American University in Bosnia and Herzegovina (AUBiH)Business Administration (MBA), BAM 658 Strategic Planning

Group Project Final project

Students: Professor:Dino Ibrahimovi Muamer Bezdrob PhDEnes TunaAhmet eunovi

Sarajevo, 23rd May 201511

ABOUT THE COMPANY

Bank was established in October 2000 as a joint venture between tree international finance institutions. Bank started operations on 2002 as the first bank operating on nonconventional banking principles, not only in Bosnia & Herzegovina but in the region as well.Bosnian banking industry is characterized by a very strong competition by Austrian, Italian, Croatian banks as well as the lack of legislation. Yet, BANK has managed to achieve a very good status in the B&H banking sector by offering different banking products and services. Nevertheless its orientation to these principles, Bank primarily targets the whole population in B&H and the Bank renders its services to all B&H citizens no matter which ethnic group they belong to.The Bank has its Head Office in Sarajevo and its branches in major cantonal cities in Federation of B&H and now has 20 organizational units throughout Federation of B&H and Brko District. The Bank has recorded positive trends and is going from strength to strength across all criteria measuring success of the bank, such as growth of the number of clients (both individual and corporate), expansion of financing portfolio, increase of deposits, increase of the value of assets and increase of profit for shareholders. The Bank renders its products and services to both retail and SME and corporate clients, with their relative proportion of one third and two thirds, respectively, in the total Bank financing portfolio. The Bank currently employs 247 staff, a majority of whom holds university degrees, are fluent in foreign languages and are dedicated to the principles of the bank. They are experienced and well trained in a great number of specialist courses in B&H and abroad.

Below are the last available financial statements that give a complete picture of the bank performance.

Basic performance indicators show that the Bank continuously increases its customer base. We will present only the most important

Total loan disbursements compared with the last yearincreased by 14,81%, growth of the retail financing is 27,16% and the growth of corporate financing is 9,26%

Total bank deposits compared with the same period last year increased by 18% yoy

Compared with the same period lastyear, total bank assets increased by 16%

Also, it is evident that Bank is expanding its business scope which results with bigger market share on B&H market.

MISSION AND VISION

To bring closer and to promote the new nontraditional concept of banking principles and products in B&H and to constantly render high quality services in all segments of the Banks activities and operations to the benefit of its clients, social community, our shareholders, the employeesand the social community.

Our vision is to dedicate all of our knowledge and expertise to meetof our clients' needs and to gain high quality in all segments of our business operations, for the benefit of our shareholders, employees, and the social community.

OBJECTIVES

To continue overtaking of good clients from the competitors in Retail and Corporate sectors at a time when local banks have slow growth in the local market; To improve Cost Income Ratio from 83% in 2013 to 79% in 2014 by increasing business operations along with gradual new investments, thus increase repayment o capital from 0.2% in 2013 to 1.16% in 2014; To use the advantage of already established credit lines and lines for guarantees and letters of credit, promote those lines to clients and, in accordance with their needs, to open new lines; To increase credit portfolio by placing focus on small and medium clients, short-term Retail and Corporate financing.

STRATEGY

To continue overtaking the market at the time of stagnation and slow growth of local market in the aim of overtaking of bigger market share and attaining higher profitability of the Bank; To increase Corporate portfolio by 37% and Retail portfolio by 23% in the aim of recovery of local economy and still low demand of the citizens; To expand the network of branches and branch offices of the Bank by adjusting prices and by making innovations in products to increase the Banks market participation share in all parts of the Retail segment (deposits, financing, credit cards, etc.), and to make more efforts to increase operating income; To monitor receivables from clients more strongly and to apply more conservative policies while approving financings in order to maintain portfolio quality on the present level; To provide long-term and low cost deposits and credit lines from the Shareholders and to ensure direct financing of individual projects of the leading BH companies.

Since this is a bank which is in difficult economic conditions managed to establish itself as a respectable financial institutions with a strong ownership structure, strategy of aggressive market penetration appears to be a suitable.

ACTION PLAN

1. Retail Banking Division Increase of retail deposits

Increase of deposits will be achieved through the following: Expansion of branch network (the goals set by the Budget of the Bank for 2014 are distributed through the branches under the supposition of opening of 6 new branch offices with the following schedule: 1 Branch offices in the 1st quarter (1 Branch office opened at the end of March); 3 Branch offices in the 2nd quarter (April, May and June the effects of the Branch office that was opened in June can be expected in the 3rd quarter); 2 Branch offices in the 3rd quarter (1 Branch office in July and 1 in September the effects of the Branch office opened in September can be expected in the 4th quarter); at the end of June and 1 at the end of July); Permanent improvement/advancement of the existing deposit products; Introduction of new forms of savings (programs of special purpose savings; housing, car purchase,); Permanent improvement of alternative sales channels (external associates); To intensify promotion programs for collection of deposits from the B&H Diaspora in a form of promote campaigns and direct contact by visiting associations and Dzemat of B&H Diaspora (the program has been started in the current year and produced good results); To intensify marketing and promotion activities related to the existing and new savings-deposit products; To intensify cooperation with the Islamic community in B&H for promotion of savings products of the Bank, especially Zakat and Hajj savings, as well as promotion of the Program for the B&H Diaspora.

Retail Financing

Increase of financing shall be achieved through: In 2014 it will be necessary to prepare encouraging-promotion actions in the first and second quarter, in the form of : discount of the price of products (housing construction, mortgage financing, home remodeling and car purchase - larger amounts, as well as financing consumer goods and tourism dispersion of risk and profitability) for certain segments of targeted market (Banks clients, employees of public institutions and large industry entities in B&H) It is necessary to perform this activity in the first six months of the year but to place focus on the first three month in order to generate profit margin; approval of certain products with facilitated approval conditions (over a certain period), enabling larger amount of financing without compulsory mortgage as repayment security ins along with higher financing price; offering free of charge issuing of credit cards and campaign of auto-issued cards on segmented clients base. Apart from this activity it is necessary to design loyalty rewarding systems and use of credit cards in places of sale; Expansion of the network of branches/branch offices in order to acquire new clients who for practical reasons did not operate their business through our Bank; Intensive marketing activities in promotion of retail financing products; Improvement/restructuring of the existing financing products and approval procedures (housing construction, car purchase, purchase of consumer goods, tourism, education, buying out projects, mortgage housing, credit cards, overdraft of current account and other Banks financing products); Packaging the Banks products and services. The packages should result by higher income because they would include and promote use of larger number of products and services (Package no.1. - Current account, overdraft, SMS, standing order, savings). Certain discounts would be approved for users of certain packages in all or some types of financing. IT quality support would be a condition for an efficient implementation; More aggressive performance in the market, which would reflect through more intensive animation of new clients. That part of activities should be performed in close cooperation of Retail and Corporate Banking Divisions. The existing and new branches should start more intensive activities for establishing cooperation with merchants and bidders of different services; Delegating more authorities to branches that are producing satisfactory level/percentage of collection (e.g. over 95%). Authorization would be reflected through increase of limit of maximum amount of financing a branch may approve independently; More efficient alternative sales channels (external assistants).

Improvement and advancement of the existing products will be primarily directed to simplification of the procedures, maintaining competitive position with other banks and establishing faster and more efficient communication between the clients and the Bank. In addition to that, the Bank planes to introduce service and product packages, which should result with an increase of overall volume of the operations of individuals with the Bank. The beneficiaries of packages will also have additional benefits in the form of discount of fees, membership fees and profit margin on some types of financing. Alternative channels

As an additional sale channel, the alternative channels of sale will be focused on acquisition of new clients and sale of products with high margin (credit cards, short-term financing) to certain groups of clients and especially to small and medium private companies and citizens.

The basic advantage of the alternative sale channels is that they can reach a client throughout Bosnia and Herzegovina, and particularly in the areas where the Banks branch network is not developed. Moreover, they can contact clients after the working time of branches.a. In order to fulfill the given tasks, the alternative channels must be trained and skilled to actively perform combined sale of all Banks products and services. Training will be performed for each particular product by responsible persons of every Branch, who is engaging and monitoring the sale channels

1. Improvement of the existing and development of new products

Improvement and development of new deposit products:Responsible part of the BankIn cooperation withCommencementConclusion

Retail (Product Development Unit)IT, Legal Dept.Services and Support Group1. Improvement of all Bank deposit products and services2. Introduction of new products and services3. Product packages

Permanent task

Permanent task

End of second quarter

Improvement and development of new financing products:Responsible part of the BankIn cooperation withCommencement Conclusion

Retail (Product Development Unit)Services and Support Group, Legal Dept, Credit and Market Risk Management Division1. Improvement of all financing products 2. Introduction of new products and services3.Product packagingPermanent task

Permanent task

End of second quarter

Improvement and advancement of the existing products will be primarily directed to simplification of the procedures, maintaining competitive position with other banks and establishing faster and more efficient communication between the clients and the Bank. In addition to that, the Bank planes to introduce service and product packages, which should result with an increase of overall volume of the operations of individuals with the Bank. The beneficiaries of packages will also have additional benefits in the form of discount of fees, membership fees and profit margin on some types of financing.

NETWORK OF BRANCHESMarket situation study has shown the following important indicators: Large number of banks in terms of retail and corporate clients operates in a very small market (over-banked market) covering market by their numerous branch offices. Every larger inhabited place in B&H has a branch office of one bank; A bank that has the largest percent of covering of the market has slightly below 100 branch offices bank is offering its services in only 12 locations and of that number 5 are situated in Sarajevo; With regard to inhabited places, bank covers about 7-8% of total market; The extent of covering of the number of inhabitants shows that the Bank can offer its services directly (present in the territory of their residence) to about 20% of the total number of the population of B&H; bank is not present at all and it is not covering adequately two very important economically and population wise regions and they are: Western Herzegovina and Tuzla region.

Taking into account the above stated and planned increase of financings and deposits there is an evident need for further expansion of the network of branches. We believe that it is necessary to open minimum 6 new branch offices in 2014. Expansion strategy would be: - Branch offices would be part of the existing branches of the Bank. - In the initial phase, small number of employees would be hired (3) and we would rent business premises in order to create lower costs of equipment, rental and maintenance.

CARDS CENTER DEPARTMENT a) Issuing credit cards (Visa Classic and Bamcard)

The plan for 2014 is to increase the sale by approx. 21% with regard to 31.12.20013 and reach the number of 6,900 cards at the end of the year. The sale of credit cards is planned through the following channels: Regular sale through the existing network 500 pieces Sale through new branches/branch offices 600 pieces Sale through acquisition of Corporate clients 100 pieceswhich in total is 1,200 new credit cards of which 1000 should be Visa Classic cards.The plan is not ambitious because of present fear of potential clients to have a debt to a bank, certain saturation of credit cards market, as well as planned change of credit cards concept next year.

In order to realize the plans, in 2014 it will be necessary to continue with occasional marketing and different promotion campaigns. With supposed sale and existing fees the following values could be reached:

Number of BamCard credit cards to be issued in 2014 1,200 Total number of credit cards to be issued by 31.12.2014 6,900 Issuance fee/ on one-time payment basis/ KM 20.00 Membership fee /per annum/ - KM 25.00 (average membership fee for 2 types of credit cards) Average use of cards in 2014 (for cards issued in 2014) 80% of approved limit Average use of cards in 2014 (for present cards) 75% of approved limit along with revolving 50% Average approved limit- KM 2,200.00 Planned approved credit limit in 2014 KM 2,640.00 Average transaction fee 11% of the transaction amount Transaction fees total KM 852 thousands (new holders KM 232 thousands, present holders KM 620 thousands).

b) Issuing VISA cards

Issuing Visa Electron Cards

Visa Electron Card current account debit card is an international card with a Chip technology and positive trend of issuing of that card achieved in previous year should be continued in 2014 as well. It is especially important to take into consideration considerable expansion of THE BANK network of branches and branch offices.

In addition to the planned opening of 3,000 new current accounts it is expected that the same number of holders of current accounts would become holders of Visa Electron card.Visa Electron card, which can generate considerable income to the Bank in 2014 (KM 180 thousands not counting the fee for current account), represents to the Bank a cross-selling product whose sale will directly depend on the terms, administration, speed and amount of approved overdraft of current account.

The data on planned income from Visa Electron cards in 2014 are based on the following suppositions: Number of issued cards in 2013 3,000 Total number of cards issued by end of 2014 12,000 Issuance no fee Annual membership fee KM 10.00 Total membership fee KM 90,000.00 Fee for cash transactions KM 65,000.00 (30x7,220x12x2.5%) Fee for non-cash transactions KM 25,000.00 (50x8,330x12x0.5%) Average monthly card turnover KM 300.00 Fee for cash transactions 2.5% of transaction on other network Income from non-cash transactions (Visa Interchange fee) 0.5% of transaction amount Ratio of cash/non-cash transactions 80%/20% Share of cash transactions on other banks network 12.5%.

Income Plan for 2014 in KM'000Item No. DESCRIPTIONINCOMENotes

Plan 2014VISA AND BamCard

To issue 3,000 new debit cards

1.Annual membership fee from 9,000 existing card holders90Fee collected from clients

3.Fee from cash transactions 65Fee collected from clients

4.Fee from non-cash transactions 25Fee collected from Visa

180

To issue 1,440 new credit cards

1.Admission membership fee 20 KM*20Fee collected from clients

2.Annual membership fee 25 KM*155Fee collected from clients

3.Fee for keeping of account and statements delivery120Fee collected from clients

4.Transaction fee852Fee collected from clients

1.147

Total income issuing1.327

Total number of issued cards in 2014 4,200

Cards acceptance- acquiring

1.Income from acquiring of other bank' cards/ATM**35In total 20 ATMs

2.Income from merchants/POS*** 18 In total 200 POS terminals

53

TOTAL INCOME1.380

* Under supposition that 17% of sale would be realized in time of promotion campaigns (free of charge cards).** Including planned installation of 6 new ATMs.*** Including planned acquisition of 100 new POS terminals.

CORPORATE BANKING DIVISION TASKS:

Increase of financing by 40%, of which short-term financing by 63% and long-term financing by 24%; Increase of documentary operations (guarantees and letters of credit) by 16%; Increase of income from financing by 29%.

PRECONDITIONS: To define the role of branches in the part of Corporate financing: to form organizational parts that will function within the Corporate Banking Division; Work on quality support within the Bank (define the role and competency of credit administration, ensure quality IT support in monitoring of clients and reporting part); To have a clear strategy in terms of selection of clients (first-class clients require more flexible approach such as lower profit rate, insurance that may not be first-class); To increase the number of employees in accordance with the plan.

TARGETED GROUPS:Present clients of the Bank To work intensively with the existing clients on expansion of business cooperation, especially in the part of operations that could bring considerable income to the Bank (foreign payment, sight deposits); To expand the business cooperation with clients who are partly working through the bank by taking over (buying out) financings from other banks; To expand business cooperation by making packages of products for Retail-clients employees.

Acquisition of new clients Clients who prefer Islamic banking; Clients who need short-term financing; Clients who need trade finance services (guarantees and letters of credit); Clients who have deposits long-term sources; Clients who have significant foreign payment operations; Clients who have large number of employees (retail clients).

CRITERIA FOR SELECTION OF CLIENTS Quality business cooperation background with the bank; Clients business operation (stable market position, positive cash flow); Quality collateral and guarantee; Profitability of relation with client; Client's operation; Technical- technological capacities; Position in the market, comparative advantages; Financial relation with the Bank (balance of the accounts with the Bank, Balance positions-ratio); Vulnerability analysis, cash flow.

INDUSTRIES Financing large wholesale food and goods chains from which we can expect considerable foreign payment operations and generation of income; Financing food producers, production which has secure placement in local and foreign market; Project financing (financing projects which have secure investors and collection instruments); Financing crude oil and oil derivatives; Financing production that has contracted undertakings and secured market supply.

PRODUCTS Short-term financing of working capital; Long-term financing for buying out of debt from other banks; Guarantees and letters of credit; Restructuring short-term financing into long-term financing to the Banks clients with a goal to unburden and adjust to clients repayment abilities.TREASURY AND FINANCIAL INSTITUTIONS DIVISION

Pursuant to the new Rules on Internal Organization and Systematization, which has instituted the Treasury and FI Division, in 2014 it will be necessary to further develop and advance the operation of its departments.

4.3.1. Financial Institutions Department

The Department will be engaged in the following activities: Establishing and developing of cooperation with financial and other institutions from which certain funds could be drawn (IFAD, EBRD, governments of Islamic countries, etc.); Profitable placement of surplus funds in treasury operations along with further development of relations with banks which operate under Islamic principles; Developing credit lines for trade financing operations in accordance with the needs of the clients. Development of Customer desk as product, which has manifold significance for the operations of the Bank with the support from the Corporate Banking Division. Expansion of network of correspondent banks according to needs and requests of clients with special accent on accounts of the large B&H Diaspora abroad.

Deposits, Liquidity, Liquidity and FX Risk Assessment DepartmentThe Department will be engaged in the following activities: Maintaining KM liquidity and FX position of the Bank in accordance to the rules of the Banking Agency and internal limitations, Maintaining the level of limitations to Bank's assets in accordance with the regulations of the Central Bank of B&H, the Banking Agency and internal enactments along with management of surplus of funds in the manner which would maximize profit; Organization and providing support to the Liquidity Committee; Preparation of materials and technical support in the work of ALCO, implementation of its instructions and conclusions related to this segment of the operations.

Central Treasury DepartmentThe operation of the Central Treasury Department should be elevated to a certain level that would enable: Establishing control system and monitoring of the operation of the cashiers and the treasury in terms of observance of the Rules and Procedures that regulate that field of the operations; Overseeing development of the business network in terms of securing cash; Creating the conditions and suppositions for development of own servicing of the business network by cash in order to decrease dependence on cash servicing by other entities; Overseeing the work on day-night treasury and further placement of those services in cooperation with the Corporate Banking Division.

Investment Banking Department In 2014 the Investment Banking Department should further develop in the following segments: To monitor and oversee realization of financing joint projects with THE BANK Real Estate Co.; In cooperation with the Corporate Banking Division to continue placement of products of depositary operations for tender bidders in the securities market and depositary operations in issuance of securities; To monitoring of trade securities portfolio of B&H firms; To research the possibility of operation with Islamic bonds - Sukuk; To research and develop a possibility of investment in funds in Islamic countries.

ACTION PLAN IT and Operations Group

PAYMENT OPERATIONS DEPARTMENTThe Bank planned increase of income from corporate payment operations by approximately 16% comparing to 2013. Despite the existing economic situation and announcement of further lowering of economic activities, the given increase is based on planned acquisition of new Corporate and retail accounts in 2014. It can be expected that volume of inflow from abroad will further decrease in 2014, especially private remittances to individuals. Therefore, increase of total income by approximately KM 180 thousands has to result from opening of new clients accounts, particularly corporate clients for realization of major internal payment operations. Attraction of a large number of clients and increasing the volume of payments, even those that are physically dislocated with regard to the existing branches and branch offices, can be achieved by higher electronic banking services sale.

LOAN ADMINISTRATION DEPARTMENTIn the first six months of 2014, the Loan Administration Department will direct most of its activities to centralization of activities of loan administration and improvement of the existing procedures in order to free the Banks branches and branch offices from loan administration work and to enable them to focus on sales increase and higher collection of receivables.Centralization process and technical activities related to that will depend a lot on IT support.

TRADE FINANCE DEPARTMENT As shown that income from documentary operations has considerably been increasing each year, the Bank is determined to continue with development and improvement of those operations in 2014, to sell those products to as large as possible number of clients in order to enable huge dispersion of risk and finally to increase the income of the Bank. Moreover, it is necessary to continue advancing specialized know-how of the employees who are engaged in that work, by their participation in seminars. In case that the number of these operations increases considerably in 2014, there might be a need for additional hiring of employees.

CREDIT RISK MANAGEMENT DIVISION

CREDIT RISK ASSESSMENT

Assessments of risks of files and documentation prepared by Corporate Banking Division and Retail Banking Division for approval of financing, Letters of guarantee, Letters of credit or other forms of investment that increases the Banks risk exposure, for regular and extraordinary meetings of the Financing and Investment Committee; Filling in vacant positions in the Credit Risk Assessment Department for SME and Retail and Credit Risk Assessment Department for Large Clients and Syndication.

Responsible part of the BankIn cooperation withCommencement Conclusion

Credit and Market Risks Management DivisionBusiness Group Permanent taskPermanent task

MARKET RISK ASSESSMENT Setting up of Market Risk Assessment Department; Compliance of the existing procedures with Amendments and Supplements to the Decision on Minimum Standards for Market Risks Management; Filling vacant working positions.

Responsible part of the Bank In cooperation withCommencement Conclusion

Credit and Market Risks Management DivisionTreasury and IT DivisionPermanent taskPermanent task

CALCULATION OF THE PROVISIONS FOR APPROVED PLACEMENTSPreparation of monthly proposals for calculation of provisions for retail and corporate financing portfolios and the Report on overdue accounts under categories C, D and E for current month. Collection of report from Business Group for clients classified under categories A and B and delivery of overall report to the Banks Management.

Responsible part of the Bank In cooperation withCommencement Conclusion

Credit and Market Risks Management DivisionBusiness Group

Permanent taskPermanent task

COLLECTION OF DUE RECEIVABLES Setting up of Department for monitoring collection of problematic receivables and reprogramming; Filling vacant position in the Corporate Remedial Department Undertaking activities for collection of due receivables for clients classified under C, D and E categories in order to bring the level of allocated provisions on optimal level; Preparing strategy proposals for recovery of debtors and for possible collection in accordance to the Program for Special Financing Risk Management; Preparing proposals for instigation of court proceedings for overdue claims from clients. Responsible part of the Bank In cooperation withCommencement Conclusion

Credit and Market Risks Management DivisionLegal DepartmentPermanent taskPermanent task

PR & MARKETING

PR activities Item No.Description of the taskQuantityBeginning and completion

1Preparing of THE BANKs page in PreporodTwice a month,Twenty four times a yearTwo pages in every editionEvery 1st and 15th day in a month and text and photos are dispatched several days earlier.

2Preparing of THE BANK NewsletterOnce a month, twelve times a year, 4 pages of information on THE BANKNewsletter is prepared at the end of every month.

3Arrangement of a page in the Journal BankeTwelve times a year(1 page per edition or more, if required)Page is delivered several days prior publishing of the Journal

4Developing topics and arranging a page in the "Business newspapers"Twelve times a year - one pagePage is delivered several days prior publishing of the Magazine

5Writing news regarding THE BANK for news agencies and mediaAt least twice a month or more, if requiredNews are written whenever the Bank releases a new product or initiates a new action, opens new branch, etc.

6Arranging pages for Magazine ZehraSix times a year- two pagesTexts and photos are sent a few days before preparation of the Magazine.

7Arranging page for Magazine Bosanska SumejjaSix times a year- two pagesTexts and photos are sent a few days before preparation of the Magazine.

8Updating the Web pageEvery time when we have new info for the publicImmediately after the information has been sent to media it is translated and placed on our Web.

9Writing monthly PR reportTwelve times a yearOn a first day in a month

10Preparing semi-annual PR clippingTwice a yearImmediately after expiry of the first six months

11Booklets and other promotional materialDepending on the need of the BankImmediately after an agreement

12Writing Jingles, spots and advertisements (radio, TV and press)Depending on the need of the BankImmediately after an agreement

13Designing marketing campaign for certain products and servicesDepending on the need of the BankImmediately after an agreement

14Coordination with journalists who are coming to the Bank and preparation of employees for interviews Depending on the need of the Bank Immediately upon an agreement

15Notes for radio broadcastTwelve times a yearEvery 1st day in a month.

16Proof-reading of monthly reports and other documents of the BankDepending on the need of the BankImmediately upon receipt of material.

MARKETING Planned Budget for marketing in 2014 amounts to KM 404 thousands.

Item no.Marketing activities (advertising and announcements) Total in KM000

1RADIO36

2TV52

3PRINTED MEDIA46

4EVENTS100

5PRINTING/PRODUCTION69

6SPONSORING ACTIVITIES10

7DESIGN 20

8ALLOCATED FUNDS50

9ENTERTAINMENT (Eid presents for children, iftars, dinners)21

TOTAL404

IT Division

The major objective of IT development strategy of Bosna Bank International is for THE BANK to be recognizable in the B&H market by the following traits: Operation based on Islamic principles Operation efficiency.

Pursuant to that the most significant strategic goals of the IT Division are: Close cooperation with other Bank divisions in the aim of aligning of the IT priorities and plans with the needs of the Bank and increasing operation efficiency; Establishing of a system for decision-making support, which would help considerably in the Bank management; Lowering of operational risk that IT system presents for the Bank, which before all implies implementation of the Data security management system; establishing, maintaining and testing of Disaster Recovery site; application of standards for information system management (COBIT, ITIL);

Operational Plan for 2013 was ambitious and has been realized to large extent; however one part of activities has not been realized due to objective reasons.Operational Plan for 2014 represents continuation of activities in accordance with strategy and leans largely on the plan of 2013, i.e. to realize activities that had not been realized in 2013, as well as to improve the work with regard to 2013. The major priorities in 2014 are: Improvement of the Banks reporting system (both regulatory bodies and management support reports); Supporting of the Banks network expansion; Amendment of credit cards processing system; Implementation of software development standard; Moving of the sales server; Implementation of the Disaster Recovery Center; Implementation of the Information security management system in accordance with ISO 27101; Education of IT Division staff in the domain of new technologies.

Detail IT Plan is given in a separate document.

LEGAL DIVISION

Department for Legal Procedures and Representation

KEY GOALS: Representing the Bank before courts and other authorities for the purpose of protection of the rights and interests of the Bank; Providing legal counseling and interpretation of legal regulations; Performing legal work related to insurance of receivables by registration of pledge right over real estates, movable property and securities and the related preparation of applications for notary public processing; Representing the Bank before notary public in the mortgage procedure; Preparing contracts on pledge over movable property and securities; Registration in the Register of pledges over movable property and registration of pledge right over securities with the Securities Register; Issuing of removing of pledge; Performing legal action in legal proceedings, executive, criminal, offences, administrative and bankruptcy proceedings in the aim of protection of the rights and interests of the Bank and the related preparation of legal suits, proposals, responses, appeals and objections and other documents; Representing the Bank in hearings and undertaking other legal actions related to the stated proceedings and keeping accurate and updated records of court actions and hearings; Preparation of internal enactments and procedures in the domain of the Department; Performing current work; Keeping data on clients and the Bank strictly confidential and performing other work in accordance with legal regulations and general enactments of the Bank and at instruction of the CEO of the Bank and the Division Director.

Responsible part of the Bank In cooperation withCommencement Conclusion

Department for Legal Procedures and Representation Management, Heads of organizational parts, Corporate Banking Division, Retail Banking Division, Credit and Market Risk Assessment Division and other Divisions when required.January 2014Permanent task

Department for Normative-Legal Work KEY GOALS:

Preparing of Retail and Corporate financing contracts; Preparing of standard and special types of contracts; Preparing and checking that legal enactments and procedures are in compliance with the regulations; Providing legal counseling and interpretation of regulations; Promptly initiating and preparing drafts of the existing and passing of new regulations in the domain of work, in accordance with legal regulations; Performing legal work related to the legal status and registration of the Bank; Performing legal work related to property insurance of the Bank and the employees of the Bank; Performing current work; Keeping data on clients and the Bank strictly confidential and performing other work in accordance with legal, sub legal and general enactments of the Bank and at instruction of the CEO of the bank and the Division Director. Responsible part of the Bank In cooperation withCommencement Conclusion

Department for Normative-Legal Work Management, Heads of organizational parts, Corporate Banking Division, Retail Banking Division, Credit and Market Risk Assessment Division and other Divisions when requiredJanuary 2014Permanent task

HR and ADMINISTRATION DIVISION

HR Department

KEY GOALS: To pass and realize the THE BANK Academy Training Plan and Program of the THE BANK employees which implies the following: Internal training for all employees, especially employees of the Branches; Familiarization of employees with the Laws and the rules of the Banking Agency of the Federation of B&H; Defining of a model of skills and competencies for every working position; Setting up a data base for HR records quality management and reporting; Profiled training in Islamic Banking products (which would result by new acceptable Islamic banking products); Filling in of vacant staff positions, as well as coordination and administration of hiring process of new employees, planning of necessary number and structure of employees according to adopted methodology; Implementation of evaluation and rewarding system which will contain good promotion system to adequate positions; Revision of Staff Rules of THE BANK; Revision of Human Resources Policy of THE BANK; Work on strengthening of motivation of employees through team work, establishing friendly atmosphere, supporting initiatives of employees and building professional approach to work; Preparing draft general enactments based on adopted strategies, policies and procedures from the domain of working-legal relations; Calculation of salaries, bonus, rewards and other forms of recompense, and performing other work in accordance with legal, sub legal and general enactments of the Bank, and similar.

Responsible part of the BankIn cooperation withCommencementConclusion

HR DepartmentManagement, Heads of Organizational partsJanuary 2014Permanent task

Employees of the HR Department are responsible for all above tasks, whereby commencement of the tasks will be in January 2014.

The Operational Plan coincides in some items with the Plan for the previous year because the Staff rules and the HR Policies have not been amended. The two documents require revision and renaming so as to become part of the project HR Potential Management; the parts that have to contain the provisions of the B&H or FB&H laws should be defined in the way that they do not have to be amended each time when laws change. We believe that it is necessary to pass a decision on implementation of the project HR Potential Management.

Planned number of increase of employees in 2014 is 32. Detail plan for every Division is attached to this Plan.

In view of the number of employees at the end of the year, we suppose that the bank will have 190 employees (two branch offices with three employees, the Executive Director and an employee in Credit and Market Risk Management Division). It is possible that the bank will open one Branch office at the beginning of 2014, but major preparation for that will be done in 2013.

Administration and General Services Department

KEY GOALS:

To constantly identify and decrease all necessary material costs; To advance the system of investment and maintaining of the assets, property and motor vehicles of the Bank; To prepare a preliminary solution of organization and reconstruction plan of the Head office of the Bank (approved by the Management of the Bank) in accordance with the decision on and the development plan of the Bank, together with the moving process and the related activities; To implement the Plan of expansion of the Banks network (approved by the Management of the Bank), in accordance with the decision on and the development plan of the Bank; To constantly provide support to all branches and organizational units of the Bank in attaining their business goals; To acquire automobiles for the Bank; To continually perform acquisition of the material, small inventory and services and investment and current maintaining of the premises, purchasing department, multiplication work and printing, maintaining cleaning services, etc.; Proper observing the procedure of use and maintaining official cars of the Bank; To improve the operation of the Central Archives of the Bank and to determine precisely the procedure which will regulate the Central Archives; All other additional tasks and requirements upon decisions and instructions of the Management of the Bank.

Responsible part of the BankIn cooperation withCommencementConclusion

Administration and General Services DepartmentHeads of organizational unitsJanuary 2014Permanent task

Security Services Department To organize permanent training in field of physical and technical security (using experience of others, organizing training sessions, etc.; To monitor functioning and integrity of technical protection system of the building; To improve the system by introducing new technical means, i.e. solutions; To fully implement the Plan for physical protection of all THE BANK buildings and the Head office (to improve telecommunication facility leading to the buildings of THE BANK), part that has not been realized in 2013.

The stated activities will be finalized in cooperation with other organizational parts of the Bank, such as shown in the following table:

Responsible part of the BankIn cooperation withCommencementConclusion

Security DivisionRetail Banking DivisionFirst Saturday in the last month of each quarterEnd of each quarter

Security DivisionAgencies for protection of persons and propertyPermanent taskPermanent task

Security DivisionAgencies for protection of persons and propertyBeginning of 2nd half of the year.Permanent taskEnd of the year.Permanent task

Security DivisionIT DivisionBeginning of 2nd half of the yearEnd of year

The given activities require above all presence of employees of the Department in the Branches in order to rectify all shortcomings on site. The third activity is upgrading of already installed technical protection systems to enable new services and more advanced system technology, thereby, defining conduct, activities and obligations through new procedures. The fourth activity includes implementation of video surveillance project over all buildings of THE BANK from the Head office of the Bank. The premises that will be opened in 2014 have to be included in this project. This project presents an important link in preventive actions, i.e. one of the ways of prevention of potential invaders. It still provides full control in the work of the security in the buildings over 24 hours with surveillance of the surrounding of buildings and the business premises.

STAFF, TRAINING AND MORALEStaff: Filling in vacant positions with high-quality and experienced banking personnel Continuous training: Internal and external training for all employees, particularly of the Branches; Familiarization of employees with the laws and regulations of the Banking Agency of the Federation of B&H, Central Bank of B&H; Profiled training about the products of Islamic banking (which should result by new acceptable products of Islamic banking),Motivation and morale of employees: Building professional approach to work; Stronger team work; Developing friendly atmosphere; Rewarding for achieved results; Supporting initiatives from employees;

SECRETARIAT

Planned activities of the Secretary General and Senior Assistant to Secretary General of the Bank in 2014:

Keeping the shareholders register and other activities and actions related to share capital of the Bank; Preparing agendas, coordinating preparation of materials for meetings, translating those materials, preparing of meetings of the bodies/Boards of the Bank, as follows: At least one bank`s General Assembly session; At least four bank`s Supervisory Board meetings; At least two bank`s Shari'ah Board meetings; Two Bank Audit Board meetings; Meetings of the Management of the Bank in accordance with the Rules of procedures of the Management Committee; Execution of all decision of the bodies of the Bank, monitoring of execution, preparing of analysis of the extent of execution and reporting thereof to the Boards of the Bank; Organization and holding of 1st International Investment Conference Sarajevo Business Forum 2014; Preparing minutes, decision and other documents of the bodies of the Bank; Keeping and distributing internal enactments of the Bank; Conducting complete procedures for securing the funds, selection of candidates and awarding scholarships; Keeping the Charity Fund of the Bank; Securing the legality of the work of the Boards of the Bank and other crucial operations of the Bank; Advising the bodies of the Bank; Communicating with the members of the Boards in respect of responsibility of members of the Boards and Shareholders, of holding of Board meetings, obtaining visas for Boards members, etc.; Drafting business and other correspondence; Performing other tasks and work deriving from the nature of the work and instructions of the relevant bodies of the Bank.

The following financial indicators for 2014 are integral part of this Operational Plan, as follows:

Planned Balance sheet and Income statement for 2014; Administrative Costs Budget and Capital Costs Budget in 2014; Summary of the Banks staff requirements in 2014.