Decision of the Management Board regarding termination of the process of selling DIALOG S.A.

Friday, 29 September, 2006

The Management Board of KGHM Polska Miedź S.A. announces that on 28 September 2006 it resolved to terminate the process of selling DIALOG S.A., which had been initiated in October 2005. The Management Board of KGHM Polska Miedź S.A., based on analyses which were carried out, considers that the price which could presently be achieved for the shares of DIALOG S.A. is unsatisfactory, while the potential of DIALOG S.A. is such that the value of these assets is expected to increase over the next several years.

The decision to terminate the sale process and to continue the policy of maintaining long-term control over DIALOG S.A. means that KGHM Polska Miedź S.A. at 30 September 2006 will charge the amount of PLN 185 928 548 to the financial result.

In 2005 the decision to sell the assets of DIALOG S.A. resulted in the creation of a deferred income tax asset in the accounts of KGHM Polska Miedź S.A. as the difference between the carrying amount (using the equity method) and the taxable value of the shares of DIALOG S.A. This asset increased the net profit of KGHM Polska Miedź S.A. in 2005.

This change in strategy towards DIALOG S.A., i.e. the decision to retain equity commitment in DIALOG S.A. and not to sell the shares of the company, means that there is no longer any reason to retain the deferred income tax asset created in 2005. Consequently, at 30 September 2006 the financial result of KGHM Polska Miedź S.A. will be decreased by the amount of PLN 185 928 548 due to the reversal of the deferred income tax asset created in a prior period. 

Legal basis: art. 56 sec. 1 point 1 of the Act dated 29 July 2005 on public offerings, conditions governing the introducing of financial instruments to organised trading, and public companies (Journal of Laws from 2005 Nr 184, item 1539)