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 on behalf of the Supervisory Board – in accordance with Section 3.10 of the German Corporate Governance Code and in accordance with Section 289a (1) German Commercial Code (HGB) about corporate governance.

Declaration of Conformity and reporting on corporate governance

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

The Executive Board and the Supervisory Board have concerned themselves on several occasions in fiscal year 2014/15 with the topic of corporate governance and jointly issued the updated Declaration of Conformity in accordance with Section 161 German Stock Corporation Act on November 6, 2015. The declaration has been made permanently accessible to the public on the Aurubis AG website. All the declarations of conformity of the past five years are also permanently accessible to the public there.

Text of the Declaration of Conformity

“The Executive Board and Supervisory Board of Aurubis AG declare that the recommendations of the ‘Government Commission on the German Corporate Governance Code’ in the version dated June 24, 2014 were applied in the period from October 1, 2014 to September 30, 2015 and that the recommendations in the version dated May 5, 2015 have been applied since October 1, 2015 with the following exceptions:

  • The contracts with new Executive Board members do not include a severance pay cap in the amount of maximum two years’ compensation in the event of premature termination of the contract without good cause, including in the form of so-called (modified) connection clauses. The first contracts of newly appointed Executive Board members only have a term of three years and a severance pay cap for the Executive Board member would not make sense. Furthermore, a severance pay cap would not be legally enforceable for the Executive Board member in many relevant cases. If there is neither a good cause for revoking the appointment in terms of Section 84 (3) sentence 1 German Stock Corporation Act (AktG) nor a good cause for terminating the employment contract without notice in terms of Section 626 German Civil Code, the service contract with the respective Executive Board member can only be terminated by mutual consent. In this case, the Executive Board member is not obliged to agree to a severance pay cap in terms of the code recommendation. So-called (modified) connection clauses that tie the termination of the Executive Board employment contract to the revocation of the appointment for a good cause and that provide for a ­corresponding severance pay cap for this case cannot be unilaterally enforced by the Supervisory Board against the will of the Executive Board member concerned ­(deviation from code Section 4.2.3 paragraph 4).
  • 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 within the framework of the applicable legal regulations, in particular with respect to the German Gender Equality Act. It is naturally very relevant that the Company’s international activities, potential conflicts of interest, the number of independent Supervisory Board members established by the Supervisory Board and diversity are taken into account. In doing so, it is neither necessary to establish a regulatory limit for the length of membership in the Supervisory Board nor to specify concrete objectives and publish them in the corporate governance report (deviation from Code Section 5.4.1 paragraphs 2 and 3).

Hamburg, November 6, 2015

For the Executive Board

Erwin Faust
(Spokesman)

For the Supervisory Board:

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, to which the German Corporate Governance Code relates. 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, in particular, 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 consisted of four and then three members during the fiscal year. Pursuant to ­Section 105 (2) German Stock Corporation Act (AktG), Dr. Bernd Drouven was dispatched from the Supervisory Board to the Executive Board of Aurubis AG from November 1, 2014 to October 31, 2015 to replace former Executive Board Member Peter Willbrandt and was appointed Executive Board Chairman. Dr. Drouven also oversaw Business Unit Primary Copper. Mr. Erwin Faust is the Chief Financial Officer. Dr. Stefan Boel is responsible for Business Unit Copper Products. Dr. Frank Schneider withdrew from the Executive Board on June 30, 2015. In its meeting on October 2, 2015 the Supervisory Board appointed Mr. Jürgen Schachler as the new Executive Board Chairman of Aurubis AG. Mr. Schachler will assume office on July 1, 2016. In the interim period between November 1, 2015 and the start of Mr. Schachler’s term, Aurubis will be led by Mr. Erwin Faust, Executive Board Spokesman, and Dr. Stefan Boel.

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.

The Executive Board takes diversity into account when filling management positions in the Company and gives attention to female applicants in particular.

On August 17, 2015 the Executive Board set targets for the proportion of women in the two management levels below the Executive Board for the first time. The target for the relatively short period until June 30, 2017 is 20 % for each level. Currently, the proportion of women is 20 % for the first management level and 17.4 % for the second management level.

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 the relationship between Executive Board compensation and the compensation of the higher management level and the relevant workforce into account. It also defines the target pension level for Executive Board members. The Personnel Committee submits corresponding suggestions to the Supervisory Board. The Supervisory Board pays attention to diversity in the composition of the Executive Board in terms of Section 5.1.2 of the German Corporate Governance Code. The Supervisory Board established an age limit for the election of Supervisory Board members. The Supervisory Board did not place a limit on the length of membership in the Supervisory Board. The Super­visory Board established a target of 0 % for the proportion of women in the Executive Board by June 30, 2017 since no new appointments are expected until then.

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, in particular 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, of which six are elected by the shareholders and six by the employees in accordance with the German Law on Co-determination (MitbestG). 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. Dr. Drouven’s Supervisory Board mandate was suspended during the period from November 1, 2014 to October 31, 2015, during which he was dispatched to the Executive Board.

The Supervisory Board has not specified any concrete objectives regarding its composition. When proposing candidates at the Annual General Meeting, the Supervisory Board will continue to orient itself 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 German 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.

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 less than two years ago. Dr. Bernd Drouven was elected to the Aurubis AG Supervisory Board pursuant to Section 100 (2) p. 1 No. 4 German Stock Corporation Act (AktG) at the recommendation of Salzgitter Mannesmann GmbH. In the Supervisory Board’s estimate, the Supervisory Board has a suitable number of independent members who do not have a personal or professional relationship with the Company, its Supervisory Board or Executive Board, a controlling shareholder or someone connected with an associated company, which 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 during which the resolution regarding the exoneration of the Supervisory Board members is passed for fiscal year 2016/17.

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.

Personnel Committee

The six-member Personnel Committee has equal numbers of representatives of the shareholders and employees. For the duration of Dr. Drouven’s dispatch to the Executive Board, his Personnel Committee mandate is suspended in addition to his Supervisory Board mandate. The Personnel Committee therefore temporarily has only five members. It considers the structure and level of compensation paid to all members of the Executive Board, the preparation of Executive Board contracts and the selection of qualified candidates for Executive Board positions in the preparation of the 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 primary task of monitoring accounting and the accounting process, the effectiveness of the internal control system and the internal auditing system, the annual audit and especially the independence of the auditors, the additional services performed by the auditors, the appointment of the auditors, the determination of the focuses of the audit and the agreement of the fee as well as compliance. 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 did not meet during the ­reporting year.

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 Conciliation Committee did not meet during the ­reporting year.

Technology Committee

The Supervisory Board formed a Technology Committee as of November 1, 2015. 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. Dr. Drouven chairs this committee.

The committees’ compositions are given in the list of Executive and Supervisory Boards 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 included in the list of the Executive and Supervisory Boards in this Annual Report.

Avoiding conflicts of interest

The mandates of the Supervisory Board and Executive Board members in other legally formed Supervisory Boards and comparable German and foreign controlling bodies are included in the list of the Executive and Supervisory Boards 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 with 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 Chairman 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. Retention 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, in particular stock market law, the Law on Co-determination (MitbestG) 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. Over and above the 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 Aurubis 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 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 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. An Annual General Meeting is held once a year, in which the Executive Board and Supervisory Board give an account of the past fiscal year. The German Stock Corporation Act (AktG) stipulates that an extraordinary General Meeting can be convened in special cases.

Each shareholder who has registered in good time and can provide proof of his or her entitlement to participate in the Annual General Meeting and exercise his 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 German stock corporation law and made available in English and German on the Aurubis AG website.

Controlling and risk management

It is also part of good corporate governance that the Company handles risks responsibly. 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. Compliance management was expanded across the Group in the fiscal year so as to comply with the requirements resulting from the legal stipulations and the Code of Conduct. The Chief Compliance Officer reported 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, which includes the mandatory report on the accounting-related internal control and risk management system issued in accordance with the German Accounting Law Modernization Act (BilMoG).

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, half-yearly reports and the quarterly interim 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. Apart from 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 of the past five years are likewise available on the website.

Furthermore, immediately after receipt of a relevant notification pursuant to Section 21 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, press conferences on 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

In accordance with Section 15a of the German Securities Trading Act (WpHG), members of the Executive and Supervisory Boards, certain employees in management positions and people closely associated to them have 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.

Members of the Executive Board did not carry out any share transactions from October 1, 2014 to September 30, 2015 or only carried out transactions under the € 5,000 threshold.

The following member of the Supervisory Board informed the Company that he had acquired or sold no-par-value shares in the Company in the period from October 1, 2014 to September 30, 2015:

  • Rolf Schwertz: sold 1,564 no-par-value shares

The Executive Board and Supervisory Board held less than 1 % of the shares issued by the Company as at ­September 30, 2015.

Financial reporting and annual audit

Aurubis AG prepares its consolidated financial statements and 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 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 2014/15. The interim reports and the half-yearly financial 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 AG Wirtschaftsprüfungsgesellschaft, Hamburg, was appointed auditor of the 2014/15 consolidated financial statements and the 2014/15 German Commercial Code (HGB) financial statements of Aurubis AG. Before submitting the proposal for the election of the auditors, the Supervisory Board obtained the declaration from PricewaterhouseCoopers AG Wirtschaftsprüfungsgesellschaft on their independence 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. The audits also covered risk management and the compliance with reporting obligations on corporate governance in accordance with Section 161 German Stock Corporation Act (AktG).

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 2015

The Executive Board

Erwin Faust
(Spokesman)

Dr. Stefan Boel
(Member)