MANAGEMENT BOARD REPORT OF THE ALIOR BANK S.A. GROUP FOR 2013 TABLE OF CONTENTS Letter from the CEO ...................................................................................................................... 4 Letter from President of the Supervisory Board ................................................................................ 5 I. Description of Alior Bank’s operations in 2013 ........................................................................ 8 1. The first year of listing of Alior Bank’s shares on the WSE ..................................................... 8 2. Crucial business initiatives executed in 2013 ....................................................................... 9 3. Financial results .............................................................................................................. 10 4. Acquisition of new customers ........................................................................................... 14 5. Distribution network and employment level ...................................................................... 16 II. External environment of the Bank’s operations ....................................................................... 19 1. Macroeconomic situation (trends in the economy, inflation, unemployment) ..................... 19 2. Financial markets ............................................................................................................ 21 3. External factors affecting the Bank’s operations in 2014 .................................................... 22 III. Situation in the banking sector .............................................................................................. 27 1. The banking sector in 2013 - structural data ..................................................................... 27 2. Results of the banking sector in 2013 ............................................................................... 27 3. Loan market .................................................................................................................... 29 4. Deposit base ................................................................................................................... 29 5. Equity and capital adequacy ratio .................................................................................... 30 IV. Financial results of Alior Bank S.A. Capital Group ................................................................. 32 1. Profit and loss account .................................................................................................... 32 2. Balance sheet .................................................................................................................. 37 3. Financial forecasts ........................................................................................................... 42 V. Operations of Alior Bank S.A. ............................................................................................... 44 1. Retail banking ................................................................................................................. 44 2. Corporate banking .......................................................................................................... 48 3. Treasury activities ............................................................................................................ 50 4. Capital investments ......................................................................................................... 50 VI. Business overview of the Alior Bank S.A. Group companies .................................................... 53 1. Alior Instytut Szkoleń ....................................................................................................... 54 2. Obrót wierzytelnościami .................................................................................................. 54 3. Centrum Obrotu Wierzytelnościami ................................................................................. 54 4. Alior Raty ........................................................................................................................ 54 VII. Events and contracts significant to the business operations of the Bank’s Group ...................... 57 1. Significant events ............................................................................................................. 57 2. Significant contracts ........................................................................................................ 58 3. Significant events linked to securities issuance ................................................................... 62 4. Significant events and contracts after the balance sheet date ............................................. 63 5. Significant post-balance sheet events relating to the Bank’s products .................................. 65 VIII. Report on the risk exposure of Alior Bank .............................................................................. 67 1. Market risk and liquidity risk management ........................................................................ 67 2. Operational risk management .......................................................................................... 75 3. Credit risk management ................................................................................................... 77 4. Capital management (ICAAP) .......................................................................................... 82 IX. Contingent liabilities ............................................................................................................ 85 X. Internal control system ......................................................................................................... 87 XI. Rating ................................................................................................................................. 90 XII. Corporate social responsibility .............................................................................................. 92 1. Relations with customers ................................................................................................. 92 2. Relations with employees ................................................................................................. 92 3. The Bank’s educational, cultural and charitable activities................................................... 93 4. Awards and honours ....................................................................................................... 93 XIII. Corporate governance .......................................................................................................... 96 1. Scope of corporate governance ........................................................................................ 96 2. Controls applied in the process of preparing financial statements ...................................... 96 3. Changes in the basic principles of management ................................................................. 98 4. Shareholders of Alior Bank S.A. ........................................................................................ 99 5. Alior Bank S.A.’s bodies ................................................................................................. 102 6. Remuneration of the Management Board and Supervisory Board members of Alior Bank S.A. ........................................................ 112 7. Registered audit company .............................................................................................. 114 XIV. Assessment of operations of the Alior Bank Group and the prospects for 2014 ...................... 116 1. Assessment of operations of the Alior Bank S.A. Group ................................................... 116 2. Development prospects of the Alior Bank S.A. Group ...................................................... 116 XV. Management representations .............................................................................................. 120 1. Appointing the registered auditor ................................................................................... 120 2. Policies adopted in the preparation of financial statements ............................................. 120 3. Material contracts ......................................................................................................... 120 4. Court proceedings in progress ........................................................................................ 120 LETTER FROM THE CEO Warsaw, 5 March 2014 Dear Sirs, Behind us is a first year of Alior Bank’s presence on the Warsaw Stock Exchange. After the successful IPO, the value of shares increased by over 30%, which has certainly contributed to an increased interest of investors in the company. Which was further confirmed by the Bank being included in the elite WIG 20 index as from 21 March 2014. Nevertheless, this year has not been easy. Inspite of economic slowdown, the Bank not only has achieved satisfactory results, but also has increased scale of its operations and market share. In the retail sector, Alior Bank maintained its position as the leader in new customer acquisition. 632 thousand new custom- ers has trusted in us in 2013, which is more than in any other Polish Bank. Changing the accounting policy related to the recognition of bancassurance income was another chal- lenge for Alior Bank. In October 2013 the Management Board of Alior Bank, took the decision to resign from recognizing any income at the moment