11 Earnings per share

Basic earnings per share are calculated by dividing earnings attributable to Volkswagen AG shareholders by the weighted average number of ordinary and preferred shares outstanding during the reporting period.

In 2012 and 2013, Volkswagen AG placed two mandatory convertible notes with identical features and an aggregate principal amount of €3.7 billion via a subsidiary, Volkswagen International Finance N.V. Amsterdam (issuer). These notes matured on November 9, 2015. The note terms and conditions provided for early conversion options. This voluntary conversion right was exercised in the reporting period, with 27,091 new preferred shares being created from €4.7 million of notes based on the effective maximum conversion price at the conversion date. Under the note terms and conditions, the mandatory convertible notes were required to be settled by issuing new preferred shares no later than at maturity. At the maturity date, November 9, 2015, the remaining amount of both notes was converted by the issuer as required. A total of 25,536,876 new preferred shares were created and the underlying principal amount of each bond was €100,000 and the final conversion price €144.50.

When comparing year-on-year, it is important to bear in mind that IAS 33.23 sets out that all potential shares that will be issued upon the conversion of a mandatory convertible note must be accounted for as issued shares and included in the calculation of basic and diluted earnings per share. In accordance with IAS 33.26, the number of potential preferred shares included in the previous year was replaced retrospectively with the shares actually issued in the reporting period when notes were voluntarily and mandatorily converted. As of their admission to the regulated market on June 12, 2014, the new preferred shares from the capital increase were included in the calculation of earnings per share for the previous year.

The finance costs associated with the mandatory convertible notes were not included in the calculation of consolidated result because the interest component was recognized in other comprehensive income when the note was issued, and interest expense arose only from the amount of compound interest. Since the basic and diluted number of shares is identical, basic earnings per share also correspond to diluted earnings per share. See note 24 for further information regarding the issuance of the mandatory convertible note and the capital increase.

Earnings per ordinary share were €−3.20 in fiscal year 2015, while earnings per preferred share were €−3.09. Article 27(2) No. 1 of the Articles of Association of Volkswagen AG sets out that, even in the event of a deficit, a preferred dividend of €0.11 per preferred share must be paid out in the subsequent fiscal years based on the cumulative arrangement if no dividend is paid for the year under review; consequently, this must be factored into the calculation of earnings per share for the current fiscal year. The dividend proposal outlined in Note 24 that is based on Volkswagen AG’s net income for the year under the German Commercial Code is not relevant for the calculation of earnings per share in accordance with IAS 33. The payment of further dividends in accordance with Article 27(2) No. 2 and No. 3 of the Articles of Association of Volkswagen AG is only factored into the calculation of earnings per share when the Company generates earnings after tax which is attributable to Volkswagen AG shareholders.