CAPITAL GROUP Page 1 Management Board’s Report to the 2006 Semi Annual Financial Statements of Prokom Software SA Capital Group RULES OF PREPARATION OF THE SEMI ANNUAL FINANCIAL STATEMENTS 1. The consolidated financial statements of Prokom Software SA Capital Group (Group) for the period from 1 January to 30 June 2006 have been prepared according to the rules listed below. § As of 1 January 2005, the Polish Accounting Act dated 29 September 1994 with further amendments (“the Act”) imposed on the Prokom Software Group an obligation to prepare consolidated financial statements in accordance with the International Accounting Standards, International Financial Reporting Standards and the related interpretations published in the form of regulations of the European Commission. At present, given the current process of implementation of International Financial Reporting Standards (“IFRS”) in the European Union and the nature of the Group’s business, there are no differences between the accounting policies applied by the Group and the IFRS adopted by the European Union. These consolidated financial statements were prepared in accordance with International Financial Reporting Standards, specifically IAS 34 “Interim financial reporting”, as well as all International Accounting Standards, International Financial Reporting Standards and related interpretations that were published as European Commission regulations and approved by the International Accounting Standards Board (“IASB”) and the International Financial Reporting Interpretations Committee (“IFRIC”). Some of the subsidiaries prepared their financial statements in accordance with the Polish Accounting Standards. For the purposes of these financial statements, they were restated to comply with the requirements of International Financial Reporting Standards. The Accountancy policies used to prepare these financial statements are presented in the chapter “Basis of preparation of the consolidated financial statements”. § Decree of the Minister of Finance on current and periodic information provided by issuers of securities, dated October 19 th 2005. 2. Detailed description of the accounting policies used for the preparation of the consolidated financial statements for 6 months ended 30 June 2006 is presented in the chapter “Accountancy polices” of those financial statements. 3. The consolidated financial statements contains comparable data for the corresponding period of the previous year (and, in case of the balance sheet - as at the end of the preceding period), presented in a way ensuring comparability of the data presented in the financial statements for the previous periods with the data relating to the current period. Group companies Entity’s name Ownership interest 30 June 2006 Proportion of vot ing rights executed 30 June 2006 Ownership interest 31 December 2005 Proportion of voting rights executed 31 December 2005 Subsidiaries: Softbank SA 34.26% 34.26% 33.01% 33.01% Incenti SA 1) 34.26% 34.26% 33.01% 33.01% Softbank Serwis Sp. z o.o. 1) 34.26% 34.26% 33.01% 33.01% Koma SA 1) 0.00% 0.00% 33.01% 33.01% Koma Nord Sp. z o.o. 1) 34.26% 34.26% 33.01% 33.01% Sawan Grupa Softbank SA 1) 34.26% 34.26% 33.01% 33.01% Gladstone Consulting Ltd. 1) 17.47% 17.47% 16.84% 16.84% bezpieczenstwo.pl Sp. z o.o. 1) 34.26% 34.26% 33.01% 33.01% ZUI Novum Sp. z o.o. 1) 17.47% 17.47% 16.84% 16.84% AWiM Mediabank SA 1) 34.26% 34.26% 33.01% 33.01% NetPower SA 1) 34.26% 34.26% 33.01% 33.01% Bielpolsoft j.v. 1) 29.12% 29.12% 28.06% 28.06% SPIN SA 50.40% 49.99% 50.40% 49.99% Optix Polska Sp. z o.o. 2) 33.51% 35.96% 33.51% 35.96% SK Galkom Sp. z o.o. 2) 44.10% 43.74% 44.10% 43.74% PIW Kom-Pakt Sp. z o.o. 2) 25.37% 25.16% 25.37% 25.16%
Transcript
C A P I T A L G R O U P
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Management Board’s Report to the 2006 Semi Annual Financial Statements of Prokom Software SA Capital Group
RULES OF PREPARATION OF THE SEMI ANNUAL FINANCIAL STATEMENTS
1. The consolidated financial statements of Prokom Software SA Capital Group (Group) for the period from 1 January to 30 June 2006 have been prepared according to the rules listed below.
§ As of 1 January 2005, the Polish Accounting Act dated 29 September 1994 with further amendments (“the Act”) imposed on the Prokom Software Group an obligation to prepare consolidated financial statements in accordance with the International Accounting Standards, International Financial Reporting Standards and the related interpretations published in the form of regulations of the European Commission. At present, given the current process of implementation of International Financial Reporting Standards (“IFRS”) in the European Union and the nature of the Group’s business, there are no differences between the accounting policies applied by the Group and the IFRS adopted by the European Union. These consolidated financial statements were prepared in accordance with International Financial Reporting Standards, specifically IAS 34 “Interim financial reporting”, as well as all International Accounting Standards, International Financial Reporting Standards and related interpretations that were published as European Commission regulations and approved by the International Accounting Standards Board (“IASB”) and the International Financial Reporting Interpretations Committee (“IFRIC”).
Some of the subsidiaries prepared their financial statements in accordance with the Polish Accounting Standards. For the purposes of these financial statements, they were restated to comply with the requirements of International Financial Reporting Standards.
The Accountancy policies used to prepare these financial statements are presented in the chapter “Basis of preparation of the consolidated financial statements”.
§ Decree of the Minister of Finance on current and periodic information provided by issuers of securities, dated October 19th 2005.
2. Detailed description of the accounting policies used for the preparation of the consolidated financial statements for 6 months ended 30 June 2006 is presented in the chapter “Accountancy polices” of those financial statements.
3. The consolidated financial statements contains comparable data for the corresponding period of the previous year (and, in case of the balance sheet − as at the end of the preceding period), presented in a way ensuring comparability of the data presented in the financial statements for the previous periods with the data relating to the current period.
Group companies Entity’s name Ownership interest
30 June 2006Proportion of voting rights
executed 30 June 2006
Ownership interest31 December 2005
Proportion of voting rights executed 31
December 2005
Subsidiaries:
Softbank SA 34.26% 34.26% 33.01% 33.01%
Incenti SA1) 34.26% 34.26% 33.01% 33.01%
Softbank Serwis Sp. z o.o.1) 34.26% 34.26% 33.01% 33.01%
Koma SA1) 0.00% 0.00% 33.01% 33.01%Koma Nord Sp. z o.o.1) 34.26% 34.26% 33.01% 33.01%Sawan Grupa Softbank SA1) 34.26% 34.26% 33.01% 33.01%
První Ceritifikacní Autorita, a.s.3) 23.25% 23.25% 23.25% 23.25%
COMP SA 20.11% 20.11% 20.11% 20.11%
RADCOMP SA5) 13.46% 15.79% 13.46% 15.79%
PACOMP SA5) 16.09% 16.09% 16.09% 16.09%
Enigma Systemy Ochrony Informacji Sp. z o.o.5) 20.11% 20.11% 20.11% 20.11%
TechLab 2000 Sp. z o.o.5) 6.03% 6.03% 6.03% 6.03%
Novitus SA5) 11.75% 11.75% 0.00% 0.00%1) indirectly throughout Softbank SA 2) indirectly throughout SPIN SA 3) indirectly throughout PVT, a.s 4) indirectly throughout ABG Ster-Projekt SA 5) indirectly throughout COMP SA
All subsidiaries, joint ventures and associates are incorporated in Poland except for PVT, a.s., První Ceritifikacní Autorita, a.s., PVT ESO, spol. s.r.o. (Czech Republic), D.Trust Certifikacná Autorita, a.s., SNLT. a.s., Slovanet a.s., Asseco Slovakia. a.s. (Slovakia), Bielpolsoft j.v. (Belarus), Soft Technologies Sp. z o.o. (Kazakhstan), Gladstone Consulting Ltd. (Cypres), UAB "Informaciniu projektu sistemos" (Lithuania).
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BASIC DESCRIPTION OF THE PARENT COMPANY AND THE GROUP
1. Principal activity of the Parent Company and the Group
The parent company of the Capital Group of Prokom Software S.A. is Prokom Software S.A. (“the Parent Company”, “Prokom”) with its registered seat in Warsaw. Since 28 May 1997 the Parent Company operates as a joint stock company registered currently in the National Court Register of Enterprises under the number KRS 0000041559.
The principal activity of the Parent Company, according to the Polish Classification of Activities (PKD-7222), is called “software activities”. This category comprises analysis, designing and programming of ready-for-use software. The Parent Company’s sector, according to the classification of the Warsaw Stock Exchange, is “information technology”.
Additional activities of the Group include internet services and sales of the computer hardware. These sales are associated mainly with the software implementation services.
The Group consists of the Parent Company and subsidiaries.
2. Employment
As at 30 June 2006 Prokom employed 1,319 employees.
Type City Address Employment
Seat Warszawa 00-697 Warszawa, Al. Jerozolimskie 65/79 36
Branch Gdynia 00-321 Gdynia, ul. Podolska 21 587
Branch Katowice 40-161 Katowice, ul. Korfantego 83 145
Branch Bydgoszcz 85-674 Bydgoszcz, ul. Gdanska 67 52
Branch Wroclaw 50-449 Wroclaw, ul. Traugutta 1/7 124
Branch Rzeszów 35-016 Rzeszów, ul. Hoffmanowej 19 25
Branch Szczecin 70-530 Szczecin, ul. Matejki 22 102
Branch Lódz 90-954 Lódz, Al. Pilsudskiego 3 65
Branch Warszawa 02-383 Warszawa, ul. Grójecka 127 165
Branch Lublin 20-950 Lublin, ul. T. Zana 39 18
Total 1,319
The employment in the Group was as follows: Employment I half of 2006 2005 2004 Average 4,575 4,577 4,395
IMPORTANT EVENTS AFFECTING THE COMPANY’S BUSINESS
In the first half of 2006, Prokom Software SA Capital Group focused its activities on the following areas:
1. Executing the contracts concluded in the prior periods as well as developing the scope and the offer quality for strategic customers;
- Continuation of works on the Comprehensive IT System for the Polish Social Security Office (ZUS), including further updates to the system as a reflection of changes in the Polish law; continuous administration and operation of the system;
- Commencement of works on migration of Insurer system data bases from the distracted architecture to the central data base. Support of the IT System at PZU SA; further development of the system’s technical infrastructure and its customization to PZU’s changing organization and users requirements.
- Implementation of GraphTalk A.I.A. system – system supporting life, health and pension insurances at PZU Zycie SA.
- Co-operation on systems maintenance, support of end users and further development of software and systems’ functionality at TP SA;
- Specification, implementation and maintenance works of e-Poczta system, supporting Polish Post services and sales structures. Implementation works on the financial and accounting system “Mrowka”.
- Successful completion of implementation of SAP at Grupa LOTOS SA subsidiaries, i.e.: Petrobaltic SA, Lotos Oil SA, Lotos Paliwa SA, Lotos Asfalty SA. Extension of the functionality of the IT system for SAP BW data base and SAP.SEM (Strategic Enterprise Management) module enabling consolidation of the financial statements of Grupa LOTOS SA. Moreover Prokom developed new technical infrastructure for SAP systems, based on the IBM technology.
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Prokom executes two projects: corporate Microsoft Enterprise License and development of LAN network based on CISCO technology.
- Implementation of SAP systems at 5 regional branches of Koncern Energetyczny Energa SA as well as integration of all software applications operating at Energa and its regional branches on the new SAP Net Weaver XI integration platform, which started the development of SOA (Service Oriented Architecture). Consolidation and uniform maintenance services for SAP licenses (approx. 2500 licenses).
- Commencement of work on expanding the functionality of Comprehensive IT System at TUiR Warta SA for the advanced mechanisms for financial accounting between different systems and migration of database environment of ZSI system under the new executed project as well as maintenance over the ZSI system;
- Implementation works on the Integrated IT System for PKO BP S.A. (development of Cent ral Customer Base and migration of all data from ZORBA system to ALNOVA system). Continuation of Works on the PKO BP S.A. Central Supporting System.
- Execution of contract for the implementation of Central Evidence of Vehicles and Drivers (CEPiK) for the Ministry of Internal Affairs and Administration: development of CEPiK internet portal enabling to evidence the information about vehicles technical maintenance data; access for the citizens to have a limited information about the registered vehicles; development of the electronic correspondence exchange module; development of software application for local departments; started the Temporary Storage Center (TCZ) in order to extend the availability of IT System CEPIK to institutional users (Police, PWPW, etc.); executed the pilot implementation of application for Vehicles Control Stations.
- Execution of modification and service works for the Agency for Restructuring and Modernization of Agriculture, concerning Integrated Administration and Control System and Identification of Allotment System.
2. Gaining and diversification of the new revenue sources through execution and performance of contracts with a number of new customers, representing various businesses and sectors of the economy, among others including:
- Tele-Fonika Kable SA – implementation of SAP system as well as delivery of complete IBM infrastructure for SAP system requirements.
- Multimedia Polska SA – delivery of Cisco Systems network hardware which will enable to provide new generation wide range services.
- KGHM SA – agreement for the extension of IBM mainframe infrastructure for SAP system requirements.
- ppup Poczta Polska – joint venture in the consortium building the Expeditionary and Distribution Center for the Polish Post in Pruszcz Gdanski.
3. Operational and investment preparations to execution of the new projects, activities connected with the new tenders and negotiations. Currently t he Group’s activities in these matters refer to such clients as: Grupa PZU S.A., ppup Poczta Polska, PKO BP S.A., KGHM Polska M iedz S.A., Grupa LOTOS S.A. , Ministry of Education and Ministry of Internal Affairs and Administration.
KEY FINANCIAL AND ECONOMIC DATA
CONSOLIDATED BALANCE SHEET
Structure of assets, liabilities and shareholders’ equity
As at June 30th 2006 the total assets amounted to PLN 2,088.2m, which represents a 6.7% decrease in comparison to December 31st 2005.
1. As of June 30th 2006 fixed assets amounted to PLN 1,123.1m and represented 53.8% of the total assets; current assets amounted to PLN 947.2m and represented 45.4% of the total assets. Comparing to December 31st 2005, this constitutes an increase of 3.9% in fixed assets and a decrease of 17.2% in current assets.
2. Shareholders’ equity and liabilities – shareholders’ equity represented 54.0% of the total assets (PLN 1,127.8m), long-term liabilities represented 13.6% (PLN 284.5m) and short-term liabilities represented 32.2% (PLN 672.8m). This constitutes an increase of 0.1% in the shareholders’ equity, a decrease of 21.8% in long-term liabilities and of 10.1% in short-term liabilities compared to December 31st 2005.
The Group’s shareholders’ equity comprises of:
- share capital PLN 14.2m - share premium PLN 239.0m - translation differences PLN 0.6m - retained earnings PLN 566.5m - minority interest PLN 307.5m Book value per share increased by 0.1% and amounted to PLN 81.19.
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CONSOLIDATED PROFIT AND LOSS ACCOUNT
Revenues and costs from operating activities
Below presented analysis comparing financial data related to the first half of 2006 to the first half 2005.
In the first half of 2006 the Group’s sales revenues totaled PLN 794.7m, and increased by 26.5% compared to the first half of 2005, when the revenues amounted to PLN 628.3m. Respectively the costs of sales went up by 29.7% and equaled PLN 542.9m, while in the first half of 2005 amounted to PLN 418.4m.
The gross margin in the first half of 2006 was 31.7% while in the first half of 2005 accounted to 33.4%. Sales of products and services constituted 72.6% of the tot al sales and amounted to PLN 577.4m. This constitutes an increase of 21.0% compared to the first half of 2005 when the sales of products and services amounted to PLN 477.2m. Respectively the cost of products sold amounted to PLN 352.4m, which is an increase of 22.9% compared to the first half of 2005 (PLN 286.8m).
This constitutes change of the gross margin on the products sold from 39.9% in the first half of 2005 to 39.0% in the first half of 2006. Sales of products and services structure
I half of 2006 I half of 2005 Change
[PLN 000] [%] [PLN 000] [%] [%]
Own licenses 167,309 29.0 63,188 13.2 164.8
Implementations 51,973 9.0 42,638 8.9 21.9
IT support services 177,395 30.7 192,820 40.4 -8.0
General contractor services 44,162 7.6 79,577 16.7 -44.5
Network infrastructure development 23,824 4.1 11,938 2.5 99.6
System development services 41,095 7.1 32,681 6.8 25.7
Technical support and post warranty services 20,666 3.6 11,800 2.5 75.1
Training services 14,267 2.5 6,238 1.3 128.7
Cryptographic devices 1,868 0.3 0 0.0 100.0
Other 34,804 6.1 36,320 7.7 -4.2
Total 577,363 100.0 477,200 100.0 21.0
In the first half of 2006, the structure of sales of the Group’s products and services did materially differ compared to previous year. The majority of sales of products and services was delivered from IT support services (30.7%), sales of own licenses (29.0%), and implementations (9.0%).
In the first half of 2005 the major share in sales of products and services was attributable to IT support services (40.4%), second was general contractor services (16.7%) and third was sales of own licenses (13.2%). Sales of goods for resale and materials constituted 27.4% of the total sales and amounted to PLN 217.4m. This constitutes an increase of 43.8% compared to the first half of 2005 when the sales of goods for resale and materials amounted to PLN 151.1m. Respectively the cost of goods for resale and materials sold amounted to PLN 190.5m, which is an increase of 44.7% compared to the first half of 2005 (PLN 131.6m).
This constitutes a change of the gross margin on the goods for resale and materials sold from 12.9% in the first half of 2005 to 12.4% in the first half of 2006. Sales of goods for resale and materials structure
I half of 2006 I half of 2005 Change
[PLN 000] [%] [PLN 000] [%] [%]
Hardware 169,090 77.8 64,438 42.6 162.4
Third party software 46,492 21.4 84,414 55.9 -44.9
Other 1,776 0.8 2,274 1.5 -21.9
Total 217,358 100.0 151,126 100.0 43.8
The structure of sales of goods for resale did materially differ from the corresponding period of the previous year. The majority of sales of goods for resale and materials were delivered from sale of hardware (77.8%) and third party software (21.4%).
The significant increase of sale of hardware (by 162.4%) comparing to the first half of 2005 results from signing new contracts for hardware delivery.
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The Group’s sales revenues by economy sectors
I half of 2006 Sector
[PLN ‘000] [%]
Financial 275,454 34.7%
Public administration 265,608 33.4%
Services 173,658 21.9%
Industry 80,001 10.0%
Total 794,721 100%
Selling and distribution costs amounted to PLN 51.6m, which constitutes an increase of 3.4% compared to the first half of previous year.
General and administrative expenses went up by 5.3% in comparison wit h the first half of 2005, to PLN 133.9m. Salaries and external services represented main categories of the G&A expenses.
Total costs by categories amounted to PLN 541.7m, and were by 15.5% higher compared to the first half of 2005. Costs by categories
I half of 2006 I half of 2005 Change [PLN ‘000] [%] [PLN ‘000] [%] [%]
Depreciation and amortization 27,960 5.2 34,330 7.3 -18.6
Materials and energy consumed 31,726 5.9 42,701 9.1 -25.7
External services 225,284 41.6 168,228 35.9 33.9
Taxes and charges 2,557 0.5 1,824 0.4 40.2
Wages and salaries 187,226 34.6 171,418 36.5 9.2
Social security contributions 38,529 7.1 34,678 7.4 11.1
Other 28,372 5.1 15,841 3.4 79.1
Total 541,654 100.0 469,020 100.0 15.5
Revenues and costs from operating activities
The financial revenues in the first half of 2006 amounted to PLN 36.3m, which constitutes a decrease of 31.5% in comparison to the previous year when amounted to PLN 53.0 m. Respectively the financial costs in the first half of 2006 amounted to PLN 50.4m, and decreased by 15.4% in comparison to the first half of 2005 when amounted to PLN 59.6m.
Profit
The gross profit of the Group in the first half of 2006 amounted to PLN 251.8m. The gross margin went down by 1.7 percentage points and equaled to 31.7%.
In the reporting period the Group reported operating profit of PLN 62.8m which is an increase of 36.1% on corresponding period of 2005.
In the first half of 2006, the profit before tax went up to PLN 52.0m, which is an increase of 35.4% on corresponding period of 2005, when the profit before tax amounted to PLN 38.4 m.
In the reporting period the net profit attributable to the Parent amounted to PLN 26.2m, presenting an increase of 52.4% on corresponding period of 2005, when the net profit equaled to PLN 17.2m. The EPS equaled to PLN 1.89 while in the first half of 2005 it equaled PLN 1.24.
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Key financial ratios for Prokom Software SA Capital Group Item I half of 2006 I half of 2005 2005 ROE 2.3% 1.8% 8.6%
ROA 1.2% 0.8% 3.7%
EBIT margin 7.9% 7.3% 8.1%
EBITDA margin 11.4% 12.8% 12.2%
Sales margin 31.7% 33.4% 31.0%
Pre tax profit margin 6.5% 6.1% 8.5%
Net profit margin 3.3% 2.7% 4.3%
Current ratio 1.4 1.5 1.5
Quick ratio 1.4 1.5 1.4
Total debt ratio 46.0% 49.7% 58.6%
Debt-equity ratio 85.2% 98.7% 141.5%
ROE Net profit / [(Shareholders’ equity at beginning of period + Shareholders’ equity at end of period) / 2]
ROA Net profit /[(Total assets at beginning of period + Total assets at end of period) / 2]
EBIT margin Operating profit / Net sales revenue
EBITDA margin (Operating profit + Depreciation and amortization) / Net sales revenue
Sales margin Gross sales profit / Net sales revenue
Pre tax profit margin Pre tax profit / Net sales revenue Net profit margin Net profit / Net sales revenue Current ratio Current assets / Short term liabilities Quick ratio Current assets – inventories / Short term liabilities Total debt ratio Liabilities and provisions for liabilities / Total assets
Debt-equity ratio Liabilities and provisions for liabilities / Shareholders’ equity
Market performance of the Prokom Software SA shares against the WIG 20 index
120
130
140
150
160
170
180
2006-01-02
2006-01-16
2006-01-30
2006-02-13
2006-02-27
2006-03-13
2006-03-27
2006-04
-10
2006-04
-26
2006-05
-12
2006-05
-26
2006-06
-09
2006-06
-26
PROKOM WIG 20 rel.
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Basic data of the Companies included in the Semi -Annual Consolidated Financial Statements of Prokom Software SA Capital Group
Net sales revenue [PLN thousand]*)
Net profit/loss [PLN thousand] Company
Capital stake/votes Business activity I half of 2006
I half of 2005
I half of 2006
I half of 2005
Prokom Software SA Parent Company www.prokom.pl
Provision of comprehensive IT solutions to large and medium sized enterprises and public
institutions, as well as satisfying needs of Polish market for technologically advanced IT services
and solutions
280,909 281,414 24,142 3,213
Softbank SA Capital Group 34.26/34.26 www.softbank.pl
Competency center of Prokom Software SA
Group for financial and banking sector
Provision of comprehensive IT solutions mainly to financial and public administration sectors
216,811 174,092 15,434 19,071
ABG Ster-Projekt SA Capital Group 38.46/38.46 www.abg.pl
Competency center of Prokom Software SA Group for public administration sector
Designing, development and integration of complex IT systems and infrastructure mainly for public administration sector and uniform
forces
148,567 - 6,265 -
SPIN SA Capital Group 50.40/49.99 www.spinet.com.pl
Competency center of Prokom Software SA Group for telecommunication and utilities
sector
Trading and IT services, design of electronic equipment and systems, in particular in
telecommunication, health and energy sector
89,115 63,992 (2,152) 2,758
Comp SA Capital Group 20.110/20.11 www.comp.com.pl
Competency center of Prokom Software SA Group in the field of IT security
Provision of comprehensive IT systems, specializes in security solutions for all market
sectors
48,213 34,249 1,795 3,515
PVT a.s. 100/100 www.pvt.cz
IT systems design and implementation, LAN and WAN development, e-business and
outsourcing. 64,410 69,579 1,056 (862)
Safe Computing Sp. z o.o. 90.00/90.00 www.safecomp.com
Consulting, design, development and implementation of security software as well as
security polices 4,433 2,050 737 133
ZETO Sp. z o.o. 100/100
Data processing services, space leasing 394 361 31 (6)
Combidata Poland Sp. z o.o. 83.80/83.80 www.combidata.pl
Organization, preparation and conducting traditional and electronic trainings,
manufacturing of training software, managing non-public IT school
14,964 5,391 717 (1,715)
Postdata SA 49.00/49.00 www.postdata.pl
IT services mainly for the Polish Post 17,933 15,785 202 953
OptiX Polska Sp. z o.o.**) 57.00/64.00 www.optix.pl
Design, preparation and implementation of complex information and document
management systems and document storage systems
- 22,876 - 325
Koma SA**) 75.00/75.00 www.koma.com.pl
Hardware trading, hardware maintenance services, implementation of internally
developed software (Koma HR) - 14,804 - 600
Incenti SA**) 49.00/49.00 www.incenti.pl
IT outsourcing services (Data Center) - 9,075 - 176
*) Without consolidation exclusions **) As on June 30th 2006 consolidated by subsidiaries
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SIGNIFICANT RISK FACTORS AND THREATS
In the opinion of the Management Board of Prokom Software SA, the Group’s financial standing, its production capacity and market position do not p ose any threat to the Group’s further dynamic development in 2006 and beyond. However, there is a number of both internal and external factors, which may affect, directly or indirectly, the scope of the Group’s activities and the pace of its development.
1. Operating Risk
Risk related to the Group’s dynamic development
In the previous years, the revenues were on the increase and also the Capital Group was expanded. Furthermore, the scope and complexity of the projects pursued by the Capital Group grow. As a result of new acquisitions, the number of companies in the Prokom Group increased; these have chiefly included companies offering products and services complementary to the Prokom Software SA offer. The changes have called for introduction of increasingly more complicated procedures for financial and accounting control, similar reporting systems and complex management systems. As a consequence, the scope of the Prokom Software SA Management staff’s duties has considerably widened. This, in turn, requires a better coordination of management processes within the Capital Group.
Dependence on a limited number of customers
Prokom Software SA Capital Group is a provider of the largest dedicated IT systems in Poland. To date, most of the Group’s revenue was derived from the provision of the services to a relatively low number of customers under long-term contracts. However, the Group seeks to diversify its sources of revenue by acquiring new mid-sized companies.
Risk related to the projects in progress
Among the great number of contracts executed by the Group, there are projects which are of crucial importance for the operations of the Group’s customers. Failure or inability to satisfy the customers’ high requirements concerning the performance of a given contract may expose the Group to a potentially high commercial risk, including no payment for the provided services or having to pay contractual penalties. However, it should be noted that despite an expanding scope and complexity of the executed projects, the Group continues to prove its exceptional competence in the performance of the concluded contracts.
2. Risk Factors Related to the Group’s Business Environment
Risk related to planned investments
Part of Prokom Software SA strategy is to seek opportunities to diversify its activities by investing in companies operating in new sectors, which offer services complementary to the services provided by the Group. These investments should widen the scope of services offered by the Group to include the solutions for financial and banking sector (Softbank SA), telecommunication and energy sectors (SPIN SA), public sector (ABG Ster-Projekt SA) as well as secure IT safety of our customers (Comp SA and Safe Computing Sp. z o.o.). However, there can be no assurance that such expansion would lead to an improvement of the Group’s performance or would not adversely affect the Group’s financial results. Furthermore, execution of new projects will require the Group to engage its Management staff for that purpose, which may have an adverse effect on its core business and financial performance.
Main shareholder’s control over the Parent Company
As at the date of this Report, Mr Ryszard Krauze directly held 11.26% of the Company shares conferring the right to 11.96% of the total vote at the General Shareholders Meeting, while Prokom Investments SA (in which Mr Krauze holds. directly or indirectly. 66.13% of the share capital and votes) held 10.23% of the Company shares conferring the right to 11.73% of the total vote at the General Shareholders Meeting. Furthermore, pursuant to Par. 18 of the Company’s Articles of Association, each of the shareholders referred to above may appoint one member to a five-member Supervisory Board. In addition, pursuant to Par. 20 of the Articles of Association, Mr Krauze has the right to appoint the Chairman of the Supervisory Board. However, it should be noted that under the Polish Companies Act., upon a request of one or more shareholders holding at least 20% of the Company shares. a member of the Supervisory Board may be appointed by way of block voting without having to obtain other shareholders’ approval. Yet Mr Krauze still has a significant power to influence all issues requiring the Supervisory Board’s or shareholders’ approval.
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FINANCIAL RISK MANAGEMENT AND DERIVATIVE FINANCIAL INSTRUMENTS
Financial risk factors
The Group’s activities expose it to a variety of financial risks, including the effects of changes in debt and equity market prices, foreign currency exchange rates and interest rates. The Group’s overall risk management program focuses on the unpredictability of financial markets and seeks to minimize potential adverse effects on the financial performance of the Group. The Group uses to some extent derivative financial instruments such as foreign currency contracts to minimize the financial risk.
Credit risk
Financial assets, which are potentially subjects to the concentration of credit risk, consist principally of balances with related parties and trade receivables.
Trade receivables, which are presented net of an allowance for doubtful receivables, reflect the nature of the Group’s business that is focused on a small number of large contracts for major Polish corporations and government entities.
The Group has policies in place to ensure that sales of products and services and also provision of finance are made to customers with an appropriate credit history and credit rating.
In the opinion of the Management Board of the Parent Company, as on June 30th 2006 none of the financial assets category was subject to the concentration of credit risk.
Foreign exchange risk
For significant sales contracts denominated in foreign currencies, foreign currency forwards are entered into to manage exposure to fluctuations in foreign currency exchange rates.
Some of the Group’s borrowings and rental contracts are denominated in Euro and are exposed to foreign exchange risk. In addition to that, the Group import majority of goods for resale and licenses. The Group attempts to minimize the foreign exchange risk by signing part of its trade contracts in foreign currencies. The Parent Company entered into forward contracts for the sale of foreign currencies.
Interest rate risk
The Group’s income and operating cash flows are, to some extent, exposed to interest rate fluctuations as about half of the Group’s borrowings are maintained as floating rate instruments.
Also a substantial part of the Group’s asset relates to held-to-maturity fixed interest rate commercial papers purchased from related parties. The maturity of each individual paper does not exceed twelve months; however redeemed issues are usually replaced by new ones and, in substance, are regarded as non-current.
Loans to non-related parties are given with either a fixed or floating interest rate. Floating rate loans are exposed to interest rate risk.
Management does not consider it is cost effective to use financial instruments to hedge or otherwise seek to reduce interest rate risk.
Liquidity risk
Prudent liquidity risk management implies maintaining sufficient cash and marketable securities, and the availability of funding through an adequate amount of committed credit facilities. Due to the dynamic nature of the underlying businesses, the Group’s aim is to maintain flexibility in funding by having committed credit lines available.
MARKETS AND SUPPLY SOURCES
The Group’s markets and supply sources did not materially change in the first half of 2006.
The Group sold its products and services exclusively on the Polish market. In terms of sales, the Group’s key customers in the first half of 2006 were: the Social Security Authority, Powszechny Zaklad Ubezpieczen SA, PKO BP SA, ppup Poczta Polska, , Ministry of Internal Affairs and Administration, Agency for Restructuring and Modernization of Agriculture, Telekomunikacja Polska SA, Grupa LOTOS SA, Koncern Energetyczny Energa SA and TUiR Warta SA. No formal links exist between these undertakings and the Dominant Company.
The Group is not dependent on any of its suppliers. Prokom Software SA and some of the Group companies cooperate with several leading hardware producers and vendors (IBM, HP, SUN, CISCO, Legrand, Molex, Avaya, Alcatel, MaxData, nCipher, Dell), and leading software developers, such as IBM, Oracle, Microsoft, SAP, Century Software, Check Point and SCO. Cooperation with these partners is exemplary. There are grounds to believe that within Central and Eastern Europe, the Prokom Software SA Capital Group is one of the key customers for the undertakings listed above.
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AGREEMENTS MATERIAL FOR THE COMPANY’S BUSINESS
1. Key events and agreements related to the Group’s operations
Prokom Software SA
The most significant events related to the operating activities of Prokom Software SA during the first half of 2005 included in particular the material agreements executed as part of continued cooperation with such partners as ZUS PZU SA, TP SA, , ppup Poczta Polska, Grupa LOTOS SA, KE Energa SA or TUiR Warta SA. The execution of the contract for Comprehensive IT System for the Social Security Authority, the Company’s largest assignment to date, continued to be the utmost importance for the Company’s business.
§ Agreement with Koncern Energetyczny Energa SA, whereby Prokom is to provide KE Energa with services related to the extension of the accounting and financial modules of the my.SAP Business Suite system functioning at the Gdansk Branch and their implementation in other organisational units of KE Energa. The value of the agreement is approx. PLN 5.9m. Thanks to the implemented system, the financial, economic and accounting functions of eight separate business entities and Energa's Head Office will be able to operate based on a uniform controlling, financial and accounting model and uniform management procedures developed at KE Energa.
(press communiqué of Prokom Software SA dated on January 16th 2006)
§ Agreement with Koncern Energetyczny Energa concerning functional enhancement of the Integrated IT System (Zintegrowany System Informatyczny - ZSI) with a view to implementing uniform business processes at Energa's branches and subsidiaries. Energa was established upon the merger of eight independent power utilities which had operated different IT systems. The current phase of the construction of the integrated system, based on the mySAP Business Suite technology, consists mainly in developing solutions supporting distribution processes, that is delivery of electricity to customers. The value of the agreement, which is to be performed within 24 months, stands at PLN 16.3m.
(press communiqué of Prokom Software SA dated on February 14th 2006)
§ The consortium of Polnord SA and Prokom Software SA signed an agreement with Poczta Polska (Polish postal services company) on constructing the Forwarding and Distribution Centre for Poczta Polska in Pruszcz Gdanski. The construction work will be performed by Polnord, while Prokom Software is to provide all electrical and data transmission installations, for which it will receive PLN 9.5m (VAT exclusive). The project is to be completed in February 2007.
(press communiqué of Prokom Software SA dated on February 21st 2006)
§ Framework agreement with Multimedia Polska SA for sale and maintenance of Cisco Systems network hardware. The agreement sets forth the rules of sale and maintenance of Cisco hardware and software and regulates the issues related to the organization of related training. The value of first orders under the agreement totals approximately PLN 8m. The agreement expires on July 31st 2007, but may be extended by the parties.
(press communiqué of Prokom Software SA dated on April 27th 2006)
§ Agreement with Tele-Fonika Kable SA (TF Kable) for the development of an Integrated IT System. The system will be based on the mySAP Business Suite solution and the SAP NetWeaver technology and is to be integrated with other systems used in the TF Kable Group and its foreign subsidiaries (eg. in Germany and England).
(press communiqué of Prokom Software SA dated on May 17th 2006)
§ Three year Microsoft Enterprise Agreement with Grupa LOTOS SA, under which Prokom will provide LOTOS with the new Microsoft software packages and updates.
Softbank SA Capital Group
§ Annex to the subcontracting agreement with COMP S.A. The object of the annex is delivery of hardware and provision of services with the total amount of PLN 220 thousand. The subcontracting agreement with COMP SA was signed on 4 December 2003. The object of the Agreement was the Safety Subsystem for the purposes of the Central Evidence of Vehicles and Drivers System.
(communiqué of Softbank SA – dated on March 10th 2006)
§ Implementation works on ZSI, delivery of software and hardware supporting Zorba-3000 system, implementation and modification works on other PKO BP S.A. systems, i.e.: Central Supporting System, Bankart system; maintenance of Cash Flow Monitoring System at Bank Pekao S.A., as well as implementation of risk management systems based on Fermat application.
§ Development of application for local departments and new CEPIK Data Base (with a new functionality enabling to analyze system data), implementation of application for city guards and tenants, enabling access to CEPIK data base through internet portal, start of the Temporary Storage Center (TCZ) in order to extend the availability of IT System CEPIK to institutional users (Police, PWPW, etc.) and pilot implementation of application for Vehicles Control Stations.
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SPIN SA Capital Group
§ Agreement for the development of Project Management IT System as well as for hardware and software delivery for City Taps and Sewerage in Bydgoszcz. The contract valued at PLN 550 thousand is to be completed by 12 months from the contract date. The system is to be Microsoft Project based and will be correlated with the integrated IT system operating at present for the City Tap and Sewerage in Bydgoszcz. Spin will provide the operational maintenance for the period of 36 months and users trainings.
(quarterly report of SPIN S.A. dated on March 10th 2006)
§ Agreement concluded by SPIN SA with National Heath Fund (NFZ) for the delivery of hardware securing the applications used by the NFZ Central in Warsaw. The contract amounts to PLN 1.3m. The hardware is to be rented for the period of 36 months.
(quarterly report of SPIN S.A. dated on March 10th 2006)
§ Agreement concluded by SPIN SA and Kamsoft with the National Heath Fund (NFZ) for the provision of maintenance services of Operations Support IT System NFZ. Total value of the contract amounts to PLN 14m. The contract expires on December 31st 2006.
(communiqué of SPIN SA – dated on April 18th 2006)
§ Agreement concluded by SPIN SA with Koncern Energetyczny Energa S.A. for the authorized and exploitation maintenance over implemented billing system Energos Handel. The contract amounts to PLN 2.2m. The agreement is valid to May 2007.
§ Agreement concluded by SPIN SA with Saur Neptun Gdansk S.A. for the implementation and maintenance of ERP system – Maks IV, in the area of finance, accountancy, controlling and logistic. The contract amounts to PLN 0.8m, and will be finished by December 15th 2006 (logistic module to be finished by March 31st 2007).
ABG Ster-Projekt SA Capital Group
§ Agreement concluded by the consortium of ABG Ster-Projekt S.A. and Bull Polska Sp. z o.o. with the Ministry of Education and Science for the delivery, installation and integration of Internet Workstation to1093 schools. Total value of contract amounts to PLN 56.4m.
(communiqué of ABG Ster-Projekt SA – dated on April 10th 2006)
§ Agreement concluded by consortium of ABG Ster-Projekt S.A., MCSI Sp. z o.o. and Softbank Serwis Sp. z o.o. with the Ministry of Education and Science the agreement for the supply of multimedia information Internet centers (ICIM) to school libraries and connection to the existing Internet network. The Consortium will provide internet centers to libraries in Kujawsko-Pomorskie, Lódzkie and Mazowieckie. For all works under this project the Ministry will pay remuneration amounting to PLN 19.0m.
(communiqué of ABG Ster-Projekt SA – dated on July 10th 2006)
§ Agreement concluded by ABG Ster-Projekt S.A. with the ppup Poczta Polska for the supply of Oracle software and provision of technical maintenance services in the period of 2 years from the agreement date. For all works under this project Polish Post will pay remuneration amounting to PLN 10m.
(communiqué of ABG Ster-Projekt SA – dated on June 7th 2006)
§ Agreement with the Guarantee Insurance Fund for the development of technical plans and implementation of financial and accounting system. For all works under this project the Guarantee Insurance Fund will pay remuneration amounting to PLN 9.4m.
(communiqué of ABG Ster-Projekt SA – dated on June 7th 2006)
PVT a.s.
§ Contract for the development of Crisis Management Information System – system supporting crisis planning and decision process during crisis – value of approx. CZK 288m (approx. PLN 40m).
§ Delivery of software applications for the Police department and the delivery of hardware for Sale of the Microsoft software to District Prague 4 – value of CZK 2.3m (approx. PLN 0.3m).
§ Sale of maintenance services regarding DMS, File Net i Workflow systems to Air Navigation of the Czech Republic - value of CZK 4.6m (approx. PLN 0.6m).
§ Implementation of Network System Management and data migration to Windows 2003 at the Czech Radiocommunications - value of CZK 3.2m (approx. PLN 0.4m).
§ Sale of servers to Vodafone - value of CZK 1.8m (approx. PLN 0.2m).
§ Implementation of metropolitan area network, development of city portal and provision of business intelligence services at Municipality Pelhrimov - value of CZK 6.7m (approx. PLN 0.9m).
§ Development of city portal and provision of business intelligence services at Regional authority Plzen - provision of business intelligence services - value of CZK 5.0m (approx. PLN 0.7m).
§ Sale of hardware to VDI Meta - value of CZK 1.2m (approx. PLN 0.2m).
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2. Key events and agreements related to the Group’s operations after the balance sheet date
§ Agreement concluded by consortium of ABG Ster-Projekt S.A and a Romanian company, Siveco S.A., with the Romanian Agency of Payments and Interventions in Agriculture for the development of IT system for the Romanian Agency of Payments and Interventions as well as the Integrated Administration and Control System (IACS).The gross value of the agreement amounts to EUR 4.8m.
(communiqué of ABG Ster-Projekt SA – dated on July 20th 2006)
§ Agreement concluded by ABG Ster-Projekt S.A. with the Agricultural Property Agency for extending and modifying software of the Integrated IT System at the Agricultural Property Agency, which supports the Agency’s statutory task, i.e. disposal of land constituting Agricultural Property Resources of the State Treasury and current operations of the Agency. The Agency will pay PLN 2.1m for all works stipulated in the agreement.
(communiqué of ABG Ster-Projekt SA – dated on August 2nd 2006)
§ Agreement concluded by Prokom Software SA with Tele-Fonika Kable SA for the delivery and implementation of dedicated infrastructure for the SAP system. Prokom Software will ensure comprehensive maintenance of the whole solution on service level agreement terms, thus ensuring the customer an appropriate guaranteed level of service. The contract, whose value exceeds PLN 3m, represents another agreement with Tele-Fonika Kable SA. In May 2006, Prokom Software and Tele-Fonika Kable SA signed an agreement for the development of an integrated IT system based on SAP solutions.
(press communiqué of Prokom Software SA dated on August 2nd 2006)
§ Agreement concluded by consortium of Prokom Software SA and Strabag Sp. z o.o. with the Katowice Regional Branch of the Polish Post on the creation of the Forwarding and Distribution Centre for the Polish Post in Zabrze. Prokom is to provide the building with all electrical and data transmission installations as well as automation systems. The aggregate value of the investment, VAT exclusive, is PLN 16.2m. The completion of the project is scheduled for August 2007.
(press communiqué of Prokom Software SA dated on August 10th 2006)
§ Agreement concluded by ABG Ster-Projekt S.A. with the Ministry of Foreign Affairs for building a special computer network.. ABG Ster-Projekt SA, will deliver working stations and other IT devices for handling secret information. The remuneration totaled at PLN 2.7m.
(press communiqué of ABG Ster-Projekt SA – dated on September 18th 2006)
3. Key events and agreements related to the Group’s financial activi ties
Prokom Software SA
§ Annex to the credit agreement with Bank BPH SA. By virtue of this annex the maturity date of the credit line of PLN 200m expires on May 18th 2009. The original maturity of this loan was set on May 18th 2006.
(communiqué of Prokom Software SA - RB/6/2006 dated on April 25th 2006)
§ On June 20th 2006, the Annual Shareholders Meeting of Prokom Software SA passed a resolution on the allocation of the amount of PLN 20,836,245 from the net profit for fiscal 2005 for the dividend, i.e. PLN 1.50 per share. The day on which the right to dividend is set is July 20th 2006 and the day on which the dividend is paid is October 3rd 2006.
(communiqué of Prokom Software SA - RB/13/2006 dated on June 20th 2006)
§ Appointment of Ernst and Young Audit Sp. z o.o., in order to review and audit of semi-annual and annual financial statements of Prokom Software SA and semi-annual and annual consolidated financial statements of Prokom Software SA Capital Group in fiscal 2006. The parties are to execute the relevant agreement for the term necessary to perform the abovementioned actions.
(communiqué of Prokom Software SA - RB/17/2006 dated on June 28th 2006)
§ Agreement with BRE Bank SA, seated in Warsaw, for the Underwriting Interest Rate Agreement, based on which BRE Bank SA is obligated to acquire (underwrite) the Company’s ordinary bearer commercial bonds to the amount of max PLN 100m, for the period ended June 30th 2007.
(communiqué of Prokom Software SA - RB/18/2006 dated on June 30th 2006)
Softbank SA Capital Group
§ On June 9th 2006 the Ordinary Annual General Meeting of Softbank S.A., resolved to allocate 30% of the net profit for 2005 in amount PLN 16,111,816 to distribute for a dividend - paying out an amount of PLN 0.64 per share. The day on which the right to dividend is set is July 30th 2006 and the day on which the dividend is paid is July 17th 2006.
(communiqué of Softbank SA – dated on June 12th 2006)
§ Annex to the loan agreement with bank BPH S.A. The annex extends the repayment of the loan until June 30th 2007. The value of the loan is up to PLN 50m. The interest stands at WIBOR 1M plus bank margin.
(communiqué of Softbank SA – dated on June 30th 2006)
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ABG Ster-Projekt SA Capital Group
§ On June 9th 2006 the Ordinary Annual General Meeting of ABG Ster-Projekt SA., resolved to divide 30% of the net profit for 2005 in amount PLN 4,511,102.26 to distribute a dividend - paying out an amount of PLN 0.07 per share.
(communiqué of ABG Ster-Projekt SA – dated on June 29th 2006)
SPIN SA Capital Group
§ On June 22nd 2006 the Ordinary Annual General Meeting of SPIN S.A., resolved to divide 30% of net profit for 2005 in amount PLN 1,413,885.286 to distribute a dividend - paying out an amount of PLN 0.26 per share.
(communiqué of ABG Ster-Projekt SA – dated on June 29th 2006)
4. Key events and agreements related to the Capital Group’s financial activities after the balance sheet date
§ Annex to the co-operation agreement between SPIN S.A. and BRE Bank SA related to the use of the bank's products and services for the financing of the company's current activities, to the limit specified. According to that annex, BRE Bank SA granted the company a limit of up to PLN 20m, including up to PLN 8m in the form of a bank guarantee until 29 June 2010, as well as credit in a current account to the amount of PLN 20m until 29 July 2007.
(communiqué of SPIN SA – dated on July 4th 2006)
§ Agreement between ABG Ster-Projekt S.A. and Reform Company Sp. z o.o. regarding rental of 5857.4 m2 of office space in the building at Al. Jerozolimskie 123A in Warsaw. The agreement has been concluded for five years and its value for a five-year rental period is PLN 20.6m.
(communiqué of ABG Ster-Projekt SA – dated on July 11th 2006)
§ Annex to the loan agreement between Softbank SA and PKO BP SAseated in Warsaw an. The annex extends the repayment of the loan until July 31st 2007. The value of the loan is up to PLN 70m.
(communiqué of Softbank SA – dated on August 1st 2006)
5. Material Agreements Between Shareholders
The Management Board of Prokom Software SA has no knowledge of any material agreements between the Company shareholders.
6. Insurance and Cooperation Agreements
In the reported period, the Group concluded no material insurance or cooperation agreements, which would have a material bearing on the Company’s operations or financial results.
CHANGES IN ORGANISATIONAL AND/OR CAPITAL RELATIONSHIPS AND MAJOR INVESTMENTS
1. Changes in capital relationships in the reported period
Prokom Software SA
§ On January 10th 2006 Prokom Software SA purchased 2,743,578 shares of ABG Ster-Projekt SA. As the result Prokom Software SA holds 24,785,857 shares which constitute 38.46 % in the share capital and entitle to 38.22 % of votes at the GSM of ABG Ster-Projekt SA
(communiqué of ABG Ster-Projekt SA – dated on January 12th 2006)
§ In February 2006 Prokom Software SA signed with ITEC LLC (seated in New York) a purchase agreement for 800,000 shares in Amiga, Inc (“Amiga”), for the price of USD 2.5 each. The purchased shares constitute 2.3% of all issued shares in Amiga. Amiga, among other products, developed a versatile platform for an operational system that enables use of any software or IT applications on all types of mobile devices . Prokom Software SA will work with Amiga on marketing and distribution of this product among Polish software and mobile devices vendors.
§ On April 21st 2006 Prokom Software SA purchased from Net Technology SA (seated in Warsaw) 1,910 shares of the nominal value of PLN 500 each in Safe Computing Sp z o.o. (seated in Warsaw), constituting 39.00% of the share capital, for the total price of PLN 12.48m. As a result Prokom holds 4,408 shares, which constitute 90.00% in the share capital and entitle to execute 90.00% voting rights at the General Meeting of Safe Computing Sp z o.o.
(communiqué of Prokom Software SA - RB/5/2006 dated on April 21 st 2006)
§ On April 26th 2006 Prokom Software SA acquired 315,000 shares of Softbank SA. As the result Prokom Software SA holds 8,624,791 shares representing 34.26% in the share capital and votes at the GSM of Softbank SA.
(communiqué of Softbank SA – dated on May 5th 2006)
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ABG Ster-Projekt SA Capital Group
§ On January 31st 2006, the Management Board of ABG Ster-Projekt SA reported that it was notified by the Management Board of DRQ Sp. z o. o. of Kraków that the Plan for Transformation of DRQ Sp. z o. o. into a joint-stock company was executed and adopted on January 31st 2006.
The shares in the Company Under Transformation will be converted into shares of the Transformed Company in accordance with the following rule: 100 shares in the Transformed Company will be delivered for one share in the Company Under Transformation. Thus, a shareholder is entitled to receive 100 shares in the joint-stock company for one share in the limited liability company. ABG Ster-Projekt SA holds 100% of shares in DRQ Sp. z o. o. of Kraków.
(communiqué of ABG Ster-Projekt SA – dated on February 1st 2006)
§ Termination of 5,246 shares in EDB – Ster Polska Sp. z o.o. under liquidation. As a result of termination and decrease of the share capital, the ABG Ster-Projekt SA became the owner of 100% stake entitling to 100% votes at the general metting.
(communiqué of ABG Ster-Projekt SA – dated on April 12th 2006)
§ On June 9th 2006 the District Court of Warsaw registered the liquidation of EDB – Ster Polska Sp. z o.o. under liquidation as well as deleted the EDB – Ster Polska Sp. z o.o. under liquidation from the Court Register. ABG Ster-Projekt SA was the owner of 100% stake entitling to 100% votes at the general meting.
(communiqué of ABG Ster-Projekt SA – dated on June 20th 2006)
§ On June 30th 2006 ABG Ster-Projekt SA changed a conditional preliminary agreement with RONSON DEVELOPMENT 2000 Sp. z o.o. The promissory agreement will be concluded within 90 days after fulfillment of the following conditions:
- the property will be clear off any debts, restrictions, mortgages, third parties rights, tax obligations and other,
- RONSON DEVELOPMENT 2000 Sp. z o.o. or any designated entity will receive final decision of building conditions.
The parties agreed that the agreement will be concluded no earlier than September 15th 2006 and no later than November 15th 2006.
(communiqué of ABG Ster-Projekt SA – dated on June 30th 2006)
Softbank SA Capital Group
§ On April 6th 2006 the Register Court of Warsaw registered the share capital increase of Agencja Wydawnicza i Marketingowa Mediabank S.A. The share capital of AWiM Mediabank S.A. was increased by PLN 500 by issuing 5 shares J series with the nominal value of PLN 100 PLN each for the issue price of PLN 132,203.11 PLN. The issuance of shares amounted to PLN 661,015.55. At present, the share capital of AWiM Mediabank S.A. amounts to PLN 10,025,500 and is divided into 100,255 shares with the nominal value of PLN 100 each.
(communiqué of Softbank SA – dated on April 14 th 2006)
§ On April 28th 2006 Softbank S.A. sold 100,265 shares of AWiM Mediabank S.A., the owner of the radio station PiN 102 FM. These shares amount to 100% of the share capital and a entitlement to 100% of votes at the General Meeting of AWiM Mediabank S.A.
(communiqué of Softbank SA – dated on April 29 th 2006)
§ On 18 May 2006 the companies Asseco Poland SA and Softbank SA signed an agreement concerning merger of both the companies. The merger shall be executed pursuant to Art. 492 § 1 item 1 of the Commercial Companies Code (merger by acquisition), this is by transferring all the assets of Asseco in exchange for shares (the "Merger Shares") which shall be issued by Softbank and assigned to the shareholders of Asseco. After the Merger the company shall take the name of Asseco Poland SA.
Concurrently to the issuance of Merger Shares, Softbank shall issue shares that will be acquired by Prokom Software SA based in Warsaw and paid up by contribution of 100% equity interest in PVT a.s. based in Prague, as well as the Prokom's separated assets and contracts concerning maintenance and network infrastructure solutions (the "Non-Cash Contribution Shares").
Furthermore, Softbank will issue shares that will be acquired by the managerial staff of the Merged Company under the motivational plan the rules of which are to be determined in separate (the "Management Shares").
The Merger registration shall be effected on condition the Registry Court registers increasing the Company's share capital by way of issuance of the Non-Cash Contribution Shares and Management Shares.
The preliminary schedule assumes that this process will be completed and the shares of the merged company will start to be listed in the 1st quarter of 2007.
Prokom shall hold 25.45% and will sustain control over the merged company through right to nominate the majority of the Supervisory Board members.
As a result of this Merger there would be established the largest Polish company providing proprietary software and services for the financial and banking sector and being the main pillar of the international group of companies
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created by Asseco Poland. Mr Adam Góral will take the position of the President of the Management Board of the merged company, and during the merger process will be also head of the merger team.
(communiqué of Softbank SA – dated on May 18th 2006)
2. Changes in capital relationships after the balance sheet date
§ On July 24th 2006, Prokom Software SA, Mr. Jacek Papaj and Comp SA, concluded an agreement, whereby Prokom is to acquire no less than 40.01% of Comp shares and to institute Comp as a Competence Center of the Prokom Software Group for IT security solutions.
The Agreement has superseded the agreement of December 23rd 2004 concluded between the same parties, which was reported by Prokom in current report RB 60/2004 of December 24th 2004.
Under the Agreement of July 24th 2006, Prokom intends to increase its equity interest in Comp to the target level of approx. 40.1%, which – in accordance with Comp’s Articles of Association – will give Prokom the right to appoint three out of the five members of the Supervisory Board of Comp. Prokom’s equity interest in Comp may be increased in the following way:
1. Comp will issue up to 581.250 Series J shares, with the existing shareholders’ pre-emptive rights waived, to be acquired by Prokom in return for a contribution of 4,408 shares in Safe Computing Sp. z o.o. of Warsaw (90.00% of the share capital) and copyright to cryptographic devices, in particular the IP Nefryt encryptors, which represent the entire cryptographic assets of Prokom. As result of the issue Prokom will acquire shares accounting for 17.39% of Comp’s share capital after the share capital increase, and will come to hold up to 1,136,250 shares in total, representing up to 34.00% of the share capital and votes at the General Shareholders Meeting of Comp. The issue price of Series J shares under the Agreement is PLN 80.00 per share, with a reservation that the parties to the Agreement may agree upon different issue parameters, depending on the valuation of contributions by experts.
2. After registration of the resolutions regarding the issue described in item 1 above, Prokom agreed to purchase the first block of 166,743 shares (4.99% of the share capital of Comp) from Mr. Jacek Papaj, under a tender offer (within the meaning of Art. 73 of the Public Offering Act of July 29th 2005, Dz.U. 05.184.1539 – “Tender Offer”), and Mr. Jacek Papaj agreed to tender in response to the Tender Offer the entire block of shares specified above. In the event that the number of shares tendered under the Tender Offer is reduced, Prokom will be released from the obligation to purchase the other shares from the first block.
3. Mr. Jacek Papaj made an irrevocable offer to Prokom to acquire a second block of 36,963 shares in Comp, at the price per share paid in the Tender Offer. The offer may be accepted by Prokom with respect to all or part of the shares in this block within 21 days from the settlement of the Tender Offer, or in special situations at a later time. The sale offer or its part may be accepted in full or in part by a party designated by Prokom.
The parties to the Agreement have agreed that their intention is that third parties holding small equity interests in Comp should hold no less than approx. 35% of Comp shares in total.
In connection with the above, the final shareholder structure of Comp should be as follows:
Prokom Software SA approx. 40.1%
Jacek Papaj approx. 23.2%
Other shareholders approx. 36.7%
The Agreement will come into force after the fulfilment of the following conditions precedent: obtaining the transaction clearance from the President of the Office of Competition and Consumer Protection, and adoption by the General Shareholders Meeting of Comp of a resolution on a share capital increase by way of an issue of Series J shares, block of the shares for the planned transactions and collateral.
In addition, under the Agreement Prokom made an irrevocable offer to Mr Jacek Papaj to purchase 333.154 shares in Comp held by him (“Put Option”), subject to fulfilment of all of the following conditions precedent:
a) the composition of the Management Board is changed during the Put Option validity term or a Management Board member is suspended from duties by the Supervisory Board whose members are persons appointed by the General Shareholders Meeting of Comp or by Prokom in exercise of its right under Par. 29.3 of Comp’s Articles of Association during the validity term of the Put Option, and
b) an objection is raised by Mr Jacek Papaj and delivered to Prokom against such a change or suspension (in writing under pain of nullity) no later than within 30 days of such change or suspension.
The Put Option will become effective upon the acquisition by Prokom of 40.1% of Comp shares and will expire after the lapse of 3 years from the Agreement date, or earlier, on the date on which Mr Jacek Papaj’s shareholding in Comp falls below 668.308 shares.
If the Put Option is exercised with respect to a part of the offered shares, it will expire in relation to the other shares covered by the Put Option.
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Within sixteen months from the date of delivery of the Put Option exercise notice Prokom is obliged to acquire the shares covered by the Put Option, and at the same time Mr Jacek Papaj is obliged to sell to Prokom, in accordance with Prokom’s instruction, the shares covered by the Put Option for a price equal to the product of the number of shares with respect to which Mr Jacek Papaj has served the exercise notice and the average market price per share in the period of two months preceding the date of delivery of the exercise notice to Prokom.
If Prokom fails to acquire the shares covered by the Put Option within the agreed timeframe, Prokom will pay to Mr Jacek Papaj a contractual penalty equal to the product of the number of shares stated, in accordance with the Agreement, in the exercise notice that have not been acquired by Prokom within the timeframe defined in the Agreement, and the average market price per share in the period of two months preceding the date of delivery of the exercise notice to Prokom.
The above does not preclude the parties’ right to claim additional compensation in excess of the contractual penalties.
Moreover, the parties agreed that by the date of the General Shareholders Meeting convened in order to pass the resolution on the issue of Series J shares, they will agree upon an operational model for the Competence Centre and will enter into an appropriate cooperation agreement. In addition, by the date on which Prokom reaches a 40.1% equity interest in the share capital of Comp, the parties will procure that Comp takes over the responsibilities of the Competence Centre related to the security of the IT systems of the Prokom Software Group.
(communiqué of Prokom Software SA - RB/19/2006 dated on July 25th 2006)
§ On August 24th 2006 the Office of Competition and Consumer Protection (OCCP), having conducted an antimonopoly proceeding, gave the Company its consent to concentration by way of merging Softbank SA with Asseco Poland SA.
(communiqué of Softbank SA – dated on August 24th 2006)
§ On August 31st 2006 Softbank SA signed the Plan of Merger with the company Asseco Poland SA based in Rzeszów ("Asseco").
(communiqué of Softbank SA – dated on August 31st 2006)
§ On August 23rd 2006, the Office of Competition and Consumer Protection gave its consent (decision of the President of OCCP no. DOK-96/06) to conduct concentration by way of taking the control over AWiM Mediabank SA by Prokom Investment SA and on 12 September 2006 the National Broadcasting Council passed a resolution (no. 507/2006) changing the list of shareholders included in the concession of Radio PiN 102FM by entering Prokom Investment SA.
There have been issued all the necessary permissions in order to transfer the ownership of 100% of shares in the company AWiM Mediabank SA (the owner of the radio station PiN 102 FM) to the buyer – Prokom Investment SA based in Gdynia.
(communiqué of Softbank SA – dated on September 19th 2006)
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Prokom Software S.A. Capital Group – as at the publication date
C A P I T A L G R O U P
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3. Key investments on the domestic and foreign markets
Treasury bonds As at the balance-sheet date, the Group held treasury notes of the value of PLN 13.4m.
Commercial bonds and mutual funds As at the balance-sheet date, the Group held commercial notes and participation units of the value of PLN 28.1m.
Shares of listed companies As at the balance-sheet date, the value of the Group’s short-term investments in shares of listed companies was PLN 1.2m. This amount was attributable to Prokom Software SA’s investments (PLN 0.76m) in the shares of Kompap SA as well as the investment of Softbank SA in the shares of Invar&Biuro System SA (PLN 0.46m).
Debt notes As at the balance-sheet date the Prokom Software SA’s exposure to the debt notes issued by Prokom Investments SA was PLN 183.8m.
Investment properties The value of real estate investments owned by the Group amounted to PLN 1.0m.
4. Investments financing
The Group’s capital expenditure in the reporting period was financed partly with internally generated funds and partly with external funding sources (commercial bonds as well as bank loans).
TRANSACTIONS WITH RELATED PARTIES WITH THE VALUE EXCEEDING EUR 500,000
Except the capital transactions described above there were no other non-recurring or one-off transactions with the value exceeding a PLN equivalent of EUR 500,000, which would be concluded at arm’s length within the Group and the terms and nature of which would result from the Company’s or subsidiary undertakings’ regular operations.
BANK LOANS AND LOAN AGREEMENTS BY MATURITY, PROVIDED SURETIES AND GUARANTEES
Trade name [PLN thousand] currency [PLN thousand] currency
Repay date
Raiffeisen Bank Polska SA 85,500 PLN 6,420 PLN 31.10.2007 Bank PEKAO SA 125,000 PLN 10,000 PLN 22.09.2007 Volkswagen Bank Polska SA 80 PLN 32 13.07.2008 Prokom Investments SA 34 PLN 34 PLN on demand Ryszard Krauze 88 PLN 88 PLN on demand HVB Bank Czech Republic a.s. 40,498 285,000,000 CZK 18,636 131,134,000 CZK 31.12.2010
The detailed description of above mentioned credits and loans were described in the note 21 of the financial report.
Trade name [PLN thousand] currency [PLN thousand] currency
Repay date
BRE Bank SA 85,000 PLN 460 PLN 30.09.2006 Bank BPH SA 200,000 PLN 0 PLN 18.05.2009 Bank Pekao SA 150,000 PLN 150 PLN 22.09.2007 Bank DnB NORD Polska SA 15,000 PLN 15,000 PLN 31.05.2007 ING Bank Slaski SA 10,000 PLN 0 PLN - PKO BP SA 70,000 PLN 0 PLN 31.07.2006 Bank BPH SA 50,000 PLN 0 PLN 29.06.2007 Bank DnB NORD Polska SA 20,000 PLN 0 PLN 31.05.2007 Raiffeisen Bank Polska SA 10,000 PLN 0 PLN 31.10.2006 Bank Millennium SA 5,000 PLN 3,850 PLN 14.04.2007 Bank Pekao SA 500 PLN 225 PLN 31.07.2006 BRE Bank SA 20,000 PLN 3,746 PLN 30.06.2007 BRE Bank SA 500 PLN 0 PLN 30.06.2007 Nordea Bank Polska SA 1,300 PLN 904 PLN 30.06.2006 PKO BP SA 300 PLN 257 PLN 31.07.2006 BRE Bank SA 3,000 PLN 0 PLN 15.05.2007 HVB Bank Czech Republic a.s. 40,498 285,000,000 CZK 6,966 49.020.000 CZK 31.12.2010
The detailed description of above mentioned credits and loans were described in the note 25 of the financial report.
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Short term debt securities Debt securities (title) Nominal value[ PLN thousand] Redemption date
The detailed description of above mentioned debt securities were described in the note 25 of the financial report.
Off-balance sheet items
30 June 2006 31 December 2005 Contingent liabilities in favor of subordinate companies, including: 11,725 - Contingent liabilities in favor of other companies 6,400 5,133
Total contingent liabilities 115,471 74,869
LOANS AND GUARANTEES GRANTED, INCLUDING THOSE GRANTED TO THE GROUP ENTITIES
1. Long-term loans: [in ,000]
- Loans granted to the Parent Company’s employees PLN 2,482 - Loans granted to unrelated parties PLN 13,652 Total long-term loans PLN 16,134
2. Short-term loans:
- Loans granted to the Parent Company’s employees PLN 852 - Loans granted to related parties PLN 10,196 Total short-term loans advanced PLN 11,048
The above amounts include interest due as at 30 June 2006 and provisions for doubtful amounts.
USE OF PROCEEDS FROM ISSUES OF SECURITIES
In 2003, the Company launched the Short-Term Ordinary Bearer Bond Issue Program with the total par value of up to PLN 200m, with BRE Bank SA acting as the offertory (communiqué of Prokom Software SA – RB/24/2003 dated on June 20th 2003). On August 2004 the program value was increased to PLN 300m (communiqué of Prokom Software SA – RB/41/2004 dated on August 14th 2004). As at 30 June 2006, the debt outstanding under the Program was PLN 219.3m. These resources were used to finance the current activities of the Parent Company.
EXPLANATION OF DIFFERENCES BETWEEN THE ACTUAL FINANCIAL RESULTS AND THE FORECASTS PUBLISHED EARLIER
Prokom Software SA has not published any forecasts of the 2006 result.
ASSESSMENT OF THE FINANCIAL MANAGEMENT
In the first half of 2006, as in the previous periods, Prokom Software Capital Group financed its business activities with cash generated from operations and external sources of financing.
The Group used free cash to decrease its external debt or invested in commercial papers and bank deposits.
The Group used its own resources, external debt and cash collected from its accounts receivable to pay its obligations in the normal course of business.
On June 20th 2006 the Annual Shareholders' Meeting decided to transfer from the net profit generated in the financial year 2005 amounting to PLN 68,316,319.14, the amount of PLN 20,836,245 for the dividend, i.e. PLN 1.50 per share. The day on which the right to dividend was set (“D” day) is July 20th 2006 and the day on which the dividend is paid (“W”day) is October 3rd 2006. Moreover the Annual Shareholders Meeting decided to transfer the amount of PLN 367,682.93 for the net loss from the previous years, presented in the financial statements for the year 2005, due to introduction of IAS. The Annual Shareholders Meeting decided to transfer the remaining part of the net profit generated in 2005 amounting to PLN 47,112,391.21 for the reserve capital.
C A P I T A L G R O U P
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As at June 30th 2006 the Group’s financial liabilities amounted to PLN 538.9m, including: bank loans and commercial bonds PLN 286.1m, obligations resulting from the finance lease PLN 133.1m and others PLN 119.6m (mainly liabilities resulting from built-in derivatives in Softbank’s long-term contract denominated in foreign currency).
Ability to Pay Liabilities
As at the balance sheet date, total liabilities represented 46.0% of the balance-sheet total and 85.2% of the shareholders’ equity. It is important, that the Group finances almost a half of its activity from its own resources and the current assets fully cover the value of the Group’s short-term liabilities. Therefore, the Management Board sees no threat to the Group being able to pay its liabilities in a timely manner.
ASSESSMENT OF FACTORS AND NON-RECURRING EVENTS AFFECTING THE GROUP’S PERFORMANCE
Main factors affecting the net profit result in the first half of 2006 were:
- Execution of contracts signed in the prior periods, including in particular contracts signed with the following institutions: Social Security Office (development of KSI ZUS, exploitation and maintenance of KSI system, supplementary agreement No5), PZU Group (development of ZSI, implementation of Graphtalk A.I.A. servicing life insurances products, maintenance of INSURER), TP SA (maintenance of ZSIWZR, implementation of CRM), Ministry of Internal Affairs and Administration (development and implementation of CEPiK), PKO BP SA (development of ZSI, deliveries of hardware and software, maintenance and development of ZORBA, CESAR and other bank applications – KONTAKT), Agency for Agriculture Restructuring and Modernization (ARiMR).
- Signing new contracts with, PZU Group, Grupa LOTOS, KE ENERGA, ppup Poczta Polska, Ministry of Education, Guarantee Insurance Fund, National Health Fund and others.
- Effects of restructuring carried out in the Parent Company. The process, which focused on marketing and general & administration costs resulted in significant reduction of employment, decrease of scale and increase in effectiveness of sponsoring activities run by the Company and optimization of the Company’s geographical structure in terms of number of branches and rented office space required to cover the existing and targeted client base.
- Effects of Capital Group reorganization that aimed to create new competence centers, optimize the cooperation and exercise the synergies between the Companies operating within the Prokom Software Capital Group.
- Increase of stake in Softbank SA from 25% to 34%. - Fully consolidation of ABG Ster-Projekt SA since 2nd half of 2005; increase of stake in ABG Ster-Projekt
SA from 34% to 38%. - Increase of stake in Safe Computing Sp. z o.o. from 51% to 90%.
FACTORS AFFECTING THE COMPANY’S DEVELOPMENT AND DEVELOPMENT PROSPECTS
Prokom Software SA Capital Group development depends chiefly on the consistent implementation of its long-term business strategy, which consists in the offering of products, goods and comprehensive IT services primarily to the large and medium sized companies and public institutions. The Parent Company also sees much potential for its development resulting from further consolidation of the Capital Group.
Plans and forecasts concerning future results
The development strategy of Prokom Software SA Capital Group is aimed at:
- Attracting new customers among large and medium-size businesses and public institutions;
- Strengthening cooperation with the existing customers;
- Provision of comprehensive services in the area of construction, installation and maintenance of network and system infrastructure to corporate customers;
- the banking sector, with Softbank SA Group as a important element of this strategy;
- Further growth in telecommunication and utilities sectors, with SPIN SA as a important element of this strategy;
- Development of IT security services area with taking strategic stake in Comp SA and control over Safe Computing Sp. z o.o.;
- Strengthening a leading position in the public sector, with taking strategic stake in ABG Ster-Projekt SA;
- Development of the consultancy and implementation groups within the Company’s structure, cooperation with leading software suppliers, such as IBM, Oracle, Microsoft, Peregrine, SAP and others;
- Further consolidation of the IT industry, example of which is merger process of Softbank SA with Asseco Poland SA.
- Foreign markets expansion, with taking strategic stake in PVT a.s. IT group (Czech Republic), UAB Informaticiu Projektu Sistemos (Lithuania), Asseco Slovakia a.s. (Slovakia) and participation in multinational projects HAKIA and Amiga.
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Implementation of the planned development strategy will depend on two principal groups of factors:
1. External factors:
a) Economic growth;
b) Government’s economic policy, including in particular:
o tax policy,
o customs policy, especially with respect to customs duties on goods imported by the Group,
o amount of funds available for computerization of public institutions,
o privatization policy;
c) Currency exchange rates, affecting in particular the prices of goods imported by the Group;
d) Progress of Poland’s integration with the European Union;
e) Level of competition (presence of large western players active in the sector);
f) Consolidation of enterprises in practically all sectors of the economy.
2. Internal factors:
a) Level of knowledge and investments in the development of new technologies, mainly in the area of computer sciences and telecommunications;
b) Further enhancement of the internal organizational structure to guarantee the smooth business process within the Prokom Software SA Capital Group;
c) Level of expertise of the managing and other staff, appropriate employment structure to guarantee that the requirements imposed by the dynamically developing market are met;
d) Group’s financial condition.
It must be underlined that Prokom Software SA Capital Group has a long-standing experience in the development of complex, dedicated IT systems, vast intellectual and technical potential and considerable financial resources. These are factors, which are unlikely to go unnoticed by potential future business partners, which will further improve its performance.
CHANGES IN SIGNIFICANT COMPANY AND GROUP MANAGEMENT POLICIES
In the first half of 2006 the changes in significant Company and Group management polices did not occurred.
CHANGES IN COMPOSITION OF MANAGEMENT AND SUPERVISORY BOARDS
During the six month period ended 30 June 2006 the composition of the Management Board of the Parent Company was as follows:
Name Function Period of service
Ryszard Krauze President 01.01.2006 – 30.06.2006 Jaroslaw Chudziak Vice-President 01.01.2006 – 30.06.2006 Tadeusz Dyrga Vice-President 01.01.2006 – 30.06.2006 Dariusz Górka Vice-President 01.01.2006 – 30.06.2006 Piotr Mondalski Vice-President 01.01.2006 – 30.06.2006 Krzysztof Kardas Member 01.01.2006 – 30.06.2006 Grzegorz Maciag Member 01.01.2006 – 30.06.2006 Maciej Wantke Member 01.01.2006 – 30.06.2006
During the six month period ended 30 June 2006 the composition of the Supervisory Board of the Parent Company was as follows:
Name Function Period of service
Irena Krauze President 01.01.2006 – 30.06.2006 Marek Modecki Member 01.01.2006 – 30.06.2006 Leszek Starosta Member 01.01.2006 – 30.06.2006 Bo Denysyk Member 01.01.2006 – 30.06.2006 Maciej Grelowski Member 01.01.2006 – 30.06.2006
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REMUNERATION OF MANAGEMENT AND SUPERVISORY PERSONNEL
The remuneration of Parent Company’s management personnel in the first half of 2006:
1. The remuneration of Management Board Members:
- PLN 6,489 thousands in total remuneration and bonus paid out or payable for serving on the Management Board of Prokom Software SA (the amount includes bonuses for 2005);
- PLN 107 thousands in remuneration and bonuses received by members of the Management Board of Prokom Software SA for serving in the governing bodies of subsidiary and associated undertakings.
2. The remuneration of Supervisory Board Members:
- PLN 486 thousands in total remuneration and bonuses paid out or payable for serving on the Supervisory Board of Prokom Software SA.
- PLN 0 thousands in remuneration and bonuses received by members of the Supervisory Board of Prokom Software SA for serving in the governing bodies of subsidiary and associated undertakings.
ADVANCES , LOANS, BORROWINGS, GUARANTEES, SURETIES, AND OTHER AGREEMENTS UNDER WHICH PERFORMANCES ARE TO BE RENDERED BY THE COMPANY, ITS SUBSIDIARY OR ASSOCIATESTO MANAGEMENT AND SUPERVISORY PERSONNEL OR THEIR RELATIVES
As at 30 June 2006 a member of Company’s Management Board held a liability to the Company under a PLN 106 thousands loan. The loan was repaid after the date of 30th June 2006.
To the best knowledge of the Company’s Management Board as at 30 June 2006, except for the above mentioned liability there were no other advances, loans, borrowings, guarantees, sureties or other agreements under which performances are to be rendered by the Company to the Prokom Software SA management and supervisory personnel, to their relatives or other persons with whom they have personal ties.
SHARES IN PROKOM SOFTWARE SA AND MEMBER UNDERTAKINGS HELD BY MANAGEMENT AND SUPERVISORY PERSONNEL
As at 30 June 2006 Prokom Software SA
Shares Options
Management personnel 1,715,655 -
Ryszard Krauze 1,564,698 -
Piotr Mondalski 114,260 -
Tadeusz Dyrga 26,666 -
Krzysztof Kardas 10,030 -
Grzegorz Maciag 1 -
Supervisory personnel - -
SHAREHOLDERS WITH AT LEAST 5% OF THE TOTAL VOTE AT THE GM
Shareholders’ structure as at June 30th 2006
Shareholder Number of shares % in share capital Number of votes at GSM % of votes at GSM
Ryszard Krauze*) 1,564,698 11.26% 1,749,498 11.96% Prokom Investments SA 1,420,776 10.23% 1,716,456 11.73% Pioneer Pekao Investments Management SA 733,566 5.28% 733,566 5.01%
*) as at June 30th 2006 Mr. Ryszard Krauze owned directly and indirectly 66.13% of the share capital and votes at the GSM of Prokom Investments SA
After the balance sheet date: § On August 14th 2006, Prokom was notified by Pioneer Pekao Investment Management SA (“PPIM”) of a decrease in
the total PPIM’s holding of shares in the Company. The shares are part of portfolios of broker-traded financial instruments managed by PPIM on a discretionary basis for PPIM’s Customers. The portfolios managed by PPIM for its Customers include a total of 728,263 Company shares, representing 5.24% of the share capital and conferring the right to 728,263 votes, that is 4.98% of the total vote at the General Shareholders Meeting of Prokom Software SA. Prior to this transaction, the portfolios managed by PPIM included a total of 733,225 Company shares, representing 5.28% of the share capital and conferring the right to 733,225 votes, that is 5.01% of total vote at the General Shareholders Meeting of Prokom Software SA. (communiqué of Prokom Software SA - RB/20/2006 dated on August 14th 2006)
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§ On September 12th 2006, Prokom was notified by Pioneer Pekao Investment Management SA (“PPIM”) of an increase in the total PPIM’s holding of shares in the Company. The shares are part of portfolios of broker-traded financial instruments managed by PPIM on a discretionary basis for PPIM’s Customers. Prior to this transaction, the portfolios managed by PPIM included a total of 715,069 Company shares, representing 5.15% of the share capital and conferring the right to 715,069 votes, that is 4.89% of total vote at the General Shareholders Meeting of Prokom Software SA. After the transaction the portfolios managed by PPIM for its Customers include a total of 732,361 Company shares, representing 5.27% of the share capital and conferring the right to 732,361 votes, that is 5.01% of the total vote at the General Shareholders Meeting of Prokom Software SA. (communiqué of Prokom Software SA - RB/21/2006 dated on September 12th 2006)
§ On September 21st 2006, Prokom was notified by Pioneer Pekao Investment Management SA (“PPIM”) of a decrease in the total PPIM ’s holding of shares in the Company. The shares are part of portfolios of broker-traded financial instruments managed by PPIM on a discretionary basis for PPIM’s Customers. The portfolios managed by PPIM for its Customers include a total of 731,467 Company shares, representing 5.27% of the share capital and conferring the right to 731,467 votes, that is 4.99% of the total vote at the General Shareholders Meeting of Prokom Software SA. Prior to this transaction, the portfolios managed by PPIM included a total of 732,371 Company shares, representing 5.27% of the share capital and conferring the right to 732,371 votes, that is 5.01% of total vote at the General Shareholders Meeting of Prokom Software SA. (communiqué of Prokom Software SA - RB/23/2006 dated on September 21st 2006)
Shareholders’ structure as on the publication date
Shareholder Number of shares % in share capital Number of votes at GSM % of votes at GSM
Ryszard Krauze*) 1,564,698 11.26% 1,749,498 11.96% Prokom Investments SA 1,420,776 10.23% 1,716,456 11.73%
*) as on the publication date Mr. Ryszard Krauze owned directly and indirectly 66.13% of the share capital and votes at the GSM of Prokom Investments SA
AGREEMENTS UNDER WHICH THE EXISTING SHAREHOLDERS AND BONDHOLDERS STRUCTURE MAY BE CHANGED IN THE FUTURE
§ Depository Agreements Agreement of December 5th 1997, concluded between the Company and Bank of New York (registered offices at 101 Barclay Street, New York, NY 10286, USA), under which Bank of New York is to issue Global Depository Receipts (GDRs) on the basis of the Company shares outside of the territory of the Republic of Poland.
§ On June 1st 2005 Prokom Software S.A. received an annex to the Depository Agreement, dated on December 5th 1997 concluded with the Bank of New York (registered offices at 101 Barclay Street. New York. NY 10286. USA) under which Bank of New York is to issue Global Depository Receipts (GDRs) on the basis of the Prokom shares outside of the territory of the Republic of Poland. By virtue of this annex, the Management Board of Prokom may instruct the BoNY how to execute the voting rights, which are deposited in the BoNY, of which GDR’s owners did not instructed the BoNY how to vote at Prokom’s General Meetings.
(communiqué of Prokom Software SA - RB/16/2005 dated on June 2nd 2005)
The Dominant Company has no knowledge of any other agreements in addition to the ones mentioned above, under which the proportionate shareholdings of existing shareholders and bondholders may be subject to change in the future,
MOST IMPORTANT R&D ACHIEVEMENTS
1. The most important Research &Development achievements of Prokom Software SA in the first half of 2006
Prokom Software SA
§ Commencement of work on hardware support of a vector database
§ Integration of office automation systems (NOTES, MS EXCHANGE) with mobile terminals and start of works on the other systems (mobile office).
§ Follow-up of data transmission subsystem for corporate networks using EDGE and G3 technology .
§ Follow-up of research on GRID data processing.
§ Follow-up of works on authentication and authorization model for large-scale information system and few thousands of users including cryptography efficiency testing.
§ Tests of the prototype of a correlation computer with performance by one order higher than that of computers available on the market.
§ Methodology and tool tests for internal monitoring of IT system security in an environment of several dozen thousand users.
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§ Commencement of work on the integration of large networks of telemetric sensors (several hundred thousand sensors) with the SAP system.
§ Continued analysis of usable properties of the components of the Netveawer platform (ccBPM, MDM).
§ Creation of an environment for the development of composite applications and their embedding in the SAP Enterprise Portal, based on SAP NetWeaver Visual Composer (Releases 6.0 and 7.0).
§ development and implementation of the VLDB monitoring and tuning methodology operating in an environment of several thousand users.
§ Development of a technological production path with use of the JAVA OPENSOURCE software.
§ Development of a technology for the integration of reporting engines with PKI mechanisms, exemplified on ORACLE Reports.
§ Analytic study for the purposes of a referential application architecture for public offices using electronic communications and PKI.
§ Cooperation related to an international project involving the construction of a next -generation search engine “Hakia”. As contribution to the project, the Company is working on the development of software enhancing Internet security of the search engine and is involved in the creation of an R&D centre for Central and Eastern Europe.
2. The most important Research &Development achievements of subsidiaries in the first half of 2006
SPIN SA
§ BiK (Budgeting and controlling system) – a system supporting the creation of financial plans and budgets, as well as the supervision of their execution. The system is dedicated to large and medium-sized enterprises.
§ SAP for Utilities – competence building and development of a pre-configured system adapted to the needs of the Polish market of electricity, water, gas and other service providers, such a system to be based on SAP IS-U.
§ WDF LP – a management system for documents and workflow, based on the Lotus Notes technology – work on the Web-enabled version of the product is underway.
§ WDF – a handling system for documents and processes, based on the Microsoft.Net technology – work on the Web-enabled version of the product is underway.
§ Billing systems for the power sector – development work with a view to integrating the two existing billing systems and developing a new product based on the NET platform.
§ Integration Platform, Integration Broker – the development of a platform supporting the integration and intercommunication of multiple external systems, operating in different technologies; enhanced with a portal and document circulation technology.
§ Development of competence in the area of OptimalJ – getting acquainted with this design and programming tool.
§ SOLMED – development work on the enhancement and maintenance of the functionality of the SOLMED system, adaptation of the system to new market requirements.
§ Knowledge management – a knowledge management system (supporting easy access to business and corporate information – an organizational structure, headhunting etc., as well as management of personnel’s scope of duties) based on Microsoft tools.
§ SCM i2 – SPIN SA’s new product. Work on competence enhancement with a view to propagating and implementing the i2 solution.
§ Integrated hospital support system – study of the enhancement of SPIN’s offering based on examining and placing various products for the hospital sector, as well as integration of these products with the SOLMED system.
§ HR Rozwój – development work on enhancement and maintenance of the functionality of the ARS-400/HR system; adaptation of the system to the changing legal environment and customers’ new expectations.
§ Development of the S-Rules tool – development of a mechanism facilitating introduction of changes in algorithms, validation methods for data entered and messages displayed in the user interface without each-time modification of the source code of the system, thus enabling the user to control the application functioning.
ABG Ster-Projekt SA
§ Streamlining of management and software production processes to enhance performance and ensure task repeatability:
§ PMI/PMBOK and SEI/CMMI, together with the scrum techniques, adopted as base models
§ introduction of measurements into the production process
§ development of patterns and control lists
§ adaptation of agile technologies to the management process
§ identification, design, construction and implementation of the knowledge base
§ design technologies
§ production management techniques
§ production process
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§ best practices in production process and project management.
§ Development of the MDA technology for the purposes of software production.
Combidata Poland Sp. z o.o.
§ Work including the launch of a multilevel adult education system based on IT technology and dispersed Combidata infrastructure – currently: 25 centers.
§ Implementation of a programme for the creation of the Company’s own library with manuals supporting educational processes carried out for customers.
§ Design, launch and operation of the Call Center structure.
§ Development of competencies of the dedicated consulting team in the area of SAP solutions supporting the operations of power companies and large enterprises.
§ Development of competencies in the field of educational process design for postgraduate studies, with the use of state-of-the-art technologies.
§ Enhancement of business processes, including EU project management, with use of universal systems and in-house solutions.
§ Development of IT tools supporting the recording, circulation and settlement of financial documents in the light of requirements applicable to projects co-financed with funds of the European Social Fund.
§ R&D work intended to enhance Combidata’s e-learning offering.
§ Development of educational portals (with the functionality of LMS-class systems) dedicated to corporations and educational community; Combidata has created and is developing and hosting:
§ educational portal for 15,000 users
§ educational platform of Europejski Fundusz Leasingowy
§ educational platform of Polska Agencja Rozwoju Przedsiebiorczosci (Polish Agency for Entrepreneurship Development) – a portal designed for 300,000 users.
§ Evaluation of Microsoft Dynamics CRM 3.0 in the light of business requirements of Polish enterprises.
