aap has always attached great importance to corporate governance. The Management Board and Supervisory Board are committed to responsible, long-term corporate management to ensuring the Company’s continued existence as a going concern and sustainable value creation.

We are convinced that good and transparent corporate governance is a key factor in ensuring corporate success. Corporate governance is therefore a part of our corporate philosophy, which covers all areas of the Company. Our aim is to justify on a long-term basis the confidence that is shown in us by investors, business partners, employees, financial markets, and the general public and to take corporate governance forward continuously in the Group.

Operational Principles of the Management Board and Supervisory Board

Management Board and Supervisory Board collaborate closely in the Company’s interest. Their common objective is to ensure the Company’s continued existence as a going concern and its sustainable value creation. In accordance with the statutory requirements of German company law, aap Implantate AG has a two-tier management system characterized by separate membership of the management and the supervisory body.

The Management Board manages the Company in the corporate interest with a view to increasing its enterprise value on a sustainable basis and to achieving the specified business objectives. It manages the business on the basis of statutory requirements, the Articles of Incorporation, the Company’s rules of procedures and the schedule of responsibilities. The Management Board sets long-term targets for the Company as a whole, develops its strategic alignment, agrees them with the Supervisory Board and ensures their implementation. It makes decisions on fundamental issues of company policy and on annual and multiannual planning. It coordinates and monitors significant activities. It determines the budget, appoints management personnel, decides on financial management, and is responsible for drawing up quarterly and 6 months reports, consolidated financial statements and the Company’s group management reports along with the annual financial statements and management report of aap Implantate AG. The Management Board is also responsible for ensuring compliance with statutory requirements and internal corporate guidelines.

It informs the Supervisory Board regularly, comprehensively and in a timely manner on all issues of corporate strategy, planning, business development, the financial and earnings position, compliance, and any risks that are of relevance for the Company as a whole. Events that differ from the targets are discussed and explained.

The two Management Board members are jointly responsible for the Company’s overall management. In addition to this overall responsibility, individual Management Board members are in charge of the areas assigned to them in the schedule of responsibilities. Management Board meetings are held at regular intervals.

The Supervisory Board’s task is to monitor the Management Board and to advise it on managing the business. It has six members. The Supervisory Board is involved directly in all decisions of fundamental importance for the Company. It also agrees with the Management Board the Company’s strategic alignment and discusses with it at regular intervals the status of corporate strategy implementation. It deals with quarterly and 6 months reports and approves the annual financial statements of aap Implantate AG and the aap Group with due regard for the auditor’s reports.

The Supervisory Board Chairman coordinates the Board’s work and chairs its meetings. In a regular exchange of views with the Management Board the Supervisory Board is always informed about company policy, planning and strategy. The Supervisory Board approves annual plans and the funding framework. A further area in which the Supervisory Board is active is the appointment of Management Board members. Fundamental decisions require its approval. Material decisions by the Management Board, such as significant acquisitions, divestments or financial measures, are subject to its consent. The Supervisory Board has laid down in the rules of procedure for the Management Board the rules that govern the Management Board’s work, especially the areas of responsibility of Management Board members.

Corporate Compliance

Compliance in the sense of measures to maintain law, justice and internal corporate guidelines and ensure that they are observed by Group companies is an important part of day-to-day activities at aap.

Our corporate activity is geared to the German and Dutch legal systems that require the aap Group and its employees in Germany and elsewhere to abide by a wide range of obligations. aap conducts its business responsibly and in accordance with the statutory provisions and official regulations in both countries. aap expects all employees to act in a legally and ethically sound manner in day-to-day business because every employee influences the Company’s reputation by means of his professional behavior. In a regular dialog and in courses with which the Compliance Officer is associated, every head of department is briefed on the wide range of statutory regulations. This is the basis on which business can be conducted responsibly and in accordance with the law of the land in question.

Transparency, Publicity and Accessibility of Information for Shareholders

To ensure the maximum possible transparency, we inform our shareholders, financial analysts, shareholder associations, the media and interested members of the public regularly and in a timely manner about the Company’s position and material business changes. Our reporting thereby complies with the provisions of the Corporate Governance Code. aap informs its shareholders four times a year about business development, the assets, financial and earnings position of the Company and the risks that it faces. In accordance with statutory requirements the members of the Management Board assure that to the best of their knowledge the annual financial statements and management report and the consolidated financial statements and group management report convey an accurate picture of the true state of affairs.

In 2010, the annual financial statements and management report of aap Implantate AG, along with the consolidated financial statements and group management report, were published within 90 days of the end of the financial year. In the course of the financial year aap also publishes a 6 months report and in the first and third quarters a quarterly report.

The Annual General Meeting (AGM) is usually held in the first eight months of the financial year. At aap the AGM is always prepared with a view to providing shareholders with all relevant information at an early stage. The holding of an AGM, the details of its agenda and an explanation of the terms and conditions of attendance are usually announced a month and a half in advance of the meeting. Documents and information for the AGM are also made available on the Company’s website. After the AGM we publish details of attendance and voting results on the Internet. Inter alia, the AGM decides on formal approval of the work of the Management Board and Supervisory Board and on the choice of auditor. Amendments to the Articles of Incorporation and measures that bring about capital changes may only be approved by the AGM and implemented by the Management Board. Shareholders may table counter-motions to Management Board and Supervisory Board proposals and file appeals against decisions taken by the AGM.

aap has always used the Internet as a publication platform. On its website, aap informs its shareholders, potential investors, analysts, shareholder associations and interested members of the general public continuously about the latest developments in the Group and, in the financial calendar, about the main recurring dates and events. These include the date of the Annual General Meeting and the publication dates of interim reports. In addition, all aap Implantate AG Press releases and Ad-hoc announcements are published on the website. It also contains information about AGMs and annual and quarterly reports. All shareholders and interested parties can subscribe to all publications on the website to ensure that they are informed without delay of each and every Press release and Ad-hoc announcement.

As part of our investor relations work the Management Board holds regular meetings with analysts and institutional investors. In addition to at least one annual analysts’ conference, a conference call is held for analysts and representatives of the Press on publication of the quarterly figures. All presentations for these events can be seen on the website.
Implantate AG complies with the recommendations on the German Corporate Governance Code (in the version published on June 18, 2009) with the following exceptions:

The D&O policy taken out for the Management Board and the Supervisory Board does not contain a deductible (Section 3.8 Para. 2). aap’s D&O policy is a group policy for management in Germany and other countries that does not distinguish between members of executive bodies and other management personnel. All members of executive bodies are required as a matter of course to act responsibly, so a deductible is therefore not necessary. Furthermore, all members of executive bodies would be free to take out insurance cover to the amount of the deductible, so the deductible would no longer have the intended effect.

A retroactive change in performance targets or comparison parameters as components in the compensation of Management Board members is not ruled out. No severance payment cap limits have been set in the event of premature termination of a Management Board member’s contract due to a change of control (Section 4.2.3 Paras. 3 and 5). The Company has hitherto dispensed with an explicit exclusion of retroactive changes to be able to respond to economic changes. Given the Company’s economic development, a cap or limit to compensation has hitherto been unnecessary. In some cases, however, monetary ceilings have been agreed.

No age limit has been set for Management Board and Supervisory Board members (Section 5.1.2 Para. 2; Section 5.4.1). Specifying an age limit for members of executive bodies restricts the shareholders in their right to elect representatives of their choice to the Supervisory Board; it also limits the Supervisory Board’s ability to appoint the candidate with the best qualifications as a member of the Management Board. Specifying an arbitrary limit to comply with the Code’s recommendations is not considered appropriate.

The Supervisory Board has not formed any committees (Section 5.3.1, 5.3.2, and 5.3.3). Setting up committees is not seen as boosting efficiency.

Compensation received by members of the Supervisory Board does not include a performance-related component (Section 5.4.6 Para. 2). It consists solely of an attendance fee, thereby maintaining the independence of the supervisory body in every respect.


Since the last declaration of conformity published on December 29, 2008, aap Implantate AG has complied with the recommendations of the German Corporate Governance Code in the version published on June 18, 2009 or, until August 5, 2009, with the previous version, with the following exceptions:

Declaration by aap Implantate AG’s Management Board and Supervisory Board

on the recommendations of the Government Commission on the German Corporate Governance Code in accordance with Section 161 of the German Stock Corporation Act (Aktiengesetz/AktG)

The D&O policy taken out for the Management Board and Supervisory Board did not contain a deductible (Section 3.8 Abs. 2). It is a group policy for management in Germany and other countries for which a distinction between members of executive bodies and other management personnel does not appear to be appropriate. Agreeing a deductible did not imply a heightened sense of responsibility inasmuch as liability claims in respect of deliberate or conscious dereliction of duty are already ruled out, as are contractual penalties and fines. A deductible is not customary internationally either, with the result that recruiting international members for executive bodies might be made more difficult by any such provision.

Until December 31, 2008 the Management Board did not have a Chairman or Spokesman (Section 4.2.1 Sentence 1) because the former directors ran the Company jointly, each in charge of equally weighted functional areas.

A retroactive change in performance targets or comparison parameters for the compensation of Management Board members was not ruled out. No severance payment cap was agreed in the event of premature termination of a Management Board member’s contract (Section 4.2.3 Paras. 3-5). The Company has so far refrained from ruling out retroactive changes in performance targets explicitly in order to be able to respond to economic changes. Given the Company’s economic development, a cap or limit to compensation has hitherto been unnecessary.

No age limit was set for Management Board and Supervisory Board members (Section 5.1.2 Para. 2; Section 5.4.1). Specifying an age limit restricts the shareholders in their right to elect their representatives to the Supervisory Board; it also limits the Supervisory Board’s ability to appoint the best qualified candidate as a member of the Management Board. Specifying an arbitrary limit to comply with the Code’s recommendations is not considered appropriate.

The Supervisory Board had not formed any committees (Section 5.3.1, 5.3.2, and 5.3.3). Setting up committees was not seen as boosting efficiency.

Compensation received by members of the Supervisory Board did not include a performance-related component (Section 5.4.6 Para. 2). It consisted solely of an attendance fee, thereby maintaining the independence of the supervisory body in every respect.

Due to the extensive changes in details to be specified in the Notes in accordance with IFRS, the consolidated financial statements for 2008 were not published within 90 days of the end of the reporting period (Section 7.1.2). The statutory deadline was met.

The declaration on the German Corporate Governance Code is also published on the web page of aap and can be viewed at: http://www.aap.de/en/Investor/Corporate_Governance/Entsprechungserklaerungen/

Shareholding of the members of the Management Board and the Supervisory Board

In accordance with the Disclosure of Management Compensation Act, the main points of the remuneration systems for the Management Board and Supervisory Board are outlined in detail in the management report, as are details of the stock option programs. To avoid repetition, readers are here referred to pages 51 to 56 of the management report and pages 102 to 104 of the Notes.

Directors’ Dealings

By the terms of Section 15 (2) of the German Securities Trading Act, Management Board and Supervisory Board members and related parties are required to make public the purchase or sale of aap Implantate AG securities if the value of transactions reaches or exceeds €5,000 in the course of the calendar year. In keeping with the Corporate Governance Code aap also publishes all transactions on its website without delay and sends a copy to the Federal Financial Supervisory Authority (Bafin). Directors Dealings of 2009, which were reported to aap, are published on the web page and can be viewed under: http://www.aap.de/en/Investor/Corporate_Governance/Directors_Dealings/