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

In accordance with Section 161 of the German Stock Corporation Act (AktG²), 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 and Consumer Protection in the official section of the 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 dealt with the topic of corporate governance on several occasions in fiscal year 2018/19 and, on November 4, 2019, jointly issued the annual Declaration of Conformity in accordance with Section 161 of the German Stock Corporation Act (AktG). The declaration is permanently accessible to the public at  www.aurubis.com/en/about-aurubis/distribution-page-corporate-governance. The Declarations of Conformity from the past five years and the details regarding fulfillment of the Code’s requirements are also permanently accessible there.

“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 5, 2018, the recommendations of the Government Commission on the German Corporate Governance Code in the version dated February 7, 2017 have been applied and will be applied with the following exceptions for the reasons given:

• Section 4.2.3 (2) sentence 3 and (4)
  (Executive Board remuneration)
  The compensation structure for the Executive Board includes variable components whose calculation is based on several years and is essentially forward-looking, as well as a cap on severance pay. However, this did not apply to the contract of Mr. Schachler, whose appointment ended on June 30, 2019, as the status quo was preserved for his contract in this respect.
• 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 skills profile into consideration and within the framework of the applicable legal regulations, in particular with respect to the German Gender Equality Act. 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 established by the Supervisory Board, the age limit also established by the Supervisory Board, and diversity are taken into account. In doing so, it is not necessary to establish a regulatory limit to Supervisory Board members’ term of office.

Hamburg, November 4, 2019

For the Executive Board

Roland Harings
Chairman

Rainer Verhoeven
Member

For the Supervisory Board

Prof. Dr. Fritz Vahrenholt
Chairman"

For Aurubis AG, the applicable legal regulations, especially stock market law, codetermination law, capital market 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 them that establishes a framework for 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 values and the Code of Conduct, as well as on the corporate guidelines stemming from them. Employees whose roles require them to deal more closely with certain legal regulations (e.g., antitrust law, anti-corruption, environmental protection, occupational safety) will be provided with corresponding mandatory training.

Aurubis AG is a company subject to German law, which is also the basis of the German Corporate Governance Code. 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 assigned independent responsibilities. The Executive Board and Supervisory Board of Aurubis AG work together closely and in a spirit of trust in the governance and supervision of the company for the benefit of the company.

Working procedures

The Executive Board is responsible for running the company without instructions from third parties in accordance with the law, the Articles of Association, and the Executive 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.

As the management body, the Executive Board runs the company’s business in the interests of the company and with the aim of achieving long-term value added, while taking the needs of all stakeholders into account. The principle of overall responsibility applies, meaning that 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, 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 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.

Composition and objectives (diversity concept)

The Executive Board of Aurubis AG initially consisted of Chairman Mr. Jürgen Schachler, Mr. Rainer Verhoeven, and Dr. Thomas Bünger, who was appointed chief operations officer as of October 1, 2018. Mr. Roland Harings was appointed deputy Executive Board chairman as of May 20, 2019.

The Supervisory Board passed a resolution on June 12, 2019 to release Mr. Jürgen Schachler, whose contract was set to expire on June 30, 2019, from his duties with immediate effect. Mr. Roland Harings took office as Executive Board chairman of Aurubis AG effective July 1, 2019.

When it comes to selecting the members of the Executive Board, the Supervisory Board focuses first and foremost on the members’ specialist knowledge and personal qualities. On the basis of their knowledge, skills, and professional experience, the Executive Board members must be able to fulfill their duties in a company operating within the copper/metal sector and to safeguard and promote the Aurubis Group’s reputation in the public sphere.

Furthermore, the Supervisory Board adopted a diversity concept for the Executive Board on September 11, 2018. According to this concept, the Supervisory Board must, by taking into account aspects such as age, gender, education, and professional background, strive to put together an Executive Board that boasts a broad spectrum of skills, experience, and educational and professional backgrounds, as well as the requisite personal and specialist skills. As an additional criterion of the diversity concept, the Executive Board as a whole should exhibit a balanced age structure and thus include younger individuals who have experience with newer technical knowledge and leadership methods, as well as older individuals who have more professional, life, and management experience. With the same level of personal and professional suitability, both women and men should be represented in the Executive Board if possible. Pursuant to Section 111 (5) of the German Stock Corporation Act (AktG), the Supervisory Board passed a minimum target quota of 25 % for the proportion of women in the Executive Board by June 30, 2022.

With this diversity concept for the composition of the Executive Board, the Supervisory Board pursues the objective of achieving the highest level of diversity with respect to age, gender, education, and professional background. In this way, a variety of perspectives should be included in the management of the company, in addition to the high individual suitability of each of the members.

The Supervisory Board decides on the personality that should fill each concrete Executive Board position in the interest of the company, taking all of the circumstances of the individual case into account.

Status of target implementation

The Supervisory Board dealt intensively with the topic of diversity in the Executive Board in general and in the case of personnel changes in the Executive Board. The diversity concept was implemented as far as possible in the process. For example, the composition of the Executive Board reflects different age groups, taking professional knowledge and personal suitability into consideration. The Executive Board members possess a broad spectrum of skills, experience, and educational and professional backgrounds, with some members holding business degrees and others, qualifications of a more technical nature.

However, it has not been possible so far to achieve the target for the proportion of female members in the Executive Board. There were no female applicants for the position of chief executive officer. When filling the position, the candidate who in the Supervisory Board’s opinion was best qualified for the position was ultimately chosen.

The Supervisory Board’s efforts to ensure that women are adequately represented in the Executive Board are ongoing.

In accordance with the legal stipulations of Section 76 (4) of the German Stock Corporation Act (AktG), there are also targets for the proportion of female employees in the first and second management levels under the Executive Board. With a resolution dated June 12, 2017, the Executive Board set a target of 20 % female employees for the first management level and a target of 25 % for the second management level. These targets should be achieved by 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 the reporting date (September 30, 2019), the proportion of women was 24 % (previous year: about 12 %) for the first management level below the Executive Board and 19 % (previous year: about 20 %) for the second management level below the Executive Board. The proportion of women in the first management level therefore decreased slightly as at the reporting date, while the percentage in the second level was nearly the same.

The Executive Board continues to strive for a suitable consideration of women in the first and second management levels and maintains its targets.

The Executive Board did not form any committees in fiscal year 2018/19.

Working procedures

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 involved in strategy and planning work, and in 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 its 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. Shareholder and employee representatives generally meet separately to prepare for the meetings.

Composition and objectives (Diversity concept and skills profile)

The Supervisory Board of Aurubis AG, which exercises the codetermination principle, 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 Codetermination 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 March 1, 2018 and in the follow-up election on February 28, 2019. 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 approval of the Supervisory Board members is passed for fiscal year 2021/22.

The Supervisory Board has designated concrete targets for its composition and compiled a skills profile for the entire Supervisory Board in alignment with the recommendations of the February 7, 2017 version of the German Corporate Governance Code. The targets and the skills profile have been made permanently accessible at  https://www.aurubis.com/en/about-aurubis/company/supervisory-board.

Furthermore, the Supervisory Board established a diversity concept for its composition on September 11, 2018. It considers aspects such as age, gender, education, and professional background. In this way, the Supervisory Board as a whole should exhibit a balanced age structure and thus include both younger individuals and older individuals with professional and life experience.

During Supervisory Board elections, care must be taken to ensure not only that Supervisory Board members possess the requisite personal and professional skills, but also that the Board comprises at least 30 % women and 30 % men, in accordance with the legal requirements.

The diversity concept stipulates that the Supervisory Board be composed of personalities that are suitable for office based not only on their personal and specialist skills but also on their educational and professional backgrounds (the Supervisory Board should ideally comprise a broad range of educational and professional backgrounds).

With these targets for its composition, the Supervisory Board pursues the objective of achieving the highest possible level of diversity with respect to age, gender, education, and professional background. This should enable diverse perspectives, knowledge, and experience to be included in the work of Aurubis AG’s Supervisory Board.

The Supervisory Board strives to implement its diversity concept by considering the corresponding diversity aspects when making recommendations for the election of Supervisory Board members representing the shareholders. The Aurubis AG shareholders at the Annual General Meeting are responsible for the final decision on the composition of the Supervisory Board.

Status of target implementation

The Supervisory Board and the Nomination Committee took the criteria of the skills profile into consideration in the recommendations regarding the Supervisory Board elections at the Annual General Meeting in 2018 and 2019.

The diversity concept was implemented to the extent possible. In the Supervisory Board’s view, the side representing the shareholders demonstrates a balanced age structure that includes younger and older individuals. The Supervisory Board is composed of at least 30 % women and men, respectively, in accordance with the legal requirements. The Supervisory Board members have different educational and professional backgrounds. Additional information regarding the Supervisory Board members’ personal and specialist skills is available in their résumés, which are permanently accessible at  www.aurubis.com/en/about-aurubis/company/supervisory-board.

In the Supervisory Board’s estimate, Prof. Dr. Karl Friedrich Jakob, Dr. Stephan Krümmer, Dr. Sandra Reich, Ms. Andrea Bauer, and Prof. Dr. Fritz Vahrenholt were seen as independent shareholder members during fiscal year 2018/19 pursuant to Section 5.4.2 of the February 7, 2017 version of the German Corporate Governance Code.

Taking into account the ownership structure, the Supervisory Board, with its five independent shareholder members, has a sufficient number of independent members who have no personal or 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.

Supervisory board committees

The Supervisory Board has formed five committees for its members to prepare and complement its work: the Personnel Committee, the Audit Committee, the Nomination Committee, the Technology Committee (since June 12, 2019), and the Conciliation 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 shareholder and employee representatives. 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 when preparing necessary Supervisory Board resolutions. The chairman of the Personnel Committee is the chairman of the Supervisory Board.

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

The Audit Committee submits a preference and a justified recommendation for the choice of an auditor to the Supervisory Board. Where the auditing mandate is subject to an invitation to tender, at least two candidates are put forward. The Audit Committee monitors the independence of the auditors and furthermore concerns itself with the additional services performed by the auditors, the appointment of the auditors, the determination of the audit’s focus areas, and the agreement of the fee.

The Audit Committee chairman during the fiscal year, Dr. Stephan Krümmer, has special expertise and experience in the application of accounting principles and internal control procedures, which he has gathered over the course of his career. 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 has only shareholder representatives 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 effective June 12, 2019. The four-member committee has equal numbers of shareholder and employee representatives. The Technology Committee’s duty, among other things, is to strategically support and monitor the Executive Board in the implementation of significant capital expenditure projects. Prof. Dr. Karl Friedrich Jakob chairs the committee.

The shareholders of Aurubis AG exercise their codetermination and supervisory rights at the Annual General Meeting, which occurs at least once a year. Resolutions are passed at the Annual General Meeting on all matters defined by law that are binding for all shareholders and the company. Each share grants the holder one vote in the Annual General Meeting voting processes. There are no different categories of shares.

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 approval 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. In special cases, the German Stock Corporation Act (AktG) stipulates that an extraordinary General Meeting can be convened and/or the German Corporate Governance Code recommends that such a meeting be convened.

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 under obligation 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 and capital market law and made available in English and German on the Aurubis AG website.

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. This includes the report on the accounting-related internal control and risk management system required pursuant to Section 289 (4) and Section 315 (4) of the German Commercial Code (HGB).

The Executive Board ensures adherence to legal requirements and the internal company guidelines, and works toward compliance across all Group companies. The compliance management system was expanded further again during fiscal year 2018/19 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 issues. He reports regularly to the Executive Board and the Supervisory Board’s Audit Committee. At the individual Group sites, local compliance officers are available as a point of contact for employees.

Employees are also given the opportunity to provide anonymous tips regarding legal violations in the company by means of a whistle-blower hotline operated by an external service provider. This option can also be used by third parties.

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 with 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 exceed € 5,000 per calendar year.

One 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, 2018 to September 30, 2019:

• Prof. Dr. Fritz Vahrenholt purchased 2,500 no-par-value shares

One member of the Executive Board informed the company that he had acquired or sold no-par-value shares in the company in the period from October 1, 2018 to September 30, 2019:

• Mr. Roland Harings purchased 10,000 no-par-value shares

Aurubis AG prepares its consolidated financial statements and Combined 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 Combined 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 Aurubis AG and the Aurubis Group for fiscal year 2018/19. 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. Deloitte GmbH Wirtschaftsprüfungsgesellschaft, Hamburg, was appointed auditor of the 2018/19 consolidated financial statements and the Combined Management Report, as well as the 2018/19 HGB financial statements of Aurubis AG. Deloitte GmbH Wirtschaftsprüfungsgesellschaft, Hamburg, has been the appointed auditor since fiscal year 2018/19. The fiscal year 2018/19 audit therefore marked the first time it had audited Aurubis.

Accordingly, auditor Annika Deutsch oversaw the audit of 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 Deloitte 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 (IDW); in addition, the International Standards on Auditing were also observed. The audits also covered risk management and compliance with reporting obligations on corporate governance in accordance with Section 161 of the 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 2019

For the Executive Board

Roland Harings
Chairman

Rainer Verhoeven
Member