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30 November 2004
Business OMV to rival MOL in bid for Bosnian co. Q3 results for Graboplast Philip Morris site to become sports center Schneider production to move to Hungary Lidl contractors dispute payment Gas co. in Nagykanizsa expands Kelly Services opens office in Hungary Montana reveals new encryption software GE offices under construction in Budaörs Animal feed plant in Zalaegerszeg Broadband Internet subscribers up 40% a year Bp-Manchester discount flights Forex loans are 80% of all business loans Forrás buys Szegedi Paprika from Pick Hungarian recognition software in Iraq Video-on-demand through Axelero Bee-keepers’ demonstration begins Hungária Grande Cuvée Brut wins gold medal Komfort Health Fund membership dwindles Ecostat: growth in Hungary may slow with EU Reuters poll: gov’t wants forint rate at 260/Euro New office to coordinate tourism President sends back central bank act amendment New gov’t com’sioner to continue Roma integration Diesel prices up Ft 5 from tomorrow Unions want to keep EU rules on working hours Alcohol-related road accidents up by 20% BUX Close: 14170.41 Change: +68.53 (+0.49%) Fixed Middle Rate Tomorrow: rain

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01 December 2004
Business WizzAir responds to easyJet provocation OBI opens biggest Hungarian store Pepsi outsources IT to Dataplex Sanoma poised to buy Index.hu Videoton partner as yet unknown MOL flotation on Warsaw bourse Cashline’s Albrecht buys Herz stake Mondi Business Paper - name change Parmalat reduces loss before liquidation Novel form of advertising Remington returns to Hungary via Varta Metro Holding to sell Renaults Zalakerámia to slash 28% of workforce to cut costs Motorway funds for winter repairs OECD less optimistic than gov’t on growth Ecostat confidence index Hungarian-Romanian pension agreement firms up Oct. industrial producer prices up 0.3% m/m Stop negative campaign, says MSzP policy section 2,000 Hungarians vote abroad in referendum FinMin ups deficit reduction targets New drugs added to OEP subsidy list Servers seized due to copyright infringement Earth tremor felt in northeast Hungary BUX Close: 14,193.88 Change: +23.47 (+0.17%) Fixed Middle Rate Tomorrow: showers

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02 December 2004
Business Pension reform will reduce deficit Feasibility study of factory begins New outlets for Pannon mobile packages Keviép wins Ft 4.6 bln tender Hoffmann builds Ft 3 bln road Advertising boom on commercial TV Malév privatization tender description changes Irish Investor's big plans for Fradi Porshe wines Magyar Posta tender Builders protest Lidl's unpaid bills BSE registers record turnover in Nov Kelly Services opens in Budapest Jet2.com starts Bp-Manchester flight Mobile use increases to 84% LLP sets up software for Sodexho Economic growth slowed for a second quarter Insurance companies pay more compensation in H1 November PMI 51.2% Investment volume up 12.7% yr/yr in Q3 Bonds to raise Ft 7.1 trillion in '05 Erste and MFB sign refinancing deal Municipality to increase utility fees Motorway fines set to increase Romanian statement unusual - ForMin Gov't to provide for ethnic Hungarians Court dissolves fascist organization BUX Close: 14317.91 Change: +124.03 (+0.87%) Fixed Middle Rate Tomorrow: rain

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03 December 2004
Business Film trust to support film industry Arago boosts stake in Forrás Richter buys own shares Forrás transfers stakes to Formix Hollóházi remains state-owned CIB employees to receive CIB shares Roaming mobile travel insurance Kravtex's Ft 300 mln center in Győr BAT opens logistics center T-Mobile extend Fradi sponsorship deal BÁV to convert shares Malév pilots to fly for free University of Szeged wins tender Biggeorge's and Otthon swap stakes E.ON seeks bigger gas stakes BauTrans sells subsidiaries to peers New car sales dip Economics MNB deputy-governor warns of reckless rate AKK aims to keep ratio of forex Anger over tax refund abolishment Eximbank to finance exports to Karelia Resources unused in war on Ragweed Biometric passports on the way Defense spending cut by Ft 593 bln Politics Conflicting info on effects of dual citizenship Domestic New highway opens to traffic in NE Hungary Stockwatch BUX Close: 14365.98 Change: +48.07 (+0.34%) Exchange Fixed Middle Rate Weather Tomorrow:cloudy

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06 December 2004
Business Alpha Bank may trump OTP for Jubanka SCA completes Ft 2.3 bln Gyor factory G. H. Financials rents in Margit Palace Strabag to build cement factory PSzÁF fines Concorde Ft 3 mln EMKTV fined again Csorna to build spa and leisure center Balda to produce mobile parts in Veszprém Sportfolió to become pub. fin. institution Pannonplast sells non-core assets ProLogis opens Budapest office Wizz Air gets Ft 25 mln from Indigo Paks to buy Skoda JS machinery Samsung has 13% share of mobile market Graboplast sells rug maker to CEO BUX ticking higher in lackluster week Malév cancels all flights to Vienna Savaria to be privatized Economics Private pension members may choose MFB to aid SMEs Politics ForMin welcomes Ukraine revote ruling Voters say no Domestic Nurses lured to Italy Roma education center for Bp Hapsburg to head Red Cross Stockwatch BUX index: BUX Close: 14314.60 Change: -51.38 (-0.36%) Exchange Fixed Middle Rate Weather Tomorrow: p/cloudy

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30 November 2004
Business
OMV to rival MOL in bid for Bosnian co. OMV AG said it has submitted a letter to express its interest in acquiring a majority stake in Energopetrol, Bosnia’s largest crude oil and oil products trader. Vienna-based OMV has told the Bosnian government it is „interested to be invited for further discussions regarding the privatization of Energopetrol,” said Thomas Huemer, a spokesman for the Austrian company. OMV has not yet decided whether it will make a binding bid, Huemer said. OMV joins Hungarian rival MOL Rt, which said on Nov. 26 that it had submitted a joint letter of intent to buy 67 % of Energopetrol with Croatia’s INA Industrija Nafte d.d. MOL owns 25% of INA. (Bloomberg) Q3 results for Graboplast Gy?r-based plastic manufacturer company Graboplast Rt forecasts Ft 20 billion in turnover this year, announced Péter Jancsó president-CEO. The company had Ft 15.7 billion in revenues in the first three quarters of the year and Ft 1.25 billion in profit. Graboplast also plans to increase its parquet manufacturing capacity from the current annual 900,000 sqm to 1.7 million sq ms next year with a Ft 1.7 billion development in its Kecskemét plant. (Vg 14) R.G. Philip Morris site to become sports center Philip Morris Magyarország Kft will publish a tender for its plant of almost 30,000 sqm in Eger, northern Hungary at the beginning of next year, announced company spokeswoman Katalin Házi. The company will take the municipality’s suggestions to create an entertainment center in the plant when choosing the winner. According to Eger mayor Imre Nagy, the municipality wants to see a fitness and sports center, a cinema, billiard and bowling rooms, restaurants and a hotel in the complex. Philip Morris Kft will shut down operation in the plant at the end of December. (Vg 23) R.G. Schneider production to move to Hungary Germany-based Schneider Electronics Gmbh, a member of China’s TCL Group, will relocate its production to Hungary and Poland as of next January and turn its German site into a distribution center, Felipe Suen, CEO of TCL Internationl Holding Ltd announced. TCL, the Hong-Kong enlisted consumer electronics maker, acquired its bankrupt German peer in 2002 and has now decided to move its entire production eastward in an effort to bring the troubled company back to profitability. Launched as a family business in 1953, Schneider employed as many as 1,500 in its prime. (Nv 15) S.F. Lidl contractors dispute payment Unpaid subcontractors of Lidl, the recently-arrived German retail chain, have blocked access to the company’s building site in Kalocsa, southern Hungary, demanding that the retailer force its lead contractor to pay up the over Ft 100 million it owes. Subcontractors blame Lidl for picking a main contractor that undercut all rivals to get the job for the project but was unable to pay its bills to subcontractors before it scooped up its own money from Lidl. (Nb 15) S.F. Gas co. in Nagykanizsa expands Gas industry machine manufacturer GG Kft continues to enlarge and modernize its production hall with a Ft 100 million investment in technological development at its Nagykanizsa production base. The company produces mainly gas industry machinery and gas pressure control equipment and has over 200 employees. GG is expanding to enable it to meet new orders from Romania, Bulgaria, Ukraine, and from Western Europe in addition to its previous orders. (NG 4) E.C. Kelly Services opens office in Hungary Kelly Services Inc., the second-largest U.S. temporary-employment agency, plans to open an office in Hungary, its first in Central Europe. Troy, Michigan-based Kelly Services will formally announce the opening of the office in Budapest on Dec. 1, the company said in an e-mailed statement. Kelly Services will compete with companies such as Manpower Inc. and Adecco SA in Hungary. (Bloomberg; NG 4) Montana reveals new encryption software Montana Rt, a Hungarian software developer, has introduced a new file encryption software. The product is part of Montana’s strategy to focus on software the company develops itself and on consulting services, President and CEO Pál Vadász said at the launch of the new encryption software in Budapest. The software enables users to make documents and other files inaccessible to other parties, guaranteeing they cannot be opened or used when sent over the Internet or if stolen. Montana, together with its subsidiary Noreg, which specializes in information protection solutions, had sales revenue of Ft 2.5 billion in the first nine months of this year, with EBITDA of Ft 125 million. (Econews; NG 5) GE offices under construction in Budaörs 7

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Merkantil Bank Rt is building a 39,000 sqm complex with a plant, a 3-storey office building and a car park for General Electric with an investment of Ft 1.5 billion in Budaörs, west of Budapest, said Gábor Morva, spokesman for constructor KÉSZ Kft. Twelve radiation-proof cabins will be constructed in the plant where X-ray equipment will be tested. The investment will create 340 new jobs. (Vg 13) R.G. Animal feed plant in Zalaegerszeg The largest animal feed factory in Central Europe is to be built at the new, 120-acre industrial park in Zalaegerszeg next year. The Slovenian investor Li Premix is putting Ft 10 billion into the construction of a production hall and logistics center of over 10,000 sqm on a 6-acre property. Li Premix chose the county capital because of small delivery distances and low transporting costs. The animal feed plant plans to process local crops, and the products are to be sold on the EU market. (NG 4) E.C. Broadband Internet subscribers up 40% a year The number of broadband Internet users is expected to rise from the current 315,000 to over 550,000 by 2006, the head of a major Internet service provider told a Budapest news conference yesterday. György Simó, who is CEO of Axelero Internet Rt, said it was likely that broadband user growth would be 40% a year through the 20042006 period. He also noted that broadband growth was changing online media access, with some 1.7 million people regularly monitoring Internet news sources, over 900,000 of them on a day-by-day basis. (MTI) Bp-Manchester discount flights A new discount airline is to appear at Budapest Ferihegy Airport starting from December. Jet2.com will fly passengers to and from Manchester on a daily basis. The British company will be the eighth discount airline to appear in Hungary. (NG 4) E.C. Forex loans are 80% of all business loans Hungarian businesses have been shifting towards domestic borrowing in foreign currency with the high forint interest rates and the strong forint. In the twelve months to October, the stock of Hungarian businesses’ loans from Hungarian banks rose by Ft 537.2 billion (Euro 2.18 billion), and Ft 432 billion (80%) of the increase was in foreign currency-denominated loans, according to figures published by the National Bank of Hungary Rt. The stock of foreign currency-denominated business loans totaled Ft 2,086.7 billion at the end of October and the forex loans accounted for 42.8% of all corporate loans. (Econews) Forrás buys Szegedi Paprika from Pick Arago Rt, a holding company owned by Hungarian investors, has transferred ownership of Szegedi Paprika Rt from its salami maker Pick Szeged Rt to Forrás Kft, another holding company in which Arago has a majority stake. The sale was part of a two-year plan to sell off Pick’s non-core businesses. Szegedi Paprika produces 12,000 tons of tinned food and 1,440 tons of paprika a year. Arago owns a 68.73% stake in Pick, and a 37.10% ownership stake and a 66.78% voting stake in Forrás. (Econews; Nv 6, Nb 7, Vg 19) Hungarian recognition software in Iraq A.R. Hungária Information Technology Rt may win several million Euros worth of business provided the Iraqi markets open up. The IT company offers license plate and personal ID recognition software in Arabic. The company is present in 66 countries worldwide. One-third of their income comes from the Middle East, and they expect a 10% increase in turnover in 2004. According to company CEO Márk Egervári, the number of orders from Arab countries may double in 2005. Their latest innovation introduced in October, the face recognition system, is currently being used in Hungary, Slovenia, and Taiwan. (NG 5) E.C. Video-on-demand through Axelero Axelero Internet Rt is about to launch Hungary’s first video-on-demand service tomorrow. Axelero ADSL subscribers can download films from Axelero’s 130-film catalogue for Ft 590-790 per film. Clients can view ’borrowed’ films for as many times as they want to in 24 hours for this amount. Axelero Internet plans to broaden the choice of films with the help of international content providers in the near future. (Vg 16) R.G. Bee-keepers’ demonstration begins Hungarian honey producers began a week-long demonstration in Brussels yesterday to protest the disadvantages faced by bee-keepers in the EU when competing with non-EU honey. The 65 Hungarian apiarists want Brussels to reintroduce stringent quality requirements on honey, which would prevent sales of low-quality honey from nonEU countries, a member of the Hungarian National Union of Apiarists (OMME) said in Brussels. Tamás Csányi, speaking on behalf of the protestors, said purchasing prices in Hungary have dropped by 50% and demand for honey had gone down since the EU began allowing honey imports from non-EU nations. (MTI; Nb 1, Vg 3, Nv 6)

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Hungária Grande Cuvée Brut wins gold medal Hungária Grande Cuvée Brut, a sparkling wine from the cellars of Hungária Pincészet has won a gold medal at the second Effervescents du Monde international sparkling wine festival in Dijon, France. Gábor Vass, marketing manager for Henkell und Sohnlein, which owns the cellars, announced the prize yesterday. Another sparkling wine, Francois President Brut, from the cellars of Francois Pincészet, which are also owned by Henkell and Sohnlein, won a silver medal. Henkell und Sohnlein controls more than 60% of the Hungarian market for sparkling wine, and owns BB and Törley. (Econews) Komfort Health Fund membership dwindles On the basis of the Q2 report of Komfort Health Fund, the State Financial Institutions Supervision (PSzÁF) noted that its headcount had sunk to a level (5 members) at which the company is unable to provide the number of members necessary to legally conduct the operations. Legislation stipulates that voluntary health funds are to establish a 3-member management and a 3-member controlling team. PSzÁF warned Komfort to reestablish the conditions necessary for legal operation within 30 days, or their license would be withdrawn and the company would be liquidated. (NG 5) E.C.

Economics
Ecostat: growth in Hungary may slow with EU Slowing economic growth in the EU could slow growth in Hungary as well, according to the latest report by economic research company Ecostat. Ecostat has projected GDP growth of 3.9% for 2004. Hungary’s current account deficit will worsen in 2005, but the general government balance will improve, albeit slightly, according to Ecostat. Ecostat expects industrial growth to slow slightly in 2004 to 8.7%. Retail turnover has been hurt by the slowing rise of gross wages, but household consumption should rise faster than expected in Q3, bringing the increase for the whole year to 3%. Ecostat puts the general government deficit at 5.4% of GDP in 2004. (Econews; NG 4, Vg 5, Nv 6) Reuters poll: gov’t wants forint rate at 260/Euro Hungary’s government probably wants to see the forint at around 260 to the euro, some 6% below current levels, analysts said in a Reuters poll yesterday. The poll was conducted between Nov. 26 and 29, with 14 participants. The estimates for the government’s preferred forint level spread in a wide range between 250 and 275, and the median estimate was 260. Prime Minister Ferenc Gyurcsány has repeatedly called for lower interest rates and a weaker currency to help cut a bloated budget deficit, increase exporters’ revenues and spur economic growth. (Econews) New office to coordinate tourism A separate government office will begin operating from Jan. next year to coordinate tourism policy, the Parliament’s tourism committee voted yesterday. The newly-established Hungarian Tourism Office (MTH), which will be answerable to the minister without portfolio in charge of regional development, will focus on programs to boost wellness tourism, spa reconstruction and regional airport development as well as increasing hotel capacity in Budapest. (Nv 4) S.F.

Politics
President sends back central bank act amendment President Ferenc Mádl has returned to Parliament a bill that would amend Hungary’s Central Bank Act to give the government a greater influence in shaping monetary policy. The President informed Speaker of Parliament Katalin Szili of his decision in a letter. In the letter the President said the amendment was in conflict with its officially declared aim of increasing the central bank’s independence and improving its efficiency. The President is particularly concerned by the fact that the amended act would create the possibility of extending the monetary council to include a disproportionate number of new members at the same time. (Econews; NG 3, Nv 3, Vg 5, Nb 7) New gov’t com’sioner to continue Roma integration Gábor Daróczi, incoming government commissioner of the Education Ministry for Roma issues told reporters yesterday that his primary tasks included integrating the many segregated Roma classes in primary schools. „The mere fact of having been born in a Roma family cannot be allowed to hurt children in school,” Daróczi said. Outgoing government commissioner Viktória Mohácsi, soon to represent Hungary in the Liberal Group of the European Parliament, said that some 600 of the nation’s 3,400-3,500 primary schools ran separate classes for Roma children. (MTI; Nv 4, Nb 7)

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Domestic
Diesel prices up Ft 5 from tomorrow Diesel prices at MOL Rt pumps are to go up another Ft 5 tomorrow, the Hungarian oil and gas flagship said yesterday citing a steady upward trend in the fuel’s global trading price. The announcement comes only two days after MOL’s latest hike yesterday, when a respective Ft 2 and Ft 1 were added to the pump price of gasoline and diesel due to a slash in the excise tax break introduced by the government to cushion the impact of high fuel prices in global markets. (Nv 6, Nb 16) S.F. Unions want to keep EU rules on working hours Trade unions rejected a government proposal calling for Hungary to agree to amending EU guidelines on working hours as early as possible, during a session of the Interest Coordination Council in Budapest yesterday. The government’s proposal was to have the EU limit official on-duty time to time actually spent working, with the inactive period considered resting time. The current EU guideline allows the inactive time spent on duty to be considered part of working hours. (MTI) Alcohol-related road accidents up by 20% The number of road accidents caused by drunken driving has grown by nearly 20% between January and September from the same period in 2003, the Central Statistics Office (KSH) reported yesterday. In the surveyed period there were 15,276 accidents causing various injuries to over 20,000 persons and claiming the lives of some 900 people, the report said. With the exception of western Hungary the figures rose in all parts of the country, KSH said, adding that the north-Hungarian region had suffered the highest of road accidents, with an increase of nearly 15%. I(MTI; Nb 22)

Stockwatch
BUX Close: 14170.41 Change: +68.53 (+0.49%) Stock Closing price Daily change (%) Average price Volume MOL 12,390 1.7 12,238 213,927 Matáv 784 1.3 787 576,248 OTP 5,281 0.2 5,319 1,245,272 Richter 23,000 0.7 23,139 30,486 Egis 10,700 0.4 10,664 9,654 Antenna 3,840 -0.8 3,845 776 TVK 5,150 5.5 5,091 16,056 Rába 630 -0.8 629 5,763 Budapest Stock Exchange

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01 December 2004
BUSINESS
WizzAir responds to easyJet provocation WizzAir, a low-fare airline owned by Hungarian and Polish investors, has responded to an advertisement paid for by UK competitor easyJet PLC. The full-page ads which appeared in several newspapers yesterday asked the question „Dear WizzAir! How many flights have you cancelled already?” The ads mark the first time a low-fare airline operating in Hungary has resorted to directly provoking a competitor. In a statement, WizzAir said that it cancelled a few flights a month ago as part of changes to its timetable. The statement added that as a young airline, it will sometimes be forced to cancel flights. (Econews; Vg 1, Nv 1, Nb 13, NG 5) OBI opens biggest Hungarian store The Hungarian subsidiary of OBI, a big DIY chain, will open a store in the new Savoya Park shopping mall, just outside of Budapest, tomorrow. The store is OBI’s seventeenth in Hungary, and, at 12,000 sqm, the biggest. The store will have a Ft 1 billion inventory, stocking 70,000 products from 400 suppliers, said the manager. Sales at the new store should help OBI Magyarország Kft reach its revenue target of Ft 40-42 billion for the financial year ending April 30, OBI’s Country Manager László Reiter said yesterday. (Econews) Pepsi outsources IT to Dataplex In line with an agreement it has recently secured with the regional management of soft drink giant PepsiAmericas Inc., Dataplex Kft will supply the mission-critical IT infrastructure of the Hungarian, Czech and Polish Pepsi subsidiaries for three years, the company said. The outsourcing contract includes data storage, server, backup and network services supporting the entire ERP system, with the implementation already up and running at Budapest-based FÁÜ (Pepsi-Cola) Rt and completed at the Czech Pepsi company a few days ago. Dataplex will take charge of managing the beverage maker’s production and sales data in Poland early next year. (NG 5) Sanoma poised to buy Index.hu Finnish-owned publishing giant Sanoma Rt is about to close a deal on the acquisition of news portal operator Index.hu Rt, unnamed sources said. Once concluded, the transaction would be almost certain to come under scrutiny by the Competition Office (GVH), as it may confer the status of a quasi monopoly on Sanoma, already a dominant market player with its Ft 17 billion annual revenue from 29 print and 29 online media. Index was acquired from its previous owners in March by CEO Sándor Mucsi, former Danubius Radio Rt CEO István Sándor and Wallitrade Kft, part of the Wallis Group. (NG 1) P.P. Videoton partner as yet unknown Consumer electronics manufacturer Videoton Holding Rt is believed to have reached a major contract work agreement with Balda AG subsidiary Balda Solutions Hungária Kft a few days ago that may require a staff of 1,000 as soon as 2005. The news reports were partly confirmed by Videoton CEO Ottó Sinkó, who said his company leased industrial space to an unnamed partner in Veszprém, western Hungary. The contract could give a boost to Videoton, which has been forced to cut jobs by several hundred over the last few years. The company will push ahead with plans to expand in Ukraine, hoping that the situation there will return to normal soon, Sinkó added. (NG 1) MOL flotation on Warsaw bourse The flotation of Hungarian Oil and Gas Rt (MOL) stocks on the Warsaw Stock Exchange is going according to plan, regional spokesman Denis Mohorovic said denying the allegations of Polish stock exchange gazette Parkiet that MOL’s failure to meet stricter reporting obligations may jeopardize plans to go public in Poland in early December. According to the newspaper, Polish laws stipulate more rigorous obligations for publicly traded companies. While there are still a few unresolved issues between MOL and the Polish bourse, these are not going to hinder the IPO, Communications Director Szabolcs I. Ferenc said. (NG 11) P.P. Cashline’s Albrecht buys Herz stake Meat processor Pick Szeged Rt has sold its 99.9% holding in Herz Rt to Ottó Albrecht, managing director and majority owner of Cashline Securities Rt. Herz has annual EBITDA of about Ft 1 billion and hopes to generated revenues of Ft 9 billion this year, up from Ft 8.1 billion in 2003. Speaking to an online business magazine, Albrecht said the company had a healthy balance sheet and was ripe for listing on the Budapest bourse, which could take place as early as next year. (Vg 1) S.F.

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Mondi Business Paper - name change Chairman Gunther Hassler announced the name change of former Neusiedler paper mills to Mondi Business Paper yesterday. The name change took place in the middle of November. Mondi Business Paper expects its two paper mills in Hungary to generate combined revenue of Euro 180,000 in 2004. The two mills in Szolnok and Dunaújváros, both in central Hungary, are expected to produce a combined 200,000 tons of paper this year, slightly less than last year’s 210,000 tons. Mondi Business Paper has so far invested Euro 150 million in its Hungarian paper mills. (Econews; NG 5) Parmalat reduces loss before liquidation Parmalat Hungária Rt has doubled its production since April, when its liquidation was started, CEO László Fónai said. In April, the company processed about 60,000-70,000 liters of milk daily; now this figure is 150,000-160,000 liters. This also resulted in the growth of turnover from monthly Ft 320 million in April to Ft 700 million-Ft 800 million now. Monthly losses decreased from Ft 180 million to Ft 40 million. (Nv 5) G.R. Novel form of advertising Macrosolid Media Consulting Kft is set to launch a city outdoor advertising concept imported from Argentina and hitherto unknown in Hungary, Marketing Director Zoltán Som said. The so-called „streetshields” are man-sized billboards carried around by people in peak traffic who march up and down between pedestrian crossings and car traffic while the lights are red. The announcement comes shortly after a ban on vehicles purpose-built to carry advertisements from the roads and streets of the city. The list price of a five-day „prime time” streetshield campaign at two locations is Ft 417,000. (NG 7) P.P. Remington returns to Hungary via Varta The Hungarian subsidiary of Germany’s Varta, best known for its batteries, has started selling Remington shaving and personal care products. Sales of the products are expected to generate revenue of Ft 250 million in 2005. Varta Hungária Kft is selling the products because its owner, Rayovac, one of the world’s biggest battery makers, bought Remington in 2003. Many of Varta’s other European units also started selling Remington products from the start of November. Rayovac will start producing Remington electric razors in Hungary soon, managing director of Varta Hungaria Attila Holladi-Horvath said. (Econews; Vg 14) Metro Holding to sell Renaults Metro Holding Hungary, the retail chain operator, has signed a deal with Renault Budapest Kft that will allow the auto dealer to sell 80 of its used cars at four Budapest Metro stores, CEO Tamás Jaross said. The cars, none of which is older than a year, all have their lease recently expired. Jaross said the move is aimed at boosting turnover to offset flagging sales and growing competition in its core business. Metro, which runs 13 stores in Hungary, last year saw its sales contract for the first time since 1998. (Vg 1) Zalakerámia to slash 28% of workforce to cut costs Tilemaker Zalakerámia Rt said it will slash 28% of its workforce, or 270 jobs, this year to cut costs and compete against imports. Zalakerámia said in a stock exchange statement yesterday it had planned to eliminate 304 posts and reduced the number after talks with employee representatives. A charge for the cuts will be taken this year, the Zalaegerszeg-based company said. The company announced plans to cut jobs Nov. 8, saying its market share was shrinking as demand in Hungary shifts toward higher-priced imported tiles. Zalakerámia had 2,824 employees at the end of June, down from 2,858 a year earlier. (Bloomberg; Nv 5, NG 11, MH 12, Vg 17) Motorway funds for winter repairs State Motorway Management Rt (ÁAK) reserved Ft 1.3 billion for road management expenses of this winter. The state-owned company has direct responsibility for 457 km of motorways, 46 km of major roads, and almost 200 km of service roads. Some further motorway sections are managed by local motorway management companies, while motorway M5 is handled by Alföld Concession Motorway (AKA) Rt. (Vg 7) G.R.

ECONOMY
OECD less optimistic than gov’t on growth Growth of Hungary’s economy will continue to slow in the next few years, warns the world macroeconomic report of OECD published yesterday. The organization expects this year’s GDP growth to be 3.9% - lower than most Hungarian economy research institutes’ and government forecasts of 4%. OECD estimates inflation at 6.9% for 2004; government figures give 6.8%. Although the budget deficit will significantly decrease this year, it will still not meet government predictions, the analysis says. (MH 12) G.R.

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Ecostat confidence index Ecostat’s ’Top 100’ economic confidence index for November was by 2 percentage points down at 52%, while its small business confidence index fell to 47.9%, the research institute’s latest poll showed. One third of the biggest companies hope their business climate to improve in the short term, almost half of them do not expect any change in that. Some 27% of SMEs are pessimistic about future, 7 percentage points more than a month ago. But one third of them hope to start cooperation with multinational companies within next six months. (NG 4) Hungarian-Romanian pension agreement firms up A new agreement on the payment of pensions to Romanian citizens in Hungary and Hungarians in Romania by the countries in which they earned their entitlement could soon be finalized, a Romanian pension fund official said yesterday. Camelia Hristea, who is in charge of bilateral agreements within the Romanian national pension fund, said that under the accord, being designed to conform to EU requirements, Romania would be obliged to pay pensions to its citizens living in Hungary in proportion with the years spent working in Romania, and the same would apply to Hungarian citizens living in Romania. (MTI; NG 3, Nb 7) Oct. industrial producer prices up 0.3% m/m Industrial producer prices rose 0.3% in the month of October and were up 3.5% in the twelve months to October, the Central Statistics Office (KSH) announced yesterday. Industrial producer prices for domestic sales rose by 0.6% in October, while producer prices in forint terms for export sales remained unchanged. Domestic sale prices rose 9.2% yr/yr in October and forint-term export prices decreased by 1.1% as the result of the forint strengthening 3.4% against the euro and 9.6% against the dollar. Ten-month industrial producer prices rose 3.8% from the same period last year. Manufacturing industry producer prices rose 0.3% in October, with domestic sales prices up 0.8% and export prices in forint terms remaining flat. October manufacturing industry prices rose 2.9% yr/yr, with domestic sales prices up 9.5% and export prices down 1.1%. (Econews)

POLITICS
Stop negative campaign, says MSzP policy section The governing Socialist Party (MSzP) needs to stop campaigning against the granting of Hungarian citizenship to ethnic Hungarians under preferential terms, the party’s social policy section agreed yesterday in a statement on this weekend’s referendum. The categorical ’no’ appeal by the Socialists runs counter to the sentiments of the majority of left-wing voters, said a press release, so social policy’s executive body is calling on the MSzP to halt its campaign and let voters in Sunday’s referendum make their own decisions. The social policy section said it thought the Hungarian political elite was to blame for failing to work out a long-term ethnic policy over the past 15 years. (MTI) 2,000 Hungarians vote abroad in referendum Some 2,000 Hungarian citizens who will be abroad on December 5 have registered to vote at 62 Hungarian missions in a binding referendum, the foreign affairs spokesman told reporters in Budapest yesterday. Viktor Polgár said most of the voters have registered at the London, Paris, Brussels and Vienna embassies for Sunday’s balloting. He said that Foreign Ministry staff would be traveling to the missions to serve as heads of local election offices. (MTI)

DOMESTIC
FinMin ups deficit reduction targets Hungarian lawmakers voted yesterday on the government’s plan to narrow its budget deficit next as part of its drive to adopt the euro by 2010. The plan seeks to cut the shortfall to 4.7% of gross domestic product next year from an estimated 5.3% deficit in 2004. The amended convergence program aims to reduce the general government deficit by a yearly 0.6-0.7%, in terms of GDP, in order to create the necessary conditions for adopting the euro. Before joining the EU’s Exchange Rate Mechanism (ERM II) Hungary must bring its deficit under 3%. - a target it hopes to meet by 2008 (Econews, Bloomberg; Nb 1, NG 1, MH 11) New drugs added to OEP subsidy list Over a hundred new pharmaceutical products, 80% of them generic, will be added to the National Health Fund Administration’s (OEP) list of subsidized drugs next year, the OEP said yesterday. Since Hungary’s EU entry in May, the number of subsidy applications by drug makers has risen to over 450 upon the adoption of the EU’s drug transparency directives, which forced many pharmaceuticals to re-submit older applications. With more lowerprice generic products set to be introduced on the market next year, the OEP expects medication prices to grow not more than 7% on average from January. (Vg 1) S.F.

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Servers seized due to copyright infringement Police last week seized 8 computer servers in Budapest and Miskolc that were used to illegally distribute an estimated 15 terabytes of pirated software, movies and music depriving producers of revenues of as much as Ft 1 billion. Only in April this year, police conducted a similar raid with FBI officials in a Budapest dormitory that uncovered an international chain of bootleg software distributors. (Nb 22) S.F. Earth tremor felt in northeast Hungary An earth tremor was felt in northeastern Hungary last night, most probably connected to a stronger earthquake in Poland, but no one was injured and there was no damage, disaster management officials said. The tremor, which measured at a 2 on the Richter scale, was felt in high-rise buildings in Salgótarján, 85 kilometers northeast of Budapest. A quake measuring 4.7 on the Richter scale was registered in Poland at 6:30 P.M. CET, and the Hungarian tremor is believed to have been an offshoot. (MTI)

STOCKWATCH
BUX Close: 14,193.88 Change: +23.47 (+0.17%)

Stock Closing price Daily change (%) Average price Volume MOL 12,450 0.5 12,457 365,411 Matáv 785 0.1 781 1,537,247 OTP 5,310 0.5 5,318 682,887 Richter 22,750 -1.1 22,861 50,617 Egis 10,700 0 10,808 15,174 Antenna 3,850 0.3 3,863 171,821 TVK 5,230 1.6 5,239 20,179 Rába 640 1.6 638 10,834

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02 December 2004
Business
Pension reform will reduce deficit

Hungary's general government deficit, calculated according to the EU's ESA'95 methodology, will be reduced, as the government will be able to take the effects of pension reform into consideration in its calculations, the finance minister said after the cabinet session yesterday. The country's modified convergence program will take into consideration the amounts paid to private pension funds under budget revenue. These adjustments will reduce Hungary's general government deficit, calculated according to the EU's ESA'95 methodology, by 0.8 %age points to 4.5% of GDP in 2004, and by 0.9 %age points to 3.8% in 2005, Draskovics said. (MTI; Ng 1, Vg 1, Nv 5)
Feasibility study of factory begins

Holcim Hungária Rt, the Hungarian subsidiary of Swiss cement maker Holcim, is starting a feasibility study for the construction of a Ft 50 billion factory in Lábatlan (NW Hungary), Chairman-CEO Richard Skene said yesterday. If the parent company approves the study, which should be completed in spring of next year, work could start in 2006 or 2007 and production could begin in 2009. The plant, if built, will turn out 1.5 million tons of cement a year. Holcim Hungária had net profit of Ft 6.2 billion on consolidated revenue of Ft 28.5 billion in 2003. (Econews; Vg 15)
New outlets for Pannon mobile packages

Mobile service provider Pannon GSM Rt plans to sell its mobile packages at Shell gas stations and ElectroWorld department stores from December, Pannon announced. The subscriptions bought in the new shops will be activated free by calling a Pannon number without further administration or signing a contract, Pannon said. (Vg 13) M.K.
Keviép wins Ft 4.6 bln tender

Debrecen-based construction company Keviép Kft has been picked winner in a tender to build conference center in Debrecen for Ft 4.6 billion. In Apr. this year Keviép was co-awarded a similar contract by the local municitity to build an adjacent four-star hotel, office and resindential building as well as an underground parking lot, valued at Ft 4.5 billion. The project is scheduled for completion by Dec. 2005. (NG 9) S.F.
Hoffmann builds Ft 3 bln road

Chairman-CEO of construction company Hoffmann Rt Ödön Hoffmann and chairman-CEO of the National Motorway (NA) Rt Zoltán Bodnár have signed an agreement to build an 8.5 km detour section of the main road no. 51 between Dunavecse and Apostag, central Hungary. The new road must be completed by November 2006. NA announced the public procurement tender for this road in April this year. (Vg 5) M.K.
Advertising boom on commercial TV

Commercial TV channels each report record braking revenues from commercials this year. Viasat3 has increased its advertising revenue by 108% in the first ten months of the year, CEO Attila Kocsis said. The channel reported Ft 909 million ad revenue last year. RTL klub earned Ft 26.6 billion from ads last year and hopes to increase this by 20%, the channel said. TV2 reported Ft 23.6 billion from commercials last year and hopes to be above this by 20% too. (Ng 5, Vg 16) M.K.
Malév privatization tender description changes

The government changed the description of Hungarian Airlines Malév Rt's tender yesterday. According to the change, bidders do not have to take a full and unconditional guarantee for Malév's loans. The government expects professional investors to be more interested in the tender after the change. The more guarantees bidders take for the loans, the better chances they have to win, the government said. (Vg 5) M.K.

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Irish Investor's big plans for Fradi

The real estate portfolio of sports club Ferencváros was bought by an Irish investor, announced János Furulyás, president of the club. The Irish group offered Euro 6 million for the club's real estate, plus agreed to run the soccer team of the club. The investors plan to built a new stadium with a capacity of seating 30,000 people and to construct stores and apartments in Fradi's lots on Könyves Kálmán krt and Gyáli út. (MH 23) R.G.
Porshe wines Magyar Posta tender

Out of six contenders, national postal service operator Magyar Posta Rt (MP) declared Porsche Leasing Kft winner in its tender to buy 190 new vehicles aimed to augment its aging delivery fleet. However, after the announcement, three of the bidders, whose offers were invalidated by MP, approached the Public Procurement Committee (KD) claiming their bids were unfairly disqualified, which left the deal pending indefinitely. MP said Porsche Leasing submitted the best offer undertaking to supply the vehicles for a total Ft 876 million. (NG 8) S.F.
Builders protest Lidl's unpaid bills

Sub-contractors of the builder of retail chain, Lidl's store in Kalocsa, Central Hungary are protesting in front of the store for two days lining up their heavy construction equipment because of unpaid dues worth Ft 100 million. Csaba Skultéti, owner of one of the construction companies said that more than 10 contractors have not received their fee. Protesters in Kalocsa contacted constructors of the Lidl store in Gyula, South-East Hungary, who have the same problem. Sub-contractors in Gyula plan to hold a demonstration today. (Nv 5) R.G.
BSE registers record turnover in Nov

Brokerages at the Budapest Stock Exchange registered a record combined tunover of Ft 661 billion in November, the best in four years and more than double compared to a year earlier, sending the benchmark BUX index to another all-time high of 14,318. The leading broker remains Erste Bank Rt, which has managed deals worth over Ft 1 trillion this year. In view of the unexpectedly strong trading seen this year the bourse said its profit margin is likely to come in at Ft 1 billion-Ft 1.2 billion this year instead of the originally projected Ft 700 million, which could add up to a 78% rise in total earnings over last year. (NG 11) S.F.
Kelly Services opens in Budapest

Kelly Services, a global staffing company based in the U.S., has opened its first office in the Central and Eastern European region, in Budapest. Kelly Services CEO Carl Camden said yesterday. Kelly Services places nearly 700,000 employees with businesses around the world every year. In Hungary, about 60% of people get jobs through personal contacts, and the rest rely on employment advertisements, according to Anikó Jónás, who will head Kelly Services Magyarország. (Econews)
Jet2.com starts Bp-Manchester flight

Low-fare airline Jet2.com of the UK has started a service between Manchester and Budapest. Jet2.com is the eighth low-fare airline to fly from Budapest. Jet2.com chairman-CEO Philip Meeson said ticket sales started at the end of September, and 70% of the available 8,000 seats on the airline's December flights have already been booked. (Econews)
Mobile use increases to 84%

Hungarian mobile-phone use rose to 83.7 % of the population in October, with the local unit of Vodafone Group Plc taking market share from T-Mobile Hungary Rt, a unit of Deutsche Telekom AG's Matáv Rt. The number of Hungarians with cellular phones rose from 83 % in September this year and 75.2 % in October last year, Budapest-based regulator NHH said yesterday on its Web site. The new EU member's three wireless companies struggled to add subscribers as 10.1 million Hungarians owned more than 8.4 million mobile subscriptions or pre-paid cards. T-Mobile had the most market share ahead of Pannon GSM and Vodafone. (Bloomberg)

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LLP sets up software for Sodexho

LLP Budapest Kft, a software company, has installed a software system for Sodexho Pass Hungária that will allow the company, which sells service vouchers, to automate some of its sales and keep better track of its customers. LLP Budapest won the contract to set up the client relationship management (CRM) system in the spring of this year and installed it in just four months. Sodexho is one of relatively few companies in Hungary that have CRM systems (Econews)

Economics
Economic growth slowed for a second quarter

Hungary's economic growth slowed for the second consecutive quarter in the third quarter as sluggish demand in Western Europe, the main market for the new EU member, curbed production and exports. The economy grew 3.7 % in the third quarter, from a revised 4.2 % in the second and 4.3 % in the first, the statistical office said. Growth was expected at 3.7 %, according to the median forecast of 10 economists polled by Bloomberg. The economy grew 0.9 % from the second quarter. (Bloomberg; Ng 1)
Insurance companies pay more compensation in H1

According to a report by the State Financial Institutions Supervision (PSzÁF), insurance companies paid Ft 80.2 billion for compensations in Hungary in the first six months of this year for non-life insurance, which is 6.6% higher than in the same period of 2003. Compensation was especially higher in car liability and the health insurance sector, PSzÁF said. Only half of compensation paid in the first half of 2004 happened actually in that period, the rest were the consequences of damages in 2003, PSzÁF said. (Vg 10) M.K.
November PMI 51.2%

Hungary's unadjusted PMI (Purchasing Manager Index) came in at 51.2% in November indicating a modest rebound in the output of the processing sector, logistics think-tank MLBKT said. The adjusted figure for the same period was 50.5%, up from 48.1% in October. Compared to the year-ago period, the index was up 0.1 yr/yr but still an average 2.5% lower than in the previous three years. The production index rose 4.2% to 52.5%, while the purchasing index stood at 61.2%. (NG 4) S.F.
Investment volume up 12.7% yr/yr in Q3

Investments in Hungary increased 12.7% in the third quarter of 2004 compared to the same period last year, rising faster than the 10.0% year-on-year increase in Q2, but slower than the marked 18.9% rise in Q1. Seasonally adjusted investment volume in Q3 was 3.2% higher than in Q2. In the first nine months of the year investments rose 13.2% compared to the same period in 2003. In the third quarter investments in machines and equipments rose by 14.1% yr/yr and building investments were up 12.7%. (Econews; Ng 3)
Bonds to raise Ft 7.1 trillion in '05

Hungary plans to increase debt sales next year by 6 % to finance government spending and pay off maturing debt, the Debt Management Agency said today. Gross bond sales will be Ft 7.1 trillion forint, said László András Borbély, deputy director of the agency. Net forint-denominated bond sales, the amount needed to finance spending, will total Ft 426 billion, 33 % less than this year, the agency said. Hungary is scaling back its net debt sales as the new member of the EU seeks to bring the budget shortfall closer to 3 % of gross domestic product from an estimated 5.3 % this year. (Bloomberg; Ng 11)
Erste and MFB sign refinancing deal

Erste Bank Hungary Rt will start drawing on a credit line from Hungarian Development Bank (MFB) Rt to grant special loans to local councils for infrastructure development projects. The new loan program is for loans running for 20 years at most, plus a three-year grace period. The government provides an exchange rate guarantee on the loan, which means local councils pay between 4% and 6% annual interest on the development loans. The loans are available both for the projects of individual municipalities and also to finance regional developments planned jointly by several local councils. Local councils must put up 10% of the project's cost to get the loan, but can also opt to take out a separate long-term loan with a maximum five-year grace period from Erste to cover this amount. (Econews; Ng 4)

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Municipality to increase utility fees

The Budapest municipality is drawing up a plan to increase utility fees, public transport prices and prices of other public services by a rate exceeding the inflation forecast for 2005. Prices of running water, sewage and waste collection services are planned to increase by 5.7%, 14.8% and 9.4% respectively. Burial services might become 6% more expensive in 2005. A municipality proposal suggests 10-25% increase in Budapest transport company BKV Rt's fees. The assembly will vote on the planned increases on Dec. 16. (Nv 5) R.G.
Motorway fines set to increase

Fines imposed on vehicles driving on motorways without a sticker will increase considerably as of January. The biggest penalty for trucks and vans will increase by Ft 84,000 to Ft 262,500. On-the-spot fines for cars without stickers will be up to Ft 11,500 from Ft 10,000, while the maximum amount from Ft 42,000 to Ft 48,300. (Nv 24) R.G.

Politics
Romanian statement unusual - ForMin

Foreign Minister Ferenc Somogyi criticized the Romanian prime minister's remarks that rejected granting Hungarian citizenship for his country's Hungarian minority, terming them as "unusual and irritated." Speaking in the course of a program on Hungarian Klubrádio yesterday, the minister said Adrian Nastase's statements could be interpreted as a sign that Romania wanted to minimize the benefits of possible Hungarian citizenship to be granted to ethnic Hungarians in the country. The Romanian prime minister, earlier in the day, said that plans to grant Hungarian citizenship to ethnic Hungarians in Romania was an "insane idea", having "no international law or political basis." (MTI; Nb 1)
Gov't to provide for ethnic Hungarians

The government intends to help ethnic Hungarians in neighboring countries by setting up the Motherland Fund and a credit program with a total Ft 21 billion and will provide passports to help them travel to Hungary, the justice minister told Parliament yesterday. "People professing to be Hungarian are considered Hungarians, irrespective of where they live, and the Hungarian state feels responsibility for them," Minister of Justice József Petrétei said. The minister added that the Motherland Fund would be established with a starting capital of Ft 1 billion. (MTI; Nv 3)

Domestic
Court dissolves fascist organization

The Budapest Metropolitan Court as a court of first instance ruled on disbanding the far-right Blood and Honor Cultural Association (VBKE) yesterday. The disbanding case was initiated by the Budapest Public Prosecutor's Office last February on the ground that VBKE activists voiced neo-fascist views, which were incompatible with the law on association, the Constitution and international law. The prosecutor argued at the trial that "Blood and Honor" had been a Nazi slogan, in addition that members of the association carried neo-Nazi insignia. The court verdict noted that disbanding the organization was prompted by the statements made at their public programs which extended harm to the dignity of others. (MTI)

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03 December 2004

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Business Film trust to support film industry Hungarian investment bank Concorde Értékpapír Rt, has devised a film trust, which has tax write-off attractions for investors. Under the Act on Motion Pictures, which came into force in April of this year, businesses who support film production with cash subsidies - or donations - may deduct 100% of this subsidy from their tax base as well as from their payable taxes. The tax break has some conditions in that investors may write off no more than 70% of their payable taxes, and they may not deduct any more than 20% of the total production costs of any one film, but the write-off is still extraordinary, providing investors with a return - in the form of a deduction - of Ft 116 on every Ft 100. (Econews; Ng 1, Nb 16, MH 13, Vg 18)

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1051 Budapest, Hercegprímás utca 19 Arago boosts stake in Forrás

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According to a statement issued by holding company Forrás Rt, its majority owner investment company Arago Rt increased its stake in the company through the purchase of some 1.03 million shares. Arago now owns 88% of Forrás. The price of Forrás shares rose 15% on the Exchange as investors scrambled to take advantage of Hungarian legislation compelling shareholders who own more than 75% to purchase minority stakes at market price. (NG 11) A.K. Richter buys own shares Pharmaceutical company Richter Gedeon Rt purchased 9,150 of its own shares in a transaction that took place outside the Budapest Stock Exchange. The company uses the shares to finance its employee share ownership scheme. As a result of a Board decision taken yesterday 18,300 shares will be distributed among employees who delivered outstanding all-round performace throughout the year. The shares have a market value of Ft 415 million. (NG 11) A.K. Forrás transfers stakes to Formix The assets management company Forrás has transferred or sold minority stakes in some of its companies to its wholly owned subsidiary Formix. Forrás transferred a 22.92% stake in winery Borászati Vállalkozási and a 47.11% stake in vintage wines trader Muzeális Borforgalmazó to Formix. At the same time Forrás sold a 26.81% stake in furniture maker Zala Bútorgyár along with other minority stakes to Formix. (Econews; Ng 11) Hollóházi remains state-owned The State Privatization and Holding Rt (ÁPV) announced, that the tender issued for the sale of its majority stake in porcelain manufacturer Hollóházi Porcelán Rt was unsuccessful. Only one investor showed interest in Hollóházi, but the price offered was too low for consideration. ÁPV also disclosed the results of other recent tenders: Saye Kft was declared the winner of a tender for the sale of financial services firm Hungarian Investment and Asset Management Rt at a price of Ft 1.2 billion and Szentes Gabonaipari Cooperative won the tender for the sale of milling company Dél Gabona Malomipari Rt with its offer price of Ft 617 million. (NG 4) A.K. CIB employees to receive CIB shares The board of directors of CIB Bank Rt, after having received permission from its parent Intesa Holding International S.A., decided to effect a capital raise of Ft 3.5 billion to finance the bank's new employee share ownership program. CIB will issue 2.22 million new shares and distribute it to its employees. CIB Bank's subsidiary CIB Lízing Rt also raised its capital by Ft 200 million through the issue of some 20 thousand shares to employees. (NG 5) A.K. Roaming mobile travel insurance Telecommunications company T-Mobile, insurance company Atlasz Biztosító and travel agency IBUSZ are launching a new, joint service in December, making it possible to get travel insurance through mobile phones. QBE Atlasz CEO Doron Grossmann stressed that at in at least 5 million cases each year, Hungarian travelers do not sign insurance contracts because of the lack of time, or similar issues, even though as many as 50% of them leaves the country by car. Mobile purchase transactions in general show an incredible growth; in 2003, the monthly number was less than 10,000, while in 2004, transactions reached 100,000/month. (Ng 5, Vg 14) M.M.

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Kravtex's Ft 300 mln center in Győr Coach producer Kravtex Kft. has completed a Ft 300 million investment; today, they will be inaugurating a new coach maintenance and diagnostics center, as well as an office building, in Gyor (west Hungary). The company that has spent over a billion forints on production development and capacity expansion in the past few years also introduces its new, Credo C12 coach. Kravex is currently producing suburban-type Credo buses for 24 Volán regional transportation companies in Hungary; their new production partner is Kühne Rt., a former agricultural machine producer. (Vg 13) M.M. BAT opens logistics center Cigarette producer, British American Tobacco Hungary Kft (BAT) opened its new logistics and storage facility in the industrial park in Pécs yesterday. The 8,000 sqm. logistics center, built at a cost of Ft 1.5 billion will serve as the company's primary distribution site in Hungary. The products produced in BAT's factory in Pécs will be stored here before delivery to the company's 14 regional distribution centers nationwide. BAT had Ft 6.5 billion profit after tax in 2003, a figure expected to be underscored this year as the cigarette market continues to shrink. (NG 5, MH 12) A.K. T-Mobile extend Fradi sponsorship deal Telecommunications giant T-Mobile prolonged their sponsorship contract with Hungarian soccer team FTC for another 2.5 years; the team's main supporter will probably cover one-fourth of the annual Ft 1 billion FTC costs. FTC Rt. chairman of the board András Sugár confirmed that T-Mobile surpassed their expectations. At the same time, he denied the validity of the recent news about an Irish investment group acquiring FTC for Ft 1.7 billion; he said he was authorized to continue negotiations with an investment group, but no contract has been signed at this point. (Vg 13) M.M. BÁV to convert shares Pawn brokerage BÁV Rt decided to convert its physical shares whose dividend slips became outdated to new physical shares. BÁV Rt opted not to dematerialize its shares as it is not an open company and thus not required to do so by legislation. Shareholders have to take out their shares from the central depository KELER Rt, a transaction that carries high fees and take it to BÁV's headquarters for conversion. Experts say that this move is probably a scheme of the majority owner to persuade minority shareholders to sell their stakes. (NG 11) A.K.

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1051 Budapest, Hercegprímás utca 19 Malév pilots to fly for free

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Malév-pilots end up flying for free despite talks that were originally started to negotiate a wage increase. The end result is attributed to the leadership skills of the management: the pilots will work 30-35 hours for free (which means 7 Bp-London-Bp trips) on top of the 750 mandatory hours. The free work is a Ft 40-50 million contribution to Malév to break even, otherwise if the company closes in the red, the State Privatization and Holding Rt (ÁPV Rt) will refuse to transfer the subsidy promised earlier. (MH 13) E.C. University of Szeged wins tender University of Szeged has been awarded Ft 873 million FinMin tender to purchase modern tools and instruments necessary for conducting scientific research and providing quality education. The university itself will add Ft 131 million from their own resources. (MH 6) E.C. Biggeorge's and Otthon swap stakes The owners of two of Hungary's biggest real estate companies, Biggeorge's International Rt and Otthon Centrum Rt, have bought stakes in each other's companies. Biggeorge's owner Tibor Nagygyörgy bought 24.95% of Otthon Centrum, buying out Otthon Centrum owner Adorján Salamon. Salamon bought 25.95 of Biggeorge's, giving him a 49.9% stake in the company. Wallis Ingatlan Rt, which is partly owned by Nagygyörgy, owns the remaining 50.1% of Biggeorge's. Salamon, who is also the CEO of Biggeorge's, said the move was intended to simplify the ownership structure of the businesses. The purchases will be followed by a change of name at Biggeorge's. The new name will be announced next week. (Econews) E.ON seeks bigger gas stakes E.ON AG, Europe's second-largest utility, plans to boost its stakes in two Hungarian natural-gas distributors, weekly HVG reported, citing a local government official. Acquisitions by E.ON of majority holdings in regional suppliers Kögáz Rt. and Ddgáz Rt. would boost its combined share of Hungary's gas market to 37 % from 30 % and would require regulatory approval, HVG cited Ferenc Horvath, head of the country's market regulator, as saying. E.ON, which last month agreed to buy majority stakes in gassales storage assets from Hungary's MOL Rt, expects to benefit from increasing demand for natural gas in Eastern Europe. (HVG 12-2) (Bloomberg) BauTrans sells subsidiaries to peers Shipping company BauTrans Hungária has sold its fleet of delivery trucks to Hungarian peer Waberer's and its heavy load unit to Austria's Felbermayer, which also specializes in moving heavy loads. Elemér Gidófalvy, director of Invescom Corporate Finance Kft, the consultancy that managed the deal, said that Waberer's bought more than 100 vehicles with the purchase of a 100% stake in BauTrans's subsidiary Transporta. Feldmayer also bought 100% in BauTrans. (Econews) Economics

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1051 Budapest, Hercegprímás utca 19 New car sales dip

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According to vehicle information company JATO Dynamics, prices of new cars in Hungary went down by an average of 3.9% yr/yr by the end of October, while in the other 19 European countries evaluated in the survey, prices went up by 2.7%. The main reasons for lowering car prices were lower demand compared to soaring car sales before the introduction of registration tax, fewer car loans taken out because of the population's higher debts and decreased wage value. Also, previous car loan structures with low starting payment had led to a significant amount of cars taken back by the sales companies and re-sold as used, suppressing both new and used car prices. (Vg 1) M.M.

Economics
MNB deputy-governor warns of reckless rate The deputy-governor of Hungary's central bank has warned against the effects of cutting the base rate too quickly. Henrik Auth, deputy-governor of the National Bank of Hungary (MNB) said an exaggerated rate reduction could cause the forint to weaken substantially, threaten economic balance and hurt investor confidence. Auth was speaking at a national conference of business executives in Budapest yesterday. Auth conceded that the slowing inflation rate, healthy investor confidence and the strong forint allow for a lower base rate, but noted that investor confidence is still vulnerable as are Hungary's balances, warranting a cautious rate policy. (Econews; Ng 1) AKK aims to keep ratio of forex In a shift from its earlier strategy, Hungary's Government Debt Management Agency (AKK) plans to keep the share of foreign currency denominated government debt to overall debt between 25-32% in the future. This implies regular net foreign issuance and financing part of the annual deficits in foreign currency in the future. The target is part of a set of new benchmarks AKK adopted as part a modified government debt strategy announced by AKK on Tuesday. The strategy also set target ranges for the fixed- and floating rate composition of both forint and foreign currency debt. Under the earlier strategy, foreign currency issues were limited to renewing expiring debt to result a dropping share. (Econews; Ng 3) Anger over tax refund abolishment The Hungarian Association of International Companies (Nemzetközi Vállalatok Magyarországi Társasága, NVMT) is submitting a complaint to the Ministry of Finance because of the recent abolishment of environmental load tax refund for waste recycling companies. NVMT claims that the amendment of the regulation may cause over Ft 100 million losses to the biggest Hungarian waste management firms in 2005. The modification affects nearly 100 companies including packaging company Dunapack Rt., metallurgical producer Dunaferr Dunai Vasm? Rt. and protein processing firm ATEV Rt. (Vg 16) M.M.

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1051 Budapest, Hercegprímás utca 19 Eximbank to finance exports to Karelia

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Prime Minister of the Republic of Karelia, Pavel Chernov, Magyar Export-Import Bank CEO Frigyes Banki and Magyar Exporthitel Biztositó (Mehib) CEO Tibor Takács signed a framework agreement on USD 30 million USD 35 million in financing for Hungarian exports to Karelia. Under the agreement, Karelian clients of Hungarian companies that export medical instruments to Karelia, take part in gas pipe development projects or construction work in Karelia, may get a buyer's loan from Eximbank. The loan will be taken out by the Karelian government's bank, the Onego Bank. Repayment of the loan is guaranteed by Karelia, and Mehib will insure the individual deals. Karelia, a member of the Russian Federation, shares a border with Finland. (Econews; Vg 5) Resources unused in war on Ragweed Although Ft 700 million was allocated to rid the land of Ragweed this year and despite the fact that a third of the population suffer from related allergies, Ft 140 million was not spent. The leftover is to be saved for next year, however, NGOs are afraid that that the budget will be cut next year. Ministry of Agriculture official István Eke said that the 2005 budget on ragweed will be over Ft 1 billion, and the regulations will make it easier to hunt down careless landowners. The Ministry will call for a procurement tender to purchase motor scythes, and will keep on spending money on campaign and education to raise awareness and to make sure people are able to correctly identify the harmful allergenic weed. (MH 7) E.C. Biometric passports on the way The introduction of the new biometric passports may cost up to Ft 10 billion. The new passports will look exactly like the old ones, however, there will be an intangible chip implanted into the cover containing the fingerprint and the digital photograph of the person. If the legislation is passed in Q1 2005, the issuance of the new passports will commence in 3 years. International data protection organizations believe that the new idea invades privacy and human rights and are afraid that, in time, these chips will be placed underneath the skin. (MH 15) E.C. Defense spending cut by Ft 593 bln The government has cut its target for defense spending over the next ten years by about Ft 593 billion to Ft 3,556.3 billion at 2004 prices. About Ft 769.5 billion of defense spending during this period will go toward developments. The new situation will have to be addressed together with the Armed Forces' suppliers, Lieutenant-General Zoltán Szenes, Chief of Staff, told a conference of defense industry companies. Lt.Gen. Szenes said monies available for development projects could be increased by restructuring spending. Payroll costs account for 50% of the overall budget, as against 40% elsewhere outside Hungary. (Econews)

Politics

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1051 Budapest, Hercegprímás utca 19

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Conflicting info on effects of dual citizenship According to FinMin estimates, every 10,000 ethnic Hungarians moving into the country would result in an extra expenditure of net Ft 4.4 billion a year. For 100,000 newcomers, the extra costs would be Ft 46 billion, approximately 80,000 jobs in Hungary may be in danger, which would cause the current unemployment rate, 6.1%, to go up to 7.5 - 8.0%. According to the World Federation of Hungarians, every 10,000 families would bring an extra Ft 39 billion income to the state and only cause a Ft 25 billion expenditure, thus awarding the dual citizenship would increase Hungarian national profit. (MH 5) E.C.

Domestic
New highway opens to traffic in NE Hungary Traffic has started on the last stretch of main road in northeastern Hungary. Prime Minister Ferenc Gyurcsány opened the new section of highway 30, linking Miskolc, 150 kilometers northeast of Budapest, to the M3 motorway, at its end junction in the nearby Fels?zsolca yesterday. This and another main road, no. 304, which also opened yesterday, were the last parts missing from a ring road bypassing the town's southern and eastern quarters. (MTI; MH 3, Ng 3, Nv 6, Nb 8)

Exchange
FIXED MIDDLE RATE In forints Dec 02, 2004 National Bank of Hungary EUR 1 244.03 USD 1 182.90 GBP 1 354.50 CHF 1 160.21 JPY 100 178.53 CZK 1 7.90 PLN 1 58.65

Stockwatch
BUX Close: 14365.98 Change: +48.07 (+0.34%) Stock Closing price Daily change (%) Average price Volume MOL 12,480 -0.5 12,440 427,194 Matáv 794 1.1 789 1,028,976 OTP 5,450 1 5,441 979,895 Richter 22,800 -0.4 22,613 38,362 Egis 10,890 -0.1 10,862 4,721 Antenna 3,840 0.4 3,835 1,888 TVK 5,260 1.2 5,215 3,428 Rába 640 2.4 638 7,335

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1051 Budapest, Hercegprímás utca 19

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06 December 2004
Business
Alpha Bank may trump OTP for Jubanka The Greek Alpha Bank had the best offer for the majority (88%) share packet in the Serbian bank Jubanka a. d. Beograd, beating out rivals OTP Bank Rt and Societé Génerale, according to unconfirmed reports. OTP Bank may submit bids for other Serbian financial institutions, namely Novosadska Banka, whose 83% share is for sale, and Continental Banka, whose 98% share is up for grabs. OTP Bank has made a binding bid for the majority (96%) share packet in the Croatian bank Nova Banka on Nov. 24. (Vg 1) P.O. SCA completes Ft 2.3 bln Gyor factory The Hungarian subsidiary of SCA, a big Swedish paper company, has set up a Ft 2.3 billion factory in Gyor (W Hungary). SCA Packaging Hungary Kft expects the factory to generate sales revenue of Ft 2 billion-2.5 billion in the first year of production, CEO Csaba Mathe said on Friday. This year, SCA Packaging Hungary expects revenue of Ft 9 billion and pre-tax profit of Ft 750 million - 800 million. SCA built the 9,000-square-metre factory in just five months. The facility cost Ft 300 million to build, and the production lines cost Ft 2 billion. SCA received Ft 150 million form Hungary's "Smart" program to build the factory. The factory will employ 40 workers. (Econews; Ng 4, Vg 7) G. H. Financials rents in Margit Palace G. H. Financials Kft has signed a long term agreement with real estate agent Jones Lang LaSalle to rent 421 sq. m. of office building Margit Palace. G. H. Financials Kft is a subsidiary of G. H. Financials Ltd, which will direct electronic trade at the European Futures and Optional Commodity Exchange from Budapest. Margit Palace offers 17,100 sq.m. office space on six levels and 90% of the building is rented. (Ng 17) M.K. Strabag to build cement factory Strabag Construction Rt plans to establish a cement production plant in south Hungary, PR manager Ottó Zimmermann said. Strabag will invest Ft 27 billion into the new plant, which will be built somewhere on the road no. 6 between Szekszárd and Szigetvár, Zimmermann said. Strabag examined some other potential investment sites as well before choosing the south Hungarian region, Zimmermann said. Strabag expects the consent of the local population before building the plant that will produce 1 million tones of cement annually. (Ng 5) M.K. PSzÁF fines Concorde Ft 3 mln The Hungarian Financial Supervisory Authority (PSzÁF) has fined brokerage Concorde Rt Ft 3 million for suspending the sale of units in two of its investment funds. Concorde stopped selling the units between September 9 and 24, citing speculative pressure on a share with a large weight in the funds' portfolio. The units were in the Concorde 2000 Open-end Investment Fund and Concorde Share Investment Fund, both of which have a high proportion of shares in Brau Union Hungária Rt, a big brewer. Small shareholders in Brau Union Hungária, including Concorde, were disputing a buyout of the company by Heineken during the period. (Econews; Ng 8, Vg 9) EMKTV fined again The Competition Office (GVH) fined cable TV company and ISP EMKTV Kft for Ft 5 million for abusing its dominant market position. According to GVH, the company can change its program packages unilaterally based on the general conditions of contract. It was not the first time the Competition Office deemed EMKTV's general conditions of contract as a means of abusing dominant market position. (Vg 5) P.O.

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Csorna to build spa and leisure center The municipality of Csorna, west Hungary, has decided to launch a real estate program in cooperation with Zalaegerszeg-based Hoffmann Construction Rt, the municipality announced. Csorna municipality plans to construct a spa center and a leisure time center in the town investing billions of Forints into the project. The project will consist of cleaning the fishing lake, the construction of new apartments and a spa as well as sports facilities and a swimming pool. Finally a 50-bed spa hotel will be built. The project is to start next spring. (Ng 17) M.K. Balda to produce mobile parts in Veszprém German Balda AG plans to move its mobile phone parts production capacity to Veszprém, west Hungary, the company said. Balda has recently signed an agreement with Videoton Holding Rt about the establishment of a new plant from one of the old IBM plants in Veszprém Industrial Park. Balda will not only rent the production halls from Videoton, but will also hire other services, like labor force and logistics from Videoton too. (Ng 4, Vg 5) M.K. Sportfolió to become pub. fin. institution Sportfolió Kht, a non-profit organization which was founded by the Ministry of Children, Youth and Sports in 2000 for the operation of state-owned sports centers, will be turned into a publicly financed institution, National Sports Centers (NS), director of the National Sports Office Attila Ábrahám announced. Sportfolió has amassed Ft 3.5 billion in losses during the past couple of years, Ábrahám added. National Sports Centers would only manage the sports center in Népliget, Budapest, and another six Olympic sports centers, the rest of the state-owned facilities would be put up for sale. National Sports Office hopes to net Ft 2 billion from the deals. (Vg 7) P.O Pannonplast sells non-core assets Plastic parts maker Pannonplast Rt said on Thursday it had sold its stakes in non-core subsidiaries and divested real estate assets as well as unused production equipment. The proceeds will cut this year's losses. In an announcement made after trading hours, Pannonplast said it sold its stakes in Kaposplast, Recyclen, Multicard and its maintenance firm Pannonplast Karbantarto. The sale is part of the company's reorganization, which was started in March. The proceeds of the sale will cut Pannonplast's consolidated debt-to-assets ratio by 8% to slightly below 50% this year, Pannonplast financial manager Denes Gyimothy said. (Econews; Vg 10) ProLogis opens Budapest office Logistics parks and services developer ProLogis has recently opened its Budapest office in Bank Center. ProLogis is now building a new logistics center with the name ProLogis Park Budapest near the motorway M5. The park will host nine buildings with a total net area of 150,000 sq.m., out of these three have been finished so far. ProLogis is also building a distribution center in Budaörs, near Budapest, which will be finished in the first part of next year. (Ng 17) M.K. Wizz Air gets Ft 25 mln from Indigo Low-fare airline Wizz Air, owned by Hungarian and Polish investors, has signed an agreemenent for a Euro 25 million loan with investors specializing in the industry from the U.S. and Europe. Half of the loan will come from Indigo Partners, a U.S.-based private equity company specializing in investments in airlines, and half will come from companies in Europe, including Debis AirFinance, a company which leases aircraft, and Lufthansa Technik, an aircraft maintenance company. "The transaction has made Wizz Air one of the strongest low-cost airlines in terms of capital," CEO of Wizz Air László Varadi said. (Econews; Ng 5, Vg 8)

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1051 Budapest, Hercegprímás utca 19

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Paks to buy Skoda JS machinery Plzen-based Skoda JS, part of Russia's United Heavy Machinery (OMZ) corporation, has signed a deal with the Paks nuclear plant to supply Euro 20 million worth of mechanical equipment between 2005 and 2007, OMZ announced. The machinery to be delivered by the Czech company will be part of the plant's regulating and safety system and will serve the purpose of extending the useful life of its four reactors beyond their expiry date, which range from 2012 to 2017. A month ago the Parliament's Energy Committee voiced support for a Ft 172 billion project that could extend the life span of the plant by 20 years. (Nv 5, MH 2) P.P. Samsung has 13% share of mobile market Samsung expects sales of its mobile phones in Hungary to generate Ft 12 billion in revenue this year, up from Ft 8.9 billion a year earlier. Samsung expects to sell 280,000 phones in 2004, giving it a 13% share of the market, sales manager Balázs Kunos said on Friday. The company sold 210,000 phones last year and 100,000 in 2002. In 1999, Samsung's first year in Hungary, it sold just 1,300 handsets. Samsung plans to launch several new handsets shortly, and is developing the software for one of the phones in Hungary. (Econews; Vg 5) Graboplast sells rug maker to CEO Flooring company Graboplast Rt has sold 97% of Soproni Szonyeggyar, which makes rugs, to a company owned by rug company's CEO, Zoltán Jarfas. Graboplast will retain a 3% stake in the company. The purchase price was not disclosed. The sale is part of Graboplast's strategy to sell off its non-core companies. Jarfas said-Eco that Soproni Szonyeggyar sells to a niche market and capitalizes on its 95-year history. (Econews; Vg 5) BUX ticking higher in lackluster week The Budapest stock index climbed to new closing highs this week as blue chips OTP Rt and MOL Rt were both edging higher. But, with no major corporate news coming out during the week, gains remained limited and the sharp rally seen over the past two months slowed considerably. Despite rising four out of five sessions, the BUX inched up just 1.51%, closing at 14,101.88 points on Friday. (Econews; MH 3) Malév cancels all flights to Vienna Hungarian airline Malév has cancelled all flights to Vienna because of poor demand, Malév announced on Thursday. The last Budapest-Vienna flight was on Friday, but Malév will still provide for travel for passengers already holding tickets for flights to Vienna leaving after December 3. Malév is continuing its flights to Munich, Zurich and Ljubljana. Separately, the State Privatisation and Holding Rt. (ÁPV), which owns more than 99.9% of MALEV, announced on Friday that it will decide in this month on a Ft 3billion capital injection to MALEV that was offered in a government decision with some conditions attached. (Econews) Savaria to be privatized The Vas county council in Szombathely, western Hungary, approved a plan to privatize Savaria Tourist Kft, the county's small travel and hospitality company, Vice President of the assembly László Beleznay said. Although the company has been a loss-making enterprise for many years and will barely stay in the back at the end of 2004, the sale could bring in an estimated Ft 500 million as Savaria owns a hotel, a B&B, a campsite, a travel agency and currency exchange precincts. However, the county will retain ownership of a castle hotel in nearby Bozsok. It has been suggested by local sources that the sale of Savaria is also very convenient for a prominent county level politician as it will eliminate competition for his own travel agency. (Nb 10) P.P.

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1051 Budapest, Hercegprímás utca 19

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Economics
Private pension members may choose The Finance Ministry is considering three amendments to the law on private pension funds. One of the amendments, discussed at a conference recently, would let private pension fund members use half of their pension savings as collateral for loans, one would allow older private pension fund members to switch back to the state pension system up to a set deadline, and another would end the practice of automatically writing off private pension fund payments from personal income taxes. People nearing retirement age who would get only about a quarter of the amount from their private pension funds than they would from the state pension fund will be allowed to switch back to the state pension system until 2012. (Econews; Vg 11) MFB to aid SMEs Hungarian Development Bank (MFB) Rt has launched a new loan program for micro-, small- and mid-sized ventures with Ft 10 billion. MFB aims to improve the competitiveness of the firms with the long-term loans given at a reduced interest rate. The maximum amount of loans is set at Ft 250 million, or 75% of the net investment value, and companies need to cover at least 25% of the investment from their own resources. Bidders should employ no more than a hundred people, and bids should be submitted at the branch offices of the bank. (Vg 6) P.O.

Politics
ForMin welcomes Ukraine revote ruling The Hungarian Foreign Ministry on Saturday expressed satisfaction over the Ukrainian Supreme Court's order to repeat a presidential runoff. In a statement issued on Saturday, Foreign Ministry spokesman Viktor Polgar said the revote decision of the Supreme Court was an important precondition for a democratic presidential election in Ukraine. The Foreign Ministry expects that Ukrainian authorities will do their best to ensure that the repeat vote fully complies with international democratic standards as this will ensure that the people of Ukraine can express their true will. (MTI) Voters say no Ethnic Hungarians will be denied the chance for preferential Hungarian citizenship while health-care privatization can continue, voters decided in a referendum on Sunday. After 97% of the ballots were counted, István Stumpf, a close aid to opposition leader Viktor Orbán, conceded that it was "almost certain" that the referendum on both questions was unsuccessful, in an interview with on private news channel Hír TV. Voter participation was 37.44 %, well below the 50% needed to make it binding. After 99.59 % of ballots were counted 51.55 % voted to grant Hungarian citizenship to ethnic kin, while 65.02 % said yes to halting hospital privatization. Since less than 25 % of registered voters had cast their ballots in agreement, neither motion passed. Prime Minister Ferenc Gyurcsány termed the referendum as "joyless" but that voters had opted for "responsible patriotism". (MTI; Nb 1, MH 1,5,6, Nv 1,2)

Domestic
Nurses lured to Italy A Rome-based employment agency called ALI lures away the best graduate nurses from Hungarian schools with tuition and language courses. The Italian agency has already reached an agreement with a number of Hungarian educational institutions, where nurses are trained. Italy has vacancies for around 60,000 nurses, and trained Hungarian employees are more than welcome. The agency also offers a brighter future for active nurses with oneoff money of Euro 3,500, a gross pay of Ft 350,000, and accommodation. (Vg 1) P.O.

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1051 Budapest, Hercegprímás utca 19 Roma education center for Bp

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Budapest will accommodate the first regional Roma education center of the Roma Decade of Inclusion program, the Ministry for Youth, Family, Social Affairs and Equal Opportunities announced. The participants in the program include Bulgaria, the Czech Republic, Slovakia, Macedonia, Romania, Croatia and Serbia-Montenegro in addition to Hungary. The center will control approximately Ft 8 billion in grant money for Roma education programs. (Nb 8, MH 7) P.P. Hapsburg to head Red Cross György Hapsburg was elected President of the Hungarian Red Cross by the 11th convention of the organization on Saturday. In his inaugural speech, Hapsburg noted with regret that state funding for the Red Cross has considerably diminished over the past three years and declared his intention to strive for closer cooperation with the government and legislation. "The Red Cross needs to lobby more intensely for funds both in Hungary and elsewhere, and I will be happy to do so", he said. The grandson of Karl von Hapsburg, Hungary's last king, György Hapsburg moved to Hungary and became a citizen in 1993. He has been representing the country as ambassador extraordinaire to the EU since 1996. (Nb 8, Nv 3) P.P.

Stockwatch
BUX index: BUX Close: 14314.60 Change: -51.38 (-0.36%) Stock Closing price Daily change (%) Average price Volume MOL 12,395 -0.7 12,435 801,669 Matáv 796 0.3 799 1,256,492 OTP 5,418 -0.6 5,394 903,199 Richter 22,795 0 22,754 36,190 Egis 10,900 0.1 10,898 4,948 TVK 5,155 -2 5,182 786

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