1 The role of shareholders

TP encourages shareholders to play an active role in the Company's corporate governance. Indeed, shareholder consent is required for key decisions, including: the review and approval of the financial statements and Management Board Report on Activities; the review and approval of the Management Board's recommendations on dividend payments; the review and approval of the Supervisory Board Assessment of the Group's situation; the election of the members of the Supervisory Board (and, if necessary, their dismissal); amendments to the Company's Articles of Association; increase and reduction of the share capital; and the buy-back of shares. At the Company's General Meetings, each share in TP entitles its owner to one vote. Holders of the Company's GDRs are also encouraged to submit their voting instructions to the Company's Depository Bank. In addition to their participation in General Meetings, members of the Company's Management Board and senior executives engage in active dialogue with the Company's shareholders. To ensure that investors receive a balanced view of the Company's performance, Management Board members – led by the President of the Management Board and the Chief Financial Officer – also make regular presentations to institutional investors and representatives of the domestic and international financial community.

2 The Supervisory Board

As of 31 December 2007, the Supervisory Board comprises 13 members. Among them there are six independent members, namely Messrs. Prof. Andrzej K. Koźmiński, Timothy Boatman, Ronald Freeman, Prof. Jerzy Rajski, Dr. Wiesław Rozłucki and Dr. Mirosław Gronicki. The other members are: Olivier Barberot, Michel Monzani, Vivek Badrinath, Antonio Anguita, Jacques Champeaux, Stéphane Pallez and Georges Penalver. The term of office of each member of the Supervisory Board is three years, and their remuneration is determined by the General Meeting. The Supervisory Board meets at least once a quarter and is responsible for the appointment and remuneration of the members of the Management Board, the appointment of the Company's independent auditors, and the supervision of the Company's business. As part of this process, it examines the Company's strategic plan and annual budget and monitors the Company's operating and financial performance. In considering these matters, the Board takes into account the social, environmental and ethical considerations that relate to TP Group's businesses. The work of the Supervisory Board is co-ordinated by the Board Chairman, with the assistance of the Board Secretary. The responsibilities and obligations of the Board, together with its rules of procedure, are defined in formal regulations of the Board. Although the Board performs its tasks collectively, it delegates some of the work. The persons and committees to whom these tasks are delegated are described in further paragraphs.

The Audit Committee

The Audit Committee is a Committee of the Supervisory Board and reviews reports from the Executive Managers of the Group and internal and external auditors.

The key functions of the Audit Committee include:

1. 1Monitoring of the work of the Company's external auditors and presentation of recommendations to the Supervisory Board with regard to selection and remuneration of the Company's auditors;
2. 2Discussion with the Company's auditors before the start of each annual audit, on the nature and scope of the audit and monitoring of the internal and external auditor's work;
3. 3Review of interim and annual financial statements of the Company (TP S.A's separate accounts as well as TP Group's consolidated accounts), focusing in particular on:
4.  aany changes to accounting standards, policies and practices;
   bmajor judgmental areas;
   csignificant adjustments arising from the audit;
   dcompliance with accounting regulations;
5. 4Discussion (with or without the presence of the Company's Management Board) with the external auditors on any problems or reservations resulting from the audit of financial statements;
6. 5Review of the external auditor's management letter, the independence and objectivity of their review and the response of the Management Board;
7. 6Review of the Group's system of internal control (including financial, operational, compliance, risk assessment and management controls) as formulated by the Management Board;
8. 7Review of contracts, transactions and arrangements between the Company and related parties;
9. 8Annual review of the internal audit programme, co-ordination between the internal and external auditors and adequacy of resources available to the internal auditors;
10. 9Analysis of reports of the Company's internal auditors and major findings of any other internal investigations and response of the Management Board to them, including review of freedom allowed to internal auditors;
11. 10Consideration of any other significant matters observed by the Committee or the Supervisory Board;
12. 11Information to the Supervisory Board about all important issues within its scope of activity.

The Audit Committee is chaired by Mr. Timothy Boatman, an independent member of the Supervisory Board. He has relevant and up to date financial experience.

The Remuneration Committee

The Remuneration Committee's task is to advise the Supervisory Board and Management Board on the general remuneration and nomination policy of TP Group.

The key functions of the Remuneration Committee include:

1. 1Determining the conditions of employment and remuneration of the Members of Management Board;
2. 2Considering proposals made by the CEO or the Supervisory Board concerning new appointments to the Management Board; taking part in the final stage of the interviewing process and making the appropriate recommendation to the Supervisory Board about the candidates;
3. 3Considering proposals made by the CEO or the Supervisory Board regarding dismissal or reports regarding resignations of any member(s) of the Management Board and making if necessary a relevant recommendation to the Supervisory Board;
4. 4Giving recommendations to the Supervisory Board regarding the amounts of bonuses for the members of the Management Board;
5. 5Providing an opinion on remuneration policy for most senior executives, and on the general policy for the wider TP Group: in both cases having regard to the relative positioning on the market of TP Group's terms of engagement and remuneration levels;
6. 6Producing a report for the Supervisory Board on the activity of the Committee and assessment of remuneration policy of TP Group.

The Committee is chaired by Mr. Ronald Freeman, an independent member of the Supervisory Board.

The Strategy Committee

The Strategy Committee's task is to advise the Supervisory Board and Management Board on the strategic plans.

The key functions of the Strategy Committee include:

1. 1Providing its opinion and recommendation to the Supervisory Board on the strategic plans set up by the Management Board and any further suggestions made by the Supervisory Board regarding such strategic plans and in particular on its main strategic options. The Strategy Committee may also provide recommendations to the Supervisory Board regarding Management's planning processes.
2. 2Consulting all strategic projects related to the development of TP Group, the monitoring of the evolution of industrial partnerships within TP Group and projects involving strategic agreements for TP Group. The Committee then reports and makes recommendations on each of these projects to the Supervisory Board.

In particular, the Committee is invited to consider projects such as:

• strategic agreements, alliances, and technological and industrial co-operation agreements, including aspects of the strategic partnership between France Telecom and TP Group;
• significant acquisitions and sales of assets.

The Committee is chaired by Mr. Olivier Barberot.

3 The Management Board

The scope of the Board's remit includes the management of all aspects of the Company's affairs, with the exception of those matters which are stipulated by the Polish Commercial Code and the Company's Articles of Association as being within the competence of the General Meeting or the Supervisory Board. The responsibilities and obligations of the Board, together with its rules of procedure, are defined in formal regulations of the Board. The members of the Board share collective responsibility for managing the Company, but the work of the Board is co-ordinated by the President of the Board.

4 Internal control and risk management

The system of internal control and risk management is designed and implemented by Management to manage, rather than eliminate, the risk of failure to achieve business objectives and can only provide reasonable and not absolute assurance against material misstatement or loss.

The key elements of such system include the following procedures:

• An internal audit function, which reports directly to the Management Board. The internal audit programme is annually reviewed by the Audit Committee which also analyses the Group's Internal Audit reports. In order to promote an appropriate independent outlook for the Internal Audit Department, Management Board decisions regarding the appointment and remuneration of the Head of the Internal Audit Department require, since 2005, an opinion of the Audit and Remuneration Committees.
• The Group conducts ongoing assessments of the quality of risk management and control. As part of this process, a Risk Map which identifies and classifies the Group's financial and non-financial risks is maintained. This Map was developed as a self-assessment exercise, but also includes findings from the risk assessment project carried out with the support of external experts.
• Procedures were implemented in order to identify, report and monitor significant risks (i.e. legal, regulatory, environmental and operational) effectively on an ongoing basis. It provides a framework for the Internal Audit Department's ongoing risk-controlling activities.

In 2007, Management again completed a comprehensive assessment of the Group's processes of internal control over financial reporting. Main deficiencies were identified and corrected or appropriate action points have been launched. As a result of the assessment, the Management concluded that there were no weaknesses that would materially impact the internal control over the financial reporting at 31 December 2007. Continued efforts by Management in this regard are also needed in 2008.

Management has implemented procedures to ensure proper identification, review and approval of transactions with related parties. In 2007, such transactions were audited by Internal Audit and the results were submitted to the Management and also to the Audit Committee.

Disclosure

TP Group is diligent in its approach to reporting financial results and its ongoing communication with the Polish and international investment community, as well as fulfilling its disclosure obligations. The TP Group Disclosure Committee began its activities in February 2004. Its role is to oversee public disclosures made by TP Group, ensuring that they are timely, exact, transparent, complete, and presented in accordance with all relevant laws, applicable regulations and recognised practices, as well as being properly representative of the financial and operational condition of the Group. In 2007 the Committee had four meetings to discuss the following:

• evaluation and approval of the statutory financial reports (quarterly, half-year, full year);
• evaluation and acceptance of quarterly investors' presentations.

In 2007 TP published 223 regulatory announcements (as well as quarterly, half-year statements of results and full year results) that were sent to the Warsaw and London Stock Exchanges. Moreover, in the field of Investor Relations activities, TP Group held around 100 meetings with investors and analysts.

Code of Ethics

A new TP Code of Ethics was implemented in 2006, together with appointment of the Ethics Committee and the network of local ethics co-ordinators. Key principles set out by the Code include:

• abiding by ethical principles in business activities;
• fair competition;
• employee care;
• high corporate governance and management standards;
• absolutely no tolerance for corruption;
• a political stance;
• environmental care.

An alert handling system related to ethics has been implemented by the Group. Further work is being conducted on the processes and policies for the prevention and reporting of potential or actual fraud, including a 'whistleblowers' charter'.