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The Israel Business Conference, December 2010

POLAND of Opportunities

Polish Privatisation Programme

POLAND of Opportunities

Polish Privatisation Programme

Location: Central EuropeCapital: WarsawPopulation: 38.1 millionCurrency: złoty (PLN)Member of the European Union

since 2004

Size: 8th largest economy in the EU, 21st largest economy globally(c,d)

GDP growth (Q3 of 2010): 4.2 % (a)

Unemployment rate (Q3 of 2010): 11.5 % (a)

Inflation rate (Q3 of 2010): 2.2 (a) FDI inflow (Jan.-Sept. 2010): EUR

5.3 bn (b) 2

Poland in a snapshot

Source: (a) Polish Central Statistical Office(b) National Bank of Poland

(c) Eurostat(b) IMF

GDP growth in Q3 2010 in selected EU countries (a) (c)

September 2009 3

During the crisis year 2009 Poland was the only country in EU to

avoid recession

Poland – attractive direction for investors

In the City of London Corporation “2010 World Financial Centers” ranking, in the category ‘regional financial centre’ Warsaw ranked higher than cities such as Moscow, Budapest and Athens.

WSE ranks 1st in the CEE region in terms of the number of listed foreign issuers (28).

Warsaw is the sole city in the region which was listed in the TOP 20 most favourable locations for investors (U.N. World Investment Prospectus Survey 2010.12); it also ranked 2nd in the 2009 European Cities Monitor (Cushman&Wakefield) ranking.

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Media about Polish Privatisation (1)

• ‘The country has become the EU’s largest building site, thanks in large part to the €67 bn in structural funds flowing into Poland during the 2007-2013 budget cyckle. The signs of activity are visible everywhere, from the south-easten border with Ukraine, site of the future A4 highway linking the region to Germany, to the outskirts of Warsaw, where a new bridge is being thrown across the Vistula River’

Financial Times, Buoyant future hangs in the balance, November 2010

• ‘Last year, Poland’s decision to cut its income – tax rate, and the resultant economic stimulus, helped it become the only European Union country to dodge recession. But it also sowed the seeds of a ballonooning deficit.’

The Wall Street Journal, Poland’s Treasury seeks to Rebrand Warsaw,

October 2010

September 2009 5

• ‘Die Aktienverkäufe in Warschau und die weiter steigende Kurse waren nur möglich , weil in Polen ein Aktienfieber unter den Privatanleger augebrochen ist und gleichzeitig internationale Anleger das Land entdeckt haben. Dies geschah, nachdem Polen im Jahr 2009 ein einziges Land in Europa ein nennenswertes Wirtschaftswachstum von 1,7 Prozent aufweisen konnte. Analysten erwarten auch für das kommende Jahr eine Fortsetzung mit Wachstumsraten von möglicherweise mehr als 4 Prozent’’

Frankfurter Allgemeine Zeitung ,Polen sieht sich als

China Europas, November 2010

• ‘Poland has been one of the bright spot in European ECM in 2010, with the country seemingly able to withstand to volatile secondary markets that have let to many deals being cancelled across the rest of EMEA’

International Financing Review, Poland pays up,

November 2010

Media about Polish Privatisation (2)

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Upcoming events in Poland – the chance of success

► Accelerates spending and investment decisions

► Huge spending plans until 2012:9 (expressways, highways,trains)for roads EUR 30 bn(b) for rail EUR 7.5 bn(c)

► Increased currency stability

► Balanced guarantee-based package worth EUR 22.7 bn

► EUR 67 bn(a) up to 2013

Source: a) National Cohesion Strategy, p. 116b) Ministry of Infrastructure – the Programme for National Roads Construction 2008-2012c) Ministry of Infrastructure – Master Plan for the Polish Rail Transport until 2030 – Scenario 3 (optimistic)

PLN/EUR: PLN 4.02 as of 2nd December, 2010

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Privatisation Plan for the years 2008-2011 Unique investment opportunities

Privatisation Plan – key facts

The Privatisation Plan for 2008-2011 fulfills Prime Minister Donald Tusk’s November 2007 inaugural commitment to increase the pace of privatisation

Prepared by Minister of Treasury Aleksander Grad, the 4-year privatisation acceleration program was adopted by the Council of Ministers on April 22, 2008

One of the most ambitious privatisation plans in the world:

offers flexible, various privatisation procedures adapted to specific company characteristics

envisages privatisation of 802 state companies from over 30 business sectors and producing revenues of PLN 37 bn (USD 13.1 bn*). At the moment revenues have reached PLN 33.5 bn

(USD 11.7 bn*)

PLN/USD : average yearly exchange rate for 2008: PLN 2.41 and for 2009: PLN 3.12. For 2010 exchange rate set at PLN 2.97* Calculation based on average exchange rate for 2008,2009 & 2010

What:

When:

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Privatisation Plan – key facts

bn (USD 13.1 bn*). At the moment revenues have reached PLN 33.5 bn (USD 11.7 bn*)

Privatisation in figures (2010 YTD): 398 projects are being carried out 361 projects have been completed so far privatisation revenues in 2010 PLN 26 bn (USD 8.75 bn)

PLN/USD : average yearly exchange rate for 2008: PLN 2.41 and for 2009: PLN 3.12. For 2010 exchange rate set at PLN 2.97* Calculation based on average exchange rate for 2008,2009 & 2010

Status:

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Significant decrease of government presence in the economy (The government‘s aim is to reach the level of 10% of public sector contribution to

Polish economy)  Result:

1989 2000 2008

19.8%25.8%

> 75%

Public sector contribution to Polish GDP (a)

1010

Privatisation plan - sector opportunities

Privatisation is being implemented in accordance with the government’s plans and strategies for each sector

Investment opportunities extend to a variety of companies:

selected for privatisation from over 30 sectors

located throughout the country

with different shareholding structures

Wide variety of companies

Power/Energy Chemicals

Machines

Transport Sea Transport/Ports

FoodsAnimal and Plant

Husbandry

Furniture Mining - Coal

Commerce Telecommunications

ShipbuildingElectronics Electrical

Engineering

Freight and Forwarding

Rock Based Raw Materials

Construction and Materials

DistilleriesAgriculture Agricultural

Products

Timber and PaperClothing and

Clothing MaterialsPrinting and Publishing

Health Resorts Tourism Pharmaceuticals

Service Companies Enterprise Agencies Others

Financial Mining -Lignite

Metallurgy Defense

Petroleum

Metals

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Privatisation revenues

Privatisation revenues are allocated to

1991-1996 1997-2006 2007-to date

*According to Commercialisation and Privatisation Act PLN/USD: PLN 3.07 as of 2nd December, 2010

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Privatisation model - Trade sale

Trade sale – overview

Addressed to trade investors as well as financial investors

the bulk of privatisation projects concern the following industries transport (53), machines (34), construction (24), food-procesing (24) and chemicals (10)

most companies are intended for privatisation in the central part of Poland (15), and in the Silesia region (9)

since November 2007, most privatisation projects have been implemented through negotiations (29 projects), public auction (24), public tender (22)

public auction is the fastest privatisation procedure

13 PLN/USD: PLN 3.07 as of 2 nd December, 2010

Publicly announced offer

Public tender

Negotiations undertaken on the basis of a public

invitation

Admission of the bid submitted by an entity

announcing the call

Publicly announced auction

Trade sale: privatisation procedures

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Trade investors taking part in Privatisation Plan

Between April 2008 and October 2010 investors from

13 countries acquired shares in 30 companies for

the total amount of over PLN 2 billion

ESP 1 transaction worth USD 0.52 million

GER 6 transactions totalling USD 13.8 million

FRA 2 transactions totallingUSD 56.5 milion

GBR 2 transactions totalling USD 14.9 million

AUT 3 transactions worth USD 31.7 million

CYP 2 transactions totallingUSD 2.9 million

FIN 1 transaction worthUSD 0.02 million

NED 4 transactions totalling USD 146.7 million

LUX 3 transactions totalling USD 1.0 million

SWE 4 transactionstotalling USD 0.42 billion

HUN 1 transaction totalling (USD 28.4 million)

USA: 3 transactions totalling USD 0.06 million)

CAN:: 1 transaction worth USD 6.5 million

Source: a) Ministry of Treasury, transactions completed between 22 April 2008 and 31 August 2010 (excluding transactions concluded in the capital markets)

PLN/USD: PLN 3.07 as of 2 nd December, 2010

ISR: 6 transactions worth (USD 25.7 million)

Pharmaceutics

Examples of trade sale transactions (1)

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PGE Zespół Elektrociepłowni Bydgoszcz (power plant)Transaction worth: PLN 959 013, 36 (USD 312 382.08)*PGE Elektrociepłownia Gorzów (power plant)Transaction worth: PLN 10 585 157, 37 (USD 3 447 933.99)*

Energy

Sold to a main shareholder PGE S.A.

PLN/USD: PLN 3.07 as of 2nd December, 2010

Polfa PabianiceSold to Zakład Farmaceutyczny Adamed Pharma (Polish pharmaceutical company)

Real Estate

Future opportunities in sectors:Health

Resorts

ChemicalsMachines

Road transport

Examples of trade sale transations (2)

September 2009 16

Road transport

PKS- passenger transportation companies6 transactions totalling: PLN 77 million (USD 25 million)*Sold to Israeli trade investor- Mobilis (subsidiary of Egged)

Egged, the leading public transport operator in Israel, established in January 1933, when four public transport companies were merged into on. Egged provides about 55% of public transport services throughout the country.

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Privatisation model – Capital market

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PLN/USD: PLN 3.07 as of 2nd December, 2010

Date CompanyDeal type

SectorSize USD m

Apr 2010

PZU IPO Insurance 2,628

Nov 2004

PKO BP IPO Banking 2,476

Oct 2009

PGE IPO Energy 1,944

Jun 2010

Tauron IPO Energy 1,372

Nov 2010

PZU ABB Insurance 1,336

Oct 2010

PGE ABB Energy 1,297

Sep 2005

PGNiG IPO Oil & Gas 874

Nov 1999

PKN Orlen IPO Oil & Gas 801

Largest privatisations in Poland conducted through WSE(a)

* since November 2007 till December 2010

Transactions on capital markets – overview

Rights issue

Note: Blue colour shading indicates privatisation processes concluded over the last two years.

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IPO of the leading thermal

coal miner ($166m).

Reopening of IPO market in

Europe

IPO of a leading energy

group ($830m), despite

challenging market

conditions

IPO of the largest Polish energy group

( $2.1bn). Ranked as the largest IPO in

Europe for 2009.

Rights issue of PKO BP, the

largest Polish bank by assets

($1.6bn).Opening of rights issue market for financial

institutions in Poland

Nov-08 Jun-09 Nov-09 Jan-10 Feb-10 Mar-10 Apr-10 May-10 Jun-10 Aug-10 Oct-10 Nov-10

ABB of the leading

global copper producer:

10% of MoT shares

($723m)

Offered to US investors

Completion of

privatisation through sale of 46.7%

shares through ABB

($395m)

Sale of 10% of shares of

leading oil&gas

company through ABB

on WSE ($142m)

ABB of a 42% stake sold by the MoT and

state bank BGK

($119m)

IPO of Poland’s leading insurance

company ($2.7bn ). The largest IPO in Europe since

2007. Largest ever IPO in CEE

region

Second stage of privatisation.

Sale of 16.05% MoT shares on

the WSE through Fully Marketed Offer ($379m )

A 51.6% stake of the second largest utility company in Poland was

floated on the WSE on

30 June ($1.3 bn)

The remaining stake in TP S.A.,

a telecommunicati

ons company was sold on the

WSE on 5 August 2010

($292m*)

*PLN/USD: PLN 2.83 as of 19 October, 2010

Sale of 10% of shares (almost $1.4 bn). The biggest ABB

transaction in the history of

capital markets in Poland

IPO of the Warsaw Stock

Exchange – leading

European stock exchange. First

listing- Nov. 9th. ($424 million)

Key transactions on capital markets

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Privatisation - future opportunities on capital market

PZU – insurance Poland's largest insurance group; leading company

providing life and non-life insurance. The Company

was floated on the Warsaw Stock Exchange in May

2010. It was the 2nd largest IPO in Europe in 2010 YTD

PKO BP Bank the leader of the Polish banking

sector. In addition to its core banking activity

PKO BP offers specialised services, i.a. various financial

products, leasing funds, investment

fund units, electronic payment services – it was listed on the

WSE in 2004

BGZ Bank one of the leading banks on the Polish market, providing

services for the agriculture/farming and food processing sector, as well as for inhabitants of rural areas and small towns. IPO of the

company is planned for 2011-2012

DIPSERVICE, TON AGRO – real estate

lease of properties from companies’ portfolio, lease of

office space in the Warsaw area; The companies also acquire

properties and prepare them for commercial investment

purposes.. It is expected that the new real estate holding,

comprising i.a. these companies will make a debut on the WSE in

2011

LOTOS- petroleum concern

activity in the field of crude oil extraction and

processing as well as distribution and sale of

wide range of petroleum products.

The deadline for submitting written

replies expires on 4 February 2011

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Warsaw as a regional Financial Center of Central – Eastern Europe

Warsaw

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Warsaw - Regional Financial Centre

(a) Based on FT Global 500(b) 2009 European Cities Monitor report by Cushman & Wakefield (c) OECD Factbook 2009(d) National Bank of Poland(e) Ministry of Economy & PAIiIZ forecasts

Warsaw is Poland’s business capital and one of the largest and most important urban centers in Central and Eastern Europe

As stated in 2010 World Financial Centers ranking prepared by City of London Corporation, Warsaw has surpassed cities like Moscow, Budapest and Athens as a regional financial centre

Moscow 35

Warsaw 36

Paris 27

London 25

Bucharest 30

Viewed as regional safe haven Poland maintained high level of FDI inflow, which in 2009 amounted to EUR 8.4bn(d), the highest in CEE. In H2 2010, the inflow of FDIs exceeded EUR 5.3bn(d). It is forecasted that the FDI inflow in the whole of 2010 will exceed EUR 10bn(e).

Number of new companies to establish their presence in the cities within the next five years (b)

Foreign direct investment (FDI) for the period of 1998-2007 (in USD billion*) (c)

PLN/USD: PLN 3.07 as of 2 nd December, 2010

Owing among others to the privatisation activities of the Ministry of Treasury, the Warsaw Stock Exchange is doing well, and therefore the largest global financial institutions cannot afford not to have a local office in Warsaw. J.P. Morgan, HSBC, BNP Paribas, Credit Suisse, UBS, Deutsche Bank, Master Card, Citigroup, Nomura, ING, Merrill Lynch, Goldman Sachs, and Morgan Stanley.

2323

Foreign companies & foreign investors at Warsaw Stock Exchange

( a) Investors in stock exchange turnover H1 2010 - presentation

Warsaw Stock Exchange lists many companies from the CEE region, such as: Kernel (Ukraine's largest vertically integrated agro-industrial company) New World Resources (producer of coal, the largest hard coal mining

company in the Czech Republic) Astarta Holding (an agro-industrial holding and one of the leaders of the

Ukrainian sugar sector) CEZ (leader on the Central and Southeastern European electricity market) Asseco Slovakia (co-founder of international Asseco Group, the fifth

largest IT Group in Europe)

31 3043 36 47

34 3739

3733

35 3318 27 20

2006 2007 2008 2009 H1 2010

Foreign Institutional Individual

Fore

ign

com

pan

ies

Fore

ign

investo

rs

Break-down of equity turnover at WSE (in %)(a)

Currently WSE has 28 domestic & 20 foreign Exchange Members including Credit Suisse, Goldman Sachs, HSBC Bank, J.P Morgan, Merrill Lynch, Societe Generale, UBS, Citigroup, Deutsche Bank(a)

Poland becomes increasingly important for the foreign financial institutions as evidenced, among others, by the following initiatives:

In May 2010 Credit Suisse re-opened its brokerage office in Warsaw

Goldman Sachs plans to open its office in Warsaw in the second half of 2010 following the motion approval by FSA (Financial Services Authority)

Citigroup opened an investment banking office in May 2010

In May 2010 UBS announced plans to strengthen its presence in Poland by expanding investment banking operations

Morgan Stanley announced plans to open an office in Warsaw by the end of 2010 once regulatory approvals are secured. On 12 August 2010 Morgan Stanley became the latest member of the WSE

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WSE is attractive for the world’s top tier international financial institutions

(a) WSE internet portal, 28 September 2010

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Global investment banks present in Warsaw:

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Investor Relations & Contact information

Ministry of Treasury of the Republic of PolandTel. (+48 22) 695 90 01Tel. (+48 22) 695 90 02Fax (+48 22) 629 98 38

E-mail: investor@msp.gov.pl

This presentation contains only introductory information which does not constitute any invitation or offer to sell, invest

or trade, nor does it constitute any invitation to place any offer to purchase, invest or trade the securities. The information presented herein is up to date as on 8December 2010.

This presentation can be distributed only as a complete document. The Ministry of Treasury of the Republic of Poland does not recommend services of any organisation using this document as part of their informational

and advertising activities.

Investor Relationswebsite

Investor Relations Centre

www.msp.gov.pl/en