Corporate Governance-Report (pursuant to §243b UGB)

Corporate Governance comprises all measures (structures, processes and rules) to ensure that actions of management and employees of a company are consistent with the interests of the shareholders. Since going public in 1992, BWT has been pursuing the goal of sustainable ecologically and economically-oriented value generation.

BWT complies with the Austrian Corporate Governance Code, a regulation framework of standards for sound management and supervision of the company. This includes the standards of good corporate management common in international practice (OECD Principles, EU Transparency Directive) but also the important significant provisions of Austrian corporation law in this respect (Börsegesetz, Gesellschaftsrechtsänderungsgesetz 2005, Unternehmensrechtsänderungsgesetz 2008). This enables a high level of transparency for all stakeholders of the company. The Code is publicly accessible on the homepage of the Austrian Working Group for Corporate Governance on http://www.corporate-governance.at/.

To avoid insider trading, a policy based on the Emittenten-Compliance-Verordnung (ECV – Regulation on Compliance for Issuers, current version: 2008) of the Austrian Financial Market Authority has been in place at BWT since 2002 and is implemented in the company by the Compliance Officer. The Code of Conduct which came into force in 2007 is aimed at all employees and includes all the principles of conduct. It provides guidance on the fundamental ethical and legal duties of BWT employees.

The new Corporate Governance  Code 2010 has now come into force – an evolution of the first version formulated in 2002 and amended in 2006 and 2008. The improvements primarily relate to the Supervisory Board regarding transparency and independence and compensation.

The Code comprises three rule categories:
1. Legal requirement (“L”) – including compulsory regulations
2. The “C” rules (Comply or Explain) in the Austrian Code of Corporate Governance are to be followed; any deviation must be explained and the reasons stated in order to comply with the Code
3. Recommendation rules (“R”)

BWT applies the Corporate Governance Code in the version 2010 in full with the following explanations:

The Executive Board
The Management Board consists of Mr. Andreas Weissenbacher, born 1959, Chairman of the Executive Board since 8/1/1991 of BWT AG; Mr. Weissenbacher is responsible for the operational business and for the departments Research & Development, Purchasing, Human Resources, Marketing and Investor & Public Relations. Mr. Gerhard Speigner, born 1960, since 1/5/1996 Chief Financial Officer is managing the departments Finance & Controlling, Treasury, Information Technology, Law, Taxes & Risk Management. Both members of the Management Board are appointed until 20/9/2010. This organization allows a high flexibility and an efficient operation in the Management Board.

The share of female employees of the BWT Group is roughly 28%, the share of management roughly 18% and in the Supervisory Board 20%. Gendering measures include opportunities to better balance job and family like flexible working time (eg part time work) and home office.

The Supervisory Board
The Supervisory Board is composed of five members with high and long term experience in business administration and legal affairs elected by the General Meeting. Two members have been serving for more than 15 years. All members are Austrian citizens.

Where applicable, other Supervisory Board mandates or similar functions in domestic or foreign listed corporations are disclosed: until November 2009, Mrs. Gerda Egger and Dr. Wolfgang Hochsteger were Supervisory Board Members of Christ Water Technology AG; Dr. Leopold Bednar until December 2009. Mr. Serge Schmitt (born 1949, first appointed May 29, 2002) was Member of the Supervisory Board of BWT AG until May 20, 2009.

Independency of the Supervisory Board
“Independent” in the sense of the blanket clause of Rule 53 refers to Members of the Supervisory Board whose business or personal relationship with BWT AG or its Management Board does not constitute a material conflict of interest allowing the Member’s behavior to be influenced. The criteria for independence are set in accordance with the guidelines of the Corporate Governance Code (Annex 1). The Supervisory Board thus comprises the following independent members:
Dr. Leopold Bednar, Klaus Kastner MBA.

Committees and activities of the Supervisory Board
The Supervisory Board of BWT AG is made up of experts of various disciplines with regular meetings on issues like strategy, balance sheet and personnel of the Group. Within this scope, the Supervisory Board of BWT AG is also involved in important decisions of the Management Board as an advisory body.

Apart from the Audit Committee there is no committee established by the Supervisory Board of BWT AG. The following persons of the Supervisory Board form part of the Audit Committee: Dr. Bednar as Chairman, Ms. Egger and Mr. Reicher. The Audit Committee held 2 meetings in the year 2009 at which the year-end accounts and analysis and the internal control, revision and risk systems were discussed.

In the year 2009, the Supervisory Board held 4 ordinary and one extraordinary meeting/s. The average rate of presence was 92.7%. No Member of the Supervisory Board attended less than 50% of the meetings. The main activities of the Supervisory Board in the reporting period are detailed in the Report of the Supervisory Board.

Internal auditing
The internal auditing duties are being performed by the Risk Management, Group Finance, Group Controlling and Group Treasury departments. The Management and Supervisory Boards are given regular reports about important results of these auditing activities.

Report on the compensation of the Management Board
Management Board compensation is determined by the scope of duties, responsibility and the personal performance of the Board Member as well as the achievement of company targets, size and the economic health of the company. At BWT AG performance-related compensation is not made with share options, but dependent on long-term and sustainable performance criteria. These include predefined goals regarding company results, qualitative and quantitative goals.

In 2009, 79.2% of the total remuneration of the Management Board was fixed and 19.8% performance-related. No value has been determined for the variable maximum. Since there are only two Board Members, no indication on the individual compensation for each Board Member is given. There is no company pension plan. There are also no Management Board entitlements or individual legal rights should the function be terminated. There is a valid liability insurance protection for the management of the Group (D&O insurance).

The duties of the Audit Committee are assumed by the entire Supervisory Board. Relevant knowledge and experience about compensation policy is contributed in particular by Dr. Bednar.

Report on the compensation of the Supervisory Board
Compensation of the Members of the Supervisory Board was determined by the Annual General Meeting on May 20, 2009, for the financial year 2008. The members of the Supervisory Board received expense reimbursements totalling € 51,600 for the activities during the 2009 financial year (2008: € 46,400). The basic remuneration for the Members of the Supervisory Board amounts to € 7,500 (2008: € 7,500) per person, for the Chairman € 20,000 (previous year: € 15,000). Beyond that, there were compensations of travel costs. In total, payments of € 51,600 were made to Members of the Supervisory Board.