Global Investor Opinion Survey on Corporate Governance IRBRI Seminar São Paulo, December 3, 2002 Copyright 2002 This report is solely for the use of client personnel. No part of it may be circulated, quoted, or reproduced for distribution outside the client organization without prior written approval from McKinsey & Company. This material was used by McKinsey & Company during an oral presentation; it is not a complete record of the discussion. CONFIDENTIAL

SA-ZXX A4 1 GLOBAL INVESTOR OPINION SURVEY 2002 – KEY FINDINGS Corporate governance remains of great concern for institutional investors according to McKinsey's 2002 Global Investor Opinion Survey Corporate governance is at the heart of investment decisions –Investors state that they still put corporate governance on a par with financial indicators when evaluating investment decisions –An overwhelming majority of investors are prepared to pay a premium for companies exhibiting high governance standards. –More than 60% of investors state that governance considerations might lead them to avoid individual companies with poor governance Reform priorities focus on rebuilding the integrity of the system –The quality of market regulation and infrastructure is highly significant, along with enforceable property rights and downward pressure on corruption –Specific policy priorities include strengthening shareholder rights, improving accounting standards, promoting board independence and tighter enforcement of existing regulations –Shareholder equality (protection of minority shareholders) and accounting disclosure are highly valued by investors Corporate governance remains of great concern for institutional investors according to McKinsey's 2002 Global Investor Opinion Survey Corporate governance is at the heart of investment decisions –Investors state that they still put corporate governance on a par with financial indicators when evaluating investment decisions –An overwhelming majority of investors are prepared to pay a premium for companies exhibiting high governance standards. –More than 60% of investors state that governance considerations might lead them to avoid individual companies with poor governance Reform priorities focus on rebuilding the integrity of the system –The quality of market regulation and infrastructure is highly significant, along with enforceable property rights and downward pressure on corruption –Specific policy priorities include strengthening shareholder rights, improving accounting standards, promoting board independence and tighter enforcement of existing regulations –Shareholder equality (protection of minority shareholders) and accounting disclosure are highly valued by investors

SA-ZXX A4 2 CONTENT Respondents to the investor opinion survey come from a wide range of types and size of investing institutions and are in most cases key investment decision markers Corporate governance remains a great concern for institutional investors and still is at the heart of investments decisions Reform priorities focus on rebuilding the integrity of the system with policy priorities such as strengthening shareholder rights, improving accounting standards, and enforcing regulations Respondents to the investor opinion survey come from a wide range of types and size of investing institutions and are in most cases key investment decision markers Corporate governance remains a great concern for institutional investors and still is at the heart of investments decisions Reform priorities focus on rebuilding the integrity of the system with policy priorities such as strengthening shareholder rights, improving accounting standards, and enforcing regulations

SA-ZXX A4 3 CONTENT Respondents to the investor opinion survey come from a wide range of types and size of investing institutions and are in most cases key investment decision markers Corporate governance remains a great concern for institutional investors and still is at the heart of investments decisions Reform priorities should focus on rebuilding the integrity of the system with policy priorities such as strengthening shareholder rights, improving accounting standards, and enforcing regulations Respondents to the investor opinion survey come from a wide range of types and size of investing institutions and are in most cases key investment decision markers Corporate governance remains a great concern for institutional investors and still is at the heart of investments decisions Reform priorities should focus on rebuilding the integrity of the system with policy priorities such as strengthening shareholder rights, improving accounting standards, and enforcing regulations

SA-ZXX A4 4 RESPONDENTS PROFILE - TYPES OF INVESTING INSTITUTIONS % of respondents *Investment banks with asset management activities, family offices, holdings, development financing, international financial institutions, proxy agencies Source: McKinsey global investor opinion survey on corporate governance, % = AsiaLatin America North America and Europe OverallAfrica Bank Mutual funds Insurance Brokers/trade Others* Pension funds Money manager Private equity/ venture capital

SA-ZXX A4 5 RESPONDENTS PROFILE - SIZE OF ASSETS UNDER MANAGEMENT % respondents; US$ billion Source:McKinsey global investor opinion survey on corporate governance, –50 5–10 1–5 0.1–1 <0.1 AsiaLatin America OverallAfrica N = North America and Europe

SA-ZXX A4 6 RESPONDENTS FUNCTION % of valid responses (N = 181) *E.g., NED, investor relations, corporate function, investment monitoring and advisers Source:McKinsey global investor opinion survey on corporate governance, 2002 Fund manager Others* Corporate governance specialist Analyst Investment professionals/ general management CEO CFO Directors/ principals

SA-ZXX A4 7 CONTENT Respondents to the investor opinion survey come from a wide range of types and size of investing institutions and are in most cases key investment decision markers Corporate governance remains a great concern for institutional investors and still is at the heart of investments decisions Reform priorities focus on rebuilding the integrity of the system with policy priorities such as strengthening shareholder rights, improving accounting standards, and enforcing regulations Respondents to the investor opinion survey come from a wide range of types and size of investing institutions and are in most cases key investment decision markers Corporate governance remains a great concern for institutional investors and still is at the heart of investments decisions Reform priorities focus on rebuilding the integrity of the system with policy priorities such as strengthening shareholder rights, improving accounting standards, and enforcing regulations

SA-ZXX A4 8 CORPORATE GOVERNANCE* IMPORTANCE RELATIVE TO FINANCIAL ISSUES *Defined as effective boards of directors; broad disclosure, and strong rights and equal treatment for shareholders Source: McKinsey global investor opinion survey on corporate governance, 2002 Less important More important Equally important Eastern Europe/ Africa Latin America AsiaNorth America Western Europe 100% =

SA-ZXX A4 9 CORPORATE GOVERNANCE IMPACT ON INVESTMENT DECISIONS Source:McKinsey global investor opinion survey on corporate governance, 2002 Decrease/increase holdings in certain companies Avoidance of certain companies Avoidance of certain countries Decrease/increase holdings in certain countries No impact % of respondents selecting this option, multiple responses possible, N = 189 Only 3% think that corporate governance does not affect their investment decision More investors take actions on a company level than just on a country level Only 3% think that corporate governance does not affect their investment decision More investors take actions on a company level than just on a country level

SA-ZXX A4 10 PERCENTAGE OF RESPONDENTS WILLING TO PAY A PREMIUM Percent saying yes* *Important note: several investors who ticked "no" added comments that they just would not invest in companies with "bad" governance, hence, "no" answers are in some cases the most radical ones (see quotes and question how corporate governance affects investment decision) Source:McKinsey global investor opinion survey on corporate governance, 2002 and 2000 China (34) India (29) Indonesia (26) Japan (36) Malaysia (29) Asia Philippines (26) Singapore (30) South Korea (35) Taiwan (33) Thailand (31) Argentina (26) Brazil (29) Chile (21) Columbia (19) Mexico (34) Latin America Venezuela (19) East Europe/Africa Canada (46) US (75) France (47) Germany (51) Italy (43) North America/West Europe Spain (41) Sweden (41) Switzerland (41) UK (49) Egypt (16) Morocco (14) Poland (22) Russia (23) South Africa (20) Turkey (18) ( ) Number of data points

SA-ZXX A4 11 PREMIUM FOR "GOOD" CORPORATE GOVERNANCE Average premiums of those saying yes, % Source:McKinsey global investor opinion survey on corporate governance, 2002 Eastern Europe/Africa average 32 Eastern Europe/Africa average 32 Eu/North America average 13 Eu/North America average 13 Asia/Latin America average 13 Asia/Latin America average 13 80% of investors would be willing to pay a premium for Brazilian companies with "Good Governance"

SA-ZXX A4 12 DO YOU BELIEVE THAT THE IMPORTANCE OF CORPORATE GOVERNANCE VARIES BY INDUSTRY/SECTOR? Source:McKinsey global investor opinion survey on corporate governance, 2002 Percent of respondents, N = 154 Asia Latin America Eastern Europe/Africa North America Western Europe Average 38% Region "… It depends on the industry structure (such as openness and competition), more than the industry itself. If it is dominated by a few family owned conglomerates, for example, the importance of corporate governance increases" – CIO, US $5 billion AuM Latin America Trader "… It depends on the industry structure (such as openness and competition), more than the industry itself. If it is dominated by a few family owned conglomerates, for example, the importance of corporate governance increases" – CIO, US $5 billion AuM Latin America Trader Yes No

SA-ZXX A4 13 CONTENT Respondents to the investor opinion survey come from a wide range of types and size of investing institutions and are in most cases key investment decision markers Corporate governance remains a great concern for institutional investors and still is at the heart of investments decisions Reform priorities focus on rebuilding the integrity of the system with policy priorities such as strengthening shareholder rights, improving accounting standards, and enforcing regulations Respondents to the investor opinion survey come from a wide range of types and size of investing institutions and are in most cases key investment decision markers Corporate governance remains a great concern for institutional investors and still is at the heart of investments decisions Reform priorities focus on rebuilding the integrity of the system with policy priorities such as strengthening shareholder rights, improving accounting standards, and enforcing regulations

SA-ZXX A4 14 IMPORTANCE OF CORPORATE FACTORS IN INVESTMENT DECISIONS Developed markets N = 56 Emerging markets N = 93 Brazil N = 38 Percentage of investors who think that factor is very important for investment decision Accounting disclosure Board practices Independent board Aligned incentives Shareholder equality Prudent debt/equity ratio Non financial disclosure Stakeholder participation Source:McKinsey global investor opinion survey on corporate governance, 2002 Average 26%Average 33%Average 28% Top 10 factors

SA-ZXX A4 15 IMPORTANCE OF CAPITAL MARKET FACTORS IN INVESTMENT DECISION Developed markets N = 56 Emerging markets N = 93 Brazil N = 38 Percentage of investors who think that factor is very important for investment decision Source:McKinsey global investor opinion survey on corporate governance, 2002 Take-over market International acco- unting standards Private equity market Strong investor community Market regulation and infrastructure Market Liquidity Average 26%Average 33%Average 28% Top 10 factors

SA-ZXX A4 16 IMPORTANCE OF BROAD COUNTRY LEVEL FACTORS IN INVESTMENT DECISION Developed markets N = 56 Emerging markets N = 93 Brazil N = 38 Percentage of investors who think that factor is very important for investment decision Source:McKinsey global investor opinion survey on corporate governance, 2002 Top 10 factors Average 26%Average 33%Average 28% Credit information Banking system Insolvency and bankruptcy regulation Competitive intensity Fiscal environment Efficient government Property rights Pressure on corruption

SW-ZXK MIH-GSSA-ZXX A4 17 TOP CORPORATE GOVERNANCE CHANGES THAT COMPANIES SHOULD PURSUE Source:McKinsey global investor opinion survey on corporate governance, 2002 Percent of those highlighting change by region Top 5 More timely, broad disclosure 1. More independent boards 2. More effective board practices 3. Adopt performance- related director/ management compensation 4. Protect minority shareholder rights 5. Asia North America Europe Latin America Brazil N= Most significant change by region

SW-ZXK MIH-GSSA-ZXX A4 18 TOP CHANGES THAT POLICYMAKERS SHOULD IMPLEMENT TO IMPROVE CORPORATE GOVERNANCE Percent of those highlighting change by region Most significant change by region Top 5 Strengthen shareholder rights 1. Improve accounting standards 2. Mandate greater disclosure 3. Stronger enforcement4. Promote/mandate independent directors 5. Asia North America Europe Latin America Brazil N= *Highlighted as most significant as more marked this factor in the "most important" category Source:McKinsey global investor opinion survey on corporate governance, 2002

SA-ZXX A4 19 WOULD YOU BE WILLING TO PAY A PREMIUM FOR "GOOD" CORPORATE GOVERNANCE AND IF YES, WHAT PERCENTAGE PREMIUM WOULD YOU BE WILLING TO PAY? Source:McKinsey global investor opinion survey on corporate governance, 2002 Suppose you are considering investing in the following companies, A and B, in the same country. Past performance has been virtually identical and future market potential appears to be similar for both companies. However, they differ in board governance practices. B has put in place "good" board governance practices Minority of outside directors Outside directors have financial ties with management Directors own little or no stock Directors compensated only with cash No formal director evaluation process Very unresponsive to investor requests for information on governance issues Minority of outside directors Outside directors have financial ties with management Directors own little or no stock Directors compensated only with cash No formal director evaluation process Very unresponsive to investor requests for information on governance issues Company A "Poor" governance Majority of outside directors Outside directors are truly independent; no ties with management Directors have significant shareholdings Material proportion of directors' pay is stock-related Formal director evaluation in place Very responsive to investor requests for information on governance issues Majority of outside directors Outside directors are truly independent; no ties with management Directors have significant shareholdings Material proportion of directors' pay is stock-related Formal director evaluation in place Very responsive to investor requests for information on governance issues Company B "Good" governance