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		Sub-scribed capital		Capital reserves		Retained earnings												Equity attribut-able to share-holders of VW AG		Minority interests		Total  equity
€ million						Accumu-lated  profit		Currency trans-lation reserve		Reserve  for actu-arial  gains and losses		Cash  flow hedge reserve		Fair value reserve for securities		Equity-accounted invest-ments
Balance at Jan. 1, 2007		1,004		4,942		23,532		–1,272		–1,640		502		242		–406		26,904		55		26,959
Capital increase		11		200		–		–		–		–		–		–		211		–		211
Dividend payment		–		–		497		–		–		–		–		–		497		0		497
Recognized income and expense		–		–		4,120		–228		1,427		995		–375		47		5,986		2		5,988
Deferred taxes		–		–		–		–		–610		–233		103		–		–740		–		–740
Other changes		–		–		11		–		–		–		–		–		11		6		17
Balance at Dec. 31, 2007		1,015		5,142		27,166		–1,500		–823		1,264		–30		–359		31,875		63		31,938
Balance at Jan. 1, 2008		1,015		5,142		27,166		–1,500		–823		1,264		–30		–359		31,875		63		31,938
Capital increase		9		209		–		–		–		–		–		–		218		–		218
Dividend payment		–		–		720		–		–		–		–		–		720		2		722
Recognized income and expense		–		–		4,753		–1,113		214		–227		–230		–188		3,209		–567		2,642
Deferred taxes		–		–		–		–		–63		96		68		–		101		44		145
Other changes		–		–		323		–108		0		5		–		108		328		2,839		3,167
Balance at Dec. 31, 2008		1,024		5,351		31,522		–2,721		–672		1,138		–192		–439		35,011		2,377		37,388

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CHANGE IN ORDINARY AND PREFERRED SHARES AND SUBSCRIBED CAPITAL
		Shares				€
		2008		2007		2008		2007
Balance at January 1		396,575,547		392,218,347		1,015,233,400		1,004,078,968
Issued shares (stock option plan)		3,582,940		4,357,200		9,172,326		11,154,432
Balance at December 31		400,158,487		396,575,547		1,024,405,726		1,015,233,400

Based on the resolution by the Annual General Meeting on May 3, 2006, authorized capital of up to €90 million, expiring on May 2, 2011, was approved for the issue of new ordinary bearer shares. Additional authorized capital of up to €400 million was adopted by a resolution by the Annual General Meeting on April 22, 2004, expiring on April 21, 2009.

There is also contingent capital of €7 million (originally €40 million) resulting from the resolution by the Annual General Meting on April 16, 2002. This contingent capital increase will be implemented only to the extent that the holders of convertible bonds issued before April 15, 2007 exercise their conversion rights.

There is also contingent capital of €100 million for the issue of up to 39,062,500 ordinary and/or preferred shares. This contingent capital increase will be implemented only to the extent that the holders of convertible bonds to be issued before April 21, 2009 exercise their conversion rights.

The capital reserves comprise the share premium of a total of €5,025 million from the capital increases, the share premium of €219 million from the issue of bonds with warrants and an amount of €107 million appropriated on the basis of the capital reduction implemented in 2006. Capital reserves rose by €209 million in fiscal year 2008 as a result of the share premium from the capital increase due to the exercise of convertible bonds under the stock option plan. No amounts were withdrawn from the capital reserves.

Stock option plan

The stock option plan entitles the optionees – the Board of Management, Group senior executives and management, as well as employees of Volkswagen AG covered by collective pay agreements – to purchase options on shares of Volkswagen AG by subscribing for convertible bonds at a price of €2.56 each. Each bond is convertible into ten ordinary shares.

The convertible bonds are measured at fair value at the date of grant to the employees. The convertible bonds measured at fair value are recognized in personnel expenses and in equity.

The conversion prices and periods following the expiration of the first four tranches are shown in the following table. The information on the fifth tranche is presented as data for the reporting period, although this tranche has now also expired.

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CONVERSION PRICES AND PERIODS FOR EACH TRANCHE OF THE STOCK OPTION PLAN
€		5th tranche		6th tranche		7th tranche		8th tranche
Base conversion price per share		36.54		38.68		37.99		58.18
Conversion price
as from July 12, 2005		40.19
as from publication of interim report for Jan. – Sept. 2005		42.02
as from July 10, 2006				42.55
as from publication of interim report for Jan. – Sept. 2006		43.85		44.48
as from July 09, 2007						41.79
as from publication of interim report for Jan. – Sept. 2007		45.68		46.42		43.69
as from July 8, 2008								64.00
as from publication of interim report for Jan. – Sept. 2008				48.35		45.59		66.91
as from publication of interim report for Jan. – Sept. 2009						47.49		69.82
as from publication of interim report for Jan. – Sept. 2010								72.73
Beginning of conversion period		July 12, 2005		July 10, 2006		July 9, 2007		July 8, 2008
End of conversion period		July 4, 2008		July 2, 2009		July 1, 2010		June 30, 2011

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		Nominal value of convertible bonds		Number of conversion rights		Number of potential ordinary shares
		€		Rights		Shares
Balance at Jan. 1, 2007		2,109,539.84		824,039		8,240,390
In fiscal year
exercised		1,115,443.20		435,720		4,357,200
returned		29,447.68		11,503		115,030
Balance at Dec. 31, 2007		964,648.96		376,816		3,768,160
Balance at Jan. 1, 2008		964,648.96		376,816		3,768,160
In fiscal year
exercised		917,232.64		358,294		3,582,940
returned		3,875.84		1,514		15,140
Balance at Dec. 31, 2008		43,540.48		17,008		170,080

MEASUREMENT OF CONVERTIBLE BONDS IN THE FIFTH TO EIGHT TRANCHES

Those convertible bonds granted after publication of the draft IFRS 2 on November 7, 2002 were measured in accordance with the transitional provisions of IFRS 2.

The fair value of the convertible bonds is estimated using a binomial option pricing model based on the issuance and conversion conditions described above. In terms of the optionees’ conversion behavior, it was assumed that they will convert when the share price is 50% higher than the conversion price. Historical and implied volatilities based on the expected remaining term of the conversion rights were used to estimate the fair value of the convertible bonds. The assumptions used and the fair value estimated are presented in the following table:

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		5th tranche		6th tranche		7th tranche		8th tranche
Volatility (%)		27.50		27.50		27.50		27.50
Risk-free rate (%)		3.00		3.49		2.57		3.77
Dividends (%)		3.20		3.20		3.20		3.20
Fair value per convertible bond (€)		48.25		39.66		48.71		63.49

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		Average exercise price per convertible bond*		Convertible bonds
		€		Quantity
* Conversion price per ten shares.
Balance at Jan. 1, 2007		519.72		703,074
In fiscal year
granted		–		–
returned		553.30		11,418
exercised		423.99		314,840
Balance at Dec. 31, 2007		603.70		376,816
of which available for exercise		449.76		71,895
Balance at Jan. 1, 2008		603.70		376,816
In fiscal year
granted		–		–
returned		629.58		1,514
exercised		609.24		358,294
Balance at Dec. 12, 2008		556.27		17,008
of which available for exercise		556.27		17,008

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		Exercise price per convertible bond*		Convertible bonds
2008		€		Quantity
* Conversion price per ten shares.
5th tranche		456.80		–
6th tranche		483.50		6,127
7th tranche		455.90		3,667
8th tranche		669.10		7,214
				17,008

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. Based on the annual financial statements of Volkswagen AG, net retained profits of €781 million are eligible for distribution. The Board of Management and Supervisory Board of Volkswagen AG will propose to the Annual General Meeting that a dividend of €1.93 per ordinary share and €1.99 per preferred share be paid, for a total of €779 million, and that the remaining amount of €2 million be carried forward to new account.

A dividend of €1.80 per ordinary share and €1.86 per preferred share were distributed in fiscal year 2008.

Minority interests

The minority interests in equity are attributable primarily to shareholders of Scania AB.