BZ WBK. Accumulate. Solid Earnings in Tough Environment. Banks. Current price PLN Target price PLN Update. Poland.

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1 3 March 2010 Update Banks Poland BZWB.WA; BZW.PW Accumulate (Upgraded) Current price PLN Target price Market cap Free float Avg daily trading volume (3M) Shareholder Structure PLN PLN 13.1bn PLN 3.9bn PLN 34.20m AIB 70.5% Others 29.5% Sector outlook Our recommended picks for the next few months are players with active corporate-banking departments (lower provisions, greater deposit expansion), and banks that offer attractive dividend yields. Our defensive approach to the sector stems from expectations of high provisions against retail loans in H In the second half of the year, we be able to determine whether the current recovery is a sustainable trend which will continue into the following year. If so, that would considerably improve the outlook for the future of Polish banks. Company Profile is one of the biggest banks in Poland. It is a universal bank which provides services both to individuals, and large corporations. Over the last two years, it has become one of the leaders in terms of operating efficiency and profit growth. Most of the deposits come from retail clients, while most loans are granted to corporations, including many developers. At the end of 2009, the Bank s capital adequacy ratio was 13%, with loans/deposits at 84%. Solid Earnings in Tough Environment With its solid results for FY09, safe capital adequacy ratio (13%) and good liquidity buffer (loans/deposits = 84%), has potential for further earnings improvement. The Bank is hoping its revenues will continue to outpace its costs. In 2009, the ratio of costs to income fell to 50%; in 2010, we expect it to decline further, to 48%. We believe the Bank's bottom line in 2010 will be very close to PLN 1bn, which represents a 13% increase in our forecast triggered by a change in our assumptions in the area of loan-loss provisions. The situation in the real-estate market is gradually stabilizing and the Bank created considerable provisions for retail loans back in FY10 P/E figures to 13, which represents a 17% discount to the median for the other banks. What is more, the 16.2% return on equity the Bank attained last year makes it a leader among the banks we cover, ahead of both Pekao and PKO BP. We set our price target at PLN per share (vs. PLN previously). The increase is a consequence of the Bank s decision to pay dividends (PLN 4 per share), an increase in relative valuation, a reduction in the risk-free rate (from 6.12% to 6.03%) and a shift in the valuation month. In our previous report, we recommended increasing exposure to in the event of a correction in the stock price. Since then, the price fell by 5%. Accordingly, we are upgrading our rating from hold to accumulate. Dividends The Management decided to pay dividends for FY2009, at 33% of net profit (PLN 292.3m), i.e. PLN 4 per share. At the current share price, this entails gross yield of 2.2%, i.e. has little impact on valuation. After Q4 09, the capital adequacy ratio figured to 13% (including 12.3% in Tier 1), which provides a good security buffer for future growth, further enhanced by the likely improvement in profits in the coming years. Thus is a positive surprise compared to our earlier expectations (we assumed that would first pay dividends from its profits for 2010). Important dates Q1 10 report vs. WIG PLN Divestment Cannot Be Ruled Out Yet Despite the fact that is currently one of the most profitable units of the AIB group, we cannot rule out a divestment, which would be bad news. We reiterate the view that the current valuation already discounts a certain improvement in s earnings, and a potential divestment decision by AIB could temporarily reduce the pace of earnings improvement. Looking at the results for the past two years, it appears that the problems of the strategic investor have had little impact on the s performance in Poland Marta JeŜewska (48 22) marta.jezewska@dibre.com.pl WIG (PLN m) F 2011F 2012F Net interest income Net interest margin 3.3% 2.8% 3.2% 3.1% 3.1% Income f/banking oper Operating income* Pre-tax income Net income ROE 18.4% 16.2% 15.8% 17.8% 17.4% P/E P/BV D/PS** Dividend yield 0.0% 2.2% 2.5% 4.2% 5.6% * before provisions; **dividends for the year, paid out the next year BRE 3 March Bank Securities 2010 does not rule out offering brokerage services to an issuer of securities being the subject of a recommendation. Information concerning a conflict of interest arising in connection with issuing a recommendation (should such a conflict exist) is located on the final page of this report.

2 Fourth-Quarter Results Reported vs. forecasted results We like the s Q4 09 earnings, though they will affect our long-term outlook on the Bank only to a limited extent. stood out in the industry, which saw its aggregate profit shrink by 36%. We have revised our forecasts for the following years, especially as far as forecasts for FY 2010 are concerned (+13.4%), mostly due to a reduction in our projections for loan-loss provisions. We have also increased our forecast of operating income before provisions by 3.5%, as we now expect slower growth in expenses. We did assume previously that loan-loss provisions would start going down in 2011, and therefore the revisions have a much lesser impact on our forecasts for the following years. At PLN 246m, net profit was far ahead of our expectations (PLN 172m), which allowed the Bank to beat our FY 2009 net profit expectations by 9% (PLN 886m vs. PLN 855m). The main driving force were the lower-than-expected loan-loss provisions (PLN 481m vs. PLN 549m). At the pre-tax level, the Bank s profit was 4% lower than in FY 2008 (PLN 1.163bn vs. PLN 1.211bn). Our forecast was ca. PLN 1.069bn. The nominal y/y increase in net income was a consequence of lower effective tax rate (19.2% vs. 21.2% in 2008) and lower minority interest (PLN 54m vs. PLN 99m, due to the decline in the profits of investment funds). (PLN m) Q409F Difference Q409 Change Q F Difference 2009 Change 2008 Net interest income % % % % Net fee income % % % % NIM 3.06% % % 2.72% % % Income f/ banking operations % % % % Operating expenses % % % % Operating income* % % % % Provisions % % % % -365 Pre-tax income % % % % Net income % % % % 855 Source:, * before provisions Net Interest Income At PLN 434m, net interest income was in line with our expectations (PLN 433m) and ahead of market expectations (PLN 421m). The strength demonstrated in this area in Q4'09 was a consequence of an improvement in the net interest margin, which was driven by higher loan margins, with some support also from the margin on deposits, which improved gradually. We believe still has room for improvement as far as net interest margin is concerned, but this potential will decline with time. We expect interest income to increase by 15% in 2010, driven by assets (+11%) and, above all, loan and deposit volumes (+5% and +10%, respectively). Net Fee Income In Q4 09, fee income brought about a negative surprise due to a negative balance on the distribution of insurance. In the final quarter of the year, the Bank revised its income for the entire FY We expect fee income to increase by ca. 9% in FY 2010, thanks to exposure to equity markets. Income from transaction fees will grow as well, though less fast. We expect fees on loans to be under pressure (competition will gradually intensify, plus, the 2009 base is high), and likewise for gains on currency translation. Trading Income Trading income surprised us on the upside in Q4 09 (PLN 76m vs. PLN 64m forecasted). Another positive development was the PLN 20m advance towards dividends from AVIVA s profit for FY 2009, which was paid during the quarter. We expect trading income to be under pressure this year. Provisions for client options in H1 09 (PLN 29m, vs. PLN 81m in 2008) had little impact on overall income. It is hard to predict whether AVIVA will pay an advance on its dividends for FY 2010 as well; if not, income from dividends will decrease in FY 2009 trading income was also improved by an revision in the valuation of CIRS (+PLN 38m). We have increased our forecasts for the coming years. An important component of trading income are swap points (PLN 215.4m vs. PLN 91.2m in 2008). While we believe that income from such swaps will be migrating towards interest income, we now see that our previous assumptions were overly conservative. 3 March

3 Structure of expenses Trading income structure (PLN m) Trading income, including Swap points Provisions for client options (81) (29) Capital gains 66 4 Dividends Adjustment in CIRS valuation 0 38 Other Source:, Operating Expenses The Bank's expenses in Q4 09 provided another positive surprise. As expected, payroll expenses increased substantially (PLN 240m), but non-payroll expenses surprised on the upside. Given the excellent earnings in FY 2009, we expected the Bank to be more inclined to incur expenses of this type, especially as the end of a budget year approached. (PLN m) Q108 Q208 Q308 Q408 Q109 Q209 Q309 Q409 Payroll expenses Administrative expenses Amortization and depreciation Total Source:, The CEO said that he expected revenue to continue outpacing expenses in FY 2010 as well, which should lead to another improvement in the cost/income ratio. We have factored this into our forecasts. We expect the ratio to decline from 50% in 2009 to 48%. Expenses might grow faster if income does. Provisions Provisions provided the biggest surprise, especially in the light of the Management s earlier declarations. This will have a positive impact on provisions in FY 2010, but has no impact on our forecasts for the following years (we expected a decline anyway). We are pleased with the fact that the costs of risk undershot expectations despite the annual review of the portfolio. The main source of provisions in FY 2009 were retail loans (PLN 337m out of PLN 481m). What is surprising in this context is the low level of provisioning in the corporate segment (PLN 146m). In FY 2009, the costs of risk in the segment were only slightly above 0.5% of gross loans (inclusive of leasing). The quality of mortgages practically did not change (0.83% vs. 0.81% in December 2008). Provisions for mortgages did not exceed PLN 10m. Thus, provisions against other retail loans figured to nearly PLN 330m in At the end of 2009, the portfolio of gross loans of this type figured to PLN 4.6bn, which puts the cost of risk at 7-8%. This is quite high compared to the market average. Loan-loss provisions by segment (PLN m) Q108 Q208 Q308 Q408 Q109 Q209 Q309 Q409 Corporate Retail Other Total Source:, We have lowered our forecast for loan-loss provisions in FY We expect provisions to continue increasing in H1 10 (due to the mounting unemployment, plus, the Bank will incur higher charges stemming from its exposure to mortgages). If no substantial new provisions for corporate loans are recognized, s provisioning may start to decline in H We believe the balance of risks does not allow us to be more sanguine about provisions, but we do see the potential for them to fall. The ratio of NPLs to total loans was 5.5% at the end of 2009 (5.4% at the end of Q3 09). We can see that this ratio is decelerating in cash loans and credit cards, which used to generate a 3 March

4 Gross loans considerable portion of overall provisions. The quality of the Bank's real property loans increased for the first time in five quarters, with the NPL ratio going down from 6.9% after Q3'09 to 6.8%. Despite this, the ratio for all corporate loans increased from 6.4% to 6.6%. Note that in the preceding quarters, property loans were the key factor driving the quality of corporate loans down. Volumes The loan portfolio did not change significantly compared to the preceding quarter. Gross loans declined by over PLN 800m (including a PLN 1bn drop in the corporate segment). Mortgages were the only component of the portfolio to show growth. The exposure to corporate property loans decreased. The Bank declared that this effect would not continue in 2010 at the same scale. It will, however, slow down the expansion in total loans. We expect the portfolio of net loans to increase by 4.8% in 2010 (+6% for gross loans). This less than the growth rate assumed for the market (ca. 7.3% y/y), but more than in our previous report for (+3.5% y/y). We see the opportunity for retail loan volumes to outpace the market, and we expect slightly lower provisions than before. (PLN m) Q108 Q208 Q308 Q408 Q109 Q209 Q309 Q409 Corporate Leasing Other Mortgages Total Source:, Deposits Deposits also declined slightly q/q, and by 4% y/y. Corporate deposits shrank in the final quarter; compared to the end of 2008, their level was also affected by the withdrawal of large deposits) (PLN 2.8bn), which had been included there since the start of the year. The loans/deposits ratio figured to 84%, which gives the Bank a considerable liquidity buffer. The decline in market shares in deposits will force the Bank to intensify efforts to retain them this year, which reduces the potential for an improvement in deposit margin; still, with s current liquidity situation, this should not become a source of considerable pressure. (PLN m) Q108 Q208 Q308 Q408 Q109 Q209 Q309 Q409 Retail , Corporate , Total Source:, Overview of quarterly results (PLN m) Q108 Q208 Q308 Q408 Q109 Q209 Q309 Q409 Q/Q Y/Y Net loans % -1.6% Deposits % -3.7% Assets % -5.9% Net interest income % 1.3% Net fee income % -3.7% Trading income % % Dividends, sale of shares, etc Income from banking operations % 11.3% Other net operating income % 78.3% Banking income % 11.9% Operating costs, amortization and depreciation % 10.6% Operating income before provisions % 13.3% Provisions % -66.6% Pre-tax income % 312.1% Tax % 199.1% Minority interests % -1.0% Net income % 500.9% Source:, 3 March

5 Valuation We used the same valuation methods for as described in the previous update (19 January 2010). We calculated our nine-month price target based on two valuation methods: the discounted dividend model and relative valuation, to which we assigned weights of 80% and 20% respectively. Note that the price multiples of some of the banks do not accurately reflect their medium-term earnings potential because of high one-time charges which are expected to be recognized at different points of the provisioning cycle (e.g. Kredyt Bank is going to book a one-time charge in 2009, and at the same time generate a one-time gain from the divestment of śagiel). Discounted Dividend Model We based our valuation on the Gordon model formula P/BV=(ROE-g)/(COE-g), which we used to calculate the implied Price-to-Book Value multiple. The P/BV ratio depends on our assumed ROE (return on equity), COE (cost of equity), which is the sum of the risk-free rate and the risk premium entailed in an investment in the Bank, and a long-term growth rate (g). Our valuation methodology has not changed since our previous research report. Long-term ROE is the value forecasted for FY2018. The earnings distribution ratios projected for the last two years of the forecast horizon reflect the dividend potential resulting from the Bank s profitability. To calculate the retention ratios necessary to maintain long term growth, we used the formula: dividend payout ratio = 1 g/roe. Dividends The Bank is planning to pay PLN 4 per share in dividends from its profit for FY 2009 (33% of consolidated net profit and 30% of standalone profit). This is a positive surprise in the light of our earlier assumptions. We did not expect the Bank to pay dividends until this year s profits come in. We expected the dividend payout ratio to increase from 30% to 75% in In the two final years of the forecast, the payout ratio was to be calculated using the 1 g/roe formula. We have taken this year s dividend plans into account, and we have increased our projected payout rate for the ensuing years from 33% to 78% in Cost of Equity The risk-free-rate is equal to the yield on 10Y T-bonds prevailing on the date of valuation. The assumed risk premium is an unchanged 5%, and the beta is 1. This has not been changed since our last report. 10Y Treasury yield at the close of trading on 1 March 2010, was 6.029%. The resulting COE is 11.03%. In our previous report for, the risk free rate was 6.12%. Change in the riskfree rate and the shift of the month when fair value is determined from December to February have had an slight positive impact on the valuation. We are increasing our DDM valuation by 4.5%, of which ca. 3pp is accounted for by this change. 3 March

6 DDM Summary (PLN/share) F 2011F 2012F 2013F 2014F 2015F 2016F 2017F 2018F + Risk-free rate 6.03% 6.03% 6.03% 6.03% 6.03% 6.03% 6.03% 6.03% 6.03% 6.03% 6.03% Risk premium 5% 5% 5% 5% 5% 5% 5% 5% 5% 5% 5% Beta Cost of equity 11.03% 11.03% 11.03% 11.03% 11.03% 11.03% 11.03% 11.03% 11.03% 11.03% 11.03% EPS Pct. y/y change in EPS 3.6% 12.1% 27.9% 10.0% 11.3% 6.0% 5.4% 5.1% 4.3% 3.7% BVPS Pct. y/y change in BVPS 19.6% 11.8% 14.2% 11.2% 9.7% 7.2% 5.4% 4.5% 4.4% 4.5% ROE 16.2% 15.8% 17.8% 17.4% 17.6% 17.2% 17.0% 17.1% 17.0% 16.9% Long-term ROE 16.9% Growth rate 4.0% Implied P/BV Equity at year-end Equity at year-end Equity at year-end Equity at year-end Equity at year-end Equity at year-end Equity at year-end Equity at year-end Equity at year-end Equity at year-end DPS 4.0** DPS/EPS 32.9% 32.9% 42.9% 52.9% 62.9% 72.9% 77.9% 77.9% 76.5% 76.4% Discounted DPS Total discounted DPS Fair value MTP Current price 180 Upside / downside potential 16.3% Source: * risk free rate = 10Y Treasury yield as of 1 March ** Management recommendation, not passed by the AGM March

7 Relative Valuation Bank multiples (2 March 2010) We compared the relative value of the bank stocks on the basis of weighted average values of their expected FY 2010 P/BV ratios (50% weight), FY 2010 P/E ratios (25% weight), and FY 2011 P/E ratios (25% weight). The resulting value represents just 20% of our target prices. As the situation of banks stabilizes, we may raise this ratio. This approach has not changed since our last valuation. We are increasing our valuation by 6% vs. our previous report, as we now expect a higher net profit in 2010 (the median for the other banks did not change significantly). P/BV P/O* P/E F 2011F F 2011F F 2011F Bank Handlowy ING BSK Kredyt Bank Millennium N.A Pekao PKO BP Getin Average Premium/discount to average 23.2% 17.0% 14.4% -1.6% -8.2% -2.3% -56.5% -25.8% 0.1% Median Premium/discount to median 23.8% 23.8% 25.1% -0.7% -8.8% -4.1% -22.7% -17.1% 1.4% Operating income per share BVPS EPS Weights 50% 25% 25% Average-based valuation Source: * Operating income before provisions FY10 ROE vs. FY10 P/BV FY11 ROE vs. FY11 P/BV 18.0% 20.0% PKO BP 16.0% Pekao PKO BP 18.0% Pekao 14.0% ING BSK FY10 ROE 12.0% 10.0% Bank Handlowy Getin FY11 ROE 16.0% 14.0% Kredyt Bank ING BSK Getin Bank Handlowy 8.0% Millennium 6.0% Kredyt Bank 12.0% Millennium 4.0% FY10 P/BV 10.0% FY11 P/BV Source: Valuation Summary We calculated our nine-month price target based on two valuation methods: the discounted dividend model and relative valuation, to which we assigned weights of 80% and 20% respectively. An overview of our valuation is presented below. Valuation Summary Price Weight DDM fair value % Relative valuation % Weighted average MTP Source: 3 March

8 INCOME STATEMENT (PLN m) F 2011F 2012F Net interest income Non-interest income Fee income Trading income Income from banking operations Other net operating income Total banking income Non-interest expense Payroll expenses Amortization and depreciation Other expenses Operating income before provisions Provisions Equity in income of associates Pre-tax income Tax Minority interests Net income Dividends paid CORE RATIOS F 2011F 2012F Net interest margin (total assets) 3.5% 3.3% 2.8% 3.2% 3.1% 3.1% Net interest margin (interest-bearing assets) 3.7% 3.6% 3.0% 3.3% 3.3% 3.2% Interest spread 3.4% 3.2% 2.7% 3.0% 2.9% 2.9% Costs / Income 52.8% 51.2% 49.7% 48.1% 48.2% 47.5% Costs / Assets 4.2% 3.4% 2.9% 2.9% 2.9% 2.8% Payroll expenses / Income 28.5% 27.7% 27.2% 26.4% 26.8% 26.5% Provisions / Operating income -0.3% -23.1% -29.3% -26.4% -12.2% -11.2% Provisions / Loans 0.0% -1.2% -1.4% -1.4% -0.6% -0.6% Non-interest income / Total income 56.5% 49.4% 52.1% 48.5% 48.6% 48.0% Operating income / Assets 3.8% 3.2% 2.9% 3.2% 3.1% 3.1% ROE 23.0% 18.4% 16.2% 15.8% 17.8% 17.4% ROA 2.6% 1.7% 1.6% 1.7% 2.0% 2.1% ANNUAL GROWTH RATE F 2011F 2012F Net income 26% -10% 4% 12% 28% 10% Operating income before provisions 29% 13% 4% 10% 6% 9% Total banking income 24% 9% 1% 7% 7% 7% Net interest income 25% 27% -4% 15% 6% 8% Net non-interest income 24% -4% 7% 0% 7% 6% Non-interest expense 21% 6% -2% 4% 7% 6% 3 March

9 BALANCE SHEET (PLN m) F 2011F 2012F Cash and central bank balances Receivables from financial institutions Debt securities Loans Equity investments Fixed assets Other assets Total assets Liabilities to financial institutions Deposits Securities outstanding Subordinated debt Other debt Equity Share capital Total equity and liabilities F 2011F 2012F NPL / Loans 2.8% 2.9% 5.5% 6.9% 6.9% 6.9% NPL /Assets 1.7% 1.8% 3.6% 4.4% 4.4% 4.4% Provisions / NPL 85.2% 85.7% 58.2% 61.7% 65.7% 67.2% Provisions / Total loans 2.4% 2.5% 3.2% 4.3% 4.6% 4.7% Provisions / Assets 1.4% 1.5% 2.1% 2.7% 2.9% 3.0% ASSET ANALYSIS F 2011F 2012F Equity /Assets 10.5% 8.7% 11.0% 11.1% 11.7% 12.0% Loans /Assets 57.9% 61.2% 64.0% 60.3% 60.1% 60.7% Deposits / Assets 72.0% 74.5% 76.3% 75.3% 74.8% 74.6% Loans / Deposits 80.5% 82.1% 83.9% 80.1% 80.4% 81.4% Loan CAGR 35.9% 46.7% -1.6% 4.8% 7.2% 10.0% Deposit CAGR 22.9% 43.8% -3.7% 9.7% 6.9% 8.6% Asset CAGR 25.3% 39.0% -5.9% 11.1% 7.6% 8.9% 3 March

10 Michał Marczak tel. (+48 22) Managing Director Head of Research Strategy, Telco, Mining, Metals, Media Research Department: Marta JeŜewska tel. (+48 22) Deputy Director Banks Analysts: Kamil Kliszcz tel. (+48 22) Fuels, Chemicals, Energy, Retail Piotr Grzybowski tel. (+48 22) IT, Media Maciej Stokłosa tel. (+48 22) Construction, Real-Estate Developers Jakub Szkopek tel. (+48 22) Manufacturers Sales and Trading: Piotr Dudziński tel. (+48 22) Director Marzena Łempicka-Wilim tel. (+48 22) Deputy Director Traders: Emil Onyszczuk tel. (+48 22) Grzegorz Stępien tel. (+48 22) Tomasz Dudź tel. (+48 22) Michał Jakubowski tel. (+48 22) Tomasz Jakubiec tel. (+48 22) Grzegorz Strublewski tel. (+48 22) "Private Broker" Jacek Szczepański tel. (+48 22) Director Paweł Szczepanik tel. (+48 22) Sales Dom Inwestycyjny BRE Banku S.A. ul. Wspólna 47/ Warszawa 3 March

11 List of abbreviations and ratios contained in the report: EV net debt + market value EBIT Earnings Before Interest and Taxes EBITDA EBIT + Depreciation and Amortisation P/CE price to earnings with amortisation MC/S market capitalisation to sales EBIT/EV operating profit to economic value P/E (Price/Earnings) price divided by annual net profit per share ROE (Return on Equity) annual net profit divided by average equity P/BV (Price/Book Value) price divided by book value per share Net debt credits + debt papers + interest bearing loans cash and cash equivalents EBITDA margin EBITDA/Sales Recommendations of A recommendation is valid for a period of 6-9 months, unless a subsequent recommendation is issued within this period. Expected returns from individual recommendations are as follows: BUY we expect that the rate of return from an investment will be at least 15% ACCUMULATE we expect that the rate of return from an investment will range from 5% to 15% HOLD we expect that the rate of return from an investment will range from 5% to +5% REDUCE we expect that the rate of return from an investment will range from -5% to -15% SELL we expect that an investment will bear a loss greater than 15% Recommendations are updated at least once every nine months. This document has been created and published by S.A. The present report expresses the knowledge as well as opinions of the authors on day the report was prepared. The opinions and estimates contained herein constitute our best judgement at this date and time, and are subject to change without notice. The present report was prepared with due care and attention, observing principles of methodological correctness and objectivity, on the basis of sources available to the public, which S.A. considers reliable, including information published by issuers, shares of which are subject to recommendations. However, S.A., in no case, guarantees the accuracy and completeness of the report, in particular should sources on the basis of which the report was prepared prove to be inaccurate, incomplete or not fully consistent with the facts. S.A. bears no responsibility for investment decisions taken on the basis of the present report or for any damages incurred as a result of investment decisions taken on the basis of the present report. This document does not constitute an offer or invitation to subscribe for or purchase any financial instruments and neither this document nor anything contained herein shall form the basis of any contract or commitment whatsoever. It is being furnished to you solely for your information and may not be reproduced or redistributed to any other person. This document nor any copy hereof is not to be distributed directly or indirectly in the United States, Australia, Canada or Japan. Recommendations are based on essential data from the entire history of a company being the subject of a recommendation, with particular emphasis on the period since the previous recommendation. Investing in shares is connected with a number of risks including, but not limited to, the macroeconomic situation of the country, changes in legal regulations as well as changes on commodity markets. Full elimination of these risks is virtually impossible. It is possible that S.A. renders, will render or in the past has rendered services for companies and other entities mentioned in the present report. The present report was not transferred to the issuer prior to its publication. S.A., its shareholders and employees may hold long or short positions in the issuer's shares or other financial instruments related to the issuer's shares. S.A., its affiliates and/or clients may conduct or may have conducted transactions for their own account or for account of another with respect to the financial instruments mentioned in this report or related investments before the recipient has received this report. Copying or publishing the present report, in full or in part, or disseminating in any way information contained in the present report requires the prior written agreement of S.A. Recommendations are addressed to all Clients of S.A. This report is not for distribution to third parties. The activity of S.A. is subject to the supervision of the Polish Financial Supervision Commission. Individuals who did not participate in the preparation of this recommendation, but had or could have had access to the recommendation prior to its publication, are employees of S.A. authorised to access the premises in which recommendations are prepared, other than the analysts mentioned as the authors of the present recommendation. Strong and weak points of valuation methods used in recommendations: DCF acknowledged as the most methodologically correct method of valuation; it is based in discounting financial flows generated by a company; its weak point is the significant susceptibility to a change of forecast assumptions in the model. Comparative based on a comparison of valuation multipliers of companies from a given sector; simple in construction, reflects the current state of the market; weak points include substantial variability (fluctuations together with market indices) as well as difficulty in the selection of the group of comparable companies. Previous ratings issued for Rating Accumulate Reduce Buy Hold Reduce Hold Hold Date issued Price on rating day WIG on rating day March