Management Report of AUDI AG for the 2005 Financial

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					Management Report of AUDI AG for the 2005 Financial Year


Annual Financial Statements of AUDI AG as at December 31, 2005
Balance Sheet, Income Statement, Notes to Financial Statements




The management report and the annual financial
statements of AUDI AG for the 2005 financial year are
published in the German Federal Gazette and filed with
the commercial register of the Ingolstadt Local Court.
Management Report of AUDI AG
for the 2005 financial year




Business and underlying situation


Company                        Audi is one of the world’s leading automotive premium brands, and builds high-quality,
                               innovative cars that are among the most admired on the world market. Its pioneering
                               concepts in the domains of general company management and technological refinement
                               constitute the basis of its success. The customers’ wishes are placed at the very heart of its
                               unceasing quest to find ever better solutions. Audi’s philosophy is reflected in the brand
                               essence “Vorsprung durch Technik” and manifested by the brand values sportiness,
                               sophistication and progressiveness.
                                  Customers are able to experience the brand claim in particular through the innovative
                               range of models. AUDI AG was consequently yet again able to consolidate its position on car
                               markets worldwide in 2005.

                               The company headquarters, with the core areas Administration, Sales and Technical
                               Development, are located in Ingolstadt, as are substantial parts of the production
                               operations.
                                  Production at this location comprises the models A3, A3 Sportback, A4 saloon and Avant,
                               and S4 saloon and Avant. The bodies for the TT Coupé and TT Roadster are also
                               manufactured in Ingolstadt.
                                  The models A6 saloon and Avant, A8 and RS 4 are built at the second German location,
                               Neckarsulm. Production of the S6 saloon, S6 Avant and S8 is due to commence there in
                               2006.

                               Volkswagen AG currently holds around 99 percent of the share capital of AUDI AG. A profit
                               transfer and control agreement exists with the former.
                                  Profit transfer agreements exist between AUDI AG and the principal fully consolidated
                               companies Audi Vertriebsbetreuungsgesellschaft mbH and quattro GmbH. All shares in Audi
                               Synko GmbH were transferred to Volkswagen Retail GmbH (formerly Volkswagen Synko
                               GmbH) with effect from January 1, 2006. The profit transfer agreement between AUDI AG
                               and Audi Synko GmbH was moreover terminated as a result of this transaction.


Corporate steering             Strategy
                               The management and employees of AUDI AG continued to work intensively on the
                               company’s strategic direction last year, always with the vision of becoming the most
                               successful premium brand in the world. 2005 saw the implementation of specific measures
                               which sought to underpin these strategic growth objectives.
                                   Audi’s strategy provides answers to the major challenges of the future by tackling the
                               following four target dimensions: attractiveness as an employer, further development of the
                               brand, maximum customer delight, and an enhanced quality of financial results. These
                               targets are closely interlinked and build on each other.
                                  Audi will only be able to develop and hold onto an expert, dedicated team of top
                               performers if it is an attractive employer. Survey results are already indicating that Audi is
                               regarded as one of the most attractive prospective employers, not just among university
                               graduates.
                                  A very strong, desirable brand provides a sound basis for lasting success, particularly in
                               times of intensive competition. Audi will consequently continue to build on its current
                               image position, focusing above all on the facets of emotion and quality. Customer loyalty
                               and the brand’s ability to captivate new customers will thus be further strengthened.
                                  The growth of the brand is nevertheless fuelled not simply by more effective market
                               exploitation, but also by tapping into new growth markets. The central success factor here is




                                                                                                                                3
                           exciting cars: new product families and derivatives are consequently gradually being added
                           to the range.
                               An intelligent vehicle architecture helps to bring about an appreciable improvement in
                           the profitability of the entire company.


Research and development   Innovation and quality are important success factors. A company-wide programme with the
                           aim of further improving core skills in the field of vehicle development was therefore
                           launched in 2005.
                               To this end, 5,685 (5,272) people were employed within the Research and Development
                           area of AUDI AG at December 31, 2005. The 7.8 percent rise in the number of employees
                           reflects the ever stronger claim of AUDI AG to the title of technology leader.
                               Development spending in the past financial year amounted to EUR 1,126 (997) million.


                           Technical innovations

                           Audi Q7 hybrid
                           The Audi Q7 hybrid concept study represents a logical step forward in the domain of
                           innovative drive concepts. Audi has for the first time combined a 4.2-litre V8 FSI petrol
                           engine with electric drive. The vehicle’s performance is high, and average fuel consumption
                           compared with the basic model is as much as 13 percent lower.


                           Audi magnetic ride
                           The innovative damping system Audi magnetic ride was unveiled in the Shooting Brake
                           Concept design study. This system establishes the correct damping forces in every driving
                           situation, thus optimising road behaviour and ride comfort.


                           Audi drive select
                           Audi exhibited a further innovation in the Roadjet Concept study vehicle at the Detroit Motor
                           Show. Audi drive select allows several entirely independent vehicle characteristics to be
                           preselected at the push of a button. Three modes directly modify the steering, damping and
                           transmission response, as well as the engine characteristic.


                           New engines
                           The new S8, which is equipped with an evolutionary 450 bhp, 5.2-litre V10 FSI engine,
                           combines sportiness with a high standard of comfort. The technical expertise gleaned from
                           the engine of the Lamborghini Gallardo served as the basis for its development. The ten-
                           cylinder engine in the Audi S8 is even more compact and light, as the number of
                           components has been reduced. The special features of this power unit are low moving
                           masses and reduced internal friction, in conjunction with an ultra-dynamic power flow.
                               Highly innovative technology from Audi also features on the racetrack in the guise of the
                           new R10. This is the first racing car in its class to feature a 5.5-litre, twelve-cylinder TDI twin-
                           turbo engine. With an output in excess of 650 bhp and over 1,100 Nm torque, Audi will be
                           entering it in this year’s Le Mans 24 Hours to challenge for yet another overall victory. Like
                           TFSI technology before it, Audi is thus testing a new technology on the racetrack in order to
                           demonstrate its high performance and reliability.




4
Innovations that bring greater safety

Audi side assist, Audi lane assist
Innovations in the area of safety likewise enjoy top priority at Audi. Active safety systems
help to prevent accidents from occurring in the first place. Pioneering developments in this
area are Audi side assist, which is available for the first time in the Audi Q7, and Audi lane
assist, which was unveiled at the start of 2005 in the Audi allroad quattro concept. Audi side
assist helps the driver when changing lanes and alerts them to the presence of other
vehicles in their blind spot. Audi lane assist, on the other hand, alerts the driver as soon as
they cross the lane markings without having set the indicator.
    The American Insurance Institute for Highway Safety (IIHS) awarded its highest possible
rating of “Double Best Pick” to the passive safety of the new models launched in the USA in
2005, the A3, A4 and A6. No other manufacturer has ever achieved this triple top score, a
fact which serves to highlight Audi’s expertise in this area.


Lightweight construction
Audi fires neutrons at specimens of material in the Technical University of Munich’s
research reactor. This new technique now for the first time makes it possible to establish
material strain and therefore deformations in a non-destructive manner. The research object
is an innovative material mix of steel and aluminium, held together by punch rivets. The new
measuring technique supplies valuable data on the crash behaviour of the punch-riveted
connections. The aim is to refine lightweight construction and for example to use such
punch rivets in the future in areas where they can actually enhance crash behaviour.


Intelligent LED rear lights
A further new development that boosts safety is LED rear lights, which Audi has used for the
first time on the A6 Avant. They respond faster than conventional lights and memorably
enhance the design.
    Audi’s engineers are in addition working on the “intelligent rear light”. This type of light
clearly signals an emergency brake application, thus reducing the risk of a nose-to-tail
collision. With the aid of sensors, it moreover automatically adapts its intensity to the
prevailing light and visibility conditions.


Refined MMI
The biggest challenge for future infotainment and safety systems is not to overburden the
driver with information and cause them to be distracted from the road situation as a result.
Audi therefore sends test candidates on a virtual drive in a new, elaborately equipped
laboratory. A 250-degree screen transports the candidates into various traffic scenarios. The
driver tries out the further-developed features of the Multi Media Interface (MMI) while
“driving”.




                                                                                               5
Employee matters   Workforce
                   The following table shows the total number of employees of AUDI AG as an average for the
                   year:


                                                                                            2005             2004


                     Ingolstadt plant                                                      31,236          31,150
                     Neckarsulm plant                                                      13,666          13,768



                      AUDI AG employed an average of 44,902 (44,918) people in 2005.
                      There were 2,236 (2,181) apprentices at Ingolstadt and Neckarsulm at the end of 2005. Of
                   this total, 2,061 (2,011) were engaged in industrial activities and 175 (170) in the
                   technical/clerical area. The proportion of people with severe disabilities in relation to the
                   total workforce of AUDI AG was 5.1 (5.0) percent at the end of the year. Audi in addition
                   awards contracts to “Lebenshilfe” workshops for disabled people in the Ingolstadt and
                   Neckarsulm regions.

                   AUDI AG was able to achieve a new record high of 97.0 percent attendance for 2005 and
                   thus build on the welcome trend of recent years. This result was made possible by countless
                   initiatives within the company and the dedication of all employees.


                   Company agreement: “Audi’s Future – Performance, Success, Sharing”
                   The management and General Works Council of AUDI AG, in consultation with the parties to
                   pay agreements, reached consensus on the content of the new agreement entitled “Audi’s
                   Future – Performance, Success, Sharing” on April 8, 2005. The conclusion of the agreement
                   represents a clear affirmation of Germany’s future as an industrial base with the goal of
                   combining competitiveness with job security. From its position of strength, Audi is
                   consequently taking precautionary measures for the future.

                   Key aspects of the agreement:


                   Job security
                   There will be no redundancies for operational reasons before December 31, 2011. The
                   Ingolstadt and Neckarsulm plants are to be integrated into a flexible production hub in
                   order to assure a constant level of capacity utilisation.


                   Industry-related services
                   Separate negotiated working hours and pay arrangements have been agreed with
                   employees performing industry-related service tasks, such as catering, office and security
                   services, in a supplementary collective agreement in order to improve competitiveness
                   compared with external service providers.


                   More flexible working hours
                   To increase the flexibility of working hours, so-called flexi-shifts have been introduced in
                   conjunction with open-ended time accounts, which replace supplementary payments with
                   time credits subject to certain conditions.




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                  New Audi remuneration system
                  The general collective agreement on pay (ERA), which will be introduced from 2007, sets out
                  a new Audi remuneration system. This redefines the performance-dependent component of
                  the profit-sharing arrangements for employees.


                  Vocational training
                  The number of apprenticeships available has been increased by 40 percent in recent years.
                  Audi furthermore handles the start of a person’s career more flexibly: time spent as a
                  “journeyman” – including, as necessary, assignments to other group companies, suppliers
                  or outside companies – contributes towards professional qualifications and helps to
                  broaden a person’s specialist and personal horizons.


                  Health and fitness
                  The “Audi Check-Up” will act as a core element in promoting the health and fitness of all
                  AUDI AG employees over the next few years. This scheme will gradually draw the entire
                  workforce – on a voluntary basis – into a diagnosis and prevention programme tailored to
                  the individual’s age and representing the state of the art in medicine.

                  Other components of the agreement include the promoting of the personal development of
                  all employees, of equal opportunities and of the compatibility of work with family life.


Audi in society   Promoting culture

                  Summer Concerts
                  AUDI AG has long been involved in promoting art and culture. One major aspect of this
                  involvement is the season of Summer Concerts, now renowned well beyond the region, that
                  Audi has been organising at various venues in the Ingolstadt area since 1990 with a view to
                  enriching cultural life in and around its home city. The Summer Concerts again took
                  “Vorsprung – Experienced Live” as their motto in 2005. The blend of different musical
                  currents was aimed increasingly at a younger audience. The programme ranged from
                  classical to pop, from jazz to hip hop, from musical to soul, with a liberal helping of cross-
                  over, too.


                  European College of Arts
                  The “European College of Arts” in Berlin, a unique development scheme for talented artists
                  from seven European states, was initiated among others by AUDI AG. A high-ranking jury
                  selected three students to spend nine months in Berlin creatively interpreting and
                  developing their ideas on how Europe is changing. The artists also spent some time in
                  Ingolstadt as part of this scheme. Audi thus built a bridge between industrial work, mobility,
                  advanced technology and artistic reflection.


                  Social involvement

                  Fundraising campaigns
                  The corporate social responsibility (CSR) of a company depends on its readiness to show
                  steadfast, lasting involvement.
                     A core component of Audi’s corporate culture in the social and regional context is the
                  Christmas appeal, first launched in 1977 by the Works Council and repeated every year
                  since. In 2005, the workforce at Ingolstadt and Neckarsulm donated EUR 526,848. The
                  management topped up this amount, with the result that EUR 686,848 in total was available
                  at both locations for supporting local charities and organisations.



                                                                                                               7
                           Audi’s solidarity with the victims of the tsunami disaster made it possible to send money
                        to aid reconstruction in the affected regions within a very short space of time.
                           Many employees donate the spare cents from their monthly earnings to the appeal “One
                        Hour for the Future”, which provides financial support for projects helping street children in
                        Germany and at other international locations of the Volkswagen Group. The employees and
                        management donated a total of around EUR 1.1 million to this cause in 2005.


                        Public-private partnerships
                        Around 45,000 men and women are employed at the Audi plants. AUDI AG consequently
                        shares responsibility for the home towns and regions where its plants are based, Audi’s
                        response taking the form of various projects that promote “a spirit of neighbourliness
                        around the Four Rings”.


                        New partnership for Neckarsulm Technical Institute
                        Through a university-level partnership between AUDI AG and the University of Stuttgart and
                        the Technical University of Karlsruhe, an academic centre of expertise where research and
                        practical work will go hand in hand has now also been established in Baden-Württemberg.
                        As well as encouraging young scientific researchers, the resulting Neckarsulm Technical
                        Institute (HIN) will in particular enhance innovative prowess and the attractiveness of the
                        location. The existing university-level partnership between AUDI AG and the Technical
                        University of Munich (INI.TUM) has already successfully established its reputation as a place
                        of interdisciplinary cooperation.
                            Exceptional, enduring technological expertise is being systematically built up in
                        partnership with these universities. Highly qualified people will thus receive an opportunity
                        to conduct scientific research at Audi’s locations.


                        Collaboration with the city of Ingolstadt
                        AUDI AG cooperates with the city of Ingolstadt in many areas. One topical example is the
                        school routes map presented to over 5,000 primary-school and pre-school children at the
                        start of the school year last autumn. This map is based on the municipal “Geoportal”
                        computer system and provides children and parents alike with a vivid, printed guide on how
                        to get to school and back home safely.
                           A further example of local patronage is the support we have lent to the establishment of
                        the Endowed Chair of Tourism at the University of Eichstätt-Ingolstadt. The aims of this
                        partnership are to communicate the specialist background to the organisation of tourism at
                        Audi plants, to support the development of regional tourism and to develop Eichstätt-
                        Ingolstadt as a centre of academic research.
                            AUDI AG is in addition a founder member of the Citizens’ Foundation established by the
                        city of Ingolstadt. By supporting social, ecological and cultural issues, this foundation seeks
                        to give citizens and businesses the opportunity to have a long-term say in the shaping of
                        their city and the way its inhabitants coexist.


Environmental aspects   Environmental management
                        ISO 14001 standard calls for a system audit to be conducted within the context of
                        environmental management systems and certifies the company’s environmental
                        performance by means of a corresponding certificate. A validation in accordance with EU
                        regulation 761/2001 (EMAS II) includes the requirements of ISO 14001 as well as stipulating
                        ongoing improvements and the compilation of a standardised environmental declaration.
                        AUDI AG already meets these requirements in full at its Ingolstadt and Neckarsulm
                        locations.




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                                           Environmental Pact for Bavaria III
                                           Audi is participating in the latest “Environmental Pact for Bavaria”, now in its third phase.
                                           Under a joint venture, Audi will support an integrated product policy at its supplier
                                           companies.
                                              As an expression of cooperation between the state and industry, working forums on focal
                                           topics such as emissions trading, integrated product policies, renewable energies and
                                           administrative simplifications have been set up. The purpose of these working forums is to
                                           promote incentives for environmentally compatible economic growth.


                                           Fall in environmental pollution at AUDI AG locations
                                           The satisfying rise in production to around 798,000 vehicles in 2005 went hand in hand with
                                           a reduction in environmental pollution at the AUDI AG’s locations, thanks to the use of
                                           water-soluble paints, and intact water and waste cycles.
                                              Since 2000, for example, 97 additional heat recovery systems have been installed at
                                           Ingolstadt, bringing an annual saving of around 38.5 million cubic metres of natural gas and
                                           avoiding 76,400 tonnes of carbon dioxide emissions.
                                              Fresh water purchases were furthermore reduced by 3.7 percent in 2005 compared with
                                           the previous year. The water used for the production process was collected, purified and re-
                                           used even more efficiently.
                                              The company likewise succeeded in reducing VOC (volatile organic compound) emissions
                                           by 4.3 percent.
                                              For further detailed notes on environmental aspects, please refer to the Audi
                                           Environmental Report and the environmental declarations at www.audi.com.

                                           Energy consumption at the Ingolstadt and Neckarsulm locations



                                                                            2001                2002                2003                2004         2005


    Overall energy consumption                         MWh            1,782,949           1,812,628           1,774,221           1,796,952      1,815,295
    VOC emissions*                                           t             1,662               1,564               1,670               1,333        1,276
    Direct CO2 emissions**                                   t           177,869             170,098             158,742             152,127      161,529


    Volume of waste water                                 m³          1,621,553           1,590,956           1,692,458           1,574,819      1,496,916
    Fresh water purchased                                 m³          2,404,945           2,351,784           2,505,206           2,225,171      2,142,889


    Total volume of waste                                    t            35,274              34,357              33,658              33,963       32,236
       of which recyclable waste                             t            26,428              24,039              23,836              23,261       24,311
       of which disposable waste                             t             8,846              10,318               9,822              10,702        7,925
    Metallic waste (scrap)                                   t           235,945             255,423             253,720             272,628      277,040


*    VOC: volatile organic compounds.

     This figure comprises emissions from the paint shops, shipment preservative treatment for motor vehicles, test rigs and other facilities.

** CO2 emissions from own power generation activities.

     This figure is made up of CO2 emissions from own power generation activities and CO2 emissions produced by the operation of test rigs.




                                                                                                                                                             9
Underlying economic   Global economic situation
situation             In spite of the sharp rise in energy and raw materials prices, the global economy enjoyed
                      stable growth in 2005, without achieving the vigour of the previous year. Low interest rates
                      worldwide helped to cushion the impact of surging oil prices. The USA and China acted as
                      the key driving forces of the global economy’s expansion. By contrast, economic growth in
                      Western Europe lagged behind the general trend.
                          In the USA, the dynamic performance of the economy and incipient inflationary
                      tendencies necessitated a tightening of monetary policy. The economy was underpinned
                      above all by private consumption and capital equipment spending by companies.
                          The economy in Western Europe developed at a restrained pace in 2005, with noticeable
                      differences between the growth rates of individual countries. Weak internal demand in
                      major national economies proved a major growth-inhibiting factor. Consumer restraint
                      persisted in those countries as a result of high levels of unemployment and consumer
                      unease. Economic development was much more positive in Central and Eastern Europe, and
                      especially in Russia.
                          With below-average economic growth, Germany found itself among Europe’s tail enders.
                      Whereas exports rose and yet again proved to be the mainstay of the economy, the
                      slackness in consumption since 2002 persisted. This development was aggravated by the
                      rising energy prices, which noticeably diminished the purchasing power of private
                      households. Nor did the parliamentary elections and the new German government’s political
                      agenda, as set forth in its coalition agreement, provide any significant impetus to improve
                      consumer confidence in the remainder of 2005.
                          In the countries of South America, the vigorous economic upswing of the previous year
                      lost some of its momentum though the positive trend continued. In addition to export
                      growth for raw materials, certain countries also benefited from growing domestic demand.
                          China remained the growth centre in the Far East economic region in 2005. Despite the
                      rise in energy and raw materials prices, the Chinese economy expanded unchecked. In
                      Japan, private consumption recovered, bolstering the country’s increasingly stable
                      economic growth.


                      International car market
                      The upward trend in worldwide demand for cars was sustained despite the sharp rise in fuel
                      prices in the course of 2005. Global sales of passenger cars and light commercial vehicles
                      amounted to 53.0 million units, representing an increase of 3.9 percent on the prior-year
                      figure. This development derived its momentum principally from Asian and South American
                      markets. In Western Europe and the USA, by contrast, car sales remained flat.
                        Following a weak start to the year and a phase of recovery, the Western European car
                      market (excluding Germany) yet again weakened and was 0.6 percent down on the prior-year
                      figure with 11.2 million registrations of new cars. In Great Britain, the second-largest car
                      market in Europe, the protracted period of growth finally came to an end in 2005.
                      Registrations of new cars yielded by 5.0 percent there. In Italy, the figure was down 0.7
                      percent. In Spain, the high market growth of the previous year was not emulated and the
                      rate of growth was only 0.8 percent. On the other hand, the French market provided positive
                      news, with growth of 2.7 percent.
                         In the USA, the car market in 2005 was dominated by drastic discounting campaigns
                      launched by US manufacturers, though this had only a short-term effect. Following growth
                      rates occasionally running into double figures in the summer months, car sales in the USA
                      finished the year just 0.5 percent up on the prior-year figure, at 17.0 million passenger cars
                      and light commercial vehicles. Particularly in the second half of the year, the sharp rises in
                      fuel prices prompted a downturn in sales.
                         As in the previous year, the positive development of the South American economy
                      rubbed off on the car sector. In Brazil, the largest market in the region, sales of passenger

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                    cars rose by 8.8 percent to 1.4 million vehicles. In Argentina, market growth reached 36.3
                    percent.
                       The car market remained dynamic in the Asia-Pacific region. Unit sales totalled 12.4
                    million passenger cars, representing an increase of 8.6 percent. In the Chinese market, car
                    sales picked up again appreciably following a period of stagnation at the start of the year.
                    With 3.3 million vehicles sold, the market for 2005 as a whole was up 25.1 percent on the
                    prior-year figure. On the other hand in Japan, the largest market in Asia, registrations of new
                    passenger cars declined by 0.4 percent to 4.7 million units.


                    The German car market
                    After a weak start to the year, the German car market picked up considerably. Registrations
                    of passenger cars were up 2.3 percent on the previous year, at 3.3 million in the year under
                    review.
                       The diesel share of total first-time registrations fell by 1.3 percentage points to 42.7
                    percent. In the early part of the year in particular, the debate concerning particulate filters
                    unsettled consumers for an extended period, preventing a better figure for diesel models,
                    which experienced a marked downturn in sales for part of the year.
                       Domestic car production likewise benefited from the development of the car market in
                    Germany. 5.3 million vehicles left the production lines, representing an increase of 3.0
                    percent on the previous year. The number of German-branded passenger cars built abroad
                    was on a par with the previous year, at 4.2 million units.
                       Exports by German manufacturers bettered the record level of the previous year. 3.8
                    million passenger cars, an increase of 3.5 percent, were exported. Of this total, just under
                    2.5 million passenger cars were exported to other Western European countries, representing
                    an increase of 4.6 percent. Exports to the USA, on the other hand, stagnated at just under
                    547,000 cars due to the adverse exchange rate.


                    Overall assessment by the management
                    The mixed performance of the global economy and rapidly rising raw materials prices have
                    placed key car markets increasingly under pressure and led to a further intensification of
                    global competition between car manufacturers.
                       AUDI AG initiated appropriate product, process and cost management measures at an
                    early stage in order to defend its long-term competitiveness despite the underlying
                    conditions described.
                       New record figures for production, revenue and sales for the past financial year already
                    serve to confirm the effectiveness of these measures.


Business progress   Procurement
                    Procurement within AUDI AG has the task of acquiring the most efficient suppliers
                    worldwide in terms of quality, service, innovativeness, reliability and economy. Strategic
                    partnerships are of considerable interest in this respect.
                       The cost of materials within AUDI AG amounted to EUR 14,759 (13,923) million in 2005.
                    This comprises raw materials and consumables used as well as other purchased goods and
                    services.
                       The developments on raw materials markets represented a particular challenge in 2005.
                    Audi counteracts rising prices in particular through intensive partnerships with its suppliers,
                    as well as through long-term agreements.




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        China, India and Russia are of increasing interest as procurement markets. China in
     particular offers Audi valuable potential in view of the company’s production operations
     there for the local market and its resulting knowledge of that supplier market.

     AUDI AG continued to build on its successful purchasing instruments in the past financial
     year.


     Global sourcing – assessing the worldwide competitiveness of suppliers
     Global sourcing is an ongoing process which seeks to secure lasting improvements in terms
     of quality, service and price by scouring international markets.
        Audi operates with 18 local purchasing teams (LPT) spread all over the world. These
     purchasing teams are the central points of contact for local suppliers in each procurement
     market, and act as the interface with Audi. The task of the LPTs is to assess the potential of
     the suppliers in their respective countries, and to assist them throughout the enquiry and
     qualifying process, then develop them into suppliers for Audi’s production operations.


     Online negotiations
     Online negotiations are used as an effective instrument alongside the “classic” negotiating
     format, and accelerate the process by boosting market transparency.


     Improving partner ties through supplier platform
     The supplier platform www.vwgroupsupply.com now provides over 24,000 potential
     suppliers with the opportunity to access numerous different applications from the
     Development, Procurement, Production and Logistics areas. All procurement processes are
     handled via the platform according to a web-based approach. The supplier platform
     furthermore allows project-relevant data to be exchanged by suppliers and AUDI AG.


     Production

     Vehicle production by model



                                                                            2005            2004


       Audi A2                                                             10,026          19,745
       Audi A3                                                             70,395         121,904
       Audi A3 Sportback                                                 150,091           52,846
       Audi A4 saloon                                                    157,320          168,621
       Audi A4 Avant                                                     155,620          144,402
       Audi A4 Cabriolet                                                   22,089          31,962
       Audi A6 saloon                                                    131,344          148,034
       Audi A6 Avant                                                       73,334          33,667
       Audi allroad quattro                                                 4,295          14,796
       Audi Q7                                                              1,194               46
       Audi A8                                                             21,515          22,429
       Audi RS 4                                                             556                 4
       Audi RS 6 saloon                                                        –             232
       Audi RS 6 Avant                                                         –            1,001
       Total, AUDI AG                                                    797,779          759,689




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AUDI AG increased car production by 5.0 percent in the 2005 financial year to a new record
total of 797,779 (759,689) vehicles.
    Production of the Audi A3 rose by 26.2 percent to 220,486 (174,750) vehicles above all as
a result of high demand for the Audi A3 Sportback. Production of the Audi A4 was on a par
with the previous year’s high level, at 312,940 (313,023) units. A total of 22,089 (31,962) of the
Audi A4 Cabriolet were built last year, this downturn being due to the advanced point of the
model cycle. Production of the first vehicles of the new Audi A4 Cabriolet already started in
autumn 2005. The new model features five different engine versions together with an array
of new technical features, and has been on the market since the start of 2006. A total of 556
(4) of the Audi RS 4 were built.
    Like the saloon before it, the A6 Avant launched in the first half of 2005 is very much in
demand. AUDI AG built 204,678 (181,701) vehicles of the A6 car line at the Neckarsulm plant.
This represents a rise of 12.6 percent. Shortly after the Audi A6 Avant went into production,
a very special milestone was reached – the five millionth Audi A6 left the production line.
   Production of the Audi A8 totalled 21,515 (22,429) units in the past financial year. In
addition, the new A8 4.2 TDI quattro, one of the most powerful diesel cars in the world, was
launched. From mid-2006, a sporty version will be added to the A8 product family in the
guise of the new S8.
   Production of the Audi A2 in Neckarsulm was terminated during the past financial year,
and the first model generation of the allroad quattro likewise went out of production.
The study Audi allroad quattro concept was exhibited at the motor show in Detroit at the
start of 2005. This study vehicle earned Audi considerable positive feedback not just from
American customers. The new Audi A6 allroad quattro will consequently go into production
in Neckarsulm from the spring.
   Volume production of the new premium SUV, the Audi Q7, commenced at the end of
2005. As its market launch in Europe will take place in March, 1,194 (46) of this car had
already been built by the end of 2005.
   AUDI AG shipped 42,329 (61,128) completely knocked down parts kits of the A4 and A6
car lines to China in 2005.
   In the year of the 25th anniversary of quattro, the proportion of Audi vehicles built with
four-wheel drive amounted to 26.9 percent of total production, with 214,702 (197,736) such
vehicles built.


Vehicle sales
Despite difficult market conditions, AUDI AG stepped up sales of Audi vehicles in the past
financial year to 829,109 units, an increase of 6.4 percent, thus establishing a new sales
record. In its home market of Germany, AUDI AG sold 247,125 Audi vehicles. Thanks to this
disproportionately high rise compared with the growth of the market as a whole, the market
share climbed from 7.2 to 7.4 percent.
   Vehicle sales in other Western European countries, one of Audi’s most important sales
regions, were very satisfactory. Whereas the market as a whole contracted slightly by 0.6
percent, sales of Audi vehicles rose by a substantial 8.4 percent. This was prompted in
particular by the sharp rise in sales in Italy (up 10.0 percent), Spain (up 13.0 percent) and
France (up 10.1 percent).
   The brand with the four rings was likewise successful in the intensely competitive US
market thanks to its attractive model range, bettering the prior-year total by 6.6 percent,
with vehicle sales of 83,066 (77,917). The market launch of the Audi Q7 mid-way through the
current year will further improve the positioning of the Audi brand in the USA.




                                                                                                13
     Vehicle sales – largest markets



                                                Vehicle sales      Year-on-year         2005 market         Year-on-year
                                                        2005        percentage                share,         percentage
                                                                        change              percent            change in
                                                                                                           overall market


       Audi worldwide                                   829,109                6.4
       Germany                                          247,125                5.1                 7.4                     2.3
       USA                                               83,066                6.6                 0.5                     0.5
       Great Britain                                     81,374                4.5                 3.4                – 5.0
       China (incl. Hong Kong)                           58,878                  –*                1.8                25.1
       Italy                                             55,574              10.0                  2.7                – 0.7
       Spain (incl. Canary Islands)                      49,453              13.0                  3.4                     0.8
       France                                            41,498              10.1                  2.1                     2.7
       Belgium                                           24,337              13.1                  4.9                – 1.0
       Austria                                           17,058                8.6                 5.6                – 1.1
       Netherlands                                       16,824              11.9                  3.2                – 3.9
       Japan                                             15,388              11.9                  0.3                – 0.4
       Switzerland                                       12,830              – 9.0                 5.2                – 1.9
       Sweden                                            12,465                7.5                 4.4                     3.8
       South Africa                                      11,802              17.0                  2.8                27.1
       Portugal                                           7,241              12.3                  3.6                     3.0

     * Change in the method used for counting vehicle sales in the 2005 financial year. Consequently, no direct comparison
       with the previous year is possible. Application of the new method of counting vehicle sales for the previous year
       results in an increase of 9.6 percent in 2005.


     Vehicle sales by model



                                                                                                 2005                 2004


       Audi A2                                                                                 13,321               21,452
       Audi A3                                                                                 75,673             142,276
       Audi A3 Sportback                                                                     139,496                37,690
       Audi TT Coupé                                                                           10,633               15,876
       Audi TT Roadster                                                                         5,635                9,326
       Audi A4 saloon                                                                        170,379              166,232
       Audi A4 Avant                                                                         154,433              144,237
       Audi A4 Cabriolet                                                                       23,560               30,541
       Audi A6 saloon                                                                        141,059              137,305
       Audi A6 Avant                                                                           64,878               35,660
       Audi allroad quattro                                                                     7,431               14,840
       Audi Q7                                                                                    674                       –
       Audi A8                                                                                 21,417               22,773
       Audi RS 4                                                                                  520                       –
       Audi RS 6 saloon                                                                              –                 232
       Audi RS 6 Avant                                                                               –               1,001
       Total, AUDI AG                                                                        829,109              779,441




14
                        Market and trend research at Audi
                        Intensive exchanges with customers are the focus of attention of Audi’s research into
                        markets and trends. Every year, 2.3 million interviews are conducted with car customers and
                        trendsetters on Audi’s behalf, through international studies. Feedback on Audi products and
                        services is an elementary component of product development. The indisputable objective of
                        this is to demonstrate customer centricity and identify customer requirements. Trend and
                        future studies analyse the factors that will shape customer satisfaction and customer
                        behaviour in the future, and translate them into new products and innovations.


Financial performance

                        AUDI AG boosted its revenue by 9.1 percent in the past financial year. With revenue reaching
                        EUR 21,694 (19,877) million, a new record level was again achieved.
                            The outstanding market reception of the Audi A3 is particularly satisfying. The launch of
                        the A3 Sportback in autumn 2004 and the changeover to the single-frame radiator grille for
                        the three-door version helped to boost revenue by 16.3 percent. The revenue generated by
                        the A4 line was also up on the previous year, accounting for 35.0 percent of total revenue.
                        The A6 car line enjoyed strong demand in the past financial year and played a significant
                        part in boosting total revenue, bringing in 21.5 percent more. The A8 achieved
                        approximately the revenue level of the previous year, despite the downturn in the European
                        market for luxury saloons last year.
                            The rise in cost of sales of 6.7 percent in the past financial year is primarily due to the
                        increased volume of direct materials as a result of higher unit sales.
                            The positive development in revenue and the modest rise in cost of sales also show
                        through in the gross profit, which rose substantially by 34.0 percent to EUR 2,339 (1,745)
                        million.
                            Distribution costs rose by 3.8 percent in the 2005 financial year and totalled EUR 1,391
                        (1,340) million at year end. Administrative expenses amounted to EUR 137 (132) million. The
                        other operating result was EUR 351 (622) million. This reduction stemmed predominantly
                        from lower income from foreign currency transactions.
                            AUDI AG posted a very satisfactory result from ordinary activities, which was a healthy
                        28.0 percent up on the previous year at EUR 1,135 (887) million. This clearly reflects the
                        success of the improved processes and cost-cutting measures implemented.
                            The balance remaining after deduction of taxes rose by 14.1 percent in the 2005 financial
                        year to EUR 462 (405) million and was transferred in full to Volkswagen AG.


Net worth

                        The balance sheet total of AUDI AG in the past financial year was well above the prior-year
                        figure, at EUR 10,935 (9,727) million. Whereas non-current assets fell by 1.7 percent to EUR
                        5,100 (5,186) million, current assets (including deferrals) rose by EUR 1,294 million to EUR
                        5,835 (4,541) million. This change is largely due to the rise in receivables from affiliated
                        companies. Capital investments by AUDI AG over the past year totalled EUR 982 (1,161)
                        million. Of this total, investments in property, plant and equipment amounted to EUR 875
                        (945) million.
                           The EUR 179 million downturn in capital investments is substantially attributable to
                        systematic investment management, without the extent, quality and timescale of the
                        envisaged product and investment plans being impaired in any way.




                                                                                                                       15
                                  The equity of AUDI AG rose by 12.3 percent to EUR 1,779 (1,584) million following an
                              injection of capital by Volkswagen AG to the tune of EUR 195 million. The equity ratio
                              remained on a par with the previous year, at 16.3 (16.3) percent.
                                  Liabilities rose above all as a result of higher other provisions and liabilities to affiliated
                              companies.


Financial position

                              The cash flow from operating activities rose sharply by 52.0 percent in 2005, to EUR 2,275
                              (1,497) million. This welcome development is principally due to the reduction in working
                              capital. The cash flow thus once again covered the entire investment spending of the past
                              financial year, underlining the impressive financial strength of AUDI AG. The outflow for
                              investing activities amounted to EUR 877 (1,102) million.
                                  At December 31, 2005 AUDI AG had generated net liquidity of EUR 2,150 (962) million, up
                              EUR 1,188 million on the prior-year figure.

                              Cash flow statement



                                 EUR million                                                              2005              2004


                                 Cash flow from operating activities                                      2,275            1,497
                                 Cash flow from investing activities                                      – 877           – 1,102
                                 Net cash flow                                                            1,398              395
                                 Cash flow from financing activities                                       – 28                –
                                 Net liquidity                                                            2,150              962



                              Cash pooling within the Audi Group is centralised at AUDI AG. Surpluses and shortages of
                              cover are equalised via the cash pool at Volkswagen AG. All transactions are handled on
                              market terms.
                                 There furthermore exists a credit line for EUR 100 million with Volkswagen AG. This had
                              not been drawn upon at the balance sheet date.


Report on post-balance sheet date events

                              No events of particular significance occurred after December 31, 2005.


Risk report


The risk management           In accordance with the risk management strategy of AUDI AG, the wide-ranging risks that
system of AUDI AG             are inseparably associated with the business activities of the company are minimised or if
                              possible avoided in order to prevent potential losses to the company. Risks are consciously
                              taken only where they are calculable and this course of action is unavoidable within the
                              context of seizing favourable business opportunities to enhance the value of the company.
                                 Over and above AUDI AG, the risk management and early warning system covers all
                              subsidiaries from which potential existence-threatening developments could spread to AUDI
                              AG.
                                 The tasks of risk management at AUDI AG are reflected non-centrally by organisational
                              processes at the level of the individual corporate divisions and subsidiaries. Risk
                              management is thus an integral aspect of the existing business processes of AUDI AG.




 16
                          Clearly defined task areas as well as reporting and recording obligations are laid down for
                          the corporate divisions and subsidiaries.
                              In the context of the defined spheres of responsibility within the risk management
                          system, potential risks are identified, appropriate measures are elaborated and
                          implemented for their management and monitoring, and the success of the measures taken
                          is constantly monitored. The effectiveness of the management and monitoring system is
                          constantly examined.
                              Within the process of identifying and evaluating risks, the probability of individual risks
                          materialising is estimated and the potential extent of the loss in each individual case
                          quantified. The lost profit contribution serves as the measure for this purpose.
                              Reports on key risks are submitted to the Board of Management and Supervisory Board
                          on a regular basis.

                          In the context of its business activities, AUDI AG encounters the following key risk areas:


Risks from the economic   In view of its business activities, AUDI AG is highly dependent on the general underlying
context and the car       state of the economy. This affects the major sales markets of the company in particular
industry                  measure. These include above all Western Europe, the USA, Japan and China. A stagnating
                          or even recessive economy in these markets can have a direct impact on consumer
                          behaviour in the car sector. Protracted high prices or further price rises for oil and steel on
                          the one hand harbour financial risks for production and on the other hand lead to consumer
                          reticence, thus hampering vehicle sales.
                              The premium segment, in which the models of the Audi brand are positioned, is
                          fundamentally less exposed to the negative impact of cyclical fluctuations. The possibility of
                          sales risks from a deterioration in the general economy and the consequent downturn in the
                          market can, however, not be excluded even in that segment.
                              As an international player, AUDI AG generates a significant portion of its revenue in
                          foreign currency. This revenue is exposed to risks from exchange rate movements. In
                          particular, unanticipated changes in the exchange rate between the US dollar and the euro
                          can severely diminish revenues and the consolidated net profit.
                              The intensive competition in the car trade as a result of the increasing use of sales
                          promotion measures, not least in the important Audi markets of USA and China, but also in
                          Germany and other European countries, is leading to price erosion and higher marketing
                          costs, with a correspondingly negative impact on revenue and earnings.
                              In launching the Audi Q7, the company has ventured into a vehicle segment that is new
                          to Audi. In spite of meticulous market studies that have accompanied the product decision-
                          making process, not every detail of the market’s response to the new product can be
                          anticipated.
                             Changes to the legal context, such as tougher statutory requirements for vehicle safety,
                          fuel consumption and exhaust emissions, remain a risk factor for the car industry.




                                                                                                                        17
Risks from                   There are diverse risks within the context of AUDI AG’s operating activities which can
operating activities         substantially undermine its financial position and financial performance.
                                 These include potential disruptions to the energy supply, technical disruptions, in
                             particular to electronic data processing, fires, explosions and similar occurrences which
                             could potentially lead to high losses, but the likelihood of which is relatively low. AUDI AG
                             counteracts such risks on the one hand through preventive measures such as fire
                             protection, and on the other hand by taking out adequate insurance cover.
                                 The close, economically advantageous collaboration between car manufacturers and
                             suppliers that is customary in this industry and the resulting dependency inflate the risk of
                             production hitches as a result of delivery delays, non-delivery and quality defects. The
                             possibility of the commercial failure of suppliers represents an added risk. The potential loss
                             of income from such risks is held in check by AUDI AG and its subsidiaries through
                             appropriate contractual arrangements, the use of suitable methods of selecting and
                             monitoring suppliers and by taking out appropriate insurance cover.
                                 The complex product development process for new vehicles and components goes hand
                             in hand with risks from delays, from changes to the product at short notice and from the
                             loss of expertise as a result of the involvement of third-party service providers in the
                             development process.
                                 Despite the presence of an efficient, systematic quality management approach within the
                             company, potential product liability risks cannot be entirely excluded. These can both result
                             in financial losses to AUDI AG and also harm its image.


Financial risks              The financial risks to which AUDI AG is exposed as a result of its business activities, whether
                             directly or indirectly via subsidiaries, comprise market price risks (exchange-rate, interest-
                             rate and price risks from commodities), creditworthiness risks and liquidity risks.
                                As a result of its worldwide sales markets, AUDI AG is exposed to particular risks from
                             exchange-rate movements, above all of the US dollar and the pound sterling.
                                AUDI AG actively steers financial risks by intensively observing the market and
                             implementing appropriate hedging instruments. Derivative financial instruments are
                             employed for hedging purposes. The hedging transactions are concluded via Volkswagen
                             AG with national and international banks of top-grade creditworthiness. AUDI AG draws up a
                             regularly updated liquidity projection with a daily, weekly and monthly horizon in order to
                             steer the liquidity risk.


Overall assessment of the    Compared with the previous year, there is no substantial change in the risk situation of
risk situation               AUDI AG.
                               The risks described harbour the potential to undermine the financial performance, net
                             worth and financial position of the company to a significant degree. However, on the basis
                             of all known particulars and circumstances, there are currently no risks that can endanger
                             AUDI AG’s survival for the foreseeable future.


Report on expected developments

Anticipated development in   General economic situation
the underlying economic      The global economy will lose momentum slightly in 2006, as the higher energy prices are
situation                    having a delayed impact. On top of this comes a tightening of monetary policy, which will
                             temporarily dampen the economy.
                                In the USA, economic growth will weaken slightly as a result of lower growth in private
                             consumer spending. The protracted inflationary pressures and rising interest rates in
                             particular are likely to more than outweigh the positive influences of stable trends in
                             employment and income. Investment spending, which will rise substantially as a result of
                             growing corporate profits, will provide a further impetus.

 18
   In Western Europe, there are early indications of a mild recovery in the economy,
resulting in the main from growth in investment activity and a continuation in the positive
trend in exports. Any growth trend in private consumer spending, on the other hand, is
expected to remain weak.
   Germany’s continuing export successes will increasingly have a knock-on effect on the
domestic economy and lend momentum to corporate investment. Broadly stagnant real
wages, the continuing high rate of unemployment and the rise in the cost of living that will
result from the new ruling coalition’s policies are, however, likely to prevent any sustained
recovery in private consumption. Compared with other European countries, Germany’s
economic development will therefore remain mixed.
   In Asia, lower demand from the USA will cause the economy to weaken somewhat in
2006. The higher rate of expansion of private consumption in China will help to keep
economic growth high despite a slight loss of momentum from investment spending. In
Japan, the moderate course of growth is expected to hold up.


The car industry
Global demand for cars is expected to rise in 2006, although this trend will lose some of its
vigour. The centre of growth will be the Asia-Pacific region, for which a steady rise in unit
sales is still expected. By contrast, new-car registrations will remain flat or slip back in the
major Western European markets and the USA. For 2006 as a whole, the Audi Group
anticipates worldwide unit sales to grow by 1.1 percent to 53.6 million vehicles (passenger
cars and light commercial vehicles).
    The rejuvenation of the vehicle population that has been prompted in the US car market
in recent years through discounting campaigns will have the consequence of damping the
development of the market in 2006. Various manufacturers’ perseverance with sales
promotion measures will not have any impact to speak of, and merely serve to stabilise their
sales volumes. Car sales in the USA will consequently stagnate at a level of just under 17.0
million vehicles (cars and light commercial vehicles).
    The Audi Group expects registrations of new cars in Western Europe (excluding Germany)
to remain flat at around 11.1 million vehicles. Continuing consumer reticence in many
countries throughout the region, in particular, will prove to be a negative factor. Of the key
high-volume markets, only France will witness a rise in first-time registrations. The volume
of registrations of new vehicles is expected to fall in the Italian, UK and Spanish car markets.
    In China, demand from private car buyers will continue to rise and maintain a high level
of dynamism in the market in 2006. With growth of approx. 4.7 percent to almost 3.5 million
passenger cars, the Chinese market is set to become the world’s third-biggest car market,
behind the USA and Japan.
  The announced rise in value-added tax will dominate the German car market in 2006. The
Association of the German Automotive Industry (VDA) expects up to 80,000 new-vehicle
registrations to be brought forward to the fourth quarter of 2006. The volume forecast for
the market as a whole is 3.4 million vehicles, which would represent growth of 1.7 percent.




                                                                                             19
Anticipated developments   The underlying economic situation and the market context again confront AUDI AG with
at AUDI AG                 major challenges for the coming financial year. At the same time, the good results of the
                           past year have established a very high benchmark against which the company’ success will
                           be gauged. The management is nevertheless convinced that AUDI AG will be able to present
                           a positive overall record of its business activities for the 2006 financial year, building on the
                           achievements of 2005.


                           Anticipated development in vehicle sales
                           AUDI AG has set itself the goal of maintaining its course of growth in 2006, and is planning
                           to better last year’s sales record. A large number of new models and derivative versions will
                           help by increasing the choice for customers in the premium segment, as well as enhancing
                           the brand’s appeal.
                               In the highly competitive Western European car market, Audi is well equipped to record
                           further successes in 2006 and achieve growth in the face of the stagnating market trend. For
                           2006, vehicle sales in Western Europe will probably be up on the prior-year figure. In
                           Germany too, the highest-volume market for Audi vehicles, AUDI AG is targeting increased
                           vehicle sales.
                               Audi believes it is moreover equipped to withstand the intensive competition in the USA
                           in 2006. The market launch of the Audi Q7 in particular will provide a vital impetus, with the
                           result that a renewed rise in volume is expected.
                               In China, Audi will share in the growth of the market and consolidate its market lead in
                           the premium segment. The locally built long-wheelbase version of the Audi A6 will play an
                           important part in boosting vehicle sales.
                               In Japan, Audi likewise expects a positive trend in sales of its vehicles in 2006.


                           Anticipated financial performance
                           AUDI AG’s revenue is likely to exceed the 2005 level in the 2006 financial year. The result
                           from ordinary activities will emulate the level of the 2005 financial year, despite anticipated
                           pressure from persistently high raw materials prices and adverse exchange rate factors.


                           Anticipated financial position
                           The priority aim for 2006 remains to finance growth from the positive cash flow generated.
                           Once again, no external sources of financing will be used.
                               The cash flow from operating activities will remain at a high level. Against the backdrop
                           of the model initiative’s longer-term perspective, higher cash outflows for investing
                           activities are expected for the 2006 financial year. The cash outflow for financing activities
                           will be up on the level of the 2005 financial year.
                              The net liquidity of AUDI AG is expected to surpass the high level of the past financial
                           year at the end of 2006.


                           Capital investments
                           Capital investments scheduled for the medium term are intended predominantly for
                           customer-oriented additions to the model and engine range, the essential expansion of
                           development and production structures, improving the productivity and quality of process
                           chains, and strengthening customer loyalty.
                              Capital investments principally concern direct product activities and will for the most
                           part be earmarked for the production areas at Ingolstadt and Neckarsulm. Capital
                           investments at suppliers represent a further focal area.




20
             Anticipated development in the workforce
             The employee total of AUDI AG is likely to show a slight decrease at the end of 2006
             compared with the 2005 balance sheet date.


             Opportunities for future development
             The main determining factors behind the positive future development of AUDI AG consist
             primarily in forward-looking strategies and measures designed to assure the steady
             qualitative and quantitative growth of the company in the long term.
                 The process of rejuvenating and expanding the model range that is already under way
             will be pursued methodically. The 2006 financial year will see further new models such as
             the Audi Q7, the Audi A6 allroad quattro, the RS 4 Avant and the TT Coupé appear on the
             market. Under the derivative models strategy, the Audi S3, Audi S6 saloon and Avant and
             the Audi S8 will be launched. Audi’s new sports car, the Audi R8 based on the Le Mans
             quattro study, will follow in 2007.
                 AUDI AG will operate even more successfully in its existing markets. The establishment of
             fully-owned sales subsidiaries in important sales regions will provide the basis for this
             success.
                 Audi will in addition actively open up new growth markets.
                 AUDI AG expects the aforementioned measures to provide lasting prospects of growth
             that will determine the development of the company’s volume figures as well as its financial
             performance data over the coming years.

             Over and above the strategy-related determining factors listed above, external factors may
             provide additional opportunities. A slackening-off or reversal of the current upward price
             trend in raw materials markets, but above all of oil, could for instance have a positive impact
             on the financial performance.


             Overall assessment of anticipated future developments
             AUDI AG is striving for sustained, qualitative and quantitative growth in 2006 and indeed in
             subsequent financial years. This objective will moreover be evident from the business
             figures for 2006.


Disclaimer

             The management report contains statements relating to anticipated future developments.
             These statements are based on current assessments and are by their very nature expose to
             risks and uncertainty. Actual outcomes may differ from those predicted in these statements.




                                                                                                         21
Balance sheet of AUDI AG
at December 31, 2005




 ASSETS in EUR ‘000                     Notes   31 Dec. 2005   31 Dec. 2004


 FIXED ASSETS
 Intangible assets                         1        145,267        187,617
 Property, plant and equipment             2      3,416,955      3,461,148
 Long-term investments                     3      1,537,764      1,536,880
                                                  5,099,986      5,185,645
 CURRENT ASSETS
 Inventories                               4      1,065,653      1,039,127
 Receivables and other assets              5      4,384,118      3,095,060
 Other securities                          6        371,568        371,672
 Cash on hand, cash in banks                          6,108         30,151
                                                  5,827,447      4,536,010
 DEFERRED CHARGES                                     7,153          5,500
                                                 10,934,586      9,727,155




 EQUITY AND LIABILITIES in EUR ‘000     Notes   31 Dec. 2005   31 Dec. 2004


 EQUITY
 Issued capital                            7        110,080        110,080
 Capital reserve                           8        251,730         56,730
 Retained earnings                         9      1,417,089      1,417,089
                                                  1,778,899      1,583,899
 SPECIAL ITEMS WITH AN EQUITY PORTION     10         12,499         13,050
 PROVISIONS                               11      4,927,560      4,265,637
 LIABILITIES                              12      4,215,628      3,864,569
                                                 10,934,586      9,727,155




22
Income statement of AUDI AG
for the 2005 financial year




 EUR ‘000                                    Notes        2005         2004


 Revenues                                      13    21,693,562   19,876,729
 Cost of sales                                 14    19,354,362   18,132,104
 Gross profit                                         2,339,200    1,744,625
 Distribution costs                            15     1,391,100    1,339,596
 Administrative expenses                               136,580      132,374
 Other operating income                        16      762,856      864,171
 Other operating expenses                      17      411,602      242,451
 Result from participating interests           18      + 70,599     + 38,940
 Net interest                                  19      – 51,978     – 15,241
 Write-down of long-term investments and
 current securities                            20       46,032       30,917
 Profit from ordinary activities                      1,135,363     887,157
 Income tax expense
    of which charged by the parent company
    EUR 673,227 (482,021) thousand             21      673,363      482,157
 Profit transferred as a result of
 profit transfer agreement                     22      462,000      405,000
 Net profit for the year                                     –            –




                                                                           23
Notes to the financial statements of AUDI AG
for the 2005 financial year




Development of fixed assets


 EUR ‘000                                      Gross carrying amounts




                                                        Costs           Additions   Transfers   Disposals       Costs
                                                   01/01/2005                                               31/12/2005
 Intangible assets
 Concessions, industrial property rights and
 similar rights and values, as well as
 licences thereto                                     298,885             17,916       5,343      14,733      307,411
 Payments on account                                        –                  –           –           –            –
                                                      298,885             17,916       5,343      14,733      307,411


 Property, plant and equipment
 Land, land rights and buildings,
 incl. buildings on land owned by others             2,710,437            46,606      34,416        4,045    2,787,414
 Plant and machinery                                 2,918,686            84,586      76,916     208,023     2,872,165
 Furniture, fixtures and
 office equipment                                    6,817,230           545,851      86,924     250,536     7,199,469
 Payments on account and assets
 in course of construction                            228,586            197,739    – 203,599       1,590     221,136
                                                    12,674,939           874,782      – 5,343    464,194    13,080,184


 Long-term investments
 Investments in affiliated companies                 1,347,901            30,344           –     111,068     1,267,177
 Loans advanced to affiliated companies                 1,605                  –           –         168         1,437
 Participating interests                               77,102                 38           –           –       77,140
 Loans to companies linked through
 participation                                              –                  –           –           –            –
 Long-term securities                                 185,299             58,597           –        4,571     239,325
 Other loans advanced                                   1,683                 34           –         244         1,473
                                                     1,613,590            89,013           –     116,051     1,586,552


 Total fixed assets                                 14,587,414           981,711           –     594,978    14,974,147




24
Reduction in gross carrying amounts                                                      Carrying amounts


Accumulated         Depreciation                                          Accumulated
depreciation                 and                                          depreciation
        and         amortisation                                                  and
amortisation     for current year     Transfers   Disposals   Write-ups   amortisation
   01/01/2005                                                               31/12/2005   31/12/2005   31/12/2004




      111,268             63,167           652      12,943           –         162,144     145,267          187,617
            –                  –             –           –           –              –            –               –
      111,268             63,167           652      12,943           –         162,144     145,267          187,617




    1,562,630             89,079             –         575           –       1,651,134    1,136,280     1,147,807
    2,509,737            176,385         1,194     207,754        3,285      2,476,277     395,888          408,949


    5,141,424            637,913        – 1,846    241,673           –       5,535,818    1,663,651     1,675,806


            –                  –             –           –           –              –      221,136          228,586
    9,213,791            903,377         – 652     450,002        3,285      9,663,229    3,416,955     3,461,148




       73,800             46,000             –      73,800           –          46,000    1,221,177     1,274,101
          407                  –             –           –          76            331         1,106           1,198
        2,002                  –             –           –           –           2,002      75,138           75,100


            –                  –             –           –           –              –            –               –
            –                  –             –           –           –              –      239,325          185,299
          501                  2             –           –          48            455         1,018           1,182
       76,710             46,002             –      73,800         124          48,788    1,537,764     1,536,880


    9,401,769          1,012,546             –     536,745        3,409      9,874,161    5,099,986     5,185,645




                                                                                                               25
General comments on the balance sheet and the income statement

                                 For the sake of greater clarity and visibility, certain individual items in the balance sheet and
                                 income statement have been combined. These items are shown separately in the Notes to
                                 the financial statements.
                                     The income statement has been prepared according to the function of expense method.
                                     The accounting principles and currency translation methods used in 2004 have in es-
                                 sence been retained.
                                     A list of all companies in which shares are held is filed with the Ingolstadt Commercial
                                 Register, HR B 1, and published on the Audi website at www.audi.com/subsidiaries. This list
                                 can in addition be requested directly from AUDI AG, Finance Analysis and Publications
                                 I/FF-12, 85045 Ingolstadt, Germany.


Notes to the balance sheet

                             1   Intangible assets

                                 Intangible assets comprise purchased development services, computer software and li-
                                 cences in such rights and values, as well as subsidies paid.


                                 Measurement principles

                                 Intangible assets are recognised at cost of purchase and amortised pro rata temporis in
                                 accordance with useful life.


                             2   Property, plant and equipment


                                   EUR ‘000                                                         31 Dec. 2005    31 Dec. 2004


                                   Land, land rights and buildings, incl. buildings on
                                   land owned by others                                               1,136,280        1,147,807
                                   Plant and machinery                                                  395,888          408,949
                                   Furniture, fixtures and office equipment                           1,663,651        1,675,806
                                   Payments on account and assets in course of construction             221,136          228,586
                                                                                                      3,416,955        3,461,148



                                 Measurement principles

                                 Property, plant and equipment are measured at cost of purchase or cost of construction,
                                 less depreciation.
                                    Cost of purchase comprises purchase price, ancillary costs and cost reductions. Property,
                                 plant and equipment invoiced in foreign currencies are measured through translation at the
                                 mean of the buying and selling rate applicable on the date of invoicing.
                                    In the case of self constructed fixed assets, in addition to the directly attributable cost of
                                 materials and personnel costs, cost of construction also comprises the material overheads
                                 and production overheads that must be capitalised for tax purposes, including proportion-
                                 ate depreciation. Borrowing costs are not taken into account.
                                    Depreciation on property, plant and equipment is charged using either the straight-line
                                 method or – to the extent permissible under tax law – the deminishing balance method. A
                                 scheduled changeover is made from the deminishing balance method to the straight-line



 26
    method as soon as the latter produces higher levels of depreciation. Depreciation of depre-
    ciable assets is dated from their acquisition or completion.
       Our depreciation plan is based on the following estimates of useful lives permissible
    under tax laws:


                                                                                       Useful life


      Buildings (excluding plant fixtures)                                            25–33 years
      Plant fixtures                                                                   8–30 years
      Production machinery                                                             5–14 years
      Other equipment, factory and office equipment, including
      special tools, jigs and fixtures                                                 3–10 years



    Minor assets are fully depreciated in the year of acquisition.
      Write-backs amounting to EUR 3 million result from the obligation to perform reversals.
      Opportunities for special depreciation for tax purposes are utilised to the full. Differences
    in comparison with depreciation according to commercial law resulting from increased
    deductions under Section 7 d of the Income Tax Act (environmental protection) as well as
    from special depreciation under Section 82 d of the Income Tax Directive (research and
    development) and pursuant to Section 6 b of the Income Tax Act (transfer of capital gains)
    are shown under special items with an equity portion.


3   Long-term investments


      EUR ‘000                                                       31 Dec. 2005    31 Dec. 2004


      Investments in affiliated companies                              1,221,177        1,274,101
      Loans advanced to affiliated companies                               1,106            1,198
      Participating interests                                             75,138           75,100
      Long-term securities                                               239,325         185,299
      Other loans advanced                                                 1,018            1,182
                                                                       1,537,764        1,536,880



    The change in shares in affiliated companies stems mainly from a reduction for impairment
    on the carrying amount of one foreign company amounting to EUR 46 million, and from the
    sale of COSWORTH TECHNOLOGY LIMITED.
       The long-term securities are resources which are invested in pension funds and time
    credit funds on the basis of the contractual trust agreement with Volkswagen Pension Trust
    e.V. AUDI AG invests pension contributions for retirement benefits in the pension fund and
    contributions by employees under the scheme which provides for the conversion of gross
    pay into pension contributions. The time credit funds are substantially made up of compo-
    nents of the employees’ pay which they have contributed to these funds.


    Measurement principles
    Investments in affiliated companies, participating interests and long-term securities are
    fundamentally measured at cost of purchase. Where impairment is likely to be permanent, a
    write-down is performed to the lower fair value at the balance sheet date.




                                                                                                 27
            Additions to long-term investments in foreign currencies are translated at the mean of
         the buying and selling rate on the day of the transaction. Interest-free and low-interest loans
         advanced are stated in present value on the basis of an annual interest rate of 7 percent.


     4   Inventories


           EUR ‘000                                                       31 Dec. 2005    31 Dec. 2004


           Raw materials and supplies                                         199,792         188,493
           Work in progress                                                   233,208         219,237
           Finished goods and merchandise                                     632,653         631,397
                                                                            1,065,653        1,039,127



         Measurement principles
         Raw materials and supplies are stated at the updated average cost of purchase or at the
         lower replacement value. Materials invoiced in foreign currencies are measured on the day
         of the transaction using regularly adjusted fixed exchange rates.
             Ancillary costs of purchase and cost reductions are taken into account as appropriate.
             In the case of work in progress and finished goods, which are measured at cost of con-
         version, direct materials are likewise included on the basis of average cost of purchase. The
         amounts given also comprise direct personnel costs, together with other costs which must
         be capitalised under tax law. Borrowing costs are not included.
         Company cars are written down to the amounts permissible under tax regulations on the
         basis of their anticipated useful life.
             Merchandise is measured at cost of purchase.
             Provision has been made for all discernible storage and inventory risks by way of value
         adjustments. In this, work in progress and finished goods, as well as merchandise, are
         measured loss-free as soon as the values derived from the sales market are lower than the
         cost of purchase or cost of conversion.


     5   Receivables and other assets


           EUR ‘000                                                       31 Dec. 2005    31 Dec. 2004


           Trade receivables
              of which amounts due in more than one year
              EUR 287 (415) thousand                                          447,431         433,861
           Receivables from affiliated companies
              of which trade receivables
              EUR 386,554 (444,042) thousand                                3,641,445        2,301,877
           Receivables from enterprises in which the company
           has participating interests
              of which trade receivables
              EUR 72,031 (97,484) thousand                                     72,031           97,530
           Other assets
              of which amounts due in more than one year
              EUR 45,523 (55,046) thousand
              of which from affiliated companies
              EUR 71,299 (86,537) thousand                                    223,211         261,792
                                                                            4,384,118        3,095,060




28
     Measurement principles
     Receivables and other assets are stated at their nominal value or at cost of purchase. Provi-
     sion is made for discernible one-off risks and general credit risks in the form of appropriate
     value adjustments.
        Reiceivables in foreign currencies are measured at the mean of the buying and selling
     rate on the day of the transaction. Lower exchange rates on the balance sheet date are taken
     into account.


6    Other securities

     This item comprises capital-market instruments and shares in securities funds.


     Measurement principles
     Other securities are recognised at cost of purchase or the lower fair value on the balance
     sheet date.


7    Issued capital

     The issued capital remained unchanged at EUR 110,080,000 on December 31, 2005. It is
     divided into 43,000,000 bearer individual share certificates.


8    Capital reserve

     The capital reserves contain shareholder contributions from the issue of shares in the com-
     pany, as well as a cash injection by Volkswagen AG in the current financial year amounting
     to EUR 195 million.


9    Retained earnings


       EUR ‘000                                                        31 Dec. 2005     31 Dec. 2004


       Legal reserve                                                           130              130
       Other retained earnings                                            1,416,959        1,416,959
                                                                          1,417,089        1,417,089



     There is no change in retained earnings as a result of the transfer of the entire profit for
     2005 to Volkswagen AG.


10   Special items with an equity portion


       EUR ‘000                                                        31 Dec. 2005     31 Dec. 2004


       Adjustment to value of fixed assets in accordance with:
          Section 7 d of Income Tax Act (environmental protection)            1,153           1,274
          Section 82 d of Income Tax Directive (research and
          development)                                                        2,328           2,542
          Section 6 b of Income Tax Act (transfer of capital gains)           9,018           9,234
                                                                            12,499           13,050




                                                                                                    29
                               11     Provisions


                                        EUR ‘000                                                       31 Dec. 2005      31 Dec. 2004


                                        Provisions for pensions and similar obligations                   1,392,693         1,295,978
                                        Tax provisions                                                            140            200
                                        Other provisions                                                  3,534,727         2,969,459
                                                                                                          4,927,560         4,265,637



                                      Other provisions relate for the most part to warranty claims cover, distribution expenses and
                                      workforce-related costs, as well as legal-expenses and product-liability risks. Provisions also
                                      exist for risks arising on pending transactions and from purchasing and development com-
                                      mitments.


                                      Measurement principles
                                      Provisions have been set up according to sound commercial judgement and cover all risks
                                      from anticipated claims within this context.
                                          The defined benefit liabilities are determined on the basis of Section 6 a of German In-
                                      come Tax Law according to the discount value method, applying actuarial principles (calcu-
                                      lated with an interest rate of 6 percent) and using the 2005 G reference tables by Professor
                                      Klaus Heubeck.
                                          Provisions for long-service awards have been discounted at a rate of 5.5 percent applying
                                      actuarial principles.
                                          Provisions for warranty claims cover have been created on the basis of previous claims
                                      and future risks incurred by vehicles sold.


                               12     Liabilities


EUR ‘000                                                                 Due in up to                  31 Dec. 2005      31 Dec. 2004


                                                                                 1 year     5 years   Total
Advances received for orders from customers                                      5,749            –             5,749          2,692
Trade payables                                                                 724,576            –           724,576        777,947
Liabilities to affiliated companies                                          2,750,882      446,742       3,197,624        2,794,467
     of which trade payables                                                  (258,205)         (–)       (258,205)         (288,447)
Liabilities to enterprises in which the company
has participating interests                                                     10,723            –            10,723         23,308
     of which trade payables                                                    (5,719)         (–)            (5,719)       (10,487)
Other liabilities                                                              222,171       26,331           276,956        266,155
     of which taxes                                                            (93,289)         (–)           (93,289)       (95,617)
     of which in respect of social insurance                                   (65,861)       (168)           (68,918)       (71,541)
                                                                             3,714,101      473,073       4,215,628        3,864,569



                                      The medium-term liabilities amount to EUR 28,454 thousand and relate to other liabilities.
                                      The include liabilities from payroll accounting of EUR 25,565 thousand and liabilities in re-
                                      spect of social insurance of EUR 2,889 thousand.




30
                                    The liabilities to employees from the pre-retirement part-time block model of EUR 36 mil-
                                lion that are included in other liabilities are appropriately secured by assignment of the
                                company car fleet as security.


                                Measurement principles
                                Liabilities are shown at settlement value. Liabilities in foreign currencies are measured at
                                the mean of the buying and selling rate on the day of the transaction. Losses resulting from
                                higher exchange rates on the balance sheet date are taken into account.


Notes to the income statement

                        13      Revenue


                                  EUR ‘000                               2005      Share in %           2004        Share in %


                                  Domestic sales                    8,134,007            37.5       7,007,672             35.3
                                  Europe excluding Germany          9,485,744            43.7       8,866,086             44.6
                                  North America                     2,206,060            10.2       2,148,336             10.8
                                  Asia / Oceania                    1,552,143             7.2       1,576,486              7.9
                                  Africa                              206,517             0.9         197,285              1.0
                                  South America                       109,091             0.5          80,864              0.4
                                  Sales outside Germany            13,559,555            62.5      12,869,057             64.7
                                  Total                            21,693,562           100.0      19,876,729            100.0



                                Vehicle sales accounted for 90 (89) percent of total revenue. The rise in revenue is a result of
                                higher unit sales and the higher-grade equipment specifications being ordered. The share of
                                vehicle export business is 65 (67) percent. The Audi A4 and Audi A6 are the highest-revenue
                                models.
                                   The remaining revenue, which accounted for 10 (11) percent of the total, is above all for
                                trade receivables from affiliated companies and miscellaneous sales to third parties.


                        14      Cost of sales

                                The cost of sales include expenses relating to the manufacturing sector and to merchandise.
                                This item also comprises research and development costs, warranty costs and changes in
                                adjustments to the value of inventories.


                        15      Distribution costs

                                Distribution costs essentially comprise expenses relating to marketing, sales promotion,
                                advertising, public relations and outgoing freight.




                                                                                                                             31
     16   Other operating income


            EUR ‘000                                                              2005            2004


            Income from the reversal of special items with an equity portion       623             718
            Income from the reversal of provisions                             133,197         144,242
            Other operating income                                             629,036         719,211
                                                                               762,856         864,171



          Other operating income primarily comprises income from passed-on costs, income from
          recourse claims and from transactions in foreign currencies.


     17   Other operating expenses

          Other operating expenses largely comprise expenses for transactions in foreign currencies.
          This item also includes allocations to the special item with an equity portion from the trans-
          fer of capital gains (Section 6 b of German Income Tax Law) amounting to EUR 72 (0) thou-
          sand.


     18   Result from participating interests


            EUR ‘000                                                              2005            2004


            Income from profit transfer agreements                              32,085          14,445
            Income from participating interests
               of which from affiliated companies
               EUR 22,374 (19,442) thousand                                     39,232          27,007
            Expenses from the transfer of losses                                   718           2,512
            Net result                                                         + 70,599        + 38,940



          The income from profit transfer agreements (relating substantially to quattro GmbH and to
          Audi Vertriebsbetreuungsgesellschaft mbH) includes taxes passed on, which are dependent
          on profit. The income from participating interests relates to Volkswagen Transport GmbH &
          Co. KG and FAW-Volkswagen Automotive Company, Ltd. The expenses from the transfer of
          losses result from the profit transfer agreement with Audi Synko GmbH.


     19   Net interest


            EUR ‘000                                                              2005            2004


            Income from loans advanced                                              32              41
            Other interest and similar income
               of which from affiliated companies
               EUR 70,271 (56,422) thousand                                     90,079          79,056
            Interest and similar expenses
                of which to affiliated companies
                EUR 139,162 (92,357) thousand                                  142,089          94,338
            Net expense                                                        – 51,978        – 15,241




32
                    20   Write-down of long-term investments and current securities

                         Write-down of long-term investments and of securities classified as current assets results
                         from the lower fair values on the balance sheet date.


                    21   Income tax expense

                         Income tax expense includes taxes passed on by Volkswagen AG on the basis of the single-
                         entity relationship between the two companies for tax purposes, along with taxes owed by
                         AUDI AG.


                         Other taxes
                         Operating taxes totalling EUR 16 (10) million are allocated to manufacturing costs, distribu-
                         tion expenses and general administration expenses; they are not shown under other taxes.


                    22   Profit transferred as a result of Profit transfer agreement

                         Persuant to the profit transfer agreement, an amount of EUR 462 (405) million is to be trans-
                         ferred to Volkswagen AG.


                         Factors influencing net profit for the year and future charges
                         The expenses to be allocated to other financial years total EUR 114 (145) million, of which
                         EUR 73 (67) million represent aperiodic allocations to provisions. This compares with aperi-
                         odic income totalling EUR 208 (181) million. The latter amount includes income from the
                         reversal of provisions totalling EUR 133 (144) million.
                            The application of tax regulations has had only a minor impact on the results for 2005.


Other particulars

                         Cost of materials


                           EUR ‘000                                                             2005             2004


                           Raw materials and supplies as well as purchased goods           13,401,214      12,808,609
                           Purchased services                                               1,357,922       1,114,050
                                                                                           14,759,136      13,922,659



                         Personnel costs


                           EUR ‘000                                                             2005             2004


                           Wages and salaries                                               2,384,024       2,273,212
                           Social insurance and expenses for retirement benefits
                           and maintenance payment
                              of which in respect of retirement benefits
                              EUR 167,151 (183,756) thousand                                  600,657         606,170
                                                                                            2,984,681       2,879,382




                                                                                                                      33
                                Total average employees for the year


                                                                                                                   2005             2004


                                  Ingolstadt                                                                      31,236          31,150
                                  Neckarsulm                                                                      13,666          13,768
                                  Total                                                                           44,902          44,918
                                  of which apprentices                                                             2,019           1,986



                                Derivative financial instruments

                                Nature and extent


                                  EUR ‘000                           31 Dec. 2005        31 Dec. 2004      31 Dec. 2005      31 Dec. 2004


                                                                     Nominal volumes                       Fair values
                                  Foreign exchange contracts             5,492,692           1,265,836        – 128,381           51,305
                                     of which positive fair values                                                12,234          79,690
                                     of which negative fair values                                            – 140,615          – 28,385
                                  Currency option transactions           2,901,779               514,767
                                     of which positive fair values                                                33,969          54,410
                                  Currency swaps                                321                   –
                                     of which positive fair values                                                       3             –



                                Cost formulas
                                The fair values of derivatives are determined from the market data confirmed by banks.


                                Balance sheet items and carrying amounts
                                The derivative financial instruments are included in the following balance sheet items:


EUR ’000                                                                                                   31 Dec. 2005      31 Dec. 2004


Nature                                                               Balance sheet item                    Carrying amount
                                                                     Receivables from affiliated
Option premiums                                                      companies                                    33,969               –
                                                                     Liabilities to affiliated
Impending losses from pending foreign exchange contracts             companies                                  179,250           26,897
                                                                     Other provisions                                    –         1,488



                                The currency hedging transactions are fundamentally carried out by Volkswagen AG on
                                behalf of AUDI AG on the basis of an agency agreement.




34
Contingencies


  EUR ‘000                                                      31 Dec. 2005    31 Dec. 2004


  Liabilities from guarantees                                         3,940            4,262
  Liabilities from guarantee bonds                                        –             950
  Obligations from factoring operations                                   –        1,542,953
                                                                      3,940        1,548,165



There exist no obligations from factoring operations at the balance sheet date, as the credit
risk was transferred to the factoring companies.


Other financial obligations
Obligations not shown in the balance sheet and arising from rental and leasing contracts
with terms of several years amount to EUR 50 (50) million. Of this amount, EUR 2 (1) million
relate to affiliated companies. Total obligations resulting from rental and leasing agree-
ments with a term of severeal years are made up as follows: short-term obligations EUR 22
(22) million, medium-term obligations EUR 22 (22) million and long-term obligations
EUR 6 (6) million. There are further financial commitments totalling EUR 36 (36) million from
loans promised. AUDI AG bears liability for its investments in commercial partnerships.
   There exist buy-back obligations from buy-back transactions with car hire companies
amounting to EUR 181 (0) million.
   Commitments arising from capital investment projects are well within the bounds of
standard business practice.


Parent company
About 99 percent of the share capital of AUDI AG is held by Volkswagen AG, Wolfsburg;
a control and profit transfer agreement exists beween the two companies.
   The consolidated financial statements of the parent company are available from
Volkswagen AG.


Auditor’s fees


  EUR ‘000                                                                             2005


  Auditing of the financial statements                                                  522
  Other certification or mearsurement services                                          130
  Tax consultancy services                                                                8
                                                                                        660



Details of the Board of Management and Supervisory Board
The members of the Board of Management and Supervisory Board, together with details of
their membership of other supervisory boards and regulatory bodies, are indicated on the
following pages.
   The remuneration of members of the Board of Management for the 2005 financial year
came to EUR 4,496 (4,264) thousand. This amount was made up of EUR 2,151 (2,069) thou-
sand in fixed payments and EUR 2,345 (2,195) thousand in variable remuneration compo-
nents.




                                                                                           35
        Payments to former members of the Board of Management or their surviving dependants
     amounted to EUR 5,344 (1,795) thousand. Pension commitments to former members of the
     Board of Management and their surviving dependats are covered by provisions totalling EUR
     15,165 (15,180) thousand. The remuneration of the Supervisory Board amounted to EUR
     382 (382) thousand, including EUR 210 thousand in variable payments.


     Declaration of compliance
     Pursuant to Section 161 of German Stock Corporation Law, the Board of Management and
     Supervisory Board of AUDI AG submitted a declaration on the recommendations of the
     ”Government Commission on the German Corporate Governance Code” on December 7,
     2005. The declaration was placed on the AUDI AG homepage. The English translation of the
     Declaration of Compliance is to be found at www.audi.com/cgk-declaration.



     Ingolstadt, February 8, 2006


     The Board of Management




36
Mandates of the Board of Management
All data as at: December 31, 2005




                        Prof. Dr. rer. nat. Martin Winterkorn (58)
                        Chairman of the Board of Management
                        Technical Development
                           Mandates:
                              FC Bayern München AG, Munich
                              Infineon Technologies AG, Munich
                              Salzgitter AG, Salzgitter
                              TÜV Süddeutschland Holding AG, Munich

                        Dr. rer. pol. Jochem Heizmann (53)
                        Production
                           Mandate:
                              Lufthansa Technik AG, Hamburg

                        Dr. rer. pol. Horst Neumann (56)
                        Human Resources,
                        until December 7, 2005

                        Dr. h.c. Andreas Schleef (62)
                        Chairman of the Board of Management of SEAT S.A.
                           Mandate:
                              Verwaltungsrat Sparkasse Ingolstadt, Ingolstadt

                        Erich Schmitt (59)
                        Purchasing

                        Rupert Stadler (42)
                        Finance and Organisation

                        Ralph Weyler (53)
                        Marketing and sales

                        Dr. rer. pol. Werner Widuckel (47)
                        Human Resources,
                        since December 8, 2005




                        In connection with their duties of group steering and governance, the members of the Board
                        of Management in addition hold supervisory board seats at group companies and signifi-
                        cant associated companies.

                          Membership of statutorily constituted domestic supervisory boards




                                                                                                               37
Mandates of the Supervisory Board
All data as at: December 31, 2005




                        Dr.-Ing. e.h. Bernd Pischetsrieder (57)*
                        Chairman
                        Chairman of the Board of Management of Volkswagen AG
                           Mandates:
                              Dresdner Bank AG, Frankfurt am Main
                              Metro AG, Dusseldorf
                              Münchener Rückversicherungs-Gesellschaft AG, Munich
                              Tetra Laval Group, Pully (Board Member)

                        Xaver Meier (60)
                        Deputy Chairman
                        Chairman of the General Works Council of AUDI AG
                           Mandates:
                             BRG-Jahreswagenvermittlung eG, Ingolstadt (Chairman)
                             Volkswagen AG, Wolfsburg
                             Volkswagen Pension Trust e.V., Wolfsburg

                        Dr. rer. pol. h.c. Bruno Adelt (66)
                        Former Member of the Board of Management of Volkswagen AG
                           Mandate:
                              Gerling-Konzern Allgemeine Versicherungs-AG, Cologne

                        Senator h.c. Helmut Aurenz (68)
                        ASB Group
                          Mandate:
                             Automobili Lamborghini Holding S.p.A., Sant’Agata Bolognese

                        Joachim Dilger (58)
                        Authorised signatury of AUDI AG

                        Heinz Eyer (48)
                        Member of the Works Council of AUDI AG, Neckarsulm plant

                        Dr. rer. pol. Thomas R. Fischer (58)
                        Chairman of the Board of Management of WestLB AG
                           Mandates:
                             AXA Konzern AG, Cologne
                             Deutscher Sparkassen Verlag GmbH, Stuttgart
                             Hapag-Lloyd AG, Hamburg
                             HSH Nordbank AG, Hamburg
                             RWE AG, Essen (Chairman)
                             Weberbank Actiengesellschaft, Berlin (Chairman)
                             Amvescap Plc, London
                             DekaBank Deutsche Girozentrale, Frankfurt
                             Kreditanstalt für Wiederaufbau (KfW), Frankfurt
                             WestLB Akademie Schloß Krickenbeck GmbH, Nettetal (Chairman)




38
Wolfgang Förster (54)
Deputy Chairman of the Works Council of AUDI AG,
Ingolstadt plant
   Mandate:
     BRG-Jahreswagenvermittlung eG, Ingolstadt

Francisco Javier Garcia Sanz (48)*
Member of the Board of Management of Volkswagen AG,
since January 1, 2005

Dr. jur. Claus Helbig (64)
Solicitor
   Mandates:
      Bankhaus August Lenz & Co. AG, Munich (Chairman)
      CLAAS KG aA, Harsewinkel
      Deutsche Asset Management Investmentgesellschaft mbH, Frankfurt
      GLL Real Estate Partners GmbH, Munich (Chairman)
      HCM Capital Management AG, Munich (Deputy Chairman)

Johann Horn (47)
Chief Executive of the IG Metall trade union, Ingolstadt office
   Mandate:
      Conti Temic microelectronic GmbH, Nuremberg

Berthold Huber (55)
 nd
2 Chairman of the IG Metall trade union
    Mandates:
     Heidelberger Druckmaschinen AG, Heidelberg
     RWE AG, Essen
     Siemens AG, Munich

Peter Mosch (33)
Member of the Works Council of AUDI AG, Ingolstadt plant

Dr. rer. pol. Horst Neumann (56)*
Member of the Board of Management of Volkswagen AG,
since December 20, 2005

Dr.-Ing. Franz-Josef Paefgen (59)
Chairman and Chief Executive Bentley Motors Ltd., Crewe
   Mandates:
      THYSSEN KRUPP Automotive AG, Bochum
      Automobili Lamborghini Holding S.p.A., Sant’Agata Bolognese
      SEAT Sport S.A., Barcelona

Hans Dieter Pötsch (54)*
Member of the Board of Management of Volkswagen AG
  Mandates:
     Allianz Versicherungs-AG, Munich
     BASF AG, Ludwigshafen
     Bizerba GmbH & Co. KG, Balingen



                                                                        39
     Richard Polzmacher (58)
     Regional Secretary of the IG Metall trade union, Bavaria
        Mandate:
          ZF Sachs AG, Schweinfurt

     Norbert Rank (50)
     Chairman of Works Council of AUDI AG,
     Neckarsulm plant

     Dr. rer. pol. Axel Freiherr von Ruedorffer (64)
     Diplom-Kaufmann
        Mandates:
            Allgemeine Kreditversicherung Coface AG, Mainz
           (Deputy Chairman)
            Allgemeine Kredit Coface Holding AG, Mainz
           (Deputy Chairman)
            Commerz Unternehmensbeteiligungs-AG, Frankfurt
           (Chairman)
            Avis Europe plc, Bracknell, Berkshire
            Erste Europäische Pfandbrief- und Kommunalkreditbank AG, Luxembourg
           (Chairman)
            HANNOVER Finanz GmbH Beteiligungen und Kapitalanlagen, Hanover
            Manuport, group of companies, Antwerpen
            Stiebel Eltron-Gruppe, Holzminden (Chairman)

     Max Wäcker (51)
     Member of the Works Council of AUDI AG, Ingolstadt plant



     Retired from the Supervisory Board:

     Dr. rer. pol. h.c. Peter Hartz (64),
     since August 4, 2005

     Dr. jur. Jens Neumann (60),
     since January 1, 2005




     * In connection with his duty of group steering and governance within the Volkswagen
       Group, the member of the Supervisory Board in addition holds further supervisory board
       seats at group companies and significant associated companies.

       Membership of statutorily constituted domestic supervisory boards
       Group mandates to statutorily constituted supervisory boards
       Membership of comparable domestic and foreign regulatory bodies




40
Independent Auditor’s Report



                                This report was originally prepared in German. In case of ambiguities the German version
                                shall prevail:



“Independent Auditor’s Report

                                We have audited the annual financial statements – consisting of balance sheet, income
                                statement and notes –, together with the bookkeeping system, and the management report
                                of the of AUDI AG, Ingolstadt, for the business year from January 1 to December 31, 2005.
                                The maintenance of the books and records and the preparation of the annual financial sta-
                                tements and management report in accordance with German commercial law and supple-
                                mentary provisions in the articles of incorporation are the responsibility of the Company’s
                                Board of Management. Our responsibility is to express an opinion on the annual financial
                                statements, together with the bookkeeping system, and the management report based on
                                our audit.
                                    We conducted our audit of the annual financial statements in accordance with § 317 HGB
                                and German generally accepted standards for the audit of financial statements promulgated
                                by the Institut der Wirtschaftsprüfer in Deutschland e.V. (IDW). Those standards require that
                                we plan and perform the audit such that misstatements materially affecting the presenta-
                                tion of the net assets, financial position and results of operations in the annual financial
                                statements in accordance with German principles of proper accounting and in the manage-
                                ment report are detected with reasonable assurance. Knowledge of the business activities
                                and the economic and legal environment of the Company and expectations of possible mis-
                                statements are taken into account in the determination of audit procedures. The effective-
                                ness of the accounting-related internal control system and the evidence supporting the
                                disclosures in the books and records, the annual financial statements and the management
                                report are examined primarily on a test basis within the framework of the audit. The audit
                                includes assessing the accounting principles used and significant estimates made by the
                                Company’s Board of Management, as well as evaluating the overall presentation of the an-
                                nual financial statements and management report. We believe that our audit provides a
                                reasonable basis for our opinion.
                                    Our audit has not led to any reservations.
                                    In our opinion based on the result of our audit, the annual financial statements are in
                                compliance with the legal regulations and the supplementary provisions in the articles of
                                incorporation and give a true and fair view of the net assets, financial position and results of
                                operations of the Company in accordance with German principles of proper accounting. The
                                management report is in accordance with the annual financial statements and provides on
                                the whole a suitable understanding of the Company’s position and suitably presents the
                                opportunities and risks of future development.”



                                Hannover, February 8, 2006

                                PricewaterhouseCoopers
                                Aktiengesellschaft
                                Wirtschaftsprüfungsgesellschaft

                                Gadesmann                       ppa. Schröder
                                Wirtschaftsprüfer               Wirtschaftsprüfer




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AUDI AG
Finance Analysis and Publications
I/FF-12
85045 Ingolstadt
Germany
Phone     +49 (0) 841 89-40300
Fax       +49 (0) 841 89-30900
email     ir@audi.de