Jetix Europe N.V. Annual Review and Financial Statements 2005

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This is the first year in which the Company has been subject to the Tabakslat Code relating to Dutch Corporate Governance (the “Code”). The Company agrees with the aims of the Code and seeks to achieve general compliance with it. During the course of the year a number of changes to the rules and regulations of the Company were developed with, and approved by the Supervisory Board and shareholders, and have been implemented. These changes were made in order to comply more fully with the provisions of the Code.

At the AGM, changes to the Articles of the Company were approved by the shareholders. The shareholders also approved a Corporate Governance Compliance Policy and Remuneration Policy. Subsequently, new rules for the Supervisory Board and Management Board were approved by the Supervisory Board, together with rules for Audit, Remuneration and Appointment Committees. A number of corporate policies relating to business, financial conduct and whistle-blowing have also been approved by the Supervisory Board and implemented and can be found on the Company’s corporate website.

For the avoidance of doubt this report relating to corporate governance is supplied by way of information only and not in purported satisfaction of Dutch law or regulation. As is appropriate, full reports and information required pursuant to Dutch law and regulation will be incorporated into the Company’s Dutch report which will be published later in the Spring. However, as the following issues have been the subject of recent discussion with the shareholders and were issues highlighted in the Company’s Remuneration and Compliance Policies, we specifically draw your attention to the following;

  
     
 
• For best practice provisions II.2.1 and II.2.2 of principle II.2 (Remuneration – Management Board) the Company partly deviates from the Code, as the current option and restricted stock schemes for the members of the Management Board (as for employees as a whole) do not include any formal conditional criteria following a grant of options or restricted stock. Additionally, options can be vested and exercised over a period of four years (while the restricted stock vests in two equal tranches, two and four years after grant). There is no formal requirement to retain stock following vesting or exercise. It is not proposed to amend this scheme, as it broadly reflects that of the majority shareholder, Disney, and it is considered desirable by the Supervisory Board to have generally consistent incentive arrangements for senior management throughout both companies. To this end, the Supervisory Board approved new Option and Restricted Stock Scheme rules and these were approved by shareholders in an EGM on September 13, 2005.
   
• Although the Company complies with principle III.2 (Independence – Supervisory Board) the Board notes that at present three of the four members of the Supervisory Board are employees of Disney. It is intended that a further Supervisory Board director, not employed by Disney, will be appointed as soon as possible.
   
• Although the principles of the Supervisory Board sub-committees and their rules have been approved, these committees have not yet been implemented. This is primarily due to recent changes in personnel on the Supervisory Board and it is intended that once a fifth Board member is appointed, these committees will be staffed and will begin their work. In the meantime, the Supervisory Board as a whole will continue to perform the broad function of these separate committees.
 
     
  The Supervisory Board held 5 meetings with the Management Board present and two without as well as a large number of more informal contacts with and without members of the Management Board being present. The CEO of the Management Board consults with the Chairman and other members of the Supervisory Board and their nominees on an informal but regular basis. The items discussed included a number of recurring subjects, such as the Company’s strategy, the financial position, results and forecasts, business plans, corporate governance and remuneration (including incentive plans) and appointments. Other subjects included an assessment of the structure and operation of the internal risk management and control systems. The external auditor attended the meeting in which the 2004 results were discussed.