Report of the Supervisory Board

Ladies and gentlemen!

In the 2009/10 financial year, the EVN Group determinedly pursued its strategy of further expanding its activities in energy and environmental services businesses. Despite the difficult market environment, important steps were taken to further optimise its strategic investments in South Eastern Europe based on a stable core business in Austria. This is complemented by the Group’s international environmental services business, which provide for attractive earnings, as well as the strategic interests held in VERBUND AG and Rohöl-Aufsuchungs Aktiengesellschaft. On balance, the EVN Group has a broad-based portfolio, which optimally protects the company against imminent business risks. Despite the ongoing weak economic situation and the unfavourable influencing factors in the energy sector, EVN still succeeded in achieving very good results.

The Supervisory Board actively monitored and supported EVN’s strategic steps as part of its designated responsibilities. It convened five times for plenary meetings during the period under review, fulfilling the tasks and duties incumbent upon it in accordance with legal regulations and the Articles of Incorporation. The average rate of attendance of the Supervisory Board members was 78%. The Executive Board reports provided the Supervisory Board with regular, timely and comprehensive information about all relevant aspects of the Group’s business development and the risk situation as well as the development of key Group subsidiaries. Thus the Supervisory Board was able to continually supervise and support the Executive Board’s management activities. The advisory and control functions exercised by the Supervisory Board within the framework of open discussions with the Executive Board did not lead to any objections. Suggestions made by the Supervisory Board were taken up by the Executive Board.

Among the main decisions made by the Supervisory Board is the approval of the budget of the EVN Group for the 2010/11 financial year, as well as the implementation of the new EVN Strategy 2020.

On the basis of the resolution pertaining to authorised capital passed at the 81st Annual General Meeting held on 21 January 2010, the Supervisory Board held in-depth consultations, subsequently authorising the working committee to grant all the required approvals and submit the necessary declarations as the basis for implementing the capital increase (which has been successfully carried out in the meantime). Moreover, the Supervisory Board also took note of and approved the employee participation scheme within the context of this transaction.

The Supervisory Board also gave its stamp of approval for EVN to conclude a partnership agreement with Wiener Stadtwerke Holding AG, in particular to set up a joint venture and to participate in the capital increase of VERBUND AG, as well as to increase EVN’s guarantees for EnergieAllianz Austria GmbH and to acquire shares of NÖKOM NÖ Telekom Service Gesellschaft m.b.H.

In the Environmental Services segment, the Supervisory Board approved the project to reconstruct the 1st waste incineration plant in Moscow, to build the Ljuberzy sludge drying facility in Moscow and to finance the Budva wastewater system in Montenegro.

Furthermore, the Supervisory Board gave its consent to a capital increase for Devoll Hydropower Sh.A. and for the Ashta hydropower plant project in Albania. It approved the expansion of EVN’s shareholding in Gorna Arda Hydropower Company AD as well as the share acquisition relating to the Kavarna wind park in Bulgaria.

The Supervisory Board put into effect the Austrian Corporate Governance Code in the January 2010 version, which applied to EVN AG starting in March 2010, granted full power of attorney and approved modifications to the variable remuneration system as of 1 October 2010 for the managers of the strategic business units, the head of Group functions as well as the executive board members and managing directors of major subsidiaries.

The Personnel committee of the Supervisory Board, which also serves as the remuneration and nominating committee, convened for three meetings during the 2009/10 financial year, dealing with issues pertaining to the relationship of the company to the members of the Executive Board. Modifications made to the variable remuneration system applying to members of the Executive Board took effect on 1 October 2010.

The Audit committee of the Supervisory Board held two meetings during the 2009/10 financial year. It dealt with the results for the first half-year 2009/10, including the outlook for the rest of the financial year, prepared the resolution approving the consolidated financial statements and made a proposal for appointing the certified public accountants to audit the annual accounts. Furthermore, the Audit committee focused on current developments in the business segments, and in particular discussed the situation in Macedonia and the major power plant projects. It also dealt in detail with the internal controlling, auditing and risk management system.

KPMG Austria GmbH Wirtschaftsprüfungs- und Steuerberatungsgesellschaft, Vienna appointed as EVN’s certified public accountants for the 2009/10 financial year, starting 1 October 2009 and ending on 30 September 2010, examined the annual accounts of EVN AG as at 30 September 2010, which were prepared in accordance with Austrian accounting regulations, as well as the Management Report submitted by the Executive Board and the Corporate Governance Report. KPMG presented a written audit report, and issued an unqualified opinion. Following detailed scrutiny and discussions in the audit committee and the entire body, the Supervisory Board approved the financial statements and the consolidated financial statements as at 30 September 2010 submitted by the Executive Board, the related Management Report, Corporate Governance Report and the proposals for the distribution of profits. The financial statements as at 30 September 2010 are thereby approved, pursuant to § 125 Section 2 of the Austrian Stock Corporation Act. These statements were prepared pursuant to International Financial Reporting Standards (IFRS) and audited by KPMG Austria GmbH Wirtschaftsprüfungs- und Steuerberatungsgesellschaft, Vienna, which issued an unqualified opinion. The Supervisory Board approved the consolidated financial statements, the explanatory notes and the Management Report.

In closing, the Supervisory Board wishes to express its sincere gratitude to the Executive Board and all employees of the EVN Group for their endeavours, hard work and commitment during the 2009/10 financial year. Particular thanks are extended to the shareholders, customers and partners of the EVN for their confidence in the company.

Maria Enzersdorf, 15 December 2010

On behalf of the Supervisory Board:
Signature Rudolf Gruber
President Rudolf Gruber
Chairman of the Supervisory Board


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