40 Related party disclosures in accordance with IAS 24

Related parties as defined by IAS 24 are natural persons and entities that Volkswagen AG has the ability to control or on which it can exercise significant influence, or natural persons and entities that have the ability to control or exercise significant influence on Volkswagen AG, or that are influenced by another related party of Volkswagen AG.

At 50.73%, Porsche Automobil Holding SE, Stuttgart, held the majority of the voting rights in Volkswagen AG as of the reporting date. The creation of rights of appointment for the State of Lower Saxony was resolved at the Extraordinary General Meeting of Volkswagen AG on December 3, 2009. As a result, Porsche Automobil Holding SE can no longer appoint the majority of the members of Volkswagen AG’s Supervisory Board for as long as the State of Lower Saxony holds at least 15% of Volkswagen AG’s ordinary shares. However, Porsche Automobil Holding SE has the power to participate in the operating policy decisions of the Volkswagen Group. In the run-up to the Annual General Meeting, the Supervisory Board of Volkswagen approved the Comprehensive Agreement between Volkswagen AG, Porsche Automobil Holding SE, Porsche Holding Gesellschaft m.b.H., Salzburg, and Porsche GmbH, Salzburg, Porsche Zwischenholding GmbH, Stuttgart, the ordinary shareholders of Porsche Automobil Holding SE and the employee representatives of Volkswagen AG, Porsche Automobil Holding SE and Dr. Ing. h.c. F. Porsche AG, Stuttgart, to create an integrated automotive group led by Volkswagen.

Moreover, in the course of the performance of these agreements, Volkswagen AG reached the following key arrangements with Porsche Automobil Holding SE and companies belonging to the Porsche Zwischenholding GmbH Group:

• Volkswagen AG shall be indemnified by Porsche Autombil Holding SE against obligations arising from certain legal disputes, tax claims (plus interest) and from certain substantial losses.
• Porsche Automobil Holding SE has also granted a number of guarantees to Volkswagen AG in respect of Porsche Zwischenholding GmbH and Dr. Ing. h.c. F. Porsche AG. Among other things, these relate to the proper issuance of and full payment for the shares of Dr. Ing. h.c. F. Porsche AG, to the ownership of the shares in Porsche Zwischenholding GmbH and Porsche AG, and to the existence of the material approvals, permissions and industrial property rights required to operate the business activities of Porsche AG.
• Volkswagen AG will indemnify Porsche Automobil Holding SE against certain financial guarantees issued by Porsche Automobil Holding SE to creditors of the companies belonging to the Porsche Zwischenholding GmbH Group up to the amount of its share in the capital of Porsche Zwischenholding GmbH.
• Volkswagen AG has guaranteed loans made by Porsche Automobil Holding SE to Porsche Zwischenholding GmbH or Porsche AG in the case that these loans fall due and cannot be recovered because of the insolvency of Porsche Zwischenholding GmbH or Porsche AG, to the extent that these obligations could have been settled if the companies had not been insolvent on the due date by offsetting them against counterclaims of Porsche Automobil Holding SE.
• Volkswagen AG agreed to indemnify Porsche Automobil Holding SE internally against claims by the Einlagensicherungsfonds (German deposit protection fund) after Porsche Automobil Holding SE submitted an indemnification agreement required by the Bundesverband Deutscher Banken (Association of German Banks) to the Einlagensicherungsfonds in August 2009. Volkswagen AG has also undertaken to indemnify the Einlagensicherungsfonds against any losses caused by measures taken by the latter in favor of a bank in which Volkswagen AG holds a majority interest.

On September 8, 2011, following talks with Porsche Automobil Holding SE, the Board of Management of Volkswagen AG came to the conclusion that a resolution on the merger with Porsche Automobil Holding SE could not be implemented by December 31, 2011 as provided for in the Comprehensive Agreement.

In the event that the merger of Porsche Automobil Holding SE with Volkswagen AG that is planned under the Comprehensive Agreement does not take place, Volkswagen AG and Porsche Automobil Holding SE have agreed mutually exercisable call and put options in respect of the remaining 50.1% interest in Porsche Zwischenholding GmbH. The put option can be exercised between November 15, 2012 and January 14, 2013 inclusive, and again between December 1, 2014 and January 31, 2015 inclusive, while the call option can be exercised between March 1, 2013 and April 30, 2013 inclusive, and again between August 1, 2014 and September 30, 2014 inclusive. Both the put option and the call option are subject to the condition that the General Meeting resolutions required for the merger of Porsche Automobil Holding SE with Volkswagen AG are not adopted by the deadline of the end of 2011 provided for in the Comprehensive Agreement. This condition occurred as of the reporting date. In addition, the Board of Management of Volkswagen AG will analyze whether there are additional ways of achieving the goal of creating an integrated automotive group with Porsche.

The strike price for the two options amounts to €3,883 million and is subject to minor adjustments. Both Volkswagen AG (if it exercises its call option) and Porsche Automobil Holding SE (if it exercises its put option) have undertaken to bear the tax burden resulting from the exercise of the options and any subsequent activities in relation to the equity investment in Porsche Zwischenholding GmbH (e.g. from recapture taxation on the spin-off in 2007 and/or 2009). To secure any potential remaining claims by Volkswagen AG under the agreement between Porsche Automobil Holding SE and Volkswagen AG on the acquisition by Volkswagen AG of an interest in Porsche Zwischenholding GmbH, a purchase price retention mechanism was agreed in favor of Volkswagen AG for the case that the put or call options are exercised.

If tax benefits accrue to Volkswagen AG, Porsche Zwischenholding GmbH, Dr. Ing. h.c. F. Porsche AG, or their respective subsidiaries as a result of recapture taxation on the spin-off in 2007 and/or 2009, the purchase price to be paid by Volkswagen AG for the transfer of the outstanding 50.1% equity investment in Porsche Zwischenholding GmbH if the put option is exercised by Porsche Automobil Holding SE will be increased by the present value of the tax benefit.

The call option had a positive fair value on the reporting date of €8,409 million (previous year: €2,001 million) as measured in accordance with financial valuation techniques, and the corresponding put option had a negative fair value of €87 million (previous year: €233 million). As it was no longer possible to adopt the General Meeting resolutions required for the merger by the date provided for in the Comprehensive Agreement, the probability of a merger was estimated at 0% (previous year: 50%) when measuring the options. In addition to the change in the probability of the merger, the adjustment of the enterprise value attributable to the updated business plans of Porsche Zwischenholding GmbH in particular materially affected the value of the options. The difference is recognized in the other financial result item (see note 9).

In addition, Volkswagen had granted a put option to Porsche Holding Gesellschaft m.b.H., a company owned by the Porsche and Piëch families, relating to the trading business of the company. In return, Volkswagen was granted rights of involvement in the management of the company during the term of the option. The option was exercised on November 10, 2010. The trading company was transferred as of March 1, 2011 at a price of €3.3 billion.

According to a notification dated January 24, 2012, the State of Lower Saxony and Hannoversche Beteiligungsgesellschaft mbH, Hanover, held 20.00% of the voting rights of Volkswagen AG on December 31, 2011. As mentioned above, the General Meeting of Volkswagen AG on December 3, 2009 also resolved that the State of Lower Saxony may appoint two members of the Supervisory Board (right of appointment).

Members of the Board of Management and Supervisory Board of Volkswagen AG are members of supervisory and management boards or shareholders of other companies with which Volkswagen AG has relations in the normal course of business. All transactions with related parties are conducted on an arm’s length basis.

The following tables present the amounts of supplies and services transacted, as well as outstanding receivables and liabilities, between consolidated companies of the Volkswagen Group and related parties.

The revised IAS 24.18 also requires other contractual obligations to related parties to be disclosed starting in fiscal year 2011. The prior-period figures have been adjusted accordingly.

Factoring finance of €0.2 billion (previous year: €0.2 billion) extended to a subsidiary of Porsche Zwischenholding GmbH at arm’s length conditions and collateral requirements was outstanding as of December 31, 2011; €103 million of this amount was granted in the reporting period.

In fiscal year 2010, Porsche Corporate Finance GmbH, Salzburg, Zurich Branch, Austria, subscribed for seven commercial paper issues by Volkswagen International Finance N.V., Amsterdam, the Netherlands, with a total volume of €0.1 billion, which were guaranteed by Volkswagen AG. All the commercial paper issues had matured by the 2010 reporting date.

The miscellaneous other financial obligations contain obligations under an irrevocable credit commitment in the amount of €1.5 billion to LeasePlan Corporation N.V., Amsterdam, the Netherlands, a Volkswagen Group joint venture, with a term until January 2014.

The Board of Management and Supervisory Board of the Volkswagen Group are related parties within the meaning of IAS 24. The following benefits and remuneration were recorded for these persons in the course of their activities as members of these bodies:

The employee representatives on the Supervisory Board are also entitled to a regular salary as set out in their employment contracts. This is based on the provisions of the Betriebsverfassungsgesetz (BetrVG – German Works Constitution Act) and represents an appropriate remuneration for their functions and activities in the Company. The same also applies to the representative of the senior executives on the Supervisory Board.

Outstanding balances for bonuses payable to Board of Management members existed in the amount of €61,075,000 at the end of the fiscal year (previous year: €28,792,500). The post-employment benefits relate to additions to pension provisions for current members of the Board of Management. The expenses shown above do not correspond to the definition of remuneration of members of the Board of Management and the Supervisory Board in accordance with the German Corporate Governance Code.