Corporate Governance

CORPORATE GOVERNANCE REPORT

DECLARATION CONCERNING THE MANAGEMENT OF THE COMPANY
(part of the Group management report – unaudited)

DECLARATION OF COMPLIANCE WITH THE GERMAN CORPORATE GOVERNANCE CODE ISSUED FOR THE 2011 FISCAL YEAR BY THE MANAGEMENT BOARD AND SUPERVISORY BOARD OF INFINEON TECHNOLOGIES AG IN ACCORDANCE WITH SECTION 161 OF THE GERMAN STOCK CORPORATION ACT

Since the submission of the last Declaration of Compliance in November 2010, Infineon Technologies AG has complied, and will comply in the future, with all recommendations of the German Corporate Governance Code in the version of May 26, 2010.

Infineon has in addition adopted all of the suggestions presented in the German Corporate Governance Code in the version of May 26, 2010.

RELEVANT DISCLOSURES IN RESPECT OF CORPORATE GOVERNANCE PRACTICES

Corporate Governance – standards for effective and responsible corporate management

The Management Board and the Supervisory Board of Infineon Technologies AG view corporate governance as a comprehensive concept for responsible, transparent and value-led corporate management. Good corporate governance fosters trust in our Company among national and international investors, the financial markets, business partners, employees and the public. The Management Board, the Supervisory Board and management ensure that corporate governance is actively implemented and continuously developed in all parts of the Company. Corporate governance at Infineon encompasses not only the German Corporate Governance Code, but also the standards of the internal control system, compliance – especially the Infineon Business Conduct Guidelines – and regulations on organizational and supervisory duties within the Company, which are available to all employees on the Infineon intranet.

Business Conduct Guidelines

We conduct our business responsibly and in compliance with legal requirements and administrative regulations – and we have established several guidelines for this purpose. The Business Conduct Guidelines are regularly reviewed and updated. They include regulations on compliance with the law, interaction with business partners and third parties, the avoidance of conflicts of interest, interaction with Company institutions, data and information management and environmental protection, health and safety. The guidelines also contain regulations concerning the handling of complaints and reports of breaches of the guidelines.

Corporate Compliance Officer and Compliance Panel

The existing Compliance Organization at Infineon has been optimized. On June 1, 2011, an independent Compliance Office was set up by Infineon and provided with more comprehensive resources than before. This confirms Infineon’s clear commitment to absolute compliance with the law and to maintaining ethical standards which protect the legitimate interests of employees, suppliers, customers, and shareholders, safeguard Infineon’s reputation, and take the Company’s requirements into account. In addition to meeting the traditional compliance objectives, such as risk mitigation and increases in efficiency and effectiveness, compliance is promoted with a view to strengthening on a sustainable basis the reputation of Infineon as a reliable and fair business partner and thus contributing to the overall success of the Company.

The Corporate Compliance Officer of Infineon Technologies AG reports directly to the Management Board. He or she is involved in setting guidelines, develops the Infineon compliance program, initiates or takes part in compliance audits, advises employees, receives complaints and tip-offs, including those made anonymously, and coordinates investigations into compliance-related incidents. In addition, he or she carries out regular compliance training measures for employees on topics such as anti-trust law and anticorruption. He or she is supported by regional Compliance Officers. We have also introduced a Compliance Panel, composed of experienced managers from the Legal, Human Resources, Internal Audit and Security departments. The members of the Compliance Panel meet regularly and advise the Compliance Officer.

Risk management

The Management Board considers the systematic and effective management of risks and opportunities as part of good corporate governance and one of our key success factors. It forms a part of our business operations and ensures that risks and opportunities are detected early and risk exposures minimized. This transparency of the risk exposure throughout the Company makes an additional contribution to increasing the Company’s value systematically and continuously.

Our Company-wide risk and opportunity management system, which is continuously adapted to changes in circumstances, consists of four sub-processes: risk identification, risk analysis, risk controlling, and risk monitoring. Its effectiveness is reviewed regularly by the Supervisory Board’s Investment, Finance and Audit Committee.

Details of risk management at Infineon are presented in the Risk and Opportunity Report, which provides an in-depth description of both risk and opportunity management and the internal control system at Infineon.

Transparent management

We submit a regular quarterly report covering our business developments and the Company’s financial position and performance to our shareholders according to a defined financial calendar. The members of the Management Board regularly inform shareholders, analysts and the general public about the quarterly and annual results. Our comprehensive investor relations service features regular meetings with analysts and institutional investors as well as telephone conferences. All notices and disclosures are usually available on our website in German and English.

Infineon Technologies AG also issues ad hoc announcements in addition to its regular reports to publicize information that is not in the public domain and the disclosure of which is likely to affect the value of the Infineon share significantlycantly.

A detailed list of all information relevant to the capital markets published in the 2011 fiscal year can be found in the Annual Document that we publish on the Infineon Technologies AG website in accordance with section 10 of the German Securities Prospectus Act (Wertpapierprospektgesetz).

We have set up a Disclosure Committee comprising members from various specialist departments to review and approve the publication of certain financial and other material information.

German law requires the Management Board to render a responsibility statement. The information required for this purpose is confirmed internally vis-à-vis the Management Board by senior executives bearing management responsibility.

FINANCIAL REPORTING AND AUDITING

Starting with the 2009 fiscal year, Infineon Technologies AG has prepared its Consolidated Financial Statements exclusively in accordance with International Financial Reporting Standards (IFRS). The Separate Financial Statements of Infineon Technologies AG continue to be prepared in accordance with the German Commercial Code (HGB). The Separate Financial Statements of Infineon Technologies AG, the Consolidated Financial Statements for the Infineon Group as well as the combined Management Report (Lagebericht) are published within 90 days of the end of the fiscal year after approval by the Supervisory Board.

Our Company’s financial reporting for the 2011 fiscal year was audited by KPMG AG Wirtschaftsprüfungsgesellschaft, Berlin (KPMG). The half-yearly financial report was also subjected to review by KPMG. The audit also considers the Company’s system for the early identification of risks and the submission of the Declaration of Compliance in accordance with section 161 of the German Stock Corporation Act. The Investment, Finance and Audit Committee discusses the quarterly reports and the half-yearly financial report with the Management Board prior to publication. We have agreed with KPMG that the Chairman of the Audit Committee should be informed immediately if any possible reasons for exclusion or bias occur during the audit, unless they can be eliminated immediately. The auditors should also report immediately on all findings and occurrences material to the Supervisory Board’s work that arise in the course of the audit.

DESCRIPTION OF THE MODE OF OPERATION OF THE MANAGEMENT BOARD AND SUPERVISORY BOARD AND OF THE COMPOSITION AND MODE OF OPERATION OF THEIR COMMITTEES

Infineon Technologies AG is subject to German stock corporation law, which stipulates a two-tier administrative system, with the Management Board responsible for management and the Supervisory Board responsible for corporate oversight. We are convinced that this separation of the two functions is an important precondition for good corporate governance. However, the Management Board and the Supervisory Board cooperate closely in the interest of the Company.

Management Board

The Infineon Technologies AG Management Board currently has three members; with effect from January 1, 2012 it will be expanded to four members. In accordance with the German Corporate Governance Code, the Supervisory Board has set an age limit for Management Board membership under which members of the Management Board in general should be no more than 67 years old. In accordance with its rules of procedure, the Supervisory Board takes account of diversity as well as technical and personal suitability in respect of the composition of the Management Board and will in particular endeavor to ensure appropriate female representation.

The Management Board is the Company’s executive body. It is obliged to serve the Company’s interests and thereby pursue the goal of sustainably increasing the Company’s value taking into account the interest of all “stakeholders”. It determines the Company’s commercial objectives, strategic direction and corporate policy and defines how the Company is to be organized.

According to German stock corporation law, the Management Board has overall responsibility for the management of the Company. The Infineon Management Board has adopted rules of procedure with the consent of the Supervisory Board. These rules stipulate that the Company is managed jointly by all of the Management Board members, who work together in a cooperative manner to this end. Collaboration between the Management Board and the Supervisory Board is coordinated by the Chief Executive Officer. The Chief Executive Officer maintains regular contact with the Chairman of the Supervisory Board, with whom he discusses the key aspects of the Company’s strategy, planning, course of business and risk management. At the ordinary meetings of the Supervisory Board, the Management Board reports comprehensively and promptly on the Company’s business development, the economic situation of the Company and its individual segments, as well as the Company’s financial and investment planning. The Chief Executive Officer notifies the Chairman of the Supervisory Board without delay of any matters that are of material importance for assessing the position and development of the Company or for its management.

Supervisory Board

Work of the Supervisory Board

The Supervisory Board advises and monitors the Management Board as it manages the Company. The Supervisory Board is informed by the Management Board regularly, comprehensively, and in a timely manner on all matters of relevance to business development, planning, and risk exposure, and agrees corporate strategy and its implementation with the Management Board. The Supervisory Board discusses the quarterly reports and reviews and approves both the Separate Financial Statements and the Consolidated Financial Statements of Infineon Technologies AG. Major decisions of the Management Board, such as group-wide financial and investment planning and major acquisitions and equity investments, divestitures, and financial measures, are subject to its approval. Further details are stipulated in the rules of procedure of the Management Board and the Supervisory Board. When Supervisory Board votes end in ties, the Chairman of the Supervisory Board has two votes if voting is carried out a second time and again results in a tie.

The duties of the Supervisory Board and its committees are regulated by law, by the Articles of Association and by the rules of procedure of the Supervisory Board and its committees.

The Supervisory Board reviews the efficiency of its work, including its interaction with the Management Board, once a year. In the 2010 fiscal year, an external independent consultant was engaged for the first time to conduct a detailed survey of Supervisory Board activities. The findings of this external efficiency study were presented and discussed in the Supervisory Board meeting on November 30, 2010. The last efficiency review took place in fall 2011. The efficiency of the Supervisory Board’s work, including its cooperation with the Management Board, was determined on the basis of a questionnaire addressing different areas and criteria of Supervisory Board work, and subsequently discussed at a Supervisory Board meeting.

Composition of the Supervisory Board

The Supervisory Board of Infineon Technologies AG has twelve members and comprises an equal number of shareholder representatives and employee representatives as stipulated in the German Co-Determination Act (Mitbestimmungsgesetz). The shareholder representatives are elected by the Annual General Meeting, the employee representatives by employee delegates at Infineon’s German facilities in accordance with the German Co-Determination Act. The regular term of office of Supervisory Board members is five years. New elections were held in the 2010 fiscal year for both the shareholder representative and the employee representative positions on the Supervisory Board. Before his election by the Annual General Meeting on February 11, 2010, Prof. Dr. Klaus Wucherer had announced that, notwithstanding his five-year term of office, he would stay in office for only one year. He resigned from the Supervisory Board with effect from the end of the Annual General Meeting on February 17, 2011. As successor, the Annual General Meeting held on February 17, 2011 elected Mr. Wolfgang Mayrhuber as a member of the Supervisory Board. At its meeting held on the same day, the Supervisory Board elected Mr. Mayrhuber as its Chairman. The terms of office of all Supervisory Board members will expire at the end of the Annual General Meeting that resolves on the approval of the acts of the members of the Management and Supervisory Boards for the 2014 fiscal year.

The overall composition of the Supervisory Board should comply with the principles of diversity in the opinion of the Supervisory Board. This means firstly that the composition of the Supervisory Board should take into account the diversity to be found in an open and innovative global company like Infineon as far as possible and secondly that nobody should be selected or dropped as a candidate for the Supervisory Board simply because he or she possesses or lacks a certain diversity factor. Diversity as the term is used here denotes international (in the sense of roots, upbringing, education or professional activity rather than citizenship), gender and age diversity.

The Supervisory Board specified concrete objectives regarding its composition at its meeting of November 22, 2010 in accordance with the recommendation in section 5.4.1 of the German Corporate Governance Code:

One half of the members of the Supervisory Board is elected by the Annual General Meeting, the other half by the employees. The Supervisory Board cannot influence the selection of candidates for the Supervisory Board by the employees. Nevertheless it is a stated objective of the Supervisory Board that

(i)    at least two of its members are women and

(ii)   at least one third of the members are “international” representatives

as defined above.

The Supervisory Board already meets these minimum criteria and it is intended that it continues to do so at all times in future. Furthermore, the Supervisory Board complies with the age limit defined in its rules of procedure, which states that in general nobody older than the age of 69 should be proposed for membership of the Supervisory Board.

The Supervisory Board will take this requirements profile and these objectives into account in its future nominations. The same applies in respect of the Nomination Committee insofar as it carries out the preparatory work for the Supervisory Board decision. The Supervisory Board recommends that its members elected by the employees also do what they can, within the scope of their influence, to have the requirements profile and objectives taken into account in the election nominations made by the relevant bodies on the employees’ side. The Supervisory Board also recommends that the objectives be taken into account by any of its members making an application for the appointment of a Supervisory Board member by the courts.

Supervisory Board committees

The Supervisory Board rules of procedure provide for the formation of three committees: the Mediation Committee, the Executive Committee, and the Investment, Finance, and Audit Committee. The Supervisory Board has also established both a Strategy and Technology Committee and the Nomination Committee recommended in the German Corporate Governance Code. All Supervisory Board committees have an equal number of employee representatives and shareholder representatives apart from the Nomination Committee, which consists exclusively of shareholder representatives.

The tasks of the Executive Committee, which consists of the Chairman of the Supervisory Board, the Vice-Chairman, one shareholder representative and one employee representative, include preparations for the appointment and dismissal of members of the Management Board and for the resolution, by a full meeting of the Supervisory Board, on Management Board compensation. It is also responsible for concluding, amending and terminating contracts with Management Board members except in matters involving pay.

The Investment, Finance, and Audit Committee (“Audit Committee”) consists of the Chairman of the Supervisory Board, the Vice-Chairman and one further representative each of the shareholders and the employees. The Chairman of the Investment, Finance, and Audit Committee, Dr. Eckart Sünner, has particular expertise in and extensive experience of financial reporting on account of his many years of service as chairman of the audit committee of another DAX-listed corporation.

The Audit Committee monitors the Company’s financial reporting process and discusses and examines the Separate Financial Statements and Consolidated Financial Statements prepared by the Management Board, the combined Management Report (Lagebericht) and the quarterly and half-yearly financial reports. It gives recommendations with respect to the approval of the Separate Financial Statements and Consolidated Financial Statements by the Supervisory Board based on the independent auditors’ report, engages the independent auditors selected by the Annual General Meeting to audit the Separate Financial Statements and Consolidated Financial Statements, specifies the key areas to be examined in audit activities and is responsible for setting the independent auditors’ compensation.

Other matters addressed by the Audit Committee include the effectiveness of the internal control system, internal audit system and risk management system. It has the authority in this connection both to contact any employee of the Company directly and to seek external assistance. Internal Audit reports annually to the Audit Committee, which can also specify an audit plan and key areas to be considered in audits.

Furthermore, the Audit Committee is responsible for the discussion of compliance issues. The Management Board and the Corporate Compliance Officer regularly report to the Audit Committee on the compliance organization and on any particular compliance issues.

The Mediation Committee, which consists of the Chairman of the Supervisory Board, the Vice-Chairman, one shareholder representative and one employee representative, submits recommendations to the Supervisory Board concerning the appointment of members of the Management Board if the first round of the election on the appointment does not result in the required majority of two thirds of the members of the Supervisory Board.

The Strategy and Technology Committee, which consists of three shareholder representatives and three employee representatives, concerns itself with key technology issues and matters of relevance to our business strategy.

The Nomination Committee, which consists of the Chairman of the Supervisory Board and two further shareholder representatives, proposes to the Supervisory Board suitable candidates for recommendation to the Annual General Meeting.

All committees regularly submit detailed reports on their work to the Supervisory Board. Further information about the work of the Supervisory Board and its committees may be found, together with details of the people who serve on them, in note 42 to the Consolidated Financial Statements (“Management Board and Supervisory Board”) and in the report of the Supervisory Board to the Annual General Meeting.

Avoidance of conflicts of interest

The members of the Management Board and Supervisory Board disclose any conflicts of interest to the Supervisory Board without delay. No conflicts of interest arose among the members of the Management Board and Supervisory Board in the 2011 fiscal year. Material transactions between the Company and members of the Management Board or related parties require the approval of the Supervisory Board. This also applies to consultant and other service or works contracts a Supervisory Board member enters into with the Company. As a precaution, the Supervisory Board also approved in November 2010 a contract between the Company and the Technische Universität München (Institute for Technical Electronics headed by Prof. Schmitt-Landsiedel) for the performance of research and development work on sensing for automotive applications.

Shareholdings of Management and Supervisory Board members

As of September 30, 2011, the shares in Infineon Technologies AG held by all members of the Management Board and Supervisory Board did not exceed 1 percent of the shares issued by the Company.

DIRECTORS’ DEALINGS

Members of the Management Board and the Supervisory Board and other persons bearing management responsibility with regular access to inside information, as well as related parties are required pursuant to Section 15a of the German Securities Trading Act (Wertpapierhandelsgesetz) to notify the Company as well as the Federal Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht – BaFin) of own transactions involving Company shares. This only applies, however, if the total value of the transactions made by one of the above managers or related parties amounts to €5,000 or more in one calendar year. Such notices are also reported to BaFin. At Infineon, this provision only applies to the Members of the Management Board and the Supervisory Board or related parties to them.

In the fiscal year ended, the Company was notified of the following transaction:

Date of the transaction: December 6, 2010
Last name, first name: Schmidt, Gerd
Function: Member of the Supervisory Board
Description: Shares in Infineon
ISIN/WKN: DE0006231004 / 623 100
Purchase/sale: Sale
Price (per unit): 7.536 euros
Number of units: 996
Purchase/sale: Sale
Price (per unit): 7.538 euros
Number of units: 63
Purchase/sale: Sale
Price (per unit): 7.536 euros
Number of units: 491
Total volume: 11,680.93 euros
Transaction location: Stock Exchange Frankfurt/Main (Xetra)

COMPENSATION OF THE MANAGEMENT BOARD AND THE SUPERVISORY BOARD

Details of Management Board and Supervisory Board compensation in the 2011 fiscal year are presented in the comprehensive Compensation Report, which also forms part of the Group Management Report of Infineon Technologies AG.

SHAREHOLDERS AND THE GENERAL SHAREHOLDERS’ MEETING

Infineon shareholders take their decisions at the Annual General Meeting, which is held at least once a year. Each share carries one vote. Shareholders can attend the Annual General Meeting as long as they are registered in the share register and have signed up for the meeting in time. The Annual General Meeting decides on all issues assigned to it by law, most notably on the formal approval of the conduct of business by the Management Board and the Supervisory Board, the election of the auditors and amendments to the Articles of Association. Shareholders are entitled to make counterproposals to motions introduced by management and to speak and ask questions at the Annual General Meeting and also have the right, subject to certain conditions, to challenge resolutions of the Annual General Meeting, to request an extraordinary judicial review and to claim compensation from corporate bodies of the Company on behalf of the Company when they suspect misconduct or serious deficiencies in the Company’s management and control. We wish to support our shareholders as far as possible in the exercise of their rights. Shareholders can register for our Annual General Meeting electronically, for example, can participate in votes by sending online instructions to their proxies and can follow the general debate via the internet. All documents and information relating to the Annual General Meeting can be found on our website. Our Investor Relations Department, moreover, can be contacted throughout the year both by telephone and electronically to ensure the exchange of information between us and our shareholders.

INFINEON STOCK OPTION PLANS

The Infineon Stock Option Plan 2006 approved by the Annual General Meeting of February 16, 2006 expired on September 30, 2009. The Annual General Meeting on February 11, 2010 accordingly approved a new Infineon Stock Option Plan 2010 (SOP 2010) to replace it. The terms of the SOP 2010 permit the Company to issue up to 12 million options over its three-year term. The exercise price for a new share amounts to 120 percent of the average share price over the five trading days preceding the day of issue of the option. The options issued may only be exercised if the Infineon share price outperforms the Philadelphia Semiconductor Index (SOX). The initial reference figures (100 percent) for this purpose are the arithmetic mean of the Infineon share price and the daily closing price of the SOX over a three-month period following the issue of the stock options. The Infineon share price must then exceed the SOX (daily closing price), as measured using the respective reference values, at least once on at least ten consecutive trading days in the period beginning one year after the issue of the stock options and lasting until the end of their lifetime.

The SOP 2010 provides for stock options to be allocated to eligible employees as well as to the Members of the Management Board within 45 days of the publication of the Consolidated Financial Statements or within 45 days of the publication of the consolidated results for the first, second or third quarter and in any case by no later than two weeks before the end of the quarter in which the allocation is made.

Our other stock option plans are detailed in the notes to the Consolidated Financial Statements; the full text of the plans may be viewed at www.infineon.com (“About Infineon/ Investor/Corporate Governance/Stock Option Plan”).

Further information about corporate governance at Infineon may be found on the internet at www.infineon.com (“About Infineon/Investor/Corporate Governance”).

Neubiberg, December 2011