Wesentliche Unterschiede zu NYSE Corporate Governance Standards

as of 11 December 2007

This document provides a brief, general summary of the significant differences between German corporate governance practices, as implemented by Infineon Technologies AG ("Infineon"), and those applicable to U.S. companies subject to the listing standards of the New York Stock Exchange (“NYSE”). For additional information on Infineon’s corporate governance, please refer to the sections headed “Management—Overview of Corporate Governance Structure” and “Articles of Association” in Infineon’s annual report on Form 20-F filed with the U.S. Securities and Exchange Commission (the “SEC”), or to the Corporate Governance section of Infineon’s website, www.infineon.com.

Companies listed on the NYSE are subject to the Corporate Governance Standards of Section 303A (the NYSE Standards) of the NYSE Listed Company Manual. Under the NYSE Standards, Infineon, as a foreign private issuer, is permitted to follow its home-country corporate governance practices in lieu of the NYSE Standards, except that it is required to comply with the NYSE Standards relating to the having of an audit committee (comprised of members who are “independent” under SEC rules) and to certain NYSE notification obligations. In addition, the NYSE Standards require that foreign private issuers disclose any significant ways in which their corporate governance practices differ from those required of U.S. domestic companies under the NYSE Standards. 

As a company incorporated in Germany, Infineon is subject to the corporate governance requirements and principles set forth in the German Stock Corporation Act (the Aktiengesetz, or “Stock Corporation Act”), the German Employee Co-Determination Act (the Mitbestimmungsgesetz, or “Co-Determination Act”), our articles of association (Satzung) and the German Corporate Governance Code (Deutscher Corporate Governance Kodex, or the “Code”). We believe the following to be the significant differences between German corporate governance practices, as we have implemented them, and those applicable to U.S. companies under the NYSE Standards.

The dual board system

Unlike U.S. corporations, German stock corporations have a dual board structure with both a management board (Vorstand), which is responsible for the day-to-day management of the company, and a supervisory board (Aufsichtsrat), which counsels, supervises and controls the management board. The dual board structure, with its strict separation of management and supervisory functions, differs from the unitary board structure provided for under the corporate laws of all U.S. states and envisaged by the NYSE Standards, and relies on a different system of checks and balances. 
 
No individual may serve as a member of the supervisory board and the management board at the same time. We believe that this separation of management and control is an essential part of good corporate governance.

The management board is responsible for managing the company, i.e., making day-to-day business decisions and representing the company in its dealings with third parties. The management board is also required to ensure appropriate risk management within the company and to establish an internal monitoring system. The members of the management board, including its chairman, are regarded by law as peers and share collective legal responsibility for management decisions. This peer approach is fundamental to an understanding of German corporate management practices and is widely regarded in Germany as an essential part of good corporate governance. Moreover, the management board is obliged to regularly report to the supervisory board with regard to current business operations and business planning, including reporting current developments that deviate from targets previously presented to the supervisory board. The supervisory board may also request special reports from the management board at any time.

The supervisory board appoints and removes the members of the management board. Although the supervisory board may not make management decisions, it has an advisory role as well as comprehensive monitoring functions. Furthermore, it must approve decisions taken by the management board with respect to certain matters that may have a fundamental impact on the company’s assets and liabilities, financial condition or results of operations. Pursuant to the rules of procedure of Infineon’s management board, such transactions include finance and investment planning, investments and divestments that exceed 10% of the annual investment budget, and the undertaking of financial risks with respect to third parties in amounts that exceed 5% of the company’s shareholders’ equity. The supervisory board is responsible for reviewing and approving the company’s annual consolidated group and unconsolidated parent company financial statements before they are presented to the shareholders.

Members of the supervisory board are generally elected by the company’s shareholders. In the case of stock corporations with more than 2,000 employees in Germany, the Co-Determination Act modifies this general principle: Half of the members of the supervisory board of such companies, including Infineon, are elected by the company’s employees in Germany.
 
The chairman of the supervisory board is elected by the members of the supervisory board in accordance with the Co-determination Act. In the case of a tie, the chairman of the supervisory board may cast the decisive tie-breaking vote.

Duty of Care
The members of both the management board and the supervisory board must exercise the standard of care of a diligent businessperson with respect to the affairs of the company (duty of care). In complying with their duty of care, members must not only take into account the interests of the shareholders, as is the case with the board of directors of a U.S. corporation, but also the interests of the company’s other stakeholders, i.e., customers, creditors and employees. We believe the company can only create value for its owners if its customers are satisfied and its employees are highly motivated, and therefore believe there is no conflict between the shareholders’ and other stakeholders’ interests.

Committees of the Supervisory Board

The supervisory board of Infineon has established five committees:

• The investment, finance and audit committee deals with major financing decisions of the company and fulfills the functions of an audit committee, as required by SEC rules. It selects the auditors, which must then be appointed by the shareholders. It also confers with the auditors regarding audit matters, especially the audit report, and prepares for the supervisory board’s approval of the annual financial statements. This committee operates under rules of procedure addressing its purpose, duties and responsibilities. German law precludes certain responsibilities from being delegated to a committee, such as the selection of the independent auditors, who are required by German law to be elected at the shareholders’ meeting.

• The executive committee serves as the nomination and compensation committee for members of the management board, and is responsible for the preparation of the meetings of the full supervisory board and certain decisions in connection with the use of the company’s authorized capital.

• The mediation committee, which is required by German law, is responsible for mediating in situations where no decision on the reappointment and dismissal of members of the management board can be reached; the mediation committee of Infineon has not been convened to date.

• The strategy and technology committee advises the management board on technology- and strategy-related issues.

• The nomination committee is composed exclusively of shareholder representatives and proposes suitable candidates for election to the supervisory board for recommendation by the supervisory board to the shareholders’ meeting.
  

Independence

The members of our audit committee meet the independence requirements of Rule 10A-3 under the Securities Exchange Act of 1934.
The NYSE Standards mandate that a majority of the members of the board of directors of a listed U.S. domestic company, and all of the members of its audit, nomination/corporate governance and compensation committees, be “independent” within the meaning of specific NYSE Standards. The NYSE independence requirements reflect specific risks that derive from the unitary board structure of U.S. companies. As a foreign private issuer, Infineon is exempt from these independence requirements, other than with respect to the members of the audit committee.

Unlike under US law, the supervisory board is not required by German law to affirmatively determine that committee members are independent. Rather, German corporate governance rules mandate that the supervisory board as a whole includes what it considers an adequate number of independent members. This has been affirmed by a resolution of our supervisory board. We believe that the structure of the dual-board system and other features of German corporate law and practice, as implemented by Infineon, provide at least equivalent safeguards and protections of independent judgment and decision-making.

Members of the supervisory board are required by law to act in the best interests of the company and may not serve other interests while performing their functions as a supervisory board member. Supervisory board members must not follow directions or instructions from third parties. They are also required to disclose to the supervisory board any conflicts of interests that may result from a consulting role or directorship with clients, suppliers, lenders or other business partners of the company. Any service, consulting, loan or similar agreements between the company and any supervisory board member must be approved by the supervisory board.

Although employees are considered under the NYSE Standards to be not independent, we regard most of the employee representatives on our supervisory board to be independent of management. These employee representatives are generally either employees working at non-management levels of the company or representatives of trade unions represented at the locations of the company and its subsidiaries in Germany. Under German law, one of the employee representatives is elected by senior management, and therefore may not be independent of management.  
 

Additional Matters

As a foreign private issuer, we are also subject to Sections 303A.12(b) and (c) of the NYSE Listed Company Manual. Section 303A.12(b) requires the chairman of our management board to promptly notify the NYSE in writing when any of our executive officers becomes aware of any material non-compliance with any applicable provisions of Section 303A. Section 303A.12(c) requires that we submit an executed Written Affirmation annually to the NYSE and that we submit an interim Written Affirmation each time a change occurs to our supervisory board or management board or any of their committees subject to Section 303A.

NYSE-listed U.S. domestic companies are subject to additional requirements that are not applicable to Infineon, as a foreign private issuer. In particular, they must:

• regularly schedule non-management director sessions;
• establish a nominating/corporate governance committee composed entirely of independent directors, with a written charter that addresses certain specified responsibilities;
• establish a compensation committee composed entirely of independent directors, with a written charter that addresses certain specified responsibilities;
• adopt and disclose corporate governance guidelines that address certain specified items; and 
• adopt and disclose a code of business conduct and ethics for directors, officers and employees, and promptly disclose any waivers of the code for directors or executive officers that should address certain specified items.
  

Infineon’s Corporate Governance Code and Code of Ethics

In February 2002, a German government commission comprised of German corporate governance experts, including top managers of large German companies and representatives of institutional and retail investors, academia, the accounting profession and labor unions, that was appointed by the German Federal Ministry of Justice in 2001, released the German Corporate Governance Code which has been amended several times since its initial release, most recently in June 2007 (the “Code”, available in its latest version at www.corporate-governance-code.de). The Code describes and summarizes the basic mandatory statutory corporate governance principles found in the Stock Corporation Act and other provisions of German law. In addition, it contains supplemental recommendations and suggestions for standards on responsible corporate governance intended to reflect generally accepted best practice. German companies must report once a year as to whether they comply with all recommendations of the Code, and if not, where and why they deviate from the Code. Infineon fully complies with the recommendations of the Code other than that the structure of the compensation for the management board is reviewed by the executive committee of the supervisory board, rather than by the supervisory board as a whole. Our latest Declaration of Compliance is available (in German) in the Corporate Governance section of Infineon’s internet website,  www.infineon.com.

In our view, corporate governance encompasses all corporate values, processes and goals. These concepts are set forth in our business conduct guidelines, which outline our standards for internal controls and guidelines for corporate ethics in a competitive environment. These business conduct guidelines include our Code of Ethics for senior financial officers, as required under SEC regulations. Beyond that, we have appointed a dedicated corporate governance officer responsible for reporting to the management board and the supervisory board. We will continue to evaluate and further develop our guidelines and our corporate governance principles in order to achieve the goal we have set for ourselves - to rank among the companies with the best corporate governance.