Poland Today Business Review+ No. 65 by Poland Today Business Review+

1 year subscription: EUR 690 +VAT (23%) Newsletter Editor: Lech Kaczanowski lech.kaczanowski@poland-today.pl tel. +48 607 079 547 Sales Contact: James Anderson-Hanney james.anderson-hanney@poland-today.pl

No. 065 / 15th December 2014 / www.poland-today.pl / magazine, conferences, portal, newsletter

ENERGY & RESOURCES Poland renegotiates huge LNG supply deal with Qatargas page 2 Lotos raises PLN 1bn for investments via rights issue page 3 PROPERTY & CONSTRUCTION HB Reavis breaks ground on Warsaw's West Station project page 5

DSV's headcount in Poland will come in excess of 1,000 by the end of 2015. Photo: DSV

Danish DSV to create hundreds of jobs

Danish forwarder DSV seeks to create hundreds of new positions at its shared services and contract logistics units in Poland, company executives tell Poland Today. DSV International Shared Services has just launched a second location in Warsaw, while DSV Solutions plans to open two new sites in 2015. page 6

Brand Group picks new site in Poland

Germany's Brand Group, a leading supplier of springs to the automotive, home appliance and door industries, will build a new manufacturing plant in the Silesian town of Siemianowice. The project will launch in 2015, creating 150 new jobs. page 2

HOSPITALITY Hotel group Orbis to add two new hotels to its Kraków portfolio page 5 TRANSPORT & LOGISTICS PHN teams up with Hillwood and Menard Doswell to develop a 95,000 sq.m logistic hub near Warsaw page 6 RETAIL FMCG giant Eurocash invests in Warsaw area online grocery retailer Frisco.pl page 7 Poland's top clothing retailer LPP sees key executive step down page 8

tel. +48 881 650 600

FOOD French bakery chain Paul to enter Poland page 9 Lithuanian owners to delist confectioner Mieszko from Warsaw bourse page 9 POLITICS & ECONOMY US Senate report on CIA secret prisons puts Poland in the spotlight page 9 Analysts optimistic about Polish economy in 2015 page 10 POLAND TODAY EVENTS Primetime Wrocław: Poland’s entrepreneurial capital? page 11 OPINION In praise of the Polish work ethic page 12 KEY FIGURES Up-to-date macroeconomic figures, currency & stock market data and lots of other hard-to-find info pages 13-15

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MANUFACTURING & PROCESSING

Brand Group to create 150 new jobs with Siemianowice project German-owned company Brand Springs Poland (BSP) will build a greenfield plant in Siemianowice Śląskie, aiming to launch production at the new site at the beginning of 2016. BSP is part of Brand Group, a family-owned German company that employs more than 800 staff in Europe, China and North America. The company, which has been supplying cold-formed springs and wire parts to customers in the automotive, white goods and door industry across the region, aims to quadruple its Polish workforce over the next year. "BSP was established in 2006 in Ruda Śląska to handle sales, service and logistics for Brand Group's clients in the CEE region. Since 2007 we've been producing small volumes of automotive springs, of which most are being shipping to our parent company's factories in Germany and some - directly to customers in Poland. Brand is one of merely three companies in the world with this kind of production profile. Our products can be found in most European cars. An average vehicle uses some 30 springs of the kind we make," Michał Morcinek, plant director at Brand Springs Polska tells Poland Today. The company has acquired a 2.2ha site in Siemianowice Business Park, where a production facility with a floor area of 8,000 sq.m is to emerge over the coming months. "The site perfectly meets our requirements and it has been fully prepared for a production-oriented investment like ours. Besides its proximity to our existing

plant in Ruda Śląska, it offers excellent access to the A1 and A4 highways, which is crucial because the new location will also serve as Brand's logistics centre for Central and Eastern Europe," says Sven Schroer, Partner & CEO at Brand Group. "The investment in Siemianowice is a huge step forward for BSP, as the new plant will be responsible for the entire production process, supplying a full range of Brand products to our clients in the region. At this point it is still difficult to determine the final capex on the project, as it will largely depend on what kind of machinery gets put inside the building, but our Polish workforce will grow from 50 to 200 as a result," he adds.

Siemianowice Business Park has won awards as one of Poland's best investment sites. Image: GTB Metropolis

Asked whether recruiting 150 qualified workers in merely a year does not seem like too ambitious a plan, Mr. Morcinek replies: "It will be a challenge, without a doubt. Despite double digit unemployment, skilled workers are hard to find in Poland. BSP seeks both regular line workers as well as more experienced machinists. We are counting on

help from job centers in the neighboring municipalities and we have established contacts with the Gliwice school of technology, hoping to employ some of its graduates. Of course BSP will provide training so any technically-minded and hardworking individual stands a chance of getting hired for the job. We believe that a substantial portion of our staff will be women, who usually have a harder time finding employment in the manufacturing sector than men."

ENERGY & RESOURCES

Poland renegotiates huge LNG supply deal with Qatargas Natural gas group PGNiG has successfully renegotiated its long-term LNG supply agreement with Qatargas, signed in 2009. Poland was initially supposed to launch LNG imports from Qatar in January 2015, but the construction of the country's LNG terminal has been delayed. Under the terms of the agreement, 1.3bn of LNG gas from Qatar were to be supplied annually to 2034 under a 100% take or pay formula. Thanks to the annex, PGNiG's result on has trading may see some improvement next year, vis-à-vis the "original scenario," the company said. According to earlier plans, the LNG terminal in Świnoujście, which is of strategic importance for Poland's energy security, were to reach completion in mid-2014, but the Saipem-Techint-PBG consortium has been given an additional six months to deliver the facility. Progress in construction works at end-October was described at 94%. The construction of the Świnoujście terminal will cost state-controlled Polskie LNG a total of about PLN 3bn. Another PLN 4.5bn is expected to be spent on all the related infra-

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structure. The terminal will have an initial capacity of 5bn cb.m, representing more than a third of Poland's total annual consumption of the fuel, with an option to be further extended to 7.5bn cb.m. Under the updated terms of its contract with the Polish gas giant, Qatargas will sell 2015 gas volumes fixed in the deal (approximately. 1.5bn cb.m) on other markets and PGNiG will "compensate Qatargas for the difference, if any, between the price of LNG specified in the Supplemental Agreement (SPA) and the market price thereof obtained by Qatargas," PGNiG said in the filing and a press statement. Should the price obtained by Qatargas be deemed too low by PGNiG, the delivery of "such unsold LNG" will be postponed to subsequent years, the firm added. The deal also authorizes the sides to set the terms on which to discuss the supplies of LNG in 2015 to the Świnoujście terminal after its full operational functionality is ensured, depending on Poland's energy needs.

icant amounts of gas from directions other than Russia, which currently supplies close to two thirds of Polish gas. As part of the ongoing efforts aimed at improving its energy security, Poland seeks to integrate the domestic transmission system with those of neighboring countries. Particular focus has been placed on the north-south pipeline and the integration of connections in the Baltic Sea region. These connections, together with the expansion of the LNG terminal and the national transmission network, are to create a common regional gas market. At the same time, PGNiG is investing in exploration and production concessions abroad. The company has recently acquired stakes in Norwegian North Sea concessions from France's Total for close to PLN 1bn, boosting its production outside of Poland by approximately 60%. Last year PGNiG's net earnings dropped 14% y/y and came to PLN 1.92bn, while its revenues increased by 12% and came in excess of PLN 32bn. The company owed much of the profit to the launch of oil production from the Skarv field in Norway and Lubiatów field in Poland. Its production and exploration revenues rose 45% y/y and topped PLN 6.26bn.

shareholder in Lotos in the Polish state, which controls the company through a 53.2% stake. "The proceeds will be used to finance the Company’s strategy, which envisages further investments to increase the Gdańsk refinery's complexity and step up hydrocarbon production," Lotos said. In line with its strategy until 2015, LOTOS intends to increase its production to 1.2m tons of crude oil per annum. According to Lotos, proceeds from the issue will be invested in the development of B4 and B6 fields on the Baltic Sea as well as construction of a delayed coking unit. Lotos is the second largest producer of hydrocarbons in Poland, and the only Polish operator extracting crude oil and natural gas from offshore deposits in the Baltic Sea. It is also the largest crude oil producer in Lithuania. Through its subsidiaries, it also operates in the Baltic Sea, the North Sea and the Norwegian Sea, as well as in Lithuania, where it is involved in exploration for and production of natural gas and crude oil from onshore and offshore fields.

Lotos Group's key financials Revenues in PLN bn, left axis Net result in P LNm, right axis

ENERGY & RESOURCES

Lotos raises PLN 1bn for investments via rights issue

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According to Polskie LNG and government ministers the Świnoujście terminal will be operational in mid2015. Photo: Polskie LNG

Poland's large-scale investments in gas transmission infrastructure will enable the country to import signif-

Poland's second-largest oil refiner Grupa Lotos sold 55m new shares in a rights public offer, raising PLN 995.5m for investments in gas and oil production, the company said in a market filing. The offer was heavily oversubscribed, with analysts and investors viewing the PLN 18.1 price per share as attractive. The main

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Source: Grupa Lotos

The company produced 146,000 tonnes of oil and 16m cb.m of gas from its Baltic fields last year but now wants to boost output of both over the coming three years. In addition to scaling up production from its ex-

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isting facilities, the company plans to launch production of 250,000 tons of oil a year from the B8 Baltic field by the end of 2015 and begin extracting gas from its B4 and B6 fields by the end of 2017, with production from both seen at a combined 250m cb.m a year. The B8 field's production potential is estimated at some 3.5m tons of crude oil, while the combined production potential of the B4 and B6 fields tops approximately 4 bn cb.m. The group is also aiming to boost efficiency at its refining business, with a number of new facilities in the pipeline, including a delayed coking unit (DCU) and a hydrocarbon recovery unit (HRU). The DCU would improve the refinery's annual output of motor fuels by 900,000 tons and allow it to increase its refining margin by approximately USD 2/bbl. The unit is scheduled to come on stream in 2017–2018. With the HRU, Lotos would gain an additional 100,000 tons of LPG and 25,000 tons of gasoline annually, which will be placed on the market. The unit is scheduled to be placed in service in autumn 2016.

PROPERTY & CONSTRUCTION

HB Reavis breaks ground on Warsaw's West Station project Slovakian developer HB Reavis has broken ground on the West Station mixed-use complex in Warsaw that will include a new railway station as well as 67,000 sq.m of office space. Located close to the city center, in the rapidly expanding Jerozolimskie Avenue office corridor in the western part of the Polish capital, West Station is being developed in cooperation with the Polish state railways PKP, which contributed the site. PKP Group companies (including PKP, PKP Informatyka, and PKP Intercity) will be among the first tenants in the office part of the complex, taking up approximately a half of its 30,000-sq.m phase one.

With a total area of 1,250 sq.m, the new Warsaw West railway station is to be completed by the end of 2015. Phase one of the adjacent West Station office complex is to be delivered in Q4 2016 and phase two - in 1H 2018. Overall, it will include three 13-storey office towers. HB Reavis is currently working on a 34,000 sq.m office project Postępu 14 in Warsaw Mokotów district, not far from its first Warsaw development, Konstruktorska Business Center (48,000 sq.m). The development is scheduled for completion in Q2 2015. The company has also broken ground on phase two of its Gdański Business Center project at the corner of Andersa and Inflancka streets in Warsaw. With two buildings encompassing more than 50,000 sq.m of class-A office space, the project is to reach completion in Q1 2016, bringing the total leasable area at Gdański Business Park in excess of 98,000 sq.m. The Slovakians are also gearing up to develop some 90,000 sq.m of offices, including a 130-m tall tower, on a 1.7ha vacant lot on Chmielna Street, across from the Warsaw Central Station, purchased from railway operator PKP.

Warsaw office vacancy rate to go up

In the first half of 2014 the Lotos posted a net loss of PLN 155m on PLN 14.4bn revenues, up from a PLN 273m loss and PLN 13.3bn turnover in January-June 2013. The 1H loss was due to a PLN 545m full writedown on the Yme field off the Norwegian coast, which knocked PLN 191m off the company's profit for the period. Lotos, which controls 20% of Yme, said the write down was due to lack of new plans for the oil field, in which Canada's Talisman Energy owns 60%, Germany's Wintershall , a unit of chemical giant BASF, has 10%, as does Norske AEDC, a unit of AOC Arabian Oil Company.

Office completions, future supply, vacancy rate in Warsaw

Source: JLL, WRF, Q3 2014, F-forecast

The West Station Office complex will include three office towers with a combined GLA of 67,000 sq.m. Image: HB Reavis

Headquartered in Luxembourg, HB Reavis operates in Slovakia, Poland, Hungary, the Czech Republic, Great Britain and Turkey. Since its establishment in 1993, it

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has executed projects in the office, commercial and logistics real estate segment with total leasable space exceeding 670,000 sq.m. A further 160,000 sq.m is currently under construction and over 1m sq.m is at a planning or permit stage. With a staff of 400 professionals and more than EUR 860m in equity, HB Reavis is managing and developing assets worth EUR 1.4bn, based on an integrated business model that combines development, construction, property management and investment management. Late last year HB Reavis placed a PLN 111m (EUR 26.5m) bond issue on Warsaw's Bondspot market to finance its development activities in Poland. The bonds, maturing in November 2017, were sold to Polish institutional investors including mutual and pension funds, insurance companies and asset management companies.

HOSPITALITY

Hotel group Orbis to add two new hotels to its Kraków portfolio It's been a busy autumn for Poland's top hospitality group Orbis. Merely days after the company agreed to buy 46 hotels in 16 countries across Central Europe and the Balkans from its strategic investor Accor at the cost of EUR 142.3m, the company has secured two new properties in Poland's top tourist destination - the historic city of Kraków.

R eve nu es in PL Nm, left ax is Ne t result in PLNm, righ t axis

Poland's commercial property, particularly office space, market suffers from increasing imbalances, reflected in increased vacancies, NBP said in a report on the real estate market in Q3.

The Warsaw office space market now records a 14% vacancy rate, NBP said. Despite the high vacancy rate, developers are still building new office buildings. The trend also results in decreasing value of property prices, the central bank said.

The Warsaw-listed Orbis turned over PLN 682.6m in 2013 (down from PLN 707.4mm in 2012), while its net income came to PLN 65m (vs. 68m in 2012). Average revenue per room dropped 4.6% last year, down to PLN 124.1, while room occupancy rose by three percentage points and topped 58.8%. As of June 2014, the company's total assets were worth PLN 2.1bn.

Orbis Group's key financials

CENTRAL BANK WARNS ABOUT OVERSUPPLY IN WARSAW'S OFFICE PROPERTY MARKET

"On the commercial real estate market, particularly office space, one could see increasing imbalances between demand for space and increasing supply tied to completed investment projects," NBP wrote. "It resulted in an increasing number of vacancies."

Orbis has also signed a franchise agreement for the first ibis Styles hotel in Kraków with a local investor Landeskrone Group, controlled by the heirs of Polish aristocratic families Lubomirski and Lanckroński. The newly built hotel is to open in 2017 with 60 rooms as Grupa Orbis' first franchise-based property in Kraków.

Orbis plans to open a new Mercure hotel in Kraków Image: Orbis by the end of 2016 .

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In early December Orbis bought an investment site on Pawia Street, near its existing hotels ibis and ibis budget Kraków Stare Miasto, which were completed in 2012. Orbis paid PLN 18.8m for the plot, where it will develop a 4-star Mercure hotel with 200 rooms, 300 sq.m conference facilities, restaurant and fitness center. The project, to be completed in late 2016, will be built in line with BREEAM green building requirements. Orbis expects the total capex on this investment to reach PLN 100m.

Currently, the Orbis Group comprises 68 hotels (including 52 owned, 1 leased, 3 hotels under management agreements and 12 franchised) operating in 32 cities and resorts in Poland and Baltic countries. However, following the completion of the Accor deal, the total number of hotels in Orbis's portfolio will come in excess of 110, making the company the key hotel operator in Central Europe.

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TRANSPORT & LOGISTICS

Danish forwarder DSV creates hundreds of new jobs in Poland Danish logistics operator DSV will create way over a hundred new jobs in Poland next year alone at its contract logistics and shared services units, company executives tell Poland Today. As of now, DSV's Polish workforce totals approximately 900 employees. "At the moment we have three warehouses in Poland, in Kampinos, Warsaw, and Gdańsk. In early 2015 we are planning to launch two new locations, in Gdańsk and Sosnowiec, which will boost our headcount from the current 160 to some 200 employees," says Maciej Walenda, CEO of DSV Solutions Poland, the Danish forwarder's contract logistics unit. The first location to open will be a 4,500 sq.m warehouse in Prologis Park Gdańsk, which will mostly handle operations for a new customer from the industrial sector. In addition to storing goods, DSV will also be responsible for a complex co-manufacturing process and the warehouse will be equipped with special workbenches, conveyors belts and a specialized shelving system. DSV is hoping to launch the new Gdańsk unit in March next year. The second office will be located in Panattoni Park Sosnowiec and will include a 6,500 sq.m warehouse, dedicated mostly to handling operations for a new customer from the healthcare sector. The Sosnowiec facility is expected to be fully operational by May 2015. DSV Solutions provides a wide range of tailored logistics services for different industries. In addition to regular, large-volume storage and handling of goods,

the company offers direct deliveries to stores, as well as dedicated services for e-commerce clients, such as returns handling, including quality inspection, kitting, labeling, repackaging and the like.

In 2012 DSV set up a shared services center in Warsaw, focusing mainly on bookkeeping and IT services, and the project continues to expand at an impressive pace.

"One of our key focus areas, since the beginning of DSV's operations in Poland, has been healthcare sector. In recent years we made additional investments in construction and expansion of our dedicated pharma consignment warehouse. At the beginning of this year DSV Solutions extended the pharmaceutical section of its Kampinos warehouse near Warsaw to 16,000 sq.m and 23,000 pallet places. The facility houses pharma wholesalers and a modern consignment warehouse, capable of storing pharmaceuticals in controlled temperature," Maciej Walenda tells Poland Today.

"Over the past year our team not only grew from 100 to 300 employees but also fulfilled all of the strategic objectives we set for 2014. These included the relocation of a large portion of back office processes from all Western European DSV units to Warsaw," Thomas S. Jansson, CEO of DSV International Shared Services (ISS) tells Poland Today. "In November we launched a new location where in the long run we intend to employ 250 staff. The recruitment will be gradual and I assume that by the end of 2014 we will have 400 employees at DSV ISS, handling processes for the entire DSV group. In the coming year we expect to go beyond the range of tasks we have been focusing on to-date, for instance in shared financial processes and IT. This process is already in motion thanks to the services we have been providing to the Scandinavian division of DSV Air & Sea. Over time, this will become one of the key growth paths for DSV ISS," he adds.

TRANSPORT & LOGISTICS

Maciej Walenda, CEO of DSV Solutions (left) and Thomas Jansson, CEO of DSV ISS (right). Image: DSV

The NASDAQ OMX Copenhagen-listed DSV offers road, air, sea and logistical transport services throughout the world. With headquarters in Copenhagen, Denmark, and offices in more than 70 countries, DSV employed 23,000 people as of end of 2013. Last year DSV's turnover totaled EUR 6.1bn

PHN teams up with Hillwood and Menard Doswell to develop a 95,000 sq.m logistic hub near Warsaw The Warsaw-listed, state-controlled real estate group Polski Holding Nieruchomości (PHN), has teamed up with US property companies Menard Doswell and

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Hillwood to develop Parzniew Logistic Hub, a 95,000 sq.m project near Warsaw. The three parties are to ink a joint-venture agreement as soon as all legal conditions have been met. Located in Brwinów, close to the Pruszków and Konotopa junctions on the A2 WarsawBerlin highway, Parzniew Logistic Hub is to be delivered in four phases, with completion expected in 2021. "Due to the highly attractive location of the project we’ve been looking for international partners for this investment. The scheme has attracted many investors in its initial stage, and we’re confident about the decision we took while selecting our partners," said Artur Lebiedziński, chairman of PHN. "Parzniew Logistic Hub will be one of the first development projects for us on the Polish market which is in line with our long-term strategy in Europe," said John Thomas, president of Hillwood Europe. 'Our success on the American warehouse market have encouraged us to expand in Europe, within which Poland plays an important role." Hillwood, a Dallas-based real estate investment and development company owned by Ross Perot, Jr., is the second largest owner of land for future development of more than 8m sq.m of logistics space in the US. The company entered the European market as recently as October 2014, setting up offices in Germany and Poland. The latter one is being headed by Hubert Michalak, Senior Vice President, who prior to joining Hillwood was a partner at AIG/Lincoln for 12 years where he was responsible for industrial and logistics projects in Poland. Hillwood is expecting deploy more than EUR 1bn in Europe over the next three to four years, and it has already purchased a number of existing buildings and development sites in Poland. PHN's other partner US partner, Menard Doswell & Co., has been operating in the CEE region, mainly Poland, since the early 1990s. Their first project was the

36,000 sq.m Warsaw Industrial Center, the first warehousing project built to international standards in the region, which the company sold in 1997. Their second project is the 320,000 sq.m Alliance Logistic Center, covering an area of 81 hectares in Błonie near Warsaw. PHN was created in 2011 when the Polish government pooled together some 180 different real estate and land holdings, to raise funds to help it reduce borrowing. According to property consultancy CBRE, PHN's portfolio comprising 171 properties, including 123 built-up areas with office, retail, residential, hotel and industrial buildings and 48 investment sites (over 1,100 ha) throughout the country was worth PLN 2.2bn as of end of 2013. PHN has been listed on the Warsaw Stock Exchange since 13 February 2013. Its net earnings came to PLN 13.4m in 1H 2014, against a PLN 17.6m loss in the corresponding period of last year. According to PHN, its non-core asset portfolio, of which the company has gradually disposing, is worth approximately PLN 800m. In 1H 2014 it sold five properties for a combined PLN 26m. Its portfolio currently includes 140 assets and 700 ha of land. Besides the Parzniew project, in the industrial property sector, PHN is also building a 40,000 sq.m logistic park (SEGRO Industrial Park Wrocław) in cooperation with British developer SEGRO. PHN is currently involved in a number of developments in the office and residential sector, including Domaniewska Office Hub with a combined GLA of 27,000 sq.m set for completion in mid-2015 and Port Rybacki, a mixed use waterfront project in Gdynia, offering up to 70,000 sq.m of commercial space and 120,000 sq.m of residential space, to be carried out in cooperation with mLocum. In October last year PHN set up a joint venture with Germany's Hochtief Group for the development of an office tower on 36 Świętokrzyska St., vis-à-vis Warsaw's most prestigious office project Rondo 1. According to PHN's prelimi-

nary plans, the building were to reach some 150m in height and 45,000 sq.m in GLA, but all final details, both financial as well as architectural, are yet to be hammered out together by the two companies.

RETAIL

FMCG giant Eurocash invests in Warsaw area online grocery retailer Frisco.pl Poland's leading FMCG distributor, the Warsaw-listed Eurocash will acquire a 44% stake in Warsaw-area online supermarket Frisco.pl, through a partial buyout of the company's existing shareholders and recapitalization. Following the transaction, the value of which remains undisclosed, Polish private equity fund MCI Management will remain Frisco's majority owner. "Bringing in Eurocash as a significant investor is a growth milestone for our store. The funds raised in this financing round will enable us to not only continue executing Frisco’s development strategy as Warsaw’s leading online supermarket, but also open up an opportunity for us to scale up the business, including through an effective launch of our full offering in other large cities in Poland within a shorter timeframe than previously expected," says Nicolas Jedraszak, Frisco.pl CEO. Frisco.pl has been reporting double-digit sales growth in recent years and it expects to break even by the end of 2015. The company’s annual revenue exceeds PLN 30m. Unlike most of key competitors, who treat online grocery sales as merely an addition (often a loss-

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making one) to their brick & mortar business, Frisco.pl operates an online-only business, relying on a dedicated logistics centre and a unique system that enables the retailer fulfill customer orders in hourly delivery windows. The company has been putting a strong emphasis on service quality from the start and currently it is being recommended by 98% of its clients.

new locations last year alone. A few weeks ago Eurocash subsidiary KDWT merged with another key FMCG player Kolporter. Last week Eurocash acquired from HDS Polska 51% of shares in a company that will operate the Inmedio chain, currently comprising 410 retail locations, mostly in shopping centers. HDS Polska, the Polish unit of France's Lagardère Services and Eurocash have joined forces in a move to strengthen their position in the convenience sector – the fastest growing segment of Poland's retail market, currently dominated by Żabka Polska.

"Frisco.pl is one of the largest players on the Polish online grocery shopping market, with a modern, effective logistics platform. The company sells only through the online channel therefore, unlike the other players on this market, online sales are not subsidized by a brick-and-mortar business. Frisco.pl will be a platform for us to gain experience in the e-commerce segment. This agreement makes it possible for us to become the company’s majority shareholder in the future. We are hoping that the know-how we gain will let us develop solutions aimed at reinforcing the competitive position of our clients – independent grocery stores," said Pedro Martinho, member of Eurocash’s management board.

RETAIL

"Having a strong partner such as Eurocash join the group of investors in Frisco.pl serves as positive verification of our investment strategy in the e-commerce area and confirmation of Frisco.pl's massive growth potential. Our mutual objective is to continue building the value of this company. The support of Eurocash will create substantial synergies for Frisco in procurement and logistics, but most of all it will speed up implementation of the company's growth strategy, enabling it to grow its operational scale," said Adam Jarmicki of MCI Management S.A.

Dariusz Pachla, the vice president of Poland’s top clothing retailer LPP has resigned as deputy CEO effective December 31. Pachla said he will continue working for the company and hopes to join LPP’s supervisory board next year. Marek Piechocki, the retailer’s CEO, has already filed Pachla’s candidacy for the supervisory board. Pachla has been the official face of the Gdańsk-based firm from the very start, as the remaining two key shareholders, Marek Piechocki and Jerzy Lubianiec, have always preferred to keep a low profile. LPP's share price on the Warsaw Stock Exchange dropped 1.8% on the day Pachla announced his resignation and a further 2.8% the following day.

Ranked as Poland's 9th largest company by revenues, with sales of more than PLN 16.5bn in 2013 and more than 12,000 employees, Eurocash operates an FMCG distribution business, cash & carry warehouses, and a franchise chain of more than 6,000 small and mediumsized convenience stores "abc", which added some 600

Poland's top clothing retailer LPP sees key executive step down

The company’s supervisory board named Przemysław Lutkiewicz as deputy CEO. Lutkiewicz joined LPP in 2008 to create the company’s controlling division, which oversees analysts, auditors and the sales department.

As of end of June 2014 LPP had 1,488 shops with a combined floor space of 674,000 sq.m. With some 18,000 employees, the company designs and sells clothing under five brands: Reserved (410 stores), Cropp (379), House (326), Mohito (243) and Sinsay (104). According to plans, a new upscale brand is to be launched in 2016. Similar to its global competitors, the Polish company orders most of its products from subcontractors in Asia. Last year the company sold more than 70m items of clothing for a total of PLN 4.1bn, and the 2014 is set to be a yet another record-breaking year for the Warsaw-listed retailer. In the first three quarters of 2013 LPP turned over PLN 3.3bn (+PLN 515m y/y) while its net earnings came to PLN 236m (PLN 15m).

LPP Group's key financials Rev enu es in PLNbn, left axis Net result in PLNm, right ax is 4.5 4.0 3 .5 3.0 2 .5 2.0 1.5 1.0 0.5 0.0

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After conquering Poland and establishing strong presence in a number of CEE markets, LPP has recently set its sights on Germany, where it plans to launch 30 Reserved outlets over the next three years. Reserved's flagship 2,000 sq.m store in Berlin will launch in 2016 on Tauentzienstraße. The company has also secured a location for a 2,400 sq.m outlet in Mannheim, a city of more 300,000 inhabitants. The first Reserved-branded store in Germany opened in September in Recklinghausen, and the company has since opened outlets in

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Stuttgart, Bremen and Hanover. So far no Polish clothing company has managed to win over German consumers. Germany marks the beginning of LPP's westward expansion. So far the company has concentrated its operations on Poland and a number of Central and Eastern European markets. The Warsaw-listed retailer is currently in the process of introducing all of its five brands to Croatia and early next year it will open the first Reserved store in Qatar. The decision to go west is partly due to the recent events in Russia (where LPP has 254 stores) and Ukraine (64 stores), where the Polish retailer had to scale down its expansion plans. Last year the two markets generated the respective 19% and 4% of LPP's revenues. The events in Ukraine have not directly affected LPP's operations in the country, as the company has no stores in conflict-stricken regions. The same goes for Western sanctions against Russia, where LPP has a separate entity that imports garments directly from Asia.

RETAIL

French bakery chain Paul to enter Poland French bakery & cafe chain Paul will open its first, flagship r in Poland at Warsaw Financial Center in Q2 2015. The company has signed a 10-year lease for 370 sq.m. Paul is a chain of Bakery/Café restaurants established in 1889 in the city of Croix, in Northern France, by Charlemagne Mayot. It specializes in serving French products including breads, crêpes, sandwiches,

macarons, soups, cakes, pastries, coffee, wine, and beer. Boulangeries Paul SAS has its global head office in Marcq-en-Barœul, in Greater Lille, in France, and operates in 29 countries. There are more than 450 Paul restaurants worldwide, most of them in France. Paul belongs to Groupe Holder, which also owns the French luxury bakery Ladurée. With 50,000 sq.m of class A+ office space and a location near the Rondo ONZ subway station and the Central Station, Warsaw Financial Center is home to more than 60 Polish and international companies. Since the end of 2012 the building has belonged to a consortium of Allianz Real Estate and Curzon Capital Partners III, an investment fund managed by Tristan Capital Partners.

FOOD

Lithuanian owners to delist confectioner Mieszko from WSE Polish confectionery company ZPC Mieszko will be delisted from the Warsaw Stock Exchange after the company's majority owner, Lithuanian millionaire Vladas Numavičius, had successfully bought out all remaining shareholders. A few months ago, Numavičius, who at the time controlled 66% of Mieszko, placed a buyout bid on the outstanding shares via his Cyprus-based venture Bisantio Investment Limited. The initial offer of PLN 3.69 per share, a notch above the average prices from the preceding three months (PLN 3.47), failed to impress investors and analysts, forcing Bisantio to raise the bid to PLN 3.99. Following a successful buyout, the Lithuanian investor has squeezed out the remaining

minority shareholders and currently owns 100% of Mieszko. The Mieszko group posted PLN 15.2m in net earnings last year (up from PLN 14m in 2012) on PLN 486m turnover (+1% y/y). The company is one of Poland's leading makers of pralines (4.8% share), chocolate gifts (5.4%), hard candy (6%, and crackers (12.4%). It has been listed on the Warsaw bourse since the year 2000 and its current market cap totals some PLN 160m. After the planned delisting of Mieszko, only three confectioner stocks will be traded on the WSE: Colian, Wawel, and Otmuchów. According to consultancy KPMG, Poland's confectionery market is worth an estimated PLN 12.7bn and over the past half a decade it has seen an average annual growth rate of 2.3%. The sector's performance mirrors consumer sentiment as during economic downturn customers cut down on sweets. With no prospects for fast-paced economic growth in sight, market analysts are not expecting the confectionery segment to pick up speed anytime soon, with gradual recovery being seen as the most probable scenario.

POLITICS & ECONOMY

US Senate report on CIA secret prisons put puts Poland in the spotlight Poland made headlines in key global media last week in connection with the US Senate report on CIA prisons, which provided details about the treatment of terrorism suspects following the September 11th attacks. The report was one of the topics brought up by US President Barack Obama during a telephone conversation with Polish PM Ewa Kopacz prior to Tuesday re-

weekly newsletter # 065 / 15th December 2014 / page 10

lease of the report's summary, the Polish government press office has said. The American president expressed hope that the publication will have no negative effects on US-Polish relations. The 6,700-page report declassified by the Senate Intelligence Committee condemned the CIA for inflicting suffering beyond its limits on detainees in secret prisons. Although he report had country names redacted, the place referred to as "Detention Site Blue" correlates with a Polish intelligence agency facility in Stare Kiejkuty in the north-east of the country, where five prisoners were held and tortured, including Khalid Sheikh Mohammed, accused of being one of the planners of the September 11th attacks and Abd al-Rahim al-Nashiri, a Saudi suspected of being behind the October 2000 bombing of the USS Cole in Yemen. Among the new, alarming details revealed by the report is that the US offered Poland payment for its role in the CIA program after the detention site was up and running. According to the report, the CIA offered Poland an undisclosed sum (according to some sources the figure was USD 15m) and refused to sign an agreement with Poland outlining the CIA’s role and responsibilities at the site. Polish officials said at a press conference that the memorandum included demands to guarantee humane treatment of the prisoners. Former Polish president Aleksander Kwaśniewski confirmed last week that while he was in power, the country hosted one of the CIA’s "black site" detention facilities that tortured detainees. The Stare Kiejkuty facility was closed in late 2003, after Mr. Kwaśniewski told his American counterpart George Bush that he had become "uneasy" about what was going on there. "We had concerns, but they did not include that the Americans would break the law in a knowing and uncontrolled way," Mr. Kwaśniewski said in a radio in-

terview last week. Prior to that, Polish officials had never acknowledged the existence of a CIA prison in their country. In July the European Court of Human Rights in Strasbourg ruled that Poland violated the European human rights convention by allowing the CIA to render two alleged terrorists on its territory. The judges said that Poland failed to stop the "torture and inhuman or degrading treatment" to which the applicants had been subjected by the CIA during their detention in Poland. The court held that Poland had co-operated with the secret illegal transfers in 2002-2003, allowing two alleged members of al-Qaeda, to be interrogated at a secret "black site" prison on Polish soil. The court also said that Poland had failed to conduct an effective and thorough investigation into the matter and ordered Warsaw to pay two prisoners EUR 230,000 in damages. Indeed, an official Polish investigation into the matter has been going on for seven years already, with the former head of Poland's spy agency Zbigniew Siemiątkowski being charged with violating Polish and international law in allowing the CIA to interrogate prisoners at a secret facility in Stare Kiejkuty. By providing additional details of the secret dealings between the CIA and its Polish counterpart, the US Senate report has provided Polish investigators with more evidence. Some commentators last week said Siemiątkowski may be the only person in the world to face legal proceedings over the CIA's torture program, as the Americans who carried out the interrogations are yet to face any charges. Interestingly, despite the country's own bitter memories of torture by the communist secret police and by the Nazis, Poland's complicity in the CIA's program has gained relatively little interest among ordinary Poles, 78% of whom have a positive opinion of the US, higher than the European average. As The Economist

put it in their December 11 article, "Poles may not be happy that the CIA used their country as a torturing ground, but with an expansionist Russia in their neighborhood, they are reluctant to press the issue too hard."

POLITICS & ECONOMY

Analysts optimistic about Polish economy in 2015 The 2015 economic outlook for Poland seems moderately optimistic according to this year's last edition of BZ WBK bank's monthly MACROscope report. The bank expects the current slowdown to be only temporary. Amid weak recovery in the Euro zone and lingering uncertainty across Poland's eastern border, domestic demand will continue to play an important role, but exports are expected to remain robust and increase by an estimated 6-7%. "Growth should be underpinned by the continuing geographical diversification of exports and gains in Poland’s market share in existing export markets. This should be supported on the demand side by a moderate recovery in the Euro zone. We assume the slowdown in the Euro zone economy is temporary and our house forecast for Euro zone GDP is for 1.1% growth for 2015 (and 1.5% in Germany)," the bank said. One the domestic front, the economy will benefit from the ongoing improvement in the labor market, where real wages, and employment keep going up. According to the Eurostat-compliant LFS data in October 2014 the number of employed persons increased by 2.7% y/y (the most since 2008), exceeding 16m for the first time on record. BZ WBK expects nominal wage

weekly newsletter # 065 / 15th December 2014 / page 11

growth to remain within the 3-4% range next year, but due to inflation hovering above zero, disposable incomes should get a much welcome boost. At the same time, unit labor costs are to increase by no more than 1-2% in 2015.

cuts fade after better-than-expected macro data. The money market is still assuming one more rate cut over the coming three months, in line with our base scenario, with a slight chance of more easing in two to three quarters," BZ WBK analysts said.

Registered unemployment in Poland

According to their projections, the EUR/PLN will decrease slightly in 2015.

14%

13%

12%

Oct 14

Aug 14

Jun 14

Apr 14

Feb 14

Dec 13

Oct 13

Aug 13

Jun 13

Apr 13

11%

Source: GUS

"Household budgets should also be supported by favorable rules on indexation for pensioners, higher tax allowances for families with children and low interest rates. Private consumption should be an important driver of GDP growth in 2015. The big question mark is over investment, where we expect growth of 8.4%," the report reads. As far as consumer prices are concerned, they are expected remain on the decline for a couple of months, before going back up gradually to reach 1% inflation by the end of 2015. BZ WBK says it's not unlikely for deflation to hang around for as long as 12 months. Low inflation and recent positive macroeconomic readings may keep the Monetary Policy Council from making interest rates much lower. "The downward trend in money market rates has reversed recently, as expectations of further interest rate

"The złoty tends to be a cyclical currency, gaining during the periods of economic recovery. The economic slowdown should prove to be relatively short-lived and the Polish economy should continue to outperform not only the Euro zone, but also its CEE peers. Moreover, real interest rates in Poland are relatively high. This should favor the złoty, especially in an environment of highly-accommodative monetary policy globally (particularly in the Euro zone). The UkraineRussia conflict seems to be the most important risk factor to our market scenario. The złoty has remained resilient to the ruble's recent weakness, but any serious political/military tensions are likely to weigh on the Polish market."

Poland Today Events For more information about Poland Today events, please visit: www.poland-today.pl/events To sponsor or attend any of Poland Today events, please call Magdalena Gawlikowska on +48 602-223-634 or e-mail magdalena.gawlikowska@poland-today.pl

Upcoming events: January 14 (NEW DATE!) Sala Sesyjna, Town Hall, ul. Sukiennice 9

Wrocław

PRIMETIME WROCŁAW Poland’s entrepreneurial capital? Wrocław, under open and steady political leadership, has blazed a business trail in Poland. But with others catching up fast, can the city maintain its entrepreneurial edge? The event will include a special "Fireside Chat" with Wrocław Mayor Rafał Dutkiewicz, in which he will discuss the city's rising expectations and the challenges it faces Ryszard Petru, president of the Association of Polish Economists. Panel discussion topics will include innovation, sustainability, as well as cooperation between business and education. Speakers include: - Krzysztof Sachs, Partner, Director of Wrocław Region, EY - Tomasz Gondek, Director, EIT+ - Karol Patynowski, Associate Director, Tenant Representation, JLL - Marcin Kozłowski, Global Manager, AIP Business Link - Jarosław Prawicki, Head of Sales & Marketing, UBM Polska There will also be an "Open Forum" where participants will have the opportunity to discuss other issues, as well as a "speed dating" session.

Partnership opportunities still available!

weekly newsletter # 065 / 15th December 2014 / page 12

OPINION

In praise of the Polish work ethic by Poland Today Editor Andrew Kureth

Elżbieta Bieńkowska, the EU’s new commissioner for the internal market, has been on the job for just over a month and is already making waves. Formerly Poland’s minister for infrastructure and regional development, Bieńkowska has a reputation for being efficient and effective, though not necessarily tactful. This no-nonsense style could sometimes raise hackles. When the Polish press took her to task for not resolving train delays in winter, she replied coolly: "That's our climate." The press had a field day, but the dust-up didn’t last long. "I’m not here to build a publicrelations image, I’m here to do work," she explained. And work she did, overseeing the most efficient distribution of EU funding among new member states. Her focus on the job at hand got her promoted to Brussels this year, where she has found she has to deal with a new set of challenges. In an interview with Polish radio station Radio Zet last week, she compared the bureaucrats in her office in the EU capital to those of Poland in the 1990s. "European Union bureaucrats are substantially slower than Polish ones," she said. "EU administration is reminiscent of ours in the 1990s." While Poland’s bureaucrats today may still

leave something to be desired, anyone who was here in the last decade of the 20th century knows Bieńkowska's comparison is quite the insult. The statements got her into a bit of hot water with her own staff, who have written a letter of protest and are demanding an explanation. But many of us here in Poland find her stance admirable. EU leaders should demand efficiency out of their personnel. Perhaps Bieńkowska’s method of stirring the pot is a lesson to our British friends, who instead of trying to reform Brussels from the inside, continually threaten to leave. Regardless, the important thing to note is that Polish workers are surpassing their Western European peers in hard work and effectiveness – and the difference is not only in the public sector. The directors of some of Poland's largest business process outsourcing centres have told me in recent conversations that the Polish work ethic, specifically the willingness to take on an additional project, travel abroad or work extra hours in return for recognition and advancement, was a key factor in their firms' decision to move operations here. I heard the same story time and again: whether Swedish, French or English, Western European workers, taken on the whole, are happy to remain in their rut as long as it means they don't have to work any harder. In contrast, Poles are willing to do more if they see it benefits both themselves and their company. In the OECD’s latest ranking of annual hours per employee worked, Poland comes in fifth place (Behind Mexico, Greece, Chile and Russia) with 1,918. It's not just companies that are moving to Poland to take advantage. Businesses based in Western Europe continually bring in Poles because of their combination of hard work and quality results. Hence the continual stream of Poles headed there in search of better wages. British concerns over immigration notwith-

standing, anecdotal evidence for Western Europeans’ appreciation of Polish workers abounds. My favourite story is one I heard from a Finnish friend whose brother had hired Poles to remodel his house. "How are those Poles working out?" My friend asked. "Pretty good," his brother answered. "There’s just one problem – they work too hard." It seems that in Finland's summertime period of the midnight sun, the Polish builders continued to work as long as they had daylight. The noise at night got on the neighbours' nerves, but they finished the project ahead of schedule. Now, anyone with a business here in Poland knows that employee-employer relations can be far from perfect. Employers will often hire workers on so-called 'trash contracts' – basically freelancer contracts that guarantee no severance payments nor contributions into (and therefore no benefit from) public health and pension services – which employees often resent. Despite having signed such contracts of their own free will, Polish workers will sometimes take a combative stance, for example refusing to give their employer reasonable notice that they are taking a holiday because they are not expressly required to do so by law. Which brings us back to Bieńkowska, who now oversees the entire EU's internal market. She can start to make a change by continuing to bring her Polish work ethic to the office each day and demanding more out of her staffers. Then she can look to find ways to continue to encourage workers across the bloc to be more efficient – keeping the labour market open and resisting member states' attempts at protecting their workers from intra-EU competition will be key. A competitive – and harder working – European Union is sure to work in Poland’s favour.

weekly newsletter # 065 / 15th December 2014 / page 13

KEY STATISTICS Consumer Prices

Inflation

0.0 +0.6

Transport

-1.0

+0.8

-5.1

-1.5

Communications +2.6

+1.2 +3.9

Gross CPI

-0.2

-2.7

0.0 +3.6

0.0

-4.7

+1.1

-4.6 +3.4

+0.1 +0.5

+0.1

0.0

-1.0

-3.0

-0.8

0.0

-0.4

-0.3

0.0

-0.6

0.0

-3.2

+1.3 +4.0

-0.3 -0.4

-0.3

Jul '14

-1.1

+4.7

Aug '14 Sep '14 Oct '14 -1.1

-0.9

+1.2

+2.1

+1.7

+1.6

+2.3

2% 1%

Year

2009

2010

2011

2012

2013

Turnover in PLNbn

582.8

593.0

646.1

676.0

685.7

-1%

y/y (%)

+4.3

+5.5

+11.6

+5.6

+2.3

Residential Construction Dwellings

2009 2010

2011

2012

2013 Jan-Oct y/y

178.8

174.9

184.1

165.1

138.7

158.1

162.2

141.8

(in '000 units)

Producer Prices

+4.2

y/y (%)

Oct 14

-2.8

+0.6

-0.2

Aug 14

-4.9

Housing

0.0 +3.6

-2.2

Jun 14

Clothing, shoes

+0.1

Jun '14

m/m (%)

m/m

Apr 14

0.0 +3.8

-2,0

Feb 14

Alcohol, tobacco +4.0

-1.6

Oct 13

-2.1

Dec 13

-1.1

Month y/y

Aug 13

-1.7

y/y m/m y/y m/m

Retail Turnover

Jun 13

Food & bev

y/y m/m y/y

Oct '14

Apr 13

y/y

Sep '14

Feb 13

Sector

Aug '14

Dec 12

Jul '14

Oct 12

Data in (%)

Industrial Output O utput

Permits

2014

(%)

133.6

+14.2

Commenced

142.9

127.4

129.0

+15.6

m/m (%)

-0.2

-0.1

+0.3

0.0

-0.3

m/m (%)

-2.3

-1.7

-0.1

+2.0

-8.5

+16.5

+3.5

U. construction

670.3 692.7 723.0

713.1 694.0

709.7

+0.3

y/y (%)

-0.7

-1.0

-1.8

-2.1

-1.5

-1.6

-1.2

y/y (%)

+5.4

+4.4

+1.7

+2.3

-1.9

+4.2

+1.6

Completed

160.0 135.7

152.5

114.2

-2.0

Year

2007

2008

2009

2010

2011

2012

2013

Year

2007

2008

2009

2010

2011

2012

2013

Source: Central Statistical Office (GUS)

y/y (%)

+2.0

+2.2

+3.4

+2.1

+7.6

+3.3

-1.3

y/y (%)

+10.7

+3.6

-3.5

+9.8

+7.7

+1.0

+2.2

Gross Domestic Product (ESA2010)

Month

Apr'14 May'14 Jun'14 Jul'14 Aug'14 Sep'14 Oct'14

Apr '14 May '14 Jun '14 Jul '14 Aug '14 Sep'14 Oct'14

Construction Output

Construction Prices Month

Month

Apr'14 May'14 Jun'14 Jul'14 Aug'14 Sep'14 Oct'14

Month

Period

Apr '14 May '14 Jun '14 Jul '14 Aug '14 Sep '14 Oct '14

m/m (%)

-0.1

0.0

m/m (%)

+3.2

+14.0

+16.9

+0.9

-5.4

+19.8

+7.2

y/y (%)

-1.5

-1.4

-1.2

-0.9

-0.8

-0.7

y/y (%)

+12.2

+10.0

+8.0

+1.1

-3.6

+5.6

-1.0

2007

2008

2009

2010

2011

2012

2013

Year

2007

2008

2009

2010

2011

2012

2013

Year y/y (%)

+7.4

+4.8

+0.2

-0.1

+1.0

+0.2

-1.8

y/y (%)

+15.5

+12.1

+5.1

+4.6

+11.8

-0.6

-12.0

Source: The Central Statistical Office of Poland, GUS

Gross Wages

131.7

146.1

GDP in PLN bn current prices

Growth y/y unadjusted

Current account def. in % of GDP

Q3 2014

+3.3%

426.836

n/a

Q2 2014

+3.5%

418,317

-1.2%

Q1 2014

+3.4%

403,121

-1.2%

Q4 2013

+3.0%

463,855

-1.3%

2013

+1.7%

1,662,052

-1.3%

2012

+1.8%

1,615,894

-3.6%

A: avg monthly wages in PLN B: indexed avg wages, 100=2005

Sentiment Indicators

2011

+4.8%

1,553,582

-5.0%

Sector

Economic sentiment and consumer confidence indicators

2010

+3.7%

1,437,357

-5.1%

163 3,747 164

Energy

6,736 205 6,358

193 6,020

183 6,392 194

Construction

3,895

166 3,706

158 3,884

166 3,872 165

Retail & repairs

3,456

147 3,544

151 3,577

153 3,532

Transportation IT, telecoms

3,913

138 3,666 130 3,650

129 3,710

151 131

6,695

174 6,987

181 6,835

177 6,835 177

Financial sector 6,602

148 6,747

152 6,738

151 6,360 143

National average 3,823

152 3,895

155 3,740

Source: Central Statistical Office (GUS)

149

3,781 154

0 -20 -40

Key Economic Data & Projections

100

Indicator

2011

2012

GDP change

+4.5%

+1.8%

+1.7%

+3.2%

Consumer inflation

+4.3%

+3.7%

+0.9%

+0.0%

Producer inflation

+7.6% +3.4%

-1.3%

-1.2%

+0.7%

CA balance, % of GDP

-5.0%

-3.7%

-1.4%

-1.8%

-2.4%

Nominal gross wage

+5.2%

+3.7%

+3.4%

+3.5%

+4.0%

Unemployment**

12.5%

13.4%

11.5%

10.9%

4.12

4.19

4.20

4.18

4.12

60 Nov 14

145 6,044 137

161 3,663 160 3,743

120

Aug 14

196 6,333 144 6,382

3,690

M ay 14

8,615

Manufacturing

C onsumer confidenc e (le ft a xis) Economic se ntiment (right axis)

Feb 14

Nov 13

Aug 13

Ma y 13

Feb 13

Nov 12

Q3 2014

Aug 12

Q2 2014

May 12

Q1 2014

Feb 12

Coal mining

Q4 2013

The economic sentiment (1990-2010 average = 100) is a composite made up of 5 sectoral confidence indicators, which are arithmetic means of seasonally adjusted balances of answers to a selection of questions closely related to the reference variable. Source: Eurostat

EUR/PLN

2013

*2014

*2015

Sources: NBP, BZ WBK, PKO BP, GUS *) projections **) year-end

weekly newsletter # 065 / 15th December 2014 / page 14

56.23 ↑

100 SEK

44.49 ↓

100 NOK

45.65 ↓

10,000 JPY

USD EUR 350

300

15.15 ↑

100 CZK 10,000 HUF

400

284.22 ↑ 135.27 ↓

Money Supply in PLN m

Jul '14

Aug '14

Sep '14

4.5%

4.4%

4.1%

PLN (up to 5 y )

4.8%

4.7%

4.8%

4.7%

4.5%

↓ Alior Bank

PLN (over 5 y)

4.7%

4.5%

↓ Asseco Pol.

PLN (total)

4.7%

4.4%

↓ Bogdanka

EUR (up to 1m EUR) 2.0%

1.9%

1.7%

1.6%

EUR (over 1m EUR) 2.7%

3.4%

3.1%

2.5%

Overnight

1 week

1 month

3 months

6 months

2.10%

2.08%

2.06%

2.05%

Lombard

NBP deposit

Rediscount

3.00%

1.00%

2.25%

167,008

166,104

171,649

574,529

578,485

574,606

122,209

124,986

124,389

985,769 1,003,128 1,003,354 415,261

428,597

424,867

125,902 1,011,930 437.323

1,002,137 1,020,561 1,021,824 1028,665

- Net foreign assets 301,207 304,359 310,172 311,298 Monetary base: Polish currency emitted by the central bank and money on accounts held with it. M1= currency outside banks + demand deposits M2= M1+ time deposits (inc in foreign currencies) M3= the broad measure of money supply Source: NBP

77.21

-6%

-5%

52.5

-2%

+14%

Change 1 week

-4%

-18%

Change end of '13

↓ BZ WBK

373.15

-4%

↓ Eurocash

39.01

-5%

-18%

WIG-20 blue chip index

25.3

-6%

-29%

19.35

-4%

-64%

2,360 2,360. 360.00

-4%

-24%

Change 1 week

-3% ↓

↓ KGHM

112

-5%

Change end of '

+2% ↑

-10%

↓ LPP

8,120

-8%

↓ mBank

483.6

-4%

-3%

8.85

-5%

-10%

Credit

↓ Pekao

184

-3%

+3%

The financial sector's net lending in PLN bn,

↓ PGE

19.8

-1%

22%

loan stock at the end of period

↓ PGNiG

4.5

-6%

-13%

Jul' 14

Aug' 14

Sep' 14

Oct' 14

49.49

+1%

+21%

Loans to customers

939,641

950,774

954,978

958,641

↓ PKO BP

36.41

-3%

-8%

- to private companies

274,549

277,482

280,248

279,124

↓ PZU

476.4

-1%

- to households

581,447

587,136

590,208

592,068

4.04

-4%

-26%

5.11

-4%

17%

Total assets of banks

1,678,129

1,718,251 1,737,728 1,742,288

Source: Central Bank NBP

-3% ↓ +2% ↑

↓ Kernel

↓ JSW

↓ Orange Pol.

Type of loan

52,265. 265.24

103.5

↓ Grupa Lotos

Warsaw Inter Bank Offered Rate (WIBOR) as of 12 Dec 2014

2.00%

164,008

4.4%

Reference

570,507

- Time deposits

WIG Total index

PLN (up to 1 year)

Oct '14

Monetary base

WIG-20 stocks Price Change Change in alphabetical 12 Dec 5 Dec end of order '14 '14 '13

May '14 Jun '14 Jul '14 Aug '14 Sep '14 Oct '14

Central Bank (NBP) Base Rates

M1 - Currency outside banks

as of 12 December 2014

↑ PKN Orlen

↓ Synthos ↓ Tauron

WIG Total closing index last three months 56,000 55,000 54,000 53,000 52,000 12 Dec 14

100 DKK

Warsaw Stock Exchange, rates in PLN

on loans to non-financial corporations

20 Nov 14

348.07 ↑

12 Dec 14

528.31 ↑

100 CHF

6 Oct 14

100 GBP

29 Jul 14

418.05 ↑

21 May 14

100 EUR

Key indices

Term / currency

450

12 Mar 14

336.39 ↑

2 Jan 14

100 USD

Stock Exchange

Average weighted annual interest rates

6 Oct 14

as of 12 December 2014

I nterest rates

28 Oct 14

100 USD/EUR against PLN

Central Bank average rates

12 Sep 14

Currency

Source: Warsaw Stock Exchange

Trade Poland's ten largest trading partners, ranked according to 2013

Poland exports and imports according to commodity groups, according to SITC classification EXPORTS in PLN bn Jan-Sep 2014

y/y (%)

share (%)

2013

EXPORTS in PLNbn

IMPORTS in PLN bn share (%)

Jan-Sep 2014

y/y (%)

share (%)

2013

share (%)

No Country

Jan-Oct share 2014

IMPORTS in PLN bn 2013

share No

Country

Jan-Oct share 2014

2013

54,009

+4.3

10.7

69,304

10.9

36,296

+3.9

7.2

47,906

7.4

1 Germany

148,094 26.1% 162,548 25.1%

1 Germany

124,792 21.8% 142,161 21.7%

7,729

+19.9

1.5

8,624

1.4

3,158

+5.8

0.6

4,150

0.6

2 UK

335,966

6.3%

42,138

6.5%

2 Russia

62,706 10.9% 79,578 12.1%

Crude materials except fuels

12,459

+2.1

2.5

15,744

2.5

16,368

+07

3.2

21,585

3.3

3 Czech Rep.

35,430

6.2%

40,110

6.2%

3 China

59,368 10.4%

Fuels etc

21,003

-6.1

4.2

30,013

4.7

55,523

-0.5

11.0

75,539

11.7

4 France

32,011

5.6%

36,367

5.6%

4 Italy

31,056 5.4% 34,940 5.3%

Food and live animals Beverages and tobacco

61,127 9.3%

1,471

+4.7

0.3

1,864

0.2

1,985

-0.6

0.4

2,646

0.4

5 Russia

25,034

4.4% 34,069

5.3%

5 Netherlands

21,277 3.7% 25,409 3.9%

Chemical products

46,392

+4.3

9.2

59,103

9.3

75,454

+6.7

14.9

92,917

14.3

6 Italy

25,808

4.5%

27,958

4.3%

6 France

21,780 3.8%

Manufactured goods by material

101,308

+2.8

20.1

129,915

20.3

90,508

+6.9

17.8

112,392

17.3

7 Netherlands

23,358

4.1%

25,707 4.0%

167,104

+4.0

32.9

216,608

33.4

8 Ukraine

10,922

1.9%

18,020

2.8%

8 USA

13,693 2.4%

17,431 2.7%

51,133 +16.6

10.1

58,210

9.0

9 Sweden

16,331

2.9%

17,581

2.7%

9 UK

14,687 2.6%

17,184 2.6%

10 Slovakia

14,368

2.5%

17,099

14,125

15,137 2.3%

Animal and vegetable oils

Machinery, transport equip.

190,119

+5.1

37.8

239,434

37.5