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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

SCHEDULE 14A
(Rule 14a-101)

INFORMATION REQUIRED IN
PROXY STATEMENT

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No.          )

Filed by the Registrant ý
Filed by a Party other than the Registrant o
Check the appropriate box:
o		Preliminary Proxy Statement
o		Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
ý		Definitive Proxy Statement
o		Definitive Additional Materials
o		Soliciting Material under §240.14a-12

 

WATTS WATER TECHNOLOGIES, INC.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
ý		No fee required.
o		Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
		(1)		Title of each class of securities to which transaction applies:
		(2)		Aggregate number of securities to which transaction applies:
		(3)		Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):
		(4)		Proposed maximum aggregate value of transaction:
		(5)		Total fee paid:
o		Fee paid previously with preliminary materials.
o		Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.
		(1)		Amount Previously Paid:
		(2)		Form, Schedule or Registration Statement No.:
		(3)		Filing Party:
		(4)		Date Filed:

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Watts Water Technologies, Inc.
March 25, 2011

Dear Stockholder:

        It is my pleasure to invite you to attend our 2011 Annual Meeting of Stockholders, which will be held on Wednesday, May 11, 2011 at 9:00 a.m. at The Andover Country Club, 60 Canterbury Street, Andover, Massachusetts 01810. On the pages following this letter you will find the notice of our 2011 Annual Meeting, which lists the business matters to be considered at the meeting, and the proxy statement, which describes the business matters listed in the notice. Following completion of the scheduled business at the 2011 Annual Meeting, we will report on our operations and answer questions from stockholders.

        Whether or not you plan to attend the 2011 Annual Meeting, your vote is important and we encourage you to vote promptly. You may vote your shares by telephone or over the Internet. If you received a paper copy of the proxy card by mail, you may sign, date and mail the proxy card in the envelope provided. Instructions regarding all three methods of voting are provided on the proxy card.

        We hope that you will be able to join us at the 2011 Annual Meeting.

		Sincerely,
		DAVID J. COGHLAN President and Chief Executive Officer

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WATTS WATER TECHNOLOGIES, INC.
815 Chestnut Street
North Andover, MA 01845

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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

To Be Held on May 11, 2011

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To the Stockholders of
Watts Water Technologies, Inc.

        Notice is hereby given that the 2011 Annual Meeting of Stockholders of Watts Water Technologies, Inc., a Delaware corporation, will be held at The Andover Country Club, 60 Canterbury Street, Andover, Massachusetts 01810, on Wednesday, May 11, 2011, at 9:00 a.m., local time, for the following purposes:

1.

To elect seven directors to our Board of Directors, each to hold office until our 2012 Annual Meeting of Stockholders and until such director's successor is duly elected and qualified;



2.

To ratify the selection of KPMG LLP as our independent registered public accounting firm for the current fiscal year;



3.

To approve an advisory vote on executive compensation; and



4.

To hold an advisory vote on the frequency of future executive compensation advisory votes.

        The stockholders will also consider and act upon any other matters that may properly come before the Annual Meeting.

        Only stockholders of record at the close of business on March 16, 2011 are entitled to notice of and to vote at the Annual Meeting or any adjournment or postponement thereof.

		By Order of the Board of Directors
		KENNETH R. LEPAGE General Counsel, Executive Vice President of Administration and Secretary

North Andover, Massachusetts
March 25, 2011

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			Page
INFORMATION ABOUT THE ANNUAL MEETING			1
	Information About this Proxy Statement		1
	Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Stockholders to be Held on May 11, 2011		1
	Information About Voting		1
	Quorum; Required Votes; Abstentions and Broker Non-Votes		2
	Solicitation of Proxies		3
	Other Business to be Considered		3
PROPOSAL 1: ELECTION OF DIRECTORS			3
	Information as to Nominees for Director		4
	Director Compensation		7
CORPORATE GOVERNANCE			10
	Our Commitment to Good Corporate Governance		10
	Role of Our Board of Directors		10
	Performance of Our Board		11
	Business Ethics and Compliance		11
	Independence of Non-Employee Directors		11
	Corporate Governance Guidelines		12
	Executive Sessions		12
	Communications with the Board		12
	Annual Meeting Attendance		12
	Committees of the Board		12
	Director Candidates		14
	Compensation Committee Interlocks and Insider Participation		15
	Policies and Procedures for Related Person Transactions		15
PRINCIPAL STOCKHOLDERS			17
COMPENSATION DISCUSSION AND ANALYSIS			22
	Compensation Philosophy and Objectives		22
	Elements of Compensation		23
	Employment Agreements		28
	Post-Termination Compensation and Change in Control Arrangements		28
	Stock Ownership Guidelines		30
	Impact of Regulatory Requirements		30
COMPENSATION COMMITTEE REPORT			31
EXECUTIVE COMPENSATION			32
	Compensation Summary		32
	Grants of Plan-Based Awards		36
	Outstanding Equity Awards at Fiscal Year-End		39
	Option Exercises and Stock Vested		40
	Pension Benefits		41
	Nonqualified Deferred Compensation		46
	Potential Payments Upon Termination or Change in Control		46
	Section 16(a) Beneficial Ownership Reporting Compliance		48
PROPOSAL 2: RATIFICATION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM			48
AUDIT COMMITTEE REPORT			49
PROPOSAL 3: ADVISORY VOTE ON EXECUTIVE COMPENSATION			50
PROPOSAL 4: ADVISORY VOTE ON THE FREQUENCY OF FUTURE EXECUTIVE COMPENSATION ADVISORY VOTES			51
HOUSEHOLDING OF ANNUAL MEETING MATERIALS			52
STOCKHOLDER PROPOSALS			52

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WATTS WATER TECHNOLOGIES, INC.

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ANNUAL MEETING OF STOCKHOLDERS

May 11, 2011

PROXY STATEMENT

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INFORMATION ABOUT THE ANNUAL MEETING

        Our 2011 Annual Meeting of Stockholders will be held on Wednesday, May 11, 2011 at 9:00 a.m., local time, at The Andover Country Club, 60 Canterbury Street, Andover, Massachusetts 01810. For directions to The Andover Country Club, please visit the 2011 Annual Meeting page on our website at http://www.wattswater.com/2011annualmeeting. If you have any questions about the 2011 Annual Meeting, please contact Kenneth Lepage, our corporate Secretary, by telephone at (978) 688-1811 or by sending a written request for information addressed to Kenneth Lepage at our principal executive offices located at 815 Chestnut Street, North Andover, Massachusetts 01845.

Information About this Proxy Statement

        You have received this proxy statement because the Board of Directors of Watts Water Technologies, Inc. is soliciting your proxy to vote your shares at the 2011 Annual Meeting of Stockholders and at any adjournment or postponement of the Annual Meeting. This proxy statement includes information that we are required to provide to you under the rules of the Securities and Exchange Commission, or SEC, and is designed to assist you in voting your shares. Only stockholders of record at the close of business on March 16, 2011 are entitled to receive notice of and to vote at the Annual Meeting.

        We are mailing this proxy statement and the accompanying proxy on or about March 25, 2011 to our stockholders of record as of March 16, 2011. We are also mailing our Annual Report for the fiscal year ended December 31, 2010 to such stockholders concurrently with this proxy statement. We will furnish copies of the exhibits to our Annual Report on Form 10-K for the fiscal year ended December 31, 2010 upon written request of any stockholder and the payment of an appropriate processing fee. Please address all such requests to Kenneth Lepage at the address provided above.

Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Stockholders to be Held on May 11, 2011

        The proxy statement and annual report to security holders are available at http://www.wattswater.com/2011annualmeeting.

Information About Voting

        Each share of our class A common stock, par value $0.10 per share, outstanding on the record date is entitled to one vote, and each share of our class B common stock, par value $0.10 per share, outstanding on the record date is entitled to ten votes. As of the close of business on March 16, 2011, there were outstanding and entitled to vote 30,225,327 shares of class A common stock and 6,953,680 shares of class B common stock.

        Stockholders of Record.    Stockholders of record may vote in person at the Annual Meeting or by proxy. There are three ways to vote by proxy:

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By telephone—Stockholders of record located in the United States and Canada can vote by calling the toll-free telephone number listed on the proxy card and following the instructions on the proxy card;

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•

By Internet—Stockholders of record can vote over the Internet by visiting the website listed on the proxy card and following the instructions on the proxy card; or



•

By mail—Stockholders of record may vote by mail by signing, dating and mailing the enclosed proxy card and returning it in the enclosed prepaid envelope.

        You may revoke or change your proxy at any time before it is exercised by (1) delivering to us a signed proxy card with a date later than that of your previously delivered proxy, (2) voting in person at the Annual Meeting, (3) granting a subsequent proxy through the Internet or by telephone, or (4) sending a written revocation to our corporate Secretary at our principal executive offices. If a choice is specified in a proxy, shares represented by that proxy will be voted in accordance with such choice. If no choice is specified, the proxy will be voted "FOR" each of the seven nominees for the board of directors, the ratification of the selection of KPMG LLP, and the approval of the advisory vote on executive compensation, and for the holding of an advisory vote on executive compensation every "THREE YEARS." Attending the Annual Meeting will not revoke your proxy unless you specifically request that it be revoked.

        Beneficial Owners.    If you are a beneficial owner and your shares are held in "street name" by a bank, broker or other holder of record, you will receive instructions from the holder of record as to how to vote your shares. You will need to follow the instructions of the holder of record in order to vote your shares. Many banks and brokers offer the option of voting over the Internet or by telephone, instructions for which would be provided by your bank or broker on your voting instruction form. If your shares are not registered in your own name and you plan to vote your shares in person at the Annual Meeting, you should contact your broker or agent to obtain a legal proxy or broker's proxy card and bring it to the Annual Meeting in order to vote.

Quorum; Required Votes; Abstentions and Broker Non-Votes

        The presence, in person or by proxy, of outstanding shares of class A common stock and class B common stock representing a majority of the total votes entitled to be cast is necessary to constitute a quorum for the transaction of business at our Annual Meeting. Abstentions and broker non-votes will be counted for purposes of determining whether a quorum is present for the transaction of business at the Annual Meeting. A "broker non-vote" occurs when a bank, broker or other nominee holder has not received voting instructions with respect to a particular matter and the nominee holder does not have discretionary authority to vote on that matter. A nominee holder has discretionary authority under the rules of the New York Stock Exchange to vote your shares on the ratification of the appointment of KPMG LLP as our independent registered public accounting firm, even if the nominee holder does not receive voting instructions from you, but will not have discretionary authority to vote on any of the other proposals submitted at the Annual Meeting.

        Election of Directors.    Under our by-laws, the seven director nominees receiving the highest number of affirmative votes out of the total number of votes represented by shares present (either in person or by proxy) and entitled to vote at the meeting will be elected as directors. You may vote for all of the director nominees, withhold your vote from all of the director nominees or withhold your vote from any one or more of the director nominees. Votes that are withheld will not be included in the vote tally for the election of directors and will have no effect on the results of the vote.

        Other Matters.    Under our by-laws, the affirmative vote of the holders of a majority of the votes present or represented at the Annual Meeting and entitled to be cast will be required for: approval of the ratification of the selection of the independent registered public accounting firm (Proposal 2); approval of the advisory vote on executive compensation (Proposal 3); and approval of one of the three frequency options under the advisory vote on the frequency of future executive compensation advisory votes (Proposal 4). If you submit a proxy or attend the meeting but choose to abstain from voting on

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any of these proposals, you will be considered present at the meeting and entitled to vote on such proposal. As a result, an abstention will have the same effect as if you had voted against such proposal. Broker non-votes, however, will have no effect on the proposal because they will not be considered to have been entitled to vote on such proposal. With respect to Proposal 4, if none of the three frequency options receives the vote of the holders of a majority of the votes present or represented and entitled to be cast, we will consider the frequency option (one year, two years or three years) receiving the highest number of votes cast by stockholders to be the frequency that has been recommended by stockholders. However, as described in more detail in Proposal 4, because this proposal is non-binding, the Board of Directors may decide that it is in the best interest of our stockholders and the Company to hold future executive compensation advisory votes more or less frequently. Proposal 3 is also a non-binding proposal.

Solicitation of Proxies

        We will bear the expenses of preparing, printing and assembling the materials used in the solicitation of proxies. In addition to the solicitation of proxies by use of the mail or the Internet, we may also use the services of some of our officers and employees (who will receive no compensation for such services in addition to their regular salaries) to solicit proxies personally and by telephone and email. Brokerage houses, nominees, fiduciaries and other custodians will be requested to forward solicitation materials to the beneficial owners of shares held of record by them, and we will reimburse them for their reasonable expenses.

Other Business to be Considered

        Our management does not know of any business other than the matters set forth in the Notice of Annual Meeting of Stockholders and described above that will be presented for consideration at the Annual Meeting. If any other business should properly come before the Annual Meeting, the proxies will be voted in accordance with the direction of the proxy holders. Each of the persons appointed by the enclosed form of proxy present and acting at the meeting, in person or by substitute, may exercise all of the powers and authority of the proxies in accordance with their judgment.

PROPOSAL 1
ELECTION OF DIRECTORS

        Our Board has nominated each of the individuals named below for election as a director. If elected, each nominee will serve until our 2012 Annual Meeting of Stockholders and until such director's successor has been duly elected and qualified. Proxies will be voted for each of the nominees named below unless otherwise specified in the proxy. All of the nominees are presently members of our Board. Management does not contemplate that any of the nominees will be unable to serve, but in that event, proxies solicited hereby may be voted for a substitute nominee designated by our Board or our Board may choose to reduce the number of directors serving on the Board. Holders of shares representing votes sufficient to elect each of the nominees named below have indicated to us their intention to vote in favor of such nominees. Current Board members Kenneth J. McAvoy and Gordon W. Moran are not standing for reelection at the Annual Meeting.

        Our Board of Directors recommends that stockholders vote FOR the election of each nominee as a director of Watts Water Technologies, Inc.

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Information as to Nominees for Director

        Set forth below are the names of the nominees for our Board of Directors, their ages, principal occupations for at least the past five years, the years they originally became members of our Board of Directors and certain other information. The information provided below is current as of February 1, 2011 except for the ages of the nominees, which are current as of May 11, 2011, the date of our 2011 Annual Meeting.

Name		Age			Present Principal Employment and Prior Business Experience		Director Since
Robert L. Ayers			65		Mr. Ayers was Senior Vice President of ITT Industries and President of ITT Industries' Fluid Technology from October 1999 until September 2005. Mr. Ayers continued to be employed by ITT Industries from September 2005 until his retirement in September 2006, during which time he focused on special projects for the company. ITT Industries' Fluid Technology manufactures a broad range of pumps, mixers, controls and treatment systems. Mr. Ayers joined ITT Industries in 1998 as President of ITT Industries' Industrial Pump Group. Mr. Ayers served as a member of the Board of Directors of T-3 Energy Services, Inc., a provider of oil field products and services, from August 2007 to January 2011. We believe Mr. Ayers' qualifications to serve on our Board include his extensive international, channel management, operations and sales and marketing experience with manufacturing companies in the fluid control industry.			2006
Kennett F. Burnes			68		Mr. Burnes is the retired Chairman, President and Chief Executive Officer of Cabot Corporation, a global manufacturer of specialty chemicals and performance materials. He was Chairman of the Board of Directors from 2001 to March 2008, President from 1995 to January 2008 and Chief Executive Officer from 2001 to January 2008. Prior to joining Cabot Corporation in 1987, Mr. Burnes was a partner at the Boston-based law firm of Choate, Hall & Stewart, where he specialized in corporate and business law for nearly 20 years. Mr. Burnes has been a member of the Board of Directors of State Street Corporation, a provider of financial services to institutional investors, since 2003. Mr. Burnes' community activities include being a member of the Dana Farber Cancer Institute's Board of Trustees, a member of the Board of Trustees of the New England Conservatory, Chairman of the Board of Trustees of the Schepens Eye Research Institute and a member of the Board of Trustees of the Epiphany School. We believe Mr. Burnes' qualifications to serve on our Board include his experience as an operating executive and chief executive officer of an international manufacturing company and his nearly 20 years of experience as a corporate attorney representing public companies.			2009

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Name		Age			Present Principal Employment and Prior Business Experience		Director Since
Richard J. Cathcart			66		Mr. Cathcart was Vice Chairman and a member of the Board of Directors of Pentair, Inc. from February 2005 until his retirement in September 2007. Mr. Cathcart served as President and Chief Operating Officer of Pentair's Water Technologies Group from January 2001 until February 2005. Mr. Cathcart also served as Executive Vice President and President of Pentair's Water Technologies Group from February 1996 to January 2001 and as Executive Vice President, Corporate Development from March 1995 to February 1996. Pentair is a diversified manufacturing company. Pentair's Water Group provides products and systems used in the movement, storage, treatment and enjoyment of water. Mr. Cathcart is also a member of the Board of Directors of Fluidra S.A. We believe Mr. Cathcart's qualifications to serve on our Board include his familiarity with our industry stemming from his service as an operating executive with an international manufacturing company in the fluid control industry, his strategic planning expertise and his extensive international experience as a business executive and as a board member of a public company based in Europe.			2007
David J. Coghlan			52		Mr. Coghlan became our Chief Executive Officer and President in January 2011. He previously served as our Chief Operating Officer from January 2010 to January 2011 and as President of North America and Asia from June 2008 to January 2010. Prior to joining our Company, Mr. Coghlan served as Vice President of Global Parts for Trane Inc. from April 2004 through May 2008. Trane is a global manufacturer of commercial and residential heating, ventilation and air conditioning equipment. Mr. Coghlan also held several management positions in the United States and internationally within the Climate Control Technologies segment of Ingersoll-Rand Company Limited, a manufacturer of transport temperature control units and refrigerated display merchandisers, from 1995 to December 2003. Before joining Ingersoll-Rand, Mr. Coghlan worked for several years with the management consulting firm of McKinsey & Co. in both the United Kingdom and the United States. We believe Mr. Coghlan's qualifications to serve on our Board include his extensive experience as an operating executive with several international manufacturing companies and his depth of knowledge about our Company and our industry.			2011

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Name		Age			Present Principal Employment and Prior Business Experience		Director Since
Ralph E. Jackson, Jr.			69		Mr. Jackson worked for Cooper Industries, Inc., a manufacturer of electrical products, from 1985 until his retirement in December 2003. Prior to joining Cooper Industries, Mr. Jackson worked for the Bussmann and Air Comfort divisions of McGraw-Edison from 1976 until McGraw-Edison was acquired by Cooper Industries in 1985. While with Cooper Industries, Mr. Jackson served as Chief Operating Officer from 2000 to December 2003, Executive Vice President, Electrical Operations from 1992 to 2000, and President, Bussmann Division from 1985 to 1992. Mr. Jackson served as a member of the Board of Directors of Cooper Industries from 2000 to December 2003. We believe Mr. Jackson's qualifications to serve on our Board include his extensive management and operations experience with an international manufacturing company.			2004
John K. McGillicuddy			67		Mr. McGillicuddy was employed by KPMG LLP, a public accounting firm, from June 1965 until his retirement in June 2000. In June 1975, Mr. McGillicuddy was elected into the Partnership of KPMG LLP, where he served as Audit Partner, SEC Reviewing Partner, Partner-in-Charge of Professional Practice, Partner-in-Charge of College Recruiting and Partner-in-Charge of Staff Scheduling. Mr. McGillicuddy is a member of the Board of Directors of Brooks Automation, Inc., a worldwide provider of automation, vacuum and instrumentation solutions to the global semiconductor and related industries. Mr. McGillicuddy is also a member of the Board of Directors of Cabot Corporation, a manufacturer of specialty chemicals and performance materials. We believe Mr. McGillicuddy's qualifications to serve on our Board include his 35 years of experience working in public accounting and his experience serving as a director of two other publicly traded international manufacturing companies.			2003
Merilee Raines			55		Ms. Raines has served as Chief Financial Officer of IDEXX Laboratories, Inc. since October 2003. Prior to becoming Chief Financial Officer, Ms. Raines held several management positions with IDEXX, including Corporate Vice President of Finance, Vice President and Treasurer of Finance, Director of Finance, and Controller. IDEXX Laboratories develops, manufactures and distributes diagnostic and information technology products and services for pet and production animal health, water quality and milk safety, and human point-of-care diagnostics. We believe Ms. Raines' qualifications to serve on our Board include her extensive financial and accounting experience with a similarly sized international manufacturing company.			2011

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Director Compensation

        Non-employee directors are compensated for their service as directors. Mr. Coghlan is the only member of our Board of Directors who is an employee of Watts, and he does not receive any additional compensation for his service as a director. Set forth below is a description of the annual compensation arrangements in effect for our non-employee directors during 2010.

        We reimburse non-employee directors for reasonable out-of-pocket expenses incurred in connection with attending Board and committee meetings and for fees and reasonable out-of-pocket expenses for their attendance at director education seminars and programs they attend at the request of the Board.

        Each non-employee director receives an annual grant of stock under our 2004 Stock Incentive Plan with a fair market value on the date of grant equal to $60,000. Our Board typically approves any grants of stock awards to non-employee directors at its regularly scheduled third quarter meeting. We have adopted a practice that stock awards for non-employee directors are granted on the third business day following the release of our second quarter earnings to the public. The purpose for setting this grant date is to ensure that we are using a date when the public markets have a maximum amount of information about our financial performance and have had a sufficient amount of time to understand and react to such information. The Board granted 1,783 shares of class A common stock to each of Mr. Ayers, Mr. Burnes, Mr. Cathcart, Mr. Jackson, Mr. McAvoy, Mr. McGillicuddy, and Mr. Moran on August 6, 2010. The shares granted to non-employee directors during 2010 were subject to a one-year vesting requirement. If a non-employee director's service as a director terminates for any reason other than death, disability or retirement at the end of the current term, the shares of stock granted in 2010 will be automatically forfeited.

        Our non-employee directors are subject to stock ownership guidelines. These guidelines stipulate that each director who has served on the Board for more than three years should own shares of our class A common stock with a market value of at least $180,000. The Compensation Committee reviews each non-employee director's compliance with these guidelines on an annual basis.

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        The following table contains information on compensation for the non-employee members of our Board of Directors during the fiscal year ended December 31, 2010.

2010 DIRECTOR COMPENSATION

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        In September 1996, we entered into a Supplemental Compensation Agreement with Timothy P. Horne, who was at that time our Chief Executive Officer and President, which provided that Mr. Horne would provide consulting services to us and receive certain compensation following his retirement as an employee of the Company. Mr. Horne retired on December 31, 2002. Under the agreement, as amended, Mr. Horne has agreed to provide consulting services to us for 300 to 500 hours per year so long as he is physically able. We agreed to pay Mr. Horne the greater of (i) one-half of the average of Mr. Horne's annual base salary as an employee of Watts during the three years immediately prior to his retirement or (ii) $400,000 for each calendar year following Mr. Horne's retirement until the date of his death, subject to certain cost-of-living increases each year. We paid Mr. Horne $499,694 for his consulting services in 2010. In the event of a change of control of the Company, Mr. Horne has the right to elect to receive a lump-sum payment instead of continuing to receive annual consulting fee payments. If Mr. Horne elects to receive the lump-sum payment, his obligation to provide consulting services to us terminates. The lump-sum payment would equal the present value of $23,650 monthly for life and would be determined with reference to discount rates and mortality tables applicable under our pension plan and an adjustment for inflation. If Mr. Horne elects to receive a lump-sum payment following a change of control of the Company, we also agreed to make a tax gross-up payment to him to cover all federal, state and local taxes payable by him with respect to the lump-sum payment. We also agreed to provide lifetime benefits to Mr. Horne, including use of secretarial services, use of an office at our corporate headquarters, retiree health insurance, reimbursement of tax and financial planning expenses, automobile maintenance expenses, one club membership, a customary director indemnification agreement and travel expenses when visiting our facilities. Our obligations to make the above-described payments to Mr. Horne and to provide the above-described benefits will not be affected or limited by Mr. Horne's physical inability to provide consulting services to us if such disability should occur. During 2010, Mr. Horne did not seek reimbursement for any travel expenses other than for business travel undertaken at our request. Pursuant to our agreement with Mr. Horne, we employ a secretary who works part time for Mr. Horne. The cost of secretarial services included in the All Other Compensation column for Mr. Horne

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represents 15% of the compensation and benefits cost of Mr. Horne's secretary, which we estimate is the portion of her time that she spent working on personal matters for Mr. Horne during 2010.

        As former employees of Watts, Mr. Horne and Mr. McAvoy each receive retirement benefit payments under our pension plan and, with respect to Mr. McAvoy, our supplemental employee retirement plan. Retirement benefit payments received by each of Mr. Horne and Mr. McAvoy pursuant to these plans are reflected in the All Other Compensation column in the above table.

        Beginning in 1992 and continuing through the end of 1999, we agreed to defer payment of director fees earned by Mr. Moran for his service as a member of our Board of Directors. The deferred payments accrue interest in June and December of each year at the short-term annual applicable federal rate. Mr. Moran stopped deferring payment of his director fees at the beginning of 2000. We paid Mr. Moran 10% of the deferred fees balance plus accrued interest in September 2010. The Fees Earned or Paid in Cash column of the above table includes the aggregate amount of deferred fees and interest paid to Mr. Moran during 2010. As of December 31, 2010, the remaining balance of deferred fees was $28,084.

CORPORATE GOVERNANCE

Our Commitment to Good Corporate Governance

        We believe that good corporate governance and an environment of the highest ethical standards are important for us to achieve business success and to create value for our stockholders. Our Board is committed to high governance standards and continually works to improve them. We periodically review our corporate governance policies and practices and compare them to those suggested by various authorities on corporate governance and employed by other public companies. We also review guidance and interpretations provided from time to time by the SEC and the New York Stock Exchange and consider changes to our corporate governance policies and practices in light of such guidance and interpretations.

Role of Our Board of Directors

        Our Board monitors overall corporate performance and the integrity of our financial controls and legal compliance procedures. It elects senior management and oversees succession planning and senior management's performance and compensation. Our Board oversees the development of fundamental operating, financial and other corporate plans, strategies and objectives, and conducts a year-long process which culminates in Board review and approval each year of a business plan, a capital expenditures budget and other key financial and business objectives.

        Members of our Board keep informed about our business through discussions with our Chief Executive Officer and other members of our senior management team, by reviewing materials provided to them on a regular basis and in preparation for Board and committee meetings and by participating in meetings of the Board and its committees. We regularly review key portions of the business with the Board, and we introduce our executives to the Board so that the Board can become familiar with our key employees. In addition, we hold periodic strategy sessions between members of senior management and the Board, during which members of the senior management team provide in-depth reviews of various aspects of our business operations and discuss our strategy with respect to such operations.

        In 2010, our Board met eight times and each director attended at least 75% of the total number of meetings of the Board and all committees of the Board on which the director served.

        The Role of our Board in Risk Oversight.    The Board's role in our risk oversight process includes receiving regular reports from members of senior management on areas of material risk to Watts, including operational, financial, legal and regulatory, strategic and reputational risks. The full Board (or the appropriate committee in the case of risks that are under the purview of a particular committee)

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receives these reports from senior management to enable it to understand our risk identification, risk management and risk mitigation processes and strategies. When a committee receives a report on a particular risk, the chairman of the relevant committee reports on the discussion to the full Board during the committee reports portion of the next full Board meeting. This enables the Board and its committees to coordinate the risk oversight role. As part of its charter, the Audit Committee discusses the guidelines and policies that govern the process by which our exposure to risk is assessed and managed by management.

        Board Leadership Structure.    We separate the roles of Chief Executive Officer and Chairman of the Board in recognition of the differences between the two roles. Our Chief Executive Officer is responsible for setting the strategic direction for Watts, providing day-to-day leadership and managing our performance. The Chairman of the Board provides guidance to our Chief Executive Officer, works with our Chief Executive Officer to set the agenda for Board meetings and presides over meetings of the full Board, including executive sessions of the non-management and independent directors.

Performance of Our Board

        Our Board considers it important to continually evaluate and improve its effectiveness and that of its committees. Our Board and each of its standing committees conduct annual self-evaluations. The Nominating and Corporate Governance Committee oversees our Board's self-evaluation process. The results of each committee's annual self-evaluation are reported to the full Board.

Business Ethics and Compliance

        We have adopted Codes of Business Conduct and Ethics applicable to all officers, employees and Board members worldwide. The Codes of Business Conduct and Ethics are posted in the "Investor Relations" section of our website at http://www.wattswater.com. Any amendments to, or waivers of, the Codes of Business Conduct and Ethics which apply to our Chief Executive Officer, Chief Financial Officer, Corporate Controller or any person performing similar functions will be disclosed on our website within four business days of the date of such amendment or waiver.

Independence of Non-Employee Directors

        The listing standards of the New York Stock Exchange require companies listed on the New York Stock Exchange to have a majority of independent directors. The New York Stock Exchange listing standards generally provide that a director will not be independent unless such director has no material relationship with us (either directly or as a partner, shareholder or officer of an organization that has a relationship with us). In addition, a director is not independent if (1) the director is, or has been within the last three years, employed by us, or an immediate family member is, or has been within the last three years, one of our executive officers, (2) the director or a member of the director's immediate family has received during any twelve-month period within the last three years more than $120,000 in direct compensation from us other than director and committee fees and pension or other deferred compensation for prior service as an employee, (3) the director or an immediate family member is a current partner of a firm that is our internal or external auditor, the director is a current employee of such a firm, the director has an immediate family member who is a current employee of such a firm and who personally works on our audit, or the director or an immediate family member was within the last three years a partner or employee of such a firm and personally worked on our audit within that time, (4) the director or a member of the director's immediate family is, or has been within the last three years, employed as an executive officer of another company where one of our executive officers at the same time serves or served on the compensation committee of such company, or (5) the director is a current employee, or an immediate family member is a current executive officer, of a company that has made payments to, or received payments from, us for property or services in an amount which, in

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any of the last three fiscal years, exceeds the greater of $1 million, or 2% of such other company's consolidated gross revenues.

        In February 2011, our Board reviewed all relationships between Watts and each non-employee director to determine compliance with the New York Stock Exchange standards described above and to evaluate whether there are any other facts or circumstances that might impair a director's independence. Based on its review, the Board determined that Mr. Ayers, Mr. Burnes, Mr. Cathcart, Mr. Jackson, Mr. McAvoy, Mr. McGillicuddy, Mr. Moran and Ms. Raines are independent directors.

Corporate Governance Guidelines

        Our Board has adopted Corporate Governance Guidelines that govern the structure and functioning of the Board and set out the Board's policies on governance issues. The Corporate Governance Guidelines are posted in the "Investor Relations" section of our website at http://www.wattswater.com.

Executive Sessions

        In accordance with our Corporate Governance Guidelines, our non-management directors meet in executive session at least quarterly. The Chairman of the Board or, in his absence, a director chosen by the non-management directors in attendance, presides at such meetings.

Communications with the Board

        Our Board welcomes the submission of any comments or concerns from stockholders and any interested parties. Communications should be in writing and addressed to our corporate Secretary at our principal executive offices and marked to the attention of the Board or any of its committees, individual directors or non-management or independent directors as a group. All correspondence will be forwarded to the intended recipient(s).

Annual Meeting Attendance

        Directors are encouraged to attend our annual meetings of stockholders. Five of our then ten directors attended the 2010 Annual Meeting of Stockholders.

Committees of the Board

        Our Board currently has three standing committees: the Audit Committee, the Compensation Committee and the Nominating and Corporate Governance Committee. Each committee is composed solely of directors determined by the Board to be independent under the applicable New York Stock Exchange and SEC rules. The Board has adopted a written charter for each standing committee. You may find copies of the charters of the Audit Committee, the Compensation Committee and the Nominating and Corporate Governance Committee in the "Investor Relations" section of our website at http://www.wattswater.com. The Board also appoints from time to time ad hoc committees to address specific matters.

        Audit Committee.    The Audit Committee consists of Mr. McGillicuddy (Chairman), Mr. Ayers, Mr. Burnes, Mr. McAvoy and Ms. Raines. The Board has made a determination that each of the members of the Audit Committee satisfies the independence requirements of the New York Stock Exchange as well as Rule 10A-3 under the Securities Exchange Act of 1934. In addition, the Board has determined that Mr. McGillicuddy, Mr. McAvoy and Ms. Raines are "audit committee financial experts," as defined by SEC rules. During 2010, the Audit Committee held ten meetings. Our Audit Committee assists the Board in its oversight of the integrity of our financial statements, our compliance with legal and regulatory requirements, the qualifications, independence and performance of our

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independent registered public accounting firm, and the performance of our internal audit function. This includes the selection and evaluation of our independent registered public accounting firm, the oversight of our systems of internal accounting and financial controls, the review of management's assessment and management of risk, the review of the annual independent audit of our financial statements, the review of our Codes of Business Conduct and Ethics, the establishment of "whistle-blowing" procedures, and the oversight of other compliance matters.

        Compensation Committee.    The Compensation Committee consists of Mr. Cathcart (Chairman), Mr. Jackson and Mr. Moran. During 2010, the Compensation Committee held six meetings. Our Compensation Committee is responsible for shaping the principles, strategies and compensation philosophy that guide the design and implementation of our employee compensation programs and arrangements. Its primary responsibilities are to:

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evaluate the performance of our Chief Executive Officer and, either as a committee or together with the independent members of our Board of Directors, determine the compensation of our Chief Executive Officer;



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review management's proposals for the compensation of our other executive officers and submit its recommendations regarding base salaries to our Board of Directors for review and approval;



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approve annual performance bonus targets and objectives and the annual bonus amounts paid to our executive officers under our Executive Incentive Bonus Plan;



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approve all stock awards granted under our 2004 Stock Incentive Plan and the participants in our Management Stock Purchase Plan;



•

review and submit its recommendations to our Board of Directors on compensation for non-employee directors;



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review and discuss with management the Compensation Discussion and Analysis to be included in the proxy statement; and



•

monitor our policies and practices for the development and succession of senior management.

        The Compensation Committee holds one regularly scheduled meeting each quarter and schedules additional meetings as often as necessary in order to perform its duties and responsibilities. The Chairman of the Compensation Committee works with our Chief Executive Officer to establish the agenda for each meeting. Compensation Committee members receive and review materials in advance of each meeting. These materials include information that management believes will be helpful to the Compensation Committee as well as materials that members of the Compensation Committee request. The Compensation Committee may establish and delegate authority to one or more subcommittees consisting of one or more of its members when the Compensation Committee deems it appropriate to do so in order to carry out its responsibilities.

        The Compensation Committee is authorized under its charter to retain consultants to assist it in the evaluation of executive compensation and to approve the fees and other retention terms for its consultants. During 2010, the Compensation Committee engaged Pearl Meyer & Partners as a compensation consultant to review our compensation programs and provide advice to the Compensation Committee with respect to the aggregate level of our executive compensation as well as the mix of elements used to compensate our executive officers. Pearl Meyer does not provide any other consultation services to Watts. As appropriate, the Compensation Committee also looks to our human resources department to support the Compensation Committee in its work and to provide necessary information.

        The Compensation Committee has conducted a review and assessment of risk as it relates to our compensation policies and practices and determined that our compensation policies and practices do

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not encourage excessive or inappropriate risk taking and are not reasonably likely to cause a material adverse effect on Watts.

        Nominating and Corporate Governance Committee.    Our Nominating and Corporate Governance Committee consists of Mr. McAvoy (Chairman), Mr. Ayers, Mr. Burnes, Mr. Cathcart, Mr. Jackson, Mr. McGillicuddy, Mr. Moran and Ms. Raines. During 2010, the Nominating and Corporate Governance Committee held four meetings. The Nominating and Corporate Governance Committee is responsible for identifying individuals qualified to become Board members, consistent with criteria approved by the Board, and recommending that the Board select the director nominees for election at each annual meeting of stockholders. The Nominating and Corporate Governance Committee is also responsible for periodically reviewing our Corporate Governance Guidelines and recommending any changes thereto, overseeing the evaluation of the Board and management, and approving related person transactions.

Director Candidates

        The Nominating and Corporate Governance Committee will consider for nomination to the Board candidates recommended by stockholders. Recommendations should be sent to our corporate Secretary at our principal executive offices and marked to the attention of the Nominating and Corporate Governance Committee. In order to be considered for inclusion as a nominee for director in our proxy statement for our 2012 Annual Meeting of Stockholders, a recommendation must be received no later than November 25, 2011. Recommendations must be in writing and must contain the information set forth in Section IV.C of the Nominating and Corporate Governance Committee charter, which is available in the "Investor Relations" section of our website at http://www.wattswater.com, or on written request to our corporate Secretary at our principal executive offices.

        In addition to considering candidates suggested by stockholders, the Nominating and Corporate Governance Committee may consider potential candidates suggested by current directors, company officers, employees, third-party search firms and others. The Nominating and Corporate Governance Committee screens all potential candidates in the same manner regardless of the source of the recommendation. The Nominating and Corporate Governance Committee's review is typically based on any written materials provided with respect to the potential candidate. The Nominating and Corporate Governance Committee determines whether the candidate meets our minimum qualifications and possesses specific qualities and skills for directors and whether requesting additional information or an initial screening interview is appropriate.

        Stockholders also have the right under our bylaws to directly nominate director candidates, without any action or recommendation on the part of the Nominating and Corporate Governance Committee or the Board, by following the procedures described later in this proxy statement under "Stockholder Proposals".

        Criteria and Diversity.    In considering whether to recommend any candidate for nomination to the Board, including candidates recommended by stockholders, the Nominating and Corporate Governance Committee will apply the criteria set forth in Exhibit A to the Nominating and Corporate Governance Committee charter. At a minimum, the Nominating and Corporate Governance Committee must be satisfied that the recommended nominee has the highest personal and professional integrity, sound business and strategic judgment, the ability to devote sufficient time and energy to the Board, and the ability and will to challenge management while refraining from assuming management's role, and the nominee must not serve on more than two public company boards in addition to our Board. The Nominating and Corporate Governance Committee also considers experience in our industry or markets, international business experience, experience serving on the boards of public companies, experience acquiring companies and diversity of background and experience to be favorable characteristics in evaluating recommended nominees. Our Corporate Governance Guidelines and our

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Nominating and Corporate Governance Committee charter specify that the Nominating and Corporate Governance Committee and the Board understand the importance of diversity among members of the Board to our long-term success. Diversity encompasses a wide range of individual characteristics and experiences, including such things as gender, age, race, sexual orientation, national origin, religion, political affiliation, marital status, disability, and geographic background. The Nominating and Corporate Governance Committee does not assign specific weights to particular criteria, and no particular criterion is necessarily applicable to all prospective nominees. The Nominating and Corporate Governance Committee believes that the backgrounds and qualifications of the members of the Board, considered as a group, should provide an appropriate mix of experience, knowledge and abilities that will allow the Board to fulfill its responsibilities.

Compensation Committee Interlocks and Insider Participation

        During 2010, Mr. Cathcart, Mr. Jackson, Mr. Moran and Mr. Murphy served as members of the Compensation Committee of our Board of Directors. None of the directors who served as members of the Compensation Committee during 2010 is or has been an executive officer or employee of Watts.

        None of our executive officers serves as a member of the board of directors or compensation committee of any entity that has one or more of its executive officers serving as a member of our Board of Directors or Compensation Committee.

Policies and Procedures for Related Person Transactions

        Our Board has adopted written policies and procedures for the review of any transaction, arrangement or relationship in which Watts is a participant, the amount involved exceeds $120,000, and one of our executive officers, directors, director nominees or 5% stockholders (or their immediate family members), each of whom we refer to as a "related person," has a direct or indirect material interest.

        If a related person proposes to enter into such a transaction, arrangement or relationship, which we refer to as a "related person transaction," the related person must report the proposed related person transaction to our General Counsel. The policy calls for the proposed related person transaction to be reviewed and, if deemed appropriate, approved by the Board's Nominating and Corporate Governance Committee. Whenever practicable, the reporting, review and approval will occur prior to entry into the transaction. If advance review and approval is not practicable, the committee will review, and, in its discretion, may ratify the related person transaction. The policy also permits the chairman of the committee to review and, if deemed appropriate, approve proposed related person transactions that arise between committee meetings, subject to ratification by the committee at its next meeting. Any related person transactions that are ongoing in nature will be reviewed annually.

        A related person transaction reviewed under the policy will be considered approved or ratified if it is authorized by the committee after full disclosure of the related person's interest in the transaction. As appropriate for the circumstances, the committee will review and consider:

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the related person's interest in the related person transaction;



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the approximate dollar value of the amount involved in the related person transaction;



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the approximate dollar value of the amount of the related person's interest in the transaction without regard to the amount of any profit or loss;



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whether the transaction was undertaken in the ordinary course of our business;



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whether the terms of the transaction are no less favorable to us than terms that could have been reached with an unrelated third party;

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•

the purpose of, and the potential benefits to us of, the transaction; and



•

any other information regarding the related person transaction or the related person in the context of the proposed transaction that would be material to investors in light of the circumstances of the particular transaction.

        The committee may approve or ratify the transaction only if the committee determines that, under all of the circumstances, the transaction is in, or is not inconsistent with, the best interests of Watts. The committee may impose any conditions on the related person transaction that it deems appropriate.

        In addition to the transactions that are excluded by the instructions to the SEC's related person transaction disclosure rule, the Board has determined that the following transactions do not create a material direct or indirect interest on behalf of related persons and, therefore, are not related person transactions for purposes of this policy:

•

interests arising solely from the related person's position as an executive officer of another entity (whether or not the person is also a director of such entity), that is a participant in the transaction, where (a) the related person and all other related persons own in the aggregate less than a 10% equity interest in such entity, (b) the related person and his or her immediate family members are not involved in the negotiation of the terms of the transaction and do not receive any special benefits as a result of the transaction, (c) the amount involved in the transaction equals less than the greater of $1 million dollars or 2% of the annual consolidated gross revenues of the other entity that is a party to the transaction, and (d) the amount involved in the transaction equals less than 2% of the annual consolidated gross revenues of Watts; and



•

a transaction that is specifically contemplated by provisions of our charter or bylaws.

        The policy provides that transactions involving compensation of executive officers shall be reviewed and approved by the Compensation Committee in the manner specified in its charter.

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PRINCIPAL STOCKHOLDERS

        The following table sets forth information regarding the beneficial ownership of our class A and class B common stock as of February 1, 2011, by:

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each person or entity known by us to own beneficially more than 5% of either class of our common stock;



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each of our directors;



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each of the executive officers named in the summary compensation table; and



•

all of our current directors and executive officers as a group.

        In accordance with SEC rules, we have included in the number of shares beneficially owned by each stockholder all shares over which such stockholder has sole or shared voting or investment power, and we have included all shares that the stockholder has the right to acquire within 60 days after February 1, 2011 through the exercise of stock options, the settlement of restricted stock units or any other right. Unless otherwise indicated, each stockholder has sole voting and investment power with respect to shares beneficially owned by that stockholder. For purposes of determining the equity and voting percentages for each stockholder, any shares that such stockholder has the right to acquire within 60 days after February 1, 2011 are deemed to be outstanding, but are not deemed to be outstanding for the purpose of determining the percentages for any other stockholder.

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COMPENSATION DISCUSSION AND ANALYSIS

Compensation Philosophy and Objectives

        Our compensation philosophy is to align compensation levels closely with the creation of shareholder value. Our executive compensation program is designed to accomplish this by:

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Rewarding achievement of specific annual, long-term and strategic business goals;



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Attracting and retaining high caliber talent by offering total compensation and benefits that are competitive in our industry and reflect job complexity and the strategic value of the individual's position;



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Setting performance goals that do not promote excessive risk while supporting our long-term financial goals;



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Providing long-term retention and motivation through equity awards and stock purchase programs; and



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Aligning the interests of our executives and our stockholders by promoting stock ownership.

Compensation Mix

        Our executive compensation program uses the following elements:

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Base salary, to provide fixed compensation that is competitive in the marketplace;



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Annual incentive bonus compensation, to reward short-term performance against specific company-wide or business segment financial and business goals;



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Long-term equity incentive compensation, to link management incentives to long-term value creation and shareholder return; and



•

Retirement, perquisites and other benefits, to attract and retain superior management employees over the long term.

        We believe that a significant portion of executive compensation should be variable, performance-based compensation as opposed to fixed compensation. Variable compensation includes cash bonuses under our Executive Incentive Bonus Plan for achievement of specified company-wide or business segment financial or business objectives and stock-based compensation whose value is dependent upon long-term appreciation in stock price. Fixed compensation consists primarily of an executive officer's base salary, perquisites and benefits.

        The value of our variable, performance-based compensation is split between short-term compensation in the form of a cash performance bonus and long-term compensation in the form of stock awards that vest over time. The annual cash performance bonus is intended to provide an incentive to our executives to achieve near-term operational objectives. The stock awards provide an incentive for our executives to achieve longer-term strategic business goals, which should lead to higher stock prices and increased stockholder value. We encourage our executives to shift all or a portion of their short-term variable compensation into the form of long-term compensation in order to more closely align their behavior with long-term value creation. We do this by giving our executives the option to invest all or a portion of their cash performance bonus in our stock through the purchase of discounted restricted stock units under our Management Stock Purchase Plan. Stock purchased under the Management Stock Purchase Plan vests over three years, and receipt of the stock can be deferred by the executive for an additional number of years beyond the three-year vesting period. The Management Stock Purchase Plan is discussed in greater detail below under "Elements of Compensation—Stock Plans—Management Stock Purchase Plan."

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Benchmarking

        Benchmarking is only one factor, among many, that we rely on in establishing our compensation levels and program design. We use information regarding pay practices at other comparable companies in two respects. First, we use benchmarking information to evaluate whether our compensation practices are competitive in the marketplace in which we compete for executive talent. Second, this marketplace information is one of the many factors that we consider in assessing the reasonableness of our executive compensation.

        In 2010, the Compensation Committee reviewed executive compensation using compensation information from a peer group of companies for benchmarking purposes. The peer group included companies proposed by senior management and approved by the Compensation Committee in 2009 after receiving advice and input from Pearl Meyer. The peer group companies were chosen using a rules-based process to identify and select firms based on the similarity of the amount of their annual revenues to Watts as well as the similarity of their business models, scope of their international operations, primary standard industrial classification codes, index memberships and analyst coverage. The peer group comprises the following companies: Actuant Corporation, Acuity Brands, Inc., A.O. Smith Corporation, CIRCOR International, Inc., CLARCOR Inc., Franklin Electric Co., Inc., Gardner Denver, Inc., Graco Inc., IDEX Corporation, Itron, Inc., Mueller Industries, Inc., Mueller Water Products, Inc., Regal Beloit Corporation, Robbins & Myers, Inc., and Roper Industries, Inc. This peer group had average annual revenue of approximately $1.33 billion for fiscal 2009, as compared to our annual revenue for fiscal 2009 of approximately $1.23 billion. The companies in this peer group also derived an average of approximately 40% of their revenues from international operations, as compared to approximately 45% of our revenue that was derived from international operations during 2009.

        The Compensation Committee and management also consider compensation survey data. The survey data is based on information reported in various Watson Wyatt, Towers Perrin and Salary.com surveys. For positions where data from multiple surveys is available, the data is averaged and, if appropriate, weighted to provide a market composite perspective.

Elements of Compensation

        Our executive compensation program consists of three primary components, each of which is intended to serve the overall compensation philosophy: base salary, an annual performance bonus, and long-term incentive awards, including purchases of restricted stock units and grants of stock options and restricted stock. In addition, we provide our executive officers with retirement benefits and limited perquisites, which are primarily intended to maintain our competitive position for attracting and retaining executive talent. Each of these programs is discussed in greater detail below.

Base Salary

        We provide each of our executive officers with a fixed salary that provides a secure base of compensation in an amount that recognizes each officer's role and responsibilities as well as experience, performance and contributions. The Compensation Committee considers base salary increases for our executive officers annually. The amount of any increase is based primarily on the executive officer's performance, level of responsibilities, leadership, experience, employee retention and internal equity considerations and the external competitiveness of the officer's base salary and overall total compensation. The Compensation Committee meets with the Chief Executive Officer annually to review proposed adjustments in the base salary amounts for our executive officers other than our Chief Executive Officer. As part of its review, the Compensation Committee receives and discusses with the Chief Executive Officer the individual performance evaluations of our executive officers, tally sheets setting forth the total compensation of our executive officers, including base salary, bonus potential, equity awards, pension values, perquisites and other compensation, and information regarding the

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competitiveness of our compensation programs relative to companies in our benchmarking peer group and other industry survey data. Based on the recommendations of our Chief Executive Officer, the materials presented for its review, and its evaluation of the performance of our executive officers, the Compensation Committee approved increases in the base salaries of all of our executive officers during 2010. Base salary increases from calendar year 2009 to calendar year 2010 for our named executive officers other than our Chief Executive Officer averaged 3.9%.

        The Compensation Committee and the Nominating and Corporate Governance Committee jointly reviewed the performance of our Chief Executive Officer during the second quarter of 2010. This evaluation included a review of the same information provided to the Compensation Committee in connection with its review and evaluation of the compensation of our executive officers and a separate discussion with our Chief Executive Officer regarding his performance. Based on its evaluation of Mr. O'Keefe's performance and his accomplishment of individual objectives as well as the competitiveness of his compensation arrangements, the Compensation Committee approved a 2.9% increase in Mr. O'Keefe's base salary from $695,000 to $715,000.

Annual Performance Bonus

        Under the Executive Incentive Bonus Plan, each of our executive officers is eligible for an annual cash bonus. We offer our executives an opportunity to earn a bonus in order to focus our executives on execution against specific annual goals and reward performance based on achievement relative to such goals. For each of our executive officers, the Compensation Committee sets a target bonus amount expressed as a percentage of base salary. The Compensation Committee determines the target bonus amount for each executive officer based on a variety of factors, including competitive conditions for the executive officer's position within our peer group and in the broader employment market, length of employment, level of responsibility and experience, input from Pearl Meyer, and, in the case of executive officers other than the Chief Executive Officer, the recommendations of the Chief Executive Officer. The Compensation Committee determined the 2010 target bonus amounts for all executive officers during the first quarter of 2010. The 2010 target bonus amounts for our named executive officers were as follows:

        Corporate performance objectives are established by the end of the first quarter of each fiscal year by our Compensation Committee after consultation with our Chief Executive Officer. For 2010, most participants were generally assigned three objectives consisting of a sales objective, an operating earnings objective and a free cash flow objective. Our 2010 earnings objective consisted of operating earnings excluding budgeted costs associated with our manufacturing restructuring plans, intangible impairments and goodwill impairments. The free cash flow objective measures the amount of free cash generated during the fiscal year. Free cash represents the amount of cash generated by operations during the year less net capitalized expenditures. The Compensation Committee believed that it would be important for Watts to generate substantial cash during 2010 given the economic recession and a free cash objective would help to focus management's attention on cost reductions, working capital

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management and capital expenditures control, all of which serve to generate free cash. These objectives are intended to align the interests of our management team with the interests of our stockholders. We believe that the capital markets evaluate companies in our industry based primarily on their ability to grow their businesses profitably while maintaining adequate returns on their invested capital. Our bonus objectives provide an incentive to management to maintain a balanced approach to growth, with appropriate emphasis on revenues, profitability and cash flow. If we are successful in meeting or exceeding our goals under these three objectives, we believe that this will lead to the creation of additional value for our stockholders.

        The Compensation Committee, in consultation with our Chief Executive Officer, determines the relative weight to be assigned to each objective. For 2010, the Compensation Committee allocated 20% of the total bonus amount for our executive officers to the sales objective, 40% to the operating earnings objective and 40% to the free cash flow objective. The Compensation Committee placed greater emphasis on the operating earnings and free cash flow objectives because it believed that in a recessionary economic environment, our focus should be on encouraging productivity, cost containment and cash generation with less emphasis on top line growth. For each executive officer whose position is substantially tied to a business segment or unit, some or all of such officer's 2010 bonus objectives were based on the performance of such segment or unit. For 2010, Mr. O'Keefe's, Mr. Coghlan's and Mr. McCartney's bonuses were based on the performance of our Company as a whole. For Mr. Cawte, 80% of his bonus was based on the performance of our Europe segment and 20% of his bonus was based on the performance of the Company as a whole. For Mr. Flanders, 60% of his bonus was based on the performance of our China segment, 20% of his bonus was based on the performance of our North America segment and 20% was based on the performance of the Company as a whole.

        The 2010 performance measures and related targets for the Company as a whole and our results with respect to each performance measure were as follows:

        The 2010 performance measures and related targets for our Europe segment and our results with respect to each performance measure were as follows:

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        The 2010 performance measures and related targets for our North America segment and our results with respect to each performance measure were as follows:

        The 2010 performance measures and related targets for our China segment and our results with respect to each performance measure were as follows:

        Based on the above results, for 2010 Mr. O'Keefe, Mr. Coghlan and Mr. McCartney each earned 96.8% of his target bonus amount, Mr. Cawte earned 144.8% of his target bonus amount and Mr. Flanders earned 40.4% of his target bonus amount.

Long-Term Incentive Compensation

        We provided long-term incentive compensation for executive officers during 2010 in the form of the purchase of restricted stock units under our Management Stock Purchase Plan and the grant of stock options and restricted stock awards under our 2004 Stock Incentive Plan. The Compensation Committee believes in granting equity-based incentive compensation as an important component of our executive compensation program to encourage sustainable growth and long-term value creation, align the interests of our executives with those of our stockholders by exposing executives to stock price changes during the vesting or deferral periods, and to attract and retain executive talent.

        Management Stock Purchase Plan.    Our Management Stock Purchase Plan is intended to provide an incentive for our executives to purchase and hold more of our class A common stock, thereby more closely aligning their interests with the interests of our stockholders. The Compensation Committee approves the participants in the Management Stock Purchase Plan based on recommendations made by senior management. Under the Management Stock Purchase Plan, participants may elect to receive restricted stock units in lieu of all or a portion of their pre-tax annual incentive bonus and, in some circumstances, make after-tax contributions up to 100% of the participant's maximum bonus in exchange for restricted stock units. Participants are required to make an election no later than the last day of the fiscal year prior to the year in which such annual incentive bonus is earned. For 2010, Mr. Cawte, Mr. Flanders and Mr. O'Keefe each elected to contribute 100% of his performance bonus to the purchase of restricted stock units, and Mr. Coghlan and Mr. McCartney each elected to contribute 50% of his performance bonus to the purchase of restricted stock units.

        Each restricted stock unit represents the right to receive one share of class A common stock after a three-year vesting period, and a participant may elect to defer receipt of the underlying stock for an additional period of time after the end of the vesting period. The Management Stock Purchase Plan permits a participant to defer compensation and the income taxes due thereon until the restricted stock

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units are converted to stock. Restricted stock units are granted at a discount of 33% from the closing sale price of our class A common stock on the date of grant. Under the terms of the Management Stock Purchase Plan, the date of grant is deemed to be the third business day after the date on which we release our year-end earnings to the public. The purpose for setting the grant date of restricted stock units three days following the release of our year-end earnings to the public is to ensure that we are using a date when the public markets have a maximum amount of information about our financial performance and have had a sufficient amount of time to understand and react to such information.

        Stock Options and Restricted Stock Awards.    The Compensation Committee typically grants stock options and restricted stock awards under the 2004 Stock Incentive Plan annually at its regularly scheduled third quarter meeting. Our Chief Executive Officer provides recommendations to the Compensation Committee on the number of stock options and restricted stock awards to be granted to our executive officers and employees, other than our Chief Executive Officer. The Compensation Committee evaluates the amount of stock option grants and restricted stock awards based on factors similar to those used to determine base salaries and annual bonuses, and also reviews information on the stock ownership of our executive officers and their compliance with our stock ownership guidelines and information on equity compensation plan dilution. Stock options and restricted stock are intended to align the interests of our executives with those of our stockholders by motivating them to achieve long-term strategic goals and thereby increase the value of our stock.

        We grant a mix of stock options and restricted stock in order to achieve a balance between the retention benefits of restricted stock and the long-term performance incentives provided by stock options. Our intention is that half of the value of an executive's equity award should be in the form of stock options and half of the value should be in the form of restricted stock. Because recipients of restricted stock receive the full market value of their shares of restricted stock rather than just the amount of any appreciation in the value of our stock after the date of grant, a share of restricted stock is considered to have more value on the date of grant than an option to purchase a share of stock. The Compensation Committee used a Black-Scholes valuation model to determine that one share of restricted stock is roughly equal in value to an option to purchase three shares of stock. Accordingly, the number of shares of restricted stock the Compensation Committee awarded to our executive officers is equal to one-third of the number of shares underlying their stock option grant. We examine this ratio periodically to ensure that the intended value is being delivered appropriately through options and restricted stock.

        Our practice is that annual equity awards under the 2004 Stock Incentive Plan should be granted as of the third business day following the release of our most recent quarterly earnings to the public. The purpose for setting the grant date of stock options on a day following the release of our most recent quarterly earnings to the public is to ensure that we are using a date when the public markets have a maximum amount of information about our financial performance and have had a sufficient amount of time to understand and react to such information.

Perquisites

        We provide our executive officers with a limited number of perquisites as part of their compensation arrangements, including the choice of receiving a cash automobile allowance or the use of an automobile leased by the Company. The amount of the automobile allowance or the maximum amount of the lease payments for the automobile used by each executive officer is determined by our Chief Executive Officer and reviewed by the Compensation Committee, and the Compensation Committee determines the maximum amount of our Chief Executive Officer's automobile allowance or lease payments. We also pay maintenance expenses for the leased automobiles and provide automobile insurance coverage under our corporate umbrella policy. We offer these perquisites as a means of providing additional compensation that is designed to be competitive with other compensation provided by companies in our peer group. In June 2009, Michael P. Flanders relocated from the United States to

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China to become President of our operations in China. In connection with his assignment in China, we provided Mr. Flanders with customary expatriate benefits to address the unique circumstances arising from living and working abroad. These expatriate benefits include tax equalization payments that are intended to ensure that Mr. Flanders does not pay taxes as a result of living and working in China that would exceed those he would have had to pay in the United States, company-paid housing, use of a car and driver for personal transportation, and transportation costs for personal visits to the United States.

Employment Agreements

        None of our executive officers has an employment agreement with us.

        We have entered into indemnification agreements with each of our directors and executive officers. The indemnification agreements provide indemnity, including the advancement of expenses, to our directors and executive officers against liabilities incurred in the performance of their duties to the fullest extent permitted by the General Corporation Law of the State of Delaware.

Post-Termination Compensation and Change in Control Arrangements

        None of our current executive officers had any arrangement or agreement during 2010 that provided for severance payments.

        Patrick S. O'Keefe resigned as our Chief Executive Officer, President and Director effective as of January 26, 2011. In connection with Mr. O'Keefe's resignation, we entered into a separation agreement with Mr. O'Keefe. Pursuant to the separation agreement, Mr. O'Keefe will continue employment with us until August 3, 2011 and will receive $16,666.67 per month in compensation for his services, provided that, if Mr. O'Keefe's claim for short-term disability benefits under the Company's short-term disability plan is approved, Mr. O'Keefe shall receive short-term disability benefits in lieu of such monthly payments. Following the termination of Mr. O'Keefe's employment on August 3, 2011, subject to Mr. O'Keefe's execution and non-revocation of a general release of claims, Mr. O'Keefe will be entitled to receive the following payments and benefits: (i) a cash severance payment of $2,860,000, which is equal to two years of Mr. O'Keefe's 2010 annual salary plus two years of bonus at Mr. O'Keefe's target bonus amount for 2010, payable 50% in an initial lump sum payment within ten days after August 3, 2011 and the balance in monthly installments over the following 24 months; (ii) accelerated vesting of all unvested stock options and restricted stock awards, and an extension in the time of exercise for the shorter of three years following Mr. O'Keefe's termination date or the original term of the option; (iii) retention of his leased automobile through August 3, 2011, and thereafter a cash payment equal to the cost of the automobile lease through November 2011; (iv) a lump sum cash payment to compensate Mr. O'Keefe for four weeks' vacation time; and (v) a cash payment to reimburse Mr. O'Keefe for professional fees incurred in connection with the preparation of the separation agreement. The separation agreement also subjects Mr. O'Keefe to non-competition and non-solicitation covenants for a two-year period following the date of his termination. In determining the terms of the separation agreement, the Board relied in part on advice and analysis provided by Pearl Meyer with respect to post-termination compensation paid to similarly situated executives at comparable companies. We believe that the compensation provided to Mr. O'Keefe pursuant to his separation agreement was fair and reasonable for an executive officer at his level. In addition, the extended transition period afforded by the continuation of Mr. O'Keefe's employment until August 3, 2011 provides significant value to our management team as they will have the benefit of Mr. O'Keefe's knowledge, experience and extensive industry contacts. We also believe that providing fair and reasonable severance compensation to our departing executives on a case-by-case basis will allow us to continue to attract and retain talented executives without needing to enter into binding employment agreements as a pre-condition to their joining our Company.

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        We provide retirement benefits through a combination of a qualified defined benefit pension plan and a qualified defined contribution 401(k) plan for all of our full-time employees who are United States residents. Benefits under our pension plan are determined by years of service and compensation amounts. For benefits under the pension plan, 25 years is the maximum number of years of service participants in the plan can accrue. Pension benefits are determined generally based on the highest five consecutive years of compensation within the last ten years of service. Employees who retire early receive reduced benefits under the pension plan. We discuss other material terms of the pension plan later in this proxy statement under "Executive Compensation—Pension Benefits." Because benefits under our pension plan increase with an employee's period of service and earnings, we believe the pension plan encourages our employees to make long-term commitments to Watts and thus serves as an important retention tool.

        We also provide an unfunded nonqualified supplemental employee retirement plan, or Supplemental Plan. To the extent that any employee's annual retirement benefits under the pension plan exceed the limitations imposed by the Internal Revenue Code, including the limitation on the amount of annual compensation that may be included for purposes of calculating a participant's benefits (the limit was $245,000 for 2010), such excess benefits are paid from the Supplemental Plan. In the past, we have also offered enhanced benefits under the Supplemental Plan to certain executive officers selected for participation by our Board of Directors. These enhanced benefits are provided in lieu of the excess benefits described above. Patrick S. O'Keefe and William C. McCartney were the only named executive officers who were entitled to enhanced benefits under the Supplemental Plan in 2010. In recent years, our Board of Directors has chosen not to offer enhanced benefits under the Supplemental Plan to any of our other executive officers. We discuss the material terms of these excess and enhanced benefits later in this proxy statement under "Executive Compensation—Pension Benefits."

        During 2010, employees whose annual base pay was $90,000 or more were not eligible to receive matching contributions from the Company for amounts they contributed to our 401(k) plan. In addition, contributions to the 401(k) plan by employees whose total compensation (base pay and bonus) exceeded $105,000 in the prior year were limited to 4% of their eligible pay. As such, contributions by our executive officers to our 401(k) plan are limited to 4% of their eligible pay and they do not receive matching contributions from the Company. As an alternative, we provide a Nonqualified Deferred Compensation Plan, pursuant to which employees whose base pay for the prior year was $90,000 or more may defer up to 100% of their earnings on a pre-tax basis. Participant deferrals are credited to an account, which may earn returns based on the participant's selection from a list of investments. The investments generally mirror those provided in our 401(k) plan. We do not provide any matching contributions for amounts deferred under the Nonqualified Deferred Compensation Plan. For additional information on our Nonqualified Deferred Compensation Plan, please see "Executive Compensation—Nonqualified Deferred Compensation" below.

        Mr. Cawte does not participate in the above described retirement benefit plans. Instead, we provide Mr. Cawte with an annual payment equal to 16% of his combined base salary and performance bonus for him to invest in his personal retirement savings plan.

        None of our executive officers is entitled to payment of any benefits upon a change in control of Watts, except that our 2004 Stock Incentive Plan, 1996 Stock Option Plan and Management Stock Purchase Plan provide that in connection with a change in control all unvested stock options, shares of restricted stock, and restricted stock units will become fully vested.

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Stock Ownership Guidelines

        The Compensation Committee monitors compliance with the stock ownership guidelines approved by the Compensation Committee for all executive officers and other members of senior management. For 2010, our Chief Executive Officer was required to hold shares of our stock with a value of at least five times the amount of his base salary, our Chief Financial Officer and Chief Operating Officer were required to hold shares of our stock with a value of at least three times the amount of their base salary and our other executive officers were required to hold shares of our stock with a value of at least twice their base salary. In determining the number of shares owned by an executive, the Compensation Committee takes into account shares held directly, the vested shares underlying restricted stock units purchased by the executive under our Management Stock Purchase Plan and shares of restricted stock, but not stock options. Our officers are expected to comply with these requirements within five years of their election to their position. The Compensation Committee evaluates compliance with these guidelines in connection with making its compensation decisions and recommendations at its regularly scheduled third quarter meeting. Compliance is typically measured based on stock ownership as of the last day of the second quarter. At the end of the second quarter of 2010, all of our executive officers who have been executive officers of Watts for five or more years were in compliance with our stock ownership guidelines.

Impact of Regulatory Requirements

        The financial reporting and income tax consequences to Watts of individual compensation elements are important considerations for the Compensation Committee when it is analyzing the overall level of compensation and the mix of compensation paid to our executive officers. Overall, the Compensation Committee seeks to balance its objective of ensuring an effective compensation package for our executive officers with the desire to maximize the immediate deductibility of compensation, while ensuring an appropriate and transparent impact on reported earnings and other financial measures.

        In making its compensation decisions, the Compensation Committee has considered that under Internal Revenue Code Section 162(m) we are not permitted to deduct for tax purposes compensation in excess of $1 million paid to our Chief Executive officer and to each other officer (other than the Chief Executive Officer and Chief Financial Officer) whose compensation is required to be reported to our stockholders pursuant to the Securities Exchange Act of 1934 by reason of being among the three most highly compensated executive officers. However, certain compensation that qualifies as "performance-based compensation" under the requirements of Section 162(m) is exempt from this deduction limit. As a result, the Compensation Committee has designed much of the total compensation packages for our executive officers to qualify for the performance-based compensation exemption from the deductibility limit. However, the Compensation Committee does have the discretion to design and use compensation elements that may not be deductible under Section 162(m) if the Compensation Committee believes such elements are appropriate and in the best interest of the Company and its stockholders. For 2010, our annual performance bonus payments to our executives and restricted stock units purchased by our executives using their annual performance bonus were tax deductible compensation under Section 162(m). Our base salary payments and restricted stock grants, as currently structured, are not considered performance-based for purposes of Section 162(m). Therefore, the value of those equity awards, in combination with the amount of base salary, in excess of $1 million paid to the executives who fall within the scope of Section 162(m) is not tax deductible by us. All of the compensation paid to our executive officers in 2010 was tax deductible except for $34,586 of compensation paid to Mr. O'Keefe.

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COMPENSATION COMMITTEE REPORT

        The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis included in this proxy statement with management. Based on such review and discussion with management, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this proxy statement and in our Annual Report on Form 10-K for the year ended December 31, 2010.

The Compensation Committee
Richard J. Cathcart, Chairman
Ralph E. Jackson, Jr.
Gordon W. Moran

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EXECUTIVE COMPENSATION

Compensation Summary

        The following table contains information with respect to the compensation for the fiscal years ended December 31, 2010, 2009 and 2008 of our Chief Executive Officer, Chief Financial Officer and our three most highly compensated executive officers serving as executive officers at the end of the last completed fiscal year other than the Chief Executive Officer and Chief Financial Officer. We refer to the executive officers identified in this table as our "named executive officers."

SUMMARY COMPENSATION TABLE

(1)

The amounts shown in this column reflect the grant date fair value of restricted stock awards under our 2004 Stock Incentive Plan and restricted stock units purchased under our Management Stock Purchase Plan computed in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718. The amounts in this column attributable to restricted stock units purchased under our Management Stock Purchase Plan relate to restricted stock units purchased using all or a portion of the named executive officer's bonus award for the year indicated. For example, the amounts shown for 2010 include amounts attributable to restricted stock units purchased by the named executive officers on March 1, 2011 using all or a portion of their 2010 bonus award. A discussion of the assumptions used in calculating the amounts in this column may be found in Note 13 to our audited consolidated financial statements for the year ended December 31, 2010 included in our Annual Report on Form 10-K filed with the SEC on March 1, 2011, except for amounts attributable to the restricted stock units purchased under our Management Stock Purchase Plan on March 1, 2011 using all or a portion of the named executive officer's bonus for 2010. The fair value of each restricted stock unit purchased under the Management Stock Purchase Plan on March 1, 2011 was estimated on the date of grant using the Black-Scholes-Merton Model based on the following weighted average assumptions:

The risk-free interest rate is based on the U.S. treasury yield curve at the time of grant for the expected life of the restricted stock unit. The expected life, which is defined as the estimated period of time outstanding, of the restricted stock unit and the volatility were calculated using historical data. The expected dividend yield is our best estimate of the expected

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future dividend yield. Based on these assumptions, the weighted average grant date fair value of a restricted stock unit purchased on March 1, 2011 was $16.25.

(2)

The amounts shown in this column reflect the grant date fair value of stock options granted under our 2004 Stock Incentive Plan computed in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718. A discussion of the assumptions used in calculating the amounts in this column may be found in Note 13 to our audited consolidated financial statements for the year ended December 31, 2010 included in our Annual Report on Form 10-K filed with the SEC on March 1, 2011.

(3)

The amounts shown in this column reflect amounts earned under our Executive Incentive Bonus Plan that the named executive officer elected to receive in cash. Amounts earned by our named executive officers under the Executive Incentive Bonus Plan that were used to purchase restricted stock units under our Management Stock Purchase Plan are not shown in this column. As indicated in note (1) above, the grant date fair value of restricted stock units purchased under our Management Stock Purchase Plan using all or a portion of the named executive officer's bonus are included in the amounts shown in the Stock Awards column.

(4)

The amounts shown in this column reflect the aggregate change in actuarial present value of the named executive officer's accumulated benefit under our Pension Plan and our Supplemental Plan from January 1 to December 31 of each year. The amounts shown in this column do not reflect the amounts recognized for financial statement reporting purposes. Mr. O'Keefe has deferred compensation under our Nonqualified Deferred Compensation Plan, but he did not earn above-market or preferential returns on these amounts during 2010, 2009 or 2008.

(5)

Mr. Coghlan served as our Chief Operating Officer from January 15, 2010 to January 26, 2011. He was promoted to Chief Executive Officer and President on January 26, 2011.

(6)

Mr. Coghlan elected to use 50% of his 2010 annual bonus of $270,500, or $135,250, to purchase 5,377 restricted stock units under our Management Stock Purchase Plan as of March 1, 2011. The number of restricted stock units was determined by dividing $135,250 by $25.15, which was 67% of $37.54, the closing price of our class A common stock on March 1, 2011. The grant date fair value of the restricted stock units is included in the "Stock Awards" column for 2010.

(7)

The amount indicated for Mr. Coghlan in the All Other Compensation column for 2010 consists of relocation expenses paid by Watts, an automobile allowance, tax gross-up payments relating to relocation expenses, and term life and accidental death and dismemberment insurance premiums.

(8)

Mr. Coghlan elected to use 50% of his 2009 annual bonus of $385,160, or $192,580, to purchase 9,691 restricted stock units under our Management Stock Purchase Plan as of February 19, 2010. The number of restricted stock units was determined by dividing $192,580 by $19.87, which was 67% of $29.65, the closing price of our class A common stock on February 19, 2010. The grant date fair value of the restricted stock units is included in the "Stock Awards" column for 2009.

(9)

Mr. McCartney elected to use 50% of his 2010 annual bonus of $210,204, or $105,102, to purchase 4,179 restricted stock units under our Management Stock Purchase Plan as of March 1, 2011. The number of restricted stock units was determined by dividing $105,102 by $25.15, which was 67% of $37.54, the closing price of our class A common stock on March 1, 2011. The grant date fair value of the restricted stock units is included in the "Stock Awards" column for 2010.

(10)

For Mr. McCartney, none of the change in pension value for 2010 is attributable to benefits accrued during the year. The entire amount of the change shown in the table is due to the effect of Mr. McCartney being one year closer to his assumed retirement age and changes in the assumptions underlying the present value calculations at the end of 2009 and 2010, including a change in the discount rate assumption for the Pension Plan from 6.0% to 5.5% and for the Supplemental Plan from 6.0% to 5.4% and changes in the mortality assumptions underlying the calculations for both the Pension Plan and the Supplemental Plan. See footnote 1 following the 2010 Pension Benefits table for more details on these assumptions.

(11)

The amount indicated for Mr. McCartney in the All Other Compensation column for 2010 consists of an automobile lease and maintenance expenses, term life and accidental death and dismemberment insurance premiums, automobile insurance payments, and the incremental cost to Watts of sporting event tickets used by Mr. McCartney.

(12)

Mr. McCartney elected to use 50% of his 2009 annual bonus of $280,820, or $140,410, to purchase 7,066 restricted stock units under our Management Stock Purchase Plan as of February 19, 2010. The number of restricted stock units was determined by dividing $140,410 by $19.87, which was 67% of $29.65, the closing price of our class A common stock on February 19, 2010. The grant date fair value of the restricted stock units is included in the "Stock Awards" column for 2009.

(13)

Mr. McCartney elected to use 50% of his 2008 annual bonus of $185,836, or $92,918, to purchase 7,012 restricted stock units under our Management Stock Purchase Plan as of February 13, 2009. The number of restricted stock units was determined by dividing $92,918 by $13.25, which was 67% of $19.78, the closing price of our class A common stock on February 13, 2009. The grant date fair value of the restricted stock units is included in the "Stock Awards" column for 2008.

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(14)

For consistency in the conversion rate used for each compensation element, the dollar amounts shown for Mr. Cawte under the Salary, Non-Equity Incentive Plan Compensation and All Other Compensation columns have been converted from British pounds into U.S. dollars as of the date of grant of restricted stock units under our Management Stock Purchase Plan each year using the following interbank conversion rates in effect on each such date:

2010: 1.6169 U.S. dollars for one British pound as of March 1, 2011


2009: 1.5612 U.S dollars for one British pound as of February 19, 2010


2008: 1.4294 U.S. dollars for one British pound as of February 13, 2009

(15)

Mr. Cawte elected to use his entire 2010 annual bonus of $210,732 to purchase 8,379 restricted stock units under our Management Stock Purchase Plan as of March 1, 2011. The number of restricted stock units was determined by dividing $210,732 by $25.15, which was 67% of $37.54, the closing price of our class A common stock on March 1, 2011. The dollar amount of Mr. Cawte's bonus was determined based on the conversion rate of 1.6169 U.S. dollars for one British pound as of March 1, 2011. The grant date fair value of the restricted stock units is included in the "Stock Awards" column for 2010.

(16)

Mr. Cawte does not participate in our Pension Plan or our Supplemental Plan.

(17)

The amount indicated for Mr. Cawte in the All Other Compensation column for 2010 consists of $59,575 paid to Mr. Cawte for investment in his personal retirement savings plan, disability and health insurance premiums of $34,573, professional services relating to Mr. Cawte's pension and an automobile allowance.

(18)

Mr. Cawte elected to use his entire 2009 annual bonus of $87,864 to purchase 4,421 restricted stock units under our Management Stock Purchase Plan as of February 19, 2010. The number of restricted stock units was determined by dividing $87,864 by $19.87, which was 67% of $29.65, the closing price of our class A common stock on February 19, 2010. The dollar amount of Mr. Cawte's bonus was determined based on the conversion rate of 1.5612 U.S. dollars for one British pound as of February 19, 2010. The grant date fair value of the restricted stock units is included in the "Stock Awards" column for 2009.

(19)

Mr. Cawte elected to use his entire 2008 annual bonus of $179,313 to purchase 13,533 restricted stock units under our Management Stock Purchase Plan as of February 13, 2009. The number of restricted stock units was determined by dividing $179,313 by $13.25, which was 67% of $19.78, the closing price of our class A common stock on February 13, 2009. The dollar amount of Mr. Cawte's bonus was determined based on the conversion rate of 1.4294 U.S. dollars for one British pound as of February 13, 2009. The grant date fair value of the restricted stock units is included in the "Stock Awards" column for 2008.

(20)

Mr. Flanders elected to use his entire 2010 annual bonus of $64,807 to purchase 2,576 restricted stock units under our Management Stock Purchase Plan as of March 1, 2011. The number of restricted stock units was determined by dividing $64,807 by $25.15, which was 67% of $37.54, the closing price of our class A common stock on March 1, 2011. The grant date fair value of the restricted stock units is included in the "Stock Awards" column for 2010.

(21)

The amount indicated for Mr. Flanders in the All Other Compensation column for 2010 includes automobile lease and maintenance expenses, automobile insurance payments and term life and accidental death and dismemberment insurance premiums. In addition, in connection with his assignment in China, we provided Mr. Flanders with customary expatriate benefits to address the unique circumstances arising from living and working abroad. The amount indicated for Mr. Flanders in the All Other Compensation column for 2010 also includes the cost of these expatriate benefits, including $195,506 in tax equalization payments, $127,822 for housing expenses, $25,579 in transportation costs for personal visits to the United States, $26,683 in tax gross-up payments, and use of a car and driver for personal transportation. Amounts paid in Chinese renminbi have been converted to U.S. dollars as of March 1, 2011 at a conversion rate of 0.1519 U.S. dollars for one Chinese renminbi.

(22)

Mr. Flanders elected to use his entire 2009 annual bonus of $252,710 to purchase 12,718 restricted stock units under our Management Stock Purchase Plan as of February 19, 2010. The number of restricted stock units was determined by dividing $252,710 by $19.87, which was 67% of $29.65, the closing price of our class A common stock on February 19, 2010. The grant date fair value of the restricted stock units is included in the "Stock Awards" column for 2009.

(23)

Mr. Flanders elected to use his entire 2008 annual bonus of $106,964 to purchase 8,072 restricted stock units under our Management Stock Purchase Plan as of February 13, 2009. The number of restricted stock units was determined by dividing $106,964 by $13.25, which was 67% of $19.78, the closing price of our class A common stock on February 13, 2009. The grant date fair value of the restricted stock units is included in the "Stock Awards" column for 2008.

(24)

Mr. O'Keefe resigned as our Chief Executive Officer and President on January 26, 2011 but he will remain an employee until August 3, 2011.

(25)

Mr. O'Keefe elected to use his entire 2010 annual bonus of $691,977 to purchase 27,513 restricted stock units under our Management Stock Purchase Plan as of March 1, 2011. The number of restricted stock units was determined by dividing

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$691,977 by $25.15, which was 67% of $37.54, the closing price of our class A common stock on March 1, 2011. The grant date fair value of the restricted stock units is included in the "Stock Awards" column for 2010.

(26)

For Mr. O'Keefe, $375,724 of the change in pension value for 2010 is attributable to benefits accrued during the year. The remaining $483,419 is due to the effect of Mr. O'Keefe being one year closer to his assumed retirement age and changes in the assumptions underlying the present value calculations at the end of 2009 and 2010, including a change in the discount rate assumption for the Pension Plan from 6.0% to 5.5% and for the Supplemental Plan from 6.0% to 5.4% and changes in the mortality assumptions underlying the calculations for both the Pension Plan and the Supplemental Plan. See footnote 1 following the 2010 Pension Benefits table for more details on these assumptions.

(27)

The amount indicated for Mr. O'Keefe in the All Other Compensation column for 2010 consists of automobile lease and maintenance expenses of $27,363, term life and accidental death and dismemberment insurance premiums, automobile insurance payments, and the cost of a comprehensive annual physical examination.

(28)

Mr. O'Keefe elected to use his entire 2009 annual bonus of $828,944 to purchase 41,718 restricted stock units under our Management Stock Purchase Plan as of February 19, 2010. The number of restricted stock units was determined by dividing $828,944 by $19.87, which was 67% of $29.65, the closing price of our class A common stock on February 19, 2010. The grant date fair value of the restricted stock units is included in the "Stock Awards" column for 2009.

(29)

Mr. O'Keefe elected to use his entire 2008 annual bonus of $548,564 to purchase 41,401 restricted stock units under our Management Stock Purchase Plan as of February 13, 2009. The number of restricted stock units was determined by dividing $548,564 by $13.25, which was 67% of $19.78, the closing price of our class A common stock on February 13, 2009. The grant date fair value of the restricted stock units is included in the "Stock Awards" column for 2008.

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Grants of Plan-Based Awards

        The following table shows information concerning grants of plan-based awards made during 2010 to the named executive officers.

2010 GRANTS OF PLAN-BASED AWARDS