Zapf Creation - Setting free a childrens imagination.

Both the Management Board and the Supervisory Board of Zapf Creation AG declare pursuant to Section 161 German Stock Corporation Act that the Company, after having issued last year's declaration of conformity on December 16, 2008, has been and is in compliance with the recommendations of the Government Commission on the German Corporate Governance Code as amended on June 18, 2009, and as published by the German Ministry of Justice on August 5, 2009, in the official section of the electronic Federal Gazette, with the exception of the following:

• "If the Company takes out a D&O (directors' and officers' liability insurance) policy for the Management Board, a deductible of at least 10% of the loss up to at least the amount of one and a half times the fixed annual compensation of the Management Board member must be agreed upon. A similar deductible must be agreed upon in any D&O policy for the Supervisory Board." (Item 3.8, para 2)
  
  The existing D&O insurance purchased by Zapf Creation AG does not require the members of the Company's Management and Supervisory Boards to pay a deductible. Deductibles are usually unsuitable for preventing losses and thus are generally taken into account by the insurance industry only in the calculation of premiums. The legally required deductible for members of the Management Board will be taken into account within the period specified.

• "For instance, share or index-based compensation elements related to the enterprise may come into consideration as variable components. These elements shall be related to demanding, relevant comparison parameters. Changing such performance targets or the comparison parameters retroactively shall be excluded. For extraordinary developments a possibility of limitation (cap) must in general be agreed upon by the Supervisory Board. (Item 4.2.3, para 3)
  
  In principle, the Company intends to follow these recommendations in future contractual agreements. However, a share-based compensation system involving phantom options which does not take into account these recommendations is still in place for the current members of the Management Board of Zapf Creation AG. Exercising the phantom options is not tied to the fulfillment of specific performance targets. This did not seem necessary given the limited number of phantom options. Furthermore, demanding, relevant performance targets were defined in connection with the variable compensation of the Management Board members. At the time they exercise their phantom stock options, beneficiaries are paid the difference per exercised option between the closing price of the share on its issue date and on the exercise date. There is no explicit regulation excluding the retroactive change of the comparison parameters. While a cap for extraordinary developments is not yet included, such a cap shall be stipulated in newly concluded director's contracts.

• "Together with the Management Board it shall ensure that there is a long-term succession planning." (Item 5.1.2, para 1, sentence 3)
  
  There is currently no long-term succession planning in place for the members of the Management Board. Given the size of the Company, internal succession planning for the Management Board is only possible to a limited extent.

• "The Supervisory Board shall form a nomination committee composed exclusively of shareholder representatives which proposes suitable candidates to the Supervisory Board for recommendation to the Annual Shareholders' Meeting." (Item 5.3.3)
  
  Given the size of the Company and its Supervisory Board, the formation of a nomination committee is not appropriate.

• "Furthermore, attention shall also be paid to [...] an age limit to be specified for the members of the Supervisory Board [...]." (Item 5.4.1, sentence 2)
  
  No age limit for members of the Supervisory Board has been set because we do not believe that the age of a Supervisory Board member is a key criterion for his or her qualification.

• "Proposed candidates for the Supervisory Board chair shall be announced to the shareholders." (Item 5.4.3, sentence 3)
  
  The current chairman of the Supervisory Board was elected without having announced proposed candidates to the shareholders because the Supervisory Board's election of its chairman took place shortly after the members of the Supervisory Board were elected by the Annual Shareholders' Meeting on May 27, 2008, and the current chairman of the Supervisory Board had already held this position prior to his election to the Supervisory Board during the aforementioned Annual Shareholders' Meeting.

• "The consolidated financial statements shall be publicly accessible within 90 days of the end of the financial year." (Item 7.1.2, sentence 4)
  
  The Company was unable to make its consolidated financial statements for the 2008 financial year publicly accessible within the required periods because the negotiations with the banking syndicate regarding the Company's long-term financing were not concluded in time.

Zapf Creation AG,
Roedental, Germany, December 11, 2009

Ron Oboler
Chairman of the Management Board

Ron Brawer
Member of the Management Board

José Antonio Santana
Member of the Management Board

Dr. Harald Rieger
Chairman of the Supervisory Board

Contact:
Jürgen Gerber
Compliance Officer
Tel.: 0 95 63 / 7 25 - 1341
Fax: 0 95 63 / 7 25 - 41341
E-Mail: juergen.gerber@zapf-creation.de

Download of the Declaration of Conformity 2009

Please click here for the Corporate Governance report 2008.