I NTERI M FI NANCI AL REPORT 2 0 1 6 INTERIM MANAGEMENT REPORT

I NTERI M M ANAGEM ENT REPORT OF THE AUDI GROUP FROM JA N UA RY 1 TO JUN E 3 0 , 2 0 1 6

BUSINESS AND UNDERLYING SI TUATI ON

/ GLOBAL ECONOMI C SI TUATI ON The global economy grew at a moderat e rat e in t he first half of The referendum held in the United Kingdom in June 2016 had 2016. A large num ber of indust rial count ries, but also m ost a drastic impact, with a majority voting for withdrawal from emerging economies, exhibited somewhat slower growth the European Union (EU). This has triggered political and eco- moment um t han in 2015 as a whole. nomic uncertainty in Europe, along with increased volatility in

financial markets worldwide. In Western Europe, economic activity showed strong develop-

ment. The northern countries of Western Europe achieved The U.S. economy maint ained it s course of growt h in t he first 4 solid economic growth. The majority of countries in the south half of 2016 with a slight loss of momentum. Positive factors of West ern Europe also achieved posit ive growt h rat es for affecting it included favorable consumer confidence and the gross domestic product. Driven mainly by a healthy domestic further fall in the unemployment rate. economy, the German economy maintained its upward trend. I n cont rast , Brazil’s economy remained in recession am id con- St able econom ic developm ent was also seen in most Cent ral tinuing political uncertainty. European count ries in t he f irst six m ont hs of 2016. On t he other hand, the economic situation in Eastern Europe contin- China’s economic growth reached a comparatively high level by ued to suffer from the conflict between Russia and Ukraine, global standards. However, ongoing structural change meant and also from low energy prices compared wit h t he long-t erm t hat t he growt h of t he Chinese economy cont inued t o slow. average. Japan’s economic output virtually flatlined in the first six months of 2016.

/ I NTERNATI ONAL CAR MARKET Worldwide demand for cars grew by 3.1 percent in the first six The German passenger car market benefited especially from months of 2016 to 39.3 (38.2) million units, while demand stronger demand among commercial customers and achieved varied in individual regions. Western Europe, Central Europe, growth of 7.1 percent with 1.7 (1.6) million new cars regis- Nort h America and t he Asia-Pacific region each recorded tered. Fueled by positive underlying economic conditions, growt h in new regist rat ions. I n cont rast , sales of aut omobiles Western European export markets also made healthy progress. in Eastern Europe and South America fell. Sales of passenger cars in the region increased by 9.0 percent

Fuel consumption and CO2 emission figures as well as t he efficiency classes can be f ound on page 18.

Audi Q2 I NTERI M FI NANCI AL REPORT 2 0 1 6 INTERIM MANAGEMENT REPORT

overall. At 19.7 percent and 12.2 percent respectively, the The marked downward trend in demand for automobiles per- Italian and Spanish passenger car markets even achieved dou- sisted in South America, principally due to market weakness in ble-digit growth rates. There was also a dynamic 8.4 percent Brazil. The Brazilian market for passenger cars and light com- rise in demand for automobiles in France. Mainly because of its mercial vehicles contracted by –25.2 percent to 1.0 (1.3) mil- vigorous expansion in previous years, the British passenger car lion units due to the poor underlying economic conditions. market’s growth rate of 3.2 percent was below par compared wit h t he European average. The Asia-Pacific region recorded the highest absolute growth in new car registrations. China also acted as the major driver of

Registrations of new cars in Eastern Europe continued to suffer worldwide growth in demand, with the market expanding from Russia’s economic weakness. Demand in t he Russian car 9.4 percent to 10.2 (9.3) million units. The main factors be- m arket – t he largest single m arket in t he region – declined by hind this positive development were strong demand for SUVs –15.0 percent to 0.6 (0.7) million units. and t he t ax breaks int roduced in Oct ober 2015 for vehicles 5 with a displacement of up to 1.6 liters. In contrast, demand Despite growing signs of market saturation, the total market for passenger cars in Japan fell by –5.3 percent to 2.1 (2.3) volume in t he Unit ed St at es exceeded t he previous year’s level million units. by 1.5 percent. Thus, 8.6 (8.5) million new passenger cars and light commercial vehicles were regist ered t here. The market was buoyed especially by attractive financing terms and low fuel prices.

/ I NTERNATI ONAL MOTORCYCLE MARKET I n t he displacem ent segm ent above 500 cc, t he est ablished most not ably in Germany, France and I t aly. However, regist ra- motorcycle markets recorded a 2.0 percent rise in demand in tions of new motorcycles in the United States and Japan were the first six months of 2016. The stronger economic situation down. boosted the major motorcycle markets in Western Europe –

EXCEPTI ONAL EVENTS

/ DI ESEL I SSUE In June 2016, Volkswagen publicly announced that The proposed set t lement s provide affect ed cust omers wit h t he Volkswagen AG, Volkswagen Group of America, I nc. and opt ion of a buyback or, for leased vehicles, early lease t ermina- certain affiliates including AUDI AG had reached settlement tion or a free technical modification of the vehicles, provided agreement s in t he USA relat ed t o t he four-cylinder TDI engine that EPA and CARB approve the appropriate modification issue with the U.S. Department of Justice (DOJ), the U.S. measures. Volkswagen will also make cash payment s t o affect - Environment al Prot ect ion Agency (EPA), t he U.S. Federal Trade ed owners and lessees. Commission, the California Air Resources Board (CARB) and private plaintiffs represented by a Plaintiffs’ Steering Volkswagen also reached separate settlement agreements Committee (PSC) in the Multi-District Litigation pending in with the attorneys general of 44 U.S. states, the District of California. The set t lement agreement s, if finally approved, will Columbia and Puerto Rico, to resolve their existing or resolve cert ain civil claim s m ade in relat ion t o aff ect ed diesel potential consumer protection and unfair trade practices vehicles wit h 2.0 TDI engines from t he Volkswagen Passenger claims – in connection with both 2.0 TDI and V6 3.0 TDI Cars and Audi brands in t he USA. The set t lement agreement s vehicles in t he USA. are subject to final court approval. The proposed settlements apply to approximately 15,000 Audi vehicles.

Fuel consumption and CO2 emission figures as well as t he efficiency classes can be f ound on page 18.

II NTERI NTERI M M FIFI NANCI NANCI AL AL REPORTREPORT 22 0 0 1 1 6 6 INTERIMINTERIM MANAGEMENTMANAGEMENT REPORTREPORT

Audi A4 allroad quattro

These settlements do not resolve all claims. Work is ongoing Mat t ers in connect ion wit h t he V6 3.0 TDI diesel issue which

to develop a mutually acceptable solution for the remaining are not attributable to operating activities of the Audi Group 6 claims, including claims relating to vehicles with the V6 3.0 are continually evaluated in terms of their legal, technical and TDI engine. accounting impact and incorporated separately into our busi- ness planning process during the year as special items that can On July 19, 2016, the U.S. states Maryland, Massachusetts and only be planned and managed to a limited extent. In connec- New York f iled complaint s in t heir respect ive st at e court s tion with this, we increased the risk provisioning in the first against Volkswagen AG, Volkswagen Group of America, I nc. and half of 2016 by EUR 132 million in the form of provisions for certain affiliates including AUDI AG seeking civil penalties and technical measures, sales measures and legal risks. injunctive relief for alleged violations of environmental laws. There are presently no further direct effects on profit beyond Maryland, Massachuset t s and New York part icipat ed in t he this arising for the Audi Group on the basis of existing contrac- st at e set t lement s described above wit h respect t o consumer t ual agreement s wit h Volkswagen AG, Wolfsburg, relat ed t o prot ect ion and unfair t rade pract ices claims, but t hose set t le- t he four-cylinder TDI engine issue. ments did not include claims for environmental penalties. Det ailed inform at ion on t he diesel issue and on t he declarat ion of the Board of Management issued in this connection is pro- AUDI AG has concluded an agreement with Volkswagen AG on vided in the Combined Management Report of the 2015 t he V6 3.0 TDI engine issue in t he event t hat t he U.S. aut hori- Annual Report in the section “Exceptional Events” on pages ties, U.S. courts and potential out-of-court settlements do not 147 f. There are no indications that the information presented different iat e bet ween t he four-cylinder TDI engine issue for there is no longer applicable, even on the basis of new findings which Volkswagen AG is accountable and the V6 3.0 TDI engine from the still ongoing investigation by the law firm Jones Day issue of AUDI AG, and that joint and several liability thus aris- that have come to light since the publication date. es. I n t hat event ualit y, cost s f or legal risks will be passed on t o AUDI AG according t o a causat ion-based cost allocat ion.

/ AI RBAG RECALL Toget her wit h various t raffic safet y agencies, t he Audi Group is Korea. We have set aside appropriat e provisions for t hese currently investigating the effects of potentially defective measures based on current findings. In connection with this, Takat a airbags. Vehicle recalls have already been ordered by the operating profit of the Audi Group was reduced by special the authorities in the United States, Canada, Japan and South items amounting to EUR 133 million in the first half of 2016.

PRODUCTI ON 1) 2)

The Audi Group increased car production to 985,211 (943,603) From January through June 2016, we built 983,263 (941,440) vehicles in the first half of 2016. This figure includes 280,167 automobiles of the premium brand Audi and 1,948 (2,163) (246,164) Audi models made by the associated company FAW- supercars of t he Lamborghini brand worldwide. I n t he same Volkswagen Automotive Company, Ltd., Changchun (China). period, the Ducati brand produced 43,114 (36,955) motorcycles.

Fuel consumption and CO2 emission f igures as well as t he eff iciency classes can be f ound on page 18.

1) This figure includes 280,167 (246,164) Audi models manufactured by the associated company FAW-Volkswagen Automotive Company, Ltd., Changchun (China). 2) The figures for the prior-year period have been marginally adjusted, along with the counting method for the Aurangabad (India) locat ion.

I NTERI M FI NANCI AL REPORT 2 0 1 6 INTERIM MANAGEMENT REPORT

In the first half of the current fiscal year, 298,930 (292,394) The Volkswagen Group locat ions in Mart orell (Spain) and Brat i- aut omobiles rolled from assembly lines at our Group head- slava (Slovakia) completed a total of 75,853 (71,474) of the quarters in Ingolstadt and 141,453 (144,728) at the Audi Q3 and 53,750 (40,495) of the Audi Q7 respectively in Neckarsulm locat ion. the first half of 2016. In Hungary, the Audi Group produced a total of 63,798 Meanwhile, 2,984 vehicles of t he Audi A3, A4, A6, Q3, Q5 (84,888) vehicl es of t he TT car line and A3 f am il y at AUDI and Q7 lines were manufactured in Aurangabad (India) – also HUNGARIA MOTOR Kft., Győr. The fall in output is attributable, a Volkswagen Group location. From January through June of among other factors, to conversions being carried out to pre- the previous year, parts and components had been delivered pare for the production start of the updated Audi A3 models. from other locations for the production of a total of 4,796 At AUDI BRUSSELS S.A./N.V., Brussels, we built 61,856 (61,255) aut omobiles. automobiles of the A1 line in Belgium. I n China, FAW-Volkswagen Aut omot ive Company, Lt d. built

In Brazil, a total of 4,027 (42) vehicles of the Audi A3 Sedan 241,860 (224,624) vehicles of the models A4 L, A6 L, Q3 and 7 and Audi Q3 were produced in the first six months of 2016 in Q5 at its company headquarters in Changchun, along with São José dos Pinhais, near Curitiba, by AUDI DO BRASIL 38,307 (21,540) cars of the A3 family in the southern Chinese I NDUSTRI A E COM ERCI O DE VEI CULOS LTDA., São Paul o. cit y of Foshan.

Car production by model 1) 2)

1–6/2016 1–6/2015

Audi A1 14,783 18,511 Audi A1 Sport back 47,073 42,744 Audi Q2 305 – Audi A3 7,342 10,680 Audi A3 Sport back 103,630 98,526 Audi A3 Sedan 65,393 65,869 Audi A3 Cabriolet 8,735 12,253 Audi Q3 117,031 104,121 Audi TT Coupé 11,254 14,353 Audi TT Roadst er 3,432 4,582 Audi A4 Sedan 122,674 105,996 Audi A4 Avant 67,699 48,231 Audi A4 allroad quattro 5,528 8,272 Audi A5 Sport back 16,528 22,156 Audi A5 Coupé 7,341 10,299 Audi A5 Cabriolet 8,684 9,208 Audi Q5 141,075 135,217 Audi A6 Sedan 113,392 118,710 Audi A6 Avant 34,041 31,411 Audi A6 allroad quattro 5,660 6,342 Audi A7 Sport back 14,333 16,067 Audi Q7 54,166 40,495 Audi A8 11,583 16,417 Audi R8 Coupé 1,536 632 Audi R8 Spyder 45 348 Audi brand 983,263 941,440 Lamborghini Huracán 1,336 1,591 Lamborghini Aventador 612 572 Lamborghini brand 1,948 2,163 Automotive segment 985,211 943,603

1) This table includes 280,167 (246,164) Audi models manufactured by the associated company FAW-Volkswagen Automotive Company, Ltd., Changchun (China). 2) The figures for t he prior-year period have been marginally adjust ed.

Fuel consumption and CO2 emission figures as well as t he efficiency classes can be f ound on page 18.

ININTERI M FI NANCI AL REPORT 2016 ININTERI M MANAGEM ENT REPORT

Ducat i Mult ist rada 1200 Enduro

8

Car engine production

1–6/2016 1–6/2015 The Audi Group produced 1,032,52 4 (1,068,111) engines in the Aut omot ive segment from Janu ary through June 2016. AUDI HUNGARI A MOTOR Kf t . 1,031,887 1,067,525

Aut omobili Lamborgghini S.p.A. 637 586

Car engine production 1,032,524 1,068,111

Motorcycle production

1–6/2016 1–6/2015 Against a backdrop of a large numb er of new models int ro- duced, Ducat i increased production t o 43,114 (36,955) Scrambler 13,977 12,599 motorcycles in t he f irst half of 2016. Of this total, 36,042 Naked/ Sport Cruiser (29,824) bikes were built at the company headquart ers in (Diavel, Monst er, St reet fight er) 13,808 10,002 Bologna (I t aly). I n the same period , t he company produced a Dual/ Hyper (Hypermotard, Multist rada) 10,663 7,556 total of 6,405 (6,671) motorcycles at t he Amphur Pluakdaeng

Sport (Superbike) 4,666 6,798 (Thailand) plant. In Manaus (Brazill), 667 (460) bikes were

Ducati brand 43,114 36,955 built on a contract manufact uring bbasis.

Mot orcycles segm ent 43,114 36,955

DELI VERI ES 1) 2)

From January through June 2016, the Audi Group delivered In our home markett Ger m an y, w e increased Audi brand 1,079,665 (1,024,571) automobiles t o cust omers worldwide deliveries to customers by 12.4 p ercent in t he f irst half of – an increase of 5.4 percent compared with the previous yeaar. 2016 to 166,154 (147,763) vehicles. Elsewhere in West ern This figure includes 265,710 (243,744) delivered Audi modeels Eur ope, t here was also a very healthy development in built locally by FAW-Volkswagen Aut omot ive Company, Ltd.,, demand for vehicles of the brand with the Four Rings. Our Ch angchun (China). The Audi brand increased t he number of deliveries to customers in t hose m arket s reached 261,227 vehicles delivered to customers by 5.6 percent to 953,218 (246,835) automobiles – an increase of 5.8 percent . I n t he (902,272) autommobiles. In the first six months of the 2016 Unit ed Kingdom, our leading Western European export fiscal year, t he Lamborghini brand handed over 2,013 (1,882) market , we achieved a delivery vo lume of 89,935 (86,376) supercars t o cust omers. Over t he same period, we delivered vehicles. Our delivery f igures t o Spain and Italy were espe- 124,434 (120,417) automobiles of other Volkswagen Group cially positive, with growth of 14..5 percent and 14.6 per- brands t o cust ommers. The Ducat i brand increased it s volum e of cent respect ively. deliveries to 34,819 (32,649) motorcycles. In the first six months of 2016, we handed over a total of 27,883 (25,239) Audi vehicles to t heir new owners in Central

Fuel consumption and CO2 emission f igures as well as t he eff iciency classes can be found on page 18.

1) This figure includes 265,710 (243,744) delivered Audi models built locally by FAW-Volkswagen Automotive Company, Lt d., Changchun (China). 2) The figures for t he prior-year period have been marginally adjusted.

I NTERI M FI NANCI AL REPORT 2 0 1 6 INTERIM MANAGEMENT REPORT

and East ern Europe. We were able t o m ore t han off set t he The development in deliveries in t he regions and market s lower volum es in Russia wit h a subst ant ial rise in demand in reflected both the worldwide increase in demand for automo- Central European countries. biles and t he appeal of our product port folio. For example, our Audi A1 car line that underwent improvements in 2015 made A total of 119,927 (113,646) customers in North America a posit ive cont ribut ion t o overall volume in t he first half of chose one of our Audi models. We also maintained our growth 2016 with 62,046 (56,250) vehicles delivered. The gradual in t he Unit ed St at es wit h a 3.5 percent rise in deliveries t o int ernat ional roll-out of t he new A4 family in t he market s customers to a total of 96,934 (93,615) vehicles. helped us increase A4 deliveries t o cust omers by 12.3 percent

to 176,607 (157,229) vehicles. On the other hand, the forth- Against a backdrop of declining demand for automobiles in coming model changeover in the A5 car line prompted a fall in

Brazil, we handed over a t ot al of 11,539 (13,410) Audi vehi- deliveries to 37,463 (42,450) vehicles. Of the A6 family, cles t o cust omers in Sout h America over t he period from 140,808 (149,022) vehicles were handed over to customers. 9 January through June 2016. The new Audi Q7 already int roduced in a large number of mar- kets proved very popular. This meant that we were able to In the same period, a total of 339,298 (326,561) customers deliver 50,352 (29,007) of the Audi Q7 to customers. The two chose vehicles of t he brand wit h t he Four Rings in t he Asia-Pacific SUV models Audi Q3 and Audi Q5 also provided momentum for region. In China, our largest market, the volume of deliveries growth, with 114,555 (100,922) and 132,177 (126,203) increased by 5.9 percent to 290,126 (273,852) vehicles. vehicles delivered respectively.

Car deliveries to customers by model 1) 2)

1–6/2016 1–6/2015

Audi A1 15,326 17,377 Audi A1 Sport back 46,720 38,873 Audi A3 9,440 10,725 Audi A3 Sport back 103,619 101,219 Audi A3 Sedan 72,455 70,847 Audi A3 Cabriolet 8,588 12,507 Audi Q3 114,555 100,922 Audi TT Coupé 13,388 11,654 Audi TT Roadst er 4,264 2,631 Audi A4 Sedan 117,058 102,025 Audi A4 Avant 53,732 46,075 Audi A4 allroad quattro 5,817 9,129 Audi A5 Sport back 20,545 23,052 Audi A5 Coupé 7,960 10,977 Audi A5 Cabriolet 8,958 8,421 Audi Q5 132,177 126,203 Audi A6 Sedan 102,348 113,571 Audi A6 Avant 32,786 29,797 Audi A6 allroad quattro 5,674 5,654 Audi A7 Sport back 13,404 14,399 Audi Q7 50,352 29,007 Audi A8 12,273 15,892 Audi R8 Coupé 1,321 800 Audi R8 Spyder 87 515 I nt ernal vehicles before market int roduct ion 371 – Audi brand 953,218 902,272 Lamborghini Huracán 1,370 1,345 Lamborghini Aventador 643 537 Lamborghini brand 2,013 1,882 Other Volkswagen Group brands 124,434 120,417 Automotive segment 1,079,665 1,024,571

1) This table includes 265,710 (243,744) delivered Audi models built locally by FAW-Volkswagen Automotive Company, Ltd., Changchun (China). 2) The figures for t he prior-year period have been marginally adjust ed.

Fuel consumption and CO2 emission figures as well as t he efficiency classes can be f ound on page 18.

I NTERI M FI NANCI AL REPORT 2 0 1 6 INTERIM MANAGEMENT REPORT

Motorcycle deliveries to customers 1)

1–6/2016 1–6/2015 Between January and June 2016, we delivered 34,819 (32,649) m ot orcycles of t he Ducat i brand t o cust om ers Scr am bl er 9,591 8,985 worldwide – an increase of 6.6 percent compared wit h t he Naked/ Sport Cruiser prior-year period. Ducati achieved a substantial increase in (Diavel, Monster, Streetfighter) 11,754 11,198 deliveries t o cust omers especially in it s home market I t aly. Our Dual/ Hyper (Hypermotard, Multistrada) 8,802 6,938 mot orcycle manufact urer also saw a part icularly posit ive de-

Spor t (Super bi ke) 4,672 5,528 velopment in the number of bikes delivered in Germany and

Ducat i brand 34,819 32,649 Japan.

Motorcycles segment 34,819 32,649 10 1) The figures for t he prior-year period have been marginally adjust ed.

PRODUCT PORTFOLI O

In January 2016, we presented the new Audi A4 allroad The Audi RS Q3 performance – the new top model of our Q3 quattro at the Detroit Motor Show. With quattro drive as model line – was also premiered at Geneva and is already standard, increased ground clearance, a wide array of driver available in a large number of market s. The at t ribut e “ perfor- assist ance and safet y syst ems plus many opt ional infot ain- mance” denotes both increased power and the exclusive ment equipment it ems, t he midsize model blends off-road equipment it ems available for t he ext erior and int erior. qualities with a high degree of ride comfort. Furthermore, Audi will be introducing the new quattro drive with ultra In March 2016, we presented the Audi SQ7 at our Annual technology for the first time in series production with the Press Conference. This first S model of our Q7 car line stands latest gasoline engine technology. At low loads and where out wit h several new f eat ures. For example, it s newly devel- there is no risk of wheel slip, the new quattro drive exploits oped engine uses an elect ric powered compressor, which is t he all t he advant ages of front-wheel drive t o reduce fuel con- key to a dynamic starting performance. One of the options for sumption. The gradual introduction of the Audi A4 allroad t he SQ7 is act ive roll st abilizat ion. I t reduces t he vehicle’s quattro initially in European markets started in June 2016. lateral inclination, permitting greater lateral acceleration and Following the presentation of the Audi S4 Sedan, we also t herefore fast er cornering. Deliveries of t he Audi SQ7 will st art unveiled t he S4 Avant at t he Geneva Mot or Show in March in t he second half of 2016. 2016. Our Audi R8 Spyder made its debut at the New York In the Audi Q2, which made its world debut at the Geneva I nt ernat ional Aut o Show 2016. This sport s car com bines im - Motor Show, we have added a compact SUV to our product pressive performance with the allure of open-top driving. The portfolio and thus branched out into a new market segment. R8 Spyder will be arriving at dealers in fall 2016. Key merits of this latest addition to our Q family are its pro- gressive design and high functionality. The high-level At the start of April 2016, we presented the models of the Singleframe grille, t he large air inlet s on t he front end and improved A3 family. The A3 can be ordered optionally with a the accentuated wheel arches give our SUV a powerful wide array of driver assist ance syst em s such as t raffic jam and appearance. Furt hermore, t he Audi Q2 comes opt ionally wit h emergency assist, the Audi virtual cockpit and Matrix LED an array of infot ainment and assist ance syst ems. For exam- headlights. In addition, its engine range has been extensively ple, along with the optional Audi virtual cockpit, the Q2 is overhauled. The updated A3 models have been arriving in the equipped as standard with a 5.8-inch MMI color display in the markets since July 2016. cent er console. The very low cent er of gravit y f or an SUV plus

t he st andard-fit progressive st eering and t he opt ional adap- The new models Audi TT RS Coupé and TT RS Roadst er were tive dampers make for advanced handling characteristics. The presented at the Auto China 2016 in Beijing. Outfitted with a

Audi Q2 will be gradually introduced initially in European new engine, the TT RS offers impressive road performance markets from fall 2016. coupled wit h a special engine sound experience. The efficient , visually impressive rear lights with Matrix OLED technology are

Fuel consumption and CO2 emission figures as well as t he efficiency classes can be f ound on page 18.

I NTERI M FI NANCI AL REPORT 2 0 1 6 INTERIM MANAGEMENT REPORT

available as an option for the first time. The two new models awards. For inst ance, at t his year’s “ Red Dot Award: Product will also have the Audi virtual cockpit in 12.3-inch format as Design,” the Audi A4, Audi R8 and Audi Q7 received a Red Dot st andard equipment . I t allows t he driver t o choose from t hree Award (http://red-dot.de/pd/online-exhibition/ ?lang=en&c= views, including a special screen t hat places t he focus on t he 166&a=%201001&y=2016&i=0&oes=). Further awards are t achomet er and provides inf ormat ion on such aspect s as detailed in our Audi MediaCenter under the following link: power and torque, g-force and also tire pressure if desired. The https://www.audi-mediacenter.com/en/awards-5. new Audi TT RS Coupé and t he new TT RS Roadst er will be available in Europe from fall 2016. Lamborghini presented the Lamborghini Centenario at the

Geneva Motor Show 2016. This supercar of futuristic, purist The Audi Q7 e-tron quattro has been appearing in the markets design will appear in a limited run of 20 coupé and 20 roadster since mid-2016. The Audi Q7 e-tron quattro is the world’s first versions. The monocoque and body of the Lamborghini plug-in hybrid model with a six-cylinder TDI engine and Cent enario are made ent irely from carbon fiber, t he key t o it s 11 quat t ro drive. This model combines t he advant ages of elect ric low weight of 1,520 kilograms. Also making its first appear- drive wit h t hose of t he int ernal combust ion engine. On t he one ance in Geneva was t he special series Huracán LP 610-4 Avio, hand, the Audi Q7 e-tron quattro permits electric driving with which will be available in a limited edition of 250 vehicles. In zero em issions f or up t o 56 km – and, on t he ot her hand, t he addition, Lamborghini presented the Aventador Miura Homage cust om er can also cont inue t o enjoy a wide operat ing range. in June 2016. 50 of this special edition Aventador Coupé will be built in commemoration of the 50th anniversary of the The Audi A5 Coupé and S5 Coupé made their world debut in Miura – the predecessor of all Lamborghini V12 supercars. June 2016. The second generation of the A5 is notable for its new, sharper appearance and various infot ainm ent and driver Since t he st art of t he year, t he Ducat i brand has been gradually assist ance syst ems. The range of equipm ent opt ions includes rolling out the two latest versions to join the successful t he Audi virt ual cockpit and Audi connect services. Cust om ers Scrambler model series, the Scrambler Sixty2 and the who choose MMI navigation plus gain access to the wide- Scrambler Flat Track Pro. I n addit ion, t he new models XDiavel ranging Audi connect services over the LTE network for three and XDiavel S as well as t he Mult ist rada 1200 Enduro have years free of charge. Bot h models also feat ure complet ely new been available to customers from the first quarter of 2016. suspension and high-performance drive unit s. Deliveries of t he These models enable Ducati to serve two entirely new seg- new Audi A5 Coupé and S5 Coupé in Europe will start in fall ment s. The Mult ist rada 1200 Pikes Peak, t he Hypermot ard 2016. 939 and 939 SP as well as the Hyperstrada 939 and the 959 Panigale are now also available in new model versions. The first half of 2016 saw us not only present and deliver a large number of new Audi models, but also receive various

Fuel consumption and CO2 emission figures as well as t he efficiency classes can be f ound on page 18.

Audi TT RS Roadst er, Audi TT RS Coupé

I NTERI M FI NANCI AL REPORT 2 0 1 6 INTERIM MANAGEMENT REPORT

Audi SQ7

EM PLOYEES

12 The workforce of t he Audi Group increased t o an average of http://www.wiwo.de/erfolg/management/arbeitgeber- 86,001 (81,640) employees in the first half of 2016. Over ranking-alle-arbeit geber-im-eberblick/ 13612688-4.ht ml). 2016 as a whole, our particular aim is to step up recruitment in t he key st rat egic fut ure areas of elect ric mobilit y and digit al- I nt ernat ionally, Audi is also considered an at t ract ive employer. ization. To that end, we will be taking on around 1,200 experts A number of our companies won awards from the Top in Germany. In addition, we will increase the number of Employers Institute, which rates human resources manage- apprenticeships by over 10 percent in 2016 to around 800. ment by employers worldwide. For example, AUDI BRUSSELS S.A./ N.V., Brussels (Belgium), received t he “ Top Employers We rem ain f irm ly f ocused on our goal of being an “ at t ract ive België/Belgique 2016” certification (http://www.top- employer worldwide.” Independent studies conducted both in employers.com/ companyprofiles/ BE/audi-brussels/ ). I n I t aly, Germany and internationally confirm our Company’s strong Automobili Lamborghini S.p.A., Sant’Agata Bolognese, and appeal as an employer. I n t he German employer rankings of Ducati Motor Holding S.p.A, Bologna, received accolades as the consultants trendence and Universum, Audi has once again “Top Employers Italia 2016” (http:// www.top-employers.com been rated highly by young academics. Among future engi- /companyprofiles/IT/automobili-lamborghini/ ; neers, we achieved first place in bot h surveys, and in t he sur- http://www.top-employers.com/companyprofiles/IT/ducati/). vey of economics st udent s we achieved an impressive second Meanwhile, in Mexico we achieved a t op five placement in t he place. In the IT area, we were also ranked highly (http://www. employer ranking for 2016 compiled by Universum in the trendence.com/en/company/rankings/germany.html; cat egory f or f ut ure engineers and I T specialist s (http://universumglobal.com/rankings/mexico/).

/ WORKFORCE

Average for the period 1–6/2016 1–6/2015

Domestic companies 58,768 56,617 of which AUDI AG 1) 57,819 55,272 Ingolstadt plant 42,279 40,046 Neckarsulm plant 15,540 15,226 Foreign com panies 24,500 22,378 of w hi ch AUDI BRUSSELS S.A./ N.V. 2,508 2,522 of which AUDI HUNGARIA MOTOR Kft. 11,370 11,334 of which AUDI MÉXI CO S.A. de C.V. 3,275 1,707 of which Automobili Lamborghini S.p.A. 1,285 1,110 of which Ducati Motor Holding S.p.A. 1,317 1,215 Em ployees 83,268 78,995 Apprent ices 2,328 2,261 Employees of Audi Group companies 85,596 81,256 St aff employed from ot her Volkswagen Group companies not belonging to the Audi Group 405 384 Workforce of the Audi Group 86,001 81,640 1) Of these, 1,022 (1,204) employees were in the passive stage of their partial retirement.

Fuel consumption and CO2 emission figures as well as t he efficiency classes can be f ound on page 18.

I NTERI M FI NANCI AL REPORT 2 0 1 6 INTERIM MANAGEMENT REPORT

PERSONNEL CHANGES

Dr.-Ing. Stefan Knirsch has been a member of the Board of Sibylle Wankel resigned as a member of the Supervisory Board Management of AUDI AG since January 1, 2016, and has as- of AUDI AG at the close of June 30, 2016. By a resolution of sumed responsibilit y f or t he “ Technical Development ” Division. July 11, 2016, the Local Court of Ingolstadt – Registration Court – appointed Irene Schulz as supplementary member of Dr. Christine Hohmann-Dennhardt was appointed as a new t he Supervisory Board of AUDI AG wit h immediat e effect . member of t he Supervisory Board of AUDI AG effect ive

February 16, 2016.

13 CONSOLIDATED COMPANIES

In the first half of 2016, there were no changes to the group of consolidat ed companies wit h a mat erial impact on t he presentation of the net worth, financial position and financial performance.

Fuel consumption and CO2 emission figures as well as t he efficiency classes can be f ound on page 18.

Audi R8 Spyder

I NTERI M FI NANCI AL REPORT 2 0 1 6 INTERIM MANAGEMENT REPORT

FINANCIAL PERFORMANCE INDICATORS

/ FINANCIAL PERFORMANCE In the first half of 2016, the Audi Group increased its revenue Operat ing prof it of t he Audi Group by 1.2 percent to EUR 30,134 (29,784) million on the back of EUR million 1–6/2016 1–6/2015 growt h in deliveries – despit e a less favorable currency envi-

ronment t han in t he prior-year period. The Aut omot ive seg- Operating profit before

ment generated revenue totaling EUR 29,648 (29,348) mil- special items 2,666 2,914 lion. The high demand for our new models Audi Q7 and Audi A4 Special items − 265 − Operating profit 2,401 2,914 as well as growth in the Western Europe region had a par- 14 ticularly beneficial impact on the development in revenue. In cont rast , however, t here were adverse currency effect s along with still intense competition in individual vehicle segments Key earnings figures of the Audi Group and regions. I n t he Mot orcycles segment , we increased revenue in % 1–6/2016 1–6/2015 to EUR 486 (436) million in the first six months of 2016.

Operating return on sales before Condensed Income Statement of the Audi Group special items 8.8 9.8 Operat ing ret urn on sales 8.0 9.8

EUR million 1–6/2016 1–6/2015 Automotive segment 7.9 9.8 Mot orcycles segment 11.9 10.5 Reven u e 30,134 29,784 Adjust ed f or PPA ef f ect s 1) 14.3 13.2 Cost of goods sold − 24,431 − 23,636 Return on sales before tax 7.3 10.6

Gross profit 5,703 6,148 1) Eff ect s of purchase price allocat ion Dist ribut ion cost s − 2,921 − 2,592 Administrative expenses − 318 − 312 Other operating result − 63 − 331 For the period from January through June 2016 – during which Operating profit 2,401 2,914 special items also had an adverse effect – the Audi Group post- Financial result − 210 236 Prof i t bef ore t ax 2,190 3,150 ed an operating profit of EUR 2,401 (2,914) million and an Income tax expense − 508 − 721 operating return on sales of 8.0 (9.8) percent. Operating profit Prof i t af t er t ax 1,682 2,429 from operating activities is reflected in operating profit before

special items of EUR 2,666 (2,914) million. This equates to an

operat ing ret urn on sales bef ore special it ems of 8.8 (9.8) percent. Special items amounting to EUR 133 million are in From January through June 2016, the cost of goods sold for connect ion wit h recalls already ordered of vehicles t hat are the Audi Group increased to EUR 24,431 (23,636) million equipped with airbags from the Japanese manufacturer Takata. mainly as a result of growth. Gross profit amounted to Furt her special it ems result from t he V6 3.0 TDI diesel issue. EUR 5,703 (6,148) million. In connection with this, we increased our risk provisioning in the first half of 2016 by EUR 132 million in the form of provi- In the first six months of 2016, the distribution costs of the sions f or t echnical m easures, sales measures and legal risks. Audi Group increased to EUR 2,921 (2,592) million mainly due Matters which are not attributable to operating activities are to volume growth and the higher marketing costs required to continually evaluated in terms of their legal, technical and strengthen our brand and competitive position. Administrative accounting impact and incorporated separately into our busi- expenses amounted to EUR 318 (312) million. The other ness planning process during the year as special items that can operating result of the Audi Group for the first half of 2016 only be planned and managed to a limited extent. cam e t o EUR −63 (−331) million. Compared with the prior-year period, mainly lower expenses for settled currency hedging In the Automotive segment, operating profit came to EUR 2,343 transactions had a positive effect. (2,868) million taking special items into account. This repre- sent s an operat ing ret urn on sales of 7.9 (9.8) percent .

Fuel consumption and CO2 emission figures as well as t he efficiency classes can be f ound on page 18.

I NTERI M FI NANCI AL REPORT 2 0 1 6 INTERIM MANAGEMENT REPORT

Audi A3 Sport back

Profit performance was impacted favorably mainly by volume act ions. I n addit ion, expenses from t he measurement of long- growth, but also by process and cost optimization measures. term provisions resulted from interest rate changes. The On t he ot her side of t he equat ion, in addit ion t o special it ems, f inancial result also includes t he result from invest ment s 15 negative currency effects and intense competition weighed on accounted for using the equity method amounting to EUR 154 operating profit. Moreover, the expansion of our model and (226) million – of which EUR 199 (219) million is attributable technology portfolio and of our international manufacturing t o t he valuat ion of shares in FAW-Volkswagen Aut omot ive structures is reflected in increased depreciation and amortiza- Company, Ltd., Changchun (China). Furthermore, the other tion. In the Motorcycles segment, volume growth in particular financial results include financial compensation agreed enabled us t o increase operat ing prof it t o EUR 58 (46) m illion bet ween AUDI AG and Volkswagen AG, Wolfsburg, concern- and t hus achieve an operat ing ret urn on sales of 11.9 (10.5) ing t he economic performance of t he respect ive brands percent . Adjust ed for t he effect s of purchase price allocat ion, achieved by FAW-Volkswagen Aut omot ive Company, Lt d. we achieved operat ing profit for t he Mot orcycles segment of totaling EUR 163 (217) million. EUR 70 (58) million and an operating return on sales of 14.3 (13.2) percent. In the first six months of 2016, the Audi Group achieved profit before tax of EUR 2,190 (3,150) million and a return on sales The financial result of the Audi Group for the first half of 2016 before tax of 7.3 (10.6) percent. After deduction of income tax totaled EUR −210 (236) million. The decrease compared with expense, the Audi Group generated profit of EUR 1,682 the prior-year period is attributable among other factors to a (2,429) million. lower result from t he measurement of currency hedging t rans-

/ NET WORTH The balance sheet t ot al of t he Audi Group as of June 30, 2016, injection of EUR 1,526 million by Volkswagen AG, Wolfsburg, rose to EUR 60,493 (56,763) million compared with December into the capital reserve of AUDI AG. Allocation of the balance 31, 2015. remaining after the transfer of profit increased equity by EUR 470 million. In addit ion, measurement effect s t o be Non-current asset s amount ed t o EUR 27,142 (25,963) million. recognized under IFRS rules with no effect on profit or loss led The increase is principally attributable to increased intangible to an increase in equity by a total of EUR 342 million. These assets that stem from the higher balance sheet item of effects stemmed mainly from fluctuations in the market value capitalized development costs. Other financial assets also of hedge-effective currency hedging instruments driven by the rose m ainly because of t he derivat ive currency hedging t rans- appreciat ion in t he ext ernal value of t he euro. Act uarial losses act ions. arising from the measurement of provisions for pensions coun- t eract ed t his posit ive eff ect . The rise in current assets to EUR 33,352 million compared with EUR 30,800 million as of December 31, 2015, is mainly Compared with December 31, 2015, the equity ratio for the attributable to higher cash and cash equivalents as well as Audi Group as of June 30, 2016, was 39.9 (38.4) percent. t he increase in t rade receivables from expanded business operat ions. Non-current liabilities of the Audi Group rose to EUR 15,129 (13,431) million at the mid-way point of 2016, primarily due As of June 30, 2016, the equity of the Audi Group grew by 11.0 to the interest-led higher provisions for pensions. percent to EUR 24,166 (21,779) million compared with the end of 2015. The increase is mainly a result of t he capit al

Fuel consumption and CO2 emission figures as well as t he efficiency classes can be f ound on page 18.

I NTERI M FI NANCI AL REPORT 2 0 1 6 INTERIM MANAGEMENT REPORT

The fall in current liabilities to EUR 21,198 million, down from t he profit t ransfer for t he 2015 fiscal year t o Volkswagen AG EUR 21,554 million as of December 31, 2015, is primarily the t hat was effect ed in t he first half of 2016. result of lower other financial liabilities, which fell following

/ FI NANCI AL POSI TI ON 1) From January through June 2016, cash flow from operating Condensed Cash Flow Statement of the Audi Group 1) activities for the Audi Group reached EUR 4,510 (3,747) mil- EUR million 1–6/2016 1–6/2015 lion. Not able posit ive eff ect s wit hin t his development included

lower aperiodic tax payments and the development in working Cash and cash equivalent s at

capit al . beginning of period 7,218 3,689 16 Cash flow from operating The cash outflow for investing activities attributable to operat- activities 4,510 3,747 ing activities rose to EUR 2,426 (2,001) million in the first half I nvest ing act ivit ies at t ribut able of 2016. Cash used in connection with capitalized develop- t o operat ing act ivit ies − 2,426 − 2,001 of which investments in ment cost s as well as changes in part icipat ions were t he main property, plant and drivers of this increase. Investments in property, plant and equipment, investment property and other intangible equipment, investment property and other intangible assets asset s − 1,238 − 1,296 amounted to EUR 1,238 (1,296) million in the first half of of which capitalized development costs − 881 − 579 2016. The ratio of capex came to 4.1 percent, compared with a of which acquisition and sale prior-year figure of 4.4 percent. of participations − 326 − 139 Net cash f low 2,085 1,747 Net cash flow of the Audi Group reached EUR 2,085 (1,747) Change in cash deposit s and loans ext ended 4,385 3,227 million in the first half of 2016. Cash flow from investing activities 1,959 1,226 Cash flow from financing activities − 1,299 − 1,499 Overall, cash flow from investing activities, taking account Change in cash and cash equivalent s due t o changes of changes in cash deposits and loans extended, came to in exchange rat es − 26 94 EUR 1,959 (1,226) million. The increase is primarily attributa- ble to the restructuring of fixed deposits as cash funds. Change in cash and cash equivalents 5,145 3,569

Net liquidity of the Audi Group as of June 30, 2016, rose to Cash and cash equivalent s at EUR 17,150 million, compared with EUR 16,668 million as of end of period 12,363 7,258

June 30, 2015. 1) The figures for t he prior-year period have been adjust ed.

EUR million June 30, 2016 June 30, 2015

Cash f unds as per Cash Flow St at ement 12,363 7,258 Fixed deposits, securities and loans ext ended 6,706 11,257 Gross liquidity 19,069 18,515 Credit outstanding − 1,920 − 1,848 Net liquidity 17,150 16,668

1) The Cash Flow St at ement figures for t he prior-year period have been adjust ed.

I NTERI M FI NANCI AL REPORT 2 0 1 6 INTERIM MANAGEMENT REPORT

REPORT ON EXPECTED DEVELOPMENTS, RI SKS AND OPPORTUNITIES

/ REPORT ON EXPECTED DEVELOPM ENTS For 2016 as a whole, based on current estimates the Audi For t he forecast ing period, we st ill expect an increase in Group anticipates that worldwide economic growth will merely overall demand in established motorcycle markets in the reach the level of the previous year. In the 2015 Annual Report, displacem ent segm ent above 500 cc. we were still expecting slightly stronger growth than in the previous year. There are risks t o economic development among Overall, the Board of Management considers the Audi Group other things from potential turbulence on the financial mar- t o be well equipped t o handle bot h current and fut ure kets, prompted in particular by Britain’s vote in favor of a challenges. The forecast s for t he key performance indicat ors 17 withdrawal from the European Union (EU). This may also trig- for the 2016 fiscal year, which are explained in detail in the ger further political uncertainty with the potential to influence 2015 Annual Report on pages 187 ff., fundamentally remain the economic development of individual countries. valid. For the operating activities of the Audi Group reflected in t he operat ing ret urn on sales bef ore special it ems, we st ill For industrialized nations, we expect the positive economic expect a value wit hin our st rat egic t arget corridor of 8 t o 10 development to continue with moderate growth rates overall. percent . We current ly expect a value slight ly below t he Most em erging m arket s – especially in t he region of Asia – strategic target corridor for the operating return on sales, should continue to grow at higher rates than the industrialized adversely affect ed by t he special it ems which can only be countries. Economic growth is expected to reach only the level planned and managed to a limited extent. of the past year. I n addit ion, we present ly expect t he rat io of capex t o be slightly above the strategic target corridor of 5.0 to 5.5 I n our assessment , worldwide demand for cars will cont inue t o percent. In the 2015 Annual Report, we assumed that the increase in 2016. We expect to see higher registrations of new ratio of capex would be within the strategic target corridor. vehicles in the Western Europe, Central Europe, North America and Asia-Pacific regions. Sales are likely to fall in Eastern Europe and South America.

/ REPORT ON RI SKS AND OPPORTUNI TI ES The cent ral t ask of risk m anagem ent is t o syst em at ically ren- findings. However, it cannot at present be ruled out that the der risks transparent and improve their controllability, while recall will be widened and that vehicles of the Audi Group also providing the impetus to generate or exploit opportuni- could also be affected. The technical investigations and official t ies. The priorit y is t o increase t he value of t he Company. consultations are ongoing.

The function of the risk and opportunity management system In view of ongoing discussions with authorities on matters as well as the opportunities and risks to which the Audi Group relat ing t o approvals, t here are risks t hat could lead t o re- is subject are described in detail in the 2015 Annual Report on strictions on approvals and consequently to financial charges. pages 189 to 201. That publication also contains statements on risks associat ed wit h t he diesel issue, which remain valid. Furthermore, there are risks in connection with the decision of Further risks for the Audi Group exist in connection with the t he Unit ed Kingdom t o leave t he European Union (EU) follow- recall f or airbags supplied by Takat a. Toget her wit h various ing the outcome of a referendum in June 2016. Against this t raffic safet y agencies, t he Audi Group is current ly invest igat - backdrop, we are continually monitoring further developments ing t he effect s of pot ent ially defect ive Takat a airbags. Recalls in the British car market. In general, we rely on our global have already been ordered by t he aut horit ies in t he Unit ed market presence t o compensat e for pot ent ial regional fluct ua- States, Canada, Japan and South Korea. We have set aside tions in demand. appropriat e provisions for t hese measures based on current

I NTERI M FI NANCI AL REPORT 2 0 1 6 INTERIM MANAGEMENT REPORT

EVENTS OCCURRI NG SUBSEQUENT TO THE BALANCE SHEET DATE

There were no report able event s of mat erial significance aft er June 30, 2016.

FUEL CONSUM PTI ON AND EM I SSI ON FIGURES AS WELL AS EFFICIENCY

CLASSES 18 The fuel consumpt ion and emission figures as well as t he Further information on official fuel consumption figures and

eff iciency classes of t he passenger cars m ent ioned in t he t he official specific CO2 emissions of new passenger cars can be

document are given below. found in t he “ Guide on t he fuel economy, CO2 emissions and Fuel consumption in l/ 100 km (combined): 16.0 – 1.6 power consumption of all new passenger car models,” which is Hybrid electric vehicles: power consumption in kWh/100 km available free of charge at all sales dealerships and from DAT (combined): 19.0 – 11.4 Deutsche Automobil Treuhand GmbH, Hellmuth-Hirth-Str. 1, Hybrid gas vehicles: fuel consumption (CNG) in kg/ 100 km 73760 Ostfildern-Scharnhausen, Germany (www.dat.de). (combined): 3.6 – 3.3

CO2 emissions in g/km (combined): 370 – 36 Eff iciency classes: G – A+

Fuel consumption, CO2 em ission f igures and eff iciency classes given in ranges depend on the tires/wheels used.

DI SCLAI MER

The Interim Management Report contains forward-looking statements relating to anticipated developments. These st at ement s are based upon current assessment s and are by their very nature subject to risks and uncertainties. Actual out comes may differ from t hose predict ed in t hese st at ement s.

Lamborghini Huracán LP 610-4 Avio I NTERI M FI NANCI AL REPORT 2 0 1 6 CONSOLI DATED FI NANCI AL STATEMENTS

CONSOLI DATED FI NANCI AL STATEM ENTS OF THE AUDI GROUP AS OF JUNE 30, 2016

I NCOM E STATEM ENT OF THE AUDI GROUP

EUR million Notes 1−6/2016 1−6/2015

Reven u e 1 30,134 29,784 19 Cost of goods sold 2 – 24,431 – 23,636 Gross profit 5,703 6,148

Dist ribut ion cost s – 2,921 – 2,592

Administrative expenses – 318 – 312 Other operating income 4 1,129 1,312

Ot her operat ing expenses 4 – 1,192 – 1,643 Operating profit 2,401 2,914

Result from investments accounted for using the equity method 154 226

Finance expenses – 245 – 133

Other financial results – 120 143

Financial result 5 – 210 236

Prof i t bef ore t ax 2,190 3,150

Income tax expense – 508 – 721

Prof i t af t er t ax 1,682 2,429 of which profit share of AUDI AG shareholders 1,633 2,344 of which profit share of non-controlling interests 49 85

Profit share t o which Volkswagen AG is ent it led in event of profit t ransfer based on profit in accordance wit h t he German Commercial Code 1,163 1,848

EUR 1−6/2016 1−6/2015

Earnings per share 6 37.99 54.50 Dilut ed earnings per share 6 37.99 54.50

I NTERI M FI NANCI AL REPORT 2 0 1 6 CONSOLI DATED FI NANCI AL STATEMENTS

STATEM ENT OF COM PREHENSI VE I NCOM E OF THE AUDI GROUP

EUR million 1−6/2016 1−6/2015

Prof i t af t er t ax 1,682 2,429

Revaluations from pension plans recognized in other comprehensive income

Revaluations from pension plans before tax recognized in other comprehensive income – 1,387 358 20 Deferred taxes on revaluations from pension plans recognized in other comprehensive income 413 – 107

Revaluations from pension plans after tax recognized in other comprehensive income – 973 251 Share of ot her comprehensive income of equit y-account ed invest ment s t hat will not be reclassified subsequent ly t o prof it or loss aft er t ax 0 –

Items that will not be reclassified to profit/loss after tax – 973 251

Currency t ranslat ion diff erences Gains/ losses f rom currency t ranslat ion recognized in ot her com prehensive incom e 4 114 Currency translation differences before tax 4 114 Deferred t axes on currency t ranslat ion differences 0 – Currency t ranslat ion differences aft er t ax 4 114

Cash flow hedges

Fair value changes recognized in ot her com prehensive incom e 1,342 – 3,068 Fair value changes t ransf erred t o prof it or loss 552 927

Cash flow hedges before tax 1,894 – 2,141

Deferred t axes on cash flow hedges – 559 638

Cash flow hedges after tax 1,335 – 1,503

Available-for-sale financial assets Fair value changes recognized in ot her com prehensive incom e 18 23

Fair value changes t ransf erred t o prof it or loss 0 – 112

Available-for-sale financial assets before tax 17 – 89

Deferred t axes on available-for-sale financial asset s – 5 27

Available-f or-sale f inancial asset s aft er t ax 12 – 63

Share of other comprehensive income of equity-accounted investments that will be reclassified subsequent ly t o prof it or loss aft er t ax – 35 80

Items that will be reclassified subsequently to profit/loss after tax 1,315 – 1,371

Other comprehensive income before tax 493 – 1,678

Deferred taxes relating to other comprehensive income – 151 558 1) Other comprehensive income after tax 342 – 1,120

Total comprehensive income 2,025 1,309 of which profit share of AUDI AG shareholders 1,983 1,196 of which profit share of non-controlling interests 42 113

1) A share of EUR – 7 (28) million of the other comprehensive income after tax from currency translation differences with no effect on profit or loss is attributable to non-controlling interests.

I NTERI M FI NANCI AL REPORT 2 0 1 6 CONSOLI DATED FI NANCI AL STATEMENTS

BALANCE SHEET OF THE AUDI GROUP

ASSETS i n EUR m i l l i on Notes June 30, 2016 Dec. 31, 2015

Intangible assets 6,218 5,787

Propert y, plant and equipment 11,647 11,380 Investment property 365 319 Investments accounted for using the equity method 4,517 4,483 Other participations 287 295 Deferred t ax asset s 2,873 2,939 21 Other financial assets 1,053 580 Ot her receivabl es 182 181 Non-current assets 7 27,142 25,963

Inventories 8 6,882 6,317 Trade receivables 5,026 4,097 Eff ect ive incom e t ax asset s 49 29 Other financial assets 1,630 2,357 Ot her receivabl es 1,394 844 Secur i t i es 4,890 4,782 Cash f unds 13,481 12,375 Current assets 33,352 30,800

To t al asset s 60,493 56,763

EQUITY AND LIABILITIES in EUR million Notes June 30, 2016 Dec. 31, 2015

Subscribed capit al 110 110 Cap i t al r eser ve 11,716 10,190 Ret ained earnings 11,805 12,308

Ot her reser ves – 37 – 1,360 AUDI AG shareholders’ int erest 23,593 21,248

Non-controlling interests 573 531

Equity 24,166 21,779

Financial liabilities 311 247 Other financial liabilities 870 1,421 Ot her l iabil it ies 1,216 1,069 Provisions for pensions 5,613 4,221 Other provisions 6,086 5,431 Eff ect ive incom e t ax obligat ions 849 849 Deferred t ax liabilit ies 183 192 Non-current liabilities 15,129 13,431

Financial liabilities 1,608 1,637 Trade payables 7,282 7,204 Other financial liabilities 4,012 6,040 Ot her l iabil it ies 2,952 2,249 Other provisions 4,876 4,153 Eff ect ive incom e t ax obligat ions 467 271 Current liabilities 21,198 21,554

Liabilities 36,327 34,985

Total equity and liabilities 60,493 56,763

I NTERI M FI NANCI AL REPORT 2 0 1 6 CONSOLI DATED FI NANCI AL STATEMENTS

CASH FLOW STATEM ENT OF THE AUDI GROUP

EUR million 1−6/2016 1−6/2015 1)

Prof it bef ore prof it t ransf er and incom e t axes 2,190 3,150

I ncome t ax payment s – 421 – 997 Amortization of and impairment losses (reversals) on capitalized development cost s 398 335

22 Depreciat ion and amort izat ion of and impairment losses (reversals) on property, plant and equipment, investment property and other intangible asset s 987 843

Result from t he disposal of asset s 34 – 2 Result from investments accounted for using the equity method 254 316

Change in inventories – 487 – 630

Change in receivables – 1,117 – 1,227 Change in liabilit ies 1,080 1,657 Change in provisions 1,393 302

Other non-cash income and expenses 199 – 1 Cash flow from operat ing act ivit ies 4,510 3,747

Additions of capitalized development costs – 881 – 579 I nvest ment s in propert y, plant and equipment , invest ment propert y and

other intangible assets – 1,238 – 1,296

Acquisition of subsidiaries and changes in capital – 3 – 29

Acquisition of other participations – 323 – 124 Sale of subsidiaries and changes in capit al – 15 Ot her cash changes 19 12

Change in investments in securities – 102 – 1,142 Change in fixed deposits and loans extended 4,487 4,369 Cash flow from investing activities 1,959 1,226

Capital contributions 1,526 1,620

Transfer of profit – 2,752 – 3,239

Change in financial liabilities – 70 125

Lease payment s – 2 – 4

Cash flow from financing activities – 1,299 – 1,499

Change in cash and cash equivalent s due t o changes in exchange rat es – 26 94 Change in cash and cash equivalents 5,145 3,569 Cash and cash equivalents at beginning of period 7,218 3,689 Cash and cash equivalents at end of period 12,363 7,258

1) The previous year was adjust ed.

EUR million June 30, 2016 June 30, 2015

Cash and cash equivalent s as per Cash Flow St at ement (bank asset s and cash deposits with maturities of no more than three months) 12,363 7,258 Currently due fixed deposits with a remaining term of < 3 months 1,118 1,556 Cash f unds as per Balance Sheet 13,481 8,814 Securit ies, loans ext ended and current ly due fixed deposit s wit h an investment period > 3 months 5,588 9,701 Gross liquidity 19,069 18,515

Credit outstanding – 1,920 – 1,848 Net liquidity 17,150 16,668

I NTERI M FI NANCI AL REPORT 2 0 1 6 CONSOLI DATED FI NANCI AL STATEMENTS

STATEM ENT OF CHANGES I N EQUI TY OF THE AUDI GROUP

EUR million Subscr i bed Cap i t al Ret ained Other reserves Equi t y capit al reserve earnings

St at ut or y Reser ve f or Reser ve f or Reser ve f or Investments AUDI AG Non- Tot al reserve and currency cash flow fair value account ed share- cont rolling other retained translation hedges measurement for using holders’ interests earnings differences of securit ies t he equit y interest method 23 Posit ion as of

Jan. 1, 2015 110 8,570 10,628 70 – 702 32 87 18,796 403 19,199 Profit after tax – – 2,344 – – – – 2,344 85 2,429 Other comprehensive

income after tax – – 251 87 – 1,503 – 63 80 – 1,147 28 – 1,120 Total comprehensive

income – – 2,595 87 – 1,503 – 63 80 1,196 113 1,309 Capit al increase – 1,620 – – – – – 1,620 – 1,620 Miscellaneous 1) changes – – – 1,861 – – – – – 1,861 – – 1,861 Posit ion as of

June 30, 2015 110 10,190 11,362 157 – 2,205 – 30 167 19,751 516 20,267

Posit ion as of

Jan. 1, 2016 110 10,190 12,308 135 – 1,622 – 31 159 21,248 531 21,779 Profit after tax – – 1,633 – – – – 1,633 49 1,682 Other comprehensive

income after tax – – – 973 11 1,335 12 – 35 349 – 7 342 Total comprehensive

income – – 660 11 1,335 12 – 35 1,983 42 2,025 Capit al increase – 1,526 – – – – – 1,526 – 1,526 Miscellaneous 2) changes – – – 1,163 – – – – – 1,163 – – 1,163 Position as of June 30, 2016 110 11,716 11,805 145 – 287 – 19 124 23,593 573 24,166 1) The miscellaneous changes relat e t o t he profit share t o which Volkswagen AG, Wolfsburg, is ent it led in event of profit t ransfer in accordance wit h t he German Commercial Code as well as t he set t lement of t he difference arising from t he acquisit ion of furt her equit y int erest s in Volkswagen Aut omat ic Transmission (Tianjin) Company Limited, Tianjin (China). 2) The miscellaneous changes relat e t o t he profit share t o which Volkswagen AG, Wolfsburg, is ent it led in event of profit t ransfer in accordance wit h t he German Commercial Code.

I NTERI M FI NANCI AL REPORT 2 0 1 6 CONSOLI DATED FI NANCI AL STATEMENTS

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

GENERAL I NFORMATI ON

/ ACCOUNTI NG PRI NCI PLES on the net worth, financial position and financial performance of AUDI AG prepares it s Consolidat ed Financial St at ement s on t he t he Audi Group. A det ailed list of t hese account ing st andards is

basis of the International Financial Reporting Standards (IFRS) shown in t he not es t o t he 2015 Consolidat ed Financial St at e- 24 and the interpretations of the International Financial Reporting ment s in t he sect ion “ New or revised st andards not applied”. Standards Interpretations Committee (IFRS IC). All pronounce- ment s of t he I nt ernat ional Account ing St andards Board (I ASB), I n t he Cash Flow St at ement , t he present at ion of t he hedging whose applicat ion is mandat ory in t he European Union (EU), relat ionships was changed t o t he eff ect t hat cash f lows f rom have been applied. The I nt erim Consolidat ed Financial St at e- hedging t ransact ions are allocat ed t o t hose of t he associat ed ments as of June 30, 2016 was prepared on the basis of IAS 34 underlying transactions. As a result of a similar amendment for and, compared wit h t he Consolidat ed Financial St at ement s as of t he prior-year period, cash flow from operat ing act ivit ies has December 31, 2015, has been present ed in condensed form. declined by EUR 113 million and cash flow from financing activi- The prior-year figures have been calculat ed according t o t he ties has correspondingly increased. same principles. All figures have been individually rounded in accordance wit h st andard com m ercial pract ice. Minor discrepan- Furt hermore, in t he Consolidat ed Financial St at ement s as of cies may t herefore occur t hrough t he addit ion of t hese amount s. Decem ber 31, 2015, amendment s concerning circumst ances wit hin t he scope of I FRS 7 were also made; t hese have been / RECOGNI TI ON AND MEASUREM ENT PRI NCI PLES described under the recognition and measurement principles. For t he first half of 2016, all st andards whose applicat ion be- The previous year’s figures have t herefore been adjust ed in t his came mandatory from January 1, 2016, have been applied. As interim report. part of the improvements to International Financial Reporting St andards 2012 (Annual I mprovement Project 2012) and t he For this Interim Financial Report, a discount rate of 1.5 improvements to International Financial Reporting Standards (December 31, 2015: 2.7) percent was applied to provisions for 2014 (Annual Improvement Project 2014), various amendments pensions in Germany. The decrease in t he int erest rat e result ed have entered into effect for 2016, particularly in relation to in higher provisions for pensions and, taking deferred taxes into I FRS 3 , I FRS 7 , I FRS 8 , I FRS 1 3 and I AS 2 4 . The am endm ent s t o account , in higher act uarial losses recognized in equit y under I AS 16 and I AS 38 clarif y t hat revenue-based m et hods f or calcu- retained earnings. lating depreciation and amortization are not permitted on a regular basis. Furt hermore, clarificat ion on various t erms has Income tax expense for the interim reporting period is, in been included in I AS 1, which has no effect on t he present at ion accordance wit h I AS 34, det ermined on t he basis of t he of the Interim Financial Report. IAS 1 also states in more explicit weight ed average annual t ax rat e t hat is expect ed for t he terms that disclosures are only required if their content is mate- ent ire fiscal year. rial. The rules set out by IAS 19 regarding the recognition of employee contributions to pensions have also changed. In the Moreover, t he same recognit ion and measurement met hods future, employee contributions that do not depend on the num- have been applied in t he condensed present at ion of t he Consol- ber of years of service (fixed percent age of employee’s salary) idat ed Financial Stat ement s for t he first half of 2016 as for t he will be deducted from service costs in the year in which contribu- Consolidat ed Financial St at ement s for t he 2015 fiscal year. A tions are made for the purpose of the Consolidated Financial detailed description of these methods is published in the 2015 St at ement s of t he Audi Group. The amendment s t o t he I FRS Annual Report . That report is also available on t he int ernet at described here as well as all other amendments have no impact www.audi.com/ annualreport .

I NTERI M FI NANCI AL REPORT 2 0 1 6 CONSOLI DATED FI NANCI AL STATEMENTS

/ CONSOLI DATED COMPANI ES The proposed set t lement s provide affect ed cust omers wit h t he I n addit ion t o AUDI AG, all of t he mat erial dom est ic and f oreign opt ion of a buyback or, for leased vehicles, early lease t ermina- subsidiaries and st ruct ured ent it ies are included in t he Consoli- tion or a free technical modification of the vehicles, provided dat ed Financial Stat ement s in cases where AUDI AG has deci- that EPA and CARB approve the appropriate modification sion-making power over the relevant activities that can be used measures. Volkswagen will also make cash payment s t o affect - t o cont rol variable ret urns. There were no significant changes t o ed owners and lessees. Given t hat t here is a corresponding the group of consolidated companies during the reporting claim against Volkswagen AG for compensat ion based on exist - period. ing contractual arrangements, there will not be any direct

effects on profit for Audi. / PARTICIPATIONS IN ASSOCIATED COMPANIES

The Audi Group, t he BMW Group and Daimler AG each hold a Volkswagen also reached separate settlement agreements 33.3 percent interest in There Holding B.V., Rijswijk (Nether- with the attorneys general of 44 U.S. states, the District of 25 lands), founded in 2015. Through its wholly owned subsidiary Columbia and Puerto Rico, to resolve their existing or poten- There Acquisition B.V., Rijswijk (Netherlands), There Holding t ial consumer prot ect ion and unfair t rade pract ices claims – B.V. acquired all shares in t he HERE Group effect ive as of De- in connection with both 2.0 TDI and V6 3.0 TDI vehicles in cember 4, 2015. The Audi stake amounts to EUR 668 million. the USA. There Acquisition B.V. was renamed to HERE International B.V., Rijswijk (Netherlands) on January 29, 2016. The purchase price These settlements do not resolve all claims. Work is ongoing allocation was completed in the first half of 2016. to develop a mutually acceptable solution for the remaining claims, including claims relating to vehicles with the V6 3.0 I n t he first half of 2016, a capit al increase was carried out at TDI engine. Volkswagen Group Services S.A., Brussels (Belgium), in which the Audi Group participated by contributing EUR 300 million. On July 19, 2016, the U.S. states Maryland, Massachusetts The participation interest of 30 percent remained unchanged. and New York filed complaint s in t heir respect ive st at e court s A capit al increase was also carried out at Volkswagen Aut om at ic against Volkswagen AG, Volkswagen Group of America, I nc. Transmission (Tianjin) Co., Ltd., Tianjin (China). The Audi Group and certain affiliates including AUDI AG seeking civil penal- st ake amount s t o EUR 23 million. The part icipat ion int erest ties and injunctive relief for alleged violations of environ- here also remained unchanged at 49 percent . mental laws. Maryland, Massachusetts and New York partici- pated in the state settlements described above with respect / NOTES ON THE DI ESEL I SSUE t o consumer prot ect ion and unfair t rade pract ices claims, but In June 2016, Volkswagen publicly announced that those settlements did not include claims for environmental Volkswagen AG, Volkswagen Group of America, I nc. and penalties. certain affiliates including AUDI AG had reached settlement agreement s in t he USA relat ed t o t he four-cylinder TDI engine AUDI AG has concluded an agreement with Volkswagen AG on issue with the U.S. Department of Justice (DOJ), the U.S. t he V6 3.0 TDI engine issue in t he event t hat t he U.S. aut hori- Environment al Prot ect ion Agency (EPA), t he U.S. Federal Trade ties, U.S. courts and potential out-of-court settlements do not Commission, the California Air Resources Board (CARB) and different iat e bet ween t he four-cylinder TDI engine issue for private plaintiffs represented by a Plaintiffs’ Steering which Volkswagen AG is accountable and the V6 3.0 TDI engine Committee (PSC) in the Multi-District Litigation pending in issue of AUDI AG, and that joint and several liability thus aris- California. The set t lement agreement s, if finally approved, will es. I n t hat event ualit y, cost s f or legal risks will be passed on t o resolve cert ain civil claim s m ade in relat ion t o aff ect ed diesel AUDI AG according t o a causat ion-based cost allocat ion. vehicles wit h 2.0 TDI engines from t he Volkswagen Passenger Cars and Audi brands in t he USA. The set t lement agreement s The risks result ing from t he V6 3.0 TDI engine issue were t aken are subject to final court approval. The proposed settlements into account in the form of provisions which cover technical apply to approximately 15,000 Audi vehicles.

I NTERI M FI NANCI AL REPORT 2 0 1 6 CONSOLI DATED FI NANCI AL STATEMENTS

measures, sales measures and legal risks. These provisions were / NOTES ON THE AI RBAG RECALL increased by EUR 132 million in the first half of 2016. Together with various traffic safety authorities, the Audi Group is currently investigating the effects of potentially faulty Det ailed inform at ion on t he diesel issue and on t he declarat ion Takata airbags. Authorities have already ordered recalls in the of the Board of Management issued in this connection is pro- United States, Canada, Japan and South Korea. Based on cur- vided in the Notes to the 2015 Annual Report in the section rent knowledge, provisions have already been recognized as a “Notes on the Diesel Issue” on pages 228 f. There are no indi- precautionary measure. However, it cannot at present be ruled cations that the information presented there is no longer out that the recall will be widened and that vehicles of the

applicable, even on the basis of new findings from the still Audi Group could also be affected. As a result of ongoing tech- ongoing investigation by the law firm Jones Day that have nical investigations and consultations with authorities, further

come to light since the publication date. disclosures in accordance wit h I AS 37.86 cannot be m ade at 26 this time.

I NTERI M FI NANCI AL REPORT 2 0 1 6 CONSOLI DATED FI NANCI AL STATEMENTS

NOTES TO THE CONSOLI DATED FINANCIAL STATEMENTS

1 / REVENUE

EUR million 1−6/2016 1−6/2015

Audi brand 21,363 21,219 Lamborghini brand 475 455 Other Volkswagen Group brands 1,932 2,077 Other automotive business 5,877 5,597

Automotive 29,648 29,348 Ducati brand 412 361 27 Other motorcycles business 73 75 Motorcycles 486 436 Reven u e 30,134 29,784

Revenue from other automotive business primarily includes 2 / COST OF GOODS SOLD t he supply of part s set s t o China, as well as t he proceeds from Amounting to EUR 24,431 (23,636) million, cost of goods sold the sale of engines and genuine parts. comprises the costs incurred in generating revenue and pur- chase prices in trading transactions. In the first six months of 2016, impairment losses on capitalized development costs at an amount of EUR 14 million were recognized (none in the previous year).

3 / RESEARCH AND DEVELOPM ENT COSTS

EUR million 1−6/2016 1−6/2015

Tot al research and development cost s 2,231 2,204 of which capitalized development costs 881 579 Capitalization quota 39.5 % 26.3 % Amortization of and impairment losses (reversals) on capitalized development costs 398 335 Research and development expenditure 1,748 1,961

I NTERI M FI NANCI AL REPORT 2 0 1 6 CONSOLI DATED FI NANCI AL STATEMENTS

4 / OTHER OPERATI NG I NCOM E AND EXPENSES The other financial results totaling EUR –120 (143) million

The other operating result of EUR – 63 (–331) million includes include expenses related to hedging transactions as well as a among other things income and expenses arising from the financial compensation agreed between AUDI AG and settlement of foreign currency and commodity hedging trans- Volkswagen AG, Wolfsburg, concerning the economic perfor- actions, from rebilling and from the reversal of provisions. mance of t he respect ive brands achieved by FAW-Volkswagen Automotive Company, Ltd., totaling EUR 163 (217) million. 5 / FI NANCI AL RESULT The result from investments accounted for using the equity 6 / EARNI NGS PER SHARE

method is EUR 154 (226) million and is mainly attributable to Basic earnings per share are calculat ed by dividing t he share of t he valuat ion of shares in FAW-Volkswagen Aut omot ive Com- profit at t ribut able t o AUDI AG shareholders by t he weight ed

pany, Ltd., Changchun (China) using the equity method of average number of shares in circulat ion during t he period under 28 accounting amounting to EUR 199 (219) million. Finance review. I n t he case of AUDI AG, t he dilut ed earnings per share expenses amounting to EUR 245 (133) million comprise are t he same as t he basic earnings per share, since t here were mainly int erest effect s from t he measurement of long-t erm no potential shares in existence as of either June 30, 2016 or provisions. June 30, 2015.

1−6/2016 1−6/2015

Profit share of AUDI AG shareholders (EUR million) 1,633 2,344 Weight ed average number of shares 43,000,000 43,000,000 Earnings per share in EUR 37.99 54.50

7 / NON-CURRENT ASSETS

EUR million Net carrying Additions Disposals/ ot her Depreciat ion and Net carrying amount as of movements amortization amount as of Jan. 1, 2016 June 30, 2016

Intangible assets 5,787 902 – 1 471 6,218 Propert y, plant and equipment 11,380 1,227 54 906 11,647

8 / INVENTORIES

EUR million June 30, 2016 Dec. 31, 2015

Raw materials and supplies 664 592 Work and services in progress 754 760 Finished goods and products 4,381 4,238 Current leased asset s 1,084 726 Inventories 6,882 6,317

I NTERI M FI NANCI AL REPORT 2 0 1 6 CONSOLI DATED FI NANCI AL STATEMENTS

9 / FI NANCI AL I NSTRUM ENTS DI SCLOSURES 9.1 / FAI R VALUE DI SCLOSURES

EUR million Measured at Measured at amort ized cost Carrying amount fair value as per Balance Sheet as of June 30, 2016

Carrying amount Carrying amount Fair val ue

Other participations 1 – – 1 Other financial assets 655 398 399 1,053 of which f rom t he posit ive f air values of derivative financial instruments 655 – – 655 of which fixed deposits and extended loans – 357 358 357 29 of which miscellaneous other financial assets – 41 41 41 Non-current financial assets 656 398 399 1,054

Trade receivables – 5,026 5,026 5,026 Other financial assets 487 1,143 1,143 1,630 of which f rom t he posit ive f air values of derivative financial instruments 487 – – 487 of which fixed deposits and extended loans – 343 343 343 of which miscellaneous other financial assets – 800 800 800 Secur i t i es 4,890 – – 4,890 Cash f unds – 13,481 13,481 13,481 Current financial assets 5,377 19,650 19,650 25,027

Financial assets 6,033 20,047 20,049 26,080

Financial liabilities – 311 311 311 Other financial liabilities 839 31 31 870 of which from the negative fair values of derivative financial instruments 839 – – 839 of which miscellaneous other financial liabilities – 31 31 31 Non-current financial liabilities 839 342 342 1,182

Financial liabilities – 1,608 1,608 1,608 Trade payables – 7,282 7,282 7,282 Other financial liabilities 1,147 2,864 2,864 4,012 of which from the negative fair values of derivative financial instruments 1,147 – – 1,147 of which miscellaneous other financial liabilities – 2,864 2,864 2,864 Current financial liabilities 1,147 11,754 11,754 12,902

Financial liabilities 1,987 12,097 12,097 14,084

I NTERI M FI NANCI AL REPORT 2 0 1 6 CONSOLI DATED FI NANCI AL STATEMENTS

EUR million Measured at Measured at amort ized cost Carrying amount fair value as per Balance Sheet as of Dec. 31, 2015

Carrying amount Carrying amount Fair val ue

Other participations 1 – – 1 Other financial assets 243 337 328 580 of which f rom t he posit ive f air values of derivative financial instruments 243 – – 243

of which fixed deposits and extended loans – 310 301 310 of which miscellaneous other financial assets – 26 27 26

Non-current financial assets 244 337 328 581 30 Trade receivables – 4,097 4,097 4,097 Other financial assets 341 2,017 2,017 2,357 of which f rom t he posit ive f air values of derivative financial instruments 341 – – 341 of which fixed deposits and extended loans – 839 839 839 of which miscellaneous other financial assets – 1,177 1,177 1,177 Secur i t i es 4,782 – – 4,782 Cash f unds – 12,375 12,375 12,375 Current financial assets 5,122 18,488 18,488 23,610

Financial assets 5,367 18,825 18,816 24,191

Financial liabilities – 247 247 247 Other financial liabilities 1,373 48 48 1,421 of which from the negative fair values of derivative financial instruments 1,373 – – 1,373 of which miscellaneous other financial liabilities – 48 48 48 Non-current financial liabilities 1,373 295 295 1,669

Financial liabilities – 1,637 1,637 1,637 Trade payables – 7,204 7,204 7,204 Other financial liabilities 1,774 4,266 4,266 6,040 of which from the negative fair values of derivative financial instruments 1,774 – – 1,774 of which miscellaneous other financial liabilities – 4,266 4,266 4,266 Current financial liabilities 1,774 13,108 13,108 14,882

Financial liabilities 3,147 13,403 13,403 16,550

The met hods used t o measure fair value remain fundament ally discounting at a risk-adequate market rate with a matching unchanged from t he Consolidat ed Financial St at ement s for t he maturity. For reasons of materiality, the fair value for current 2015 fiscal year. Det ailed not es on t he measurement met hods balance sheet items is equated with the balance sheet value. can be found in the 2015 Annual Report. Equity instruments recognized at their carrying amount are assigned to level 3 in the fair value hierarchy. The fair value of t he financial inst rument s measured at amor- tized cost, such as receivables and liabilities, is determined by

I NTERI M FI NANCI AL REPORT 2 0 1 6 CONSOLI DATED FI NANCI AL STATEMENTS

9.2 / ALLOCATI ON OF FAI R VALUES TO THE LEVELS OF THE FAI R VALUE HI ERARCHY

EUR million June 30, 2016 Level 1 Level 2 Level 3

Other participations 1 – – 1 Other financial assets 655 – 648 7 Non-current financial assets 656 – 648 8

Other financial assets 487 – 480 7 Secur i t i es 4,890 4,890 – – Current financial assets 5,377 4,890 480 7

31 Financial assets 6,033 4,890 1,129 15

Other financial liabilities 839 – 705 135 Non-current financial liabilities 839 – 705 135

Other financial liabilities 1,147 – 1,082 65 Current financial liabilities 1,147 – 1,082 65

Financial liabilities 1,987 – 1,787 200

EUR million Dec. 31, 2015 Level 1 Level 2 Level 3

Other participations 1 – – 1 Other financial assets 243 – 239 5 Non-current financial assets 244 – 239 6

Other financial assets 341 – 335 6 Secur i t i es 4,782 4,782 – – Current financial assets 5,122 4,782 335 6

Financial assets 5,367 4,782 574 11

Other financial liabilities 1,373 – 1,219 154 Non-current financial liabilities 1,373 – 1,219 154

Other financial liabilities 1,774 – 1,706 68 Current financial liabilities 1,774 – 1,706 68

Financial liabilities 3,147 – 2,925 222

The allocat ion of fair values t o t he t hree levels of t he fair acquired via price service agencies. Fair values of level 3 are value hierarchy is based on t he availabilit y of observable mar- calculat ed using measurement met hods t hat include fact ors ket prices. Level 1 shows fair values of financial instruments that cannot be observed directly on an active market. In the for which a market price can be directly determined. These Audi Group, non-current commodity futures are allocated to f inancial inst rum ent s are securit ies. Level 2 involves t he level 3 because t he prices available on t he market need t o be measurement of financial instruments such as derivatives, ext rapolat ed for measurement purposes. The ext rapolat ion where t he fair value is calculat ed using measurement pro- for the different commodities is carried out on the basis of cesses based on observable market dat a. Part icular use is observable input fact ors, acquired via price service agencies. made of exchange rates, interest rates and commodity prices, Furthermore, level 3 shows the residual value hedging model which can be observed on the corresponding markets and are which is valued based on input factors (model-related residual

I NTERI M FI NANCI AL REPORT 2 0 1 6 CONSOLI DATED FI NANCI AL STATEMENTS

values of used cars) which cannot be observed on act ive market s and are instead forecast by various independent institutions.

9.3 / RECONCILIATION OF FINANCIAL INSTRUMENTS MEASURED ACCORDING TO LEVEL 3

EUR million 2016 2015 1)

Posit ive fair values of level 3 derivat ive financial inst rument s as of Jan. 1 11 18

I ncome (+) and expense (–) recognized in t he financial result + 5 0 I ncom e (+) and expense (–) recognized in ot her com prehensive incom e + 1 –

Settlements – 1 – 4

32 Transfer from level 3 to level 2 – 1 – Positive fair values of level 3 derivative financial instruments as of June 30 15 15 I ncome (+) and expense (–) recognized in t he financial result from level 3 derivative financial instruments still held as of June 30 + 5 0

1) The previous year was adjust ed.

EUR million 2016 2015

Negat ive fair values of level 3 derivat ive financial inst rument s as of Jan. 1 222 227 Income (–) and expense (+) recognized in the financial result + 19 + 50 Income (–) and expense (+) recognized in other comprehensive income – + 1

Settlements – 36 – 36

Transfer from level 3 to level 2 – 5 – 6 Negative fair values of level 3 derivative financial instruments as of June 30 200 235 Income (–) and expense (+) recognized in the financial result from level 3 derivative financial instruments still held as of June 30 + 19 + 50

Reclassificat ions bet ween t he levels of t he fair value hierarchy Residual value risks arise from hedging arrangements with are t aken int o account at t he respect ive report ing dat es. The dealers according to which, under buy-back obligations stipu- reclassifications from level 3 to level 2 include commodity lat ed by lease agreement s, t he Audi Group bears some of t he futures that no longer require the exchange rates to be extrap- effects on profit resulting from market-related fluctuations in olated for their valuation because exchange rates which can be residual values. observed are now available. There were no shift s bet ween t he ot her levels of t he fair value hierarchy. The market prices of used cars are t he main risk variable for t he fair value of t he opt ions from residual value risks. The The commodit y price is t he principal risk variable for t he fair impact of changes in used car prices on profit after tax is esti- value of commodit y f ut ures. A sensit ivit y analysis reveals t he mated using sensitivity analyses. If the used car prices of the effect of commodity price changes on profit after tax and equity. vehicles in the residual value hedging model had been 10 percent higher (lower) as of June 30, 2016, profit after tax If the commodity prices of commodity futures, which are allo- would have been EUR 244 million higher (lower). cated to level 3, had been 10 percent higher (lower) as of June 30, 2016, profit after tax would have been EUR 1 million higher (lower). There would be no effect on equit y.

I NTERI M FI NANCI AL REPORT 2 0 1 6 CONSOLI DATED FI NANCI AL STATEMENTS

10 / CONTINGENT LIABILITIES 12 / OTHER FI NANCI AL OBLI GATI ONS There were no mat erial changes in t he cont ingent liabilit ies Other financial obligations were higher compared with De- compared to December 31, 2015. cember 31, 2015, primarily due t o an increase of EUR 160 million to EUR 8,927 million in purchase orders for property, 11 / LI TI GATI ON plant and equipment. There were no material changes in litigation compared to December 31, 2015.

13 / RELATED PARTY DI SCLOSURES

33 EUR million Goods and services supplied to Goods and services received

1−6/2016 1−6/2015 1−6/2016 1−6/2015

Volkswagen AG 3,486 3,278 4,060 3,706 Volkswagen AG subsidiaries and other participations outside of the Audi Group 7,841 8,065 4,229 3,222 Associat es and joint vent ures as well as t heir subsidiaries 4,218 4,354 188 178 Non-consolidat ed subsidiaries of AUDI AG 24 24 50 53

In the first half of 2016, goods and services with a total value Goods and services provided t o members of t he Board of Man- of EUR 201 (166) thousand were provided to the German State agement or Supervisory Board of AUDI AG and Volkswagen AG, of Lower Saxony and to companies in which the State of Lower Wolfsburg, in the first half of 2016 totaled EUR 6 (27) thou- Saxony holds a majority stake. sand.

EUR million Receivables from Liabilities to

June 30, 2016 Dec. 31, 2015 June 30, 2016 Dec. 31, 2015

Volkswagen AG 2,774 5,887 5,556 7,406 Volkswagen AG subsidiaries and other participations outside of the Audi Group 1,520 3,102 5,324 6,013 Associat es and joint vent ures as well as t heir subsidiaries 1,205 2,376 1,725 1,749 Non-consolidat ed subsidiaries of AUDI AG 194 149 15 44

Of the cash stated in the balance sheet, EUR 12,567 (11,257) million is invest ed in associat ed companies, Volkswagen AG and Volkswagen AG subsidiaries outside of the Audi Group.

I NTERI M FI NANCI AL REPORT 2 0 1 6 CONSOLI DATED FI NANCI AL STATEMENTS

14 / SEGM ENT REPORTI NG to the Consolidated Financial Statements. Business relations The segmentation of business activities is based on the inter- between the companies of the segments in the Audi Group are nal management and reporting of the Company in accordance generally based on t he same prices as t hose agreed wit h t hird with IFRS 8. The decision-making body for both segments with parties. Consolidation between the segments is carried out in regard t o t he allocat ion of resources and assessing t he per- the Reconciliation column. formance is the full Board of Management. The definition and composition of operating profit are shown Segment reporting tracks the economic activities of the Audi in the Income Statement of the Audi Group on page 19 of the

Group and is divided into two segments – Automotive and Interim Financial Report. For a breakdown of revenue, please Motorcycles. Although the Motorcycles segment falls short of refer to the corresponding note on page 27.

t he quant it at ive t hresholds of I FRS 8, it is report ed here as a 34 segment in its own right for information purposes. Internal reporting corresponds to external IFRS reporting. In addition, the full Board of Management regularly monitors the The act ivit ies of t he Aut omot ive segment encompass t he de- following financial and economic key figures, among others. velopment, production, assembly and distribution of vehicles of the Audi brand and the Lamborghini brand. Moreover, the The operating return on sales of the Audi Group totaled 8.0 segment includes the distribution of vehicles of other (9.8) percent. Volkswagen Group brands as well as t he accom panying acces- sories and spare part s business. The Aut omot ive segment recorded an operat ing ret urn on sales of 7.9 (9.8) percent. After taking into account additional The activities of the Motorcycles segment comprise the devel- depreciation due to the revaluation of assets and liabilities as opment, production, assembly and distribution of Ducati part of the historical purchase price allocation, the Motorcy- brand mot orcycles as well as t he accessories and spare part s cles segment recorded an operat ing profit of EUR 58 (46) business. million and an operating return on sales of 11.9 (10.5) per- cent . Adjust ed t o t ake account of t hese it ems, operat ing profit As a general rule, segment reporting is based on the same totaled EUR 70 (58) million and operating return on sales reporting, recognition and measurement methods as applied 14.3 (13.2) percent.

14.1 / RECONCILIATION OF THE SEGMENTS

EUR million 1−6/2016

Aut om ot ive Motorcycles Reconciliation Audi Group

Revenue with third parties 29,648 486 – 30,134 Revenue with other segments – 0 0 – Revenue 29,648 486 0 30,134

Segment profit (operating profit) 2,343 58 – 2,401

EUR million 1−6/2015

Aut om ot ive Motorcycles Reconciliation Audi Group

Revenue with third parties 29,348 436 – 29,784 Revenue with other segments – 0 0 – Revenue 29,348 436 0 29,784

Segment profit (operating profit) 2,868 46 – 2,914

I NTERI M FI NANCI AL REPORT 2 0 1 6 CONSOLI DATED FI NANCI AL STATEMENTS

14.2 / RECONCILIATION TO GROUP PROFIT

EUR million 1−6/2016 1−6/2015

Segment profit (operating profit) 2,401 2,914 Consolidation – – Operating profit 2,401 2,914

Financial result – 210 236 Group profit before tax 2,190 3,150

14.3 / REVENUES BY REGI ON 35

1−6/2016 1−6/2015

EUR million in % EUR million in %

Ger m any 6,552 21.7 6,094 20.5 Rest of Eu r op e 10,343 34.3 9,919 33.3 Asia-Pacific 7,438 24.7 8,009 26.9 North America 5,345 17.7 5,269 17.7 Sout h Am er i ca 295 1.0 316 1.1 Af rica 162 0.5 178 0.6 Reven u e 30,134 100.0 29,784 100.0

Revenues by region pursuant to IFRS 8.33 have been determined on the basis of the country of origin of external customers.

GERMAN CORPORATE GOVERNANCE CODE

The current declarat ions on t he German Corporat e Governance Code by the Board of Management and Supervisory Board of AUDI AG pursuant t o Sect ion 161 of t he Germ an St ock Corpo- rat ion Act (Akt G) are permanent ly available on t he websit e www.audi.com/cgk-declaration.

EVENTS OCCURRI NG SUBSEQUENT TO THE BALANCE SHEET DATE

After June 30, 2016, there were no events subject to a report- ing obligation in accordance with IAS 10.

I NTERI M FI NANCI AL REPORT 2 0 1 6 RESPONSI BI LI TY STATEMENT

‘‘RESPONSI BI LI TY STATEMENT

To t he best of our knowledge, and in accordance wit h t he Managem ent Report includes a fair review of t he development applicable reporting principles for interim financial reporting, and performance of the business and the position of the Group, t he I nt erim Consolidat ed Financial Stat ement s give a t rue together with a description of the principal opportunities and and fair view of the net worth, financial position and finan- risks associat ed wit h t he expect ed development of t he Group cial performance of t he Group, and t he I nt erim Group for the remaining months of the fiscal year.’’

Ingolstadt, July 27, 2016

36 The Board of Management

Pr of. Ruper t St adl er

Dr.-Ing. Stefan Knirsch Dr. Bernd Martens Prof. h. c. Thomas Sigi

Axel Strotbek Dr. Dietmar Voggenreiter Prof. Dr.-Ing. Hubert Waltl

I NTERI M FI NANCI AL REPORT 2 0 1 6 REVI EW REPORT

„REVIEW REPORT

To AUDI Aktiengesellschaft, Ingolstadt

We have reviewed t he condensed I nt erim Consolidat ed Finan- with our engagement, we have not performed a financial state- cial St at ement s – comprising t he income st at ement , st at ement ment audit , we cannot issue an audit or’s report . of comprehensive income, balance sheet , cash flow st at ement , st at ement of changes in equit y, and select ed explanat ory not es Based on our review, no mat t ers have come t o our at t ent ion t hat

– and the Interim Group Management Report of AUDI Aktien- cause us to presume that the condensed Interim Consolidated gesellschaft, Ingolstadt, for the period from January 1 to June 30, Financial St at ement s have not been prepared, in all mat erial

2016, which are part of the Interim Financial Report pursuant respects, in accordance with the IFRS applicable to interim finan- to § (Article) 37w WpHG (“Wertpapierhandelsgesetz”: German cial reporting as adopted by the EU nor that the Interim Group 37 Securit ies Trading Act ). The preparat ion of t he condensed I nt er- Management Report has not been prepared, in all material re- im Consolidat ed Financial Stat ement s in accordance wit h t he spects, in accordance with the provisions of the German Securi- IFRS applicable to interim financial reporting as adopted by the ties Trading Act applicable to interim group management reports. EU and of the Interim Group Management Report in accordance wit h t he provisions of t he German Securit ies Trading Act appli- Without qualifying our opinion, we point out that the interim cable to interim group management reports is the responsibility st at us of t he invest igat ion in connect ion wit h t he diesel issue, of the parent company’s Board of Management. Our responsibil- present ed in select ed explanat ory not es in t he sect ion ‘General it y is t o issue a review report on t he condensed I nt erim Consoli- I nformat ion / Diesel I ssue’ and in t he I nt erim Management dated Financial Statements and on the Interim Group Manage- Report in t he sect ion ‘Except ional Event s / Diesel I ssue’, was ment Report based on our review. taken into account in the creation of provisions for legal risks and warrant ies. On t hat basis, and as st at ed in t he Combined Man- We conducted our review of the condensed Interim Consolidated agement Report of the Audi Group and AUDI AG for the 2015 Financial Statements and the Interim Group Management Report f iscal year, t here are no indicat ions t hat serving members of t he in accordance wit h German generally accept ed st andards for t he Board of Management of the Company had knowledge of the review of financial statements promulgated by the Institut der unregist ered soft ware component s (auxiliary em ission cont rol Wirtschaftsprüfer (Institute of Public Auditors in Germany, IDW). devices) in connection with V6 3.0 TDI engines, or knowledge of Those st andards require t hat we plan and perform t he review so irregularities in connection with control software used on the that we can preclude through critical evaluation, with reasonable four-cylinder diesel engines developed and submitted for type assurance, t hat t he condensed I nt erim Consolidat ed Financial approval by Volkswagen AG, unt il not ified by t he U.S. Environ- St at ement s have not been prepared, in all mat erial respect s, in mental Protection Agency (EPA) in fall 2015. Nevertheless, if in accordance wit h t he I FRS applicable t o int erim financial report ing t he course of furt her invest igat ions new f indings should com e as adopt ed by t he EU and t hat t he I nt erim Group Management t o light t hat indicat e t hat members of t he Board of Manage- Report has not been prepared, in all material respects, in accord- ment were aware of t he diesel issue earlier, t hese could pot en- ance wit h t he provisions of t he German Securit ies Trading Act t ially have an effect on t he condensed I nt erim Consolidat ed applicable to interim group management reports. A review is Financial Statements as of June 30, 2016, and the Interim limited primarily to inquiries of company personnel and analyti- Group Management Report for the period from January 1 to cal procedures and t herefore does not provide t he assurance June 30, 2016, on the comparative figures as of June 30, 2015, attainable in a financial statement audit. Since, in accordance and on t he Consolidat ed Financial St at ement s of AUDI AG as of December 31, 2015.“

Munich, July 27, 2016

Pricewat erhouseCoopers Akt iengesellschaft Wirt schaft sprüf ungsgesellschaft

Frank Hübner Klaus Schuster Wirt schaft sprüfer Wirt schaft sprüfer (German Public Auditor) (German Public Auditor)

AUDI AG Financial Communication/ Financial Analysis I /FF-3 Aut o-Union-St raße 1 85045 Ingolstadt Ger m any Phone +49 841 89-40300 Fax +49 8 41 89 -30 90 0 email [email protected] www.audi.com/ investor-relations