt.
Numerous investors came to the strategy and product presentation on July 6, 2007 at the Lamborghini facilities in the Emilia-Romagna region of Italy. Volkswagen AG’s Chairman of the Board of Management, Prof. Dr. Martin Winterkorn, took part as well as the Group CFO, the brand heads of Audi and Lamborghini, and the heads of development and Group design at Volkswagen AG, among others. Analysts were able to get a picture of the performance of the traditional Lamborghini business and the entire Group with a tour of the plant, a design presentation and numerous test drives of our models. Prof. Dr. Winterkorn also introduced the Group’s strategic goals and unveiled two new Volkswagen models in the shape of the Scirocco and the Golf BlueMotion*. In the unanimous opinion of the participants, the key to the success of the event was the opportunity to talk in detail with the members of the Board of Management and the top management of the Volkswagen Group.
Another prominent event in the year was the Group and product presentation for analysts and investors on September 10, 2007 in the run-up to the International Motor Show in Frankfurt. Reports by the members of the Board of Management and the management of Volkswagen AG on the topics of financial and human resources strategy, productivity increases, and growth markets as well as sustainability in the areas of fuel and drivetrain strategy, met with a positive response from the 180 participants. The highlight of the day was at the end with the “Night of Driving Ideas” at the Ballsporthalle in Frankfurt. As part of this grand event, Prof. Dr. Martin Winterkorn and the brand heads demonstrated the Group’s diversity and innovative power by presenting eight world premieres to the approximately 1,500 international analysts, investors and journalists present.
Investor Relations activities in 2008 will also focus on strategy and product presentations with the participation of the members of the Board of Management and the management of the Volkswagen Group.
All presentations that were given as part of events were published online at www.volkswagenag.com/ir shortly afterwards.
NEW ISSUES
In 2007, the Volkswagen Group was active in the international money and capital markets with a large number of transactions. We used our multi-faceted debt issuance programs when required and depending on the market situation. The main elements of the refinancing strategy are specified by Group Treasury and approved by the Board of Management on a regular basis.
Our Automotive Division expanded its already favorable liquidity position over the course of 2007. This created a high degree of flexibility for the Group in refinancing the Financial Services Division's growing capital requirements. In view of this, we also optimized the ratio between external and internal financing during the crisis on the capital markets in the second half of the year. The Financial Services Division issues its convertible bonds directly from the Financial Services companies’ refinancing programs.
The following table lists the Group’s debt issuance programs:
Volkswagen Bank GmbH, Volkswagen Leasing GmbH and Volkswagen Credit Inc. are the largest issuers in these debt issuance programs. In 2007, we issued an asset-backed security (ABS) for Volkswagen Bank of approximately €1.0 billion as well as two floaters amounting to approximately €2.25 billion from the Driver Program on the open market. Volkswagen Leasing received approximately €2.0 billion on the ABS market from its Volkswagen Car Lease program. In October, we also successfully placed a fixed-rate bond of €1.25 billion for the Company. In 2007, Volkswagen Credit Inc. sold a total of USD 1.2 billion worth of ABSs, issuing two bonds worth €300 million on the European capital market in its first appearance as an issuer. In Mexico, we issued our first bond of over 4.0 billion Mexican pesos for VW Leasing S.A. de CV to refinance its local financial services portfolios.
The existing network of confirmed credit lines was further streamlined due to the positive development of liquidity. In line with this, the Group’s syndicated credit line was reduced by €2.5 billion to €10.0 billion due to equally decreased need for commercial paper program backup. The unused facility was also extended by another year to June 2012.
The cash holdings, short- and long-term credit lines and the available general credit facilities give the Volkswagen Group a very high degree of financial flexibility, thereby enabling it to cover its refinancing requirements and ensuring that it remains solvent at all times.
RATINGS
In 2007, rating agencies Moody's Investors Service and Standard & Poor's carried out their regular update of credit ratings for Volkswagen AG, Volkswagen Financial Services AG and Volkswagen Bank GmbH. The previous short- and long-term credit ratings for Volkswagen AG and Volkswagen Financial Services AG remained unchanged. It is particularly encouraging that these agencies recognized Volkswagen AG’s improved financial data and business outlook, both of which will have a positive effect on the ratings going forward. The credit rating given to Volkswagen Bank GmbH by Moody's Investors Service and Standard & Poor's is one notch higher than that of Volkswagen AG and Volkswagen Financial Services AG. We are using this to our advantage in the refinancing of our financial services activities. The following table gives an overview of our current ratings and their development in past years.
RATINGS
OUR INVESTOR RELATIONS TEAM IS AVAILABLE FOR QUERIES AND COMMENTS
WOLFSBURG OFFICE (VOLKSWAGEN AG)
Phone + 49 53 61 9– 8 66 22 IR-Hotline
Fax + 49 53 61 9– 3 04 11
E-mail investor.relations@volkswagen.de
Internet www.volkswagenag.com/ir
LONDON OFFICE (VOLKSWAGEN AG)
Phone + 44 20 72 90 7820
Fax + 44 20 76 29 2405
LIAISON OFFICE AUBURN HILLS (VOLKSWAGEN GROUP OF AMERICA, INC.)
(Questions relating to American Depositary Receipts)
Phone + 1 248 754 5000
Fax + 1 248 754 6405