ComArch S.A.'s Management Board conveys 2006 activities' report of ComArch S.A.'s Board of Supervisors including assessment of the Company's situation in 2006 according to the rule number 18 of the Corporate Governance Principles:

Report of ComArch S.A. Board of Supervisors' activities in 2006

The Board of Supervisors held 4 meetings in 2006 (on 28 March, 19 June, 25 September, 20 December). Furthermore the Board of Supervisors passed the resolutions in correspondence mode on 8 November and 1 December. Four persons of the five members of the Board of Supervisors were present at the Board of Supervisors' Meetings averagely. Main subjects of the Board of Supervisors' meetings were:
a) monitoring and analysis of financial situation of the company and the Capital Group,
b) assessment of the strategy realisation by the company's Management Board, 
c) analysis and rating of risk related to the company's activity,
d) official and legal matters.

According to the Board of Supervisors, ComArch Capital Group gained very good and the best in its history financial results. Revenues from sales increased by 11 % in comparison to the last year and at the same time net profit increased by 88 % (to the amount of 28.1 million PLN). The operating profit increased by 66.5 % to the amount of 45.6 million PLN. EBIT margin increased from the level of 6.2 % to the level of 9.3 % and net margin from the level of 6.3 % to the level of 10.7 %. It is noteworthy that  improvement in the Group's profitability came about with the simultaneous increase in employment in the Group to the level of 1,836 persons, i.e. 607 persons more than at the beginning of the year (excluding those employed in MKS Cracovia SSA). It is also noteworthy the return on equity in the amount of 21.8 % compared to 19.1 % in the previous year. The Board of Supervisors is very satisfied that very favourable financial results achieved by the Group have led to the increase in the price of ComArch S.A. shares of almost 200 %. Profit per share increased by 76 % from the level of 4.06 PLN in 2005 to 7.13 in 2006.

The Board of Supervisors assessed positive the strategy which is realised by the company based on proprietary products and international expansion. The ComArch brand, after several years of international expansion, is steadily gaining worldwide recognition and is associated with technologically advanced IT systems and a modern customer focused approach. In the Board of supervisors' opinion the prognosis for the future is good with contracts signed in 2006 with such companies as Auchan and T-Mobile. At the same time, the maintaining of sectoral and geographical diversification of revenues protects ComArch Group before business fluctuation in particular sections of the economics and regions of the world. Maintenance of intensive investment in new technologies, innovative products and human resources realised by financing of R&D works and constant development of production background in Krakow, in foreign branches and in foreign competence centres are significant for long-term development of ComArch Group. 

The Board of Supervisors was making also constant analysis of risk areas related to the company's activities and analysis of the manner of the risk management by the Management Board. As the most important risks, similarly how in previous periods, they acknowledged:
a) the risk related to the R&D works (creation of new software products);
b) the risk related to the fulfilling terms of the contracts and necessity of penalties as well as the risk related to payments from contract performance guarantee;
c) the risk of the proper valuation of the time consuming of long-term contracts;
d) the risk of the foreign legal and political environment  related to the realisation of export-contracts;
e) the risk of the financial standing of foreign contractors (difficulties in checking and monitoring);
f) the tax risk related to the activity in the Special Economic Zone and unsteadiness of the tax legal environment in Poland;
g) the risk of the proper kilter of the internal audit in the company and procedures of management in the Group in the face of a dynamic growth of employment and operation scale;
h) growing competition that bears on margins decrease; IT companies compete in new orders/contracts as well as the best employees;
i) wage pressure in IT sector.

In the Board of Supervisors' opinion, the Management Board properly identifies risks with the activity of the Company and efficiently manages them.