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• Corporate Governance Code

Compliance with Austrian Corporate Governance Code

The Austrian Corporate Governance Code (“ACGC”) provides a framework for the responsible management and controlling of companies and groups aiming to achieve long-term and sustainable value creation. The ACGC is generally acknowledged in Austria. Both the latest and previous editions of the ACGC are published online at www.corporate-governance.at – the January 2009 edition is applicable to the present report.

The ACGC is contains three categories of rules. Whereas so-called L Rules substantially reproduce legal regulations, making compliance compulsory, so-called C Rules should be complied with, and any departure from these rules explained and justified in order to ensure that reporting complies with the code. Finally, the code also contains so-called R Rules that are of the nature of recommendations only, and non-compliance does not have to be either disclosed or justified.

The Code is designed as a self-regulatory initiative and goes beyond legal requirements of a public company. The Austrian Corporate Governance Code comprises a total of 80 rules, which are classified in three categories:

Declaration of compliance with the C Rules

bwin Interactive Entertainment AG has undertaken to comply with the ACGC since the financial year 2002. The Company departed from the following C Rules in the financial year 2009:

Rule C-4: Motions at the Annual General Meeting

Some of the motions placed on the agenda of the Annual General Meeting and available were not published separately on the website.

Rule C-16: Appointment of an Executive Board chairman

The rule that the Executive Board should have a chairman is inconsistent with the Company’s actual organizational structure, where two co-CEOs have been responsible for the Company’s strategic orientation and development right from the word go.

Rule C-18: Establishment of an internal audit department

Tasks similar to internal audit were carried out by the “Corporate Security” department in technical areas (IT) and in many instances by Controlling with respect to commercial matters. A report on the results of this audit to the audit committee by this department was made for the first time during the year under review. A department (“Internal Audit and Security“) has featured in the Company’s organigram since March 2010, and will focus entirely on the task of internal auditing.

Rule C-28: Share-based payments (stock option plans)

When bwin went public, an Employee Stock Option Plan (ESOP) was approved by the Annual General Meeting and introduced in February 2000 in order to bind employees and executives to the Company and allow them to share in its success. This stock option plan has since been adapted and expanded – each time with the approval of the Annual General Meeting – the last time being at the Annual General Meeting on 19 May 2009. Under the terms of the ESOP, options are granted to the Executive Board on the basis of performance criteria.

In March 2007, the Executive Board was also granted performance-oriented share options outside the ESOP. Under the Companies Act, the wording of Executive Board contracts (with regard to both fixed and variable remuneration) is the responsibility of the Supervisory Board, and in this instance, too, it was the Supervisory Board that determined details of the wording and the allocation of these performance-oriented options.

The lockout periods and exercise periods associated with the exercise of all options are specified and communicated in the Compliance Guideline (see the section "Share options" of this report for further information).

Rule C-34: Rules of procedure for the Supervisory Board

The Supervisory Board complies with the stipulations of the Companies Act and the Corporate Governance Code with respect to the establishment of committees. These regulations therefore take the place of those contained in rules of procedure.

Rule C-36: Self Evaluation of Supervisory Board

The Supervisory Board is constantly involved in its work and consequent improvements to the board. In the financial year 2009, the board embarked on a structured and formal self-evaluation, a process that had not been completed at the time of going to press.

Rule C-53: Criteria for independence

In the past there was no formal classification of the criteria for defining independence. The guidelines in Appendix 1 of the Code were applied for the purpose of evaluating independence within the scope of this report.

Rule C-66: Quarterly reporting in accordance with IFRS

The quarterly reports for the financial year 2009 were prepared with due consideration for IFRS, the only exception being that the information about segment reporting and the business segments was not yet based on the new regulations of IFRS 8. These were applied for the first time in the consolidated financial statements for the financial year 2009.

Rule C-83: Final audit

An evaluation of the functionality of the risk management system in accordance with this rule was not carried out by the auditor for the financial year 2009.

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