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					           Partners for Financial Stability (PFS) Program

           Reporting on Corporate Governance
                  by Listed Companies in
      Central and Eastern European (CEE) Countries

                                          IFRS Seminar
                                         Tallinn, Estonia
                                         October 27, 2004
                                                                            August 2003
Bulgaria    Croatia   Czech Rep.   Estonia   Hungary   Latvia   Lithuania   Poland   Romania   Slovakia   Slovenia
                             Agenda
1.   Case in Point

2.   Online Investor Relations: Surveys of Websites of Listed Companies in
     CEE

3.   Surveys of Reporting on Corporate Social Responsibility (CSR) by
     Listed Companies in CEE

4.   Recent Trends in Reporting on Corporate Social Responsibility (CSR)

5.   Investors’ Views Regarding CSR – Practical Findings

6.   Impact of Corporate Governance on Company Valuation

7.   Questions and Discussion / Feedback
Case in Point
                     Case in Point – I
  1990s – During the height of the dot.com boom and equity culture craze,
                    company expanded internationally.


Senior executives received extravagant bonuses based on incentive schemes.
The incentive schemes influenced management to pay more attention to the
  short-term share price and less attention to the long-term health of the
                                 company.


The board of directors did not supervise these schemes. Changes were made
 to the size and scope of the schemes without the approval of the board. For
    example, the Chief Executive Officer (CEO) removed the limit on one
incentive program so that it paid out more than 100% above its initial limit;
whereas the initial limit was approximately EURO 39 million, approximately
EURO 100 million was paid. In another case, the CEO and finance director
 received incentives of approximately EURO 5 million above the authorized
                                   amount.
                    Case in Point – II
   1990s – Senior executives and members of their families received luxury
  rental apartments in an expensive apartment building in the capital. The
 apartments belonged to the company’s insurance subsidiary. The CEO, the
finance director and the CEO of the company’s insurance subsidiary ordered
   luxury renovations of their apartments. These senior executives received
              interest-free loans to undertake these renovations.


2000 – 2002 – As international stock markets fell, the company reported heavy
 losses and the share price fell by 90 percent. The company was forced to sell
                               its US subsidiaries.


February 2003 – The company’s chairman of the board of directors resigned,
                   one year before the end of his term.


                 April 2003 – The company’s CEO was fired.
                  Case in Point – III
September 2003 – The company’s deputy CEO and the head of the company’s
                     insurance subsidiary resigned.

 October 2003 – The company announced that was considering legal action
 against (unnamed) former senior executives. The legal question was: Who
               paid for the renovations of the apartments?

The press reported that an independent investigation would be conducted of:
 the relationship between the company and its insurance subsidiary; and the
      manner in which the company did business during the boom years.

 December 1, 2003 - The company’s insurance subsidiary announced that it
             would reduce pension payouts to policyholders.
The chairman of the board, in office only since April 2003, resigned. He was
 a board member during the time the incentive programs were established.
 The company announced that it would claim damages for mismanagement.
                   Case in Point – IV
December 2, 2003 – Details of the internal investigative report were published
  in the press. The report said that changes were made to incentive schemes
without board approval. The report especially criticized the former CEO and
 former finance director. It also criticized the former chairman of the board
      of directors and former CEO of the company’s insurance subsidiary.
 The report explained that full details of the bonus payments were not found
 in the company’s annual financial statements. Total payments of EURO 154
 million were found in the annual reports, whereas the internal investigative
             report found payments totaling EURO 220 million.
The report concluded, “a small number of individuals … behaved extremely
                unethically and possibly even criminally.”


  The public prosecutor announced the launch of a criminal investigation.
                    Case in Point – V
December 3, 2003 – The company’s insurance subsidiary announced it would
                     discontinue incentive schemes.


December 2003 – Pension funds in company’s home country sent letters to 50
listed companies in the same country, asking that each company report their
 executive compensation policies to shareholders at the 2004 annual general
                          meeting of shareholders.
   Institutional investors and the country’s leading shareholder association
            called for the drafting of a corporate governance code.
  An extraordinary session of Parliament was convened to discuss this and
   other scandals in the country. Parliament established a commission to
                    research the situation in the country.
April 2004 – As the company prepared financial reports for the 2003 financial
year, new details emerged: more than SKr 4 billion (EURO 434 million) was
                             paid in bonuses.
                    Case in Point – VI
 April 2004 – At the company’s annual general meeting, shareholders did not
discharge the former board of directors from liability for their actions during
the previous financial year. This allowed the possibility for future lawsuits by
                 shareholders against the board of directors.


                            Questions to Consider:
                        How did the scandal emerge?
                Who played a role in resolving the situation?
                             Name the Company
                              Name the Country
    Can such situations happen in other companies / in other countries?
 Impact of the Scandal at Skandia

Goran Persson, Prime Minister of Sweden: “When the
  stock market turns up and the big money starts to roll in
  again there are always going to be those who claim that
  it was due to our services that shareholders got these
  billions and we ought to have 10 percent of it at least.

  That’s why we have to vaccinate ourselves and how that
  is done is not just a matter of morals and ethics, but also
  a question of making laws.”
                                    Financial Times
                                    December 6-7, 2003
 Online Investor Relations:
    Surveys of Websites
of Listed Companies in CEE
        Investor Relations Online: Survey of Websites
of the 10 Largest Listed Companies in Eleven CEE Countries
                         August 2004

                               Executive Summary

The PFS Program’s seventh semi-annual survey of the websites of the 10 largest listed
     companies (by market capitalization) in Central and Eastern European (CEE)
  countries demonstrates improved online disclosure. Bulgaria, Croatia and Romania
                    were included in the survey for the first time.

 The survey, consisting of three Excel spreadsheets and this PowerPoint presentation,
                            presents the following information:
                     Current data about all eleven CEE countries;
 Separate charts presenting data about the eight new member states of the European
                                        Union (EU);
   Comparisons of the data about these eight countries with data from the surveys
                                                         2003, August 2002,
   conducted in February 2004, August 2003, February August 2003 February
                                2002 and August 2001; and
  Separate charts presenting first-time data about Bulgaria, Croatia and Romania.
                           Investor Relations Online:
               Survey of Websites of the 10 Largest Listed Companies
                            in Eleven CEE Countries
                                    August 2004




10
 9                                                        Additional Information on
                                                          Supervisory Board
 8
                                                          List of Supervisory Board
 7                                                        Members
 6                                                        Additional Information on
                                                          Management Board
 5
                                                          List of Management Board
 4                                                        Members
 3                                                        English-language Website
     2
     1                                                    Website

     0
         BG CZ
               EE HR
                     HU   LT   LV   PL   RO   SI   SK
         Investor Relations Online: Survey of Websites
 of the 10 Largest Listed Companies in Eleven CEE Countries
                          August 2004

                     Survey Findings – All 11 CEE Countries

                               Website in Local Language
Each of the ten largest listed companies in the following countries has a local language
      website: Czech Republic (CZ), Hungary (HU), Lithuania (LT), Poland (PL),
   Romania (RO) and Slovenia (SI). In the other countries, 80-90% of the companies
                                have a local language website.

                               English-Language Website
  Each of the ten largest listed companies in the following countries has an English-
  language website: Czech Republic and Slovenia. In Hungary, Lithuania and Poland,
    90% of companies have an English-language website. In the other countries, 60%-
                80% of the companies have an English-language website.
                                                         August 2003
        Investor Relations Online: Survey of Websites
of the 10 Largest Listed Companies in Eleven CEE Countries
                         August 2004

                  Survey Findings – All 11 CEE Countries

                            Data on Management
 77% of companies provide a list of management online. 34% provide additional
                          information on management.

                           Data on Board Members
66% of companies provide a list of board members online. 23% provide additional
                         information on board members.




                                                    August 2003
              Investor Relations Online: Survey of Websites
of the 10 Largest Listed Companies in Eight New Member States of the EU
                               August 2004



10

 9                                                    Additional Information on
                                                      Supervisory Board
 8
                                                      List of Supervisory Board
 7                                                    Members

 6                                                    Additional Information on
                                                      Management Board
 5
                                                      List of Management Board
 4
                                                      Members
     3
                                                      English-language Website
     2

     1                                                Website

     0
         CZ   EE   HU   LT   LV   PL   SI   SK
          Investor Relations Online: Survey of Websites
               of the 10 Largest Listed Companies
             in Eight New Member States of the EU
                           August 2004

           Survey Findings – Eight New Member States of the EU

                              Website in Local Language
Each of the ten largest listed companies in the following countries has local language
   website: Czech Republic (CZ), Hungary (HU), Lithuania (LT), Poland (PL) and
 Slovenia (SI). In the other countries, 80-90% of the companies have a local language
                                         website.

                              English-Language Website
 Each of the ten largest listed companies in the following countries has an English-
 language website: Czech Republic and Slovenia. In Hungary, Lithuania and Poland,
  90% of companies have an English-language website. In the other countries, 60%-
               80% of the companies have an English-language website.
          Investor Relations Online: Survey of Websites
                of the 10 Largest Listed Companies
              in Eight New Member States of the EU
                            August 2004


           Survey Findings – Eight New Member States of the EU

                                Data on Management
In Hungary and Slovenia, 100% of companies provide a list of management online. In
    the other countries, 50%-90% of companies provide a list of management online.
           Disclosure of additional information on management varies widely.

                               Data on Board Members
In Hungary, 100% of companies provide a list of board members online. In the other
  countries, 30%-90% of companies provide a list of board members online. Disclosure
               of additional information on board members varies widely.
                         Local Language Websites
of the 10 Largest Listed Companies in Eight New Member States of the EU
                                2001-2004




   10
    8
    6
    4
    2
    0
        CZ EE HU LT LV PL SI SK
        August-01          February-02         August-02
        February-03        August-03           February-04
        August-04
                        English-Language Websites
of the 10 Largest Listed Companies in Eight New Member States of the EU
                                2001-2004




    10
     8
     6
     4
     2
                                     `
     0
         CZ EE HU LT LV PL SI SK

         August-01     February-02       August-02   February-03
         August-03     February-04       August-04
           Investor Relations Online: Survey of Websites
     of the 10 Largest Listed Companies in Eight New Member
                           States of the EU
                             August 2004
                  Comparison of Results of the Seven Surveys –
                     Eight New Member States of the EU

The first survey of these eight CEE countries was conducted in August 2001. Since then,
    it has been conducted ever since every six months – in February 2002, August 2002,
               February 2003, August 2003, February 2004 and August 2004.

                                Local Language Website
Existence of a local language website remains at the same level of 95% as an average for
                   the eight countries. In February 2004, it was also 95%.
                    (Best performers: CZ, HU, LT, PL and SI - 100%)

                                English-Language Website
Since the previous survey, the percentage of companies with an English-language website
          increased to 84% for the eight countries. In February 2004, it was 75%.
                         (Best performers: CZ and SI – 100%)
List of Management Available Online at the 10 Largest Listed Companies
               in Eight New Member States of the EU
                              2001-2004




    10
     8
     6
     4
     2
     0
         CZ EE HU LT LV PL SI SK

         August-01      February-02       August-02
         February-03    August-03         February-04
         August-04
Additional Information on Management Available Online at the 10 Largest
        Listed Companies in Eight New Member States of the EU
                              2001-2004



 10
  8
  6
  4
  2
  0
      CZ EE HU LT LV PL SI SK


      February-02           August-02             February-03
      August-03             February-04           August-04
         Investor Relations Online: Survey of Websites
   of the 10 Largest Listed Companies in Eight New Member
                         States of the EU
                           August 2004

                 Comparison of Results of the Seven Surveys –
                    Eight New Member States of the EU

Information available online about management increased since the last survey. As in
      the February 2004 survey, this survey recognizes/accepts information about
     management available “indirectly,” that is, in an annual report available on the
                                   company website.

 An average of 84% of companies surveyed provide a list of management online. In
                             February 2004, it was 78%.
                      (Best performers: HU and SI - 100%)

  An average of 38% of companies surveyed provide additional information about
               management online. In February 2004, it was also 38%.
                     (Best performers: HU and PL - 70% )
List of Board Members Available Online at the 10 Largest Listed
        Companies in Eight New Member States of the EU
                           2001-2004




10
 8
 6
 4
 2
 0
     CZ EE HU LT LV PL SI SK
      August-01           February-02          August-02
      February-03         August-03            February-04
      August-04
 Additional Information on Board Members Available Online at the 10
  Largest Listed Companies in Eight New Member States of the EU
                             2001-2004




10
 8
 6
 4
 2
0
     CZ EE HU LT LV PL SI SK

      August-01          February-02           August-02
      February-03        August-03             February-04
      August-04
          Investor Relations Online: Survey of Websites
    of the 10 Largest Listed Companies in Eight New Member
                          States of the EU
                            August 2004

                  Comparison of Results of the Seven Surveys –
                     Eight New Member States of the EU

Information available online about board members increased since the last survey. As in
     the February 2004 survey, this survey recognizes/accepts information about board
   members available “indirectly,” that is, in an annual report available on the company
                                          website.

 An average of 70% of companies surveyed provide a list of board members online. In
                              February 2004, it was 61%.
                  (Best performers: HU – 100%; PL and SI - 90%)

An average of 26% of companies surveyed provide additional information about board
                   members online. In February 2004, it was 24%.
                       (Best performers: HU and PL - 60% )
          Investor Relations Online: Survey of Websites
    of the 10 Largest Listed Companies in Eight New Member
                          States of the EU
                            August 2004

                 Comparison of Results of the Seven Surveys –
                    Eight New Member States of the EU

Please note: The Lithuanian data on supervisory board information should be ignored,
         since 30% of the Lithuanian companies surveyed have a one-tier board.
            Investor Relations Online: Survey of Websites
of the 10 Largest Listed Companies in Bulgaria, Croatia and Romania
                             August 2004

          10
           9                                        Additional Information on
           8                                        Supervisory Board
                                                    List of Supervisory Board
           7
                                                    Members
           6                                        Additional Information on
           5                                        Management Board
                                                    List of Management Board
           4
                                                    Members
           3                                        English-language website
           2
                                                    Website
           1
           0
               BG     HR      RO
          Investor Relations Online: Survey of Websites
               of the 10 Largest Listed Companies
                in Bulgaria, Croatia and Romania
                           August 2004

                Survey Findings – Bulgaria, Croatia and Romania

In August 2004, the PFS Program conducted for the first time a survey of the websites of
       the 10 largest listed companies (by market capitalization) in three countries:
                               Bulgaria, Croatia and Romania.

                            The results were as follows:
  In Croatia and Romania, all 10 companies have a website. In Bulgaria, 80% of the
                               companies have a website.

In Croatia, 90% of the companies have an English-language website. In Bulgaria 70%
        and in Romania 60% of the companies have an English-language website.
                                                         August 2003
        Investor Relations Online: Survey of Websites
             of the 10 Largest Listed Companies
              in Bulgaria, Croatia and Romania
                         August 2004

              Survey Findings – Bulgaria, Croatia and Romania

In Croatia 70%, in Romania 60% and in Bulgaria 50% of the companies provide a list
                              of management online.

In Romania 70%, in Croatia 60% and in Bulgaria 40% of companies provide a list of
                              board members online.

Additional information on management and board members varies widely among the
                           companies in the three countries.



                                                     August 2003
          Investor Relations Online: Survey of Websites
               of the 10 Largest Listed Companies
                in Bulgaria, Croatia and Romania
                           August 2004

  Historical Comparison of Data on Bulgaria, Croatia and Romania (August
    2004) with Data on Eight New Member States of the EU (February 2002)

  A comparison of the first complete survey of companies in eight Central and Eastern
     European (CEE) countries conducted by the PFS Program in February 2002 with
     this first survey of companies in Bulgaria, Croatia and Romania leads to a positive
                                         conclusion:

In August 2004, the online investor relations practices of companies in Bulgaria, Croatia
      and Romania are strikingly similar to the practices of the eight CE countries in
                     February 2002, two years prior to EU accession.

The last three slides of the survey provide comparisons of the sets of data regarding each
                                                           August 2003
               category of information from August 2004 and February 2002.
      Investor Relations Online: Survey of Websites
           of the 10 Largest Listed Companies
            in Bulgaria, Croatia and Romania
                       August 2004

Historical Comparison of Data on Bulgaria, Croatia and Romania (August
  2004) with Data on Eight New Member States of the EU (February 2002)

                       Local-Language Website
                  BG, HR and RO – August 2004 – 93%
                   EU Eight – February 2002 – 94%



                      English –Language Website
                  BG, HR and RO – August 2004 – 73%
                   EU Eight – February 2002 – 83%

                                              August 2003
     Investor Relations Online: Survey of Websites
          of the 10 Largest Listed Companies
           in Bulgaria, Croatia and Romania
                      August 2004

 Historical Comparison of Data on Eight New Member States of the EU
(February 2002) with Data on Bulgaria, Croatia and Romania (August 2004)

                  List of Management Available Online
                  BG, HR and RO – August 2004 – 60%
                    EU Eight – February 2002 – 63%



          Additional Information on Management Available Online
                   BG, HR and RO – August 2004 – 23%
                      EU Eight – February 2002 – 34%

                                                August 2003
     Investor Relations Online: Survey of Websites
          of the 10 Largest Listed Companies
           in Bulgaria, Croatia and Romania
                      August 2004

 Historical Comparison of Data on Eight New Member States of the EU
(February 2002) with Data on Bulgaria, Croatia and Romania (August 2004)

                 List of Board Members Available Online
                  BG, HR and RO – August 2004 – 56%
                     EU Eight – February 2002 – 49%



        Additional Information on Board Members Available Online
                   BG, HR and RO – August 2004 – 13%
                     EU Eight – February 2002 – 21%

                                                August 2003
IR Online in CEE – General Conclusions
      The conclusions of previous surveys remain valid:

  There is a gap between the information provided in local
     language and the information provided in English.
  Sometimes it takes longer for the information to appear in
            English; sometimes it is never provided.

For example, not all companies have their complete archive of
 annual reports available online, neither in local language nor
                          in English.

It is still difficult to obtain information on management board
                    and supervisory board members.

Nevertheless, the situation continues to improve rapidly across
                            the region.
   Surveys of Reporting on
Corporate Social Responsibility
(CSR) by Listed Companies in
            CEE
           Executive Summary
On September 28, 2004 the PFS Program published its third semi-
annual Survey of Reporting on Corporate Social Responsibility (CSR)
by the 10 Largest Listed Companies (by market capitalization) in
Central and Eastern Europe. Companies in Czech Republic, Estonia,
Hungary, Latvia, Lithuania, Poland, Slovakia and Slovenia were
surveyed for the third time. Companies in Bulgaria, Croatia and
Romania were included in the survey for the first time.

The regional survey notes a generally similar level of disclosure to that
observed in April 2004 across all three information categories analyzed
– corporate governance, environmental policy and social policy.

However, the survey demonstrates improvement in the quality and
quantity of information about corporate governance issues.

As noted in the survey conducted in spring 2004, EU accession and
adoption of corporate governance codes in several countries in
2003/2004 are two factors influencing broader and deeper reporting.
                 Introduction
This third survey of reporting on Corporate Social
Responsibility (CSR) by listed companies in Central and
Eastern Europe (CEE) demonstrates increased disclosure
about corporate governance and CSR issues.                The
following are some of the key drivers noted by the
companies themselves as well as the local and
international financial press:
     audit (scrutiny of the role of the external auditor)
                        business ethics
                      competitiveness
                corporate governance codes
                  environmental protection
                    risk management; and
          socially responsible investment (SRI).
     Introduction (continued)

Clearly, the accession of eight CEE countries to the
European Union (EU) on May 1, 2004 impacts corporate
disclosures on many of the above-mentioned areas.

The EU influences corporate disclosure directly and
indirectly, through specific EU directives and general
policy statements such as the Lisbon Agenda.
     Introduction (continued)
However,     other     country-specific,   regional    and
international factors also continue to play a role. For
example, the implementation of a Corporate Governance
Codes by the Warsaw Stock Exchange, while is not directly
related to EU accession, has clearly influenced the quality
and quantity of disclosure about governance issues by
companies listed on that exchange.

The following brief explanation of the implementation of
corporate governance codes in several CEE countries will
provide a useful framework for analyzing the disclosures
covered by this survey.
                Methodology
This is the PFS Program’s third semi-annual Survey of
Reporting on Corporate Social Responsibility (CSR) by
Listed Companies in CEE. The ten largest listed companies
(by market capitalization) in Czech Republic, Estonia,
Hungary, Latvia, Lithuania, Poland, Slovakia and Slovenia
are surveyed for the third time. The ten largest listed
companies (by market capitalization) in Bulgaria, Croatia
and Romania are surveyed for the first time.


The survey analyzes companies’ disclosures during August
2004 on the following three topics: corporate governance,
environmental policy and social policy.
      Methodology (continued)
The survey template was developed after analyzing the
selection criteria of a number of socially responsible
investment (SRI) funds and SRI research firms.


The survey consists of two integral components:
A database, including a report on each company that
indicates whether or not the company discloses the
information and includes hyperlink(s) to the actual
disclosure(s); and this presentation of the survey results.
Via the hyperlinks, a reader can move from the database
directly into a company’s website and/or annual report to see
how and where the specific information is disclosed.
        Methodology (continued)
This survey includes a comparison of the disclosures made by
listed companies in the new EU member states in August
2004 with those made in April 2004 and August 2003.


Note:
Comparative data from April 2004 and August 2003 is not
available for Bulgarian, Croatia and Romanian companies
since these countries were included in the survey for the first
time in August 2004.
Also, comparative data from August 2003 is not available for
Hungarian and Polish companies, since the country surveys
conducted in those countries in 2003 analyzed information
provided in Hungarian and Polish respectively.
        Comparison of the Three Surveys
Information Available Online in English - Websites

   10

    9

    8                                           English
                                                Language
    7                                           Website
                                                08'2003
    6
                                                English
    5                                           Language
                                                Website
    4
                                                04'2004
    3                                           English
    2                                           Language
                                                Website
    1                                           08'2004

    0
        CZ   EE   HU   LT   LV   PL   SI   SL
      Comparison of the Three Surveys
     Information Available Online in English -
                 Annual Reports

10

 9
                                              English
 8                                            Language
                                              Annual
 7
                                              Report 2002
 6
                                              English
 5                                            Language
                                              Annual
 4                                            Report
                                              2002/2003
 3                                            English
                                              Language
 2
                                              Annual
 1                                            Report 2003

 0
      CZ   EE   HU   LT   LV   PL   SI   SL
     Data from Bulgaria, Croatia and Romania
       Information Available Online in English –
            Websites and Annual Reports

10

9

8
                                         English
7                                        Language
                                         A nnual Repo rt
6                                        2003

5

4
                                         English
3                                        Language
                                         Website 08'2004
2

 1

0
         BG          HR          RO

				
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