DIRECTORS’ REPORT ON THE OPERATIONS OF BANK OCHRONY ŚRODOWISKA GROUP IN 2020 prepared together with the Directors’ Report on the operations of Bank Ochrony Środowiska S.A. Warsaw, April 2021 Contents SUMMARY OF THE FINANCIAL RESULTS OF THE GROUP ..........................................................................................................................5 I. FACTORS AND EVENTS AFFECTING THE FINANCIAL POSITION OF THE GROUP .............................................................. 9 1. Macroeconomic situation ........................................................................................................................................................................................... 9 2. Measures taken by the Bank in connection with the COVID-19 pandemic ............................................................................ 12 3. Significant events in 2020 ......................................................................................................................................................................................... 19 4. Main products, services and business areas ................................................................................................................................................ 22 4.1. Banking products and share in the banking sector ..................................................................................................................... 22 4.2. Brokerage business ............................................................................................................................................................................................ 27 5. Cooperation with foreign financial institutions in BOŚ S.A. .............................................................................................................. 29 6. Key capex projects ......................................................................................................................................................................................................... 29 7. Information on sales markets with a breakdown into domestic and foreign markets ................................................. 32 8. Selected figures relating to the Group’s operations .............................................................................................................................. 33 9. Development directions for the Bank ............................................................................................................................................................. 33 10. Organisation of the Group ....................................................................................................................................................................................... 35 II. FINANCIAL RESULTS AND ACTIVITY ................................................................................................................................................................. 35 1. Financial performance of the Group ................................................................................................................................................................. 35 1.1. Profit and loss account of the Group ...................................................................................................................................................... 35 1.2. Balance sheet total of the Group .............................................................................................................................................................. 40 1.3. Group contingent assets and contingent liabilities .................................................................................................................... 45 2. Financial results of the Bank ................................................................................................................................................................................. 46 2.1. Profit and loss account of the Bank ........................................................................................................................................................ 46 2.2. Balance sheet total of the Bank ................................................................................................................................................................ 50 2.3. Contingent assets and contingent liabilities of the Bank ........................................................................................................ 55 3. Difference between financial forecasts and actual performance ................................................................................................. 55 4. Information on key achievements in the field of research and development and information on expected development ..................................................................................................................................................................................................................... 56 III. RISK MANAGEMENT AT THE GROUP ............................................................................................................................................................... 56 1. Credit risk ............................................................................................................................................................................................................................. 56 2. FINANCIAL RISK ............................................................................................................................................................................................................. 60 2.1. Liquidity risk .............................................................................................................................................................................................................. 61 2.2. Interest rate risk.................................................................................................................................................................................................... 64 2.3. Currency risks ......................................................................................................................................................................................................... 69 2.4. Other market risks ................................................................................................................................................................................................ 71 3. Operational risk and compliance risk ................................................................................................................................................................ 71 3.1. Operational risk ...................................................................................................................................................................................................... 71 3.2. Compliance risk ..................................................................................................................................................................................................... 72 IV. ADDITIONAL INFORMATION .................................................................................................................................................................................. 73 1. Assessment of financial resources management .................................................................................................................................... 73 Director’s Report on the operations of the BOŚ Group in 2020 Page | 2 2. Dependence on partners ......................................................................................................................................................................................... 74 3. Related-party transactions ..................................................................................................................................................................................... 74 4. SEASONAL OR CYCLICAL NATURE OF ACTIVITY..................................................................................................................................... 74 5. The Bank’s agreements ............................................................................................................................................................................................ 74 5.1. Significant agreements ................................................................................................................................................................................... 74 5.2. Agreements with the Central Bank and regulatory bodies .................................................................................................... 75 5.3. Agreements for audit of financial statements ................................................................................................................................. 75 5.4. Auditor’s fee ............................................................................................................................................................................................................. 75 6. Non-recurring factors and events .......................................................................................................................................................................76 7. Court proceedings .........................................................................................................................................................................................................76