Alior Bank S.A. — M&A Activity 2016

Apr 30, 2016

Intended demerger of Bank BPH S.A. and agreeing and signing of thedemerger plan. First notification of the intended demerger. Amendmentsto the statute of Alior Bank. Satisfaction of the condition to thesignificant agreement

The Management Board of Alior Bank S.A. ("Alior Bank"), in reference toAlior Bank's current report No. 14/2016 dated 1 April 2016 on theexecution of a share purchase and demerger agreement regarding theacquisition of the demerged business of Bank BPH S.A. ("BPH") (the"Share Purchase and Demerger Agreement"), hereby announces that on 29April 2016, the Management Board of Alior Bank and the Management Boardof BPH, agreed and signed the plan of the demerger of BPH (the "DemergerPlan"), which was made in compliance with Article 534 §1 and § 2 of theCommercial Companies Code ("CCC"). Agreeing and signing of the DemergerPlan satisfy one of the conditions to the Share Purchase and DemergerAgreement.

The demerger will be effected in accordance with the procedure specifiedin Art. 529 § 1 item 4 of the CCC (spin-off) (the "Demerger"), takinginto account that:

(i) under the Demerger an organised part of the enterprise of BPHconnected with the pursuit of BPH's business other than the MortgageBusiness (as defined below) (the "Demerged Business"), will betransferred to Alior Bank, while the remaining organised part of thebusiness of BPH (the "Mortgage Business") will remain in BPH;

(ii) the Demerged Business will be transferred to Alior Bank on the dateof registration of the share capital increase of Alior Bank by way ofthe issuance of the Demerger Issue Shares (as defined below) as a resultof the Demerger (the "Demerger Date");

(iii) the Demerger requires a number of regulatory approvals to beobtained, as discussed in the following parts of the report;

(iv) the Demerger requires certain resolutions to be adopted by generalmeetings of Alior Bank and BPH (listed in the following parts of thereport);

(v) the Demerger is an element of an acquisition of the DemergedBusiness under the Share Purchase and Demerger Agreement;

(vi) after the Demerger the sole shareholders of BPH will be the GEShareholders (as defined below); the other shareholders of BPH (otherthan Alior Bank and BPH itself) will become shareholders of Alior Bank.

As a result of the Demerger, pursuant to Art. 531 § 1 of the CCC, AliorBank will on the Demerger Date assume all of the rights and obligationsof BPH connected with the Demerged Business. Consequently, immediatelyfollowing the Demerger Date, BPH will conduct activity which will belimited to the Mortgage Business and the activity of Alior Bank will beenlarged by the Demerged Business.

In connection with the Demerger, Alior Bank's share capital will beincreased by at least PLN 10 (ten zlotys) through the issuance of atleast one (1) series J ordinary bearer shares in Alior Bank with anominal value of PLN 10 (ten zlotys) each (the "Demerger Issue Shares").The maximum amount of Alior's Bank share capital increase in connectionwith the Demerger and the maximum number of the Demerger Issue Shareshave not been determined at this stage, due to the fact that the ShareExchange Ratio (as defined below) is subject to adjustment related todilution of Alior's Bank share capital resulting from the rights issueoffering planned by Alior Bank before the Demerger Date. The DemergerIssue Shares will be granted and allocated to the shareholders of BPHother than: (i) GE Investments Poland sp. z o.o.; and/or (ii) DRBHoldings B.V.; and/or (iii) Selective American Financial Enterprises,Inc. and/or (iv) the affiliates of the entities mentioned in points (i)- (iii) above (the "GE Shareholders"), based on the rules presented inthe Demerger Plan. However, pursuant to Article 550 §1 of the CCC, noDemerger Issue Shares will be issued in exchange for the shares held byAlior Bank in BPH and no Demerger Issue Shares will be issued inexchange for the shares held by BPH in its own capital, if any.

In connection with the Demerger, BPH's share capital will be decreasedwith the result that: the GE Shareholders will be the only shareholdersof BPH and all of the shares held by shareholders other than the GEShareholders will cease to exist.

In the Demerger Plan, the following exchange ratio of shares in BPH intoshares in Alior Bank was established: for 1 (one) share in BPH, ashareholder of BPH (other than the GE Shareholders) will be granted andallocated 0.44 (forty-four hundredths) of a Demerger Issue Share ("ShareExchange"), subject to adjustment related to dilution of Alior's Bankshare capital resulting from the rights issue offering planned by AliorBank before the Demerger Date.

In accordance with Art. 541 of the CCC, the Demerger will requireresolutions of the general meetings of BPH and Alior Bank, includingresolutions regarding:

(i) consent to the Demerger Plan;

(ii) consent to the amendments to Alior Bank's statute to be made inrelation to the Demerger as provided for in Schedule 4 to the DemergerPlan; and

(iii) consent to the amendments to the statute of BPH to be made inrelation to the Demerger.

The Demerger will be executed subject to obtaining the followingregulatory approvals:

(i) a decision from the Polish Financial and Supervision Authority (the"PFSA") permitting the Demerger in accordance with Article 124c, section2 of the Act of 29 August 1997 on the banking law (the "Banking Law");

(ii) a decision from the PFSA permitting the amendments to Alior Bank'sstatute to be made in connection with the Demerger as provided for inSchedule 4 to the Demerger Plan in accordance with Article 34, section 2and in connection with Article 31, section 3 of the Banking Law;

(iii) a decision from the PFSA permitting the amendments to BPH'sstatute to be made in connection with the Demerger in accordance withArticle 34, section 2 and in connection with Article 31, section 3 ofthe Banking Law;

(iv) a decision from the PFSA stating that there are no grounds toobject to Alior Bank exceeding the threshold of 33%, 50% or more of thevotes at the general meeting of BPH or, alternatively, the lapse of thestatutory deadline for the delivery of a decision containing anobjection raised with respect to the above in accordance with Article 25of the Banking Law;

(v) if required, a decision from the PFSA stating that there are nogrounds to object to GE Investments Poland sp. z o.o. exceeding thethreshold of 50% of the votes at the general meeting of BPH or,alternatively, the lapse of the statutory deadline for the delivery of adecision containing an objection raised with respect to the above inaccordance with Article 25 of the Banking Law; and

(vi) a (unconditional or conditional) decision of the relevant antitrustauthority (the "Antitrust Authority") consenting to a concentrationinvolving the acquisition of control over the Demerged Business pursuantto the respective competition law, or (ii) a final and non-appealablejudgment of a competent court (as a result of an appeal filed by AliorBank against the decision of the Antitrust Authority) in favour of anappeal and amending the decision consenting to the concentration, or(iii) a decision of the Antitrust Authority on discontinuing theproceedings or the Antitrust Authority returning the clearance requeston account of the transaction not being subject to notification pursuantto the respective competition law, or (iv) the lapse of the deadline setout in the respective competition law within which the AntitrustAuthority may issue a decision regarding a concentration, provided thatunder the respective competition law, in the case of the AntitrustAuthority's failure to issue a decision within the specified deadline,the concentration may be implemented without the consent of theAntitrust Authority.

Alior Bank will take actions to procure the admission and introductionof the Demerger Issue Shares to trading on the regulated market operatedby the Warsaw Stock Exchange (Giełda Papierów Wartościowych w WarszawieS.A.) (the "WSE"). To that end, Alior Bank will file a motion with thePFSA requesting approval of the offering document in accordance with theAct on Public Offering, the Conditions Governing the Introduction ofFinancial Instruments to Organised Trading, and Public Companies dated29 July 2005 (the "Act on Public Offering"), if such offering documentwill be required, and will file a motion for the registration of theDemerger Issue Shares with the National Depository of Securities(Krajowy Depozyt Papierów Wartościowych S.A.) as well as a motion withthe WSE for the introduction of the Demerger Issue Shares to trading onthe regulated market. Furthermore, if the offering for the DemergerIssue Shares should constitute a public offering within the meaning ofthe Act on Public Offering, the offering document referred to above willalso cover such public offering.

On 31 March 2016, after an active sales process lasting several months,the GE Shareholders and Alior Bank entered into the Share Purchase andDemerger Agreement. On 1 April 2016, Alior Bank, the GE Shareholders andBank BPH entered into a pre-demerger cooperation agreement. The Demergeris a consequence of the above agreements.

The GE Shareholders' decision to sell their direct investment in BPH isa result of the General Electric Company's global strategy to limit itsbanking operations and dispose most of GE Capital's assets.

Alior Bank's acquisition of the Demerged Business from BPH is aconsequence of the development strategy presented many times andconsistently pursued by the Management Board of Alior Bank, based on adynamic organic growth and acquisitions, coupled with the achievement ofthe highest levels of return on equity.

Since the commencement of its operations, Alior Bank has always focusedon the provision of high-margin, unsecured retail loans. The loanoffering is mainly complemented by PLN mortgage and housing loans forretail clients and in the case of corporate clients, working capitalloans and investment loans. As a result of the foregoing strategy ofoperations, Alior Bank's loan portfolio share of high-margin unsecuredretail loans is greater as compared to the market average, which enablesAlior Bank to maintain a high level of the net interest margin, with anacceptable and manageable level of costs of risk.

In view of the above, the acquisition of a sizable, mainlyCHF-denominated mortgage loan portfolio, with its relatively lowprofitability, was of no interest to Alior Bank. Another, equallyimportant factor which contributed to the lack of Alior Bank's interestin acquiring the CHF housing loan portfolio was Alior Bank's inabilityto ensure viable sources of its financing given the current marketconditions.

Simultaneously, the acquisition of the Demerged Business only, togetherwith an attractive and complementary deposit and loan portfolio, theoperational efficiency of Alior Bank in the implementation of theintegration processes and the advanced and high-capacity ITinfrastructure will enable Alior Bank to strengthen its presence in themarket, increase the scale of operations and achieve the highestachievable synergies while minimising integration costs.

The acquisition of only the Demerged Business will be beneficial for theclients of both Alior Bank and BPH (offering an improved product range,a comprehensive distribution network and effective sales and supportprocesses), the shareholders (offering a higher rate of return oninvested capital achievable thanks to the related cost and incomesynergies) and will help Alior Bank become one of the leading players onthe Polish banking market. At the same time, the Demerger is the onlylegal form of the transaction which would provide the expected legalsecurity for all of the parties and stakeholders involved and whichwould ensure the continuance of the business operations of both theMortgage Business and the Demerged Business immediately upon theregistration of the Demerger.

In light of the above, Alior Bank hereby presents to the public, as anattachment to this report, the Demerger Plan (with schedules) and thereport of the Management Board of Alior Bank justifying the Demerger.

This report should be treated as a first notification to theshareholders of the intention to conduct the Demerger within the meaningof Article 539 § 1 and 2 of the CCC, read in conjunction with Art.402(1) of the CCC. The Demerger Plan was announced and publishedpursuant to Article 535 § 3 of the CCC by being posted on the AliorBank's website: www.aliorbank.pl in the bookmark "InvestorRelations/Banks' merger".

Pursuant to Article 540 §3 item 1 of the CCC, Alior Bank herebyannounces that until the completion of the general meetings ofshareholders of BPH and Alior Bank the agenda of which will include theadoption of a resolution on the Demerger, the shareholders may reviewthe documents referred to in Article 540 § 1 items 1, 2, 3 and 4 of theCCC posted on the Alior Bank's website: www.aliorbank.pl in the bookmark"Investor Relations/Banks' merger".

Moreover, Alior Bank explains that the auditor opinion regarding theaudit of the Demerger Plan, in terms of its accuracy and reliability, asreferred to in Article 537 §1 of the CCC, will be provided immediatelyafter it is made by the auditor appointed by a competent registry court,so as to allow the shareholders to review them pursuant to Article 540of the CCC. The information about the possibility of reviewing theauditor opinion will be published by way of a current report as asupplement to this notification.

Furthermore, in connection with the Demerger, the Management Board ofAlior Bank announces that Alior Bank intends to amend its statute (the"Statute") in the manner indicated in the attachment to the this report.

The amendments to the Statute referred to above are related to issuanceof the Demerger Issue Shares or intended to render the Statute compliantwith the actual operations of Alior Bank after the Demerger.

Legal basis: Art. 539 §1 and 2 of the CCC, in connection with Article402 (1) of the CCC Article 56, section 1 point 2 of the Act on PublicOffering and § 5, section 1 point 15, § 21, section 1 and 2 point 1 and2, § 5, section 1 point 4, § 10 and § 38, section 1 point 2 of theRegulation of the Minister of Finance dated 19 February 2009 regardingcurrent and interim reports published by issuers of securities and theterms of deeming as equivalent the information required under the lawsof non-member states.