17. Equity

Share capital (incl. disclosures in accordance with Sec. 240 of the Austrian Commercial Code (Unternehmensgesetzbuch, UGB)

As of March 31, 2014, the share capital amounts to EUR 313,309,235.65 and is divided into 172,449,163 ordinary no-par value shares unchanged compared to the previous year. All shares are fully paid up.

Under Sec. 4 (2) of the Articles of Incorporation, the Management Board of voestalpine AG is authorized up to June 30, 2014 to increase the share capital of the Company by up to EUR 152,521,231.38 by issuing up to 83,949,516 ordinary no-par value bearer shares (about 48.68%), against cash contributions and/or, if necessary, by excluding shareholders’ subscription rights in full or in part, (i) against contributions in kind, including but not limited to contributions of equity interests, companies, businesses, or business units, and/or (ii) to be issued to employees, executives, and members of the Management Board of the Company or an affiliated company under an employee stock ownership plan or stock option plan (authorized capital increase). The Management Board of voestalpine AG resolved on September 12, 2012, to exercise this authorization to increase voestalpine AG’s share capital by issuing 3,400,000 new, no-par value bearer shares, thus increasing the share capital by approximately 2%. This capital increase was recorded in the Commercial Register effective November 24, 2012. During the reporting period, the Management Board did not exercise this authority.

Under Sec. 4 (6) of the Articles of Incorporation, the Management Board of voestalpine AG is authorized to increase the share capital of the Company by up to EUR 145,345,668.35 by issuing up to 80,000,000 ordinary no-par value bearer shares (= 46.39%) for issuance to creditors of financial instruments within the meaning of Sec. 174 of the Austrian Stock Corporation Act (Aktiengesetz, AktG) (convertible bonds, income bonds, or participation rights); the Management Board was authorized to issue these shares during the Annual General Meeting on July 1, 2009 (contingent capital increase). During the reporting period, the Management Board did not exercise the authority granted on July 1, 2009, to issue financial instruments within the meaning of Sec. 174 AktG.

During the Annual General Meeting on July 3, 2013, the Management Board was authorized to repurchase own shares for a term of validity of 30 months, representing no more than 10% of the respective share capital. The repurchase price may not be more than 20% below or 10% above the average closing price of the shares on the three market trading days prior to the repurchase. The Management Board did not exercise this authority during the reporting period.

Capital reserves mainly include the share premium (net of capital funding costs), gains/losses from the sale of own shares, and share-based compensation.

Reserves for own shares include the deducted cost of acquisition and the increase in equity from disposal of own shares at cost.

Retained earnings include the profit for the period less dividend distributions. When increasing majority interests, the difference between the cost of acquisition for the additional shares and the pro-rated carrying amount of the non-controlling interests is recognized directly in retained earnings. Actuarial gains and losses from severance and pension obligations are recognized directly in the retained earnings in the year in which they are incurred.

The translation reserve comprises all foreign currency differences arising from the translation of the financial statements of foreign subsidiaries.

The hedging reserve comprises gains and losses from the effective portion of the cash flow hedges. The cumulative gains or losses from hedged transactions recognized in the reserves are not recognized in the income statement until the hedged transaction also affects the result.

The number of shares outstanding for the periods presented in the consolidated financial statements as of March 31, 2014, has changed as follows:

Hybrid capital

On October 16, 2007, voestalpine AG issued a EUR 1 billion subordinated bond with an indefinite term (hybrid bond). The coupon rate of the bond, which can also be suspended if dividends are suspended, is 7.125%. Seven years after issue of the bond, voestalpine AG, but not the creditors, will have its first opportunity to redeem the bond or to continue it at a variable interest rate (3-month EURIBOR plus 5.05%). In the first quarter of 2013, voestalpine AG issued a new subordinate undated bond (hybrid bond 2013) with a volume of EUR 500 million following an invitation extended to the holders of the hybrid bond to exchange the bond for a new hybrid bond at a 1:1 ratio. The outstanding nominal value of the hybrid bond 2007 as a result of this exchange is thus EUR 500 million. The coupon of the hybrid bond 2013 is 7.125% until October 31, 2014, 6% from October 31, 2014, to October 31, 2019, the 5-year swap rate +4.93% from October 31, 2019, to October 31, 2024, and the 3-month EURIBOR +4.93% plus a step-up of 1% starting October 31, 2024. The hybrid bond 2013 can be first called in and redeemed by voestalpine AG, but not the creditors, on October 31, 2019. The bond terms of the hybrid bond 2013 largely correspond to those of the hybrid bond 2007, but differ in some aspects. The detailed features of the hybrid bonds are presented in the respective bond terms.

As the hybrid bond satisfies the IAS 32 criteria for equity, the proceeds from the bond issues are recognized as part of equity. Accordingly, coupon payments are also presented as dividend payments.

The issue costs of the new hybrid bond 2013 amounted to EUR 2.8 million. Therefore, equity increased by EUR 497.2 million in the business year 2012/13, resulting in a total stated amount of EUR 993.2 million for the total hybrid capital, taking into account 50% of the amount recognized under hybrid capital in the business year 2011/12 amounting to EUR 496.0 million.

Accrued interest in the amount of EUR 13.7 million was recognized as of the exchange date for that portion of the hybrid bond 2007, which was submitted for exchange (nominal value EUR 500 million). Due to the resulting obligation to pay interest, EUR 14.8 million was recognized as an payable dividend for the remaining portion of the hybrid bond 2007 (nominal value EUR 500 million) and shown as a liability as of the reporting date of March 31, 2013. As of October 31, 2013, EUR 71.3 million was paid out for the two hybrid bonds. Due to the partial payment and recognition as a liability in the previous year, only EUR 42.8 million was deducted from equity in the form of a dividend.

Non-controlling interests

The non-controlling interests as of March 31, 2014, result primarily from non-controlling interests in the V54 Fonds, CGU Turnout Systems, voestalpine CPA Filament GmbH, voestalpine Railpro B.V., ASPAC Group, and Danube Equity AG.