The Austrian Corporate Governance Code is mainly geared towards publicly traded corporations and includes standards for good business practices which are implemented through voluntary commitment by the corporation.

The Austrian study group for corporate governance developed a new version of the Austrian Corporate Governance Code which applies for business years starting on January 1, 2006. The revised form of the in 2002 formulated first version implements among other things the new corporate governance recommendations of the EU commission and the Change of Corporation Code of 2005. This involved a total change of 36 of the 80 regulations.1

The code covers three standard categories:

1. Legal requirements (L): Rule is based on mandatory legal regulations
   
   
2. Comply or explain (C): Company has to comply with the rule, deviations must be explained and justified in order to achieve a code compliant conduct
   
   
3. Recommendation (R): Rule with recommending character; noncompliance does not have to be disclosed or to be justified

With the approval of the supervisory board, the management board of JoWooD Productions Software AG decided to implement the Austrian Corporate Governance Code (version January 2006). The Corporate Governance Code ensures the efficient control of the corporate administration and therefore protects the interests of the shareholders.

JoWooD operates in accordance with the rules and regulations of the relevant laws, in particular in accordance with the rules of the Stock Exchange and Stock Corporation Act. Furthermore, JoWooD recognizes the regulations of the Corporate Governance Code as an important and valuable instrument for voluntary self-regulation and transparency of the capital markets and commits to the observance of the here documented regulations. JoWooD only deviates with the following Comply or Explain Regulations of the regulations of the Austrian Corporate Governance Code (version January 2006) and justifies this as follows:

Paragraph 4 of the CGC (C Rule)
The bylaws of JoWooD currently stipulate the calling of the annual general meeting with a notification period of 14 days. With the next amendment the bylaws, JoWooD will extend this period to at least three weeks. JoWooD deems an amendment of the bylaws only for an adaptation of the bylaws to paragraph 4 of the CGC as impractical for economical reasons.

Paragraph 16 of the CGC (C Rule)
The management board of JoWooD currently consists of one person. Based on the size of the corporation and the business volume of JoWooD, the appointment of an additional board member is currently not necessary.

Paragraph 18 of the CGC (C Rule)
The internal auditing duties are performed by the Controlling division. Essential results of this auditing activity are reported regularly to the board and the supervisory board. Based on JoWooD’s corporate size, the establishment of an internal auditing division as an administrative department of the board or the outsourcing of the internal auditing to an appropriate institution is currently not necessary.

Paragraph 38 of the CGC (C Rule)
An age limit for the nomination of board members is currently not stipulated in the bylaws. The appointment of board members for JoWooD is based exclusively on their professional and personal qualifications.

Paragraph 41 of the CGC (C Rule)
The supervisory board does not appoint a nomination committee. The supervisory board is comprised of experts from various professions and holds meetings in regular intervals which address the filling of seats on the board as they become available and which deal with questions concerning succession planning.

Paragraph 43 of the CGC (C Rule)
The supervisory board does not appoint a compensation committee. The supervisory board is comprised of experts from various professions and holds meetings in regular intervals which among other items address the compensation of the board members as well as the content of employment agreements.

Paragraph 57 of the CGC (C Rule)
An age limit for the nomination of supervisory board members is currently not stipulated in the bylaws. The composition of supervisory board is based exclusively on professional and personal qualifications.