Methods and Practices of the Board of Management and Supervisory Board

The Annual General Meeting, the Supervisory Board and the Board of Management make up the executive bodies of AUDI AG. The Annual General Meeting of a stock corporation is the meeting of the corporation’s shareholders at which they exercise their rights with regard to the stock corporation’s affairs. AUDI AG is held by a sole shareholder, Volkswagen AG.

The members of the Board of Management manage the business of AUDI AG and of the Audi Group in accordance with the law, the Articles of Incorporation and Bylaws of AUDI AG and the Rules of Procedure issued by the Supervisory Board. Corporate governance also gives due consideration to the corporate goals and to shared interests within the Volkswagen Group network. The Board of Management of AUDI AG consists of the chairman and six other members, each responsible for a specific division.

The companies of the Audi Group are managed independently by their respective managements, in accordance with legal requirements. Those management organizations act not only in the interests of their respective companies, but also in the interest of the Audi Group as a whole.

As part of its corporate management, the members of the Board of Management of AUDI AG have established cross-divisional and Group-wide management bodies which make strategic and operational decisions in accordance with the defined corporate goals and policies and in compliance with the applicable legal requirements.

AUDI AG has a balanced Board of Management structure with various areas of expertise, qualifications, backgrounds and capabilities in order to make a positive impact on the performance of the company, improve its market share and strengthen its financial position. Upon their nomination, the members of the Board of Management are reviewed regarding whether they possess the necessary capabilities, experiences and industry knowledge to be a part of the Board of Management and to fulfill the requirements made.

The members of the Board of Management are generally encouraged to regularly take part in events and conferences to keep their knowledge and expertise up to date, as is required by the business and the standing of the company. Moreover, the Board of Management regularly takes part in internal and external training courses (including within the context of sustainability) to expand its knowledge and expertise.

The members of the Board of Management manage the business of AUDI AG. The members of the Supervisory Board of AUDI AG do not have management roles at AUDI AG.

The Supervisory Board of AUDI AG comprises ten shareholder representatives and ten employee representatives as provided for by law (seven employees of the company and three representatives of trade unions). The shareholder representatives are elected by the Annual General Meeting. The employee representatives are elected by employees of the Audi Group’s German operations. The members of the Supervisory Board are normally elected for a period of five years. The composition of the Supervisory Board and Board of Management of AUDI AG is provided on the website of AUDI AG.

The Supervisory Board oversees and advises the Board of Management’s running of the business. In this connection it receives regular reports on

• the intended business policy and other fundamental matters of corporate planning,
• the profitability of the company,
• the course of business and on
• transactions that may be of considerable significance for the profitability or liquidity of the company, as well as
• the accounting process, the effectiveness of the Internal Control System, the Risk Management System and the Internal Audit System.

Other significant duties of the Supervisory Board include appointing and dismissing members of the Board of Management and establishing and conducting regular reviews of Board of Management remuneration.

The Supervisory Board examines the Annual and Consolidated Financial Statements of the Audi Group and AUDI AG that are prepared by the Board of Management. Provided its members raise no objections, it approves the financial statements of the Audi Group and AUDI AG. Once approved, the Annual Financial Statements are established.

Ordinary meetings of the Supervisory Board are normally held once each quarter. If necessary, the Supervisory Board also holds extraordinary meetings. It reaches its decisions on the basis of written submissions and oral explanations by the members of the Board of Management. In urgent cases, the Supervisory Board also reaches decisions by written communication.

The Supervisory Board as an overall body must possess the requisite expertise and competences to be in a position to perform its supervisory function and assess and monitor the transactions that the company conducts. To that end, the members of the Supervisory Board must as a whole be familiar with the sector in which the company operates.

Core competences and requirements for the Supervisory Board as an overall body include in particular:

• knowledge of or experience in the manufacturing and sale of vehicles and powertrains of all kinds or of other technical products,
• knowledge of the automotive industry, business model and market as well as product expertise, knowledge of the Research and Development area, in particular in the technological fields that are relevant for the company,
• experience in positions of entrepreneurial leadership or on Supervisory Boards of major corporations,
• knowledge of the governance, legal and compliance areas,
• in-depth knowledge of the fields of finance, accounting or financial audit,
• knowledge of the capital market,
• knowledge of the areas of Controlling/Risk Management, Internal Control System,
• human resources competence (in particular searching for and recruiting Board of Management members, successor process) as well as knowledge of incentive and remuneration systems for the Board of Management,
• in-depth knowledge of or experience in the areas of co-determination, employee affairs and the working world in the company.

The Supervisory Board decides on the membership and duties of the committees through resolutions within the framework of the provisions of the statutory regulations and of the articles of incorporation. The Supervisory Board of AUDI AG has established three committees in order to perform its duties: the Presiding Committee, the Negotiating Committee pursuant to Section 27, Para. 3 of the German Codetermination Act (MitbestG) and the Audit Committee. Each Supervisory Board committee comprises three shareholder representatives and three employee representatives. The names of the committee members can be viewed here: Supervisory Board Committees.

The Presiding Committee of the Supervisory Board normally meets before each Supervisory Board meeting for extensive consultations. It prepares the decisions of the Supervisory Board and may make recommendations to the Supervisory Board as part of the decision-making process. It decides on contractual matters for the members of the Board of Management where these do not concern remuneration.

The Negotiating Committee is formed in accordance with legal requirements to perform the tasks described in Section 31 of the German Codetermination Act.

The Audit Committee deals, among other matters, with

• monitoring the accounting process,
• the effectiveness of the Internal Control System, the Risk Management System and the Internal Audit System,
• key preparatory tasks for auditing of the financial statements, as well as
• compliance.

Once the auditor has finalized their reports, the Audit Committee examines the Annual and Consolidated Financial Statements of the Audi Group and AUDI AG on the basis of these reports and oral explanations by the Board of Management and the auditor. It makes a recommendation to the Supervisory Board on the establishment of the Annual Financial Statements as well as recommendations on the selection of the auditor.

The Audit Committee discusses the main focus of the audit with the auditors and proposes this to the Supervisory Board for resolution. It assesses the suitability and independence of the auditors and prepares the fee agreement with the auditor.

The Audit Committee normally meets four times per calendar year.

Members of the Board of Management generally require the prior consent of the Supervisory Board in order to take up public office or a mandate on a Supervisory Board or similar in a domestic or international company, corporation or institute. Consent is not required in the event of a legal obligation to assume the role or if the person concerned will be exercising civic rights. All members of the Board of Management must disclose conflicts of interest to the Supervisory Board immediately and must inform the other members of the Board of Management. Major transactions with persons or enterprises closely connected with a member of the Board of Management should only be undertaken with the consent of the Supervisory Board.

Every member of the Supervisory Board is obliged to disclose conflicts of interest to the chairperson of the Supervisory Board immediately. In its report to the Annual Shareholders’ Meeting, the Supervisory Board must provide information about any conflicts of interest that have arisen as well as how they were addressed. Significant and non-temporary conflicts of interest involving a member of the Supervisory Board must lead to termination of the member’s mandate. Supervisory Board members must not perform an executive or advisory function for significant competitors of AUDI AG or for significant competitors of a company associated with AUDI AG and must not have a personal relationship with a significant competitor.

The Supervisory Board members shall immediately inform the company if they intend to accept a Board of Management mandate for a listed company, a Supervisory Board mandate or the chair of a Supervisory Board in a non-group listed company or a role that is similar to a Board of Management mandate, Supervisory Board mandate or to the chair of a Supervisory Board in a non-group listed company. The Supervisory Board members shall inform the company of all information required to create a résumé detailing the relevant knowledge, abilities and specialist experience and a supplementary overview of the key activities in addition to the Supervisory Board mandate. The Supervisory Board members will further inform the company of all information required to update this résumé and the supplementary overview of the key activities in addition to the Supervisory Board mandate on a yearly basis.