COMPONENTES DE LA BICICLETA

Figures in million HUF

LINE ITEM 31. Dec. 2007. 31. Dec. 2008. _2008/2007Change

Net interest income 16,148 14,028 -13.1%

Net fees and commission income -1,678 93 -105.7%

Net result of financial operations 1,003 2,652 164.4%

Other income and expenditure -1,893 -1,735 -8.3%

Gross operating income 13,580 15,038 10.7%

Operating costs -6,737 -5,825 -13.5%

Net operating income 6,843 9,213 34.6%

Net provisions and losses -968 159 -116.4%

General risk provision -238 0 --

Extraordinary income and expenses -13 -27 107.7%

Earnings before tax 5,624 9,346 66.2%

Tax -1,064 -1,790 68.2%

Profit after tax 4,560 7,555 65.7%

General reserve -456 -755 65.6%

Retained earnings 1 4,104 6,800 65.7%

1 Before dividend payment

The Bank’s gross operating income was 15.0 billion forints as of 31 December 2008, 10.7% above the 31 December 2007 figure and also exceeded the budgeted figure. Net income from interest, a key component of gross operating income dropped by 13.1% against the 2007 figure. Operation throughout the year generated a total of 5.8 billion forints costs, which is 86.5% of the 2007 figure.

a) Net income from interest

The 14.0 billion forints net income from interest generated in 2008 emerged as the balance of 71.3 billion forints income from interest (18.2% higher than at the end of 2007) and 57.3 billion forints interest expenditure (29.6% growth).

In 2008 interest and interest-type income from customers contributed 23.8% to income from interest, slightly decreasing compared to 24.0% in the previous year. Interest subsidy on loans to customers amounted to 7.7 billion forints, thus income from interest on loans to customers amounted to 24.6 billion forints. Income from interest on securities and interbank loans were up from 2.7 billion forints in 2007 to 4.2 billion forints in 2008; similarly, its contribution to income from interest increased to reach 5.9%. Income from interest on swaps contributed 24.7% to total income from interest as opposed to 13.9% in 2007. Refinancing generated 12.1 billion forints, and combined with the related interest subsidy it was 24.9 billion forints.

Almost all of the expenditure on interest (60.9% in 2008 and 74.7% in 2007) was generated by interest paid on mortgage bonds. Interest charged on swaps was also significant, contributing

ANNUAL REPORT FOR 2008 OF FHB MORTGAGE BANK PLC

25.4% to the total expenditure on interest (as opposed to 19.9% in 2007). Interest expenditure on bonds amounted to 4.5 billion forints and contributed 7.8% to the item.

The average net interest margin (NIM) was 2.73% as of 31 December 2007 and 2.24% as of 31 December 2008. The drop in NIM continues to be caused by two major factors. One is the Bank’s transforming portfolio structure, which has a long-term impact on the Bank’s own and refinanced loans structure. The contribution of subsidized loans within the refinanced portfolio has been steadily shrinking as new loans are denominated mainly in FX, thus scheduled repayments and early repayments exceed new loans and shrinking subsidized loans have been replaced by FX loans with lower interest margins. Another negative effect on the Bank’s average margin is the re-pricing of subsidized loans, which takes place predominantly in 2007-2008. A similar process is going on in the portfolio of own lending. The impact of falling EUR and CHF interst rates is expected in the first half of 2009.

b) Net fees and commissions income

In 2008 the net income from fees and commission amounted to 0.1 billion forints as opposed to 1.7 billion forints loss in 2007. In the course of 2007 the Bank achieved 3.2 billion forints income from fees and commission (12.8% more than in the base period) against substantially lower, 3.1 billion forints, expenditure on fees and commissions (31.1% less than the reference year’s figure of 4.5 billion forints).

The bulk of income from fees and commission resulted from collateral valuation fees, which amounted to 969.6 million forints and contributed 26.0% compared to 31.4% in the reference year. The contribution of handling commission dropped from 17.3% to 11.5% as a result of a decline in state subsidies, and amounted to 363.5 million forints in the reported year. In 2008 income from fees paid by financial institutions contributed 32.9% (1.2 billion forints) due primarily to an increase in early repayment of refinanced loans and the modification of contracts.

Expenditure on fees increased mainly because of the Type A acquisition agency and loan management agreement concluded between the Mortgage Bank and the Commercial Bank. Under the agreement the Commercial Bank sells Mortgage Bank products through its network of branches and also manages the existing loans portfolio. The fee paid for these services amounted to 2.4 billion forints in 2008, significantly short of the 3.8 billion forints achieved in 2007, due to the Mortgage Bank’s shrinking lending. Fees paid to acquisition agents amounted to 136.4 million forints as opposed to 436.2 million forints in 2007. The drop is explained by the fact that in 2008 a large portion of the fees was paid by the Commercial Bank. As a result of the expansion of the portfolio, the Mortgage Bank paid 219.6 million forints to FHB Services for handling the rated loans portfolio as opposed to 69.7 million forints paid in 2007. Fees related to mortgage bonds sales amounted to 203.8 million forints, and fees related to bond issues were 12,9 million forints. Fees paid to credit institutions and NBH amounted to 4.0 million forints in 2008 as opposed to 65.2 million forints in 2007. Acquisition fees paid to syndicate partners amounted to 14.6 million forints in 2008.

ANNUAL REPORT FOR 2008 OF FHB MORTGAGE BANK PLC

c) Net profit from financial transactions

The net result of financial transactions amounted to +2.6 billion forints in 2008, two and a half times the previous year’s figure. The contribution of net exchange rate gains from mortgage bonds was 486.4 million forints, twice the reference year’s gains. The exchange rate gains from FX transactions amounted to 2.2 billion forints, triple the 2007 figure of 0.7 billion forints. The net result of other securities and financial transactions amounted to 68.1 million forints.

d) Other income and expenditure

Under the item of other earnings the Bank recorded 1.7 billion forints loss in 2008, 8.3% down from the 2007 figure. To the item of other income amounting to 0.6 billion forints in the year of reporting Almost half was contributed by intra-Group invoicing. Income from rated loan sales amounted to 0.3 billion forints and contributed 53.3% to other earnings. The remaining items were related mainly to cost reimbursement to staff and asset sales.

The item of other expenditures amounting to 2.3 billion forints included 1.6 billion forints taxes paid, of which the bank tax alone was 1.0 billion forints. Local business tax was 429.5 million forints, innovation contribution 71.9 million forints, and supervisory fees paid to HFSA amounted to 65.9 million forints. The book value of receivables from mortgage loans sold was 429.6 million forints, and collection costs amounted to 37.8 million forints. The book value of fees reinvoiced to Group companies was 0.3 billion forints related to sales of other assets and payment for mediated services.

ANNUAL REPORT FOR 2008 OF FHB MORTGAGE BANK PLC

e) Operating costs

Figures in million HUF

LINE ITEM 31. Dec. 2007. 31. Dec. 2008. Change

2008/2007

General administrative costs 6,601 5,701 -13.60%

Personnel expenses 2,305 1,909 -17.20%

- Wages and salaries 926 994 7.3%

- Other personnel expenses 858 467 -45.6%

- Other payroll costs 521 448 -14.0%

Other administrative costs 2,632 2,267 -13.9%

- including banking activity costs 1,738 1,496 -13.9%

Costs of internal services 1,664 1,525 -8.4%

Depreciation 135 125 -7.4%

TOTAL OPERATING EXPENSES 6,737 5,825 -13.5%

The Bank’s operating costs amounted to 5.8 billion forints in the course of 2008 as opposed to 6.7 billion forints in the reference year. Personnel costs contributed 43.4% to the decrease, and the contribution of other administrative costs was 40.0% (this item was 13.9% down from the reference year), and decreasing costs of internal services reduced costs by another 15.2%. Cost- to-income ratio (CIR) improved from 49.6% in 2007 to 38.7% as of 31 December 2008.

There was a slight shift in the breakdown of operating costs. In 2008 personnel expenses contributed 32.8% as opposed to 34.2% in 2007 due to a 17.2% drop over the year in conjunction with staff transfers to other companies in the Group and measures aimed at improving cost effectiveness. Other administrative costs contributed 38.9% in 2008, largely the same as 39.1% in 2007. The item of costs of internal services includes rent and operating charges paid for equipment used in day-to-day operation as well as business administration and back office service fees paid to FHB Services Ltd. The item amounted to 1.5 billion forints and contributed 26.2% to the 2008 operating costs as opposed to 24.7% in 2007.

Personnel expenses including employer’s contributions amounted to 1.9 billion forints. Wages and salaries amounted to 994 million forints, 7.3% above the reference year figure. Other personnel costs were 467 million forints, 45.6% short of the previous year’s figure, due mainly to the fact that the management share option was almost half of the reference year’s 626.4 million forints. Payroll expenditure amounted to 448 million forints in total, 14.0% less than the previous year’s figure.

Other administrative costs decreased by 13.9% over the base period figure. The 2.3 billion forints item includes 771 million forints other administrative costs, 13.8% less than the reference year figure. A significant portion of this amount, 237.3 million forints, included the 2008 marketing and advertising fees and 352.4 million forints aggregate amount of consulting fees, auditor’s, property inspector’s and attorney’s fees and costs of other business administration activities. Real estate related costs amounted to 8.6 million forints. Data base license was 19.2 million forints, software costs amounted to 8.2 million forints, and the combined cost of postal and ITC network charges was 58.7 million forints in 2008.

The contribution of special mortgage banking costs to the item of other administrative costs did not change significantly: the item was down from 25.8% in 2007 to 25.7% in 2008 as a result of

ANNUAL REPORT FOR 2008 OF FHB MORTGAGE BANK PLC

a 13.9% drop in these costs year-on-year. Valuation costs amounted to 1.2 billion forints, significantly exceeding the 948.5 million forints recorded in 2007. The contribution of life insurance premium payments related to loan cover amounted to 189.4 million forints as opposed to 709 million forints in 2007.

Depreciation was 7.4% below the 2007 figure. As the Bank concluded its new asset purchases depreciation will gradually decrease over the depreciation term.

f) Loss in value and provision

In 2008 the Bank recorded 159 million forints as net reserve for impairment and provisions, which emerged as the balance of 1,520 million forints provisions and 1,679 million forints charge. Of the provisions 254 million forints was the provision covering short-term swaps closed after the balance sheet date but expected to generate a loss on the basis of the market price on the balance sheet date.

The Bank modified its accounting policy and has discontinued keeping a general risk reserve since 1 January 2008. Funds available on the item as of 1 January 2008 will be used for offsetting losses not covered by independent lending loss, impairment and provisions.

ANNUAL REPORT FOR 2008 OF FHB MORTGAGE BANK PLC