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Agora S.A. (AGOD)

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Wednesday 20 May, 2009

Agora S.A.

SB resolution on brief assessment of Company's ...

Supervisory Board resolution concerning brief assessment of the Company's
standing in 2008

With regard to the adoption by Agora SA ("the Company") Good practices of
publicly traded companies quoted on Warsaw Stock Exchange in Warsaw S.A.,
resolved on the basis of § 29 of the Warsaw Stock Exchange S.A. by-laws, the
Supervisory Board of the Company resolves as follows:

1. The Supervisory Board of the Company evaluated the Company's situation in

The Supervisory Board formulated its evaluation on the basis of the review of
the Company's affairs and the discussions with the Management Board which took
place principally during the Supervisory Board meetings attended by the
Management Board. The Supervisory Board has also taken into consideration the
review of the financial statements for the first half of 2008 and the financial
year 2008 prepared by the Audit Committee, whose meetings were held with the
participation of the representatives of the Company's auditor.

2008 was another year of intense changes on the media market. It was time of
increased competition, spectacular Internet expansion and further progress of
media offers fragmentation. Media market, with the above mentioned changes, was
additionally influenced by the first signs of economic slowdown observable
already in the third quarter of 2008. The first symptom of the slowdown was the
drop in number of recruitment ads due to which dailies suffered the most. Other
advertising categories which decelerated the most were automotive, telecom,
financial services and real estate. In the fourth quarter of 2008 other
segments of ad expenditure but Internet and TV, noticed the decrease of ad

Facing the economic slowdown and financial crisis, the Management Board made
the decision on implementation of an operating efficiency plan in the Group.
The plan assumes, inter alia, increased cost discipline and employment
reduction in order to assure stability and financial security of Agora Group in
the adverse market conditions.

For the purpose of the plan execution the companies of the Group created
provisions for the cost of the implementation of this plan in the total amount
of about PLN 8.5 million, which in full affected the consolidated financial
results of the Group in the fourth quarter of 2008. The results of all actions
taken by the Company should be visible in the second half of 2009.

Due to the worsening of the macroeconomic and advertising market situation, in
particular in the real estate and automotive segments, in which
(Polska) Sp. z o.o. operates, in December 2008 the Company decided to recognize
an impairment loss in the amount of PLN 27.2 m. The impairment loss affected
the consolidated results of the Group in the fourth quarter of 2008.

In sum, all one - off events and provisions decreased the Company's
consolidated financial result by almost PLN 42 million.

Despite adverse market conditions Group's sales revenue increased by 0,4% and
amounted to PLN 1,3 billion, including 71,7% from ad sales. The Group generated
healthy amounts of operating cashflow and was net cash positive at the year end
(PLN 124 million). The increase in operating expense of the Company resulted
from necessary salary regulations executed in April 2008, development of online
offer, growing portfolio of AMS carriers and consolidation of
(Polska) Sp. z o.o.

Daily newspaper market still remained one of the most competitive in 2008.
Publishers of the selected titles continued gadget and prices wars, supporting
their daily papers with costly campaigns.

In 2008 Gazeta was still the most widely read quality newspaper in Poland and
held the largest share in newspaper ad expenditure (41%). Gazeta maintained
healthy distance towards competition, in relation to readership as well as
commercial revenue.

Metro continued to rapidly expand revenues while new layout and editorial
formula attracted new readers. As promised by the Management Board, the
newspaper reached its 2008 operating goal of EBITDA break-even (PLN 1 million)
in 2008. Metro is efficient in persuading advertisers, that free newspaper is a
very good advertising medium, which translates into Metro's increasing share in
total newspaper advertising expenditure (to 3.5%).

The Company dynamically developed its Internet business last year. Several
dozen of new services supplemented Agora's Internet offer and those created in portal were highly ranked by independent institutions. All these
activities resulted in revenue increase (up nearly 68%) and brought about new

The Company worked on development of audiovisual products, both using online
services and its own multimedia studio. It succeeded in syndicating its own
content via mobile platforms, inter alia, to all Polish mobile telephone
operators, gaining sales competencies with the use of mobile technologies.

Magazines, published by Agora, maintained strong business position. Agora's
titles recorded increase in advertising revenue by 7.9% and operating EBITDA
margin reached 17,5%. Avanti, monthly shopping magazine, reached record copy
sales - October edition sold over 220 thousand copies. The Company continued to
focus on accelerated development of its first-tier titles presence online.

The ad revenue of the AMS group outperformed the market and increased by almost
11% in 2008. High dynamics of AMS group revenue growth resulted from an
expanded panel portfolio as well as effective multiformat sales campaigns. The
Company also uses its experiences in the area of urban space equipment. AMS won
bidding for equipping in newsstands and advertising columns the most
representative Warsaw street - Krakowskie Przedmieście, for advertising faces
on the bus stops in the center of Lublin and main communication routes in Gdań
sk in 2008. As an effect, AMS remains unquestionable leader in the outdoor ad
market, with the share of 24.7%.

Radio business grew revenues by 19% which was faster than the growth of radio
advertising market. TOK FM increased sales revenues by 34% and the station
substantially improved its operational results. Moreover, the Company undertook
various initiatives to develop online presence of its radio brands.

An important organizational change which influenced the activity of the Group
was the resignation from his post and departure from the Company of Mr. Marek
Sowa, the CEO and Mr. Jarosław Szaliński, the CFO. This in consequence led to
election of Mr. Piotr Niemczycki to the position of CEO and appointing Mr.
Grzegorz Kossakowski as CFO.

Taking into account the above mentioned facts, the Supervisory Board is of the
opinion that the Agora Group has well utilized the period of prosperity in
2008. The Board also notices that in view of the threat of a decline of the
economy in late 2008, the costs savings program implemented by the Management
Board should be evaluated positively and should be continued in 2009.

2. Evaluation of the internal control system and risk management in AGORA

The Supervisory Board, together with the Company's Management Board analysis
the market situation and risk factors on the daily basis. New projects are
scrutinized and evaluated. The Group maintains high liquidity and low level of
debt, which limits the financial risk. In the case of regulation changes, the
Group adjusts its operations accordingly.

Internal control and risk management systems currently operate in the Group.

The main elements of the internal control system are parts of business
processes of the Group and they include:

  * procedures and by-laws regarding, inter alia: delegation of the rights and
    decision authorization, evaluation of the business projects, registration
    and processing of business transactions,
  * reporting and transaction control of the processes and results of
    particular areas of the Group's activity,
  * controls in the IT systems supporting execution of the business processes
    and monitoring activities of the system itself.
The executive personnel fulfills particular tasks arising from the internal
control system and permanent supervision over its effectiveness as a part of
managing selected segments of the Group.

Moreover, the Internal Audit department, supervised by the President of the
Management Board, operates in the Company. Internal Audit Department formally
identifies risks in the area of internal control and security and recommends
the Management Board activities aimed at decreasing risks when applicable. In
the next stage, the department supports control of the system effectiveness
through systematic research of selected areas of activity. This operation aims
at identifying weaknesses of the system and operational risks. The Audit
Department recommends the Management Board actions eliminating above mentioned

Risk management system includes internal control system and permanent,
multistage supervision of the Management Board and executive personnel over
particular business activities. Moreover, evaluation of the risk factors for
the execution of the particular business goals arising from the strategy
accepted by Management Board is undertaken, on the daily basis. Whenever there
are identified risks, the Management Board and executive personnel implement
changes to the procedures in force.

Based on the information submitted to the Supervisory Board and discussion with
the Management Board and representatives of the Agora's Internal Audit
Department, Supervisory Board is of the opinion that the internal control and
risk management system has proved itself in the activities of the Company up to
date. At the same time, the Supervisory Board points to the necessity of
developing further both these systems, in particular with reference to the
implementation of new IT systems in the Group as well as to the business needs
related to the operations of the Group.




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