The text below is an unofficial translation of the report disclosed by PKO BP pursuant to the Polish Act on Public Trading in Securities of 21 August, 1997 (as amended). As Polish is the only official language in the Republic of Poland, PKO BP only assumes responsibility for the Polish language report. PKO BP assumes no responsibility for the report in its unofficial English translation. Legal basis: Paragraph 5.1.3 of the Ordinance of the Council of Ministers on current and periodical information provided by issuers of securities dated 16 October 2001 The report: The Management Board of Powszechna Kasa Oszczędności Bank Polski Spółka Akcyjna hereby informs that on 17th December 2004 the Bank signed Annexe 1 to the Agreement for Delivery and Implementation of the Integrated IT System (IITS) dated 18th August, 2003 between PKO BP SA and Accenture Sp z o.o., Alnova Technologies Corporation S.L. and Softbank S.A. acting as Consortium. The object of the above Agreement is to develop, deliver and implement at PKO BP SA IITS software, and to provide additional services related to the implementation of this project. The Annexe significantly broadens the functionality of the delivered software. The Bank’s decision to enter into an Annexe to the Agreement was based on the analyses carried out during the year-long IITS implementation process. The Management Board of Powszechna Kasa Oszczędności Bank Polski Spółka Akcyjna wishes to emphasise that the delivery and implementation of the IITS as contemplated in the Agreement is the biggest and the most complicated IT project carried out in the history of the Polish banking in terms of the scale (over 15 million transactions a day) and the degree of technological sophistication of the implemented solutions. Systems of this type are built and implemented gradually, and as the level of knowledge about the system increases, so can the requirements and eventually the scope of the project change. The purpose of executing the Annexe is to broaden the existing scope of work connected with the implementation of the Integrated IT System in order to considerably enhance its functionality. It is necessary to expand the system functionality due to growing business requirements of the Bank and the Bank’s plans to upgrade its customer service and products offer as well as to offer new products in the future. The Annexe makes it possible to extend the system functionality to IKE [Individual Retirement Account]-related products, insurance products, and broaden the functionality of alternative distribution channels. The implementation of new legal regulations, particularly in the sphere of accounting, which includes IAS, is an equally important element contributing to increased requirements in respect of the scope of IITS functionality. Completion of the IITS implementation project will allow the Bank to reach an IT level identical with the standard characteristic of leading European banks with a profile comparable with PKO BP S.A. and will generate benefits owing to the standardisation of operational processes, simplification of the product and infrastructure management, and a higher level of operational security. The Annexe increased the value of the payments for implementation of IITS by US$ 71,190,000. Payments under the Annexe in respect of the IITS implementation will be made gradually over the years 2004-2007, and the completion of the IITS implementation is planned for April 2007. The annual remuneration for the maintenance of the system increases under the Annexe by an amount between USD 2.9 million (after the pilot implementation) and USD 7.8 million (after the final acceptance of the IITS software). One of the material provisions of the Annexe is the Consortium’s undertaking to increase the amount of the US$ 8,100,000 bank guarantee by US$ 5,700,000, or to provide the Bank with an additional bank guarantee for the above amount within 6 months of the date of the Annexe. The guarantee is to secure the correct and timely performance by the Consortium of its obligations under the Agreement. Failure by the Consortium to fulfil its obligation to increase the amount of or provide the Bank with an additional bank guarantee may result in the Bank suspending any payments to the Consortium under the Agreement until said obligation has been fulfilled. The Consortium must maintain said guarantee(s) for at least 18 months after the acceptance of the final IITS software. Contractual penalties under the Agreement are expressed in percentage points (from 12 to 15% of the value of the Agreement, 20% of the independent contractor’s fees payable for the tasks which were to be carried out after the date of rescission of the Agreement in the event of rescission, or 50% of the maintenance service fees) or in amounts (from US$ 1,000 up to 15,000,000). In most cases, the payment of contractual penalties does not prejudice the possibility for the Parties to seek indemnity on general terms. The entire indemnity of the Parties for non-performance or improper performance of the Agreement is limited to the losses actually incurred and in no case will exceed US$ 60,000,000 (including contractual penalties), and in the event of maintenance services, from 20 to 100% of the annual fees for the provision of such maintenance services. Should the work performed by the Consortium fail to meet the terms and conditions of its acceptance, the Bank may rescind the Agreement in the part which includes such faulty work. The Bank’s declaration of rescission will not affect the licence and the service, including the warranty service, in respect of the work accepted. The Bank may also rescind the entire Agreement in the event an error of a specified category is found and is not remedied within the deadlines specified in the Agreement. Notwithstanding the above, the Bank may also rescind the Agreement to the extent it has not yet been performed, without stating any reasons, by the date of completion of the roll-out, against the payment of compensation for loss of contract amounting to 20% of the contractor’s remuneration for the tasks which were to be carried out after the date of rescission. The Consortium’s right to rescind the Agreement, only in respect of the scope of work not yet completed, has been limited only to a case when the Bank is in default with the payment of remuneration equal to at least 5% of the implementation fees and for a period of at least 60 days from the date of the Consortium having invited the Bank to pay that amount. The above provisions of the Agreement concerning the contractual penalties and conditions for rescinding the Agreement were not addressed in the Annexe. The value of the Agreement meets the criteria for deeming it a significant Agreement within the meaning of the Ordinance of the Council of Ministers on current and periodical information provided by issuers of securities dated 16 October 2001. Within the last 12 months the Bank concluded, as part of an ongoing co-operation with a member of the Consortium, Softbank S.A., agreements in respect of the IT systems currently operated by the Bank, but the total value of all such agreements does not meet the criteria of a significant agreement.
