Investor Releases
Declaration of Magyar Telekom on its Corporate Governance Practices
Budapest, April 28, 2006
Declaration in connection with the Corporate Governance Recommendations (dated December 8, 2003) published by the Budapest Stock Exchange Company Limited by Shares regarding corporate governance practices
Magyar Telekom Telecommunications Public Limited Company (the “Company”) declares as set forth below and provides the following information:
1. to Section 1.1.2 of the Recommendations
The mission of the Board of Directors covers matters set forth in this Section.
Yes (Complies) No (Please explain)
The Board of Directors established its Charter.
Yes (Complies) No (Please explain)
2. to Section 1.2.2 of the Recommendations
The Supervisory Board established its Charter and work schedule.
Yes (Complies) No (Please explain)
3. to Section 1.3.2 of the Recommendations
Minutes have been prepared on meetings of the Board of Directors and the Supervisory Board, respectively, and resolutions had been properly administered.
Yes (Complies) No (Please explain)
4. to Section 1.6.1. and Section 2.1.6 of the Recommendations
The Board of Directors has prepared the guidelines regarding the evaluation and
remuneration of the management.
Yes (Complies) No (Please explain)
The Board of Directors has published the guidelines regarding the evaluation and
remuneration of the management.
Yes (Complies)
No (Please explain)
(when, where: Corporate website of Magyar Telekom
June 12, 2005 http://www.magyartelekom.hu/english/investorrelations/corporategovernance/compensation.vm)
5. to Section 1.7. of the Recommendations
An independent internal audit department (independent internal control) functions at the Company.
Yes (Complies)
No (Please explain:
Internal
Audit Branch is the independent internal auditing organization of the
Magyar Telekom Group. From the organizational viewpoint it reports
directly to the Chief Executive Officer. The Director of Internal Audit
reports directly to the Supervisory Board and the Chief Executive
Officer. Internal Audit reports to the Supervisory Board and the Chief
Executive Officer on its audit work performed. The Audit Committee of
the Supervisory Board reviews the effectiveness of the Internal Audit
function, as well as the report on Internal Audit activities prior to
its submission to the Supervisory Board.)
The independent audit department has an auditing plan approved by the Board of Directors or the Supervisory Board.
Yes (Complies) No (Please explain)
6. to Section 1.10. of the Recommendations
The shareholders’ meeting and the Supervisory Board have been informed about the fact that the outside audit firm of the Company received a material assignment in addition to the audit.
Yes (Complies) No (Please explain:
In view of the fact that Magyar Telekom is also listed on the New York Stock Exchange, in compliance with the extremely strict provisions of the Sarbanes-Oxley Act, the Audit Committee, which operates as a committee of the Supervisory Board is responsible for the oversight of the work of the independent external auditor of the Company. For this activity the “Rules of Procedure and Pre-Approval Policy of Matáv Ltd.’s Audit Committee of the Supervisory Board” approved by the Supervisory Board on December 8, 2004 were applicable, since December 13, 2005 the “Rules of Procedure and pre-approval policy of Magyar Telekom Ltd.’s Audit Committee of the Supervisory Board” approved by the Supervisory Board and superseding the earlier regulation are applicable. All Supervisory Board members receive the minutes of the Audit Committee meetings and of fax votes, and the Audit Committee also reports on its activities at the Supervisory Board meetings.)
7. to Section 2.1.1. of the Recommendations
The guidelines for disclosures have been prepared by the Company.
Yes (Complies) No (Please explain)
8. to Section 2.1.4. of the Recommendations
The Board of Directors published its actual business strategy.
Yes (Complies)
No (Please explain)
(when, where: Corporate website of Magyar Telekom
June 12, 2005 http://www.magyartelekom.hu/english/investorrelations/corporategovernance/strategy.vm)
9. to Section 2.1.6. of the Recommendations
The Company published in accordance with Section 2.1.6 of the Recommendations the information relating to the career of the members of the Board of Directors, the Supervisory Board and executive management.
Yes (Complies)
No (Please explain)
(when, where: Corporate website of Magyar Telekom
June 12, 2005
http://www.magyartelekom.hu/english/investorrelations/corporategovernance/boardofdirectors/members.vm
http://www.magyartelekom.hu/english/investorrelations/corporategovernance/supervisoryboard/members.vm
http://www.magyartelekom.hu/english/investorrelations/corporategovernance/managementcommittee/members.vm)
10. to Section 2.1.7. of the Recommendations
The Company published in accordance with Section 2.1.7 of the Recommendations its risk management guidelines.
Yes (Complies)
No (Please explain)
(when, where: Corporate website of Magyar Telekom
June 12, 2005 http://www.magyartelekom.hu/english/doc/kockazatkezeles_en.pdf)
11. to Section 2.1.9 of the Recommendations
The Company published its guidelines on insider dealings.
Yes (Complies)
No (Please explain)
(when, where: Corporate website of Magyar Telekom June 12, 2005
http://www.magyartelekom.hu/english/doc/bennfentes_en.pdf)
12. to Section 2.1.10. of the Recommendations
The Board of Directors published in accordance with Section 2.1.10 of the
Recommendations information regarding the relationships of the directors and members of the management with third parties.
Yes (Complies)
No (Please explain)
(when, where: Corporate website of Magyar Telekom June 12, 2005 http://www.magyartelekom.hu/english/investorrelations/corporategovernance/boardofdirectors/members.vm
http://www.magyartelekom.hu/english/investorrelations/corporategovernance/supervisoryboard/members.vm
http://www.magyartelekom.hu/english/investorrelations/corporategovernance/managementcommittee/members.vm)
Information and other notes
1.
to Section 1.3.1. of the Recommendations
The Board of Directors held with 80 % average participation ratio 5 meetings in the business year of 2005.
The Supervisory Board held with 93 % average participation ratio 3 meetings in the business year of 2005.
2.
to Section 1.5.2. of the Recommendations
The
ratio of the independent directors qualifying as independent according
to the recommendation of the Budapest Stock Exchange compared to the
total number of directors: 77 % independent.
3.
to Section 1.5.5. of the Recommendations
The
ratio of the independent Supervisory Board members qualifying as
independent according to the recommendation of the Budapest Stock
Exchange compared to the total number of Supervisory Board members was
62 % independent until April 27, 2005. Since the US Securities and
Exchange Commission prescribes special requirements for the composition
of the Audit Committee of companies that are listed on the New York
Stock Exchange, in order to ensure that the Company complies both with
these requirements and those of the Act on Business Associations, the
General Meeting increased the number of the members of the Supervisory
Board to 12 on April 27, 2005.
So from that date the ratio of the independent Supervisory Board members qualifying as independent according to the recommendation of the Budapest Stock Exchange compared to the total number of Supervisory Board members changed to 66 %. (When the ratio of the independent Supervisory Board members is determined the employee representatives participating in the Supervisory Board are not qualified as independent by the Company in line with the recommendation of the Budapest Stock Exchange.)
4.
to Section 1.8. of the Recommendations
At the Company the below board committees held the below number of meetings per
committee in the business year of 2005:
-
Remuneration Committee: 3 meetings
-
Audit Committee: 2 meetings
5. to Section 3.1.4. of the Recommendations
In preparing and holding the shareholders’ meeting at the Company the relevant
recommendations on preparation and holding of shareholders’ meeting had been taken into account in the business year of 2005.
Yes No
6. The Company established a Corporate Governance Code.
Yes
No
(available at the Corporate website of Magyar Telekom
http://www.magyartelekom.hu/english/doc/alapszabaly_en.pdf
http://www.magyartelekom.hu/english/doc/igazgatosag_ugyrendje_en.pdf
http://www.magyartelekom.hu/english/doc/FEB_ugyrendje_en.pdf
http://www.magyartelekom.hu/english/doc/EB_ugyrendje_en.pdf)
7. The Company established a Code of Ethics.
Yes
No
(available at the Corporate website of Magyar Telekom
http://www.magyartelekom.hu/english/doc/etikaikodex_en.pdf )
8. The function of the Chief Executive Officer and the Chairman of the Board of Directors is fulfilled by the same person.
Yes No
Date: April 28th, 2006
Elek Straub
Dr. Klaus Hartmann
Chairman-CEO
Member of the Board of Directors,
Chief Financial Officer