Report and declaration on corporate governance
(part of the Management Report)

The principles of responsible and sustainable corporate governance determine the actions of the management and controlling bodies of Aurubis AG. In this declaration, the Executive Board reports – also for the Supervisory Board – pursuant to Section 3.10 German Corporate Governance Code as well as Sections 289a and 315 (5) HGB (German Commercial Code) in conjunction with Art. 80 EGHGB (Introductory Act of the German Commercial Code) about corporate governance.

Declaration of Conformity and reporting on corporate governance

In accordance with Section 161 of the German Stock Corporation Act, the Executive Board and Supervisory Board of a company listed in Germany must issue an annual declaration stating that the recommendations of the “Government Commission on the German Corporate Governance Code” published by the Federal Ministry of Justice in the official section of the electronic Federal Gazette (Bundesanzeiger) were/are being complied with, or list the recommendations that were/are not being applied and explain why.

The Executive Board and the Supervisory Board have dealt on several occasions in fiscal year 2016/17 with the topic of corporate governance and jointly issued the updated Declaration of Conformity in accordance with Section 161 of the German Stock Corporation Act on November 6, 2017. The declaration is permanently accessible to the public on the Aurubis AG website in the Investor Relations/Corporate Governance section. The Declarations of Conformity from the past five years and the details regarding fulfillment of the Code’s requirements are also permanently accessible there.

Text of the Declaration of Conformity

“In accordance with Section 161 of the German Stock Corporation Act, the Executive Board and Supervisory Board of Aurubis AG declare that, since the issue of the last Declaration of Conformity dated November 4, 2016, the recommendations of the ‘Government Commission on the German Corporate Governance Code’ in the version dated May 5, 2015 have been applied, and that the recommendations in the version dated February 7, 2017 have been applied since April 24, 2017, with the following exceptions for the reasons given:

  • Section 4.2.3 (2) Sentences 3 and 4 (Executive Board compensation)
    Beginning with the completion of new contracts for the Executive Board as of October 1, 2017, the compensation structure for the Executive Board will generally include variable remuneration components with a multiannaul assessment basis that shall have essentially forward-looking characteristics, as well as a cap on severance pay. However, this is not valid for existing contracts. In this respect, prior rights exist.
  • Section 5.4.1 (2) (term limit for Supervisory Board membership)
    When proposing candidates at the Annual General Meeting, the Supervisory Board has focused and will continue to focus on the professional and personal qualifications of the candidates, taking the profile of skills into consideration as well as the framework of the applicable legal regulations, in particular the Gender Equality Act (“Gleichstellungsgesetz”). It is naturally very relevant that, within the framework of the company-specific situation, the company’s international activities, potential conflicts of interest, the number of independent Supervisory Board members as well as the age limit established by the Supervisory Board and diversity are taken into account. In this regard, it is not necessary to establish a regulatory limit for the length of membership in the Supervisory Board.

Hamburg, November 6, 2017

For the Executive Board

Signature: Jürgen Schachler
Signature: Dr. Stefan Boel

Jürgen Schachler           Dr. Stefan Boel
Chairman                       Member

 

For the Supervisory Board

Signature: Prof. Dr.-Ing. Heinz Jörg Fuhrmann

Prof. Dr.-Ing. Heinz Jörg Fuhrmann
Chairman"

 

Working procedures of the Executive Board and Supervisory Board

Aurubis AG is a company subject to German law, of which the German Corporate Governance Code is a part. A basic principle of German stock corporation law is the dual management system with the two bodies of the Executive Board and Supervisory Board, which are strictly separated as regards personnel between the Executive Board as the board of management and the Supervisory Board as the monitoring organ and each provided with independent responsibilities. The Executive Board and Supervisory Board of Aurubis AG work closely together and in a spirit of trust in the governance and supervision of the company for the benefit of the company.

The Executive Board

The Executive Board runs the company on its own responsibility without instructions from third parties in accordance with the law, the Articles of Association and the Board’s rules of procedure, taking into account the resolutions passed at the Annual General Meeting. The Executive Board represents the company in dealings with third parties.

The Executive Board as the management body runs the company’s business on its own responsibility with the aim of achieving long-term value added in the company’s interests while taking the needs of all stakeholders into account. The principle of overall responsibility applies, i.e. the members of the Executive Board together bear responsibility for the management of the entire company. They work together in a spirit of cooperation and inform one another continuously about important measures and occurrences in their areas of responsibility. The overall responsibility of all Executive Board members notwithstanding, the individual members of the Executive Board oversee the areas of responsibility assigned to them in the Executive Board resolutions on their own responsibility. The principles of the cooperation between Aurubis AG’s Executive Board members are stated in the rules of procedure for the Executive Board issued by the Supervisory Board. These regulate, above all, the allocation of responsibilities between the individual Executive Board members, matters reserved for the full Executive Board, the passing of resolutions, i.e. the required majority for resolutions, and the rights and obligations of the Chief Executive Officer.

Certain Executive Board decisions of particular importance require the approval of the Supervisory Board. They are stipulated in a catalogue. For example, the Supervisory Board makes decisions about investments in other companies if the measure is of great significance for the Group, as well as about substantial capital expenditure measures.

The Executive Board of Aurubis AG initially consisted of three members during the fiscal year (Mr. Jürgen Schachler as Chairman, Mr. Erwin Faust and Dr. Stefan Boel). Beginning November 1, 2016, Mr. Erwin Faust was not available to assist the company due to health reasons. For this reason, Mr. Faust was released from his duties and obligations as CFO of Aurubis AG by mutual agreement in the Supervisory Board resolution dated November 24, 2016. Mr. Faust’s duties were initially taken over by Mr. Jürgen Schachler and Dr. Stefan Boel. With the end of June 30, 2017, Mr. Faust resigned from his post as Aurubis AG’s Chief Financial Officer. Mr. Rainer Verhoeven was appointed as the new Chief Financial Officer effective January 1, 2018.

The Executive Board keeps the Supervisory Board informed promptly and comprehensively, in written and verbal reports, as well as in the scheduled meetings, about the strategy, planning, business development, important business transactions and the Group’s risk situation, including risk management and compliance, i.e. the measures to comply with legal requirements and the internal corporate guidelines. The Executive Board discusses in detail and provides reasons for deviations in the business performance from previously prepared budgets and targets.

For the composition of the Executive Board, filling management positions and also election nominations for Supervisory Board members (Sections 4.1.5, 5.1.2 and 5.4.1 of the Code), as well as filling other committees, Aurubis AG’s Executive Board and the Supervisory Board will ensure within the scope of their respective responsibility to increasingly take into consideration the point of view of diversity, in particular the appropriate representation of women.

In accordance with Section 76 Paragraph 4 of the German Stock Corporation Act, Aurubis AG’s Executive Board is required to establish a target for the proportion of women in both management levels below the Executive Board, as well as a deadline for achieving this goal.

The entire Executive Board addressed the regulation in good time and set the targets for the first and second management levels at Aurubis AG for the first time in August 2015. For the initial determination, the implementation deadline could not legally extend beyond June 30, 2017. The target for the relatively short period until June 30, 2017 was 20 % for each level. As at this target date, the proportion of women was 19.4 % for the first management level and 20.4 % for the second management level.

The target for the second management level was thus slightly exceeded and the target for the first management level was nearly achieved. In the first management level, there were limited open positions in the reporting period. For these, men and women were considered equally. The vacant positions were ultimately awarded to the most suitable applicants.

On June 12, 2017, the Executive Board determined a target of 20 % for the first management level and a target of 25 % for the second management level for the period ending June 30, 2022. Further increasing the number of women in management positions independently of legal regulations is an important goal for the Group.

As at this reporting date, the proportion of women was unchanged at 19.4 % for the first management level below the Executive Board, and 20.4 % for the second management level below the Executive Board.

There were no further personnel changes in the fourth quarter of fiscal year 2016/17.

The Supervisory Board

The Supervisory Board advises and monitors the Executive Board in the management of the company. It appoints and rescinds the contracts of Executive Board members, decides on the compensation system for Executive Board members and specifies their respective total compensation. In the process, the Supervisory Board takes into account the relationship between Executive Board compensation and the compensation of the higher management level and the relevant workforce, as well as the market position of the company. It also defines the target pension level for Executive Board members. The Personnel Committee submits corresponding suggestions to the Supervisory Board.

The Supervisory Board is included in the strategy and planning as well as all aspects of major significance for the company. The Supervisory Board has defined rights of veto in favor of the Supervisory Board for transactions of fundamental importance, particularly those that would significantly change the company’s net assets, financial position and results of operations. In the case of important events, an extraordinary Supervisory Board meeting is convened if deemed necessary. The Chairman of the Supervisory Board coordinates the work within the Supervisory Board, chairs their meetings and attends to the affairs of the Supervisory Board externally. The Supervisory Board meets without the Executive Board as necessary.

The Supervisory Board has defined rules of procedure for its work. The representatives of the shareholders and the employees generally meet separately to prepare for the meetings.

Composition of the Supervisory Board

The Supervisory Board of Aurubis AG with co-determination has twelve members in accordance with the Articles of Association. Six of these members are elected by the shareholders and six by the employees in accordance with the German Co-determination Act. The periods of office are identical. In accordance with the recommendations of the German Corporate Governance Code, the shareholders’ representatives were elected individually to the Supervisory Board in the last election at the Annual General Meeting on February 28, 2013.

The Supervisory Board has designated concrete targets for its composition and compiled a competency profile for the entire Board. The targets and the competency profile have been made permanently accessible to the public on the Aurubis AG website. Aurubis AG’s Supervisory Board is composed according to this target. With due regard for the requirements of Section 96 (2) of the German Stock Corporation Act, the Supervisory Board will comprise no less than 30 % women and no less than 30 % men at the close of the 2018 Annual General Meeting.

When proposing candidates at the Annual General Meeting, it will continue to orient itself according to the statutory provisions in the future while focusing on the professional and personal qualifications of the candidates within the framework of the applicable legal regulations, in particular with respect to the Gender Equality Act. It is naturally very relevant that the company’s international activities, potential conflicts of interest as well as the length of membership in the Supervisory Board, the age limit for Supervisory Board members, the number of independent Supervisory Board members in terms of Section 5.4.2 of the German Corporate Governance Code, and diversity are taken into account. The Supervisory Board did not place a limit on the length of membership in the Supervisory Board.

In the Supervisory Board’s estimate, Dr. Drouven, Dr. Reich, Prof. Vahrenholt and Dr. Wortberg were seen as independent shareholders’ members during fiscal year 2016/17 pursuant to Section 5.4.1 (4) of the German Corporate Governance Code.

Dr. Bernd Drouven, a former member of the Aurubis AG Executive Board, is now a member of the Supervisory Board. His appointment as an Executive Board member ended significantly more than two years ago. Dr. Bernd Drouven was elected to the Aurubis AG Supervisory Board pursuant to Section 100 (2) p. 1 No. 4 of the German Stock Corporation Act at the recommendation of Salzgitter Mannesmann GmbH.

Taking into account the ownership structure, the Supervisory Board assesses that the Supervisory Board, with its four independent shareholder members, has a sufficient number of independent shareholder members who have no professional relationships with the company, with its Supervisory Board or Executive Board, with a controlling shareholder or with someone connected with an associated company, that could be cause for a significant conflict of interest that is not merely temporary.

The Supervisory Board’s term of office amounts to five years; the current term of office ends at the close of the Annual General Meeting on March 1, 2018.

Pursuant to Section 111 (5 ) of the German Stock Corporation Act, on September 11, 2015 the Supervisory Board determined a target of 0 % and an implementation deadline of June 30, 2017 for the proportion of women in Aurubis AG’s Executive Board, because no new appointments were pending at that time. This target could therefore not be exceeded in the reporting period.

Jürgen Schachler was appointed as Executive Board Chairman effective July 1, 2016. No suitable female candidates were available to fill this position.

On June 7, 2017, the Supervisory Board determined a significantly higher target of 25 % for the Executive Board for the period of time ending June 30, 2022. Upon evaluating general circumstances, the Supervisory Board believes it is possible to implement this target within the indicated period.

The target could not be reached in the relatively short time period ending September 30, 2017. In this time period, only the position of Chief Financial Officer needed to be filled. In the search for suitable candidates, a stronger focus was put on the choice of suitable women. With Mr. Verhoeven’s appointment, the candidate who in the Supervisory Board’s opinion was best qualified for the position of Chief Financial Officer was ultimately chosen.

Supervisory Board committees

The Supervisory Board has formed five long-term committees for its members to prepare and complement its work: the Personnel Committee, the Audit Committee, the Nomination Committee, the Conciliation Committee and the Technology Committee. Some of the Committees’ tasks as well as their composition and work are specified in the rules of procedure of the Supervisory Board. The Committees’ compositions during the fiscal year are outlined in this Annual Report. The mandates of the Supervisory Board members in other legally formed Supervisory Boards and comparable German and foreign controlling bodies are also specified in this Annual Report.

Personnel Committee

The six-member Personnel Committee has equal numbers of representatives of the shareholders and employees. It considers the structure and level of compensation paid to all members of the Executive Board, prepares Executive Board contracts and selects qualified candidates for Executive Board positions and prepares necessary Supervisory Board resolutions. The Chairman of the Personnel Committee is the Chairman of the Supervisory Board.

Audit Committee

The four-member Audit Committee with equal representation has the main task of monitoring the accounting process, the effectiveness of the internal control system, the risk management system, the internal auditing system and the annual audit as well as compliance.

The Audit Committee submits a justified recommendation for the choice of an auditor to the Supervisory Board, which consists of at least two candidates in cases concerning the tendering process for the auditing mandate. The Audit Committee monitors the independence of the auditors and furthermore concerns itself with the additional services performed by the auditors, with the appointment of the auditors, the determination of the audit’s focal areas and the agreement of the fee.

The Audit Committee Chairman during the fiscal year, Dr. Ernst J. Wortberg, is an independent financial expert whose business career has provided him with special expertise and experience in the application of accounting principles and internal control procedures. He is not a former member of the company’s Executive Board whose appointment ended less than two years ago.

Nomination Committee

The Nomination Committee only has representatives of the shareholders in accordance with the German Corporate Governance Code. The Nomination Committee has the duty of suggesting suitable candidates for the Supervisory Board to propose for election to the Supervisory Board at the Annual General Meeting.

Conciliation Committee

The legally formed Conciliation Committee did not meet during the reporting year.

Technology Committee

The four-member Committee has equal numbers of representatives of the shareholders and employees. The Technology Committee’s duty is to strategically support and monitor the Executive Board in the implementation of significant capital expenditure projects.

Avoiding conflicts of interest

The mandates of the Executive and Supervisory Board members in other legally formed Supervisory Boards and comparable German and foreign controlling bodies are included in this annual report. No Executive Board member holds more than three Supervisory Board mandates at public limited companies that are not part of the Group or in supervisory committees of non-Group companies, which have comparable requirements. Related parties are presented in the Notes to the Consolidated Financial Statements.

In transactions with Executive Board members, the Supervisory Board represents the company. Significant transactions with parties related to an Executive Board member were and are only carried out with the agreement of the Supervisory Board.

In the last fiscal year no conflicts of interest occurred among Executive Board or Supervisory Board members that should have been disclosed to the Supervisory Board and the other Executive Board members. There were no consulting or other service or work contracts between Supervisory Board members and the company in the reporting year either.

Retention in the D&O insurance

Aurubis AG has taken out D&O insurance (pecuniary loss/third party indemnity) for the Executive Board and the Supervisory Board with a reasonable retention. A deductible of 10 % of the damage or one and a half times the fixed annual compensation has been agreed.

Disclosures on relevant corporate governance practices

For Aurubis AG, the applicable legal regulations, especially stock market law, the law on co-determination and capital markets law, the Articles of Association, the German Corporate Governance Code and the rules of procedure of the Supervisory Board and the Executive Board provide the basis for the structure of management and controlling in the company. Above and beyond its legal obligations, Aurubis has defined values and derived a Code of Conduct from these, which regulates the framework of behavior and decisions and provides orientation for corporate activities. The values and the Code of Conduct are published on the company’s homepage. Each employee is briefed on these group-wide applicable values and the Code of Conduct as well as the corporate guidelines stemming from them. Mandatory instruction is given on special topics to (potentially) affected employees (e.g. antitrust law, anticorruption, environmental protection and occupational safety).

Shareholders and the Annual General Meeting

The shareholders of Aurubis AG exercise their co-determination and supervisory rights at the Annual General Meeting, which occurs at least once a year. Resolutions are passed at the AGM on all matters defined by law which are binding for all shareholders and the company. Each share grants the holder one vote in the AGM voting processes.

The Annual General Meeting elects the members of the Supervisory Board, who are chosen by the shareholders without obligation to a particular nomination, and passes a resolution on the exoneration of the members of the Executive Board and Supervisory Board. It decides on the utilization of the unappropriated earnings and on capital measures and gives approval to company agreements. Furthermore, it makes decisions about the compensation of the Supervisory Board and amendments to the company’s Articles of Association. The German Stock Corporation Act stipulates that an extraordinary General Meeting can be convened in special cases.

Each shareholder who has registered in good time and can duly provide proof of their entitlement to participate in the Annual General Meeting and exercise their voting rights is entitled to attend the Annual General Meeting. Shareholders who cannot or do not wish to attend the Annual General Meeting in person may authorize a bank, a shareholders’ association, the proxies designated by Aurubis AG, who are bound to follow the shareholders’ instructions, or another person of their choice to exercise their voting rights. The shareholders also have the option of submitting their votes online before the Annual General Meeting. Aurubis AG will give further details in the invitation to the Annual General Meeting.

The invitation to the Annual General Meeting and the relevant reports and information for the resolutions are published in accordance with the German Stock Corporation Law and made available in English and German on the Aurubis AG website.

Controlling/risk management and compliance

The company’s responsible handling of risks is also part of good corporate governance. As part of our value-oriented Group management, adequate risk management ensures that risks are identified early on and risk positions are minimized. Risk management reports regularly to the Executive Board and the Supervisory Board’s Audit Committee. Details of risk management at Aurubis AG are given in the risk report. Pursuant to Section 289 (5) and Section 315 (2) No. 5 of the German Commercial Code (HGB) in conjunction with Art. 80 of the EGHGB (Introductory Act of the German Commercial Code) , the required report on the accounting-related internal control and risk management system is contained in this.

The Executive Board ensures the adherence to legal requirements and the internal company guidelines, and works toward compliance across all Group companies. The compliance management system was expanded during the fiscal year so as to comply with the requirements resulting from the legal stipulations and the Code of Conduct.

Compliance is ensured in the company by means of prevention, controls and sanctions. Preventive measures include internal regulations, guidance and particularly the training of employees. In the event that violations of laws or internal regulations are detected, labor, civil, or criminal penalties are imposed.

The company’s Chief Compliance Officer is the central point of contact for all compliance-relevant questions. He reports regularly to the Executive Board and the Supervisory Board’s Audit Committee. At individual Group locations, local compliance officers are available as a point of contact for employees.

Employees are also granted the opportunity to give anonymous tips regarding legal violations within the company by means of a whistleblower hotline operated by an external service provider. This option can also be used by third parties.

Transparency

Aurubis AG regularly informs the participants in the capital market and the interested general public about the Group’s economic situation and new facts. The annual report, interim reports and the quarterly reports are published within the stipulated periods. Press releases and, if necessary, ad hoc announcements provide information on current events and new developments. Information is made available in German and English and is published in printed form or via suitable electronic media. Meetings are arranged on a regular basis with analysts and institutional investors as part of our investor relations activities. In addition to an annual analysts’ conference, conference calls are also held for analysts, especially in connection with the publication of quarterly figures. We also made new matters that were disclosed to financial analysts and similar contacts immediately available to the shareholders on the company’s website.

The company’s Articles of Association, the current Declaration of Conformity and the Declarations of Conformity from the past five years are likewise available on the website.

Furthermore, immediately after receipt of a relevant notification pursuant to Section 21 of the German Securities Trading Act (WpHG), the achieving, exceeding or falling below of 3, 5, 10, 15, 20, 25, 30, 50 or 75 % of the voting rights in the company is published in an information system that is distributed throughout Europe.

Financial calendar

The scheduled dates of the main recurring events and publications – such as the Annual General Meeting, the Annual Report, interim reports and quarterly reports, as well as press conferences regarding the annual financial statements and analyst conferences – are listed in a financial calendar. The calendar is published sufficiently in advance and made permanently available on the Aurubis AG website.

Directors’ dealings

Pursuant to Article 19 of the Market Abuse Regulation (EU 596/2014), the members of Aurubis AG’s Executive and Supervisory Boards, certain employees in management positions and people closely associated to them are required to disclose acquisitions and sales of company shares and related financial instruments. This does not apply if the total transactions per person do not reach an amount of € 5,000 per calendar year.

A member of the Supervisory Board carried out share transactions in the time period from October 1, 2016 to September 30, 2017:

  • Dr. Thomas Schultek/increase of 200 no-par value shares acquired by inheritance.

The Executive Board members informed the company that they neither acquired nor sold any no-par value shares in the company in the period from October 1, 2016 to September 30, 2017.

Financial reporting and annual audit

Aurubis AG prepares its consolidated financial statements and Management Report as well as the consolidated interim reports in accordance with International Financial Reporting Standards (IFRS) as they should be applied in the European Union. The financial statements of Aurubis AG are issued in compliance with the German Commercial Code (HGB) and the German Stock Corporation Act (AktG). The financial statements of Aurubis AG and the consolidated financial statements, as well as the Management Report, are compiled by the Executive Board and examined by the auditors and the Supervisory Board. Aurubis AG released a Combined Management Report for the AG and the Group for fiscal year 2016/17. The interim report and the quarterly reports are discussed by the Audit Committee and the Executive Board before publication.

The company’s auditor was elected at the Annual General Meeting in compliance with the provisions of the German Stock Corporation Act. PricewaterhouseCoopers GmbH Wirtschaftsprüfungsgesellschaft, Hamburg, was appointed as auditor of the 2016/17 consolidated financial statements and the Management Report as well as the 2016/17 HGB financial statements of Aurubis AG. PricewaterhouseCoopers GmbH Wirtschaftsprüfungsgesellschaft, Hamburg has been the appointed auditor since fiscal year 2008/09 and thereby audited Aurubis for the ninth time including the fiscal year 2016/17 audit. The responsible auditor for fiscal year 2016/17 was Mr. Claus Brandt, who audited the Group and the company for the first time. Before submitting the proposal for the election of the auditors, the Supervisory Board obtained the declaration from PricewaterhouseCoopers GmbH Wirtschaftsprüfungsgesellschaft on their independence as specified by the German Corporate Governance Code. The audits were performed in accordance with German auditing regulations, taking into account the generally accepted standards for the audit of financial statements promulgated by the German Institute of Public Auditors; in addition, the International Standards on Auditing were also observed. They also covered risk management and compliance with reporting obligations on corporate governance in accordance with Section 161 of the German Stock Corporation Act.

Furthermore, it was also agreed with the auditors that they would inform the Supervisory Board without delay about any possible grounds for exclusion or lack of impartiality and about the main findings and incidents arising during the audit.

Hamburg, December 2017

Executive Board

Signature: Jürgen Schachler
Signature: Dr. Stefan Boel

Jürgen Schachler           Dr. Stefan Boel
Chairman                       Member