In May 2004, this defined contribution, open pension fund led the way by publicly announcing a code of corporate governance, the first of its kind in Poland. The code, which came into effect from 1 June 2004, comprises four main sections. These are: an introduction detailing investment and governance targets; a code of best practice, based on Organisation for Economic Co-operation and Development principles; the fund’s standards, namely specific voting policy, and the fund’s commitments, being the disclosure of voting records. Overall planning and implementation of the code has been carried out by an in-house team, consisting of the president of the supervisory board, the fund’s chief investment officer and two management board members.
To ensure the transparency and predictability of the fund’s corporate actions and voting patterns, one of the main focus points is the fund’s commitment to register and publicly disclose its full voting record. This extends to all shareholder meetings attended. Since June 2004, the fund has attended and exercised its vote at 23 such meetings.
All voting records will be disclosed on an annual basis, to be divulged before 31 March of the following year. The fund views disclosure of its voting records as integral to its fiduciary duty and responsibilities towards its clients and other stakeholders.
The voting principles are set out comprehensively by the code in the three main areas that are most frequently submitted for shareholder approval. These are acceptance of stock option plans, issues connected with takeovers, and issues connected with the equal treatment of stockholders’ rights.
To give an example, when considering stock option plans, the code stipulates that the fund will not vote for plans envisaging an issue that is greater than 5% of the total outstanding shares or issues with a minimum exercise price lower than the prevailing market price at the time of granting.
This particular clause responds to the common practice in Poland of arranging management stock option plans with the stock price considerably below the market price. The fund is confident that it can bring its influence to bear effectively in opposing practices like these, particularly given that to ratify such a plan successfully requires 80% of the vote.
With a capital value of €2.13bn and significant growth of its assets under management, and as the leading institutional investor in Poland, the fund’s belief in its ability to influence the corporate policies of its holdings is certainly warranted. Established in 1999, it casts a formidable presence over the domestic institutional investment marketplace. To date, the fund has invested more than €900m in the Polish public equity market, which translates as around about a 2% holding of this total market and approximately 6.2% of the free float. It holds above 3% share in 28 companies, above 5% in 17 and above 8% in seven.
Where the fund has led the way in corporate governance, other institutional investors seem set to follow. In July 2004, two months after the fund announced the code, the Polish Insurance and Pension Funds Supervisory Commission (KNUiFE) fully endorsed the move by issuing a statement, which recommended that other Polish pension funds follow suit and plan and implement their own rules of corporate governance. The move reflects KNUiFE’s belief that such rules should be made public and aim to boost the transparency of pension fund activities in this area.

It is not just KNUiFE that has strongly supported the fund’s activities. There has also been a warm reception from the local financial community, with particular backing from Poland’s corporate governance activists. Overall, the code has been heralded by many as an early success in Poland’s pension fund industry as a move, through improving the transparency of governance execution, to enhancing the overall transparency of Poland’s financial markets. To date, Poland’s rapidly expanding pension fund industry has invested around €3.8bn in Polish equities, approximately a quarter of the equity market’s free float, while owning over 10% stakes in many of these listed companies.
The code is available on the fund’s website:

Highlights and achievements
It may have been busy flying the flag of corporate governance in Poland, but when it comes to its overall responsibilities to its members, ING Nationale Nederlanden Poland OPF has kept its eye firmly on the ball. The fund’s investment performance continues to go from strength to strength. It has outperformed the pension fund industry benchmark over a five-year rolling period by 0.92%, with an average return of just over 13%.
It has been ranked in the top quartile in 10 out of 12 investment performance rankings published by the Polish Insurance and Pension Funds Supervisory Commission.
The fund’s impressive record has not gone unnoticed in the Polish press. It has won the accolade of best Polish pension fund in 2003 and 2004 from the two largest national daily papers in Poland. The ING Nationale Nederlanden Pension Fund Company has also been ranked as the best pension fund management company in Poland for the past two years.
Members continue to vote with their feet. Given that in Poland, pension fund clients can move freely to any of the other 15 open pension funds once every quarter, it has not stopped the fund attracting a record number of new members, some 127,000, nearly a 30% market share of new additions. The fund is justifiably proud of an annual record that has remained unbroken since 2000 with a present market share of 17.6%. Membership loyalty is reflected in the fact that it has been the only pension fund in Poland to maintain a positive balance during all transfer sessions.