Corporate Governance

EGL is committed to professional and transparent corporate management in line with its corporate values. EGL believes that good corporate governance is an important prerequisite for the company’s success.

• 01 Group structure and shareholders
• 02 Capital structure
• 03 The Board of Directors
• 04 Executive Management
• 05 Remuneration, participating interests and loans
• 06 Shareholders’ rights
• 07 Change of control and defensive measures
• 08 Auditors
• 09 Risk Management
• 10 Compliance
• 11 Information policy
• 12 Contact addresses for further information

01 Group structure and shareholders

The EGL Group has three business divisions: "Energy Trading & Origination", "Assets" and "Gas Supply & Southeast Europe". Other tasks are organised in the "Finance & Operations" and "Corporate Functions" divisions.

1.1 Energy Trading & Origination. "Energy Trading & Origination" comprises the trading hubs Central and Eastern Europe, Northern Europe, Iberia, Italy and the UK as well as parts of the Swiss business. These units are active in the fields of energy supply, energy trading and services related to energy trading, and portfolio management. Energy trading covers cross-border trading, cross-commodity trading, power plant production optimisation and origination. Trading is conducted in physical as well as financial products. Trading in energy-related commodities covers electricity, natural gas, oil, coal and emissions certificates.

1.2 Assets. The "Assets" division incorporates the planning, construction, operation, maintenance and long-term economic optimisation of assets. EGL’s asset portfolio comprises power plants, long-term contracts and transport installations in Switzerland and abroad.

1.3 Gas Supply & Southeast Europe. The long-term natural gas business (with a time horizon of more than three years) covers procurement, transport and storage, wholesaling, sales to large customers and the centre of competence for Liquefied Natural Gas (LNG). EGL primarily procures natural gas directly from producers and uses it to supply proprietary gas-fired combined cycle power plants as well as for short-term trading transactions or long-term sales to customers. This unit also includes electricity and gas trading activities in the illiquid markets of Southeast Europe (SEE), including wholesale trading and cross-border trading in electricity.

1.4 Finance & Operations. In addition to the traditional finance functions such as Controlling, Accounting, Tax and Treasury, the "Finance & Operations" division is also responsible for risk management and Group IT matters as well as business development processes in electricity and natural gas trading.

1.5 Corporate Functions. The “Corporate Functions” division includes the Analysis & Strategy, Communication, Human Resources, Legal & Compliance and Project Portfolio Management departments.

1.6 Group structure. The parent company EGL AG is the only listed company in the consolidated group. The company is listed on the SIX Swiss Exchange (Zurich) and is based in Laufenburg, with a subsidiary in Dietikon, Zurich. The market capitalisation of the listed bearer shares (Sec. No. 328822/ISIN CH 0003288229) amounted to CHF 1,874.4 million as at 30 September 2010 (closing price of EGL share CHF 710 x 2,640,000 shares).

The list of Group subsidiaries, associates and other investments contains all companies in the consolidated group of EGL AG.

1.7 Significant shareholders. Axpo Holding AG, Baden, directly holds 91.00% of the share capital. No shareholders’ agreements exist.

1.8 Cross-shareholdings. There are no cross-shareholdings.

Management structure of the EGL Group at 1 October 2010

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02 Capital structure

2.1 Capital. The ordinary share capital as at 30 September 2010 is CHF 132 million. EGL has no authorised or conditional capital.

2.2 Changes in capital. Changes in share capital over the last four years are shown in the "Information per share" table.

2.3 Shares and participation certificates. The share capital of EGL amounts to CHF 132 million, divided into 2,640,000 fully paid-up bearer shares with a par value of CHF 50 per share. Each bearer share entitles the holder to a vote at the Annual General Meeting. Each share has the same dividend entitlement; there are no restrictions on transferability. There are no preferential rights or restrictions on voting rights. The company has no outstanding participation certificates, dividend-right certificates or options.

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03 The Board of Directors

The responsibilities of the EGL Board of Directors are defined in the Swiss Code of Obligations, the Articles of Association and the Organisational Regulations.

3.1 Members of the Board of Directors. The Board of Directors of EGL AG comprises seven people. None of the Board members exercises an executive management function within the company. In the three financial years preceding the reporting period, no member of the Board was entrusted with an executive management function within the EGL Group, and no business relationships existed.

The Board of Directors of EGL AG
(as at 30 September 2010)

Manfred Thumann stood down from the Board of Directors in January 2010. The Annual General Meeting of EGL held on 25 January 2010 appointed Hansueli Sallenbach as his successor on the Board.

Election and term of office. Board members are elected for a period of three years and may be re-elected. There is no restriction on the number of terms of office, but members are only eligible for election to the Board of Directors until the age of 65. Newly elected members take over their predecessor’s term of office. The year in which the current members of the Board of Directors were elected for the first time is shown in the brief biographies.

3.3 Internal organisation.. The Board of Directors is self-constituting. It appoints the Chairman and the Vice Chairman for a period of three years, as well as the Secretary, who need not be a member of the Board of Directors. The Board of Directors may appoint committees from among its members to perform special duties and assign them the necessary powers. A quorum is constituted when the majority of the board members are present. In the event of a tied vote, the Chairman has the casting vote.

A record of the proceedings and resolutions is kept. The Board of Directors convenes at the invitation of the Chairman as often as business requires, and at the written request of a Board member or Executive Management. During the year under review, the Board of Directors held eleven meetings at which generally all members were present or participated via telephone.

3.4 Audit and Finance Committee. The Audit and Finance Committee consists of Dr. Dominik Koechlin (Chairman), Dr. Peter Derendinger, Heinz Karrer and Dr. Rolf Bösch. It forms an independent assessment of the financial condition of the EGL Group, discusses the company’s financial statements with the CFO and the Chief Auditor, and provides advice to the Board of Directors, particularly with regard to financial objectives, financial strategy and financial planning. The Committee meets whenever required. During the year under review, it convened five times.

3.5 Nomination and Remuneration Committee. The Nomination and Remuneration Committee consists of Dr. Peter Derendinger (Chairman), Heinz Karrer and Dr. Dominik Koechlin. It is charged with defining the contractual terms and conditions of employment for members of Executive Management. It also advises the Board of Directors, particularly with regard to election proposals for new Board members, the selection and evaluation of candidates for Executive Management, and other personnel matters. The Committee meets whenever required. During the year under review, it convened four times.

3.6 Risk Council. In addition to the Board Committees, there is a Risk Council comprised of Heinz Karrer, Dr. Rolf Bösch, Dr. Peter Derendinger and members of Executive Management. The Risk Council supports the responsible bodies by providing advice on monitoring the risk situation and the further development of risk management. It meets once a quarter.

3.7 Assignment of Authorities. The division of authorities and responsibilities between the Board of Directors and Executive Management is laid down in the Organisational Regulations, which are published on the EGL website (www.egl.eu) under “Investor”. The Organisational Regulations set forth the non-transferable and inalienable duties of the Board of Directors as stipulated by law, and delegate all remaining activities (especially those of an operational nature) to the CEO, who in turn delegates them to members of Executive Management. Executive Management is presided over by the CEO, who ensures that decisions made by the Board of Directors are implemented. Financial powers and authorities are governed by the Appendix to the Organisational Regulations. The CEO can personally approve, inter alia, non-budgeted projects and loans as well as investments and divestments up to the amount of CHF 3 million. Decisions on transactions over and above these amounts are subject to the approval of the Board of Directors. Every year the Board sets special limits of authority for the CEO for energy transactions.

3.8 Information and control instruments vis-à-vis Executive Management. Executive Management informs the Board of Directors about the progress of business on a quarterly basis and about other important events on an ongoing basis. The auditors draw up an annual Management Letter outlining the most important findings of their audit. The internal auditors report on the results of their activities to the Board of Directors. The Risk Council reports to the Board of Directors on a regular basis regarding risk assessment and risk management at EGL.

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04 Executive Management

(as at 30 September 2010)

Hans Schulz, CEO
Andreas Rudolf, Finance & Operations (CFO)
Domenico De Luca, Energy Trading & Origination
Guy Bühler, Assets
Markus Brokhof, Gas Supply & SEE Andreas Rudolf, Finance & Operations (CFO)

No management agreements exist with third parties.

EGL Executive Management in the trading room at the company’s headquarters in Dietikon (from left):
Domenico De Luca, Guy Bühler, Markus Brokhof, Andreas Rudolf, Hans Schulz

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05 Remuneration, participating interests and loans

5.1 Content and process for determining remuneration and share ownership programmes. Under the terms of the Articles of Association, members serving on the Board of Directors receive "appropriate remuneration for their activities, as defined by the Board of Directors". Remuneration is not dependent on company results. It comprises a lump-sum remuneration which was defined in December 2007. The remuneration is reviewed by the Board of Directors at undefined intervals and revised if necessary.

In accordance with Art. 663b bis of the Swiss Code of Obligations (Transparency Law), remuneration to members of the Board of Directors is listed in the Notes to the financial statements of EGL AG.

The remuneration model applied to Executive Management is the same as the remuneration model used for all other EGL employees, and consists of a basic salary and a bonus component. The model has basically remained unchanged for the last five years.

The bonus component for members of Executive Management is dependent on the company’s business results and the achievement of personal objectives. Personal performance is evaluated at the end of the reporting period on the basis of the objectives agreed during a meeting with the employee’s line manager at the beginning of the financial year. The maximum bonus in this context is limited to 70 % of the basic remuneration.

An exception to this rule is the bonus model of the Executive Management member responsible for trading activities. Part of this bonus is calculated based on personal objectives. In addition, the Executive Management member responsible for trading participates in the gross profit from trading activities. Part of the bonus entitlement calculated in this way is paid out only in a subsequent year, taking into account any interim losses.

The remuneration model for Axpo Executive Board members, which consists of the components for personal goal achievement and business performance of the Group and the Group company, applies to the CEO.

Salaries paid to members of Executive Management also contain other components, including company car and fringe benefits, which apply equally to all EGL employees. EGL does not operate a share ownership programme, nor does it allocate shares or options as a fixed salary component.

All components of the remuneration package for members of Executive Management (including salary for the following calendar year and the bonus for the previous business year) are set on an annual basis. The CEO submits his proposal to the Nomination and Remuneration Committee of the Board of Directors, which then makes a decision on the proposal.

In accordance with Art. 663b bis of the Swiss Code of Obligations (Transparency Law), remuneration to Executive Management is listed in the Notes to the financial statements of EGL AG.

5.2 Share ownership.As at 30 September 2010, members of the Board of Directors owned 213 shares in EGL AG and members of Executive Management held none.

5.3 Loans to officers and directors. No loans were granted to members of the Board of Directors or Executive Management or to related parties, and no such loans are outstanding.

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06 Shareholders’ rights

EGL has only issued bearer shares. The shareholders’ rights are fully in accordance with the requirements of the Swiss Code of Obligations. There are no restrictions on voting rights.

There are no quotas in the Articles of Association that deviate from the provisions of the Swiss Code of Obligations with regard to passing resolutions at the Annual General Meeting.

The Articles of Association do not contain any provisions that deviate from the rules laid down by the Swiss Code of Obligations with regard to convening the Annual General Meeting.

Shareholders who represent shares with a par value of CHF 1 million may submit items for inclusion on the agenda of the Annual General Meeting. The request must be submitted to the Board of Directors no later than 50 days before the Annual General Meeting.

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07 Change of control and defensive measures

7.1 Obligation to submit a purchase offer. The Articles of Association include an opting-out clause. No defensive measures are provided for in the Articles of Association.

7.2 Change of control clauses. There are no longstanding contractually binding relationships with members of the Board of Directors or members of Executive Management. No compensation payments to departing members have been contractually agreed.

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08 Auditors

8.1 External auditors. The mandate to act as external auditors for EGL AG and to perform the EGL Group audit was awarded to KPMG AG of Basel in 1956. The Auditor in Charge since the 2004 Annual General Meeting has been Markus Forrer. The auditors’ term is one year. KPMG invoiced CHF 1,936,235 for auditing services provided in Switzerland and abroad and CHF 84,000 for other services during the 2009/10 financial year.

8.2 Internal auditors. The internal audit of all EGL Group companies was performed by PricewaterhouseCoopers (PwC). The purpose of this audit, which is not prescribed by law and is commissioned by the Chairman of the Board of Directors or the CEO in consultation with the Chairman of the Audit and Finance Committee, is to examine the effectiveness and efficiency of operational procedures.

A written report is submitted to the Chairman of the Board of Directors and to the Audit and Finance Committee. The Board of Directors is informed verbally of the results of the audit in a special meeting.

8.3 Supervisory and control instruments vis-à-vis the auditors. The Audit and Finance Committee of the Board of Directors is the supervisory body of the external and internal auditors. It instructs the auditors to submit a report on the audits performed and the related findings at least once a year. It also inspects the auditing plans and requests any proposals for improvement to the internal control systems, as well as evaluating the work done by the auditors.

The Board of Directors is informed of the findings of the audit by means of a Management Letter from the external auditors, which must first be commented upon by Executive Management. The external auditors conduct an interim audit to make sure that the points addressed in the Management Letter have been dealt with, and the results are reported to the Board of Directors.

A representative from the external auditors usually attends meetings held by the Audit and Finance Committee of the Board of Directors. Representatives from the external auditors attended three meetings held by the Audit and Finance Committee during the 2009/10 financial year.

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09 Risk Management

EGL’s risk management meets high standards and is an important instrument of corporate governance. A report on the activities of EGL Group Risk Management is published here.

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10 Compliance

EGL has a comprehensive compliance programme which systematically familiarises EGL management and employees with the company’s compliance culture and binds them to uphold the applicable principles and rules. EGL’s compliance programme is managed by the Group Compliance Officer, who operates an independent office for compliance issues and supports Executive Management and the Board of Directors in ensuring ongoing compliance with the corporate rules and regulations.

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11 Information policy

The EGL Annual Report is intended to provide information on business activities, organisation and strategy. In its half-year report, EGL publishes the income statement, statement of comprehensive income, balance sheet, statement of changes in equity and cash flow figures for the first six months of the financial year, while important information is disseminated ad-hoc to the general public by means of media releases. All current publications and up-to-date information can be found online at www.egl.eu.

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12 Contact addresses for further information

Investors
EGL Investor Relations
Tel. + 41 44 749 41 01
E-Mail investor.ch@egl.eu

Media
EGL Media Relations
Tel. + 41 44 749 40 10
E-Mail media.ch@egl.eu

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