Bank Ochrony Środowiska S.A. Statement of Corporate Governance Rules Compliance in 2009

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1 Appendix to the Directors Report of BOŚ S.A. Group for the year 2009 Bank Ochrony Środowiska S.A. Statement of Corporate Governance Rules Compliance in 2009 (This statement complies with requirements of the Finance Minister Regulation of 19 February 2009 on current and periodic information to be published by issuers of securities and conditions for recognizing as equivalent information required under the law of non-member countries). I. Corporate governance rules BOŚ S.A. should comply with and links to websites where the rules are available for inspection with information in respect of compliance with corporate governance rules. In 2009, BOŚ S.A. complied with all corporate governance rules set out in the Code of Best Practice for WSE Listed Companies attached as appendix to Resolution No. 12/1170/2007 of the Supervisory Board of Giełda Papierów Wartościowych w Warszawie S.A. (Warsaw Stock Exchange) of 4 July The Annual General Meeting of BOŚ S.A. approved adoption of and compliance with these rules by the Bank in Resolution No. 26/2008 on 17 June The text of the Code of Best Practice for WSE Listed Companies is available, in Polish, on the Bank s website in the subpage Investors, where readers will also find the Bank s Annual Report[in English] for 2008 on compliance at Bank Ochrony Środowiska S.A. with the corporate governance rules. As of 1 January 2009 the Bank has launched its English language service on corporate governance compliance as recommended under section II.2 and in keeping with the scope and structure of a Model Service of Investor Relations at the WSE. II. Description of features of internal control and risk management systems BOŚ S.A. applies in the generating its financial reports. The Bank operates a system of managing the Bank adopted by the Bank Supervisory Board by resolutions at end 2007 which consists of: a risk management system, an internal control system. The purpose of risk management is to maximise goodwill of the Bank by adjusting risk levels and profiles to market conditions and the specific character of the Bank activities. Management of risk comprises risk identification, evaluation, measurement and monitoring, control and reporting, as well as making decisions and taking actions inducing changes in risk levels and profiles and monitoring results of such decisions and actions. Risk Management is conducted pursuant to written internal procedures approved by the Management Board. The risk management system sets out roles, duties and rights of directing bodies and offices and organizational units at the Bank involved in management of risk and interaction profiles between particular entities involved in the process. The purpose of the internal control system is to support decision-making to help ensure: the efficient and effective operation of the Bank, relevance of financial reports prepared to support the management of the Bank,

2 compliance of the Bank's activities with the law and internal regulations. The internal control system at BOŚ S.A. comprises closely interrelated diverse processes of managing and overseeing all areas of the Bank activities. The internal control system comprises: 1) risk control mechanisms, 2) services to watch compliance of the Bank's activities with the law and internal regulations, 3) an internal audit service which reports to the Bank Supervisory Board. The Bank has created an Internal Audit Committee. The members of the Supervisory Board were appointed as the members of Internal Audit Committee with the chairman becoming the head of Internal Audit Committee. Risk control mechanisms at the Bank, applicable in the generation of financial reports, include in particular: 1) a relevant organization of financial reporting process by defining internal legislation duties and responsibilities of organizational units involved in the preparation and verification of financial reports, 2) submission of financial reports to independent external auditors for verification, 3) data reconciliation, e.g., comparing source documents with balances and turnover figures, confirmation of: account balances by clients, the existence of assets, transactions/operations etc., 4) physical counts of assets and stocks, 5) general reviews performed at Supervisory Board and Management Board levels and by Committees/Groups functioning at the Bank based on reports presenting reviews of the particular areas of activity (or offices/organizational units of the Bank) for an assessment of the extent of realization by the Bank of goals and tasks assumed in financial plans, strategies, policies and other documents, 6) the ongoing monitoring, through the Bank Accounting Department, of the Bank's books and financial reports for compliance with binding regulations of the law and internal regulations, 7) control inspections/internal audit reviews, 8) follow-up functional control inspections. The monitoring of the Bank's operations for compliance with binding regulations of the law and internal regulations, including the effectiveness of risk control mechanisms implemented by the Bank, is an ongoing activity, especially through functional internal control inspections, by every employee at the Bank (the Head Office and in outlets) and their supervisors. Functional control is an integral part of managing and overseeing the Bank, i.e., the processes of planning, realization and supervision; it is viewed as a tool of management and supervision by the directors of the Company, managers of the Bank offices, Head Office organizational units and outlets of the Bank. The purpose of functional control is: 1) to identify risks facing the Bank in considered/performed operation/transaction and to mitigate their impact at the stage of operation/transaction planning, 2) to ensure compliance of operations with procedures, limits, standards and binding provisions binding generally as well as internally, 3) to prevent and to react to irregularities, instances of deviation from regulations of the law, to forestall the commission of mistakes or errors and to remove any mistake or error committed. Functional control is a basic control service at BOŚ S.A. III. Shareholders holding indirectly or directly by subsidiary entities at least 5% of the total number of votes at the general shareholders meeting the Bank. Shareholder Number of % share in the share 2

3 Narodowy Fundusz Ochrony Środowiska i Gospodarki Wodnej Państwowe Gospodarstwo Leśne Lasy Państwowe shares / votes at the general meeting capital / total number votes at the general meeting IV. Holders of special control rights on securities All shares the Bank are equal and each share represents one vote at the general meeting and equal right to dividend. V. Restrictions in the exercise of the right of vote and in transferring right of ownership to securities. Under the Bank's Articles of Association, in case a pledge or usufruct is established on a registered share, neither the pledgee nor the usufructuary may exercise the voting right under such share. Currently there are no registered shares in the Bank s share capital. VI. Directors appointment and dismissal rules. Under the Bank s Articles of Association, the Management Board shall consist of at least 3 natural persons, including the President, a Vice-President acting as the first deputy of the President, and the other Vice-Presidents and other Management Board members. The number of Management Board members is determined by the Supervisory Board. Management Board members are appointed by the Supervisory Board for a collective term of office of three years. Contracts of employment with Management Board members and competition contracts are concluded on behalf of the Bank s Supervisory Board Chairman. Contract conditions are laid down collectively by the Supervisory Board. The Management Board President has the right to apply for the appointment or dismissal of Management Board members. The Management Board President manages the entire body of the Bank's activities. The President of the Management Board in particular: issues internal regulations, duty instructions, rules of procedure, and other guidance acts governing the Bank's activities, manages the work of the Management Board, convenes meetings of the Management Board, accepts the agenda, and chairs meetings, appoints and dismisses directors of Head Office, organisational units and their deputies and directors of branches and their deputies, approves rules of organisation of the Bank branches and Head Office organisational units, issues post- internal audit recommendations. If the mandate of the Management Board President has expired or he has been dismissed as Management Board member, functions of Management Board President are fulfilled, and the entire body of the Bank business is managed, by the vice-president first deputy president of the Management Board, appointed with the consent of the Polish Financial Supervision Commission. In the absence of the Management Board President, the functions of this office are fulfilled, and the total body of activity of the Bank is managed (with the exception of power to appoint and to dismiss directors of Head Office organisational units and their deputies and directors of branches and their deputies) by, the vice-president first deputy president of the Management Board or another Management Board member the Management Board President may have appointed. Vice-Presidents or Management Board members manage the Bank s activities within the scope the Management Board President has laid down. 3

4 Under the Bank s Articles of Association, decisions related to the issue of BOŚ S.A. shares are taken by the Bank General Meeting. Anything related to share redemption is handled in pursuance of regulations set out in the Code of Commercial Companies. Nothing in the Bank s Articles of Association empowers Management Board members to make decisions applicable to share redemption. VII. Amendments to the Bank s Articles of Association. Any amendment to the Bank s Articles of Association may only be made by the General Meeting of the Bank. Resolutions to amend Articles of Association shall not pass unless on a majority of threefourths of the vote. VIII. Description of the procedures of the General Meeting and its main powers and rights of shareholders and exercise thereof The Company has a Rules of Procedure of General Meetings of BOŚ S.A. written policy which prescribes: the conduct of proceedings by the Chairman, the manner of voting on resolutions of the meetings, the manner of voting on the appointment and removal of Supervisory Board members, rules of electing Supervisory Boards by voting in separate groups. The written policy adopted by Resolution No. 7/2004 of an Extraordinary General Meeting of BOŚ S.A. on 23 March 2004 and Resolution No. 35/2005 of a General Meeting of BOŚ S.A was in effect up to 3 August On a General Meeting of BOŚ S.A. on 25 June 2009 the new resolution adopting entries from the Code of Best Practice for WSE Listed Companies and new law regulations. General Meetings are held at the registered seat of BOŚ S.A. Under the Articles of Association of the Company, the Bank Management Board calls an ordinary general meeting within 6 months of the lapse of the financial year. Extraordinary general meetings are called by the Bank Management Board at their own initiative, at request from the Supervisory Board or Shareholders representing at least 5% of the Company s share capital. Extraordinary general meetings may also be called by the Supervisory Board if deemed necessary, shareholders representing at least 50% of the Company s share capital. In such situation shareholders nominate the Chairman. Shareholders representing at least 5% of the Company's share capital may request an extraordinary general meeting to be called, as well as specific matters to be included in the agenda. Such requests have to be supplied in writing, with the grounds quoted, and must be submitted not later than 21 days before the proposed General Meeting date. The Bank Management Board keeps to their general principle of never cancelling or changing published dates of general meetings, save in extraordinary or strongly justified circumstances. To participate in a general meeting and to exercise voting rights a person is required to hold a power of attorney document (in writing or in the electronic form) signed by duly authorised persons, in accordance with an extract from the relevant register, or, in cases of natural persons, in accordance with Civil Code provisions. The Company checks these documents when preparing attendance registers before general meetings. A general meeting is opened by the Supervisory Board chairman or deputy chairman or another member of the Supervisory Board. In the absence of any of these, a general meeting would be opened by the president of the Management Board or another person appointed by the Management Board. Under the Rules of Procedure of General Meetings of BOŚ S.A. the person opening a general 4

5 meeting has a duty immediately to get a chairman elected, and to refrain from taking any other decisions concerning the merits of the case or formal reasons. Except for instances mentioned in the Commercial Companies Code, a general meeting is legally valid irrespective of the number of shares represented. General meeting resolutions are adopted by simple majority of votes cast, unless the Commercial Companies Code or Articles of Association of BOŚ S.A. provide for more stringent conditions of vote. An electronic system of vote counting is used for greater voting efficiency in adopting resolutions. General Meetings have the following competences: 1) to consider and approve the Management Board's Bank activity report and the Bank s financial report, 2) to consider and approve report the Management Board's activity report for the Bank Group and the consolidated financial report for the Bank Group, 3) to adopt a resolution on appropriation of profit or offset of loss, 4) to consider and approve the Supervisory Board s activity report, 5) to acknowledge the fulfilment of duties by members of the Bank's directing bodies, 6) to appoint or remove members of the Supervisory Board, 7) to make amendments to the Bank's Articles of Association, 8) to authorise the Supervisory Board to approve the consolidated text of the amended Articles of Association or to make material edits to it as specified in the resolution of the meeting, 9) to adopt resolutions on increasing or reducing the Company's share capital, 10) to adopt resolutions on issuing convertible bonds or bonds with priority to shares, 11) to make decisions on the establishment or cancellation of funds referred to in 36 subpar 1 of the Bank's Articles of Association, 12) to adopt resolutions on the merger, sale or liquidation of the Bank, 13) to appoint liquidators and set their remuneration, 14) to set the remuneration of Supervisory Board members, 15) to adopt resolutions on other matters brought up by the Management Board and the Supervisory Board or by shareholders in the manner provided for in the Code of Commercial Companies, the Banking Law Act, and the Bank's Articles of Association. Shareholders of the Bank hold the following corporate rights: 1. The right to participate in general meetings and the right to vote. Under art. 411 of the Commercial Companies Code, one share entitles its holder to one vote at the general meeting. Participation in a General meeting is based upon following conditions: - being the Bank s shareholder 16 days before the General Meetings. - having the written confirmation of entitlement to participate in a General Meeting issued by the entity that holds shares of the Bank no later than 1 day after the general meeting was announced and not before the announcement. 2. The right to submit a request to convene an Extraordinary General Meeting and to get particular items included on the agenda of the next general meeting. This right is vested in a shareholder or shareholders representing at least 1/20 of the Bank's share capital. Under art. 401 of the Commercial Companies Code, such a request should be submitted in writing to the management board no later than 21 days before the proposed date of the General Meeting. 3. The right to appeal against General Meeting resolutions. Under art. 422 of the Commercial Companies Code, a resolution of the general meeting contrary to the Company s Articles of Association or best practices, which violates the interests of the 5

6 company or is aimed at harming a shareholder may be appealed against by an action brought against the Bank to cancel the resolution. 4. The right to elect Supervisory Board members in separate groups. Under art of the Commercial Companies Code, at a request of shareholders representing at least 1/5 of the share capital, the supervisory board should be elected at the next general meeting of shareholders by voting in separate groups. 5. The right to demand information concerning the Bank. Under art. 428 of the Commercial Companies Code, during the proceedings of the general meeting of shareholders, the Management Board is obliged to give a shareholder, at their request, information concerning the company if this is justified for the assessment of an item included on the agenda. The Management Board shall however refuse to give information if: (i) to do so would be harmful to the Bank or an affiliate or a subsidiary or subsidiary cooperative, in particular because of the disclosure of any of the company's technical, commercial, and organisational information of a confidential nature, (ii) to do so could put a Management Board member at risk of bearing criminal, civil, or administrative liability. In justified cases, the Management Board may give information in writing within two weeks of the end of the general meeting at which the shareholder requested the information. 6. The right to request issuance in copy of the Management Board's Bank activity report and financial report along with a copy of the Supervisory Board activity report and of the independent auditor's opinion no later than fifteen days before the general meeting (art of the Commercial Companies Code). 7. The right to inspect, in the Management Board's office, a list of shareholders entitled to participate in the general meeting and to request a copy thereof (art of the Commercial Companies Code). 8. The right to request issuance of copies of items included on the agenda delivered during the week preceding the general meeting (art of the Commercial Companies Code). 9. The right to submit a request to inspect the attendance register of participants in the general meeting by a committee elected especially for this purpose, to be composed of at least three persons. Such a request may be submitted by shareholders holding one tenth of the share capital represented at the general meeting. The shareholders who put forward the request shall have the right to elect one member of the committee (art of the Commercial Companies Code). 10. The right to examine the minutes book and to demand that the Management Board issue certified copies of resolutions (art of the Commercial Companies Code). 11. The right to examine documents and to demand that the Management Board makes available for inspection, in the Management Board's office, copies of documents referred to in art of the Commercial Companies Code (in cases of mergers of companies), in art of the Commercial Companies Code (in cases of the Company being divided) and in art of the Commercial Companies Code (in cases of the Company being transformed). 13. The right to examine the share register and demand that an excerpt be made (art of the Commercial Companies Code). 14. To be in compliance with the Bank's Articles of Association, omission to consider an item included on the agenda of the proceedings at a request from shareholders or cancellation thereof from the agenda of the proceedings requires a resolution of the General Meeting passed by a majority of 3/4 of votes, upon the expression of consent from all applicants present at the General Meeting. 15. It has been an established practice for the chairman of the proceedings to enable every person objecting to a resolution to present their arguments and to quote their grounds for the objection. An appropriate provision is included in the Rules of Procedure of General Meetings of BOŚ S.A Under the established practice, statements of participants in General Meetings are accepted for inclusion in the minutes in writing. 6

7 Rules of Procedure of BOŚ S.A. General Meetings are available for inspection on the Bank website under Investors, Rules. IX. Composition and rules of procedure of directing bodies and supervisory bodies The Bank Management Board The Bank Management Board consisted, form 11 February 2009, of the following persons: 1) Mariusz Klimczak President of the Management Board, 2) Adam Zbigniew Grzebieluch Vice-President of the Management Board, 3) Jerzy Witold Pietrewicz Vice-President of the Management Board, 4) Marek Kazimierz Serafiński Vice-President of the Management Board, 5) Krzysztof Wojciech Telega Vice-President of the Management Board. On 11 February 2009 Polish Financial Supervision Commission gave their consent to the appointment of Mr Jerzy Witold Pietrewicz as member of the Management Board of BOŚ S.A. In line with the Supervisory Board of BOŚ S.A resolution dated 19 August 2008 Mr Jerzy Witold Pietrewicz has become the Vice-President First Deputy President of Management Board as soon as Polish Financial Supervision Commission gave their consent. On 10 July 2009 Supervisory Board of BOŚ S.A. adopted the resolution to dismiss Mr Jerzy Witold Pietrewicz from the position of Vice-President First Deputy President of the Management Board. On the same day the Supervisory Board adopted the resolution to appoint Mr. Stanisław Kolasiński as the Vice-President of Management Board of BOŚ S.A. On 29 October 2009 Supervisory Board of BOŚ S.A. adopted the resolution to appoint Mr Jacek Pierzyński as the Vice-President First Deputy President of the Management Board. The resolution will enter into force when Polish Financial Supervision Commission will give their consent. On 31 December 2009, the Bank Management Board consisted of the following persons: 1) Mariusz Klimczak President of the Management Board, 2) Adam Zbigniew Grzebieluch Vice-President of the Management Board, 3) Stanisław Kolasiński Vice-President of the Management Board, 4) Marek Kazimierz Serafiński Vice-President of the Management Board, 5) Krzysztof Wojciech Telega Vice-President of the Management Board Competences, rules of procedure and tasks of the Management Board were defined in detail in of the Articles of Association and in the Rules of Procedure of the Management Board (these documents are available for inspection on the Bank website under Investors, BOŚ S.A., Rules). According to provisions in these documents, the Bank Management Board is composed at least of 3 natural persons including: a President of the Management Board, a Vice-President First Deputy President of the Management Board and other Vice-Presidents or other members of the Management Board. Management Board members are appointed by the Supervisory Board for a collective term of three years. There is no restriction on the number of terms served. The Management Board President has the right to apply for the appointment or dismissal of Management Board members. Appointment of two members of the Management Board, including the President, is subject to the Polish Financial Supervision Commission giving their consent at the request of the Supervisory Board. Mandates of Management Board members expire as of the day a General Meeting has approved the activity report and the financial statement for the previous full financial year they served in the capacity of Management Board member. Mandates of Management Board members further expire due to death, resignation, or dismissal from the Management Board. 7

8 In the event that the mandate of President of the Management Board expires due to death, resignation, or dismissal from the Management Board, pending appointment of a President, functions of Management Board President are fulfilled, and the entire body of the Bank business is managed, by the Vice-President First Deputy President of the Management Board, appointed with the consent of the Polish Financial Supervision Commission. The Vice-President First Deputy President of the Management Board is empowered to manage the entire body of the Bank's activities. In the absence of the Management Board President, the functions of this office are fulfilled, and the entire body of the Bank business (with the exception of powers related to appointment and dismissal of directors of Head Office organisational units and their deputies and directors of branches and their deputies) is managed by the Vice-President First Deputy President of the Management Board or another member of the Management Board the Management Board President may have appointed. Vice-Presidents or members of the Management Board shall manage the Bank s activities within the scope laid down by the Management Board President The powers of the Management Board shall include any matter that does not fall within the powers of other directing bodies of the Bank. The Bank Management Board in particular: represents the Bank before courts, public administration bodies, and third parties, draws up draft strategies of the Bank, including its market mission and general risk level, as well as yearly financial plans of the Bank, adopts resolutions on the organisational structure of the Bank, its Head Office, as well as on establishing and liquidating branches and operations branches, adopts resolutions on the acquisition and transfer of real property or shares in real property, drafts legal instruments the issue whereof falls within the scope of powers of the General Meeting and the Supervisory Board, makes decisions in matters connected with entering into commitments or disposing of assets, where the aggregate value in relation to one entity exceeds 5% of the Bank's authorised share capital, adopts resolutions on the Bank s information policies, adopts resolutions on risk management at the Bank, adopts resolutions on prudential principles and stable management of the Bank business, lays down internal risk level limits in the particular areas of activity of the Bank to adjust them to general risk levels accepted by the Supervisory Board for the Bank, lays down internal capital valuation, capital management and capital planning procedures, supervises risk management related to activities of subsidiaries, adopts resolutions on the Management Board rules of procedure, to specify matters which cannot be adopted unless by collective resolution, and the procedural and formal requirements regarding the holding of meetings. Further, the Management Board collectively considers and adopts resolutions on: convening general meetings of the Bank, setting interest rates on deposits and credits and cash advances at the Bank, employee remuneration rules at the Bank, rules of procedure in appointing and dismissing authorised representatives and commercial proxies, other business provided for in the Bank Articles of Association or brought up by Management Board members for consideration. The Management Board collective powers of authority further included: reviewing draft internal Management Board President regulations, duty instructions, rules of procedure, and other guidance acts governing the Bank's activities, ongoing monitoring of risks occurring in the Bank's activities, making credit decisions attributed to the Management Board in the rules of procedure, 8

9 reviewing periodic progress reports on the Bank's activities, its condition economic and financial standing and organisational and personnel situation, evaluating effects of work of organisational units and outlets of the Bank, establishing quarterly work agendas of the Bank Management Board. The Management Board President manages the entire body of the Bank's activities, and in particular: issues internal regulations, duty instructions, rules of procedure, and other guidance acts governing the Bank's activities, manages the work of the Bank Management Board, calls and chairs meetings of the Management Board, appoints and dismisses Head Office organisational units and their deputies and directors of branches and their deputies, approves rules of organisation of the Bank branches and Head Office organisational units, issues post-internal audit recommendations within the internal control system now in operation. Under 23 the Articles of Association, persons authorised to submit declarations relating to financial rights and obligations and to sign in the name of the Bank include: the Management Board President acting individually or two persons acting jointly from among other Management Board members, commercial proxies or authorised representatives, acting within the scope of their authorisation arising within the limits of the powers granted. The Bank authorised representatives are appointed and dismissed by the Management Board President acting individually or two other members of the Management Board acting jointly. Within the scope of supervision, Management Board members: initiate business actions of Head Office organisational units they supervise, in line with the tasks assigned to them and directions of the Bank development set out in the Bank strategy papers and financial plans, watch the Head Office organisational units they supervise for the progress of work, the actions taken for adequacy, their advancement and eventual completion, as well as for compliance with the law and internal regulations, verify binding internal regulations and organisational structures for adequacy against current tasks of Head Office organisational units they supervise, in exercising functional control tasks, approve in supervised units quarterly follow-up control plans and progress reports, also issue post-internal audit recommendations for Head Office organisational units and outlets in areas of banking activity they supervise, watch risks in areas of activity they supervise, issue circular notes, give instructions regarding the manner in which the units they supervise are to handle the matter, put forward personnel policy proposals in Head Office units they supervise, and express opinions on candidates recommended to managerial positions. Supervisory duties are performed by the Management Board members in person. Individual Management Board members also supervise activities of branches for business merits in banking activity areas corresponding to the scope of duties in Head Office units they supervise. Individual Management Board members take care to ensure the right operation of the internal functional control system in the Bank activity areas they supervise, in order to warrant completion of the identified goals and tasks BOŚ S.A. Individual Management Board members, in exercising the above-named supervisory activities, may submit to the Management Board for consideration proposals and suggestions to be decided collectively by the Management Board, both about the total body of the Bank activities and the particular areas thereof. Management Board meetings are called by the Management Board President as needed, not less frequently than 2 times in a month. Management Board meetings are normally held every week. The Management Board President may, on a reasonable request from Management Board members or on 9

10 his own initiative, call Management Board meetings the in urgent procedure, setting a date, venue and agenda for the meetings. Only Management Board members and individuals the Management Board President may have invited to the meetings may participate in Management Board meetings. At a meeting, the Management Board President presents a draft agenda for approval, presides over the debate, gives the floor to participants, resolves procedural matters, recapitulates the discussion, formulates resolutions, motions and other decisions of the Management Board. Where there is good reason given business prospects or formal legal considerations, Management Board members may with the consent of the Management Board President submit to the Management Board for consideration a matter not previously included in the agenda. In the absence of the Management Board President, Management Board meetings are called by: Vice- President First Deputy President of the Management Board, or another member of the Management Board the Management Board President may have appointed. In such cases, Vice-President First Deputy President of the Management Board is required to attend the meeting. Management Board resolutions are adopted at meetings called in procedure specified in the Rules of Procedure of the Management Board. Resolutions pass by a simple majority of votes. Resolutions can be adopted if all members of the Management Board have been duly notified of the Management Board meeting, and if at least one half of all Management Board members participate in the meeting, including the Management Board President or in his absence the Vice-President First Deputy President of the Management Board, as well as the other Management Board member the Management Board President has appointed, if the meeting was called by him. In case of an equal number of votes, the casting vote is the Management Board President s or in his absence that of the Vice-President First Deputy President of the Management Board. This rule also holds if in the of the Management Board President the total body of activities of the Bank is managed by the other Management Board member the Management Board President has appointed. Every Management Board member who disagrees with a resolution that passed may submit their reasoned separate position to the minutes of the meeting. This does not relieve them though of the duty to comply with Resolution the Management Board has passed. No Management Board member may participate in votes on matters that concern them personally. Meetings the Management Board are recorded in minutes. The Supervisory Board In the year 2009 there were no changes in the Supervisory Board and it consisted of: 1) Marcin Likierski Chairman, 2) Jacek Maciej Bajorek Deputy Chair, 3) Marian Adam Pigan Secretary. Supervisory Board members: 4) Józef Kozioł, 5) Michał Juliusz Machlejd, 6) Marian Malicki, 7) Ryszard Ochwat, 8) Michał Jacek Wysocki. Under the Bank's Articles of Association, the Supervisory Board is composed of natural persons appointed by the General Meeting for a collective term of office in the number established by the General Meeting but not less than 5 persons and not more than 13 persons. The collective term of the Supervisory Board lasts three years. The Supervisory Board elects a Chairman, Deputy Chair, and Secretary, from their members. Supervisory Board members may be dismissed before their term expires and new members may be appointed to replace them. Where a Supervisory Board member s mandate expires following death, resignation, or dismissal from the Supervisory Board during their term in office, the Supervisory Board may work, pending the filling of the vacancy, in reduced composition yet not in less than 5 persons. 10

11 The Supervisory Board fulfils its duties collectively, nevertheless, it may delegate its members to perform specific supervisory activities individually. The powers of the Supervisory Board include the following: assessing the Management Board activity report on the Bank and its capital group and the financial statement and consolidated financial statement of the capital group for the last financial year for compliance with books and documents, and with the facts and Management Board requests concerning profit distribution or loss absorption, and submitting an annual evaluation report to the General Meeting, setting the number of the Bank Management Board members and setting the remuneration of Management Board members, appointing and dismissing the President and Vice-Presidents and members of the Management Board, suspending in activities, for important reasons, individual or all Management Board members and delegating Supervisory Board members to temporarily perform duties of those Management Board members who have been removed, have resigned, or are unable to perform their duties for other reasons, choosing a registered auditor to audit the financial statements and other experts, approving the Bank strategies, including its market mission and general risk level, as well as yearly financial plans of the Bank, approving rules of prudential and stable management of the Bank business principles, written policies related to banking risk management, operational risk and assumptions of the Bank policy in respect of non-compliance risk, approving the Bank s information policies, approving internal procedures of internal capital valuation, capital management and capital planning, approving Management Board resolutions concerning the organisational structure of the Bank, its Head Office, as well as on establishing and liquidating branches, except operations branches, approving Management Board motions on the acquisition of shares in companies where the nominal value, together with the shares in such companies already held by the Bank, exceeds 5% of the Bank's authorised share capital, with the exclusion of shares in companies admitted to public trading, considering matters brought up for debate at the General Meeting and to review draft resolutions of the meeting, except resolutions regarding points of order or procedure, adopting the Rules of Procedure for Supervisory Board work. Meetings of the Supervisory Board are convened by its Chairman as necessary but no rarer than once in a quarter. Requests to convene Supervisory Board meetings may be submitted to its Chairman by each member of the Supervisory Board as well as the Bank Management Board. The Chairman then convenes meetings within two weeks from the date of receipt of the request. The Chairman of the Supervisory Board may convene at a justified request from the Bank Management Board or a member of the Supervisory Board, or at his own initiative meetings in urgent procedure, setting a date, venue and agenda for the meeting. The Supervisory Board examines matters on the agenda of the meeting and decides them through resolution. Supervisory Board resolutions may be adopted if at least one half of its members are present at the meeting, including the Chairman or the Deputy Chairman, and provided that all members thereof have been duly notified. Supervisory Board resolutions to appoint or remove Management Board members are adopted by a 2/3 majority of votes. Other resolutions are adopted by a simple majority of votes. In case of an equality of votes the Chairman has the casting vote. Supervisory Board members may participate in adopting resolutions (except for votes to elect a Chairman or Deputy Chair of the Supervisory Board, to appoint a member of the Management Board, and to dismiss or suspend of such persons in the performance of duties) by casting their votes in writing via another member of the Supervisory Board or in writing or by means of direct long-distance communications. 11

12 A first meeting of a Supervisory Board in a new term is convened by the President of the Bank Management Board. The agenda of the first meeting of a Supervisory Board in a new term provides for the Supervisory Board establishing itself. The Supervisory Board oversees directly a separate audit and internal control unit at the Bank Head Office and appoints from among its members a 3-person Audit and Internal Control Committee. The Chairman of the Supervisory Board performs duties of Chairman Committee. Committee meetings may be convened as needed, yet not less frequently than once in a quarter. The Chairman Committee may convene a Committee meeting in urgent procedure. The Audit and Internal Control Committee include in particular: supervision of implementation at the Bank of an system internal control and assessing its adequacy and efficiency, supervision of activities of internal audit units, reviewing periodic reports on findings and conclusions from audits and internal control inspections completed and on major irregularities found and actions taken to remove the grounds thereof, reviewing periodic reports submitted by the compliance unit. reviewing reports, submitted by the internal audit unit, from risk managements process review and adopting changes aimed at improving the efficiency of the project and removing any deficiencies. reviewing periodic reports submitted by the internal audit unit. recommending the choice of independent external auditor to the Supervisory Board, monitoring of Bank s financial statements audit process together with communicating with external auditor on any issue identified during the audit including, in particular, significant deficiencies in risk management process and internal control procedures,reviewing following documents to be submitted to the Supervisory Board: rules of procedure of the internal control system operative at BOŚ S.A.; organisational rules of a standalone internal audit unit; yearly internal audit and internal control plans; quarterly, semi-annual and annual reports presenting results of audits and internal control inspections completed; other documents the Chairman may have up for review, considering as needed other information, reports, protocols, draft recommendations, motions related to the internal control system, The Chairman of the Supervisory Board, in his capacity as Chairman of the Audit and Internal Control Committee: is empowered to instruct the internal audit unit to carry out a control inspection of organisational units at the Bank. After obtaining such instructions the head of internal audit unit has to inform the President of Management Board, is empowered to direct the internal audit unit director to perform duty services, receives final audit reports and protocols and other materials from completed audits and control inspections, receives reports on starting important explanatory proceedings and on findings thereof, is advised in case circumstances are fund such as bring to light a prospect of major loss to the Bank of any measures being taken immediately to prevent any loss, is advised of any suspected criminal offense by a member of the Bank management, is empowered to appoint from among persons sitting on the Audit and Internal Control Committee Supervisory Board to participate in the work of any audit team carrying out a control inspection of organisational units at the Bank, can participate in person in post-audit meetings, or appoint another member of the Audit and Internal Control Committee to attend, receives reports on findings of control inspections external entities performed in the Bank. Detailed competences, rules of procedure and responsibilities of the Supervisory Board are set out in of the Articles of Association of the Bank and in the Rules of Procedure of the Supervisory Board (these documents are available for inspection on the Bank website under Investors, Rules.). 12

13 Management Board of BOŚ S.A. members signatures: Date Name Function Signature Mariusz Klimczak President of the Management Board Adam Zbigniew Grzebieluch Vice-President of the Management Board Stanisław Kolasiński Vice-President of the Management Board Marek Kazimierz Serafiński Vice-President of the Management Board Krzysztof Wojciech Telega Vice-President of the Management Board... 13