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FRANSABANK • ANNUAL R EPORT 2 0 14 | 0 - 1

CONSOLIDATED FINANCIAL HIGHLIGHTS

STATEMENT OF THE CHAIRMAN

CORPORATE GOVERNANCE • Corporate Governance Framework

• Biographies of Board Members

• Group Chart

• Organization Chart – Fransabank SAL

• Executive and Management Committees - Fransabank SAL

• Management - Fransabank SAL

• Local Banking Subsidiaries - Board of Directors and General Managers

• Overseas Banking Subsidiaries and Associate - Board of Directors and General Managers

HISTORICAL MILESTONES

MANAGEMENT REPORT• Lebanon’s Economic Performance in 2014

• Consolidated Results of Operations

• Main Ratios

• Resolutions of Fransabank SAL Ordinary General Assembly

• Core Banking Activities

- Investment and Private Banking

- Corporate Banking

- Retail Banking

- China Desk

• Local Subsidiaries and Associate

- BLC Bank SAL

- Fransa Invest Bank SAL (FIB)

- Lebanese Leasing Company SAL (LLC)

- Bancassurance SAL

- Société Générale Foncière SAL (Sogefon)

• Overseas Subsidiaries and Associate

- Fransabank (France) SA

- Fransabank El Djazaïr SPA

- Fransabank OJSC (Belarus)

- Fransabank Syria SA

- Fransabank SAL Iraq branches

- United Capital Bank (Sudan)

• Risk Management

• Compliance

• Human Resources

• Information and Communication Technology

• Corporate Social Responsibility

CONSOLIDATED FINANCIAL STATEMENTS• Independent Auditors’ Report

• Consolidated Statement of Financial Position

• Consolidated Statement of Profit or Loss

• Consolidated Statement of Profit or Loss and Other Comprehensive Income

• Consolidated Statement of Changes in Equity

• Consolidated Statement of Cash Flows

• Notes to the Consolidated Financial Statements

GROUP NETWORK• Lebanon - Parent Company, Subsidiaries and Associates

• Overseas Subsidiaries

• Overseas Associate

• Representative Offices

2

7

1013161820212425

30

343649505151525354555555565656575757585859595961626465

70727475767880

144149151151

CONTENTS

0

30

60

90

120

150

180

(in million of USD)

NET PROFITFOR THE FINANCIAL YEAR

+ 3.46% CAGR

20142013201220112010

145.

75 155.

32

160.

37

160.

75

166.98

(in million of USD)

0

3,000

6,000

9,000

12,000

15,000

18,000

21,000

TOTALASSETS

+ 11.53% CAGR

20142013201220112010

12,2

43.9

5

14,4

44.1

2

15,7

50.6

4

16,9

64.3

9

18,942

.47

0

1,000

2,000

3,000

4,000

5,000

6,000

(in million of USD)

LOANS & ADVANCESTO CUSTOMERS (net)

+ 16.83% CAGR

20142013201220112010

3,14

1.85

4,42

6.22

4,83

9.17

5,29

2.86

5,85

4.08

OR THE FINANCIAL YEARFNET PROFIT

OR THE FINANCIAL YEARNET PROFIT

SETSASLATOT

O CUSTTANS & ADOL

OMERS (net)O CUSTANCESVVANCESANS & AD

(in million of USD)

180

150

120

90

(in million of USD)

.14

5.75 15

5.32

7116

0.37

516

0.75 9

166.98

(in million of USD)

00012,

00015,

00018,

00021,

443.9

5

44,44

4.12 5

15,7

50.6

4

93

16,9

64.3

9 418

,942

.47

(in million of USD)

0006,

0005,

0004,

0003,

3,14

1.85

(in million of USD)OMERS (net)

3,14

1.85

2,4,42

6.22 9

4,83

9.17

62

5,29

2.86

45,85

4.08

90

60

30

0

3.46+

R

1020 1120 1220 1320 1420

GAC%3.46

0003,

0

0006,

000,9

%

1020 1120 1220 20

311.5+

12,2

43.9

5

14,4

44.1

2

R

1320 1420

GAC

0003,

0002,

0001,

0

16.83

20

+

13

141

8

R

1020 1120 1220 1320 1420

GAC%16.83

13,

141.

8

31.12.10

10,081.95

3,141.85

145.75

1,287.55

12,243.95

12.00%

107

2,702

1,507.5

31.12.11

11,747.17

4,426.22

155.32

1,295.51

14,444.12

10.01%

108

3,074

1,507.5

31.12.12

13,065.30

4,839.17

160.37

1,488.57

15,750.64

12.44%

114

3,227

1,507.5

31.12.13

14,121.09

5,292.86

160.75

1,654.76

16,964.39

14.72%

116

3,265

1,507.5

Customers' Creditor Accounts

Loans & Advances to Customers (net)

Net Profit for the Financial Year

Shareholders' Equity

Total Balance Sheet

Capital Adequacy Ratio

Number of Local Branches

Staff Number

Exchange Rate USD/LBP

as per Basel II as per Basel III as per Basel III as per Basel III

+17%

+41%

+7%

+1%

+18%

31.12.14

15,346.48

5,854.08

166.98

1,865.74

18,942.47

15.07%

124

3,416

1,507.5

as per Basel III

In million of USD

CONSOLIDATED FINANCIAL HIGHLIGHTS

+11%

+9%

+3%

+15%

+9%

+8.08%

+9.38%

+0.24%

+11.16%

+7.71%

+8.68%

+10.60%

+3.88%

+12.75%

+11.66%

prog.14/13

prog.13/12

prog.12/11

prog.11/10

0

300

600

900

1,200

1,500

1,800

2,100

+ 9.72% CAGR+ 11.07% CAGR

20142013201220112010

1,28

7.55

1,29

5.51

1,48

8.57

1,65

4.76

1,86

5.74

0

3,000

6,000

9,000

12,000

15,000

18,000

20142013201220112010

10,0

81.9

5

11,7

47.1

7

13,0

65.3

0

14,1

21.0

9

15,346

.48

0

5

10

15

20

25

30

35

40

20142013201220112010

31.1

6% 37.6

8%

37.0

4%

37.4

8%

38.15%

(in million of USD)

CUSTOMERS’CREDITOR ACCOUNTS

(in million of USD)

SHAREHOLDERS’EQUITY

0

10

20

30

40

50

60

+ 4.44% CAGR+ 11.20% CAGR

20142013201220112010

46.2

7

57.7

9

56.7

5

54.8

5

55.06

(in million of USD)(in million of USD)

NET FEE &COMMISSION INCOME

LOANS & ADVANCES TO CUSTOMERS TO CUSTOMERS’ CREDITOR ACCOUNTS (%)

0

100

200

300

400

20142013201220112010

253.

92 317.

26 360.

91

373.

00

388.30

NET INTERESTINCOME

CREDITCUST

(in million of USD)

OUNTSCCOR ACREDIT

OMERS’CUST

(in million of USD)

EQUITYSHAREHOLDERS’

(in million of USD)

CREDITCUST

ANS & ADOL

OUNTS (%)CCOR ACREDITOMERS’ O CUSTOMERS TCUST

TOANCES VVANCES ANS & AD

00018,

00015,

00012,

000,9

0006,

5,

10,0

81.9

5 711

,747

.17

0,

13,0

65.3

0 .14

,121

.09

83

15,346

.48

600

900

1,200

1,500

1,800

1002,

81,

287.

55

21

1,29

5.51

1.

1,48

8.57

67

1,65

4.76

46

1,86

5.74

40

35

30

25

20

15

10

%31

16%

%31

.16%

%737

.68% %

.37

.04%

%737

.48%

%838.15%

11.+

0003,

0

RGAC%7011.

1020 1120 1220 1320 1420

300

0

%2.79+

1020 1120 1220 20

RGAC

1320 1420

5

020

1020 1120 1220 1320 1420

(in million of USD)

400

300

253.

92 317.

26

6360.

91

OMEINCNET INTEREST

60

50

40

246

27

OMMISCNET FEE &

(in million of USD)

7373.

00

3388.30

246

.27

757.7

9

656.7

5

554

.85 0

55.06

OMESION INCOMMISNET FEE &

(in million of USD)

%11.20+

200

100

01020 1120 1220 20

325

3.

30

20

10

0

4.44+ R

20

GAC

1320 1420

RGAC%4.44

1020 1120 1220 1320 1420

%11.20+

4.44+ RGAC

RGAC%4.44


S T A T E M E N T O FT H E C H A I R M A N


Adnan Kassar • Chairman | Adel Kassar • Deputy Chairman

The Lebanese banking sector witnessed another good year in 2014,with a relative improvement in performance and confirmed itssustained resilience, registering an increase in total assets,customers’ deposits and loans of 7%, 6% and 8% respectively as ofend-December 2014. This is impressive given that it was anotheryear with many economic challenges, largely influenced by thepersisting geo-political events in some of the Arab countries, ingeneral and in the neighboring countries in particular.

It is in this landscape that Fransabank Group achieved a satisfactorygrowth of 11.66% in the Group’s total assets which increased fromUSD 16.964 billion at year-end 2013 to USD 18.942 billion atyear-end 2014. The Group achieved year-on-year increase of 8.68%in the consolidated customers’ deposits which registeredUSD 15.346 billion at year-end 2014 from USD 14.121 billion at year-end2013. In parallel, consolidated loans and advances to customersincreased by 10.60% and reached USD 5.854 billion at year-end 2014.

These financial results were backed by a sustainable growth ofprofitability, whereby net consolidated profits reached USD 167 millionin 2014, increasing by 3.9% on 2013. In this context, Return onAverage Common Equity (ROAE) reached 10.65% and Return onAverage Assets reached 0.93%. Thus, shareholders’ equity increasedby 12.75% and amounted to USD 1.866 billion at year-end 2014. TheSolvency Ratio as per Basel III stood at 15.07% by end December2014, exceeding the standards required by the Central Bank ofLebanon (11.5%), which are also higher than the minimum levelrequired by Basel III (8%).

This performance consolidated the Group’s ranking in Lebanon asthe third largest in terms of loans and advances to customers andthe fourth largest financial institution in terms of total assets andcustomers’ deposits.

Fransabank Group’s expansion strategy aimed at increasing andconsolidating its leading position in the countries where it is present.At the regional and international expansion levels, FransabankGroup is present in ten countries; France, Algeria, Syria, Belarus,Sudan, Cyprus, Iraq, Cuba and UAE (Abu Dhabi), in addition toLebanon of course. In 2014, the Bank launched two branches in theIraqi market in Erbil – Kurdistan region and in Baghdad, and it is inadvanced stage of establishing a presence in Africa.

At the local level, the Bank concluded its seventh acquisition andmerger operation of Ahli International Bank SAL. This acquisition ispart of Fransabank’s corporate growth strategy, which aims to leveragethe development efficiency of its franchise. It also consolidatedFransabank Group ranking as the largest branch network inLebanon, with 124 branches strategically spread all over the country.

As far as the new products and services are concerned, the Bankestablished a “China desk“ to serve and facilitate the existing andpotential customers’ business with China, and to contribute to thedevelopment of the Chinese companies operating in our markets.In this concern, Fransabank launched the first China UnionPay cardin Lebanon in order to provide customers with a reliable, trustworthyand safe mode of payment, accepted all over the Chinese territories.

At Fransabank, we are driven by a strong awareness of corporategovernance, compliance, social and environmental responsibility.Our corporate governance practices are a tool for incorporating theethical, social and environmental standards into our business decisionmaking process.

We are, as well, in full compliance with the Central Bank ofLebanon’s regulations and the pertinent international laws and bestpractices. To this effect, we have made significant investmentsin Information Technology and in our People, in a highly evolvingorganizational structure with required dynamism and in a proactivemanner.

Our commitment to protect the environment is evidenced by oursustainable lending policy to the corporate, small and medium sizeand micro credits, and in cooperation with the International FinanceCorporation (IFC), the European Investment Bank (EIB), and incollaboration with the Government of Canada.

Fransabank reaffirms, once again, its commitment to implementresponsible business practices and to play a constructive role infostering development, stability and peace in the communitieswhere we operate; by becoming the first Bank in Lebanon to signthe Business for Peace Statement of Support in June 2014 afterbeing an active participant in the United Nations Global Compact(UNGC), noting that this was a special reaction as I launched in 1999,as the Chairman of the International Chamber of Commerce, theGlobal Compact with UN Secretary General Kofi Annan.

While, we are well aware that we may face challenges on the roadahead, we are confident that the continued momentum we see inour strategic businesses, combined with the successful implementationof our action plans, will allow us to achieve our set targets, and builda dynamic and sustainable business module creating long-termvalue to all our stakeholders.

Last but not least, we express our sincere gratitude to ourshareholders for their continuous support, to our customers fortheir trust and loyalty, and to our employees and managementteam for their dedication and diligence that keep us advancing forward.

Sincerely,

Adnan Kassar

STATEMENT OF THE CHAIRMAN


CORPORATE GOVERNANCE FRAMEWORK

CORPORATE GOVERNANCE

The Board of Directors has adopted a Corporate Governance Code,which was developed in accordance with Fransabank SAL by-lawsand the guiding principles of good corporate governance. TheCode delineates a Corporate Governance Framework in linewith the regulatory requirements and international best practices.This Framework promotes fair and transparent relationship betweenthe Bank’s management, its Board of Directors, its shareholders andother stakeholders.

The Group’s strategy is to standardize the Corporate Governancepractices to all its local and foreign subsidiaries, taking intoconsideration the Corporate Governance requirements of hostjurisdictions.

GOVERNANCE STRUCTURE

Fransabank Corporate Governance structure includes the GeneralAssembly of shareholders; the Board of Directors; the Chairman; the

Deputy Chairman; the various committees; control functions; theexternal auditors; senior management and the business andsupport functions. The aim behind such a structure is to provide anefficient framework for the assignment of responsibility andaccountability.

RIGHTS OF SHAREHOLDERS

Shareholders enjoy all rights conferred upon them by the LebaneseCode of Commerce, including the right to vote at the GeneralAssembly, the right to receive dividends, the right to transfer theirshares and the preferential right to subscribe to capital increases. Allcommon shareholders, including minority shareholders, enjoy thesame rights and benefits and have one voting right for eachcommon share (the principle of one share, one vote) withoutlimitation. Shareholders who own registered shares for at least twoyears are entitled to a double voting right according to Article 117of the Lebanese Code of Commerce.

Fransabank believes in, and is committed to implement sound corporategovernance practices, which is considered the basis for its future development,enhanced performance and strong confidence in its activities.

MAIN HOLDERS OF COMMON SHARES AS AT DECEMBER 31, 2014

Adnan Kassar

Adel Kassar

Deutsche Investitions - und Entwicklungsgesellschaft mbH (DEG) (2)

Al-Fadl Holdings Limited

The Public Institution for Social Security – Kuwait

Others (3)

TOTAL SHAREHOLDING

(1) Percent of total share capital consisting of 21,000,000 Common Shares as at 31.12.2014(2) Deutsche Investitions-und Entwicklungsgesellschaft mbH (DEG) is one of Germany’s top development and investment banks. DEG is owned

by Kreditanstalt für Wiederaufbau KfW, which, in turn, is owned by the German Government. (3) Each with less than 2%.

39.53

39.53

5.00

2.70

2.00

11.24

100

PERCENT (1)

FRANSABANK • ANNUAL R EPORT 2 0 14 | 1 0 - 1 1

BOARD OF DIRECTORS

Fransabank is governed by a Board of Directors, which consists oftwelve members elected by the General Assembly of shareholdersfor three years.

The management of the Bank is vested in the Board of Directors,which at Fransabank consists of a sufficient mixture of non-executive and independent members. The majority of Boardmembers qualify as non-executive. This composition aims tosafeguard the governance and effectiveness of the Board and toensure the objective of adding value to all shareholders, investors,clients and community in the short, medium and long terms.

The Board has overall responsibility of the Bank, including adoptingand overseeing the implementation of the Bank’s strategic objectives,risk strategy, risk policies, corporate governance and corporate values,as well as ensuring that adequate, effective and independentcontrols are in place.

During 2014, the Board of Directors has met four times.

In carrying out its oversight duties, the Board is supported by theCorporate Governance Committee, Risk Management Committeeand Audit Committee. These Committees are chaired by independentnon-executive members and comprise non-executive boardmembers. These Committees meet at least quarterly and whennecessary. A charter was established to each Committee, whichindicates the Committee’s scope of work, membership structureand composition, meetings as well as its roles and responsibilities.

In 2014, the Board has established a Remuneration Committee,comprised of non-executive Board members, which shall meet atleast semi-annually.

• H.E. Mr. Adnan Kassar

• Mr. Adel Kassar

• Mr. Antoine Jeancourt Galignani

• Mr. Bernd Tümmers

• The Public Institution for Social Security - Kuwait

• Mrs. Magda Rizk

• H.E. Mr. Nehmé Tohmé

• H.E. Mr. Walid Daouk, Esq.

• Mr. Rafic Charafeddine

• Mr. Nadim Kassar

• Dr. Walid Naja

• Mr. Henri Guillemin

BOARDMEMBERS

Executive Director

Executive Director

Non-Executive Director Chair of the Audit Committee and the Corporate Governance Committee

Non-Executive Director


Non-Executive Director Chair of the Remuneration Committee and Member of the Risk Management Committee


Non-Executive Director Member of the Audit Committee, the Corporate Governance Committee and the Remuneration Committee

Non-Executive DirectorMember of the Remuneration Committee

Executive Director

Non-Executive DirectorMember of the Risk Management Committee, the Audit Committee and the Corporate Governance Committee

Non-Executive DirectorChair of the Risk Management Committee

Corporate Governance Committee

The responsibility of the Corporate Governance Committee is toprovide oversight of all material Corporate Governance issuesaffecting the Bank and its subsidiaries; and to ensure that FransabankCorporate Governance practices are in line with the regulatoryrequirements and international best practices.

Risk Management Committee

The Risk Management Committee’s responsibilities are to assist theBoard of Directors in fulfilling its risk-related duties and to overseethe proper implementation of the risk management principles. Indischarging its responsibilities, the Committee monitors the Bank’srisk profile through the reports submitted by the Chief Risk Officerto the Risk Management Committee prior to presenting them tothe Board of Directors. The Committee is also responsible forrecommending to the Board of Directors the Bank’s risk policyincluding the risk appetite and risk tolerance.

Audit Committee

The Audit Committee is established to assist the Board of Directorsin its oversight responsibilities regarding the:

• Evaluation of the internal control regulations and procedures• Assessment of the qualifications and independence of the external

auditors• Supervision of the internal audit’s activities• Integrity of the financial statements• Review of the Bank’s disclosure standards

During 2014, each of the Corporate Governance Committee, RiskManagement Committee and Audit Committee held four meetings.

MANAGEMENT

The Chairman of the Board, in his capacity as General Manager, maydelegate some of his managerial responsibility to another GeneralManager or Managers, subject to Board approval. At Fransabank,and in addition to the Chairman and the Deputy Chairman, theSenior Management includes General Managers, Deputy GeneralManagers and Heads of key departments. Also an ExecutiveCommittee and several Management Committees are establishedto support the Chairman and the Deputy Chairman in running theday-to-day management of the Bank.

CONTROL FUNCTIONS

Fransabank implements sound internal control system, includingRisk Management, Internal Audit, Compliance, CorporateGovernance and Inspection functions. These functions ensure thatthe Bank’s activities are performed in accordance with the prevailinglaws and regulations as well as with the Bank’s policies andprocedures.

CHARTER OF BOARD COMMITTEES


Mr. Adel Kassar | Deputy Chairman of the Board of Directors

Mr. Antoine Jeancourt Galignani | Chair of the Audit Committee & the Corporate Governance Committee

H.E. Mr. Adnan Kassar | Chairman of the Board of Directors

Mr. Adel Kassar is the Deputy Chairman and Chief Executive Officer of Fransabank SAL. He is the Chairmanof the Board of Directors of Fransabank France SA and Fransabank Syria SA. He is also the Chairman of theBoard of Directors and General Manager of Bancassurance SAL and Lebanese Leasing Company SAL. He ismember of the Board of Directors of BLC Bank SAL and member of the Supervisory Board of FransabankOJSC in Belarus. He and his brother Adnan acquired Fransabank in 1980. He is a former Chairman ofthe Association of Banks in Lebanon and is the Honorary Consul General of the Republic of Hungary inLebanon. He holds a degree in Lebanese and French law from Saint Joseph University, Beirut.

H.E. Mr. Adnan Kassar is the Chairman & CEO of Fransabank Group and member of the Board of Directors ofBLC Bank SAL, Fransabank (France) SA and Fransabank Syria SA. He is also the Chairman of the SupervisoryBoard of Fransabank OJSC in Belarus. He and his brother Adel acquired Fransabank in 1980. H.E. Mr. Kassarserved as Minister of Economy and Trade in Lebanon from 2004 to 2005 and Minister of State in Lebanon from2009 to 2011. He was the first Arab businessman elected Chairman of the International Chamber ofCommerce (ICC) and headed the World Business Organization from 1999 to 2000. He is also former Presidentof the Lebanese Federation of Chambers of Commerce, Industry and Agriculture in Lebanon and headed thisFederation for over thirty years (from 1972 to 2002). He is the President of the Lebanese EconomicOrganizations and is the Honorary Chairman of the General Union of Chambers of Commerce, Industry andAgriculture of the Arab Countries which groups millions of companies and associations from the 22member Arab countries. Mr. Kassar has received global awards and high distinguished decorations frommany Heads of States and International Organizations with the latest in 2014 being the Oslo Business for PeaceAward. He holds a law degree from Saint Joseph University, Beirut and an Honorary Doctorate from theLebanese American University. www.adnankassar.com

Mr. Antoine Jeancourt Galignani started his career at the French Ministry of Finance and later joinedChase Manhattan Bank in New York and Crédit Agricole. He was appointed as Managing Director,then Chairman of Bank Indosuez. He was also member of the Board of Directors of Banque Saudi Fransi,in Saudi Arabia and the Chairman and CEO of AGF, which was later acquired by Allianz Group and theChairman of the holding company of SNA. He also served in numerous Boards such as TOTAL,Bouygues and Société Générale and he chaired the Board of the Institute of International Finance inWashington from 1991 to 1994. Mr. Galignani was until the 1st of December 2012 the Chairman of theBoard of Eurodisney France. He is currently a director of Oddo, a Paris based Investment Bank. He holdsa master degree in economics and political sciences from ENA, France.

| Born in 1930 - Lebanon


| Born in 1937 - France

BIOGRAPHIES OF BOARD MEMBERS


Mrs. Magda Rizk | Chair of the Remuneration Committee & Member of the Risk Management Committee

Mrs. Magda Rizk is an important property owner in Lebanon. She holds a law degree from Saint JosephUniversity, Beirut.

The Public Institution for Social Security – Kuwait

The Public Institution for Social Security is a public institution which has an independent budget and is underthe supervision of the Minister of Finance. The Institution has a Board of Directors, chaired by the Minister of Financeand a General Manager who is responsible for executing the policy as drawn-up by the Board of Directors. ThePublic Institution for Social Security is represented by Mr. Mohammad Al-Qassar in the Board of Directors.

Mr. Bernd Tümmers began his career as business administration trainer in a large German manufacturingcompany, followed by being the assistant to the CFO of a large engineering and construct ion company inthe USA. He joined Deutsche Investitions – und Entwicklungsgesellschaft mbH (DEG) and was appointed asInvestment Manager in South East and East Asia, and then Head of Department in charge of DEG’s activities inAsia. In 1996, he became Senior Vice President responsible for DEG’s investments for approximately fivehundred companies worldwide with an investment volume of USD 6 billion. After his retirement in 2012,he founded his own consulting firm and became partner of AdminiStraight GmbH, a company advisingGerman companies in different fields. He still serves as a member of the Board of Directors in DEG’s fewcompanies. He holds an MBA degree in marketing, organization and social psychology from University ofCologne, Germany.

Mr. Bernd Tümmers

| Born in 1947 - Germany



H.E. Mr. Nehmé Tohmé is the Chief Executive Officer for many contractor companies operating in Saudi Arabia,Qatar and Bahrain. He also established several corporations and was a shareholder, partner or member of theBoard of Directors in many companies. He was elected as member of the Lebanese Parliament in 2000 andserved as Minister of Displaced in Lebanon from 2005 to 2008. He holds a BS in civil engineering from theAmerican University of Beirut.

H. E. Mr. Nehmé Tohmé


H.E. Mr. Walid Daouk, Esq is specialized lawyer in commercial law, civil and property law. He started his career, in1981, as an associate in Takla & Trad law firm becoming thereafter a partner. In 2005, he occupied the position ofVice Chairman at the International Affairs Commission at the Beirut Bar Association, and in 2008, he becamea member of the Arbitration Commission. In 2011, he was appointed Minister of Information and Minister of Justiceper interim. After the termination of his appointment in 2014, he resumed his practice as lawyer and legalconsultant in above mentioned firm. He is a lawyer and legal advisor for multinational and Lebanesecompanies performing business in various fields. Also, he is a Board member of many corporations in Lebanon andabroad including Fransabank SAL, Fransabank (France) SA, Fransabank El Djazaïr SPA, BLC Bank SAL, USB Bank(Cyprus), Stow Securities Corporations (Panama), Semiramis SAL, Beirut Waterfront Development SAL, Tourism andHotel Development Company SAL. He was a member of the Board of Directors of the Counsel for Developmentand Reconstruction of Lebanon (CDR) 2001-2004. He is the Commissioner of the Lebanese Government at theBeirut Stock Exchange since 1994. He holds a degree in Lebanese and French law from Saint Joseph University,Beirut and had prepared a degree in Business Management from Beirut University College.

H.E. Mr. Walid Daouk , Esq. |


Member of the Audit Committee, the Corporate Governance Committee & the Remuneration Committee

Mr. Rafic Charafeddine | Member of the Remuneration Committee

Mr. Rafic Charafeddine is a businessman, and has participations in various companies. He deals in constructionprojects and real estate investments.

Mr. Nadim Kassar

Dr. Walid Naja is former Chairman of the Banking Control Commission - Central Bank of Lebanon. He previouslyserved as Economic Counselor at the Lebanese Embassy in Washington D.C., and General Manager of theFederation of Chambers of Commerce, Industry and Agriculture in Lebanon. He holds graduate degrees ineconomics and international relations from the American University of Beirut and Yale University, USA.

Mr. Nadim Kassar is a General Manager of Fransabank SAL. He is also the Vice-Chairman and General Managerof BLC Bank SAL, Founder and Board Member of Fransa Invest Bank SAL (FIB), Founder and Chairman ofFransabank El Djazaïr SPA, Board Member of the Association of Banks in Lebanon since 2001, Board Member ofUSB Bank PLC, Board Member of Lebanese International Finance Executives (LIFE), Co-Manager of A.A. Kassar(France) SARL and General Manager of A.A. Kassar SAL. Mr. Kassar is also a Board Member of the followinginstitutions: MasterCard Incorporated Asia, Pacific, Middle East & Africa, SAMEA Regional Board of Directorssince 2005, NetCommerce, International Payment Network (IPN) SAL, Credit Card Management, Founder andBoard Member of the American Lebanese Chamber of Commerce. He holds as well the position of DeputyChairman of Société Financière du Liban SAL. He holds a bachelor's degree in Business Administration fromthe American University of Beirut.

Dr. Walid Naja |

Mr. Henri Guillemin | Chair of the Risk Management Committee

Mr. Henri Guillemin started his banking career at Crédit Lyonnais. He then joined Indosuez Bank andheld different management positions in Singapore, Saudi Arabia (Jeddah and Riyadh), Bahrain and Paris. Mr.Guillemin was appointed the Manager of Crédit Agricole Indosuez (CALYON), Paris for the Middle East, andthen promoted to Manager for the Middle East and Africa region. Mr. Guillemin was the Managing Director ofCrédit Agricole Egypt SAE, Cairo. He holds a degree in economic sciences from Sorbonne University, Paris,as well as a degree in political studies, and an MBA degree from INSEAD Fontainbleau.

Member of the Risk Management Committee, the Audit Committee & the Corporate Governance Committee




| Born in 1947 - France

F R A N S A B A N K • A N N U A L R E P O R T 2 0 1 4 | 1 4 - 1 5

Banque Libano-Française SAL 4

BLC Bank SAL 1

DEG Germany 1

Others 0

Holding Mr. Sehnaoui 1

Others

Silver Capital Holding

Banks Abroad B

Representative Offices

68%

Group CMA-CGM (Franco-Lebanese) 25%

Maghreb Truck Cie SPA Algeria 7%

55.67%*

Others 44.33%

60%

BPCE International et Outre Mer (IOM) 40%

20%

Aref Investment Group Kuwait 25%

Athman Moushtaraks for Trading Co. - Kuwait 15.02%

Boubyan Bank KSC Kuwait 21.67%

Financial Company for Investment & Development Egypt 6.25%

Al Imtiyaz Investment Co. Kuwait 5.83%

Others 0.04%

Riyada Capital - Kuwait 2.92%

Others 3.31%

88.08%

Fransa Holding SAL Lebanon 11.88%

Nota: Fransabank Group Chart updated for events occurring up to May 2015

* or 65.98% to paid-up capital.

BLC Bank has three subsidiaries in Lebanon: BLC Invest, BLC Finance & BLC Services.

98.71%

FransabankSyria SASyria

Fransabank(France) SAFrance

UnitedCapital BankSudan

FransabankOJSCBelarus

USBBank PLCCyprus

FransabankEl DjazaïrSPA - Algeria

Cuba

UAE(Abu Dhabi)

Fransabank S

ansabank Fr

ansabank

b

68%

GMCA-oup CMGr

A - AlgeriaSPEl Djazaïr

ansabankFr

ab

Banks Abr

60%7%* 55.6

BPCE I

yria Fr(FrFr

SAyria SS

ansabankFr

d

oadnks Abr

a

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national erntBPCE I estment Grvnef IAr

e SudanCapital Bank

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ansabankFr

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oupestment Gr ransa Holding SAL F

Capital BankBelarus

JSCOansabankFr

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yprusCCBank PL

USB

7%iaAlger

Aruck Cie SP PATeb aghr M

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44.33%thersO

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40%er (IOM) e M et Outrnational erntBPCE I

gypt E estment & Dvn I

ompaninancial C F

7%21.6uwaitK

yan Bank KSC oub B

2%015.

orading CTor f for oushtaraksthman M A

25%

uwait Kestment Grvnef IAr

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elopmenty f

veestment & Dory f

el forompan

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uwait. - Kooushtaraks

oupestment Gr

11.88%ebanon Lransa Holding SAL F

Silv

O

3.31%thers O

2%2.9apital - Kiyada C R

5.83%

uwait Kvnmtiyaz I Al I

6.25%

gypt E

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Cuba

(Abu Dhabi)EUA

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C Bank has thrBL

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ansabank Gr FrNota:

ebanon: BLee subsidiaries in LC Bank has thr

o paid-up capital.* or 65.98% t

or eed ftoup Chart updaansabank Gr

C Service & BLC Financt, BLesvC Inebanon: BL

15y 20o Macurring up tents ocvor e

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15

GROUP CHART


50%

Banque Libano-Française SAL 40%

BLC Bank SAL 10%

87.49%

DEG Germany 12.50%

Others 0.01%

99.88% 99.70% 99.70% 96.70%

68.58% 100%

Holding Mr. Sehnaoui 18.44%

Others 1.87%

Silver Capital Holding 4.86%

37.067%

Banks in Lebanon

Companies in Lebanon

R

(Franco-Lebanese) 2

Algeria 7

6.25%

BPCE International et Outre Mer (IOM) 4

Aref Investment Group Kuwait 2

Athman Moushtaraks for Trading Co. - Kuwait 1

Boubyan Bank KSC Kuwait

Financial Company for Investment & Development Egypt 6

Al Imtiyaz Investment Co. Kuwait

Riyada Capital - Kuwait

Others

Lebanese LeasingCompany SAL

Fransabank Insurance Services Co SAL

SogefonSAL

ExpressSARL

Switch & ElectronicServices SAL

BLC BankSAL

F

BancassuranceSAL

SAL

FransaInvest BankSAL

Bank of Beirut andthe Arab CountriesSAL

LSA

68.58%

ehnaoui . SrHolding M

kLSAC BankBL

100%

ebanonBanks in L

6.25%LSA

t BankesvInansaFr

%76.037

Beirut and

ebanon

LSAountriesab Cthe Ar

Bank of Beirut and

ountries

Bank of Beirut and

4.86%apital Holdinger C Silv

7%1.8thers O

18.44%ehnaoui . SrHolding M

O

50%

LSAeancsurBancas

%49.87

eALy SompanCeasingebanese LL

.88%99 .7099

L es C

ebanonompanies in LC

SAonSogef

Servicansabank InsurFr

%.7099%.70

AL AL

ebanon

es SServicch & ElectrwitS

o Ses Ce ancansabank Insur

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ch & ElectrS

sesExpr

10%C Bank SAL BL

40%rançaise SAL-FLibano

Banque

rançaise SAL

%10.0thersO

12.50%

ymaner GDEG

75 branches in L

47 branches in L

anches in Lebanon and 2 br

anches in Lebanon

ebanon and 2 branches in Iraq



Boardof Directors

Chairman &Deputy Chairman

Inspection

ExecutiveAdvisor to

the Chairman

Strategy &Development

CorporateBanking

LegalAffairs

Judicial

GeneralManager

GeneralManager

BranchNetwork

RetailBanking

LoanRecovery

RealEstate

CentralOperations

CreditAdministration& Information

FinancialControl

& Accounting

CreditAppraisal

Policies& Procedures

CDeputy Chairman

ors

m Chairman &

ectof DirdBoar

Deputy Chairman

Inspection

airsffAegalL

Inspection

egal

the Chairmanodvisor tAeecutivEx

airsffA

Judicial

airs

Judicial

elopmentvDeegy &tatrS

BankingetaorporC

NetwBr

BankingetailR

aManagerne alGener

orkNetwanchBr

eryvoecRoanL

ettaEsealR

tionsaOperalentrC

& InfA

a

e

Manager

an

ne alGener

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editCr

ountingcc& AolontrC

Financial

aisalAppreditCr

eseduroc& ProliciesP

NetwBanking orkNetw eryvoecR ettaEs tionsaOper & Inf tionorma& Inf ountingcc& A aisalAppr

ORGANIZATION CHART - FRANSABANK SAL


RiskManagement

InternalAudit

Compliance

SecretaryGeneral

International Treasury &

Capital Markets ICT & Projects Engineering& Logistics Administration Human

Resources

Marketing &Corporate

CommunicationOrganization

ManagementRisk

Management uditAernalInt eompliancC

tionalernaInt Capital Mark

easury &rTetsCapital Mark

easury & ojectsICT & Pr

GenerSecr

tiontics

ganizaOrogis& L

Engineering

n alnereetarySecr

tion escesourRHumanatrdminisA

eting &

tionommunicaCetaorporC

eting &Mark

Capital Mark ticsogis& L escesourR tionommunicaC



EXECUTIVE AND MANAGEMENT COMMITTEES - FRANSABANK SAL


EXECUTIVE COMMITTEE

H.E. Mr. Adnan Kassar Chairman General Manager

& or

Mr. Adel Kassar Deputy Chairman General Manager

Mr. Nadim Kassar General Manager

Mr. Mansour Bteish General Manager

Mr. Nabil Kassar Secretary General

Mr. Joe Sarrouh Executive Advisor to the Chairman

Miss Mona Khoury Group Chief Risk Officer (Non-voting Member)

Mr. Nabih Saddy Group Chief Financial Officer

MANAGEMENT COMMITTEES

Management Committee

Credit Committees

Assets & Liabilities Committees

Overseas Expansion Committee

Banking Technology Committee

Information Security Committee

Compliance Committee

Human Resources Committee

Marketing & Corporate Communication Committee

Purchasing Committee

MANAGEMENT - FRANSABANK SAL


Mr. Nadim Kassar General Manager

Mr. Mansour Bteish General Manager

Mr. Nabil Kassar Secretary General

Dr. Mohamad Daher Deputy General Manager, Head of Corporate Banking

Mr. Philippe El Hajj Deputy General Manager, Head of Retail Banking

Dr. Nicolas Khairallah Deputy General Manager, Head of Human Resources

Miss Mona Khoury Deputy General Manager, Group Chief Risk Officer

Mr. Nadim Moujaes Deputy General Manager, Head of Strategy & Development

Mr. Nabih Saddy Deputy General Manager, Group Chief Financial Officer

Mr. Nabil Tannous Deputy General Manager, Head of Treasury & Capital Markets

GENERAL MANAGEMENT

EXECUTIVE ADVISOR TO THE CHAIRMAN

MANAGEMENT

H.E. Mr. Adnan Kassar Chairman General Manager

Mr. Adel Kassar Deputy Chairman General Manager

Mr. Joe Sarrouh Executive Advisor to the Chairman


Mr. Wajdi Abi Chacra Advisor, Legal Affairs

Mr. Fawzi Moussa Advisor, Corporate Banking

Mr. Fouad Helou Head of Central Operations

Mr. Antoine Younes Head of Credit Appraisal

Mr. Pierre Posbic Head of Organization

Mr. Antoine Asmar Business Development Consultant, Corporate Banking

Mr. Roland Tabib Chief Information Officer, Head of ICT & Projects

Mr. Georges Andraos Head of International Banking

Mr. Zouheir Chouraiki Group Chief Internal Auditor

Mr. Zakaria El Khatib Head of Inspection

Mr. Khalil Assaf Head of Special Credits

Mrs. Dania Kassar Head of Marketing & Corporate Communication

Miss Hoda Kadi Head of Policies & Procedures

Mr. Antoine Zarifeh Head of Small & Medium Enterprises

Mrs. Magida Kasbani Head of Administration

Mr. Adel Moubarak Head of Security & Business Continuity

Mr. Aed Jalloul Head of Consumer Banking

Mrs. Lama Dick Head of Local & Overseas Credit Cards

Mrs. Dalal Halabi Head of Credit Reporting & Documentation

Mr. Roger Abboud Head of Credit Information

Mr. Wissam Ali Hassan Head of Alternative Channels

Mrs. Lama Ghoutaymi Head of Loan Recovery

Mr. Nagi Makhlouf Head of Engineering & Logistics

Mr. Fouad Khalifeh Group Chief Compliance Officer

Me. Joumana Oueidat Head of Judicial

MANAGEMENT


Mr. Joseph Akiki Head of Branch Management,Regional Manager, Main Branch & North

Mrs. Najwa Sandid Regional Manager, Beirut I

Mr. Antoine Nehmeh Regional Manager, Beirut II

Mr. Francis Abi Nakhoul Regional Manager, Mount Lebanon, Group A

Mr. Georges Saliba Regional Manager, Mount Lebanon, Group B

Mr. Talal Hamadi Regional Manager, South

Mr. Amine Abou Mhaya Regional Manager, Bekaa

Mr. Farouk Chreif Deputy Regional Manager, Bekaa

Mr. Nazih Chaarani Deputy Regional Manager, North

LOCAL NETWORK MANAGEMENT

LEBANON

BLC BANK SAL

Board of Directors

H.E. Mr. Maurice Sehnaoui Chairman General Manager

Mr. Nadim Kassar Vice Chairman General Manager

H.E. Mr. Adnan Kassar Member

Mr. Adel Kassar Member

Mr. Nabil Kassar Member

H.E. Mr. Walid Daouk, Esq. Member

Mr. Mansour Bteish Member

H.E. Mr. Nazem El Khoury Member

Mr. Raoul Nehme Member

Mr. Walid Ziade, Esq. Member

H.E. Mr. Ziad Baroud, Esq. Member

Mr. Henri De Courtivron Member

General Manager Mr. Raoul Nehme

FRANSA INVEST BANK SAL

Board of Directors

Mr. Nabil Kassar Chairman General Manager

Mr. Nadim Kassar Member



Mr. Michel Saroufim Member

Mr. Mohammed Mou'minah Member

Fransabank SAL Memberrepresented by Mr. Adel Kassar

General Manager Mr. Michel Saroufim

BLC INVEST SAL

Board of Directors

H.E. Mr. Maurice Sehnaoui Chairman General Manager

Mr. Nadim Kassar Vice Chairman General Manager


Mr. Nabil Kassar Member


Mr. Raoul Nehme Member

Mr. Walid Ziade, Esq. Member

Mr. Joe Sarrouh Member

General Manager Mr. Fouad Rahme

LOCAL BANKING SUBSIDIARIESBOARD OF DIRECTORS AND GENERAL MANAGERS


FRANCE ALGERIA

FRANSABANK (FRANCE) SA

Board of Directors

Mr. Adel Kassar Chairman General Manager

Mr. Yvan de La Porte Du Theil Vice Chairman

H.E. Mr. Adnan Kassar Member

Mr. Philippe Garsuault Member representing BPCE IOM

Mr. Henri de Courtivron Member


Mr. Nabil Kassar Memberrepresenting Fransabank SAL


Mrs. Patricia Lantz Member

General Manager Mr. Andre Tyan

FRANSABANK EL DJAZAÏR SPA

Board of Directors

Mr. Nadim Kassar Chairman

Mr. Nabil Kassar Member representing Fransabank SAL

Mr. Raja Sarkis Memberrepresenting CMA CGM SA

Mr. Bernard Gerdy Member representing Merit Corporation



General Manager Mr. Mehemed Belghit

OVERSEAS BANKING SUBSIDIARIES & ASSOCIATEBOARD OF DIRECTORS AND GENERAL MANAGERS



SYRIA BELARUS

FRANSABANK SYRIA SA

Board of Directors

Mr. Adel Kassar Chairman

Mr. Ahmad Al Shahabi Vice Chairman

H.E. Mr. Adnan Kassar Member representing Fransabank SAL

Mr. Nabil Kassar Member representing Fransabank SAL

Mr. Shady Karam Member representing Fransabank SAL

Mr. Elie Sioufi Member

Mr. Ali Wahib Merhi Member

Mr. Thaer El Laham Member

Mr. Farouk Bachir Member

General Manager Mr. Nadim Moujaes

FRANSABANK OJSC

Supervisory Board

H.E. Mr. Adnan Kassar Chairmanrepresenting Fransabank SAL

Mr. Adel Kassar Deputy Chairmanrepresenting Fransa Holding

Mr. Georges Andraos Memberrepresenting Fransabank SAL

Mr. Ghantous Gemayel Memberrepresenting Fransa Holding

General Manager Mr. Alexandr Ignatov


SUDANCYPRUS

USB BANK PLC (SUBSIDIARY OF BLC BANK)

Board of Directors

H.E. Mr. Maurice Sehnaoui ChairmanNon Independent, Non-Executive (BLC Bank)

Mr. Nadim Kassar Non Independent, Non-Executive (BLC Bank)

Mr. Nabil Kassar Non Independent, Non-Executive (BLC Bank)

H.E. Mr. Walid Daouk, Esq. Non Independent, Non-Executive (BLC Bank)

Mr. Raoul Nehme Non Independent (BLC Bank)

Fransabank SAL Non Independent, Non-Executive represented by Mr. Adel Kassar (shareholder in BLC Bank)

Fransa Invest Bank SAL Non Independent, Non-Executive represented by Mr. Mansour Bteish (shareholder in BLC Bank)

BLC Bank SAL Non Independent, Non-Executive (BLC Bank)represented by Mr. Yussef Eid, Esq.

Mr. Andreas Theodorides Executive - Non Independent (USB Bank)

Mr. Despo Polycarpou Executive - Non Independent (USB Bank)

Mrs. Tania Moussallem Non Independent, Non-Executive (BLC Bank)

Mr. George Galatariotis Independent, Non-Executive (USB Bank)

Mr. George Stylianou Independent, Non-Executive (USB Bank)

Mr. Philippos Philis Independent, Non-Executive (USB Bank)

Mr. Agis Taramides Independent, Non-Executive (USB Bank)

General Management Mr. Andreas Theodorides, CEO

UNITED CAPITAL BANK

Board of Directors

Mr. Mohamad Al Adasani Chairmanrepresenting Aref Investment Group

Mr. Mansour Bteish Vice Chairman

Mr. Abdelsalam Al Saleh Memberrepresenting Boubyan Bank

Mr. Ghanem Yousif Abdallah MemberAl Ghanem representing Aref Investment Group

Mrs. Amira Al Alami Memberrepresenting Financial Company for Investment and Development - Egypt

Mr. Sherif Ahmad Omar Badr MemberIndependent Director

Prof. Ahmed Al Majzoub Ahmed MemberIndependent Director

Mr. Kamal El Zubeir Member

General Manager Mr. Kamal El Zubeir

Fransabank was firstestablished in Beirutas a full branch of oneof the major Frenchbanks then, CréditFoncier d’Algérie et deTunisie (C.F.A.T.).

Fransabank is regis-tered n° 1 on the listof banks operating inLebanon indicatingthat it is the oldestBank in the country.

Société Centrale deBanque in Beirut wasacquired by BanqueFrançaise pour leMoyen-Orient SAL(B.F.M.O.), a Lebanesecompany whoseshares were predomi-nantly owned byBanque IndosuezGroup.

C.F.A.T. changedits name to Société Centralede Banque.

Banque Indosuez(now Crédit AgricoleCorporate andInvestment Bank –CACIB which is theinvestment arm ofCrédit Agricole SA)was also the majorshareholder ofBanque Sabbag SAL.Banque Indosuezmerged these twobanks under thename of BanqueSabbag et Françaisepour le Moyen-Orient SAL.

The Bank’s denomina-tion was changed toFransabank SAL.

Fransabank concluded acooperation agreementwith Crédit Agricole SA– France. It led at first tothe joint creation inParis of Fransabank(France) SA, and to theparticipation of CréditAgricole SA - France inthe shareholding ofFransabank SAL. In linewith its global strategy,Crédit Agricole SA exited from Fransabank(France) SA in 2007 andfrom Fransabank SALshareholding in 2012.

Fransabank openedits branch in theDamascus free zonein Syria.

Fransa Invest Bank(FIB), the investmentbanking subsidiaryof Fransabank startedits operations.

Fransabank becameone of the major share-holders (37.067%) ofBank of Beirut & theArab Countries SAL(BBAC).

Fransabank acquired allthe shares of Banquede la Békaa SAL.Subsequently, in 2007,the Bank sold Banquede la Békaa.

Fransabank was thefirst Lebanese Bank toenter the Algerianmarket with theopening of its subsidiary FransabankEl Djazaïr SPA.

Fransabank launchedits operations inSudan through an associate bank,United Capital Bank.

Fransabank acquiredBLC Bank SAL alongwith its two sub-sidiaries, BLC ServicesSAL and BLC FinanceSAL.

Fransabank concurrentlypurchased 34% of theshare capital ofFransabank (France)SA held by CréditAgricole SA (bringingits participation in theshare capital to 100%),and sold 40% of theshare capital ofFransabank (France)SA to FinancièreOcéor, a subsidiary ofGroupe Caissed’Epargne (France),currently BPCE, following which theBank’s participation inthe share capital ofFransabank (France)SA is 60%.

Fransabank acquired UnitedBank of Saudi &Lebanon SAL.

Banque Indosuezsold its shares inBanque Sabbag etFrançaise pour leMoyen-Orient SAL toa financial groupheaded by Messrs.Adnan & Adel Kassar.

1921 1963 1971 1978 1980 1984

2001 2002 2003 2005 2006 2007

HISTORICAL MILESTONES

Fransabank acquiredBanque Tohmé SAL.

A private placementof shares tookplace, pursuant towhich 5% of theBank’s shares weresold to Lebanese,Arab and foreigninvestors.

The Public Institutionfor Social Security– Kuwait, acquired2% of the Bank’sshare capital.

Fransabank concluded anagreement withDeutsche Investitions- und Entwicklungs-gesellschaft mbH(DEG), which led tothe acquisition byDEG of 5% of theBank’s share capital.

Fransabank estab-lished the LebaneseLeasing CompanySAL.

Fransabank acquiredUniversal Bank SAL.

Fransabank issued itsseries B preferredshares for USD 85million as additionalTier 1 capital.

BLC Bank SAL acquired 9.9% of USBBank PLC – Cyprusand increased thisshare gradually toreach 98.71% in May2015.

Fransabank becameoperational in Syriathrough its subsidiary, Fransabank Syria SA.

Fransabank celebrated its 90years anniversary oflegacy and expertise.

Fransabank issuedits series C preferredshares for USD 75million as additionalTier 1 capital.

BLC Bank inauguratedits representative office in Abu Dhabi.

Fransabank issued itsseries A preferredshares for USD 100million as additionalTier 1 capital.

Fransabank acquiredFransabank OJSC,formerly known asGolden Taler Bank.

Fransabank acquired the Assets &Liabilities of ChaseManhattan Bank’sbranches in Beirut.

Fransabank and Predica SA – the insurance arm ofCrédit Agricole SA –France establishedBancassurance SAL.

2014

1985 1993 1995 1997 1998 1999

2008 2009 2010 2011 2012

Fransabank inaugurated its twonew branches inBaghdad and in ErbilKurdistan, Iraq.

Fransabank acquired Ahli International BankSAL.

Fransabank issuedits series D preferredshares for USD 85million as additionalTier 1 capital.


LEBANON’S ECONOMIC PERFORMANCE in 2014

MANAGEMENT REPORT

The year 2014 witnessed a relative improvement in performanceas compared to 2013, with a nominal growth well below thesocial and financial needs of the country, and at a pace muchlower than the intrinsic capacity of the economy.

The three main drivers of the Lebanese economy are thefinancial, touristic and real estate sectors. As such, the Lebanesebanking sector total assets increased by 6.6% in 2014, reachingUSD 175.7 billion at the end of 2014 as compared toUSD 164.8 billion at end-December 2013. The numberof tourists registered an increase of 6.3% in 2014 relativeto 2013. In addition, the construction permits increased by4.8%, the number of property sales transactions by 2.4%, andthe number of containers via Beirut Port by 15%.

On the other hand, the Consumer Price Index decreased by0.73% at end-2014 as compared to an increase of 2.63% atend-2013; while the Beirut Traders Association-FransabankRetail Index stood at 58.42 for the fourth quarter of the year2014 as compared to 64.52 for the fourth quarter of the year2013. The amount of small and medium enterprises loans underthe guarantee of Kafalat also decreased by 7.3%.

Total public finance revenues, which include budget andTreasury receipts, reached USD 10.88 billion in 2014, an increaseof 15.5% from USD 9.42 billion in 2013. It was coupled with a2.3% increase in public finance expenditures, which includebudget and Treasury spending, reaching USD 13.95 billion in2014, compared to USD 13.64 billion in 2013. Accordingly, thefiscal deficit decreased by 27.3% to reach USD 3.07 billion in2014, as compared to USD 4.22 billion in 2013. In addition, thefiscal deficit has narrowed to 6.2% of GDP in 2014, comparedto 8.9% of GDP in 2013.

In parallel, the gross public debt reached USD 66.6 billion at theend of 2014, an annual increase of 4.9% as compared toUSD 63.5 billion at end-2013. Excluding the public sector'sdeposits at the Central Bank of Lebanon and commercial banksfrom the total public debt, the net public debt increased by7.7% to USD 57.3 billion at end-2014 compared to USD 53.2 billionat end-2013. The debt-to-GDP ratio is estimated at 133.7% in2014 compared to 134.5% in 2013, a relatively stable level overthe past year, and still below the peak of 2006 recording 182%.

Based on the data issued by the Central Bank of Lebanon, theyear 2014 was marked by a rebound in total foreign currencyassets of the Central Bank of Lebanon reaching USD 37.9 billionat end-2014, an increase of 7.4% as compared to USD 35.3 billionat end-2013. Gold reserves decreased slightly by 0.9%to USD 11 billion in 2014, as compared to USD 11.1 billion in2013. The financial sector deposits at the Central Bank ofLebanon reached USD 67.5 billion at end-2014, as compared toUSD 57.4 billion at end-2013, with an increase of 17.6%.

Lebanon’s trade deficit decreased slightly by 0.6% fromUSD 17.3 billion in 2013 to USD 17.2 billion in 2014. In fact,imports registered USD 20.5 billion in 2014 as comparedto USD 21.2 billion in 2013, a decrease of 3.3%; while exportsdecreased by 15.4% to reach USD 3.3 billion in 2014 ascompared to USD 3.9 billion in 2013. The balance of paymentsposted a deficit of USD 1.4 billion in 2014 following a deficit ofUSD 1.1 billion a year earlier. The deficit is mainly the result of asurplus of USD 3.8 billion in the Central Bank of Lebanon's netforeign assets and a deficit of USD 5.2 billion in those of banksand financial institutions. The inflows of remittances posted anincrease of 12.7% to stand at USD 8.9 billion in 2014 ascompared to USD 7.9 billion in 2013.

The Lebanese banking sector continued its sound growth in2014. The private sector's deposits increased by 6% in 2014,reaching USD 144.4 billion at the end of 2014 as compared toUSD 136.2 billion at end-December 2013. Total loans to theprivate sector increased by 7.4% to USD 50.9 billion at the endof 2014, compared to USD 47.4 billion at end-December 2013,while total loans to the public sector reached USD 37.4 billion atend-December 2014, compared to USD 37.7 billion at end-December 2013, registering a decrease of 0.8%. The banks'aggregate capital base reached USD 15.7 billion at end-December2014, compared to USD 14.2 billion at end-December 2013,registering an increase of 10.6%.

The World Bank assessed real GDP growth at 2.2% in 2014, whilebetter estimations are anticipated for 2015 with a real GDPgrowth of 2.5%.


Public Finance

Public revenues

Public spending

Fiscal deficit

Gross public debt

Net public debt

Gross public debt / Nominal GDP

Monetary Situation

Central Bank of Lebanon gross foreign currency assets

Consumer Price Index (CPI Variation)

Central Bank of Lebanon gold reserves

Financial sector deposits

Foreign Trade Sector

Exports

Imports

Trade deficit

Balance of payments

Banking Sector (Commercial Banks)

Total assets

Total deposits

Total claims on the private sector

Total claims on the public sector

Total capital accounts

9.42

13.64

- 4.22

63.5

53.2

134.5%

35.3

+2.63%

11.1

57.4

3.9

21.2

- 17.3

- 1.1

164.8

136.2

47.4

37.7

14.2

+ 15.5%

+ 2.3%

+ 27.3%

+ 4.9%

+ 7.7%

-

+ 7.4%

-

- 0.90%

+ 17.6%

- 15.4%

- 3.3%

+ 0.6%

- 27.3%

+ 6.6%

+ 6.0%

+ 7.4%

- 0.8%

+ 10.6%

Sources: Ministry of Finance, Central Bank of Lebanon, Association of Banks in Lebanon and Higher Customs Council.

LEBANON’S MAJOR ECONOMIC INDICATORS

2014 2013 VARIATION

10.88

13.95

- 3.07

66.6

57.3

133.7%

37.9

- 0.73%

11

67.5

3.3

20.5

- 17.2

- 1.4

175.7

144.4

50.9

37.4

15.7

2014 2013

In 2014, Fransabank SAL net income, amounted to LBP 182.86 billion(USD 121.30 million) compared to LBP 185.31 billion (USD 122.92 million)in 2013. This has translated into a Return on Average Assets of 1.00%and a Return on Average Equity of 10.98%.

In 2014, the Group’s net income amounted to LBP 251.72 billion(USD 166.98 million) compared to LBP 242.32 billion (USD 160.75 million)in 2013, an increase of 3.88%. This has translated into a Returnon Average Assets of 0.93% and a Return on Average Equity of10.65%.

1.1 Net Interest Income

In 2014, the Group’s net interest income amounted to LBP 585.36 billion(USD 388.30 million) compared to LBP 562.30 billion (USD 373.00 million)in 2013, an increase of 4.10%.

In 2014, the Group’s interest received amounted to LBP 1,515.59 billion(USD 1,005.37 million) compared to LBP 1,414.24 billion(USD 938.14 million) in 2013, an increase of 7.17%. Interest receivedfrom loans and advances to customers, investment securities,loans to banks & placements with banks and investments at FairValue through Profit or Loss (FVTPL), represents 41.43%, 41.24%,15.14%, and 2.19% respectively of total 2014 interest income,compared to 41.51%, 42.26%, 13.53%, and 2.70% respectively in 2013.

From loans and advances to customersFrom investment securitiesFrom loans to banks and placements with banksFrom investments at FVTPL

TOTAL

| - BREAKDOWN OF INTEREST RECEIVED

587,055,910597,621,285191,328,048

38,238,457

1,414,243,700

In 2014, the Group’s monthly average interest-earning assetsreached LBP 24,422.37 billion (USD 16,200.58 million) comparedto LBP 22,461.63 billion (USD 14,899.92 million) in 2013(+ 8.73%). This growth is due to the increase in :- investment securities (+ LBP 712.97 billion or c/v USD 472.95 million),

- loans and advances to customers (+ LBP 669.78 billion or c/vUSD 444.30 million),

- loans to banks and financial institutions plus placements withbanks and financial institutions (+ LBP 577.99 billion orc/v USD 383.41 million).

627,895,858625,101,078229,414,556

33,176,718

1,515,588,210

Overview The extremely violent and largely unstabling geo-politicalevents which have been rocking for the past few years, some ofthe small countries and particularly Syria, have increased thepolitical divide in the country and deepened the stagnationof the economy, which has avoided recession for yet anotheryear albeit modest growth. A growth which in absolute terms,demonstrates one more time remarkable resilience, remainsvery much short from country’s public and private needs forgrowth. Fransabank Group in the context of this very challengingbusiness environment which is further accentuated by a verythreatening geo-political situation has managed for anotherwinning performance in 2014, which can be qualified as moreof the same good thing, characterized by the Group’s resilience,supported a dynamic well perceived and thoroughly implementedbusiness strategy. This strategy has unfolded exactly as intended in

May 2014 via acquiring and merging 97.8915% of AhliInternational Bank SAL (AIB).

Banque Du Liban (BDL) approved this operation in June 2014and Fransabank started to fully consolidate the figures of AIBSAL as of 31 July 2014. On 27 December 2014, the figures of AIBSAL were merged with those of Fransabank SAL.

At the date of the merger the figures of AIB were as follows:- Total assets: LBP 1,126.07 billion (USD 746.98 million)- Total customers’ deposits: LBP 927.64 billion (USD 615.35 million)- Net loans and advances to customers: LBP 304.25 billion (USD 201.83 million)- Number of branches: 9- Number of employees: 146

CONSOLIDATED RESULTS OF OPERATIONS

MANAGEMENT REPORT

1 NETINCOME

Investment securitiesBanks and financial institutionsLoans and advances to customers

TOTAL

| - AVERAGE VOLUME OF INTEREST-EARNING ASSETS

8,729,810,5196,396,898,6807,334,923,230

22,461,632,429

2014 2013

2014 2013

2014 2013

9,442,784,8536,974,886,1588,004,699,917

24,422,370,928


In 2014, the Group’s interest paid amounted to LBP 930.23 billion(USD 617.07 million) compared to LBP 851.95 billion(USD 565.14 million) in 2013 (+ 9.19%). In 2014, the largest single

component of interest paid belongs to customers’ deposits, whichrepresents 96.12% of the total compared to 96.59% in 2013.

In 2014, the Group’s monthly average interest-bearing liabilitiesreached LBP 23,641.69 billion (USD 15,682.71 million) comparedto LBP 21,549.74 billion (USD 14,295.02 million) in 2013

(+ 9.71%). This growth is largely attributed to an increase in thecustomers’ creditor accounts at amortized cost of 8.60%, i.e.LBP 1,744.33 billion (USD 1,157.10 million).

On deposits and loans from banks On deposits from customers and related parties at amortized costOn subordinated loansOn bonds issued and certificates of depositsOn cash contributions to Share Capital

TOTAL

| - BREAKDOWN OF INTEREST PAID

(23,562,123)(822,859,273)

(3,950,475)(376,992)

(1,197,973)

(851,946,836)

Soft loans Banks and financial institutionsCustomers’ creditor accounts at amortized costCertificates of depositsSubordinated loansCash contributions to Share Capital

TOTAL

| - AVERAGE VOLUME OF INTEREST-BEARING LIABILITIES

710,073,888476,127,147

20,293,342,785-

53,080,96117,113,885

21,549,738,666

(30,118,887)(894,120,611)

(3,940,585)(847,772)

(1,197,972)

(930,225,827)

998,937,860515,801,378

22,037,671,72918,992,42753,172,48617,113,885

23,641,689,765

1.2 Net Fee and Commission Income

In 2014, the Group’s net fee and commission income reachedLBP 83.00 billion (USD 55.06 million), an increase of 0.38%compared LBP 82.69 billion (USD 54.85 million) in 2013.

Fees and commissions received in 2014 reached LBP 109.12 billion(USD 72.39 million), an increase of 0.32% compared toLBP 108.77 billion (USD 72.15 million) in 2013.

Fees and commissions received comprise mainly fees oncustomers’ transactions and commissions on documentary LCs

and on LGs, which represented 73.29% and 25.54% respectivelycompared to 69.68% and 29.64% in 2013.

Fees and commissions paid reached LBP 26.12 billion(USD 17.32 million), an increase of 0.12%, compared toLBP 26.08 billion (USD 17.30 million) in 2013.

Fees and commissions paid comprise fees on customers’transactions and commissions on transactions with banks,which represents 89.06% and 10.94% respectively compared to90.02% and 9.98% in 2013.

MANAGEMENT REPORT

2014 2013

2014 2013

1.3 Other Net Gain / (Loss) on Investments at FVTPL

In 2014, the Group’s other net gain / (loss) on investments atFVTPL reached LBP 40.05 billion (USD 26.56 million) comparedto LBP 8.64 billion (USD 5.73 million) in 2013, an increase of363.57% . This gain includes, dividends received on investments

at FVTPL, change in fair value and gain on sale of investments atFVTPL, which represented 4.94%, 82.01% and 13.05% comparedto, 13.37%, -2.95% and 89.58% in 2013 respectively.

1.5 Other Operating Income

In 2014, other operating income amounted to LBP 29.59 billion(USD 19.63 million) compared to LBP 20.31 billion (USD 13.47million) in 2013 (+ 45.68%). This increase was mainly due to theincrease in the gain from the sale of assets acquired in settlement ofloans, properties and equipment from LBP 3.13 billion (USD 2.08million) in 2013 to LBP 6.45 billion (USD 4.28 million) in 2014.Also, from the increase in the share in profit of associates fromLBP 13.81 billion (USD 9.16 million) in 2013 to LBP 15.54 billion(USD 10.31 million) in 2014.

Other operating income comprises dividends received oninvestment securities, share in profit of associates, gain on saleof assets acquired in settlement of loans and gain on sale ofproperties & equipment, change in fair value of investmentproperties and other income, which represented 12.39%,52.53%, 21.81%, -10.60% and 23.87% in 2014 compared to17.46%, 67.99%, 15.41%, -21.81% and 20.95% in 2013 respectively.

Fee and commission received

Commissions on documentary LCs and on LGsService fees on customers’ transactionsCommissions on transactions with banksAsset management feesFee and commission paid

Commissions on transactions with banksOther commissions paid (including those on customers’ transactions)

NET FEE AND COMMISSION INCOME

| - BREAKDOWN OF NET FEE AND COMMISSION INCOME

108,775,102

32,240,76775,798,892

685,79649,647

(26,084,401)

(2,602,593)(23,481,808)

82,690,701

Dividends received on investments at FVTPLChange in fair value of investments at FVTPL (net)Gain on sale of investments at FVTPL (net)

OTHER NET GAIN / (LOSS) ON INVESTMENTS AT FVTPL

| - BREAKDOWN OF OTHER NET GAIN / (LOSS) ON INVESTMENTS AT FVTPL

1,154,515(254,582)7,738,725

8,638,658

In 2014, foreign exchange gain amounted to LBP 15.43 billion (USD 10.23 million) compared to LBP 26.00 billion (USD 17.25 million) in 2013.

1.4 Foreign Exchange Gain

109,121,149

27,866,69979,971,013

959,971323,466

(26,116,728)

(2,857,770)(23,258,958)

83,004,421

1,978,09032,840,872

5,227,281

40,046,243


2014 2013

2014 2013

1.7 General Expenses

In 2014, the Group’s general expenses comprising staff costs,administrative expenses, depreciation and amortization of assets,reached LBP 398.60 billion (USD 264.41 million) compared toLBP 372.78 billion (USD 247.28 million) in 2013, an increase of 6.93%,if we exclude the effect of the merger with Ahli International BankSAL this increase would be 4.65%. The 6.93% increase is brokendown as follows:

- 5.25% in salaries and related charges which amounted toLBP 245.15 billion (USD 162.62 million) in 2014 compared

to LBP 232.92 billion (USD 154.50 million) in 2013,

- 9.71% in administrative expenses which amounted toLBP 126.42 billion (USD 83.86 million) in 2014 compared toLBP 115.23 billion (USD 76.44 million) in 2013,

- 9.72% in depreciation and amortization of assets whichamounted to LBP 27.03 billion (USD 17.93 million) in 2014compared to LBP 24.63 billion (USD 16.34 million) in 2013.

| - BREAKDOWN OF OTHER OPERATING INCOME

In 2014, the Group’s net allocation to provisions for loans andadvances to customers amounted to LBP 99.55 billion(USD 66.03 million) compared to LBP 79.90 billion (USD 53.00 million)in 2013, which can be broken down as follows:

- allowance for impairment of customers’ loans and advancesfor LBP 120.30 billion (USD 79.80 million) in 2014 compared toLBP 81.51 billion (USD 54.07 million) in 2013,

- allowance for credit risk linked to Syria’s risk amountingto LBP 5.57 billion (USD 3.69 million) in 2013 against nil in2014,

- bad debts recovery for LBP 0.26 billion (USD 0.17 million),compared to bad debts expense for LBP 0.27 billion(USD 0.18 million) in 2013,

- write-back of impairment loss on loans and advances forLBP 20.22 billion (USD 13.41 million), against LBP 7.30 billion(USD 4.84 million) in 2013,

- write-back of discount on purchased loan portfolio forLBP 0.27 billion (USD 0.18 million) against LBP 0.15 billion(USD 0.10 million) in 2013.

1.6 Net Allocation to Provisions for Loans & Advances to Customers

Allowance for impairment of loans and advances and off Balance Sheet itemsAllowance for credit risk linked to country riskWrite-back of impairment loss on loans and advances and off Balance Sheet itemsBad debts expense/recoveryWrite-back of discount on purchased loan portfolio

TOTAL

| - NET ALLOCATION TO PROVISIONS FOR LOANS & ADVANCES TO CUSTOMERS

(81,515,298)(5,567,027)

7,299,270(267,607)

148,028

(79,902,634)

Dividends income on investment securitiesShare in profit of associatesGain resulting from the sale of assets acquired in settlement of loans, properties and equipmentChange in fair value of investment propertiesOther

OTHER OPERATING INCOME

3,545,87413,808,821

3,129,995(4,428,962)

4,254,983

20,310,711

3,667,03015,543,198

6,451,807(3,135,314)

7,061,768

29,588,489

(120,297,896)-

20,221,754259,102270,600

(99,546,440)

MANAGEMENT REPORT

| - BREAKDOWN OF GENERAL EXPENSES

The Group’s income tax for the financial year 2014 amounted toLBP 51.28 billion (USD 34.02 million), compared to LBP 47.19 billion(USD 31.31 million) for the financial year 2013. Deferred tax on

associates and subsidiaries’ profits for the financial year 2014amounted to LBP 7.47 billion (USD 4.95 million), compared toLBP 8.64 billion (USD 5.73 million) for the financial year 2013.

1.8 Income Tax and Deferred Tax

As at 31 December 2014, the Group’s funding sources amountedto LBP 27,992.88 billion (USD 18,569.08 million) compared toLBP 25,023.54 billion (USD 16,599.36 million) as at 31 December2013, reflecting a year-on-year increase of 11.87%.

Similar to all other banks in Lebanon, the principal source offunding is customers’ creditor accounts which represented as at31 December 2014, 82.64% of total funding sources as compared

to 85.07% as at 31 December 2013. Other funding sourcesinclude in addition to the shareholders’ equity which includes aswell preference shares, long-term credit lines provided byinternational banks and financial Institutions, deposits of banksand financial institutions, subordinated loans, certificates ofdeposits and soft loans granted by Banque du Liban for theBank acquisitions according to the stipulations of the LebaneseLaw of mergers and acquisitions.

2.1 Funding Sources

As at 31 December 2014, the Group’s Total Balance Sheetamounted to LBP 28,555.77 billion (USD 18,942.47 million)compared to LBP 25,573.81 billion (USD 16,964.39 million) as atyear-end 2013, an increase of 11.66%, if we exclude the effect of

the merger with Ahli International Bank SAL (AIB), this increasewould be 7.62%. At year-end 2014, the Group maintained its 4th

ranking within the Lebanese banking sector in terms of TotalBalance Sheet, with a market share of 9.82% compared to 9.29%as at 31 December 2013.

Soft loans from Banque du LibanLong-term borrowingsBanks and financial institutionsCustomers’ creditor accountsSubordinated loansCertificates of depositsShareholders’ equity

TOTAL

| - BREAKDOWN OF FUNDING SOURCES AS AT 31 DECEMBER

1.06%2.09%1.59%

85.07%0.22%

-9.97%

100%

265,469,487522,558,904398,515,414

21,287,548,85954,886,214

-2,494,558,209

25,023,537,087

%Amount

2 TOTAL BALANCE SHEET

2014 2013

2014 2013

(245,148,131)(126,425,230)

(27,027,223)

(398,600,584)

(232,914,856)(115,232,332)

(24,633,760)

(372,780,948)

Staff costsAdministrative expensesDepreciation and amortization of assets

GENERAL EXPENSES

323,472,1501,079,293,717

548,839,27323,134,814,756

52,500,68441,361,128

2,812,599,728

27,992,881,436

1.15%3.86%1.96%

82.64%0.19%0.15%

10.05%

100%

Amount %


Lebanese PoundsU.S. DollarsEurosOther foreign currencies

TOTAL

| - FUNDING SOURCES BY CURRENCY AS AT 31 DECEMBER

39.92%48.63%

9.19%2.26%

100%

9,990,491,00112,168,568,442

2,298,645,614565,832,030

25,023,537,087

%Amount

As at 31 December 2014, 57.93% of the Bank’s major funding sources were denominated in foreign currencies, as compared to 60.08%as at 31 December 2013.

CUSTOMERS’ CREDITOR ACCOUNTS

As at 31 December 2014, the Group’s customers’ creditor accountsat amortized cost amounted to LBP 23,134.81 billion(USD 15,346.48 million). An increase of 8.68% over the 31 December2013 level of LBP 21,287.55 billion (USD 14,121.09 million), ifwe exclude the effect of the merger with AIB SAL this increasewould be 4.32%.

The 8.68% increase was mainly due to the growth in (i) termdeposits accounts of LBP 492.81 billion (USD 326.91 million), in (ii)time saving accounts of LBP 935.93 billion (USD 620.85 million), in (iii)related parties accounts of LBP 259.05 billion (USD 171.84 million), in

(iv) demand and sight saving accounts of LBP 114.89 billion(USD 76.21 million) and in (v) margins and collateral accounts ofLBP 21.56 billion (USD 14.30 million). As at 31 December 2014,customers’ creditor accounts represent 81.02% of the Group’sTotal Balance Sheet as compared to 83.24% as at 31 December2013.

As at 31 December 2014, the Group maintained its 4th rankingwithin the Lebanese banking sector in terms of customers’ creditoraccounts, with a market share of 9.52% compared to 9.15% as at31 December 2013.

Short-term funding (less than 1 year)Medium-term funding (between 1 & 5 years)Long-term funding (more than 5 years)

TOTAL

| - FUNDING SOURCES BY MATURITY AS AT 31 DECEMBER

87.69%2.22%

10.09%

100%

21,942,389,582555,097,614

2,526,049,891

25,023,537,087

%Amount

Demand and sight saving accountsTime saving accountsTerm depositsBlocked accountsMargins and collateral accountsRelated parties accountsAccrued interest

TOTAL CUSTOMERS’ CREDITOR ACCOUNTS AT AMORTIZED COST

Lebanese Pounds

Foreign currencies

| - BREAKDOWN OF CUSTOMERS’ CREDITOR ACCOUNTS BY TYPE AS AT 31 DECEMBER

2014 2013

2014 2013

2014 2013

11,776,749,28013,557,337,426

2,181,753,320477,041,410

27,992,881,436

Amount

42.07%48.43%

7.79%1.71%

100%

%

24,041,522,170889,803,026

3,061,556,240

27,992,881,436

85.88%3.18%

10.94%

100%

Amount %

2,398,104,48012,903,957,205

4,430,976,88467,943,464

1,334,057,1751,864,092,666

135,682,882

23,134,814,756

38.32%

61.68%

2,283,212,04811,968,023,208

3,938,167,31656,353,182

1,312,499,7591,605,039,065

124,254,281

21,287,548,859

37.46%

62.54%

MANAGEMENT REPORT

| - BREAKDOWN OF CUSTOMERS’ CREDITOR ACCOUNTS BY AMOUNT AS AT 31 DECEMBER 2014

Amount % % Cum.

1,245,871,730953,976,987993,953,812

1,744,456,6051,976,913,0782,184,771,9635,169,333,853

14,269,278,028

8.73%6.69%6.97%

12.22%13.85%15.31%36.23%

8.73%15.42%22.39%34.61%48.46%63.77%

100%

Amount % % Cum.

1,387,514,183927,444,094

1,211,974,9191,676,585,5301,405,914,4421,175,490,6841,080,612,876

8,865,536,728

15.65%10.46%13.67%18.91%15.86%13.26%12.19%

15.65%26.11%39.78%58.69%74.55%87.81%

100%

A < 50 million

50 million ≤ A < 100 million



500 million ≤ A < 1.5 billion

1.5 billion ≤ A < 5 billion

A ≥ 5 billion

TOTAL 100% 100% 100%

| - BREAKDOWN OF CUSTOMERS’ CREDITOR ACCOUNTS BY INITIAL MATURITY AS AT 31 DECEMBER 2014

Amount % % Cum.Amount % % Cum.

5,736,165,5563,246,880,2432,917,948,4661,834,452,287

162,836,676295,671,956

75,322,844

14,269,278,028

40.20%22.75%20.45%12.86%

1.14%2.07%0.53%

40.20%62.95%83.40%96.26%97.40%99.47%

100%

Amount % % Cum.

4,253,058,9282,526,558,1381,577,133,839

223,703,35259,448,022

165,274,41160,360,038

8,865,536,728

47.97%28.50%17.79%

2.52%0.68%1.86%0.68%

47.97%76.47%94.26%96.78%97.46%99.32%

100%

P ≤ 1 month

1 month < P ≤ 3 months

3 months < P ≤ 12 months

1 year < P ≤ 3 years

3 years < P ≤ 5 years

P > 5 years

Accrued interest

TOTAL

Number of accounts

Average per account

Weighted average period

100% 100% 100%

277,72231,922

128 days

312,74445,626

216 days

590,46639,181

182 days

SHAREHOLDERS’ EQUITY

Shareholders’ equity as at 31 December 2014 stood atLBP 2,812.60 billion (USD 1,865.74 million), compared toLBP 2,494.56 billion (USD 1,654.76 million) as at 31 December2013, reflecting a year-on-year increase of 12.75%. This

increase is mainly due to the incorporation of 2014 net profitsand the issuance by Fransabank SAL of new series D perpetualnon-cumulative redeemable preferred shares for the amount ofUSD 85 million.

TOTAL

TOTAL

FCsLBP

2,633,385,9131,881,421,0812,205,928,7313,421,042,1353,382,827,5203,360,262,6476,249,946,729

23,134,814,756

11.38%8.13%9.54%

14.79%14.62%14.52%27.02%

11.38%19.51%29.05%43.84%58.46%72.98%

100%

Amount % % Cum.

LBP FCs

43.18%24.95%19.43%

8.90%0.96%1.99%0.59%

9,989,224,4845,773,438,3814,495,082,3052,058,155,639

222,284,698460,946,367135,682,882

23,134,814,756

43.18%68.13%87.56%96.46%97.42%99.41%

100%


Cash on handCompulsory / regulatory deposits and Central BanksBanks and financial institutionsInvestment securitiesLoans and advances to customers

TOTAL

| - BREAKDOWN OF USES OF FUNDS AS AT 31 DECEMBER

0.78%22.95%

5.99%37.56%32.72%

100%

189,766,9105,596,147,3991,461,462,2819,157,605,7967,978,979,051

24,383,961,437

%Amount

Lebanese PoundsU.S. DollarsEurosOther foreign currencies

TOTAL

| - USES OF FUNDS BY CURRENCY AS AT 31 DECEMBER

41.68%46.31%

8.89%3.12%

100%

10,163,855,30111,292,905,421

2,167,054,069760,146,646

24,383,961,437

%Amount

2.2 Uses of Funds

The Bank uses its funds to comply with Central Banks regulatoryreserve requirements, cash and liquid short term placements

with international banks and financial institutions, loans andadvances to customers and investment securities.

CASH, CENTRAL BANKS, BANKS AND FINANCIAL INSTITUTIONS

As at 31 December 2014, cash, Central Banks and banks &financial institutions amounted to LBP 8,233.18 billion(USD 5,461.48 million) and constituted 28.83% of total assets

compared to LBP 7,247.38 billion (USD 4,807.55 million) and28.34% of total assets as at 31 December 2013. This represents ayear-on-year increase of 13.60%.

2014 2013

2014 2013

193,048,6566,314,397,4261,725,730,506

10,201,698,3658,825,031,747

27,259,906,700

0.71%23.16%

6.33%37.43%32.37%

100%

Amount %

12,361,031,21412,161,620,486

2,104,304,091632,950,909

27,259,906,700

45.35%44.61%

7.72%2.32%

100%

Amount %

MANAGEMENT REPORT

Cash on hand

Compulsory / regulatory deposits and Central Banks

Compulsory deposits with Central BanksRegulatory placements with Central Banks Current accounts with Central Banks Free placements with Central Banks Blocked deposits with Central BanksAccrued interest Banks and financial institutions

Current accounts with banks & FIsTerm placements with banks & FIsBlocked margins with banks & FIsPurchased checks for collection Loans to banks & FIsAccrued interest

TOTAL

| - BREAKDOWN OF CASH, CENTRAL BANKS, BANKS AND FINANCIAL INSTITUTIONS AS AT 31 DECEMBER

2.62%

77.22%

5.66%23.99%

2.70%43.67%

0.29%0.91%

20.16%

3.10%15.23%

0.01%0.54%1.27%0.01%

100%

189,766,910

5,596,147,399

410,258,7801,738,467,090

195,724,5013,164,844,988

21,105,00065,747,040

1,461,462,281

224,577,2161,104,047,018

714,17838,859,04492,507,949

756,876

7,247,376,590

Amount % %Amount

INVESTMENT SECURITIES

As at 31 December 2014, the Group’s investment securitiesportfolio, which consists of both fixed and variable incomesecurities, amounted to LBP 10,201.70 billion (USD 6,767.30 million)compared to LBP 9,157.61 billion (USD 6,074.70 million) as at

31 December 2013, an increase of 11.40%. Investment securitiesconstituted 35.81% of total assets as at 31 December 2013against 35.73% as at 31 December 2014.

| - BREAKDOWN OF INVESTMENT SECURITIES PORTFOLIO BY CLASSIFICATION AS AT 31 DECEMBER

Securities measured at FVTPLAmortized cost securitiesSecurities measured at fair value through other comprehensive income

TOTAL

7.01%90.69%

2.30%

100%

641,566,1198,305,264,082

210,775,595

9,157,605,796

%Amount

2014 2013

2014 2013

193,048,656

6,314,397,426

472,333,8551,789,332,661

302,889,1513,673,057,614

-76,784,145

1,725,730,506

344,035,5401,046,885,229

4,060,82843,781,015

285,997,022970,872

8,233,176,588

2.35%

76.69%

5.74%21.73%

3.68%44.61%

-0.93%

20.96%

4.18%12.72%

0.05%0.53%3.47%0.01%

100%

988,404,8928,935,731,615

277,561,858

10,201,698,365

9.69%87.59%

2.72%

100%

%Amount


Equities and preference sharesLebanese Treasury billsLebanese Government bondsForeign Government bondsForeign Eurobonds issued by banksSubordinated EurobondsCertificates of deposit issued by Central Bank of LebanonCertificates of deposit issued by banksCorporate bondsAsset-backed securitiesMutual fundAccrued interest

TOTAL

Lebanese PoundsForeign currencies

| - BREAKDOWN OF INVESTMENT SECURITIES PORTFOLIO BY TYPE AS AT 31 DECEMBER

2.86%27.52%24.58%

2.08%2.09%0.02%

37.98%0.41%0.82%0.02%

-1.62%

100%

262,271,4602,519,792,5832,250,791,712

190,434,781191,676,420

1,507,5003,477,853,375

37,746,50975,285,871

1,507,500-

148,738,085

9,157,605,796

Amount % %Amount

64.48%35.52%

LOANS AND ADVANCES TO CUSTOMERS

As at 31 December 2014, the Group’s loans and advances tocustomers, net of provisions and unrealized interest for non-performing loans and discount on loan book, amounted toLBP 8 ,825.03 bi l l ion (USD 5,854.08 mil l ion) againstLBP 7,978.98 billion (USD 5,292.86 million) as at 31 December2013, an increase of 10.60%, which includes 3.82% being theeffect of the merger with Ahli International Bank SAL (AIB).

As at 31 December 2014, the Group maintained its 3rd rankingwithin the Lebanese banking sector in terms of net loansand advances to customers, with a market share of 9.39%compared to 8.67% as at 31 December 2013.

2014 2013

334,391,4503,421,457,4262,178,342,370

165,687,504196,077,548

1,507,5003,658,022,883

40,457,94241,324,814

5,653,1253,502,722

155,273,081

10,201,698,365

69.59%30.41%

3.28%33.54%21.35%

1.62%1.92%0.01%

35.86%0.40%0.41%0.06%0.03%1.52%

100%

MANAGEMENT REPORT

| - BREAKDOWN OF LOANS AND ADVANCES TO CUSTOMERS BY TYPE AS AT 31 DECEMBER

21.36%78.64%

2014 2013

Short term (Commercial loans & other current debtor accounts)Medium & long term

Consumer loansHousing loansEPH housing loansHousing loans to army personnelEducational loansLoans subsidized by the GovernmentKafalat guaranteed loansCar loansLoans to enterprisesOther loansLoans and advances to related parties

Substandard debts

Doubtful and bad debts

Accrued interest

TOTAL

Less :

Unrealized interest for substandard debtsProvisions and unrealized interest for doubtful and bad debtsDiscount on loan bookCollective provisions for un-classified debts

NET LOANS AND ADVANCES TO CUSTOMERS

Lebanese PoundsForeign currencies

3,847,682,179

3,708,715,673

645,039,712565,926,457504,174,376

95,178,27536,158,516

361,547,772135,586,100266,806,014

1,040,964,39557,334,05630,080,464

52,309,265

1,572,249,118

36,876,776

9,247,913,475

(18,978,049)(1,181,115,445)

(9,308,109)(59,532,821)

7,978,979,051

4,190,454,934

4,167,657,877

703,560,616718,846,334581,304,951111,417,966

38,968,183415,416,944146,502,566281,884,027

1,129,565,30240,190,98833,215,974

100,616,873

1,644,247,724

27,265,496

10,163,458,878

(30,746,100)(1,242,436,734)

(7,209,597)(58,034,700)

8,825,031,747

23.07%76.93%


Doubtful and bad debts and purchased loans (net) to Total loans and advances to customers (net)Doubtful and bad debts and purchased loans (net) to Shareholders’ EquitySub-standard accounts (net) to Total loans and advances to customers (net)Provisions, discount and unrealized interest to Doubtful and bad debts and purchased loansUnrealized interest for sub-standard accounts to Sub-standard accounts

Regular, watch and unclassified accountsDoubtful & bad debtsSub-standard accounts Purchased loan bookAccrued interest

TOTAL LOANS AND ADVANCES TO CUSTOMERS

Less provisions, discount and unrealized interest for non-performing debts

Provisions for doubtful and bad debtsDiscount on loan bookCollective provisions for un-classified debtsCollective provisions for doubtful and bad debtsUnrealized interest for doubtful and bad debtsUnrealized interest for sub-standard accounts

NET LOANS AND ADVANCES TO CUSTOMERS

| - ASSET QUALITY AS AT 31 DECEMBER

7,586,478,3161,570,050,393

52,309,2652,198,725

36,876,776

9,247,913,475

(1,268,934,424)

(293,785,000)(9,308,109)

(59,532,821)(35,976,904)

(851,353,541)(18,978,049)

7,978,979,051

As at 31 December 2014:

• The Group’s doubtful and bad debts, net of provisions, discountand unrealized interest, amounted to LBP 394.60 billion(USD 261.76 million) compared to LBP 381.83 billion(USD 253.28 million) as at 31 December 2013. This increase ismainly due to the merger with Ahli International Bank SAL (AIB)which net doubtful and bad debts amounted to LBP 7.26 billion(USD 4.82 million).

• The Group’s provisions, discount and unrealized interest fordoubtful and bad debts amounted to LBP 1,249.65 billion(USD 828.95 million) against LBP 1,190.42 billion (USD 789.67 million)as at 31 December 2013. This places the coverage ratio in 2014at 76% compared to 75.71% in 2013.

• The Group’s sub-standard accounts, net of unrealized interest,amounted to LBP 69.87 billion (USD 46.35 million) comparedto LBP 33.33 billion (USD 22.11 million) as at 31 December 2013.

| - ASSET QUALITY RATIOS AS AT 31 DECEMBER

4.79%15.31%

0.42%75.71%36.28%

2014 2013

2014 2013

8,391,328,7851,642,021,458

100,616,8732,226,266

27,265,496

10,163,458,878

(1,338,427,131)

(349,265,823)(7,209,597)

(58,034,700)(40,723,382)

(852,447,529)(30,746,100)

8,825,031,747

4.47%14.03%

0.79%76.00%30.56%

MANAGEMENT REPORT

Trade & ServicesIndustryConstruction

AgricultureRetailMiscellaneous

17%13%

4%

26%

2%

38%

31.12.14

Trade & ServicesIndustryConstruction

AgricultureRetailMiscellaneous

17%

11%

4%

26%

2%

40%31.12.13

- | BREAKDOWN OF LOANS AND ADVANCES TO CUSTOMERS BY ECONOMIC SECTOR

- | BREAKDOWN OF GROSS LOANS AND ADVANCES TO CUSTOMERS BY AMOUNT AS AT 31 DECEMBER 2014

Amount % % Cum.Amount % % Cum.

625,699,060232,227,818327,777,702710,525,336

1,152,503,6591,672,898,6562,807,347,751

7,528,979,982

8.31%3.08%4.35%9.44%

15.31%22.22%37.29%

8.31%11.39%15.74%25.18%40.49%62.71%

100%

Amount % % Cum.

625,461,933221,274,623468,513,044392,274,798178,060,180196,209,320552,684,998

2,634,478,896

23.74%8.40%

17.78%14.89%

6.76%7.45%

20.98%

23.74%32.14%49.92%64.81%71.57%79.02%

100%

A < 50 million




500 million ≤ A < 1.5 billion

1.5 billion ≤ A < 5 billion

A ≥ 5 billion

TOTAL 100% 100% 100%

The Group’s total capital adequacy ratio as at 31 December2014 is 15.07% (2014 profit included), as compared to14.72% (2013 profit included) as at 31 December 2013. The2013 and 2014 profits were included in the Equity for thecalculation of the capital adequacy ratio as at 31 December2013 and 2014 pursuant to the Board of Directors decisionsto allocate the 2013 and 2014 profit to the Equity after thededuction of estimated dividends to be distributed. Thesedecisions were made in anticipation to the 2013 and 2014General Assemblies’ resolutions. To note that the 2013 and2014 Ordinary General Assemblies held respectively on23.05.2014 and 22.05.2015 approved the Board a/m decisions.

The capital adequacy ratio is calculated according to Central Bankof Lebanon guidelines, which are in line with the recommen-dations of the Committee on Banking Regulations and SupervisoryPractices of the Bank for International Settlements (the BaselIII Accord).

On a stand-alone basis, Fransabank’s capital adequacy ratio as at31 December 2014, is 17.48% (2014 profit included), as comparedto 16.94% (2013 profit included) as at 31 December 2013.

The statutory minimum total capital adequacy ratio required byCentral Bank of Lebanon is 11.5% as at end December 2014 upfrom 10.5% as at end December 2013.

3 CAPITAL ADEQUACY RATIO

TOTAL FCsLBP

1,251,160,993453,502,441796,290,746

1,102,800,1341,330,563,8391,869,107,9763,360,032,749

10,163,458,878

12.31%4.46%7.84%

10.85%13.09%18.39%33.06%

12.31%16.77%24.61%35.46%48.55%66.94%

100%


A. PROFITABILITY

ROAA (Return on Average Assets)

ROACE (Return on Average Common Equity)

Total interest paid to Total interest received

Net interest income to Average assets

Net commissions to Net financial revenues (before allocation to provisions)

Operating expenses to Net financial revenues (before allocation to provisions) (Cost-to-income ratio)

Non-interest income to Net financial revenues (before allocation to provisions)

Operating expenses to Average customers’ creditor accounts

EPS in USD (Earnings per common share in US Dollar)

DPS in USD (Dividend per common share in US Dollar)*

Dividend payout ratio (Dividends on common and preferred shares / Distributable profits)*

B. LIQUIDITY

Average net customers’ loans to Average customers’ creditor accounts

Average customers’ creditor accounts to Average total deposits

Foreign currency customers’ loans to Foreign currency customers’ creditor accounts

C. CAPITAL ADEQUACY

Shareholders’ equity to Total assets

Shareholders’ equity to Loans and acceptances

Capital Adequacy Ratio (as per Basel III)

D. ASSET QUALITY RATIOS

Doubtful debts (net) to Total customers loans (net)

Doubtful debts (net) to Shareholders’ equity

Provisions for doubtful debts to Doubtful debts

Sub-standard accounts (net) to Total customers’ loans (net)

Unrealized interest for sub-standard accounts to Sub-standard accounts

Total provisions and unrealized interest to Total Gross customers’ loans

(*) On an unconsolidated basis.

0.98%

11.39%

60.24%

2.28%

11.66%

52.55%

20.74%

1.82%

6.37

1.53

59.32%

37.27%

98.14%

47.13%

9.75%

30.21%

14.72%

4.79%

15.31%

75.71%

0.42%

36.28%

13.72%

MAIN RATIOS

2014 2013

0.93%

10.65%

61.38%

2.16%

10.57%

50.75%

25.48%

1.79%

6.59

1.66

84.00%

37.83%

97.91%

47.58%

9.85%

31.20%

15.07%

4.47%

14.03%

76.00%

0.79%

30.56%

13.17%

MANAGEMENT REPORT

RESOLUTIONS OF FRANSABANK SAL ORDINARY GENERAL ASSEMBLY

THE ORDINARY GENERAL ASSEMBLY OF FRANSABANK SAL HELD ON 22 MAY 2015:

• Approved the accounts and the Balance Sheet of Fransabank SAL as at end December 2014

• Acquitted Fransabank SAL Board of Directors for their management of the business activities of the fiscal year 2014

• Decided to allocate out of Fransabank SAL net profit (LBP 182,857,507 thousands) as follows:

- 10% to legal reserve (LBP 18,285,751 thousands),

- LBP 31,620,000 thousands to reserve for general banking risks,

- LBP 5,799,158 thousands to reserve for assets acquired in settlement of bad loans,

- LBP 227,878 thousands to special reserve for non productive loans,

- LBP 2,149,924 thousands to general reserve for performing retail loans,

- LBP 52.5 billion (LBP 2,500/share) as dividend distribution on common shares, LBP 12,813,750 thousands on preferred shares - series A,LBP 8,649,281 thousands on preferred shares - series B and LBP 7,631,719 thousands on preferred shares - series C, andLBP 402,843 thousands on preferred shares - series D, representing 53.79%, 13.12%, 8.86%, 7.82% and 0.41% respectively of the Bank’s2014 distributable profits,

- LBP 27,151,401 thousands to unrealized profits on securities classified as FVTPL,

- LBP 15,625,802 thousands i.e. the remaining balance, to the free reserves.


INVESTMENT AND PRIVATE BANKING

In 2014, Fransa Invest Bank (FIB) registered good increase in itsactivities, and earned itself recognition for its business withinthe investment and private banking circle of clientele inLebanon and abroad.

ADVISORY SERVICES/EQUITY & DEBT FINANCING

FIB’s Investment Banking Unit was involved in several importantdeals including securitization, equity investments, companyvaluations, and syndicated financing. In this context, FIBachieved the following:

• Co-placing (co-placement agent) with Bemo SecuritizationsSAL (“BEMO”) an USD 8.6 million auto-loan securitizationissuance for Century Motor Company SAL (CMC), theexclusive distributor of Hyundai vehicles in Lebanon.

• Conducting financial, legal, and operational due diligence onboth Fransabank and FIB participations in three local fundslaunched under the Banque du Liban Intermediate Circular331. Furthermore, FIB contributed to the success of thesefunds, already constituted or under constitution, byproactively participating in the negotiations with the fundmanagers, the Central Bank, the sponsors, and the legalcounsels.

• Performing valuations for several potential direct equityinvestment transactions for Fransabank Group, mainly in theenergy, financial, information technology, and food &beverage sectors.

• Providing financial advisory for the development of amulti-use real estate project in the region of Beirut, Lebanon.

PRIVATE BANKING/ASSET MANAGEMENT & CAPITAL MARKETS

Fransabank Preferred SharesFIB was designated as the Placement Agent and Book Runnerfor Fransabank series D preferred shares, which successfullyclosed on November 3, 2014. The issued shares were Tier I,non–cumulative and redeemable. The transaction wasoversubscribed and the issue size was finally set at USD 85 millionat a very favorable dividend rate of 6.50% p.a.

Fransa Invest Beehive FundFIB’s Asset Management Department continued to develop itsinvestment offerings. The Beehive Fund, which is FIB’s first fund,launched in August 2013, is a professionally managed globalbalanced fund, offering clients, retail and institutions, apotentially higher return than bank deposits while diversifyinginvestments to reduce risk. The fund size has grown steadilysince the launching. This fund is the first of a projected series offunds bearing different objectives and focus. Altogether, thesefunds will solidify Fransa Invest Bank’s position as a leadinginvestment Bank with a top notch Asset Management business.

Private Banking/BrokerageFransa Invest Bank’s brokerage services expanded, resulting insignificantly higher activity in 2014.

Structured ProductFIB was designated by Fransabank to structure another successfulretail investment product that will be sold through Fransabank’sretail branches starting January 2015. The product will be 5-yearcapital guaranteed investment deposit in US Dollar, offeringguaranteed coupons in addition to participation at maturity inthe performance of a basket of indices.

CORE BANKING ACTIVITIES

MANAGEMENT REPORT

Fransabank has once again recorded a solid annual growth inthe corporate lending space in 2014, further consolidating itsleading position as one of the major players in the bankingindustry.

The essence behind the distinctive progress is the strictformulation and implementation of a solid strategy based onan ongoing commitment to support the effort of severalentrepreneurial and key initiatives.

In addition, this year’s targets were achieved through anongoing commitment to Corporate Social Responsibility andsustainable finance.

Consequently, Fransabank was able to further contribute toLebanon’s economic real growth, the improvement of itsinfrastructure, the promotion of key services and technologicalinnovations and the financing of prime businesses and projectsboth nationally and internationally, including the following:

• Continuous support to the improvement of the educationalsector

• Developing and reinforcing the knowledge economy,whether directly or through participating in specialized funds

• Promoting and supporting the tourism sector by financing keytouristic projects with beneficial effects on the industry

• Ongoing financial support to key industries, such asagriculture, agro-alimentary, contracting, trade financing,FMCG, retail, food processing, health and pharmaceutical,production and manufacturing

• Developing and financing key real estate projects bysupporting contractors and developers with a good trackrecord

• Developing a strong corporate platform by supporting andfinancing several firms based in Lebanon and well establishedfirms in the country and abroad, by giving them the opportunityto expand their activities smoothly toward key potentialmarkets within MENA, Africa, Europe, and China.

• Improvement and materialization of financing sustainableeco-environmental and energy friendly projects, greenbuilding, in collaboration with the world leaders in this sector:the International Finance Corporation (IFC) and the EuropeanInvestment Bank (EIB).

With these projects, the Bank effectively offered distinguished,competitive and various corporate products and services.

Actually, it is a fact that the efforts will continue to be deployedto support the Lebanese economy and the much neededdevelopment of the infrastructure and utilities servicesespecially through energy efficiency and Sustainable EnergyFinancing (SEF). A lot of key projects were financed andmaterialized after signing with the International FinanceCorporation (IFC) and the European Investment Bank (EIB)concerning green buildings and sustainable energy, amongothers.

Furthermore, we will continue exploring, financing andsupporting key projects during 2015, expanding and strength-ening our activity internationally in key potential countries,allowing us to expand our variety of corporate products atcompetitive rates.

On the other hand, the commerce sector and the trade withChina as a potential vital market was strengthened, viaproviding attractive products and financial services to prominentand new businesses in various sectors such as contracting,trade financing, agriculture, production, FMCG, etc...

Growth was achieved in spite of the ongoing difficult economicand political situation in the country and in the region, mainlythanks to an aggressive yet highly selective corporate strategyand business approach.

CORPORATE BANKING


RETAIL BANKING

Despite intensely competitive market conditions, FransabankSAL retail business achieved its growth targets and met theperformance objectives set at the beginning of the year.Customers’ portfolio and lending volumes both recorded ahealthy increase. Customers' expectations were fulfilledwhether through the improvement of existing products’conditions or the introduction of new products, so as to adaptto the ever changing needs and demands of today’s customersas described here below:

• A EUR 45 million credit line was signed between Fransabankand the European Investment Bank (EIB), to support andfinance the SMEs’ projects in the sectors of energy, industry,agro-industry, health, education, high knowledge andservices in Lebanon.

• Eco-friendly loans for individuals and businesses werelaunched with flexible conditions, aiming at reducing house-hold expenses, energy consumption, and at the same timepreserving the environment.

• Launch of China UnionPay Cards in Lebanon, the onlyaccepted credit card in China, thus securing to our existingand potential customers an effective and safe cross-borderpayment services to the world’s largest cardholder base. Itprovides its holders with flexibility and safety for their commercialtransactions, as well at points of sale and at ATM’s.

• Regular SME’s workshops and seminars were held throughoutLebanon, providing consultancy services to the Bank'sexisting customers and potential clients. Through the ongoingworkshops, Fransabank worked on strengthening the bondswith its valuable customers.

• A reward campaign was launched in collaboration withMasterCard, reinforcing the customers’ loyalty to the Bank.Twelve MasterCard cardholders were granted the chance towatch live the UEFA Champions League Games. The cam-paign brought an enthusiastic response from the Bank’s cus-tomers who actively used their MasterCard paymentsolutions.

• Two campaigns for housing loans and car loans promotingefficient and exclusive competitive conditions were alsolaunched.

• An agreement with the Army Directorate was signed in orderto grant housing loans for the Lebanese Army Martyrs’ families.

Furthermore, Fransabank continued to expand its activities onsocial media. In addition to the Twitter and Facebook accounts,

Fransabank introduced a new means to stay in touch with itscustomers. A Hadzup account was opened – a new applicationthat allows customers to contact Fransabank by text messagefrom their smartphone. Moreover, an Instagram page wasunveiled, keeping our customers informed about the Bank’slatest products, events, greetings, among others. As for Facebook,Fransabank reached 37,951 fans at the end of 2014, comparedwith 33,847 fans at the end of 2013. The Twitter account wasalso quite active, especially during conferences and specialevents, whereby live tweets were posted by the Bank.

LOCAL GEOGRAPHICAL EXPANSION

During the year 2014 and in line with the Bank’s expansionstrategy, Fransabank Group local network continued tostrengthen its structures and to reach out to a higher number ofclients through a wider network. In this vein, Fransabankconcluded its seventh acquisition and merger of AhliInternational Bank SAL, which resulted in the integration ofnine additional branches. This achievement consolidatedFransabank Group ranking as the largest branch network inLebanon with 124 branches spread all over the country.

Moreover, additional branches are scheduled to open in 2015and 2016, namely at Bliss Street and Adlieh. It is worth notingthat some branches shall be relocated to new premises, with

Mount LebanonBeirutNorth

SouthBekaa

27%

15%

9%

14%

35%

2014

- | DISTRIBUTION OF LOCAL BRANCH NETWORK BY REGION

MANAGEMENT REPORT

CHINA DESK

the same innovative concept applied in all the new branches,which depicts an evolved image of the Bank (e.g. Marjeyoun,Basta, Saida (Fakhereddine), etc.)

BUSINESS GROWTH

Throughout the past couple of years, the overall branches’network succeeded in keeping pace with its ambitious businessobjectives, while achieving reasonably encouraging results andmaintaining a steady business development, despite thevarious challenges and complex political situation withinthe region.

• Clients’ Deposits: over the past five years, clients’ depositsportfolio has shown a steady increase, with a compoundedannual growth rate of 11.7%. Similarly, total clients’ depositsportfolio in 2014 grew by 14.05%.

• SME Loans and Facilities: between 2010 and 2014, SMEbusiness almost doubled, improving by 1.7 times, with acompounded annual growth rate of 19.12%. As of end-December2014, total SME portfolio registered a growth rate of 9%.

• Retail Loans: over the past five years, retail loans recorded atwofold rise, while sustaining a compounded annual growthrate of 20.1%. Likewise, in 2014, retail portfolio increased by16% and was distributed among housing loans (59%),consumer loans (34%), car loans (6%), and other loans (1%).

• Payment Cards: throughout the past five years, paymentcards portfolio expanded by 42.9%.

• Bancassurance Products: Between 2010 and 2014,Bancassurance portfolio registered a growth rate of 48.9%.Similarly, total Bancassurance portfolio progressed by 33%throughout 2014.

Fransabank China Desk was established in 2013 to build onFransabank Chairman and Deputy Chairman, Messrs. Adnanand Adel Kassar’s longstanding and strong relations with Chinawhich date back to the 1950’s. It is dedicated to serve Chinesecompanies in Lebanon and in the markets where FransabankGroup is present, as well as local clients dealing with China.

Fransabank is the first Bank in the Arab world and in other marketsto dedicate a China Desk for the development of the bankingand finance ties with China. It is a witness of a new era ofrelations, built on the historical and close ties between theKassar Group and China.

Since its inception, China Desk has been proactively developingits products and services in different fields:

Correspondent Banking

Over the last three decades, Fransabank developed a strongcooperation with the various leading Chinese banks to servethe Bank’s mutual customers and to facilitate the tradeexchanges between China and the Arab world, as well as withthe other markets served by Fransabank’s growing internationalexpansion.

China Desk built on this historical strong relationship with theChinese banks to further strengthen these relations and to bettercater to the growing Chinese presence and investments inmany markets. In this respect, Fransabank has opened accountsin Renminbi to support the increasing volume of transactions inChinese currency.

Corporate Banking

Fransabank dedicated a special team to provide its clientelewith competitive and tailor-made products and services.

SMEs and Retail: products tailored to answer clients’ needs

China Desk works to identify competitive products and services,to cater the needs of its clients in their dealings with China.Fransabank has worked relentlessly for the acceptance andissuance of China UnionPay cards in Lebanon and aims toexpand this service to other potential markets. It offers manybenefits to its holders such as company information reports,inspection services, travel insurance program, purchase protectionprogram, membership in priority pass, discounts, etc.

Fransabank Group retail operations

and loans to SME reached c/v

USD 2.90 billion increasing by 10.27%

at end of 2014 compared with c/v

USD 2.63 billion at end of 2013.


LOCAL SUBSIDIARIES AND ASSOCIATE

BLC Bank confirmed in 2014 its determination of becoming aBank of reference in the Lebanese landscape.

This ambition has translated on the financial side by an increaseof the consolidated gross income by 9% as compared to 2013.Total recurrent income increased by 17% and net income aftertax by 5%, outperforming the market growth. On the balancesheet side, BLC Bank total deposits and total assets stood atUSD 4.3 billion and USD 5.4 billion respectively. Total loansincreased by 3.4% to reach USD 1.9 billion.

As a consequence of the above, BLC Bank’s net spread reached2.54% as at end-December 2014 compared to 2.41% as atend-December 2013, standing among the best in the sector. BLCBank’s capital adequacy ratio was 15% as at end-December 2014,higher than the regulatory requirement of 11.5%, reflecting thesolidity of its financials and the ability to seize new growthopportunities.

On the corporate strategy level, BLC Bank continued on buildingup on its major strategic axes being SME’s, women, greeninitiatives and innovation while confirming its positioning amongthe leaders both on the retail and the corporate side.

While the market share in the SME’s segment continued growing,registering in particular a peak in the Kafalat loans, the Bankfocused further on developing the offer to SME’s by widening thenon-financial services to small and medium enterprises. “TheBusiness Power Sessions”, a set of full fledge information-richbusiness networking breakfasts, were introduced by BLC Bank tohelp business owners’ network and improve their businesses. Thiscomes as an addition to the already well-known road showsconducted in the regions and the multiple value added servicesdelivered.

On the Women segment level, the Bank reaffirmed its position asleader in the economic empowerment of women through the“We Initiative” program, providing a set of financial and non-financial solutions. In this scope, BLC Bank became a Bank ofreference hosting study tours and training banks from all aroundthe world on the best practices in serving this segment. Theactive role played in this area by the Bank, has been recognizedby the Global Banking Alliance who elected a seniorrepresentative of the Bank as Vice Chair of the organization.

In this context of supporting SME’s and women, BLC Bank was yetagain able to successfully rise to the challenges of the thirdedition of the “Brilliant Lebanese Awards” in 2014. “The Businessof the Year”, “Women Entrepreneur of the Year” and “People’sChoice Award” were announced on television for the second yearin a row, taking the Bank a step forward in its commitment tohonor successful men and women entrepreneurs.

Within the Bank’s vision of being an industry leader in innovation,service excellence and technology, and after introducing in all itsbranches smart ATM’s that accept cash and checks, BLC Banklaunched HEY!, a mobile payment solution designed to facilitatepayment, not only at points of sale, but also for money transferswith a simple tap.

Despite the challenging economic situation in Cyprus, BLC Bank’sCypriot subsidiary USB witnessed an increase in operationalprofits of 63% in 2014 as compared to 2013. It enjoys a solidcapital base with a Capital Adequacy Ratio (CAR) that exceeds therequired level and a liquidity level in Euros of 33% largely abovethe 20% regulatory ratio. This puts USB in a good position to copewith changes of market conditions.

Last but not least, as a responsible corporate citizen committedto empower its local community, BLC Bank pursued its activitiesamong which a competition was organized in collaboration withthe American University of Beirut (AUB) to transform the Adliehroundabout into a less congested area.

This performance is the direct result of the dynamism of BLCBank’s management and team with the full support of itsshareholders and Board of Directors.

Fransa Invest Bank, the investment arm of Fransabank, is one ofthe leading investment and private banking institution inLebanon. FIB has built its reputation on being at the forefront ofproviding a wide range of financial services to a diversified clientbase including high-net-worth individuals, financial institutions,corporations, and governments.

FIB stays abreast of all events in the banking and financial marketsand their potential impact on the development of national,regional and international economies. The Bank draws on thisknow-how to provide clients with strategic advice and developsolutions to meet their investment and financial objectives.

BLC BANK SAL

FRANSA INVEST BANK SAL (FIB)

MANAGEMENT REPORT

The Bank’s long-term success is based on core principles ofsuperior client service, teamwork, excellence, and accountability.

FIB’s activities include:

• Financial Advisory - mergers and acquisitions, equity capitalmarkets, private investments, corporate equity/debtadvisory, re-organization and balance sheet re-structuring.

• Equity and Debt Financing - feasibility studies, legal andfinancial due diligence, corporate and project financing,syndicated financing, debt/equity structuring, equityplacements, and debt settlement arrangement.

• Private Banking & Asset Management - offers clients acomplete range of tailor made advice, investment productsand services.

• Capital Markets Services - available through a very wellequipped and staffed trading room, which provides fullbrokerage services to carry out transactions in equities,fixed income, currencies, commodities, futures and options,with access to local, regional and international markets.

• Research - FIB provides in-house research and analysis onfinancial markets, as well as economic and country analysis,supported by international banks and asset managers upon therequest of clients.

2014 was another challenging year for the Lebanese LeasingCompany due to the deterioration of the regional politicaleconomic environment and its negative impact on theLebanese market. Despite that, LLC witnessed growth in itsactivities with approved and signed contracts, increasing by43% and 15%, respectively. LLC net profits reached aroundUSD 1 million, almost close to that of 2013.

For the year 2015, LLC portfolio will mainly include the financingof eco-friendly industries and energy saving and renewableenergy equipment; considering that we signed, in 2014,Sustainable Energy Finance (SEF) credit line of USD 10 millionwith the International Finance Corporation (IFC).

Bancassurance, the insurance arm of Fransabank, has beenexperiencing an ongoing growth with hundreds of thousands ofpolicies sold by the Bank’s employees for the past 15 years. This isthe natural result of the professional expertise of Fransabank’semployees and Bancassurance team. Thus, net profits reachedUSD 13.46 million in 2014, an increase of 15% as compared to2013. The collected premiums stood at USD 60.56 million at theend of 2014, rising by 11.8%, compared to 2013.

For the third year in a row, Bancassurance ranked first among theBancassurance companies in Lebanon, and second in theLebanese life insurance market. (Source: Al Bayan Magazine, March

2015)

With its broad spectrum of products and services, Bancassurancenot only enlarged and diversified the Bank’s portfolio, but alsogave customers the ideal solutions to their evolving needs andwants. The products vary from insurance and saving to wealthmanagement. They include:

- Term Life insurance products for family protection

- Saving and Life insurance plans for retirement, education andhousing

- Investment and Life insurance plans for access to internationalfinancial markets

- Compulsory Life insurance products to cover all types of loans.

Due to continuous regional and neighboring unrest, 2014 wasnot so different than 2013, adversely affecting the potential ofreal estate investments in Lebanon. However, Sogefon, the realestate subsidiary of Fransabank Group, was able to overcomethese challenging circumstances registering a 10% profitmargin, with four units sold at market value.

A well-studied strategy coupled with new enhanced internalprocedures impacted positively 2014’s performance. Sogefonmaintained a steady growth; confirming its insatiablededication and continuous contribution to the Groupachievements.

LEBANESE LEASING COMPANY SAL (LLC)

BANCASSURANCE SAL

SOCIÉTÉ GÉNÉRALE FONCIÈRE SAL (SOGEFON)


OVERSEAS SUBSIDIARIES AND ASSOCIATE


Fransabank (France) witnessed a marked development in itsactivities in 2014. It continued to expand its customer base bytargeting prime corporate and private clients among theLebanese and other Middle-Eastern communities based inAfrica, the Middle East and Europe.

The Bank continued to work on synergies with its shareholders,Fransabank Group and Groupe BPCE, the second largestbanking Group in France. In this respect, it has maintained itstrade finance business within the group and more particularlywith Fransabank El Djazaїr, and increased the financing of thereal estate acquisition in France for the account of Middle-Easterncustomers. With Natixis (affiliated to BPCE), it has put in place aforeign exchange dealing platform allowing its customers tobenefit from competitive currency prices.

Besides enriching Fransabank (France) correspondent bankingactivity, the management team was reinforced through therecruitment of a senior head of corporate who is working withhis team to further develop the client base and to widen therange of products and services tailored to the Bank’s corporateand individual clients.

Fransabank (France) has pursued its conservative policy andconstituted in 2014 provisions leading to a net profit afterprovisions and taxes of Euro 0.7 million. Total assets increasedby 18% over the year reaching Euro 211 million at year-end2014. Customers’ deposits and loans to customers increased bymore than 42% and 22% respectively at year-end 2014.


The world growth in 2014 has decelerated due to the slowdownin the US economy as well as to many emerging countries,coupled with a weak recovery in the Eurozone and politicaldisturbances in certain countries, which also impact their securitysituation.

Algeria has, however, experienced a more strengthenedeconomic activity with a real GDP growth of 4% in 2014 comparedwith 2.8% in 2013, despite a lower level of foreign exchangereserves due to the fall in oil prices.

As for the Algerian banking sector, the important changesbrought in 2013 to the regulations related to the terms andconditions applicable by the banks have affected their balancesheets in 2014. The latter will need a readjustment period in order

The year 2014 was marked by a series of events affecting boththe political and economic scenes around the world. Thoserange from different aspects of security issues which have hitcertain countries namely in Europe and the Middle East.

In that perspective, the growing unrest in many spots haveaffected different countries in various manners: militaryconflicts, the volatile foreign exchange markets in some casesaggravated by devaluations, the low growth achievementsconsidering the prevailing historic low rates of interest applicableto major currencies, the difficulty to resolve sovereign debt ofsome countries and the continuous increase in global debt, thevery rapid decline in the prices of oil and the continuing threatof record high unemployment levels have all contributed to anatmosphere of uncertainty and even deflation in somecountries at least on the short term.

Naturally, all of these factors have had a repercussion on thecountries in which our Group is present, generating thereforean unfavorable impact on their performance over the year.Notwithstanding these facts, our parent company and its localpartners, have consistently continued to provide them with allthe financial and logistical support they need, while closelymonitoring the business conducted and the results achieved.

In coordination with the management of each overseas unit,fairly conservative business plans were set for the near futuretaking into consideration the specificities of each market, henceallowing for new products and services which aim at securing asteady and safe growth in the activity. Measures to accompanythose plans are being carefully drawn and range from thepossibility of expanding the local network to the internalreorganization within each subsidiary.

The synergy among Fransabank Group units remains the key tosuccess. This particularly reflects on trade finance and othermodes of financing. In fact, our various units have succeeded increating this synergy in a smooth and organized manner, alwayskeeping in mind the close relationships which have been builtover the years with foreign correspondents, namely from theHeadquarters.

The year 2015 is expected to be a turning-point for theforeseeable future, and to hold many challenges. Thus, a timelyadapted activity is of the essence in order to reach our goals,and that is precisely the spirit in which our management andstaff in all our subsidiaries are currently working.

MANAGEMENT REPORT

Based on the above, Fransabank OJSC achieved the followingresults:

Net profit during 2014 amounted to c/v USD 1.53 million, totalassets as at end of 2014, totaled c/v USD 92.8 million, loanportfolio stood at c/v USD 43.8 million, customers’ depositsat c/v USD 23.1 million, and shareholders’ equity amountedto c/v USD 40.6 million (including Tier II Capital subordinatedloan of USD 12 million).

FRANSABANK SYRIA SA

The war in Syria which began in 2011 witnessed a dramaticevolution in 2014: it has openly and clearly become a regionalconflict involving neighboring and other countries. Such escalationof events led to a further distortion of the economic cycleemanating from the continuous destruction of cities, industries,and social structures.

Fransabank Syria, leaning on the solid foundations of the Groupto which it belongs, the expertise of its decisions-makers inmanaging businesses in difficult times, the early deployment of itsbusiness continuity plan, and its adaptation according to theevolution of events, tackled the situation with a clear andadaptive strategy, enabling the Bank to withstand the waradversities and even to control most of the risk factors thatusually accompany such conflicts: a wise management of itscredit portfolio, a proactive approach towards the elements ofoperational risk, and the general safeguarding of its assetssometimes even in dramatic environments. Thus, the Bank didnot witness any significant operational incident, continued tooperate in four major districts of Syria (Damascus, Aleppo, Lattakiaand Tartous) through seven branches, while two of this Bank’snetwork remain temporarily closed (Homs and Rif Damascus).

This led to a financial performance that is considered to beexemplary in the current circumstances: the highest credit riskcoverage ratio amongst the peers constituted of direct creditprovisions and general precautionary ones, a sustainable levelof total assets, as well as acceptable level of profits in 2014.

Despite war and its adversities, and a general atmosphere ofuncertainty and daily risk, Fransabank Syria’s executives and staffcontinue to exercise a notable determination in the preservation ofthe Bank’s assets and wellbeing. The Bank strategy will allow itto be ready to tackle the needs of the market, particularly whenpeace hopefully finds its way to this wounded country.

to change their commercial policy and to offer innovativeproducts, which will compensate the decrease in revenues.

In this respect, Fransabank El Djazaïr is pursuing the developmentof its commercial activity through the strengthening of itsmarketing force, the readjustment of its sales mechanisms tomatch the market needs, the launching of different e-bankingactivities and the expansion of its branch network to recentlyinclude the wilaya of Blida.

These praiseworthy efforts are accompanied in parallel by a netconsolidation of the support functions, namely with the adoptionof the latest version of information systems, which will allow theimprovement of the productivity and competitiveness of theBank.

Taking all these measures of repositioning and improvement intoconsideration, the year 2015 looks promising in terms of netresults. This is mainly due to our Bank’s successfully adapted policyand tools, to comply with the requirements and specificities of theAlgerian market.

FRANSABANK OJSC (BELARUS)

In 2014, the Belarus economy grew by 1.5% (against an estimationof 3.3%) coupled with a continuous devaluation of the BelarusRuble (BYR) against the US Dollar and the Euro.

In December 2014, the Russian financial crash, aggravated by thefall in global oil prices and the sanctions over the Ukraine crisis,took its full toll on the Belarus economy.

The monetary authorities adopted several measures to preventthe collapse of the financial market, including the devaluation ofthe BYR by 25% over year end.

This situation persisted in January 2015, where the authoritiesdevalued again the Ruble by 30%, bringing it to BYR 15,360against the US dollar at the end of the month; which is equivalentto a total devaluation of 61% from the beginning of 2014.

Amid these events, and with the persisting challenges in the localeconomy, Fransabank OJSC has adopted, starting the thirdquarter of 2014, a strategy based on (i) a very selective lendingpolicy along with an adequate provisioning level to pair anyeventual defaults (ii) a re-engineering of the organization structureof some departments and branches to suit the business needsand reduce expenses.


FRANSABANK SAL IRAQ BRANCHES

During 2014, two branches were inaugurated in Baghdad andErbil – Iraq. Fransabank Group has been very close to the Iraqimarket for a long period of time, hence the incorporation of thetwo branches in the country.

Despite the prevailing security situation, Fransabank considersIraq as one of the major markets in the Arab region and isdetermined to rank among the top players in the country. Forthat purpose, the Bank is concentrating its efforts on building-up solid grounds and infrastructure, in order to be in a positionto serve its clientele in the most professional way and to offer awide array of services.

In fact, Fransabank is considering expanding its presence toother major locations in a gradual manner, which would ensurea smooth growth and its capacity to face the rising challengeundoubtedly existing in the country.

UNITED CAPITAL BANK (SUDAN)

Sudan and South Sudan continue to pursue a stable politicalrelationship and a fair distribution of oil wealth, which is one ofthe main sources of foreign exchange in the country.

Our associate Bank in Sudan, United Capital Bank has continuedto perform well locally in 2014, with a 13% increase in net profit,reaching c/v USD 10.86 million. The Bank’s total assets increasedby 15% and shareholders’ equity by 8%, totaling c/vUSD 314.73 million and c/v USD 72.16 million respectively, atthe end of 2014.

The Bank has managed to position itself among the top investmentbanks in the country and is presently acting as lead manager invarious syndicated loans financing sustainable developmentprojects. United Capital Bank is increasingly becoming areference bank catering for major organizations operatingmainly in mining, agriculture and foodstuffs trading amongother areas of activities.

With this framework, the Bank is contemplating to widen itsbranch network over the coming years in order to sustain itsactivity and gain a bigger market share.

RISK MANAGEMENT

RISK MANAGEMENT FOCUS 2014 ONWARD

The evolution of the risk management practices at Fransabankhas served the Bank well in supporting its business model todate as evidenced by generally low level of credit lossesexperienced whilst making consistent balance sheet growthand returns.

In 2014, Fransabank has made it a strategic priority to developits risk management framework in a proactive fashion throughachieving a more advanced risk management model androlling out the risk management processes at all Group entities.

The main focus will be to strengthen and build a coordinatedGroup-wide integrated risk management to enable a consoli-dated and strategic perspective of the risk profile, capitalmanagement and stress testing, linked to a more clearlydefined risk appetite and risk-adjusted performance measures.

During 2014, Fransabank risk management focus revolvedaround the following main themes:

- Improving the quality of data and reporting, in addition tostandardizing the reporting requirements from FransabankGroup entities.

- Reviewing and updating the risk management policies andlimits.

- Enhancing the rating system by introducing new models(project finance, SMEs with and without financials) andexpanding its coverage on the Group entities.

- Promoting a strong risk culture by providing awarenesssessions, mainly on operational risk, in addition to trainingmissions delivered to the risk managers / officers of Group entities.

RISK PROFILE

Despite the challenging operating environment in 2014,Fransabank has maintained stable growth in its financial results.The Group’s risk profile continues to be conservative and withinthe Bank’s strategic objectives, business plan and risk appetite;the latter being expressed in terms of qualitative statementsand quantitative measures.

In 2014, Fransabank Group has witnessed several milestones,including the acquisition of a small local Bank – Ahli InternationalBank SAL and the development of the Bank’s internationalnetwork through the establishment of two branches in Iraq.

MANAGEMENT REPORT

Fransabank Group is mainly exposed to credit risk, and to alesser extent market risk and operational risk, at the sides ofinterest rate risk in the banking book, liquidity risk andreputational risk. The inherent risks are identified, assessed andmanaged through a sound governance and effective riskmanagement systems and processes throughout theGroup’s financial entities. The Bank is committed to complywith regulatory standards and has achieved adequate buffersover prudential ratio requirements.

Capital Management

The Bank manages its capital structure to continuously remainat adequate comfortable levels to support its risk profile,growth plans and expansion strategy. As at 31.12.2014, and withmore than 60% of Fransabank Group regulatory capital formedof Common Equity Tier 1 (CET1), the CET1 capital ratio stood at9.47% versus the 7% minimum regulatory and the Total Capitalratio at 15.07% as compared to the regulatory minimum of11.5%.

Also, Fransabank Group Tier 1 leverage ratio comfortablyexceeds the level of 3% proposed by Basel III.

Credit Risk

Fransabank credit risk embeds its exposures on sovereigns, onclients – corporates, SMEs and retail, as well as on banks andfinancial institutions. The Bank manages the levels of credit riskundertaken by placing limits on the amount of risk accepted inrelation to one borrower or groups of related borrowers. Countrylimits are established and reviewed on regular basis.

Each credit request, in that respect, is subject to an independentcredit risk assessment that thoroughly analyses and identifiesthe embedded risks. The assessment of sovereigns, banks andfinancial institutions is done in light of the external credit ratingassigned to them. Corporate, SME, and retail files are processedthrough a uniform credit proposal that assesses the client’squantitative and qualitative risks. Credit files are submitted forapproval to ad hoc committees and eventually to the Board ofDirectors.

Fransabank Group’s net loans & advances to customers, which arefor around 83% booked in the Group’s Lebanese entities, increasedby 11% in 2014.

The Group’s asset quality slightly bore the impact of the difficultconjuncture prevailing in some of its international entities, wherebythe Group’s ratio of net non-performing loans to net total loansstood at 5.3% in 2014 as compared to 5.2% a year before, with acoverage ratio of 73.4% that would increase to 107% whenaccounting for real securities.

Market Risk

Fransabank has a low appetite to market risk in the Fair ValueThrough Profit or Loss Portfolio. Various risk identification andmeasurement techniques are adopted to control and monitorcurrent and potential market risk exposures to abide by the Bank’sconservative policy.

Interest Rate Risk in the Banking Book (IRRBB)

IRRBB emerges from the negative re-pricing gap betweenRate Sensitive Assets and Rate Sensitive Liabilities. The resultingmismatch between long term assets and short term liabilities isinherent in banking activities and is a structural characteristic of theLebanese banking sector. Fransabank has set internal limits formonitoring IRRBB, taking into consideration a stressed interest rateenvironment.

Liquidity Risk

The Group continued to put high emphasis on maintaining a strongliquidity. The ratio of loans to deposits, which registered 38% as at31.12.2014, is hence kept at a conservative level. Stress scenarios onthe liquidity position have been carried out to test theBank’s resilience under difficult situations. Also, the Bank hasdeveloped a methodology to internally compute the LiquidityCoverage Ratio (LCR) as per Basel III guidelines.

Operational Risk

Fransabank implements sound and reliable set of managementprocesses to identify, assess, control, and monitor operational risks.In 2014, the Bank further developed its operational Loss IncidentReporting tool and expanded the collection of operational lossincidents. In addition, ongoing Risk and Control Self-Assessments(RCSA) are scheduled in order to evaluate the effectiveness ofthe internal control system and to recommend the necessarycorrective action(s).


COMPLIANCE

OVERVIEW

Effective compliance risk management aims at stimulating,monitoring and controlling the observation of laws, regulations,internal rules - including the compliance principles outlined inFransabank’s Code of Conduct - and establishing good businessstandards that are relevant to the integrity and, hence, to thereputation of Fransabank. Integrity is the focus in managingcompliance risk and, therefore, the driving force behindeverything Fransabank does. Controlling integrity risk isaccordingly placed within the scope of the compliance function.

The compliance function of Fransabank supports the entity andits management in managing the compliance risks, embeddingand improving the compliance arrangements in all levels andstructures of the entity. The compliance function therefore hasthe following objectives:

- To identify, assess, control, monitor, test and report on thecompliance risks faced by Fransabank.

- To assist, support and advise the Board of Directors, top andsenior management of Fransabank, in fulfilling theirresponsibilities to manage compliance risks.

- Foster a compliance culture among staff and enhancingcompliance awareness throughout the organization.

- Implement the compliance program in a fashion that is in linewith regulatory environments and expectations.

- Enforce compliance policies and procedures whichimplement applicable laws and regulations and adoptindustry standards and best practices.

- Advise any staff member of Fransabank with respect to theirpersonal responsibility to manage compliance risks.

The scope of compliance depends on the nature, the size andthe location of business activities. It generally includes:

- Legal/Regulatory Compliance including: compliance with rules &regulations, FATCA law, and local and international sanctions andrestrictive measures (UN, US, EU sanctions).

- Anti-Money Laundering and Combating the Financing ofTerrorism including: customer acceptance – Know YourCustomer / Customer Due Diligence, transaction monitoring,investigation and reporting.

- Capital Markets Compliance including: treatment of confidentialinformation, management of conflicts of interest, preventionof insider trading and market manipulation, new productapproval, and fair treatment of customers.

GOVERNING PRINCIPLES

AML/CFT

Fransabank Group’s AML/CFT (Anti-Money Laundering/Combatting the Financing of Terrorism) Policy primarily aims atsetting, within the Group, the essential standards for fightingmoney laundering operations and terrorism financing. Should theapplicable AML/CFT laws and regulations of any country orjurisdiction require higher standards, Fransabank Group’s overseassubsidiaries and associate banks must conform to thosestandards. However, in case the relevant subsidiary or associatebank comes across any applicable law that is inconsistent with theGroup’s policy, it must first refer to the Group’s ComplianceDepartment to resolve the conflict.

The AML/CFT Policy also encompasses the following objectives:

• Promoting a Know Your Customer (KYC) standard as acornerstone principle for Fransabank Group business ethicsand practices:

- Prior to any transaction of any type, Fransabank Group’s entitiesgather and document the relevant customer identificationdata, along with the background information, the purposeand the intended nature of the business.

- Fransabank Group’s entities retain and document anyadditional customer information relevant to the assessmentof the money laundering risk, by adopting a risk-basedapproach which triggers the proper enhanced duediligence for the relevant customers.

• Enforcing the following additional due diligence measures whileestablishing and maintaining correspondent relations:

- Gathering sufficient documentary evidence on a respondentinstitution, to avoid any relationships with “shell banks”;

- Enquiring about the good reputation of a respondentinstitution from public sources of information, includingwhether it has been subject to a Money Laundering orTerrorist Financing investigation or other regulatory action;

- Verifying, on a periodic basis, that the respondent institution isimplementing sufficient and effective procedures to fightMoney Laundering and Terrorist Financing.

• Monitoring and reporting suspicious transactions/activity:

- Fransabank Group’s entities apply due diligence measureswhenever they detect any unusual or suspicious transaction oractivity, taking into account the legal framework of theconcerned institution.

MANAGEMENT REPORT

- All suspicious transactions or activities complying with thelaws and regulations of the corresponding jurisdictionare reported.

- The Group’s Compliance Department is notified of allsuspicious transactions or activities when doubts arise.

• Developing an effective internal control structure where noactivity with a customer is carried out without obtaining inadvance all the required information relating to the customer;

• Consolidating, within the Group, the AML/CFT efforts deployedby Fransabank entities;

• Conducting self-evaluation processes on the compliance withthe AML/CFT policy and measures.

Consequently, the adoption of the AML/CFT Policy is crucial toascertain that all Fransabank Group’s entities, whatever theirgeographic location, fully comply with the enacted AMLlegislation. Thus, the Group is committed to overseeing itsAML/CFT strategies, objectives and guidelines on an ongoingbasis, and supporting an effective AML/CFT Policy within theGroup’s business.

Compliance

Fransabank Group’s Compliance governing principles are asfollows:

• Integrity and reputation are vital assets to maintain the healthygrowth of business.

• Management is the owner of compliance to foster theadequate enterprise-wide culture.

• The compliance function is independent from business lines,yet is a shared responsibility of all employees.

• A transparent and constructive relationship between theFransabank’s Group and its’ regulators is maintained.

• Effective monitoring of compliance risks is implemented.• Timely, accurate and systematic compliance reporting is

provided.• The compliance function will continue to improve itself by

improving its governance, its measurement methods, itspolicies and procedures, and adopting the industry’s bestpractice in line with local and global developments.

The Group compliance team is headed by the Group ChiefCompliance Officer who coordinates “overall compliance” withinFransabank Group. He is the internal supervisor and responsiblefor ensuring that Fransabank Group operates within the definedcompliance framework. The Group Chief Compliance Officer issupported by a number of designated officers and controllingbodies within Fransabank‘s Group organization structures.

HUMAN RESOURCES

Fransabank’s employees are the foundation of its success;therefore, we are committed to supporting their needs anddeveloping their skills. We also seek to provide a suitable workenvironment that is rewarding for all the Bank’s employees, topromote diversity, and to offer opportunities to evolveprofessionally.

At the end of 2014, Fransabank Group had a total workforceof 3,416 employees, compared with 3,265 at the end of 2013,equivalent to an annual increase of 4.62%.

Diversity helps Fransabank meet the changing needs of itscustomers, employees and the communities where it operates.Fransabank translates its pledge to diversity into actively recruitingand hiring employees from various backgrounds and experiences.In 2014, Fransabank gender distribution was almost evenlydistributed, with males constituting 54% of the staff andfemales 46%, which remained unchanged for the past threeyears. As a matter of fact, the Bank is keen on preserving itstalented workforce while attracting fresh minds, with anaverage age of 36.4 years. Moreover, 70% of the employeesare university graduates, while nearly 20% hold a Master’sdegree or a PhD.

Every year, Fransabank takes part in the annual job fairs as theybring universities and businesses together. Held at major localuniversities, the American University of Beirut, Lebanese AmericanUniversity, Université Saint Joseph (USJ), and Ecole Supérieuredes Affaires (ESA), this cooperation with universities contributesto diversifying the Bank's human resources, assists the younggeneration in fulfilling their ambitions, and to obtain informationabout Fransabank Group, its values, business activities andopportunities. Therefore, and following every participation,Fransabank welcomes students for a Summer InternshipProgram. In 2014, 196 students (almost unchanged from theyear 2013) were received at the Bank for a period of 4 to 8weeks. Tailored programs were specially developed for theirbenefit and to better apprehend banking operations andactivities.

In order to improve the staff employability, Fransabank supportsthem by encouraging mobility and career development. Thiscontributes to both the Bank’s performance and the personaland professional fulfillment of its staff. Therefore, the Bankcontinuously invests in the empowerment of its employees andtheir development and is responsive to their needs.

The training programs covered a range of fields from bankingand financial techniques, management and behavioral skills, to


marketing and selling skills and information technology, as wellas comprehensive training programs on the Bank's regulatorycontrol and compliance agenda. The Training and Development(T&D) Department works on decentralizing the training process,thus sessions are held regularly and separately according toeach region’s requirements.

Closely tied to the training and development efforts, the Bankfocuses on promoting internal mobility. In other words, wewant to ensure that Fransabank employees get to exercise thedeveloped skills to progress professionally within the Bank.

Therefore, the T&D Department has also elaborated theOrientation Program that aims to increase employeeeffectiveness, boost their self-confidence and job satisfaction,and improve both the personal and professional well-being.

Internal and external training are made available to employees,depending on their needs in terms of competence, and on thejob requirements.

The Orientation Program is divided into two categories:

1. The Training Program:

Induction Program and On-The-Job Training

- The Induction Program targets the recruits and aims tosmoothly integrate them through a corporate-culture briefingpackage, and to efficiently introduce them to their assignedtasks and responsibilities.

- On-The-Job Training allows employees to acquire newabilities, whether general skills applicable to all jobs orspecific skills pertaining to a particular function.

2. The Development Program:Potential Development, Talent Management, Polyvalence

Enhancement and Succession Planning

- The Potential Development program prepares competentemployees to occupy higher positions. A total number of 398potentials were identified in 2014, compared with 399individuals in 2013.

- The Talent Management program helps to broaden thecareer prospects of fast-track employees and provide themwith better support. These employees are selected based ona combination of personal skills, educational backgroundand banking knowledge. During 2014, Fransabank hastargeted 119 individuals, compared with 105 individuals in2013.

- The Polyvalence Enhancement program focuses on theemployees’ ability to exercise multiple functions. In 2014, 408employees became polyvalent, compared with 330 individualsin 2013.

- The Succession Planning program initiates employees tofuture organizational requirements. 204 potential successorswere selected in 2014, compared with 200 individuals in2013.

- | EMPLOYEE FACTS AND FIGURES AS OF DECEMBER 31, 2014

EMPLOYEE SPLIT BY AGE

TOTAL TRAINING HOURS EVOLUTION

TRAINING & DEVELOPMENT PROGRAMS

FRANSABANK GROUPTOTAL NUMBER OF EMPLOYEES

NUMBER OF EMPLOYEES

PROPORTION OFMALE EMPLOYEES

PROPORTION OFFEMALE EMPLOYEES

Under 25

Between 25 and 29

Between 30 and 35

Between 36 and 39

Between 40 and 49

Between 50 and 60

Above 60

54% 46%

3,416

7%17%

25%

2014

2013

2012

71,455

8%23%

Talents Management

Polyvalence Enhancement

Potentials Development

Succession Planning

Orientation Programs

119408398

204122

17%3%

42,123

13,088

MANAGEMENT REPORT

INFORMATION AND COMMUNICATION TECHNOLOGY

advanced centers in the region in terms of technology, usingthe best proactive monitoring and advanced technologiesfrom the world leaders in this field. The datacenter is fullydesigned to be maintained and upgraded without any down-time or service interruption due to its multiple redundancies.

- New technologies to interconnect systems and applications atthe Bank (Enterprise Service Bus) and within the FransabankGroup entities are also being developed and graduallydeployed.

- All Central Bank of Lebanon requirements related to NPS andnew regulatory requirements have been smoothly andsuccessfully implemented.

IT SECURITY

As far as the Information Security is concerned, an additionalimprovement has been achieved in 2014 in many aspects. Dataleakage protection and End Point management systems wereimplemented in order to protect illicit disclosure of information.Moreover, the centralization of all office files on file servers in thebranches and the headquarters provided a controlled accessibilityto the data, and a better availability through an advanced backupsystem. On the other hand, during 2014, Fransabank made a bigleap in the PCI DSS compliance project, reaching a very high levelof conformity to the injunctions of the said standard.

Regarding the Physical Security, the deployment of firefightingsystems in all the premises and the upgrade of the camerasurveillance platform using advanced IP technology, drasticallyenhanced the human safety level of Fransabank environment.

As for the Business Continuity site, more services were addedduring 2014 to cover all customers' related processes, withoutaffecting in any way the level of servicing provided to our clientelein case of disaster. Moreover, proper drills were conductedsuccessfully to ensure the continuous readiness of the site.

On the other hand, Fransabank is focusing on the development ofits human capital, composed of a large team of technologyspecialists, functional and business analysts and experts (theOrganization Department), senior developers and administrators.And it is also to be noted that all initiatives and projects arerunning towards complying to the ISO 20000 Standard.

BUSINESS DEVELOPMENT PROJECTS

- Implementation of an Integrated Credit Card and MerchantManagement solution, that enabled the Bank to develop awider range of products more adapted to the marketdemands with increased reliability and security.

- Installation of the new ATM switch, coupled with the embeddedadvanced security features and its compliance to the bestsecurity standards (full-fledged EMV services…). Besides, theAdvanced Fraud prevention tools and solutions are a majorpillar of the plastic card business development as well asadvanced ATM functionalities and will be gradually deployedon all the ATMs.

- The new generation core banking transformation projectbased on a multi-tier architecture and integrated workflowswill also be the cornerstone of Fransabank banking technologyservices.

- Enhancement of Fransabank's multichannel E-bankingplatform, that will consolidate its leading position in providingthe Bank’s clientele with a flexible mobile banking service(SIMBA), and allowing them to access their banking transactionswhile facilitating their payments.

- Addition of new functionalities, major upgrades, and securityfeatures to the online delivery channels (Internet Banking, CallCenter, CRM…).

- Full integration of the Ahli International Bank branches andservices following its acquisition.

IT TECHNICAL PROJECTS

The process of infrastructure enhancement, development andupgrade, based on multiple partnerships and agreements withinternational vendors and market leaders such as CISCO, IBM,EMC, HP, was successfully achieved. - The first high end IBM Power 870 servers in the middle east

were acquired and installed at Fransabank, using SVC Technologyand Flash storages that can provide the Bank with outstandingperformances and extremely flexible storage capabilities.

- Advanced backup and archiving project ensures a full coverageof all the Bank’s systems centrally with an online replication ofthe disaster recovery site.

- A state-of-the-art Tier III compliant design datacenter is in thefinal implementation phase. This datacenter is one of the most

During the past two years, Fransabank has worked on the development and implementation of a very ambitious plan consisting ofmajor enhancements and transformations of its information technology core infrastructure and services; the main objective is to ensurethe ability to drive, and successfully support the business growth, developments and changes. The challenge of ensuring a stable operationduring this major evolution was met and the transitions and various upgrades were done in a seamless manner.

The solid foundations that were put in place and the large investments in the banking service IT applications started blooming in 2014as per the following achievements:


CORPORATE SOCIAL RESPONSIBILITY

Fransabank has long been committed to helping localeconomies and communities grow and prosper through itsresponsible work, believing that an active banking sector isindispensable for social and economic progress. Indeed, all ouractions, from the way we run our business to how we use ourresources, align with our Corporate Social Responsibility (CSR),whether in banking, as an employer, and also in economy,environment, or communities.

One of the ways we inspire trust in our stakeholders is byknowing what they expect from us and how their expectationsare changing. Actually, we regularly engage in a dialogue withour main stakeholders: clients, employees, government, non-governmental organizations, media, and local communities.This enables us to gain a deeper insight into our responsibilitiesin our core business of banking, as well as our responsibilitiestoward our employees, the society and the environment. At thesame time, this dialogue allows us to identify potential issues atan early stage.

In 2014, we gave a comprehensive presentation of our CSRstrategy and initiatives to the Bank’s Board of Directors. A brandequity research included 700 one–to-one interviews revealingthe strengths and weaknesses of Fransabank brand in comparisonwith competition. Moreover, we engaged in internal discussionswith selective Bank’s employees to better initiate the entire staffinto Fransabank's CSR aspirations and plans, and we evaluatedour customers’ satisfaction levels.

Fransabank CSR strategy embraces the Global Compact universalprinciples in the areas of human rights, labour, environment andanti-corruption, and so focuses on the following five pillars ofinterest:

1. OUR RESPONSIBILITY IN BANKING

Fransabank has always committed itself to implement soundCorporate Governance practices, which focus on the mainguiding principles of transparency, accountability, responsibilityand fairness in the treatment of all related parties. A solidfoundation of sound corporate governance, integrity,accountability and strong risk management culture has wellpositioned Fransabank in the challenging economic environmentof the past few years. It has helped to build and maintainstrong, enduring relationships with customers and otherstakeholders in the communities where we operate.

Fransabank has a revised Code of Conduct to help employeesmake decisions about customers, suppliers and authorities. Itsets forth the general behavioral guidelines including insideinformation and conflicts of interest. Furthermore, in order topreserve confidentiality and protection of valuable information,Fransabank information security follows a strong governanceframework by which all employees abide.

2. OUR RESPONSIBILITY FOR THE ECONOMY

Promoting financial inclusion and economic progress is anessential part of Fransabank’s CSR activities; it helps providefinancial opportunities, access, knowledge and support forunderserved communities and individuals.

Fransabank supports companies of all sizes – micro, SMEs andcorporates - in Lebanon by operating a fair and reliable lendingpolicy. Despite the evolving market conditions in recent years, thelending practices have remained essentially unchanged.Throughout 2014, Fransabank has created 266 jobs through itsmicro-lending activity; with micro credits totaling an outstandingamount of USD 2,499,695 by the end of December 2014,increasing by 18.17%, compared with USD 2,115,328 at the endof December 2013. The non-performing loan ratio stood at 1.81%in 2014. A total of 1,159 males and 617 females were grantedloans, (i.e. 65.26% of this year’s beneficiaries were men and 34.74%were women). As for the age distribution, 43.28% of beneficiariesbelong to the 18 to 35 age bracket, 39.50% to the 36 to 50 bracket,and 17.22% are beneficiaries older than 50. Moreover, a grant ofUSD 25,000 was awarded to selective 25 micro-entrepreneurs(each received USD 1,000) based on selective Key PerformanceIndicators (KPI’s).

In parallel, Fransabank launched a first-of-its-kind initiative,signing with the International Finance Corporation (IFC),and in collaboration with the Government of Canada, two creditlines, of USD 40 million, promoting the financing of sustainable

After becoming an active participant in

the United Nations Global Compact

(UNGC) in 2013, we have raised the

challenge of communicating, for the

second year our journey towards

responsible business. Then again in

2014, we decided to go a step further

and become the first Lebanese Bank to

sign the Business for Peace (B4P)

Statement of Support by the UNGC as

we deem our role constructive in fostering

development, stability and peace in the

communities where we operate.

MANAGEMENT REPORT

energy in Lebanon, through which businesses can use cleanenergy and energy efficient technology, save money, and combatclimate change. On the other hand, Fransabank and the EuropeanInvestment Bank (EIB) renewed the support of SME’s in Lebanon,with a EUR 45 million line to finance the investment projects ofSME’s in the sectors of industry and agro-industry, health,education, high knowledge and services. And indeed, it offered itscustomers - whether companies or SMEs, eco-businessenvironmentally friendly loans, to support and invest in renewableenergy projects and reduce energy costs on the economy.

Besides offering quality products to customers, Fransabank seeksto maintain good quality service to retain good clients.Accordingly, the Bank is constantly thriving for innovation,state-of-the-art systems, and dedicated employees who careabout the customers’ satisfaction. Being trusted and respected byclients in all the communities where we do business is a priority asit contributes to long-term benefits for both the Bank as well asthe people we serve.

3. OUR RESPONSIBILITY AS AN EMPLOYER

Fransabank’s policies and practices encourage a corporate culturethat embraces difference, teamwork and meritocracy. It ensuresan equal employment opportunity with employees representinga variety of personalities, gender, lifestyles and expectations. Interms of gender distribution, the Bank is well-balanced with 54%of males and 46% of females. As for the average age, it is 36.4 yearsold, with 70% of the total employees holding a university degree.

The Bank actively recruits and hires employees from a broad rangeof backgrounds and experience, and is committed to providing allits employees with opportunities to develop their skills andadvance their career. Training programs range from broad leader-ship and management courses to marketing and selling skills andinformation technology, while still promoting internal mobility.Thus, the total number of training hours, including externaland internal training sessions, amounted to 71,455 hours in 2014,attended by 1,137 employees.

Our CSR efforts towards our employees go beyond trainingthem to progress in the workplace; rather by engaging andempowering them to give back to the community throughtheir individual contribution, which is a very important aspect ofFransabank corporate culture. It’s in this context thatFransabank launched an internal reading campaign under thetitle of "Today’s Readers are Tomorrow’s Elites,” motivating

employees’ individual contribution for greeting the Children ofthe Lebanese Army Martyrs, either by donating a book/story orby donating a sum of money. This initiative reflected the Bank’sCorporate Social Responsibil ity, which, in essence,promotes the spirit of individual participation in servingcommunities. 76% of Fransabank branches employees and60% of employees at departments participated in thiscampaign.

4. OUR RESPONSIBILITY FOR THE ENVIRONMENT

Fransabank continuously seeks to incorporate the concern for theclimate and environment in its products and the way it conductsbusiness.

In 2014, the Bank assisted companies seeking to deploytechnologies that help them use energy more efficiently, reducegreenhouse gas emissions and generate clean energy. The totalamount of granted loans for the financing of energy or sustainabledevelopment projects is in circa of USD 2,254,000 at the end of 2014.

As previously mentioned, the Bank’s agreements with the IFC andEIB to finance energy related technologies in order to makeprofitable investments in sustainable development, were a majorstep in recognizing the importance of sustainable energyfinancing. Fransabank believes that this step would highlycontribute to a better environment.

Most importantly, the Bank’s employees succeeded in reducingtheir negative impact on the environment by committing to the“Bouchons Roulants” initiative launched by arcenciel to raisepublic awareness on the importance of recycling and protectingthe environment. Consequently, this CSR initiative allowed todonate two wheelchairs; one wheelchair thanks to Fransabankfamily efforts, and the other from the Bank’s management, as anequal contribution to the staff ’s effort. The two wheelchairswere donated afterwards to direct family members of twoFransabank employees.

On the other hand, different forest reserves and green initiativeswere supported by Fransabank, whether through financialcontributions or tree planting.

5. OUR RESPONSIBILITY FOR THE COMMUNITIES

Fransabank strategic philanthropic investments amounted toUSD 1.45 million in 2014, and are distributed among 146beneficiaries in the local communities.


Fransabank acts in three major focus areas:

• Fransabank's support to art and culture aims to introduce art,music, theater or humanities to all types of public, by coveringdifferent regions in Lebanon. Consequently, the annual artexhibition, JABAL, in its 10th edition was sustained in 2014,hosting and showcasing the talent of dozens of artists who neverpreviously had the opportunity to display their works tothe public. Fransabank's patronage of these annual exhibitionsconsists of entirely preparing, organizing and supporting theseexhibitions. The success of this 10th edition of JABAL revealedonce again Fransabank’s commitment to promote young talentsin Lebanon, by offering them a platform to exhibit their work andto contribute to the effervescence of the contemporary creationin Lebanon year after year. JABAL 2014 was coupled with severalother strategic partnerships with the international and localfestivals, restoration of several historical monuments thatdefine the Lebanese rich heritage, or even supporting regionalmusical productions.

• Fransabank believes that education should be accessible to alland is, therefore, keen on promoting equal opportunitiesthrough its study scholarships for different groups. Thus, for thesecond year in a row, the “Adnan Kassar Annual Scholarship” wasawarded to 14 Lebanese American University students, grantinga total amount of USD 60,000. Moreover, the Bank granted 969educational loans and the total outstanding amount reached

USD 13,870,176 at the end of December 2014. Besides, for thefifth consecutive year, Fransabank continued to support thepublic sector through its partnership with the Ecole Nationaled'Administration (ENA), the French Embassy in Beirut and theBasil Fuleihan Institute of Finance, for a joint education programtargeting leaders of the public sector such as judges, directorsand other professional experts.

• Fransabank always seeks to create a positive impact on thecommunities where it operates. The Bank invests strategically invarious areas to respond to the different needs of the society,while trying to cover the widest scope. As such, assistance wasextended to hospitals and medical initiatives, differentorganizations that care for the elderly and youth, sportsprograms, among others.

In 2014, the Bank launched a special call for the sake of both itsemployees and business. An internal campaign took place,inviting all female staff, above 40 years old and working at theHeadquarters and the Beirut area branches to attend an interactiveworkshop with cardiologists from prominent local hospitals,namely the American University of Beirut Medical Center andHotel Dieu de France. The workshop lasted for two days with atotal of 82 attendees. Arising from this initiative’s success, and tobetter reach all of our staff, a special edition of our internalmagazine Zapping was dedicated to women’s heart health,including recommendations for a healthier heart and a betterlifestyle, as well as facts and statistics.

Social & Health : USD 938,864Art & Culture : USD 347,195Education : USD 168,428

64%

12%

24% 2014

- | INVESTED USD 1.45 MILLION FOR 146 BENEFICIARIES

CORPORATE SOCIAL RESPONSIBILITY REPORTING

We have included here a summary of our CorporateSocial Responsibility (CSR) progress in 2014.

A comprehensive Communication On Progress (COP) ispublished.

That COP report examines a wider range of issues andcontains extensive in-depth information about ourCorporate Social Responsibility strategy, initiatives, casestudies, challenges and much more.

For more information about our CSR activities, please besure to visit Fransabank webpage on the followingaddress: www.fransabank.com/English/MediaCenter/Publications/Corporate%20Responsibility%20Report/Pages/CR-Reports.aspx

INDEPENDENT AUDITORS’ REPORT

FINANCIAL STATEMENTS

REPORT ON THE FINANCIAL STATEMENTS

We have audited the accompanying consolidated financial statementsof Fransabank SAL, and its subsidiaries (The “Group”) which comprisethe consolidated statement of financial position as at December 31,2014, and the consolidated statement of profit or loss, consolidatedstatement of profit or loss and other comprehensive income,consolidated statement of changes in equity and the consolidatedstatement of cash flows for the year then ended, and a summary ofsignificant accounting policies and other explanatory information.

MANAGEMENT’S RESPONSIBILITY FOR THE FINANCIAL

STATEMENTS

Management is responsible for the preparation and fair presentation ofthese financial statements in accordance with International FinancialReporting Standards, and for such internal control as managementdetermines is necessary to enable the preparation of financialstatements that are free from material misstatement, whether due tofraud or error.

AUDITOR’S RESPONSIBILITY

Our responsibility is to express an opinion on these consolidatedfinancial statements based on our audit. We conducted our audit inaccordance with International Standards on Auditing. Those standardsrequire that we comply with ethical requirements and plan andperform the audit to obtain reasonable assurance whether the financialstatements are free from material misstatement.

TO THE SHAREHOLDERS

FRANSABANK SAL

BEIRUT, LEBANON


An audit involves performing procedures to obtain audit evidenceabout the amounts and disclosures in the financial statements, withinthe framework of local banking laws. The procedures selected dependon the auditor’s judgment, including the assessment of the risks ofmaterial misstatement of the financial statements, whether due to fraudor error. In making those risk assessments, the auditor considers internalcontrol relevant to the entity’s preparation and fair presentation of thefinancial statements in order to design audit procedures that areappropriate in the circumstances, but not for the purpose of expressingan opinion on the effectiveness of the entity’s internal control. An auditalso includes evaluating the appropriateness of accounting policiesused and the reasonableness of accounting estimates made bymanagement, as well as evaluating the overall presentation of thefinancial statements.

We believe that the audit evidence we have obtained is sufficient andappropriate to provide a basis for our audit opinion.

OPINION

In our opinion, the consolidated financial statements present fairly, in allmaterial respects, the consolidated financial position of the Group as ofDecember 31, 2014, and of its f inancial per formance and itsconsolidated cash flows for the year then ended in accordance withInternational Financial Reporting Standards.

Beirut, LebanonMay 6, 2015

DFK Fiduciaire du Moyen-Orient Deloitte & Touche

CONSOLIDATED STATEMENT OF FINANCIAL POSITIONAS AT DECEMBER 31,


5,785,914,309 1,368,477,501

92,984,7807,978,979,051 9,157,605,796

277,501,36246,769,853

197,401,51857,989,822

334,674,206 13,552,238 52,453,762

209,507,477

25,573,811,675

443,355,425 761,177,381895,733,799

Notes

ASSETS

Cash and Central BanksDeposits with banks and financial institutionsLoans to banksLoans and advances to customersInvestment securitiesCustomers' liability under acceptancesInvestments in associatesAssets acquired in satisfaction of loansInvestment propertiesProperty and equipmentIntangible assetsGoodwillOther assets

TOTAL ASSETS

FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISKS

Documentary and commercial letters of creditGuarantees and standby letters of creditForward contracts

2014LBP’000 2013

56789

1011121213141516

3939

6,507,446,082 1,439,194,932

286,535,5748,825,031,747

10,201,698,365 190,422,114

59,825,856200,738,519

56,402,506391,196,109

13,441,912 55,654,472

328,181,041

28,555,769,229

214,966,721724,993,147

1,349,469,471


Notes

LIABILITIES

EQUITY

398,515,414 21,287,548,859

277,501,362 788,028,391

54,886,214-

231,554,198 41,219,028

23,079,253,466

420,000,00026,000,000

365,950,000 17,113,885

273,821,842100,182,279 625,477,829 226,536,524

2,055,082,359

439,475,850

2,494,558,209

25,573,811,675

Deposits and borrowings from banksCustomers' accounts at amortized costCustomers' acceptance liabilityOther borrowingsSubordinated loanCertificates of depositOther liabilitiesProvisions

TOTAL LIABILITIES

Issued capital - Ordinary sharesIssued capital - Preference sharesShare premium - Preference sharesShareholders’ cash contribution to capitalReservesCumulative change in fair value of financial assetsBrought forward retained earningsNet profit for the year

Equity attributable to the owners of the Bank

Non-controlling interests

TOTAL EQUITY

TOTAL LIABILITIES AND EQUITY

1718101920212223

242626252728

30

29

Notes 2014LBP’000 2013

548,839,27323,134,814,756

190,422,114 1,402,765,867

52,500,684 41,361,128

334,052,476 38,413,203

25,743,169,501

420,000,00034,500,000

485,587,50017,113,885

326,599,151159,088,218 693,909,410 238,681,259

2,375,479,423

437,120,305

2,812,599,728

28,555,769,229

CONSOLIDATED STATEMENT OF PROFIT OR LOSSFOR THE FINANCIAL YEAR ENDED DECEMBER 31,


3233

3435

369

37

8

8

15

16 (b)

13, 142338

2230

3030

Interest income Interest expenseNet interest income

Fee and commission incomeFee and commission expenseNet fee and commission income

Net interest and other gain / (loss) on financial assetsat fair value through profit or lossNet gain from derecognition of investments at amortized costOther operating income (net)Net financial revenues

Allowance for impairment of loans and advances (net)Bad debts recovery/(expense)Write-back of discount on purchased loan portfolioAllowance for off-balance sheet risksAllowance for off-balance sheet bad debtsImpairment of goodwillNet financial revenues after impairment losses

Income originated from contractual future cash flowsStaff costsAdministrative expensesDepreciation and amortizationWrite-back of provision no longer requiredProvisions for charges (net)

Profit before income tax

Income tax expenseDeferred tax on investees undistributed profits

NET PROFIT FOR THE YEAR

Attributable to:

Owners of the BankNon-controlling interests

1,376,005,243 (851,946,836)524,058,407

108,775,102 (26,084,401)82,690,701

46,877,115 9,462,353

46,314,249709,402,825

(79,671,786)(267,607)

148,028(50,190)(61,079)

(34,268,905)595,231,286

77,159,472 (232,914,856)(115,232,332)

(24,633,760)1,414,214

(2,863,388)

298,160,636

(47,192,808)(8,643,716)

242,324,112

226,536,524 15,787,588

242,324,112

2014LBP’000 2013

1,482,411,492 (930,225,827)552,185,665

109,121,149 (26,116,728)83,004,421

73,222,961 32,058,454 45,016,694

785,488,195

(100,099,668)259,102 270,600

30,245 (6,719)

-685,941,755

26,163,596 (245,148,131)(126,425,230)

(27,027,223)-

(3,030,638)

310,474,129

(51,284,827)(7,467,965)

251,721,337

238,681,259 13,040,078

251,721,337

Notes

CONSOLIDATED STATEMENT OF PROFIT OR LOSSAND OTHER COMPREHENSIVE INCOMEFOR THE FINANCIAL YEAR ENDED DECEMBER 31,


91311

242,324,112

36,196,7354,518,958

(354)(3,619,674)37,095,665

(4,431,624)

32,664,041

274,988,153

259,051,28215,936,871

274,988,153

Net profit for the year

Other comprehensive income:

Items that will not be reclassified subsequently to profit or loss

Unrealized gain on financial assets designated at fair value through other comprehensive income (IFRS 9)Revaluation surplusShare in other comprehensive income of associatesDeferred tax

Items that may be reclassified subsequently to profit or loss

Currency translation adjustment

Total other comprehensive income

TOTAL COMPREHENSIVE INCOME FOR THE YEAR

Attributable to: Owners of the BankNon-controlling interests

2014LBP’000 2013Notes

251,721,337

66,101,8371,524,814

-(7,001,544)60,625,107

(34,956,268)

25,668,839

277,390,176

278,129,808(739,632)

277,390,176

CONSOLIDATED STATEMENT OF CHANGES IN EQUITYFOR THE FINANCIAL YEAR ENDED DECEMBER 31,


Equity Attributable to

LBP’000

PreferenceShares

CapitalOrdinaryShares

Shareholders’Cash

Contribution to Capital

Reserves

Share Premium on Preference

Shares

17,113,885

-

-

-

-

-

-

-

-

-

-

17,113,885

-

-

-

-

-

-

-

-

-

-

-

-

17,113,885

202,573,685

-

-

1,194

(537,509)

-

-

67,125,721

(2,054,535)

-

441,451

267,550,007

-

-

87

(2,788,031)

-

-

-

74,419,098

(1,373,816)

-

-

(19,457,390)

318,349,955

BALANCE AS AT JANUARY 1, 2013

Dividends paid (Note 31)

Issuance of preference shares

Effect of acquisition of additional equity interest

Effect of increase of capital in subsidiary

Deferred liabilities

Other movement

Allocation of 2012 profit

Reallocation between reserves and retained earnings

Earnings originated from contractual future cash flows (Note 16)

Comprehensive income for the year 2013

BALANCE AS AT DECEMBER 31, 2013

Dividends paid (Note 31)

Issuance of preference shares

Effect of acquisition of additional equity interest

Effect of increase of capital in subsidiary

Deferred liabilities

Effect of other equity adjustments related to an associate (Note 11)

Other movement

Allocation of 2013 profit

Reallocation between reserves and retained earnings

Board of Directors’ remuneration in subsidiaries

Effect of acquisition of subsidiary through business combination

Comprehensive income for the year 2014

BALANCE AS AT DECEMBER 31, 2014

420,000,000

-

-

-

-

-

-

-

-

-

-

420,000,000

-

-

-

-

-

-

-

-

-

-

-

-

420,000,000

26,000,000

-

-

-

-

-

-

-

-

-

-

26,000,000

-

8,500,000

-

-

-

-

-

-

-

-

-

-

34,500,000

365,950,000

-

-

-

-

-

-

-

-

-

-

365,950,000

-

119,637,500

-

-

-

-

-

-

-

-

-

-

485,587,500


the Owners of the Bank

Total Equity

CumulativeChange in

Fair Value ofFinancial Assets

TotalProfit

for the YearRetained Earnings

SpecialReserve

Non-ControllingInterests

377,210,686

(8,733,340)

52,762,500

(24,690)

894,992

651,020

(18,630)

-

-

796,441

15,936,871

439,475,850

(5,462,771)

-

175,937

3,183,965

842,438

-

(355,482)

-

-

-

-

(739,632)

437,120,305

1,866,809,318

(73,294,014)

-

24,690

(170,427)

348,753

(55,050)

-

-

2,367,807

259,051,282

2,055,082,359

(85,969,685)

128,137,500

(175,937)

(1,476,454)

(595,807)

2,668,953

(35,590)

-

-

(474,534)

188,810

278,129,808

2,375,479,423

68,108,618

-

-

-

-

-

-

-

-

-

32,073,661

100,182,279

-

-

-

-

-

-

-

-

-

-

-

58,905,939

159,088,218

225,469,819

(73,294,014)

-

-

-

-

-

(152,175,805)

-

-

226,536,524

226,536,524

(85,969,685)

-

-

-

-

-

-

(140,566,839)

-

-

-

238,681,259

238,681,259

535,963,807

-

-

23,496

367,082

348,753

(55,050)

84,407,753

2,054,535

2,367,807

(354)

625,477,829

-

-

(176,024)

1,311,577

(595,807)

2,668,953

(35,590)

64,170,380

1,373,816

(474,534)

188,810

-

693,909,410

5,629,504

-

-

-

-

-

-

642,331

-

-

-

6,271,835

-

-

-

-

-

-

-

1,977,361

-

-

-

-

8,249,196

2,244,020,004

(82,027,354)

52,762,500

-

724,565

999,773

(73,680)

-

-

3,164,248

274,988,153

2,494,558,209

(91,432,456)

128,137,500

-

1,707,511

246,631

2,668,953

(391,072)

-

-

(474,534)

188,810

277,390,176

2,812,599,728

CONSOLIDATED STATEMENT OF CASH FLOWSFOR THE FINANCIAL YEAR ENDED DECEMBER 31,


298,160,636

254,582 4,428,962

(13,808,821)- -

24,633,760

79,523,758 34,268,905

(720)-

(32,728)-

(77,159,472)(1,886,614)

3,858 (1,247,239) (1,414,214)

5,481,583 851,946,836

(1,414,243,700)(4,700,389)

(215,791,017)

153,721,029(785,443,657)(268,913,059)

10,207,962 (50,383,646)

22,254,098 1,581,428,243

(5,541,260)5,123,226

(8,263,873)438,398,046

(843,171,470)1,395,132,151

16,232,410 (51,763,505)

954,827,632

2014LBP’000 2013Notes

CASH FLOWS FROM OPERATING ACTIVITIES

Profit for the year before tax 310,474,129 Adjustments for: Unrealized (gain) / loss on financial assets at fair value through profit or loss 36 (32,840,872) Change in fair value of investment properties 12 3,135,314 Share in profits of associates 37 (15,543,198)Board of Directors’ remuneration in subsidiaries (300,000)Negative goodwill – Indirect acquisition of a subsidiary 489,459Depreciation and amortization 13,14 27,027,223 Net impairment allowance of loans and advances tocustomers and write-back of discount on purchased loans 8 99,829,068Impairment of goodwill 5 - Regulatory allowance / (write-back) for country risk – Deposits with banks 6 1,500Regulatory allowance for country risk – Loans with banks 7 81,883Impairment allowance / (write-back) of investment in securities 9 15,704Impairment allowance of other assets 16 34,158 Income generated from contractual future cash flows 16 (26,163,596)Loss / (gain) on disposal of property and equipment 37 169,371Loss on disposal of intangible assets - Gain on disposal of assets acquired in satisfaction of loans 37 (6,621,178)Write-back of provision for employees’ end-of-service indemnity 23 -Provisions 23 5,854,720 Interest expense 930,225,827 Interest income (1,515,588,210)Dividend income 36,37 (5,645,120)

(225,363,818)

Net (increase) / decrease in loans to banks 7 (193,559,741) Net increase in loans and advances to customers 8 (661,444,355)Net decrease in investment securities 9 (394,147,944) Net decrease in other assets 16 5,230,347Net increase in compulsory deposits with Central Banks 5 (71,383,065) Net increase in deposits and borrowings from banks 17 103,575,870 Net increase in deposits at amortized cost 18 775,727,513Net decrease in other liabilities 22 (8,154,679) Proceeds from disposal of foreclosed assets 11,971,717Settlement of provisions 23 (1,724,757) (659,272,912) Interest paid (809,209,432)Interest received 1,526,627,476 Dividends received 9,564,530 Income tax paid (47,536,217)

Net cash provided from operating activities 20,173,443


3,255,699-

(1,102,603,918)(26,527,000)

(3,834,746)(1,129,709,965)

- 52,762,500

-(50,984,386)

724,565(82,027,354)

(79,524,675)

(254,407,008)(241,876)

-2,468,645,236

2,213,996,352

2014LBP’000 2013Notes

CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from disposal of property and equipment 202,215 Paid-up share in business combination 15 (155,272,500)Net decrease / (increase) in placements with banks 170,970,029 Acquisition of property, plant and equipment 13 (38,647,433)Acquisition of intangible assets 14 (3,305,858)Net cash used in investing activities (26,053,547)

CASH FLOWS FROM FINANCING ACTIVITIES Issuance of preference shares 26 128,137,500 Issuance of preference shares by subsidiaries - Decrease in certificates of deposit 21 (3,015,000) Net increase / (decrease) in other borrowings 19 612,072,525 Subscription of capital by non-controlling interests 1,707,511 Dividends paid 31 (91,432,456)

Net Cash Provided from / (Used in) Financing Activities 647,470,080

Net increase / (decrease) in cash and cash equivalents 641,589,976 Unrealized currency translation adjustment and other (5,819,470)Cash received through business combination 6,319,066

Cash and cash equivalents beginning of year 2,213,996,352

CASH AND CASH EQUIVALENTS END OF YEAR 41 2,856,085,924

1 GENERALINFORMATION

2NEW AND REVISED INTERNATIONAL FINANCIALREPORTING STANDARDS (IFRSs)

Fransabank SAL (the “Bank”) is a Lebanese joint-stock companyregistered in the Trade Register under Number 25699 and in theCentral Bank of Lebanon list of banks under number 1. Theconsolidated financial statements of the Bank comprise theBank and its subsidiaries (the “Group”). The Group is primarilyinvolved in investment, corporate and retail banking.

The Bank’s registered address is Fransabank Center, Hamra, P.O.Box 11-0393 Beirut, Lebanon.

No ultimate direct or indirect Company controls the Group. TheGroup is controlled by individual shareholders of the Kassarfamily members.

The consolidated subsidiaries consist of the following as

at December 31:

During 2014, the Central Council of the Central Bank ofLebanon granted the Bank his approval to acquire and totally

merge before year-end the accounts of “Ahli International BankSAL”. As a result of this merger, “The Kuwaiti Lebanese Companyfor Real Estate Services SAL” which is owned by “Ahli Interna-tional Bank SAL”, becomes a subsidiary to the Bank.

Financial information of subsidiaries that have material non-controlling interests is provided under Note 29.

The Group has interest in the following associates:

Information on the Group’s associates is provided underNote 11.

Information on other related party relationships is providedunder Note 40.

2.1Application of New and Revised InternationalFinancial Reporting Standards (IFRSs)

In the current year, the Group has applied the following newand revised Standards issued by the International AccountingStandards Board (IASB) that are mandatorily effective with adate of initial application of January 1, 2014 and that are appli-cable to the Group:

Amendments to IFRS 10, IFRS 12, and IAS 27 Investment

Entities

The amendments to IFRS 10 define an investment entity and re-quire a reporting entity that meets the definition of an investmententity not to consolidate its subsidiaries but instead measure itssubsidiaries at fair value through profit or loss in its consolidatedand separate financial statements.

Country ofIncorpora-tion

Interest BusinessActivity2013

%2014%

Country ofIncorpora-tion

Interest held BusinessActivity2013

%2014%

Fransa Invest Bank SAL Lebanon 99.99 99.99 Specialized Bank

Fransabank (France) SA France 59.98 59.98 Banking

Lebanese Leasing Lebanon 87.49 87.49 Financial Company SAL Institution

Switch and Electronics Lebanon 99.70 99.70 Financial Services SAL Services

Sogefon SAL Lebanon 99.88 99.88 Real Estate Company

Fransabank Insurance Lebanon 99.70 99.70 InsuranceServices Co. SAL

Fransabank El Djazaïr SPA Algeria 67.99 67.99 Banking

BLC Bank SAL & its Lebanon 74.83 74.83 BankingSubsidiaries(BLC Services SAL, BLC Finance SAL,BLC Invest SAL & USB Bank PLC)

Express SARL Lebanon 98.35 98.35 Restaurant

Fransabank Syria Syria 65.98 69.50 Banking

Fransabank OJSC Belarus 88.08 88.08 Banking

The Kuwaiti LebaneseCompany for Real Estate Lebanon 100 - Real Estate Services SAL Company

INVESTEE

INVESTEE

Bancassurance SAL Lebanon 60.00 60.00 Life Insurance

United Capital Bank Republic 20.00 20.00 IslamicPLC of Sudan Banking

International Payment Lebanon 20.30 20.30 Payment Network SAL Network

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED DECEMBER 31, 2014


The application of the above new and revised Standards did nothave a material impact on the disclosures and amountsreported for the current and prior years, but may affect theaccounting for future transactions or arrangements.

2.2New and Revised IFRS(s) in Issue but Not Yet Effective

The Group has not applied the following new and revised IFRSsthat have been issued but not yet effective:

• Annual Improvements to IFRSs 2010-2012 Cycle that includeamendments to IFRS 2, IFRS 3, IFRS 8, IFRS 13, IAS 16, IAS 38and IAS 24. Effective for annual periods beginning on or after July1, 2014.

• Annual Improvements to IFRSs 2011-2013 Cycle that includeamendments to IFRS 1, IFRS 3, IFRS 13 and IAS 40. Effective forannual periods beginning on or after July 1, 2014.

• Amendment to IAS 19 Employees Benefits clarify therequirements that relate to how contributions fromemployees of third parties that are linked to service should beattributed to periods of service. In addition, the amendmentspermit a practical expedient if the amount of the contributionsis independent of the number of years of service, in thatcontributions, can, but are not required, to be recognized asreduction in the service cost in the period in which therelated service is rendered. Effective for annual periodsbeginning on or after July 1, 2014.

• IFRS 15 Revenue from Contracts with Customers- establishes asingle comprehensive model for entities to use in accountingfor revenue arising from contracts with customers. IFRS 15 willsupersede the current revenue recognition guidanceincluding IAS 18 Revenue, IAS 11 Construction Contracts andthe related interpretations when it becomes effective. Thecore principle of IFRS 15 is that an entity should recognizerevenue to depict the transfer of promised goods or servicesto customers in an amount that reflects the consideration towhich the entity expects to be entitled in exchange for thosegoods and services. Effective for annual periods beginning on orafter January 1, 2017.

• Amendments to IFRS 11 Accounting for Acquisitions ofInterests in Joint Operations - provide guidance on how toaccount for the acquisition of a joint operation thatconstitutes a business as defined under IFRS 3 Business

To qualify as an investment entity, a reporting entity is required to:

• Obtain funds from one or more investors for the purpose ofproviding them with investment management services;

• Commit to its investor(s) that its business purpose is to investfunds solely for returns from capital appreciation, investmentincome, or both; and

• Measure and evaluate performance of substantially all ofits investments on a fair value basis.

Consequential amendments have been made to IFRS 12 andIAS 27 to introduce new disclosure requirements for investmententities. The amendments require retrospective application.

Amendments to IAS 32 Offsetting Financial Assets and

Financial Liabilities

The amendments to IAS 32 clarify the requirements relating tothe offset of financial assets and financial liabilities. Specifically,the amendments clarify the meaning of “currently has a legallyenforceable right to set-off” and “simultaneous realization andsettlement”. The amendments require retrospective application.

Amendments to IAS 36 Recoverable Amount Disclosures for

Non-Financial Assets

The amendments to IAS 36 remove the requirement to disclosethe recoverable amount of a Cash-Generating Unit (CGU) towhich goodwill or other intangible assets with definite usefullives had been allocated when there has been no impairment orreversal of impairment of the related CGU. Furthermore, theamendments introduce additional disclosure requirementsapplicable to when the recoverable amount of an asset or aCGU is measured at fair value less costs of disposal. These newdisclosures include the fair value hierarchy, key assumptionsand valuation techniques used which are in line with thedisclosure required by IFRS 13 Fair Value Measurements. Theamendments require retrospective application.

IFRIC 21 - Levies

IFRIC 21 addresses the issue as to when to recognize a liability topay a levy imposed by a government. The interpretation definesa levy, and specifies that the obligating event that gives rise tothe liability is the activity that triggers the payment of the levy,as identified by legislation.



Combinations. Effective for annual periods beginning on or afterJanuary 1, 2016.

• Amendments to IAS 16 and IAS 38 Classification of AcceptableMethods of Depreciation and Amortization - Amendments toIAS 16 prohibit entities from using a revenue-based depreciationmethod for items of property, plant and equipment. Theamendments to IAS 38 introduce rebuttable presumptionthat revenue is not an appropriate basis for amortization of anintangible asset. Effective for annual periods beginning on orafter January 1, 2016.

• Amendments to IAS 27 Separate Financial Statements permitinvestments in subsidiaries, joint ventures and associates tobe optionally accounted for using the equity method ofaccounting in separate financial statements. Effective forannual periods beginning on or after January 1, 2016.

• Amendments to IFRS 10 and IAS 28 Sale or Contribution ofAssets between an Investor and its Associate or Joint Ventureclarify the treatment of the sale or contribution of assets froman investor to its associate or joint venture to (i) require fullrecognition in the investor’s financial statements of gains andlosses arising on the sale or contribution of assets that constitutea business (as defined in IFRS 3 Business Combinations),(ii) require the partial recognition of gains and losses wherethe assets do not constitute a business; i.e. a gain or loss isrecognized only to the extent of the unrelated investors’interests in that associate or joint venture. These requirementsapply regardless of the legal form of the transaction, e.g.whether the sale or contribution of assets occurs by aninvestor transferring shares in a subsidiary that holds theassets (resulting in loss of control of the subsidiary), or by adirect sale of the assets themselves. Effective for annual periodsbeginning on or after January 1, 2016.

• Amendments to IAS 1 Presentation of Financial Statementsaddress perceived impediments to prepares of financialstatements exercising their judgment in presenting thefinancial reports. Effective for annual periods beginning on orafter January 1, 2016.

• Amendments to IFRS 10 Consolidated Financial Statements,IFRS 12 Disclosure of Interests in Other Entities and IAS 28Investments in Associates and Joint Ventures (2011) clarifycertain aspects of applying the consolidation exceptionfor investment entities. Effective for annual periods beginning onor after January 1, 2016.

• Annual Improvements to IFRSs 2012-2014 Cycle that include

amendments to IFRS 5, IFRS 7, IAS 19, and IAS 34. Effective forannual periods beginning on or after January 1, 2016.

• IFRS 9 Financial Instruments (2013) was revised in November2013 to incorporate a hedge accounting chapter and permitearly application for presenting in other comprehensiveincome the own credit gains or losses on financial liabilitiesdesignated under the fair value option without early applyingthe other requirements of IFRS 9. The main amendments tohedge accounting are summarized by (i) The 80 - 125% rulefor testing of hedge effectiveness is no longer required, (ii)hedge effectiveness is measured prospectively with no moreconsideration for retrospective testing, (iii) funding of foreigninvestments in foreign currency can be considered as a hedgeand related foreign currency adjustment is deferred underequity, (iv) hedging instrument can be re-designated andperiodically revisited to eliminate mismatch, and (v) cash flowhedge for fixed income securities classified at amortized costhas become eligible. This version of the standard remains available for application ifthe relevant date of initial application is before 1 February2015.

• The final version of IFRS 9 Financial Instruments (2014) wasissued in July 2014 to replace IAS 39: Financial Instruments:Recognition and Measurement. IFRS 9 (2014) incorporatesrequirements for classification and measurement, impairment,general hedge accounting and derecognition. The finalversion of IFRS 9 introduces a) new classification for debtinstruments that are held to collect contractual cash flowswith ability to sell, and related measurement requirementconsists of “fair value through other comprehensive income(FVTOCI)”, and b) impairment of financial assets applyingexpected loss model through 3 phases, starting by 12 monthexpected impairment loss to be initiated on initial recognitionof the credit exposure, and life time impairment loss to berecognized upon significant increase in credit risk prior to thedate the credit exposure is being impaired, and phase 3 whenthe loan is effectively impaired. On phase 1 and 2 incomefrom time value is recognized on the gross amount of thecredit exposure and in phase 3 income is recognized onthe net exposure. Effective for annual periods beginning on orafter January 1, 2018.

Except for IFRS 9 on the provisioning for impairment, theDirectors of the Group do not anticipate that the application ofthese amendments will have a significant effect on the Group’sconsolidated financial statements.



Statement of Compliance

The consolidated financial statements have been preparedin accordance with International Financial Reporting Standards(IFRSs).

Basis of Measurement

The consolidated financial statements have been prepared on thehistorical cost basis except for the following measured at fair value:

- Financial instruments at fair value through profit or loss.- Investments in equities.- Other financial assets not held in a business model whose

objective is to hold assets to collect contractual cash flows orwhose contractual terms do not give rise solely to paymentsof principal and interest.

- Derivative financial instruments.

Assets and liabilities are grouped according to their nature andpresented in the consolidated statement of financial position inan approximate order that reflects their relative liquidity.

Summary of Significant Accounting Policies

Following is a summary of the most significant accounting policiesapplied in the preparation of these consolidated financialstatements:

A. BASIS OF CONSOLIDATION:

The consolidated financial statements of Fransabank SALincorporate the financial statements of the Bank and enterprisescontrolled by the Bank (its subsidiaries) as at the reporting date.Control is achieved when the Group is exposed, or has rights, tovariable returns from its involvement with the investee and hasthe ability to affect those returns through its power over theinvestee.

Specifically, the Group controls an investee if and only if theGroup has:

• Power over the investee (i.e. existing rights that give it thecurrent ability to direct the relevant activities of the investee);

• Exposure, or rights, to variable returns from its involvementwith the investee, and

• The ability to use its power over the investee to affect itsreturns.

When the Group has less than a majority of the voting or similarrights of an investee, the Group considers all relevant facts andcircumstances in assessing whether it has power over aninvestee, including:

• The contractual arrangement with the other vote holders ofthe investee;

• Rights arising from other contractual arrangements;• The Group’s voting rights and potential voting rights.

The Group re-assesses whether or not it controls an investee iffacts and circumstances indicate that there are changes to oneor more of the three elements of control.

Consolidation of a subsidiary begins when the Group obtainscontrol over the subsidiary and ceases when the Group losescontrol of the subsidiary. Income and expenses of a subsidiaryacquired or disposed of during the year are included in theconsolidated statement of comprehensive income from thedate the Group gains control until the date the Group ceases tocontrol the subsidiary.

Total comprehensive income of subsidiaries is attributed to theowners of the Bank and to the non-controlling interests even ifthis results in the non-controlling interests having a deficitbalance.

Adjustments are made to the financial statements of thesubsidiaries to bring their accounting policies into line withthose used by the Bank.

All intra-group transactions, balances, income and expenses(except for foreign currency transaction gains or loss) areeliminated on consolidation. Unrealized losses are eliminated inthe same way as unrealized gains, but only to the extent thatthere is no evidence of impairment.

Changes in the Group's ownership interests in subsidiaries thatdo not result in the Group losing control over the subsidiariesare accounted for as equity transactions. The carrying amountsof the Group's interests and the non-controlling interests areadjusted to reflect the changes in their relative interests in thesubsidiaries. Any difference between the amount by which the

3 BASIS OFPREPARATION


non-controlling interests are adjusted and the fair value of theconsideration paid or received is recognized directly in equityand attributed to owners of the Bank.

Upon the loss of control, the Group derecognizes the assets andliabilities of the subsidiary, any non-controlling interests and theother components of equity related to the subsidiary. Anysurplus or deficit arising on the loss of control is recognized inprofit or loss. If the Group retains any interest in the previoussubsidiary, then such interest is measured at fair value at thedate that control is lost.

B. BUSINESS COMBINATIONS:

Acquisitions of businesses are accounted for using the acquisitionmethod. The consideration transferred in a business combinationis measured at fair value, which is calculated as the sum of theacquisition-date fair values of the assets transferred by the Group,liabilities incurred by the Group to the former owners of theacquiree and the equity interests issued by the Group in exchangefor control of the acquiree. Acquisition-related costs are expensedas incurred in profit or loss.

The consideration transferred does not include amounts relatedto the settlement of pre-existing relationships. Such amounts aregenerally recognized in profit or loss.

Goodwill is measured as the excess of the sum of theconsideration transferred, the amount of any non-controllinginterests in the acquiree, and the fair value of the acquirer'spreviously held equity interest in the acquiree (if any) over the netof the acquisition-date amounts of the identifiable assets acquiredand the liabilities assumed. When the excess is negative, a bargainpurchase gain is recognized immediately in profit or loss. Whereapplicable, adjustments are made to provisional values ofrecognized assets and liabilities related to facts and circumstancesthat existed at the acquisition date. These are adjusted tothe provisional goodwill amount. All other adjustments includingabove adjustments made after one year are recognized in profitand loss except to correct an error in accordance with IAS 8.

Non-controlling interests that are present ownership interests andentitle their holders to a proportionate share of the entity'snet assets in the event of liquidation may be initially measuredeither at fair value or at the non-controlling interests' proportionateshare of the recognized amounts of the acquiree's identifiable netassets. The choice of measurement basis is made on a transaction-by-transaction basis. Non-controlling interests in business

acquisitions transacted so far by the Group were initially measuredat the non-controlling interests’ proportionate share of net assetsacquired.

Any contingent consideration payable is recognized at fair value atthe acquisition date. If the contingent consideration is classified asequity, it is not remeasured and settlement is accounted for withinequity. Otherwise, subsequent changes to the fair value of thecontingent consideration are recognized in profit or loss.

C. FOREIGN CURRENCIES:

The consolidated financial statements are presented inLebanese Pound (LBP) which is the reporting currency of theGroup. The primary currency of the economic environment inwhich the Group operates (functional currency) is the US Dollar.The Lebanese Pound rate has been constant to the US Dollarssince many years.

In preparing the financial statements of each individual groupentity, transactions in currencies other than the entity's reportingcurrency (foreign currencies) are recognized at the rates ofexchange prevailing at the dates of the transactions. At the endof each reporting period, monetary items denominated inforeign currencies are retranslated at the rates prevailing at thatdate. Non-monetary items carried at fair value that aredenominated in foreign currencies are retranslated at the ratesprevailing at the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in aforeign currency are not retranslated.

Exchange differences on monetary items are recognized inprofit or loss in the period in which they arise except forexchange differences on transactions entered into in order tohedge certain foreign currency risks, and except for exchangedifferences on monetary items receivable from or payable to aforeign operation for which settlement is neither planned norlikely to occur in the foreseeable future, which are recognized inother comprehensive income, and presented in the translationreserve in equity. These are recognized in profit or loss ondisposal of the net investment.

For the purposes of presenting consolidated financialstatements, the assets and liabilities of the Group's foreignoperations are translated into Lebanese Pound using exchangerates prevailing at the end of each reporting period. Incomeand expense items are translated at the average exchange ratesfor the period when this is a reasonable approximation.



Exchange differences arising are recognized in othercomprehensive income and accumulated in equity (attributedto non-controlling interests as appropriate). Such exchangedifferences are recognized in profit or loss in the period inwhich the foreign operation is disposed of.

D. RECOGNITION AND DERECOGNITION OF FINANCIAL

ASSETS AND LIABILITIES:

The Group initially recognizes loans and advances, deposits,debt securities issued and subordinated liabilities on the datethat they are originated. All other financial assets and liabilitiesare initially recognized on the trade date at which the Groupbecomes a party to the contractual provisions of the instrument.

Financial assets and liabilities are initially measured at fair value.Transaction costs that are directly attributable to the acquisitionor issue of financial assets and financial liabilities (other thanfinancial assets and financial liabilities at fair value through profitor loss) are added to or deducted from the fair value of thefinancial assets or financial liabilities, as appropriate, on initialrecognition. Transaction costs directly attributable to theacquisition of financial assets or financial liabilities at fair valuethrough profit or loss are recognized immediately in profit orloss.

The Group derecognizes a financial asset only when thecontractual rights to the cash flows from the asset expire, orwhen it transfers the financial asset and substantially all the risksand rewards of ownership of the asset to another entity. If theGroup neither transfers nor retains substantially all the risks andrewards of ownership and continues to control the transferredasset, the Group recognizes its retained interest in the asset andan associated liability for amounts it may have to pay. If theGroup retains substantially all the risks and rewards of owner-ship of a transferred financial asset, the Group continues torecognize the financial asset and also recognizes a collateralizedborrowing for the proceeds received.

On derecognition of a financial asset measured at amortizedcost, the difference between the asset’s carrying amount andthe sum of the consideration received and receivable isrecognized in profit or loss.

Debt securities exchanged against securities with longermaturities with similar risks, and issued by the same issuer, arenot derecognized because they do not meet the conditions forderecognition. Premiums and discounts derived from the

exchange of said securities are deferred to be amortized as ayield enhancement on a time proportionate basis, over theperiod of the extended maturities.

When the Group enters into transactions whereby it transfersassets recognized on its statement of financial position andretains all risks and rewards of the transferred assets, then thetransferred assets are not derecognized, for example, securitieslending and repurchase transactions.

The Group derecognizes financial liabilities when, and onlywhen, the Group’s obligations are discharged, cancelled or theyexpire. The difference between the carrying amount of thefinancial liability derecognized and the consideration paid andpayable, including any non-cash assets transferred or liabilitiesassumed, is recognized in profit or loss.

E. CLASSIFICATION OF FINANCIAL ASSETS:

All recognized financial assets are measured in their entirety ateither amortized cost or fair value, depending on theirclassification.

DEBT INSTRUMENTS

Non-derivative debt instruments that meet the following twoconditions are subsequently measured at amortized cost usingthe effective interest method, less impairment loss (except fordebt instruments that are designated as at fair value throughprofit or loss on initial recognition):

• They are held within a business model whose objective is tohold the financial assets in order to collect the contractual cashflows, rather than to sell the instrument prior to its contractualmaturity to realize its fair value changes, and

• The contractual terms of the financial asset give rise onspecified dates to cash flows that are solely payments ofprincipal and interest on the principal amount outstanding.

Debt instruments which do not meet both of these conditionsare measured at fair value through profit or loss (“FVTPL”).

Even if a debt instrument meets the two amortized cost criteriaabove, it may be designated as at FVTPL upon initial recognitionif such designation eliminates or significantly reduces ameasurement or recognition inconsistency that would other-wise arise from measuring assets or liabilities or recognizing thegains and losses on them on different bases.


EQUITY INSTRUMENTS

Investments in equity instruments are classified as at FVTPL,unless the Group designates an investment that is not heldfor trading as at fair value through other comprehensiveincome (“FVTOCI”) on initial recognition (see below).

Financial assets at FVTPL are measured at fair value at theend of each reporting period, with any gains or losses arising onre-measurement recognized in profit or loss.

On initial recognition, the Group can make an irrevocableelection (on an instrument-by-instrument basis) to designateinvestments in equity instruments as at fair value throughother comprehensive income (“FVTOCI”). Investments in equityinstruments at FVTOCI are measured at fair value. Gains andlosses on such equity instruments are recognized in othercomprehensive income, accumulated in equity and arenever reclassified to profit or loss. Only dividend income isrecognized in profit or loss unless the dividend clearly represents arecovery of part of the cost of the investment, in which caseit is recognized in other comprehensive income. Cumulativegains and losses recognized in other comprehensive incomeare transferred to retained earnings on disposal of an investment.

Designation at FVTOCI is not permitted if the equity investmentis held for trading.

RECLASSIFICATION

Financial assets are reclassified between FVTPL and amortizedcost or vice versa, if and only if, the Group’s business modelobjective for its financial assets changes so its previous modelassessment would no longer apply. When reclassification isappropriate, it is done prospectively from the reclassificationdate.

F. FINANCIAL LIABILITIES AND EQUITY INSTRUMENTS:

CLASSIFICATION AS DEBT OR EQUITY

Debt and equity instruments issued by a group entity areclassified as either financial liabilities or as equity in accordancewith the substance of the contractual arrangements and thedefinitions of a financial liability and an equity instrument.

An equity instrument is any contract that evidences a residualinterest in the assets of an entity after deducting all of its

liabilities. Equity instruments issued by the Group are recognizedat the proceeds received, net of direct issue costs.

Repurchase of the Group’s own equity instruments is recognizedand deducted directly in equity. No gain or loss is recognized inprofit or loss on the purchase, sale, issue, or cancellation of theGroup’s own equity instruments.

The component parts of compound instruments (convertiblenotes) issued by the Group are classified separately as financialliabilities and equity in accordance with the substance of thecontractual arrangements and the definitions of a financialliability and an equity instrument. A conversion option that willbe settled by the exchange of a fixed amount of cash or anotherfinancial asset for a fixed number of the entity’s own equityinstruments is an equity instrument.

FINANCIAL LIABILITIES

Financial Liabilities that are not held-for-trading and are notdesignated as at FVTPL are subsequently measured at amortizedcost using the effective interest method.

Financial liabilities are classified as at FVTPL when the financialliability is either held for trading or it is designated as atFVTPL.

A financial liability other than a financial liability held for tradingmay be designated as at FVTPL upon initial recognition if:• such designation eliminates or significantly reduces a

measurement or recognition inconsistency that wouldotherwise arise; or

• the financial liability forms part of a group of financial assets orfinancial liabilities or both, which is managed and its performanceis evaluated on a fair value basis, in accordance with theGroup’s documented risk management or investmentstrategy, and information about the grouping is providedinternally on that basis; or

• it forms part of a contract containing one or more embeddedderivatives, and the entire combined contract is designated as atFVTPL in accordance with IFRS 9.

G. OFFSETTING:

Financial assets and financial liabilities are set-off and the netamount is presented in the statement of financial positionwhen, and only when, the Group has currently enforceablelegal right to set-off the recognized amounts or intends either



to settle on a net basis or to realize the asset and settle theliability simultaneously.

H. FAIR VALUE MEASUREMENT OF FINANCIAL

INSTRUMENTS:

Fair value is the price that would be received to sell an asset orpaid to transfer a liability in an orderly transaction betweenmarket participants at the measurement date.

The fair value of an asset or a liability is measured by taking intoaccount the characteristics of the asset or liability that if marketparticipants would take those characteristics into accountwhen pricing the asset or liability at the measurement date.

A fair value measurement of a non-financial asset takes intoaccount a market participant's ability to generate economicbenefits by using the asset in its highest and best use or byselling it to another market participant that would use the assetin its highest and best use.

The Group uses valuation techniques that are appropriate in thecircumstances and for which sufficient data are available tomeasure fair value, maximizing the use of relevant observableinputs and minimizing the use of unobservable inputs.

For financial reporting purposes, fair value measurement arecategorized into level 1, 2 or 3 based on the degree to whichthe inputs to the fair value measurements are observable andthe significance of the inputs to the fair value measurement inits entirety, which are described as follows:

• Level 1 - Quoted prices (unadjusted) in active markets foridentical assets or liabilities that the entity can access at themeasurement date;

• Level 2 – Inputs, other than quoted prices included withinLevel 1, that are observable for the asset and liability eitherdirectly or indirectly; and

• Level 3 – Inputs are unobservable inputs for the asset or liability.

I. IMPAIRMENT OF FINANCIAL ASSETS:

Financial assets carried at amortized cost are assessed for indicatorsof impairment at the reporting date. Financial assets areimpaired where there is objective evidence that, as a result ofone or more events that occurred after the initial recognition ofthe asset, a loss event has occurred which has an impact on theestimated future cash flows of the financial asset.

Objective evidence that an impairment loss related to financialassets has been incurred can include information about thedebtors’ or issuers’ liquidity, solvency and business and financialrisk exposures and levels of and trends in delinquencies forsimilar financial assets, taking into account the fair value ofcollateral and guarantees.

The Group considers evidence of impairment for assetsmeasured at amortized cost at both specific asset and collectivelevel.

Impairment losses on assets carried at amortized cost aremeasured as the difference between the carrying amount ofthe financial assets and the corresponding estimatedrecoverable amounts. Losses are recognized in profit or loss. If,in a subsequent period, the amount of the impairment lossdecreases, the previously recognized impairment loss isreversed through profit or loss to the extent that the carryingamount of the financial asset at the date the impairment isreversed does not exceed what the amortized cost would havebeen, had the impairment not been recognized.

For investments in equity securities, a significant or prolongeddecline in fair value below cost is objective evidence ofimpairment.

J. DERIVATIVE FINANCIAL INSTRUMENTS:

Derivatives are initially recognized at fair value at the date aderivative contract is entered into and are subsequentlyremeasured to their fair value at each reporting date. The resultinggain or loss is recognized in profit or loss immediately unlessthe derivative is designated and effective as a hedginginstrument, in which event the timing of the recognition inprofit or loss depends on the nature of the hedge relationship.

EMBEDDED DERIVATIVES

Derivatives embedded in other financial instruments or otherhost contracts with embedded derivatives are treated asseparate derivatives when their risks and characteristics are notclosely related to those of the host contracts and the hostcontract:

• is not measured at fair value with changes in fair valuerecognized in profit or loss.

• is not an asset within the scope of IFRS 9.


HEDGE ACCOUNTING

The Group designates certain hedging instruments, whichinclude derivatives, embedded derivatives and non-derivativesin respect of foreign currency risk, as either fair value hedges,cash flow hedges, or hedges of net investments in foreignoperations. Hedges of foreign exchange risk on firm commitmentsare accounted for as cash flow hedges.

At the inception of the hedge relationship, the Group documentsthe relationship between the hedging instrument and thehedged item, along with its risk management objectives and itsstrategy for undertaking various hedge transactions. Further-more, at the inception of the hedge and on an ongoing basis,the Group documents whether the hedging instrument that isused in a hedging relationship is highly effective in offsettingchanges in fair values or cash flows of the hedged item.

FAIR VALUE HEDGE

Changes in the fair value of derivatives that are designated andqualify as fair value hedges are recognized in profit or lossimmediately, together with any changes in the fair value of thehedged item that are attributable to the hedged risk. Thechange in the fair value of the hedging instrument and thechange in the hedged item attributable to the hedged risk arerecognized in the line of the income statement of profit or lossrelating to the hedged item.

Hedge accounting is discontinued when the Group revokes thehedging relationship, the hedging instrument expires or is sold,terminated, or exercised, or no longer qualifies for hedgeaccounting. The adjustment to the carrying amount of thehedged item arising from the hedged risk is amortized to profitor loss from that date.

CASH FLOW HEDGE

The effective portion of changes in the fair value of derivativesthat are designated and qualify as cash flow hedges aredeferred in other comprehensive income. The gain or loss relatingto the ineffective portion is recognized immediately in profit orloss.

Amounts previously recognized in other comprehensiveincome and accumulated in equity are reclassified to profit orloss in the periods when the hedged item is recognized in profit

or loss, in the same line of the statement of profit or loss as therecognized hedged item. However, when the hedged forecasttransaction results in the recognition of a non-financial asset ora non-financial liability, the gains and losses previously recognizedin other comprehensive income and accumulated in equity aretransferred from equity and included in the initial measurementof the cost of the non-financial asset or non-financial liability.

Hedge accounting is discontinued when the Group revokes thehedging relationship, when the hedging instrument expires oris sold, terminated, or exercised, or when it no longer qualifiesfor hedge accounting. Any gain or loss recognized in othercomprehensive income and accumulated in equity at that timeremains in equity and is recognized when the forecast transactionis ultimately recognized in profit or loss. When a forecasttransaction is no longer expected to occur, the gain or lossaccumulated in equity is recognized immediately in profit or loss.

K. LOANS AND ADVANCES:

Loans and advances are non-derivative financial assets withfixed or determinable payments that are not quoted in anactive market. Loans and advances are disclosed at amortizedcost net of unearned interest and after provision for creditlosses. Non-performing loans and advances to customers arestated net of unrealized interest and provision for credit lossesbecause of doubts and the probability of non-collection ofprincipal and/or interest.

L. FINANCIAL GUARANTEES:

Financial guarantees contracts are contracts that require theGroup to make specified payments to reimburse the holder fora loss it incurs because a specified debtor fails to make paymentwhen due in accordance with the terms of a debt instrument.These contracts can have various judicial forms (guarantees,letters of credit, and credit-insurance contracts).

Financial guarantee liabilities are initially measured at their fairvalue, and subsequently carried at the higher of this amortizedamount and the present value of any expected payment (whena payment under the guarantee has become probable). Financialguarantees are included within other liabilities.

M. INVESTMENTS IN ASSOCIATES:

An associate is an entity over which the Group has significantinfluence and that is neither a subsidiary nor an interest in a



joint venture. Significant influence is the power to participate inthe financial and operating policy decisions of the investee butis not control or joint control over those policies.

The results and assets and liabilities of associates are incorporatedin these consolidated financial statements using the equitymethod of accounting, except when the investment is classifiedas held for sale, in which case it is accounted for in accordancewith IFRS 5 Non-current Assets Held for Sale and DiscontinuedOperations. Under the equity method, an investment in anassociate is initially recognized in the consolidated statement offinancial position at cost and adjusted thereafter to recognizethe Group’s share of the profit or loss and other comprehensiveincome of the associate. When the Group's share of losses of anassociate exceeds the Group's interest in that associate, theGroup discontinues recognizing its share of further losses.Additional losses are recognized only to the extent that theGroup has incurred legal or constructive obligations or madepayments on behalf of the associate.

Any excess of the cost of acquisition over the Group's share ofthe net fair value of the identifiable assets, liabilities andcontingent liabilities of an associate recognized at the date ofacquisition is recognized as goodwill, which is included withinthe carrying amount of the investment. Any excess of theGroup's share of the net fair value of the identifiable assets,liabilities and contingent liabilities over the cost of acquisition,after reassessment, is recognized immediately in profit or loss.

The entire carrying amount of the investment (includinggoodwill) is tested for impairment in accordance with IAS 36Impairment of Assets as a single asset by comparing its recoverableamount (higher of value in use and fair value less costs to sell)with its carrying amount, Any impairment loss recognized formspart of the carrying amount of the investment. Any reversal ofthat impairment loss is recognized in accordance with IAS 36 tothe extent that the recoverable amount of the investmentsubsequently increases.

N. PROPERTY AND EQUIPMENT:

Property and equipment except for buildings acquired prior to1993 are stated at historical cost, less accumulated depreciationand impairment loss, if any.

Depreciation is recognized so as to write off the cost or valuationof property and equipment, other than land and advance

payments on capital expenditures less their residual values, ifany, using the straight-line method over the useful livesestimated as follows:

Buildings 50

Office improvements and installations 5 - 17

Furniture, equipment and machines 5 - 12

Computer equipment 3 - 5

Vehicles 5 - 10

The gain or loss arising on the disposal or retirement of an itemof property and equipment is determined as the differencebetween the sales proceeds and the carrying amount of theasset and is recognized in profit or loss.

O. INTANGIBLE ASSETS AND GOODWILL:

GOODWILL

Refer to Note 3B for the measurement of goodwill at initialrecognition arising on the acquisition of subsidiaries. Subsequentto initial recognition, goodwill is measured at cost lessaccumulated impairment losses.

OTHER INTANGIBLE ASSETS

Other intangible assets consisting of computer software andkey money are amortized over a period of 3 to 5 years and 6.66years respectively and are subject to impairment testing.Subsequent expenditure on software assets is capitalized onlywhen it increases the future economic benefits embodied inthe specific asset to which it relates. All other expenditure isexpensed as incurred.

P. FORECLOSED ASSETS:

Policy Applicable to the Lebanese Group Entities

Real estate properties acquired through the enforcement ofcollateral over loans and advances are measured at cost lessany accumulated impairment losses. The acquisition of suchassets is regulated by the local banking authorities who requirethe liquidation of these assets within 2 years from acquisition. Incase of default of liquidation the regulatory authorities requirean appropriation of a special reserve from the yearly profitsand accumulated in equity.

USEFUL LIFE - YEARS


Q. INVESTMENT PROPERTIES:

Investment properties are measured initially at cost, includingtransaction costs. Subsequent to initial recognition, investmentproperties are measured at fair value, as at the balance sheetdate. Gain or losses arising from changes in the fair values ofinvestment properties are included in the statement of profit orloss. Valuations are carried out by independent qualified valuerson the basis of current market values.

The Group’s Cypriot entity acquires in its normal course ofbusiness properties in satisfaction of debts. These propertiesare directly held by the Group or by special purpose entities forthe sole purpose of managing these properties. To reflect thesubstance of transactions, these are classified as investmentproperties and are consolidated without the entities beingexplicitly disclosed as subsidiaries.

R. IMPAIRMENT OF NON-FINANCIAL ASSETS:

At the end of each reporting period, the Group reviews the carryingamounts of its non-financial, asset other than investment propertiesand deferred taxes, to determine whether there is any indicationthat those assets have suffered an impairment loss. If anysuch indication exists, the recoverable amount of the asset is esti-mated in order to determine the extent of the impairment loss (ifany). Goodwill is tested annually for impairment. Recoverableamount is the higher of fair value less costs to sell and value in use.

If the recoverable amount of an asset is estimated to be less than itscarrying amount, the carrying amount of the asset is reduced to itsrecoverable amount. An impairment loss is recognized immediatelyin profit or loss, unless the relevant asset is carried at a revaluedamount, in which case the impairment loss is treated as arevaluation decrease.

Where an impairment loss subsequently reverses, the carryingamount of the asset (cash-generating unit) is increased to therevised estimate of its recoverable amount, but so that theincreased carrying amount does not exceed the carrying amountthat would have been determined had no impairment loss beenrecognized for the asset (cash-generating unit) in prior years.A reversal of an impairment loss is recognized immediately in profitor loss, unless the relevant asset is carried at a revalued amount, inwhich case the reversal of the impairment loss is treated as arevaluation increase.

An impairment loss in respect of goodwill is not reversed.

S. DEFERRED ASSETS:

Deferred assets on business acquisition and against contractualprojected cash flows are stated at amortized cost. Such deferredcharges are amortized over the period of related benefitsderiving from the net return of the invested funds fundedthrough committed structured medium term debt purpose tooffset exceptional impairment losses. Amortization charge istreated as a yield adjustment to the interest income of theinvested funds.

T. PROVISION FOR EMPLOYEES’ END-OF-SERVICE

INDEMNITY:

Policy Applicable to the Lebanese Group Entities

The provision for staff termination indemnities is based on theliability that would arise if the employment of all the staff werevoluntary terminated at the reporting date. This provision iscalculated in accordance with the directives of the LebaneseSocial Security Fund and Labor laws based on the number ofyears of service multiplied by the monthly average of the last 12months’ remunerations and less contributions paid to theLebanese Social Security National Fund and interest accrued bythe Fund.

Policy Applicable to Other Jurisdictions

Obligations in respect of defined benefit pension plans iscalculated separately for each plan by estimating theamount of future benefit that employees have earned in returnfor their service in the current and prior periods; that benefit isdiscounted to determine its present value, and any unrecognizedpast service costs and the fair value of any plan assets arededucted.

U. PROVISIONS:

Provision is recognized if, as a result of a past event, the Grouphas a present legal or constructive obligation that can beestimated reliably, and it is probable that an outflow ofeconomic benefits will be required to settle the obligation.Provisions are discounted where the impact is material.

V. REVENUE AND EXPENSE RECOGNITION:

Interest income and expense are recognized on an accrualbasis, taking account of the principal outstanding and the



rate applicable, except for non-performing loans and ad-vances for which interest income is only recognized uponrealization. Interest income and expense include the amortizationof discount or premium.

Fee and commission income and expense that are integralto the effective interest rate on a financial asset or liability(e.g. commissions and fees earned on loans) are includedunder interest income and expense.

Other fee and commission income are recognized as therelated services are performed.

Interest income and expense presented in the statement ofprofit or loss include:

- Interest on financial assets and liabilities at amortized cost.- Changes in fair value of qualifying derivatives, including

hedge ineffectiveness, and related hedged items when interestrate risk is the hedged risk.

Interest income on financial assets measured at fair valuethrough profit or loss are presented separately in the statementof profit or loss under “Net Interest and Other Gain / (Loss)on financial assets at fair value through profit or loss” (Seebelow).

Net Interest and Other Gain / (Loss) on financial assetsmeasured at fair value through profit or loss includes:

- Interest income.- Dividend income.- Realized and unrealized fair value changes.- Foreign exchange differences.

Interest expense on financial liabilities designated at fairvalue through profit or loss are presented separately in thestatement of profit or loss.

Dividend income is recognized when the right to receivepayment is established. Dividends on equity instrumentsdesignated as at fair value through other comprehensive in-come in accordance with IFRS 9, are recognized in profit orloss, unless the dividend clearly represents a recovery ofpart of the investment, in which case it is presented in othercomprehensive income.

W. INCOME TAX:

Income tax expense represents the sum of the tax currentlypayable and deferred tax. Income tax is recognized in theconsolidated statement of profit or loss except to the extentthat it relates to items recognized directly in other comprehensiveincome, in which case it is recognized in other comprehensiveincome.

The tax currently payable is based on taxable profit for the year.Taxable profit differs from profit as reported in the consolidatedstatement of profit or loss because of the items that are nevertaxable or deductible. The Group’s liability for current tax iscalculated using tax rates that have been enacted or substantivelyenacted by the end of the reporting period.

Part of debt securities invested in by the Group is subject towithheld tax by the issuer. This tax is deducted at year-end fromthe corporate tax liability not eligible for deferred tax benefit,and therefore, accounted for as prepayment on corporateincome tax and reflected as a part of income tax provision.

Deferred tax is recognized on differences between the carryingamounts of assets and liabilities in the consolidated statementof financial position and the corresponding tax base used in thecomputation of taxable profit, and are accounted for using thebalance sheet liability method. Deferred tax liabilities aregenerally recognized for all taxable temporary differences anddeferred tax assets are recognized to the extent that it is probablethat taxable profits will be available against which deductibletemporary differences can be utilized.

X. FIDUCIARY ACCOUNTS:

Fiduciary assets are held or invested on behalf of the Group’scustomers on a discretionary basis, non-discretionary basis, orboth. The related risks and rewards belong to the accountholders and accordingly, these accounts are reflected as off-balance sheet accounts.

Y. CASH AND CASH EQUIVALENTS:

Cash and cash equivalents comprise balances with maturities ofa period of three months including: cash and balances with thecentral banks and deposits with banks and financial institutions.


In the application of the Group’s accounting policies, which aredescribed in Note 3, the directors are required to make judgments,estimates and assumptions about the carrying amounts ofassets and liabilities that are not readily apparent from othersources. The estimates and associated assumptions are basedon historical experience and other factors that are consideredto be relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on anongoing basis. Revisions to accounting estimates arerecognized in the period in which the estimate is revised or inthe future periods if the revision affects both current and futureperiods.

A. CRITICAL ACCOUNTING JUDGMENTS IN APPLYING

THE GROUP’S ACCOUNTING POLICIES:

CLASSIFICATION OF FINANCIAL ASSETS

Business Model

The business model test requires the Group to assess whetherits business objective for financial assets is to collect thecontractual cash flows of the assets rather than realize their fairvalue change from sale before their contractual maturity. TheGroup considers at which level of its business activities suchassessment should be made. Generally, a business model canbe evidenced by the way business is managed and theinformation provided to management. However the Group’sbusiness model can be to hold financial assets to collectcontractual cash flows even when there are some sales offinancial assets. While IFRS 9 provides some situations wheresuch sales may or may not be consistent with the objective ofholding assets to collect contractual cash flows, the assessmentrequires the use of judgment based on facts and circumstances.

In determining whether its business model for managingfinancial assets is to hold assets in order to collect contractualcash flows the Group considers:

• The frequency and volume of sales;• The reasons for any sales;• How management evaluates the performance of the portfolio;• The objectives for the portfolio.

Characteristics of the Financial Asset

Once the Group determines that its business model is to holdthe assets to collect the contractual cash flows, it exercisesjudgment to assess the contractual cash flows characteristicsof a financial asset. In making this judgment, the Group considersthe contractual terms of the acquired asset to determine thatthey give rise on specific dates, to cash flows that solelyrepresent principal and principal settlement and accordinglymay qualify for amortized cost accounting.

Features considered by the Group that would be consistentwith amortized cost measurement include:

• Fixed and / or floating interest rate;• Caps, floors, collars;• Prepayment options.

Features considered by the Group that would be inconsistentwith amortized cost measurement include:

• Leverage (i.e. options, forwards and swaps);• Conversion options; • Inverse floaters;• Variable rate coupons that reset periodically;• Triggers that result in a significant reduction of principal,

interest or both.

B. KEY SOURCES OF ESTIMATION UNCERTAINTY:

The following are the key assumptions concerning the future,and other key sources of estimation uncertainty at the reportingdate, that have a significant risk of causing a materialadjustment to the carrying amounts of assets and liabilitieswithin the next financial year.

ALLOWANCES FOR CREDIT LOSSES - LOANS AND ADVANCES TO

CUSTOMERS

Specific impairment for credit losses is determined by assessingeach case individually. This method applies to classified loansand advances and the factors taken into considerationwhen estimating the allowance for credit losses include thecounterparty’s credit limit, the counterparty’s ability to generatecash flows sufficient to settle his advances and the value ofcollateral and potential repossession. Loans collectivelyassessed for impairment are determined based on lossesincurred by loans portfolios with similar characteristics.

4CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCESOF ESTIMATION UNCERTAINTY



DETERMINING FAIR VALUES

When the fair values of financial instruments recorded in thestatement of financial position cannot be measured based onquoted prices in active markets, their fair value is measuredusing valuation techniques including the Discounted Cash Flow(DCF) model, as described in Note 44.

The inputs in these models are taken from observable marketswhere possible. Where practical, the discount rate used in themark-to-model approach included observable data collectedfrom market participants, including risk free interest rates andcredit default swap rates for pricing of credit risk (both own andcounter party), and a liquidity risk factor which is added to theapplied discount rate. Changes in assumptions about any ofthese factors could affect the reported fair value of thesovereign bonds including Central Bank certificates of deposit.

Unobservable inputs are used to measure fair value to theextent that observable inputs are not available, thereby allowingfor situations in which there is little, if any, market activity for theasset or liability at the measurement date. However, the fairvalue measurement objective should remain the same; that is,an exit price from the perspective of a market participant thatholds the asset or owes the liability. Unobservable inputs aredeveloped based on the best information available in thecircumstances, which may include the reporting entity's own data.

IMPAIRMENT OF GOODWILL

The Group tests annually whether goodwill has suffered anyimpairment in accordance with the accounting policy underNote 3R. The recoverable amount is deemed to be the valuein use using a discounted cash flow model. This requires thedirectors to estimate the future cash flows and a suitablediscount rate.

Cash on hand Current accounts with Central Bank of Lebanon Current accounts with other Central BanksTerm placements with Central Bank of LebanonTerm placements with other Central BanksBlocked deposits with other Central BanksAccrued interest receivable

TOTAL

of whichCompulsory/RegulatoryDeposits

Balance

-352,982,760

57,276,0201,738,467,090

---

2,148,725,870

189,766,910480,099,918 125,883,363

4,658,090,228245,221,850

21,105,00065,747,040

5,785,914,309

Compulsory deposits under current accounts with CentralBank of Lebanon are in Lebanese Pounds and non-interestearning. These deposits are computed on the basis of 25%and 15% of the average weekly sight and term customers’deposits in Lebanese Pounds subject to certain exemptions,in accordance with the local banking regulations. These depositsare not available for use in the Group’s day to day operations.

Regulatory deposits under term placements with CentralBank of Lebanon are in foreign currencies and made inaccordance with local banking regulations which requirebanks to maintain interest earning placements in foreigncurrency to the extent of 15% of customers’ deposits in foreigncurrencies, certificates of deposit and borrowings acquiredfrom non-resident financial institutions.

DECEMBER 31, 2014LBP’000 DECEMBER 31, 2013

193,048,656658,094,966 117,128,040

5,219,771,900242,618,375

-76,784,145

6,507,446,082

-425,739,931

46,593,9241,789,332,661

---

2,261,666,516

of whichCompulsory/RegulatoryDeposits

Balance

5 CASH ANDCENTRAL BANKS

Checks in course of collection Current accounts with banks and financial institutionsCurrent accounts with related banks and financial institutionsCurrent margin accounts with banks and financial institutions Term placements with banks and financial institutionsTerm placements with related banks and financial institutionsBlocked margins with banks and financial institutionsAccrued interest receivableAccrued interest receivable - Related partiesRegulatory allowance for country risk

TOTAL

38,859,044196,124,010

22,711,5865,742,772

1,103,061,603985,415714,178274,998

5,047(1,152)

1,368,477,501


2014LBP’000 2013

2014LBP’000 2013

2014LBP’000 2013

2014LBP’000

43,781,015 318,899,998

8,218,962 16,919,331

1,043,804,436 3,080,793 4,060,828

430,494 1,826

(2,751)

1,439,194,932

Balance January 1 Additions (Note 38) Write-back (Note 38)Effect of exchange rates changes

BALANCE DECEMBER 31

1,90698,000

(98,720)(34)

1,152

The movement of the regulatory allowance for country risk was as follows:

1,15246,292

(44,792)99

2,751

Loans to banks are reflected at amortized cost and consist of the following:

Regular performing accountsLoans under reverse repurchase agreement Accrued interest receivableRegulatory allowance for country risk

TOTAL

92,507,949-

476,831-

92,984,780

88,319,723197,747,967

538,552(70,668)

286,535,574

Balance January 1 Additions Effects of exchange rate changes

BALANCE DECEMBER 31

The movement of the regulatory allowance for country risk during 2014 was as follows:

-81,883

(11,215)

70,668


7 LOANSTO BANKS

6 DEPOSITS WITH BANKSAND FINANCIAL INSTITUTIONS



As guarantee of loans in the amount of LBP 76.74 billion(LBP 87.36 billion in 2013), the borrower has pledged in favor ofthe Group regular and performing notes receivable againsthousing loans granted to its customers.

Loans under reverse repurchase agreement represent shortterm loans granted to a resident financial institution during2014 covered by certificates of deposit in US Dollar issued bythe Central Bank of Lebanon in the amount of USD 26 millionequivalent to LBP 39.2 billion.

GrossAmount

UnrealizedInterest

Discount onLoan Book

ImpairmentAllowance

CarryingAmount

GrossAmount

UnrealizedInterest

Discount onLoan Book

ImpairmentAllowance

CarryingAmount

The carrying value of loans and advances to customers includeaccidentally temporary debtors with carrying value amountingto LBP 45.3 billion (LBP 37.3 billion in 2013).

The carrying value of loans and advances to customers includeloans to related parties in the aggregate of LBP 33.24 billion(LBP 30.09 billion in 2013) (See Note 40).

Regular and Watch ListRetail Customers:

Mortgage loans 1,411,569,251 - - - 1,411,569,251 1,165,279,108 - - - 1,165,279,108

Personal loans 703,560,616 - - - 703,560,616 645,039,712 - - - 645,039,712

Car loans 281,884,027 - - - 281,884,027 266,806,014 - - - 266,806,014

Credit cards 51,865,477 - - - 51,865,477 48,272,174 - - - 48,272,174

Educational loans 38,968,183 - - - 38,968,183 36,158,516 - - - 36,158,516

Other 23,485,050 - - - 23,485,050 23,394,602 - - - 23,394,602

Loans to staff 9,576,930 - - - 9,576,930 8,954,396 - - - 8,954,396

2,520,909,534 - - - 2,520,909,534 2,193,904,522 - - - 2,193,904,522Regular and Watch ListCorporate Customers:

Corporates 4,035,501,334 - - - 4,035,501,334 3,637,132,449 - - - 3,637,132,449

Small and medium enterprises 1,834,917,917 - - - 1,834,917,917 1,755,441,345 - - - 1,755,441,345 5,870,419,251 - - - 5,870,419,251 5,392,573,794 - - - 5,392,573,794Accrued interest receivable 27,265,496 - - - 27,265,496 36,876,776 - - - 36,876,776

Allowance for CollectivelyAssessed Loans:

Regular and watch list loans

(including allowance for country risk) - - - (58,034,700) (58,034,700) - - - (59,532,821) (59,532,821)

Total regular and watch list 8,418,594,281 - - (58,034,700) 8,360,559,581 7,623,355,092 - - (59,532,821) 7,563,822,271

Non-Performing Accounts:

Purchased loan book 2,226,266 - - - 2,226,266 2,198,725 - - - 2,198,725

Substandard 100,616,873 (30,746,100) - - 69,870,773 52,309,265 (18,978,049) - - 33,331,216

Doubtful 1,287,200,772 (589,071,866) (4,649,985) (260,385,469) 433,093,452 1,216,722,439 (563,557,446) (6,651,163) (230,913,648) 415,600,182

Bad 354,820,686 (263,375,663) (2,559,612) (88,880,354) 5,057 353,327,954 (287,796,095) (2,656,946) (62,871,352) 3,561

Collectively Allowance:

Doubtful and bad - - - (40,723,382) (40,723,382) - - - (35,976,904) (35,976,904)

Total non-performing 1,744,864,597 (883,193,629) (7,209,597) (389,989,205) 464,472,166 1,624,558,383 (870,331,590) (9,308,109) (329,761,904) 415,156,780

TOTAL 10,163,458,878 (883,193,629) (7,209,597) (448,023,905) 8,825,031,747 9,247,913,475 (870,331,590) (9,308,109) (389,294,725) 7,978,979,051

8 LOANS AND ADVANCESTO CUSTOMERS


Balance January 1 AdditionsAdditions through business combination Recoveries (Note 32)Write-offTransfer to off-balance sheetReclassification to allowance accountEffect of exchange rates changes

BALANCE DECEMBER 31

802,056,482156,802,446

-(25,811,187)(43,449,211)(21,343,921)

(500,961)2,577,942

870,331,590

Balance January 1

Additions Recoveries Net allowance charge

Additions through business combinationWrite-offTransfer from provision for contingencies (Note 23)Transfer to off-balance sheetReclassification from unrealized interest Effect of exchange rates changes

BALANCE DECEMBER 31

320,662,049

86,958,771(7,286,985)79,671,786

-(6,508,263)

-(1,623,018)

500,961(3,408,790)

389,294,725

The movement of allowance for impairment of loans and advances was as follows:

The movement of unrealized interest was as follows:

The allowance of impairment of loans and advances includes ageneral allowance for credit risk linked to country risk in the

amount of LBP 28.5 billion. This allowance is calculated on the basis ofa stress test scenario performed on Syrian credit risk exposure.

Balance January 1 Additions RecoveriesTransfer to off-balance sheetWrite-off

BALANCE DECEMBER 31

9,515,159 2,528

(148,028)(52,048)

(9,502)

9,308,109

The movement of the discount on purchased loan book was as follows:

2014LBP’000 2013

2014LBP’000 2013

2014LBP’000 2013

870,331,590104,037,260

78,293,966 (13,231,684)(98,974,553)(49,050,240)

(1,576,224)(6,636,486)

883,193,629

389,294,725

120,257,392(20,157,724)100,099,668

20,306,761(41,807,005)

8,325,200(2,955,495)

1,576,224(26,816,173)

448,023,905

9,308,109 23,847

(270,600)(17,865)

(1,833,894)

7,209,597



Equities and preference shares Lebanese Treasury bills Lebanese Government bonds Foreign Government bonds Foreign Eurobonds issued by banksSubordinated Eurobonds Certificates of deposit issued by Central Bank of Lebanon Certificates of deposit issued by banks Corporate bonds Asset-backed securitiesMutual fund

Accrued interest receivable

TOTAL

Equities and preference shares Lebanese Treasury bills Lebanese Government bonds Foreign Government bonds Foreign Eurobonds issued by banksSubordinated Eurobonds Certificates of deposit issued by Central Bank of Lebanon Certificates of deposit issued by banks Corporate bonds Asset-backed securities

Accrued interest receivable

TOTAL

Total

Fair ValueThrough OtherComprehensive

Income

Amortized Cost

(Net of ImpairmentAllowance)

Fair ValueThrough Profit

or Loss

262,271,4602,519,792,5832,250,791,712

190,434,781191,676,420

1,507,5003,477,853,375

37,746,50975,285,871

1,507,5009,008,867,711

148,738,085

9,157,605,796

210,775,595---------

210,775,595-

210,775,595

12,810,7352,261,797,6042,183,631,155

171,151,40218,651,321

1,507,5003,400,361,731

37,746,50975,285,871

1,507,5008,164,451,328

140,812,754

8,305,264,082

38,685,130257,994,979

67,160,55719,283,379

173,025,099-

77,491,644---

633,640,7887,925,331

641,566,119

Investment securities are allocated as follows:

DECEMBER 31, 2014LBP’000

LBP’000 DECEMBER 31, 2013

39,496,357283,568,756

25,352,80012,985,523

182,157,082-

432,087,501---

3,502,722979,150,741

9,254,151

988,404,892

17,333,2353,137,888,6702,152,989,570

152,701,98113,920,466

1,507,5003,225,935,382

40,457,94241,324,814

5,653,125-

8,789,712,685146,018,930

8,935,731,615

277,561,858----------

277,561,858-

277,561,858

334,391,4503,421,457,4262,178,342,370

165,687,504196,077,548

1,507,5003,658,022,883

40,457,94241,324,814

5,653,1253,502,722

10,046,425,284155,273,081

10,201,698,365

Fair ValueThrough Profit

or Loss

Amortized Cost

(Net of ImpairmentAllowance)

Fair ValueThrough OtherComprehensive

Income Total

9 INVESTMENTSECURITIES


INVESTMENTS AT AMORTIZED COST

The Group had Treasury bills classified at amortized cost withcarrying value of LBP 638 billion that are pledged against softloans and credit facility granted by Central Bank of Lebanon –(Notes 19(e), 19(f ) and 43) (LBP 279 billion in 2013).

The Group had Lebanese Government bonds classified atamortized cost with carrying value of LBP 370 billion that arepledged against a stand-by line facility funded by the CentralBank of Lebanon – (Notes 19(e) and 43) (LBP 370 billion in 2013).

The Group had certificates of deposits issued by Central Bank ofLebanon at amortized cost with carrying value of LBP 7 billionthat are pledged against credit facility granted by Central Bankof Lebanon (Notes 19 (e) and 43).

During 2014, the Group derecognized investments at amortizedcost with carrying value LBP 692 billion resulting in a realizedgain of LBP 32 billion (LBP 9.5 billion for 2013) recognized in thestatement of profit or loss.

During 2014, the Group reclassified investments at amortizedcost with carrying value of LBP 323 billion to investments at fairvalue through profit or loss resulting in an unrealized gain ofLBP 22 billion recognized in the statement of profit or loss andthe remaining unrealized gain of LBP 11 billion is related toinvestment securities originally classified at fair value throughprofit or loss (Note 36).

Allowancefor

Impairment

AmortizedCost

AccruedInterest

Receivable

CarryingValue

Fair Value

Preference shares 12,810,735 - - 12,810,735 12,810,735

Lebanese Treasury bills 2,261,797,604 - 39,879,380 2,301,676,984 2,290,512,018

Lebanese Government bonds 2,183,631,155 - 29,710,879 2,213,342,034 2,192,465,821

Foreign Government bonds 171,151,402 - 4,907,594 176,058,996 166,260,687

Foreign Eurobonds issued by banks 18,651,321 - 145,027 18,796,348 20,134,723

Subordinated Eurobonds 1,507,500 - 97,799 1,605,299 1,605,299

Certificates of deposit issued by Central Bank of Lebanon 3,400,361,731 - 65,732,725 3,466,094,456 3,471,655,321

Certificates of deposit issued by banks 37,746,509 - 158,730 37,905,239 37,970,131

Corporate bonds 75,290,094 (4,223) 161,645 75,447,516 76,382,558

Asset-backed securities 1,507,500 - 18,975 1,526,475 1,526,475

TOTAL 8,164,455,551 (4,223) 140,812,754 8,305,264,082 8,271,323,768

Below are the details of investments classified at amortized cost with related fair value at December 31:


Preference shares 17,333,235 - - 17,333,235 17,333,235

Lebanese Treasury bills 3,137,888,670 - 52,629,525 3,190,518,195 3,196,704,383

Lebanese Government bonds 2,152,989,570 - 30,593,175 2,183,582,745 2,216,845,729

Foreign Government bonds 152,701,981 - 3,066,251 155,768,232 157,686,994

Foreign Eurobonds issued by banks 13,920,466 - 98,502 14,018,968 14,951,581

Subordinated Eurobonds 1,507,500 - 97,516 1,605,016 1,605,016

Certificates of deposit issued by Central Bank of Lebanon 3,225,935,382 - 59,271,363 3,285,206,745 3,329,222,519

Certificates of deposit issued by banks 40,457,942 - 107,154 40,565,096 40,469,643

Corporate bonds 41,341,757 (16,943) 124,815 41,449,629 42,326,675

Asset-backed securities 5,653,125 - 30,629 5,683,754 5,683,754

TOTAL 8,789,729,628 (16,943) 146,018,930 8,935,731,615 9,022,829,529

AmortizedCost

Allowancefor

Impairment

AccruedInterest

Receivable

CarryingValue

Fair Value




RedemptionValue

Amortized Cost(Net of Impairment)

Fair Value Average Interest Rate %

Investments at amortized cost are segregated over remaining periods to maturity as follows:

Lebanese Treasury bills:Up to one year1 year to 3 years3 years to 5 years5 years to 10 yearsBeyond 10 years

Lebanese Government bonds:Up to one year1 year to 3 years3 years to 5 years5 years to 10 yearsBeyond 10 years

Foreign Government bonds:Up to one year1 year to 3 years5 years to 10 yearsBeyond 10 years

Foreign Eurobonds issued by banks:Up to one year1 year to 3 years3 years to 5 years5 years to 10 years

Subordinated Eurobonds:3 years to 5 years

Certificates of deposit issued by Central Bank of Lebanon:Up to one year1 year to 3 years3 years to 5 years5 years to 10 yearsBeyond 10 years

Certificates of deposit issued by banks:Up to one year1 year to 3 years3 years to 5 years

Corporate bonds:Up to one year1 year to 3 years3 years to 5 years5 years to 10 yearsBeyond 10 years

Assets-backed securities:5 years to 10 yearsBeyond 10 years

Preference shares redeemable starting:From 2 yearsFrom 3 yearsFrom 4 yearsFrom 5 years

238,310,000487,427,465625,353,765629,150,000275,299,990

2,255,541,220

135,232,929267,074,730606,948,477828,497,881341,659,800

2,179,413,817

43,570,17068,015,80366,392,640

358,785 178,337,398

9,045,0005,123,307

-4,522,500

18,690,807

1,507,5001,507,500

319,642,500516,011,400677,335,500

1,075,302,275836,000,000

3,424,291,675

1,958,9113,013,710

32,850,60037,823,221

35,371,53925,838,033

8,299,0802,757,5454,520,565

76,786,762

-1,507,500

1,507,500

-2,261,2507,537,5003,015,000

12,813,750

238,213,441488,953,796628,628,454630,196,261275,805,652

2,261,797,604

135,219,617275,857,543602,407,173828,013,267342,133,555

2,183,631,155

42,230,42565,974,94162,587,251

358,785 171,151,402

9,035,3545,118,458

-4,497,509

18,651,321

1,507,5001,507,500

320,040,783522,480,024679,311,825

1,053,510,383825,018,716

3,400,361,731

1,958,9113,013,710

32,773,88837,746,509

34,623,84825,461,278

7,890,4772,780,4594,529,809

75,285,871

-1,507,500

1,507,500

-2,258,2357,537,5003,015,000

12,810,735

241,650,556 489,326,116 639,006,892 616,960,861263,688,213

2,250,632,638

135,776,697273,183,579592,713,399825,337,451335,743,816

2,162,754,942

42,951,88963,016,19955,026,220

358,785 161,353,093

9,361,5755,305,138

-5,322,983

19,989,696

1,507,5001,507,500

324,606,886535,497,535704,670,873

1,038,472,891802,674,411

3,405,922,596

1,958,9113,013,710

32,838,78037,811,401

34,822,15925,684,426

8,165,8802,926,1754,622,273

76,220,913

-1,507,500

1,507,500

-2,258,2357,537,5003,015,000

12,810,735

7.446.707.557.918.74

8.178.096.476.756.67

4.694.394.634.75

5.004.47

-7.50

6.75

9.308.637.847.688.97

4.154.755.35

1.400.770.824.955.00

-5.50

----

Remaining Period to Maturity


373,102,000 567,118,630 793,324,364 841,150,000 546,999,990

3,121,694,984

39,660,170 512,443,055 646,796,723 694,957,501 250,848,000

2,144,705,449

90,891,919 6,356,370

59,042,625 -

156,290,914

3,620,292 -

5,794,652 4,522,500

13,937,444

1,507,5001,507,500

237,387,225930,612,500

98,892,000892,978,750

1,064,000,0003,223,870,475

-40,424,880

-40,424,880

4,089,84029,913,075

377,1142,383,3594,525,366

41,288,754

3,015,000 2,638,125

5,653,125

2,258,235 7,537,5003,015,000 4,522,500

17,333,235

373,227,084567,314,535796,783,211850,400,897550,162,943

3,137,888,670

39,887,892519,604,295640,743,505702,522,496250,231,382

2,152,989,570

90,208,0156,343,965

56,150,001-

152,701,981

3,620,172-

5,773,1624,527,132

13,920,466

1,507,5001,507,500

238,124,177935,491,243

97,030,410893,995,653

1,061,293,8993,225,935,382

-40,457,942

-40,457,942

4,080,57929,930,144

375,6962,404,5604,533,835

41,324,814

3,015,000 2,638,125

5,653,125

2,258,235 7,537,5003,015,000 4,522,500

17,333,235

376,204,660566,402,357803,737,828848,266,512549,463,501

3,144,074,858

39,884,135529,806,149629,149,273728,587,138258,825,859

2,186,252,554

90,253,7966,374,709

57,722,238-

154,350,743

3,649,407-

6,676,5404,527,132

14,853,079

1,507,5001,507,500

239,757,614959,758,371

95,506,014898,066,932

1,076,862,2253,269,951,156

-40,362,489

-40,362,489

4,076,93230,271,061

394,8392,571,6354,887,393

42,201,860

3,015,000 2,638,125

5,653,125

2,258,235 7,537,5003,015,000 4,522,500

17,333,235

6.866.697.518.048.74

7.048.405.467.196.61

3.886.534.63

-

4.25-

10.247.00

6.75

9.478.045.307.888.94

-5.38

-

1.440.776.254.755.00

7.005.50

----

RedemptionValue

Amortized Cost(Net of Impairment)

Fair Value Average Interest Rate %


INVESTMENTS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME

The Group has designated investments in equity securities as at fair value through other comprehensive income. This classification waschosen as the investments are expected to be held for a long time.

Quoted equitiesUnquoted equities

TOTAL

Quoted equitiesUnquoted equities

TOTAL

Cost

1,307,01996,431,484

97,738,503

CarryingValue

Cumulative Changein Fair Value

9,772,665201,002,930

210,775,595

8,465,646104,571,446

113,037,092


11,139,141266,422,717

277,561,858

9,832,122169,306,807

179,138,929

Cost CarryingValue

Cumulative Changein Fair Value

1,307,01997,115,910

98,422,929


Acceptances represent documentary credits which theGroup has committed to settle on behalf of its customersagainst commitments by those customers (acceptances).

The commitments resulting from these acceptances arestated as a liability in the statement of financial position forthe same amount.

Investments in associates, which are not listed, are as follows:

Bancassurance SALUnited Capital BankInternational Payment Network TOTAL

24,041,512 21,242,304

1,486,037

46,769,853

Interest Held

60.0020.0020.30

60.0020.0020.30

LebanonRepublic of Sudan

Lebanon

2014LBP’000 201336,595,043 21,761,348

1,469,465

59,825,856

Country of Incorporation 2014 % 2013 %


11 INVESTMENTS IN ASSOCIATES

10 CUSTOMERS’ LIABILITY UNDER ACCEPTANCES

FRANSABANK • ANNUAL R EPORT 2 0 14 | 1 0 0 - 1 0 1

The following table summarizes the financial information of Bancassurance and United Capital Bank before intercompany eliminations:

Eventhough, the Group’s interest in Bancassurance SAL is 60%,the Group determined that it does not control this entity on thebasis that according to the shareholders’ agreement, the relevant

activities of Bancassurance are directed on the basis of 75%votes of the Board of Directors which does not give the Grouppower over the investee.

BANCASSURANCE UNITED CAPITAL BANK

Balance January 1 Unrealized gain through other comprehensive incomeDividends received Share in net profit (Note 37)Board of Directors' remunerationPrior year adjustmentCurrency translation adjustment

BALANCE DECEMBER 31

44,423,527(354)

(11,532,021)13,808,821

--

69,880

46,769,853

Below is the reconciliation of the carrying amount of investments in associates:

20142014LBP’000 20132013

2014LBP’000 2013

Cash and banks 155,517,056 101,734,766 107,967,629 107,475,184Loans and advances - - 271,971,101 242,694,395Investment securities 295,754,192 296,707,718 62,252,971 48,659,627Other investments - - 1,204,860 1,634,029Other assets 12,226,257 4,501,051 31,056,036 25,758,142Deposits from banks - - (90,983,415) (108,275,350)Deposits from customers - - (85,657,302) (74,342,556)Equity of unrestricted investments of account holders - - (147,652,560) (111,954,986)Insurance contracts liabilities (410,263,736) (367,463,399) - -Other liabilities and provisions (8,959,721) (7,680,550) (41,348,408) (25,431,801)Net assets 44,274,048 27,799,586 108,810,912 106,216,684

GROUP'S SHARE IN NET ASSETS (EXCLUDING GOODWILL) 26,564,429 16,679,752 21,762,182 21,243,337

Net revenues 47,949,828 42,422,463 25,647,752 23,045,235Net income from financial assets at FVTPL 120,590 761,555 - -Claims paid and change in insurance liabilities (20,743,026) (19,036,562) - -Other income (net) 49,488 (11,627) 8,200,232 9,239,275Operating expenses (6,236,096) (5,723,334) (11,829,912) (11,605,640)Income tax expense (844,801) (759,340) (5,614,316) (5,366,560)Net profit for the year 20,295,983 17,653,155 16,403,756 15,312,310

GROUP'S SHARE IN NET PROFIT 12,177,590 10,591,893 3,280,681 3,062,314

46,769,853-

(3,919,410)15,543,198

(174,534)2,668,953

(1,062,204)

59,825,856


This section represents foreclosed real estate properties acquiredthrough enforcement of security over loans and advancesto customers. For regulatory purposes foreclosed assets

acquired by the Group’s local operation are categorized as“Assets Acquired in Satisfaction of Loans”.

Assets acquired in satisfaction of loans - Lebanon Investment properties – Foreign operations

TOTAL

197,401,51857,989,822

255,391,340

12.1Assets Acquired in Satisfaction of Loans

According to the Lebanese banking regulations, the acquisitionof assets in settlement of loans requires the approval of thebanking regulatory authorities and these should be liquidatedwithin 2 years. In case of default of liquidation, a regulatory

reserve should be appropriated from the yearly net profits overa period of 5 or 20 years as applicable. These assets are carried atcost less impairment allowance.

12.2Investment Properties

Foreclosed assets acquired by the Group’s foreign entities are presented separately under investment properties and are measured atfair value.

Gain on disposals amounted to LBP 6.6 billion during 2014(LBP 1.2 billion in 2013) Note 37.

The fair values of the assets acquired in satisfaction of loansexceeds their carrying value as at December 31, 2014 and 2013.

The table below shows the reconciliation of the carrying amounts of assets acquired in satisfaction of loans:

Balance January 1, 2013

Foreclosures DisposalsBalance December 31, 2013

ForeclosuresAdditions through business combinationDisposals

Balance December 31, 2014

2014LBP’000 2013

LBP’000

200,738,51956,402,506

257,141,025

ImpairmentAllowanceCost Carrying

Value

194,200,807

20,366,638(3,843,367)

210,724,078

7,105,8782,250,331

(5,469,849)

214,610,438

(13,518,060)

-195,500

(13,322,560)

-(668,669)

119,310

(13,871,919)

180,682,747

20,366,638(3,647,867)

197,401,518

7,105,8781,581,662

(5,350,539)

200,738,519


12 ASSETS ACQUIRED IN SATISFACTION OF LOANS/ INVESTMENTS PROPERTIES

Balance January 1, 2013ForeclosuresRevaluation loss DisposalsEffect of exchange rates changesBalance December 31, 2013 ForeclosuresRevaluation loss - Note 37 Effect of exchange rates changes

BALANCE DECEMBER 31, 2014

53,423,8446,810,935

(4,428,962)(228,120)2,412,125

57,989,8228,724,697

(3,135,314)(7,176,699)

56,402,506

Investment properties are categorized as Level 3 fair values since they are based on real estate market values made by independent real estate experts.

The table below shows the reconciliation of the carrying amounts:

LBP’000

Balance as at December 31,2014

Currency TranslationAdjustment

RevaluationAdjustment

Retirements

Additions and Transfers from

Advance Payments

Balance at January 1, 2013

Cost/Revaluation:

Owned properties 242,909,305 10,047,317 (2,010,963) 4,368,335 (7,159,878) 248,154,116

Furniture, equipment and computer 88,606,051 10,784,323 (2,255,459) 416,219 (1,104,802) 96,446,332

Vehicles 4,484,879 836,333 (181,166) 51,677 (82,440) 5,109,283

Office improvements and installations 79,961,579 11,178,395 (805,228) - (1,213,074) 89,121,672

TOTAL 415,961,814 32,846,368 (5,252,816) 4,836,231 (9,560,194) 438,831,403

Accumulated Depreciation (141,195,765) (21,147,352) 3,883,731 (317,272) 816,660 (157,959,998)Provision for Impairment (3,273,950) 506,117 (232,499) - (14,359) ( 3,014,691)Advance Payments 63,926,051 (7,108,559) - - - 56,817,492

CARRYING VALUE 335,418,150 334,674,206

LBP’000

Balance as at December 31,

2013


Cost/Revaluation:

Owned properties 248,154,116 45,315,478 51,255,754 (430,688) 1,585,483 - (7,917,047) 337,963,096

Furniture, equipment and computer 96,446,332 10,661,128 8,453,558 (1,659,681) 6,068 - (3,097,927) 110,809,478

Vehicles 5,109,283 842,541 349,523 (565,450) - - (213,370) 5,522,527

Office improvements and installations 89,121,672 12,997,972 5,500,011 (34,903) - - (2,184,964) 105,399,788

TOTAL 438,831,403 69,817,119 65,558,846 (2,690,722) 1,591,551 - (13,413,308) 559,694,889

Accumulated Depreciation (157,959,998) (23,276,963) (11,655,775) 2,319,126 (66,737) - 3,871,294 (186,769,053)Provision for Impairment (3,014,691) (65,287) - (136,305) - - 44,952 (3,171,331)Advance Payments 56,817,492 (30,968,084) - - - (206,631) (4,201,173) 21,441,604

CARRYING VALUE 334,674,206 391,196,109



Advance Payments

Additions through Business

Combination

Retirements RevaluationAdjustment

Transfer toIntangibleAssets

Currency TranslationAdjustmentLBP’000

13 PROPERTYAND EQUIPMENT


Currency TranslationAdjustment

RevaluationAdjustment

Retirements


Advance Payments


Cost/Revaluation:

Purchase software 32,305,983 3,697,200 - 515,572 (324,047) 36,194,708

Licenses 8,839 297,528 (6,559) - (440) 299,368

Key money 196,017 - - - - 196,017

TOTAL 32,510,839 3,994,728 (6,559) 515,572 (324,487) 36,690,093

Accumulated Depreciation:

Purchase software (22,907,811) (3,456,998) - - 183,394 (26,181,415)

Licenses (4,016) (25,390) 2,701 - 1,895 (24,810)

Key money (144,762) (4,020) - - - (148,782)

TOTAL (23,056,589) (3,486,408) 2,701 - 185,289 (26,355,007)

Advance Payments: 3,377,134 (159,982) - - - 3,217,152

CARRYING VALUE 12,831,384 13,552,238

LBP’000

Balance as at December 31,

2013

Balance as at December 31,2014

Cost/Revaluation:

Purchase software 36,194,708 3,160,383 3,529,975 - 206,631 (718,439) 42,373,258Licenses 299,368 262,899 - (1,769) - (58,874) 501,624Key money 196,017 - - - - - 196,017

TOTAL 36,690,093 3,423,282 3,529,975 (1,769) 206,631 (777,313) 43,070,899

Accumulated Depreciation:

Purchase software (26,181,415) (3,653,835) (2,995,391) - - 384,244 (32,446,397)Licenses (24,810) (92,405) - 393 - 17,503 (99,319)Key money (148,782) (4,020) - - - - (152,802)

TOTAL (26,355,007) (3,750,260) (2,995,391) 393 - 401,747 (32,698,518)

Advance Payments: 3,217,152 (116,048) - - - (31,573) 3,069,531

CARRYING VALUE 13,552,238 13,441,912

391,196,109



Advance Payments

Additions through Business

Combination

RetirementsTransfer fromProperty andEquipment

Currency TranslationAdjustmentLBP’000


14 INTANGIBLEASSETS


Goodwill is derived from acquisition of control of subsidiaries as follows:

Goodwill Allocated to BLC Bank

The recoverable amount is determined based on the value inuse calculation which uses future cash flows over five yearsbased on the current net return to total assets and adding backdepreciation.

Goodwill Allocated to USB Bank

The recoverable amount of the goodwill allocated to theCypriot banking unit was estimated at EUR 3.7 million andaccordingly the Group booked an impairment loss of EUR 17 million(c/v of LBP 34 billion) during 2013.

Fransabank OJSC - BelarusBLC Bank SALUSB Bank PLC (Cyprus)Ahli International Bank SAL (merger) TOTAL

720,704 44,095,440

7,637,618-

52,453,762

The movement of goodwill during 2014 and 2013 was as follows:

2014LBP’000 2013

Euro

720,704 44,095,440

6,750,819 4,087,509

55,654,472

Counter Value inLBP’000

Balance as at January 1, 2013 20,767,085 41,280,604

Impairment loss (17,087,888) (34,268,905)Other adjustment 1,991 3,993Effect of exchange rates changes - 621,926Balance as at December 31, 2013 3,681,188 7,637,618

Effect of exchange rates changes - (886,799)

BALANCE AS AT DECEMBER 31, 2014 3,681,188 6,750,819

15 GOODWILL


Goodwill from Merger of Ahli International Bank SAL

On July 31, 2014, the Group acquired “Ahli International BankSAL“ for a consideration of USD 103 million and then it was totallymerged within the Group’s accounts. This transactionresulted in a goodwill for the amount of LBP 4.08 billion

representing the excess of the consideration paid over the fairvalue of the net assets of “Ahli International Bank SAL” and thedeferred assets (Note 16) as follows:

JULY 31, 2014LBP’000

CarryingValue

Adjustments made to Net Assets

and Protocole Paid to

Employees

Fair Value

ASSETSCash and Central Banks 237,784,751 237,784,751 - 237,784,751 Deposits with banks and financial institutions 5,891,712 5,891,712 - 5,891,712 Loans and advances to customers 320,966,932 320,966,932 (2,411,792) 318,555,140 Investment securities 553,514,725 555,094,585 - 555,094,585 Customers' liability under acceptances 1,157,991 1,157,991 - 1,157,991 Investments in subsidiaries 300,649 300,649 - 300,649 Assets acquired in satisfaction of loans 1,581,662 1,581,662 - 1,581,662 Property and equipment 15,119,447 54,622,043 (718,972) 53,903,071 Intangible assets 3,549,584 3,549,584 (3,015,000) 534,584 Other assets 8,982,566 8,982,566 - 8,982,566

TOTAL ASSETS 1,148,850,019 1,189,932,475 (6,145,764) 1,183,786,711

LIABILITIES

Deposits and borrowings from banks 46,478,695 46,478,695 - 46,478,695 Customers' accounts at amortized cost 953,270,732 953,270,732 - 953,270,732 Customers' acceptance liability 1,157,991 1,157,991 - 1,157,991 Certificates of deposits 44,561,158 44,561,158 - 44,561,158 Other liabilities 3,768,652 3,768,652 19,318,799 23,087,451 Provisions 3,318,701 3,318,701 - 3,318,701

TOTAL LIABILITIES 1,052,555,929 1,052,555,929 19,318,799 1,071,874,728

NET ASSETS 96,294,090 137,376,546 (25,464,563) 111,911,983

Purchase consideration of Ahli International Bank SAL 155,272,500 Net assets of Ahli International Bank SAL at fair value 111,911,983 Deferred assets resulting from the merger (Note 16) 42,963,750 Less: Non-controlling interests (3,690,742) 151,184,991Goodwill 4,087,509

Fair Value(before

Adjustments to Net Assets)



Deferred assets on acquisition of Ahli International Bank SALDeferred assets on acquisition of Bank Lati SAL

TOTAL

Amortization charge for the year

-12,079,213

12,079,213

(10,846,770)

The unamortized balance of deferred assets on acquired banks is allocated as follows at December 31:

Amortization charge is treated as a yield adjustment to the interest income on the pledged Lebanese Treasury bills acquired from thesoft loan proceeds.

Deferred assets on business acquisitions (a) Deferred assets against future cash flows (b)Derivative assets held for risk management (c) Deferred tax asset (d) Regulatory blocked deposit (e) Assets in process of acquisition in settlement of loans (f ) Deferred charges Collateral on dealings with "Visa International" Prepayments Foreign exchange operations Accrued incomeDebit balances against credit balances (Note 23) (g)Doubtful claims by banksProvision on doubtful claims by banksSundry accounts receivable Allowance for doubtful accounts receivable (h)

TOTAL

12,079,21384,217,433

1,314,767 2,205,966

17,901,995 1,011,2723,942,8131,804,321

34,793,375 1,150,258

706,715-

1,451,810 (1,451,810)52,015,374(3,636,025)

209,507,477

(a) Deferred assets on business acquisition represent what wascompensated by the Central Bank of Lebanon in the form offuture cash flows and benefits originated from the soft loansgranted to the Group (refer to Note 19 f ).

The Group is amortizing these deferred assets against the reductionof future economic benefits derived from the soft loans and thusthe carrying value of these deferred assets corresponds to thepresent value of future cash flows expected to be derived fromthe soft loans.

2014LBP’000 2013

2014LBP’000 2013

45,593,08384,954,950

1,832,159 5,317,832

17,711,011 1,011,272

264,996 1,809,882

26,987,796 -

1,262,887 65,903,489

1,336,212 (1,336,212)79,292,960(3,761,276)

328,181,041

42,963,750 2,629,333

45,593,083

(9,449,880)

16 OTHERASSETS

2014


(b) Deferred assets against future cash flows equivalent toEUR 46.3 million (EUR 40.6 million in 2013) correspond to aGroup’s Cypriot subsidiary losses incurred since the crisis inCyprus has occurred. These deferred assets represent netprojected cash flows deriving from future positive spreads oncontractual medium term revolving low yield borrowing in the

amount of LBP 300 billion made available to the Group during2013 and withdrawn in January 2014. These deferred assets areamortized effective 2014 as a yield adjustment to interestincome on Lebanese treasury bills acquired from the loanproceeds and pledged in 2014.

The movement of deferred assets against future cash flows during the year 2014 and 2013 was as follows:

Euro Counter Value inLBP’000

Net carrying value as at January 1, 40,591,214 84,217,433

Deferred assets originated with offset to: Present value of contractual future cash flows 13,140,388 26,163,596Amortization offsetting to yield adjustment (7,406,100) (14,800,838)Effect of foreign currency exchange differences - (10,625,241)

Net carrying value as at December 31, 46,325,502 84,954,950

2013Euro Counter Value in

LBP’000

Balance as at January 1, - -

Deferred assets originated with offset to: Present value of contractual future cash flows 38,474,892 77,159,472Brought forward retained earnings 1,525,108 3,164,248Provision for contingency (Note 23) 591,214 1,226,633Effect of foreign currency exchange differences - 2,667,080

Net carrying value as at December 31, 40,591,214 84,217,433

(c)Derivative assets held for risk management represent a forwardcontract swap designated as cash flows hedge. The Group usedforward contract swaps to manage its exposure to exchangerate movements on forward contracts with Central Bank of Syriaby purchasing foreign currencies against buying Syrian Pound.At December 31, 2014 currencies with notional principalamounts of SYP 1.5 billion were designated as hedges of futurecash flows against USD 7.7 million (SYP 4 billion against USD 22million and EUR 6 million in 2013).

(d) Deferred tax asset represent deferred tax on losses incurredby a Group entity, which can be brought forward against futureprofits.

(e) The regulatory blocked deposits represent non-interestearning compulsory deposits placed with the Lebanese Treasuryand Central Bank of Syria upon the inception of banks accordingto Article 132 of the Lebanese Code of Money and Credit and

Article 19 of the Syrian Law No.28 respectively and are refundablein case of cease of operations.

(f) Foreclosed assets not yet registered represent the value ofloans written-off against enforcement of real estate securityheld and will be reallocated to “Assets Acquired in Settlement ofLoans” when the registration in the name of the Group is finalized.

(g) Debit balances against credit balances are offset against anequal amount under other liabilities (Note 22) resulting fromthe acquisition and merger of “Ahli International Bank SAL”.These balances were reversed subsequent to the date of thefinancial position.

(h) The majority of the allowance for doubtful accountsreceivable relate to old advances made in previous yearsagainst purchases of property and equipment.



Current deposits of banks and financial institutions Current deposits - Central Bank of Syria Current deposits - Related partiesMoney market deposits - Central Bank of BelarusMoney market deposits - Central Bank of Syria Money market deposits - Banks and financial institutions Money market deposits - Related parties Other short term borrowings Accrued interest payable Accrued interest payable - Related parties

TOTAL

46,716,692 125,168,866

9,509 5,980,463 3,170,879

184,533,584 12,448,62019,767,272

713,671 5,858

398,515,414

2014LBP’000 2013

2014LBP’000 2013

50,070,464 1,984,210

7,260 4,799,511

97,205,626337,557,877

25,674,180 30,170,549

1,368,208 1,388

548,839,273

2,409,587,83519,180,970,421

1,099,049,407

74,258,085 80,618,26583,495,100 71,152,761

135,682,882 23,134,814,756

Deposits from customers:- Current / demand deposits - Term deposits - Collateral against loans and advances

Margins and other collateral:- Margins for irrevocable import letters of credit - Margins on letters of guarantee - Other margins - Blocked accounts

Accrued interest payable TOTAL

2,295,255,27817,494,427,631

1,064,722,839

129,519,880 63,356,61556,579,281 59,433,054

124,254,281

21,287,548,859

18 CUSTOMERS’ ACCOUNTSAT AMORTIZED COST

17 DEPOSITS AND BORROWINGSFROM BANKS


2014LBP’000 2013

11,483,3551,846,036,332

3,328,564

- 10,244 24,874

3,209,29717,477,147

1,881,569,813

Deposits from customers:- Current / demand deposits - Term deposits - Collateral against loans and advances

Margins and other collateral:- Margins for irrevocable import letters of credit - Margins on letters of guarantee - Other margins - Blocked accounts

Accrued interest payable TOTAL

12,043,2301,588,237,107

897,955

770,657 10,244

- 3,079,872

16,990,850

1,622,029,915

Customers’ deposits include related parties deposits detailed as follows:

Deposits at amortized cost are allocated by brackets of deposits as follows:

Less than LBP 200 million

From LBP 200 million to LBP 1.5 billion

Above LBP 1.5 billion

TOTAL

Less than LBP 200 million

From LBP 200 million to LBP 1.5 billion

Above LBP 1.5 billion

TOTAL

Total Deposits% to Total Deposits

% to Total Deposits

Total

F/Cy Base Accounts

Total Deposits

LBP Base Accounts

3,273,370,836 41 2,946,980,710 22 6,220,351,546

2,631,216,144 33 3,660,793,499 28 6,292,009,643

2,069,089,104 26 6,706,098,566 50 8,775,187,670

7,973,676,084 100 13,313,872,775 100 21,287,548,859

Deposits from customers at amortized cost include coded depositaccounts totaling LBP 368.95 billion (LBP 348.54 billion in 2013).These accounts are subject to the provisions of Article 3 of theLebanese Banking Secrecy Law dated September 3, 1956 whichprovides that the Bank’s management, in the normal course ofbusiness, cannot reveal the identities of these depositors to thirdparties, including its independent public accountants.

Deposits from customers include fiduciary deposits received fromresident and non-resident banks for a total amount of LBP 41 billionand LBP 309 billion respectively (LBP 81.6 billion and LBP 265.9 billionrespectively in 2013).


3,526,933,196 40 3,193,802,529 22 6,720,735,725

3,082,499,972 35 3,721,369,683 26 6,803,869,655

2,256,103,561 25 7,354,105,815 52 9,610,209,376

8,865,536,729 100 14,269,278,027 100 23,134,814,756



LBP Base Accounts

Total Deposits% to Total Deposits

Total Deposits

F/Cy Base Accounts

% to Total Deposits

Total


19 OTHERBORROWINGS

Borrowings from European Investment Bank (a)Borrowings from Agence Française de Développement (b)Borrowings from International Finance Corporation (c)Borrowings from Arab Trade Financing Program (d)Borrowings from Central Bank of Lebanon (e)Soft loans from Central Bank of Lebanon (f )Revolving loan from Central Bank of Lebanon (g)Borrowings from the German Investment and Development Company - DEG (related party) (h)Borrowings from SANAD (i)Accrued interest payable

TOTAL

51,694,79715,152,138

-20,644,805

422,078,422263,951,500

-7,537,5004,522,5002,446,729

788,028,391

(a) Borrowings from European Investment Bank:

Borrowings from European Investment Bank represent termborrowings to finance loans extended to customers. Theseborrowings are divided into 2 types, a 12 years line of creditfor touristic loans and a 10 years line of credit for industrialloans. These borrowings mature in 2015, 2019 and 2020.

(b) Borrowing from Agence Française de Développement:

The borrowing from Agence Française de Développementrepresents a 10 years line of credit for a limit of Euro 15 million(LBP 28 billion) and is granted to help the small and mediumenterprises that were affected by the July and August 2006Lebanon war. This borrowing matures in 2017.

(c) Borrowing from International Finance Corporation:

The borrowing from International Finance Corporationrepresents a 7 years line of credit for a limit of USD 3 million(LBP 5 billion). This borrowing is payable through fixed semi-annual installments starting June 2016.

(d) Borrowings from Arab Trade Financing Program:

The borrowing from Arab Trade Financing Program represents2 revolving line of credit for USD 15 million (LBP 23 billion)

and USD 4 million (LBP 6 billion) granted in years 2000 and2011 to support inter-Arab Trade exchanges. These borrowingsmature in 2015.

(e) Borrowings from Central Bank of Lebanon:

During year 2011, the Group obtained borrowings fromCentral Bank of Lebanon representing 2 loans of 5 years lineof credit for a limit of USD 200 million each (LBP 301 billion).Up to December 31, 2014, USD 110 million and USD 125 millionwere utilized (USD 110 million and USD 125 million up toDecember 31, 2013). These borrowings mature during 2016.These lines of credit are collateralized by Lebanese Governmentbonds (Notes 9 and 43).

Borrowings from Central Bank of Lebanon include also facilities inthe aggregate amount of LBP 328.5 billion (LBP 67.8 billionas at December 31, 2013) following Central Bank of LebanonBasic Decision No. 6116 of March 7, 1996 and its amendmentsby which the Bank benefited from credit facilities grantedagainst loans that the Bank has granted, on its own responsibility,to its customers, pursuant to certain conditions, rules andmechanism. Part of these facilities is collateralized byLebanese Treasury bills and Certificates of deposit issued byCentral Bank of Lebanon (Notes 9 and 43).

2014LBP’000 201341,734,707

9,566,3114,522,500

26,746,937 682,744,082322,540,900300,000,000

6,030,0003,768,7505,111,680

1,402,765,867


(f) Soft Loans from Central Bank of Lebanon:

This caption represents soft loans granted by the Central Bank of Lebanon as detailed below:

Soft loan against merger with Ahli International Bank SAL

Soft loan against merger with Bank Lati SAL

Additional soft loan against merger with Bank Lati SAL

3 Soft loans against providing liquidity to cover 60% of the replacementvalue of buildings and equipment pertaining to four of the Bank'sclients who were directly damaged from the July 2006 Lebanon war:

- Loan 1- Loan 2- Loan 3

CARRYING VALUE

Maturity DateDate Granted

-

185,000,000

48,765,500

11,678,000774,000

17,734,000

263,951,500

January 21, 2017

November 6, 2014

August 11, 2016

February 12, 2015July 2, 2015

March 21, 2019

December 26, 2014

May 13, 2010

August 18, 2011

February 18, 2010July 8, 2010

March 29, 2012

Soft loans are secured against pledged Lebanese Treasury bills (Note 9 and 43).

2014LBP’000 2013

243,589,400

-

48,765,500

11,678,000774,000

17,734,000

322,540,900

(g) Revolving Loan from Central Bank of Lebanon:

On December 30, 2013, the Group obtained a revolving loan inthe amount of LBP 300 billion from the Central Bank of Lebanonfor a period of one year maturing on December 31, 2014and renewable for one additional year. This loan bears anaverage interest rate of 2.5% per annum and is collateralized byLebanese Treasury bills (Note 9). The purpose of this loan is toprovide low cost funding that allows the Group to generatepositive spread over short term facilities expandable at therequest of the borrower until the purpose of the debt to offsetthe Group’s losses arising from its Cypriot subsidiary is achieved.

(h) Borrowing from The German Investment andDevelopment Company – DEG (related party):

The borrowing from The German Investment and DevelopmentCompany – DEG represents a loan for a limit of USD 6 million(LBP 9 billion), payable through 12 semi-annual payments ofUSD 500,000 each starting June 2013.

(i) Borrowing from SANAD:

The borrowing from SANAD (a non-resident specialized investmentfund) represents a loan for USD 5 million (LBP 7.54 billion)obtained on December 28, 2011. The proceeds of the loanare to finance micro, small, and medium enterprises inLebanon. This borrowing is payable through 10 semi-annualpayments of USD 500,000 each starting July 2012.

223,834,466447,526,372

22,453,05994,214,494

788,028,391

The remaining contractual maturities of all above borrowings are as follows:

The Group has not had any defaults of principal, interest or other breaches with respect to these borrowings.

Less than one year From 1 to 3 years From 3 to 5 years Over 5 years

TOTAL

2014LBP’000 2013360,157,290674,942,057

35,273,300332,393,220

1,402,765,867



2014LBP’000 2013

20 SUBORDINATEDLOANS

31,874,580 2,020,625

16,598,1601,922,7102,470,139

54,886,214

Loan from Proparco (7.61%) Capital securities Non-convertible bonds Convertible bonds Accrued interest payable

TOTAL

LOAN FROM PROPARCO

This caption represents a loan according to a contractsigned between the Bank and “Proparco” on January 19,2010 for an amount of USD 21,144,000 and is to be settledover a period of 10 years including a 6 year grace period.The Group started to accrue interest effective June 30, 2010and is payable on July 15 of each year starting year 2011.Repayment of principal starts on July 15, 2016.

CAPITAL SECURITIES

The Capital Securities were issued on December 1, 2005 by aGroup subsidiary in Cyprus. The Capital Securities have nomaturity date, however, they may be redeemed in whole at theoption of the subsidiary subject to the prior consent of theCentral Bank of Cyprus, at their nominal amount together withany outstanding interest payments, five years after their issuedate or on any interest payment date thereafter, and providedthat they will be replaced with capital of equivalent or seniorranking unless the Central Bank of Cyprus concludes that thesubsidiary’s capital is at a satisfactory level.

The Capital Securities bear floating interest rate, which is revisedat the beginning of each period and is valid for that specificperiod. Interest rate is equal to the base rate of the subsidiary atthe beginning of each period interest is charged plus 1.60%annually. Interest is payable every six months, on June 30 andDecember 31. According to the terms of issue, if the subsidiarydoes not proceed with the repurchase of Capital Securitieswithin ten years from their issuance date (i.e. up to November30, 2015), then from December 1, 2015, the Capital Securitieswill bear floating interest rate that will be revised at thebeginning of each period in which interest will be charged andwill be equal to the base rate ruling at the beginning of eachperiod interest is charged plus 2.25% annually.

NON-CONVERTIBLE BONDS

On December 30, 2009 a Group subsidiary in Cyprus issuedbonds amounting to Euro 8 million with a maturity date ofDecember 31, 2019. The bonds constitute direct, unsecured,subordinated securities of the subsidiary and bear a fixed interestrate of 7.50% on the nominal value for the period from the issuedate to December 30, 2014. From December 31, 2014 to theirmaturity, the bonds will bear a fixed annual interest rate of 9%on the nominal value.

The subsidiary has the right to redeem fully the bonds at anytime before their maturity date, in cash at their nominal value,along with any accrued interest relating to the current interestrate period, on June 30, 2015, or on any following interestpayment date, upon approval from the Central Bank of Cyprus.

CONVERTIBLE BONDS

On June 14, 2010, a Group subsidiary in Cyprus issuedEuro 1,209,060 convertible bonds maturing on June 30, 2020.The convertible debentures are direct, unsecured andsubordinated obligations of the subsidiary and carry a fixed annualrate of 7.25% on the nominal value for the period from the dateof issue until June 30, 2015. From July 1, 2015 until their maturity,the convertible bonds will carry fixed interest rate 8.75%annually on the nominal value. Except the first interest periodcommencing on May 26, 2010 (inclusive) and maturing on June30, 2010 (exclusive), each interest period will be 6 months.

The convertible bonds may, at the option of the holder, beconverted into ordinary shares of the subsidiary in the year 2014.

The subsidiary in Cyprus has a right of early redemption ofconvertible bonds in whole, not in part, in cash at par plusaccrued interest of the current interest period on June 30, 2015or any interest payment date, after approval from the CentralBank of Cyprus.

31,874,580 1,786,011

14,670,9601,699,466 2,469,667

52,500,684

21 CERTIFICATESOF DEPOSIT

22 OTHERLIABILITIES


2014LBP’000

Certificates of deposit 40,702,500Accrued interest payable 658,628

TOTAL 41,361,128

On August 18, 2014, the Group issued Certificates of deposit with18 month maturity period and bearing a 4.375% rate per annum.

The original program was issued by “Ahli International Bank SAL”and became part of the Group as a result of the merger.

24,530,123 11,472,057 34,106,861

5,199,918 11,703,344

2,216,135 34,888,179 65,040,566

3,282 1,839,004

- 1,458,409

39,096,320

231,554,198

Current tax liability Deferred tax liability on items recognized in other comprehensive income (Note 28) Deferred tax liability on undistributed profits of subsidiaries and associates of the BankOther deferred income tax liability Withholding and other taxes payable Due to the Social Security National Fund Checks and incoming payment orders in course of settlement Accrued expenses Accrued interest payable - Cash contribution to capital Financial guarantee contracts issuedCredit balances against debit balances (Note 16) Effect of exchange rates changes on structural positionSundry accounts payable

TOTAL

2014LBP’000 2013

2014LBP’000 2013

27,831,94618,473,601 37,165,503

7,267,003 11,425,922

3,082,161 52,686,191 63,956,903

3,282 2,068,168

65,903,489 -

44,188,307

334,052,476

Below is the reconciliation of income tax expense:

298,160,636

50,247,441(3,054,633)47,192,808

(24,302,158)(73,150) 127,137

1,585,486

24,530,123

Profit before tax

Income tax on enacted applicable rates Effect of non-deductible expense and non-taxable income Income tax expense Less: Tax paid in advance Net effect of deferred tax assets (Note 16 (d))Deferred tax on temporary differences Effect of exchange rates changes

CURRENT TAX PAYABLE

310,474,129

46,231,0085,053,819

51,284,827

(22,840,328)3,111,866

(4,770,514)1,046,095

27,831,946


23 PROVISIONS


2014LBP’000 2013

2014LBP’000 2013

2014LBP’000 2013

Provisions consist of the following:

The movement of provision for staff termination indemnities is as follows:

Provision for staff termination indemnities Provision for contingencies Provision for loss on foreign currency positionProvision for off-balance sheet risk

TOTAL

22,697,38418,112,382

364,63944,623

41,219,028

27,322,52610,383,677

460,281246,719

38,413,203

Balance January 1Additions - EmployeesAdditions through business combinationAdditions - Legal expensesWrite-backSettlements

BALANCE DECEMBER 31

23,166,577 2,299,751

- 65,066

(1,414,214)(1,419,796)

22,697,384

22,697,384 2,835,732 2,562,834

56,198 -

(829,622)

27,322,526

The movement of the provision for contingencies was as follows:

Balance January 1Net additions (Note 38)Additions through business combinationAdditions against deferred charges (Note 16b)SettlementsReallocation to allowance for impairment of loans and advances (Note 8)Effect of exchange rates changes

BALANCE DECEMBER 31

20,749,3642,896,836

-1,226,633

(6,844,077) -

83,626

18,112,382

18,112,382 2,897,393

515,867 -

(895,135) (8,325,200)(1,921,630)

10,383,677

Settlements made from the provision for contingencies during2013 include an amount of USD 3.8 million (LBP 5.7 billion) inrespect of a legal case raised against the Group in previous years.

During 2013, and as a result of the review by the tax authoritiesof the Bank’s tax returns for the years 2008, 2009, 2010 and 2011,

the Bank was subject to an additional tax liability of approximatelyLBP 6 billion which was settled during 2014 from provision forcontingencies to the extent of LBP 888 million and the remainingdifference amounting to LBP 5.2 billion was recognized withinthe administrative expenses in the statement of profit or loss.

24 SHARECAPITAL

25 SHAREHOLDERS’ CASHCONTRIBUTION TO CAPITAL

26 PREFERENCESHARES


At December 31, 2014 and 2013, the authorized ordinary sharecapital of the Bank was LBP 420 billion consisting of 21,000,000fully paid shares of LBP 20,000 each.

Up to 2014 year-end, the Bank has established a fixed exchangeposition in the amount of USD 56,988,889 authorized by CentralBank of Lebanon to hedge its equity against exchange fluctuationswithin the limit of 60% of equity denominated in LebanesePounds.

The shareholders’ cash contribution to capital is for a totalamount of LBP 17.1 billion (USD 11,352,494) as at December 31,2014 and 2013 and it is subject to a yearly interest of 7% payablefrom unrestricted profits after securing the approval of CentralBank of Lebanon.

This sort of financial instrument is accounted for in foreigncurrency and therefore allows hedging against nationalcurrency exchange fluctuation.

On June 30, 2008, the Bank issued 500,000 non-cumulativeconvertible redeemable series “A” preference shares withnominal value of LBP 20,000 each at an issue price ofUSD 200 per share.

On September 30, 2010, the Bank issued 425,000 non-cumulativeconvertible redeemable series “B” preference shares withnominal value of LBP 20,000 each at an issue price ofUSD 200 per share.

On December 21, 2012, the Bank issued 375,000 non-cumulativeredeemable series “C” preference shares with nominal valueof LBP 20,000 each at an issue price of USD 200 per share.

On December 15, 2014, the Bank issued 425,000 non-cumulativeredeemable series “D” preference shares with nominal valueof LBP 20,000 each at an issue price of USD 200 per share.


27 RESERVES

28 CUMULATIVE CHANGE IN FAIR VALUEOF FINANCIAL ASSETS


The legal reserve is constituted in conformity with therequirements of the Lebanese Money and Credit Code on thebasis of 10% of net profit. This reserve is not available fordistribution.

The reserve for general banking risks is constituted according tolocal banking regulations, from net profit, on the basis of aminimum of 2 per mil and a maximum of 3 per mil of the totalrisk weighted assets, off-financial position risk and global

exchange position as defined for the computation of thesolvency ratio at year-end. This reserve is constituted inLebanese Pound and in foreign currencies in proportion to thecomposition of the Group’s total risk weighted assets and off-financial position items. This reserve is not available for distribution.

The special reserve is made based on regulatory requirements,in connection with the uncovered portion of the doubtfuldebts outstanding as at June 30, 2003.

Reserves consist of the following:

Legal reserve Reserve for general banking risks Reserve for assets acquired in satisfaction of loans (Note 12) Owned buildings revaluation reserve Foreign currency translation reserveSpecial reserve

TOTAL

110,103,868 156,887,505

43,615,943 42,415,207

(85,472,516)6,271,835

273,821,842

2014LBP’000 2013

2014LBP’000 2013

134,936,161 193,982,926

54,797,626 43,694,235

(109,060,993)8,249,196

326,599,151

This caption represents the cumulative change in fair value of investment securities at fair value through other comprehensive income.It consists of the following:

Cumulative unrealized gain on investments at fair value through other comprehensive income (Note 9) Less: Deferred tax liability (Note 22)

Net

Share of non-controlling interests (Note 29)

SHARE OF OWNERS OF THE BANK

113,037,092(11,472,057)

101,565,035

(1,382,756)

100,182,279

179,138,929 (18,473,601)

160,665,328

(1,577,110)

159,088,218

29 NON – CONTROLLINGINTERESTS


Non-controlling interests represent the minority share in the subsidiaries’ equities as follows:

Capital Change in fair value of investment securities through other comprehensive income (Note 28)Preference shares Reserves and retained earnings Profit for the year

TOTAL

167,186,5181,382,756

195,975,00159,143,98715,787,588

439,475,850

The following table summarizes financial information of subsidiaries that have material Non-Controlling Interests (NCI) beforeintra-group eliminations:

2014LBP’000 2013

167,364,0291,577,110

195,975,00159,164,08713,040,078

437,120,305


NCI percentage 25.17% 32.00%

Cash and banks 1,346,156,891 147,901,653 Loans and advances 2,929,670,148 202,369,342 Investment securities 3,441,081,136 268,670 Foreclosed assets and investment properties 145,290,025 - Other assets 211,558,404 76,489,429Deposits from banks (51,410,251) (139,520)Deposits from customers (6,466,234,609) (198,594,488)Borrowings and subordinated bonds (737,382,211) -Other liabilities and provisions (98,479,292) (20,330,422)NET ASSETS 720,250,241 207,964,664

Carrying amount of NCI 181,286,986 66,548,692

Net financial revenues 237,276,827 21,295,384 Net allowance for impairment of loans (55,754,979) 143,037 Impairment on goodwill - -Other income (net) 32,812,911 -Operating expenses (132,969,750) (15,177,710)Income tax expense (14,973,176) (1,238,378)Other Comprehensive Income (OCI) 270,359 (26,055,219)TOTAL COMPREHENSIVE INCOME 66,662,192 (21,032,886)

Profit allocated to NCI 16,425,571 1,607,149 OCI allocated to NCI 218,923 (8,407,656)

BLC Bankand its DirectSubsidiaries

Fransabank El Djazaïr SPA



NCI percentage 25.17% 32.00%

Cash and banks 1,114,394,781 214,102,649 Loans and advances 2,834,848,545 217,226,411 Investment securities 3,402,851,147 302,684 Foreclosed assets and investment properties 146,789,499 -Other assets 217,403,599 64,746,676Deposits from banks (2,153,046) (135,064)Deposits from customers (6,481,583,888) (230,713,209)Borrowings and subordinated bonds (488,486,484) -Other liabilities and provisions (79,023,867) (29,762,088)NET ASSETS 665,040,286 235,768,059

Carrying amount of NCI 167,390,640 75,445,779

Net financial revenues 220,640,544 37,814,487Net allowance for impairment of loans (60,554,145) (2,554,021)Impairment on goodwill (34,268,905) -Other income (net) 79,916,045 -Operating expenses (131,117,541) (16,809,925)Income tax expense (11,129,111) (4,657,274)Other Comprehensive Income (OCI) (26,261) 880,655TOTAL COMPREHENSIVE INCOME 63,460,626 14,673,922

Profit allocated to NCI 15,170,211 4,413,844OCI allocated to NCI 569,790 261,700

BLC Bankand its DirectSubsidiaries

Fransabank El Djazaïr SPA


30 PROFIT FOR THE YEAR


The consolidated profit is allocated as follows between the Bank and its subsidiaries (after intra-group eliminations):

TotalOwners

of the BankNon-Controlling

Interests

Profit of the Bank 164,693,755 - 164,693,755 Profit/(loss) of subsidiaries:Fransa Invest Bank SAL 10,395,820 - 10,395,820 Fransabank France SA 488,492 325,958 814,450Lebanese Leasing Company SAL 1,289,585 184,227 1,473,812Switch and Electronics Services SAL 339,864 - 339,864 Sogefon SAL (59,206) - (59,206)Fransabank El Djazaïr SPA 9,379,419 4,413,844 13,793,263Fransabank Insurance Services SAL 2,321,010 - 2,321,010 BLC Bank SAL and subsidiaries 48,316,666 15,170,211 63,486,877Express SARL 94,427 - 94,427 Fransabank Syria (7,572,420) (3,257,700) (10,830,120)Fransabank OJSC 3,914,166 529,710 4,443,876

Deferred tax on profit from associates and subsidiaries (7,065,054) (1,578,662) (8,643,716)

TOTAL 226,536,524 15,787,588 242,324,112

YEAR ENDED DECEMBER 31, 2014LBP’000

Ownersof the Bank

Non-Controlling Interests Total

Profit of the Bank 183,704,539 - 183,704,539 Profit/(loss) of subsidiaries:Fransa Invest Bank SAL 10,337,767 - 10,337,767 Fransabank France SA 874,442 583,493 1,457,935Lebanese Leasing Company SAL 1,215,458 173,637 1,389,095 Switch and Electronics Services SAL 371,808 - 371,808 Sogefon SAL (58,187) - (58,187)Fransabank El Djazaïr SPA 3,415,190 1,607,149 5,022,339 Fransabank Insurance Services SAL 2,549,473 - 2,549,473 BLC Bank SAL and subsidiaries 49,966,262 16,425,571 66,391,833 Express SARL (120,913) - (120,913) Fransabank Syria (9,632,963) (4,878,883) (14,511,846)Fransabank OJSC 2,350,072 318,039 2,668,111 Kuwaiti Lebanese Company for Real Estate Services SAL (12,652) - (12,652)

Deferred tax on profit from associates and subsidiaries (6,279,037) (1,188,928) (7,467,965)

TOTAL 238,681,259 13,040,078 251,721,337

LBP’000 YEAR ENDED DECEMBER 31, 2013


31 DIVIDENDSPAID

32 INTERESTINCOME


1 - 1

1 - 1 4 3 8

1 1 1 3 - 3

( - ( 9 4 1 2 - 2

4 1 6 9 - 9

( ( ( 3 5 4

( ( (

2 1 2

1 - 1

1 - 1 8 5 1

1 1 1 3 - 3

( - ( 3 1 5 2 - 2

4 1 6 ( - (

( ( ( 2 3 2

( - ( ( ( (

2 1 2

The following dividends were declared and paid by the Group:

180,039,9725,329,6271,812,829

597,621,2854,145,620

556,431,643 3,682,936

25,811,1871,126,163

3,981

1,376,005,243

Interest income from:Deposits with Central Banks Deposits with banks and financial institutions Deposits with related party banks and financial institutions Investment securities Loans to banks Loans and advances to customers Loans and advances to related parties Interest recognized on impaired loans and advances to customers (Note 8) Interest recognized on impaired loans transferred to off-balance sheet Other

TOTAL

Interest income realized on impaired loans and advances tocustomers represent recoveries of interest. Accrued intereston impaired loans and advances is not recognized untilrecovery / rescheduling agreements are signed with customers.

Interest income on investments at fair value through profitor loss is reflected separately under “net interest and othergain / (loss) on investments securities at fair value throughprofit or loss” (Note 36).

LBP 2,300 per ordinary share paid by the Bank from 2013net income (LBP 2,100 during 2013 paid from 2012 net income)

USD 17 (LBP 25,627.50) per preference share series "A" andUSD 13.5 (LBP 20,351.25) per preference share series "B" and “C” during 2014

Dividends paid by subsidiaries to non-controlling interests

TOTAL

44,100,000

21,692,400

16,234,954

82,027,354

2014LBP’000 2013

2014LBP’000 2013

48,300,000

29,094,750

14,037,706

91,432,456

219,788,545 5,111,628 1,231,520

625,101,078 3,282,863

612,822,9631,377,259

13,231,684 456,652

7,300

1,482,411,492

33 INTERESTEXPENSE

34 FEE AND COMMISSION INCOME

35 FEE AND COMMISSION EXPENSE


Interest expense on:Deposits and borrowings from Central BanksDeposits and borrowings from banks and financial institutions Customers’ deposits at amortized cost Related parties’ deposits at amortized cost Other borrowings (Note 19) Borrowings from related party (Note 19)Subordinated loansCertificates of depositBonds issued by banks Shareholders’ cash contribution to capital (Note 25)

TOTAL

108,833 5,011,077

806,844,362 16,014,911 18,096,860

345,353 3,950,475

-376,992

1,197,973

851,946,836

Commission on documentary credits Commission on letters of guarantee Service fees on customers’ transactions Commission on transactions with banks Asset management fees

TOTAL

23,083,3079,157,460

75,798,892685,796

49,647

108,775,102

Fee and commission income include fee and commission from related parties with immaterial amounts.

2014LBP’000 2013

2014LBP’000 2013

2014LBP’000 2013

94,514 3,762,681

840,314,683 53,805,928 25,986,009

275,683 3,940,585

800,292 47,480

1,197,972

930,225,827

17,211,153 10,655,546 79,971,013

959,971 323,466

109,121,149

Commission on transactions with banks and financial institutions Sundry

TOTAL

Fee and commission expenses include fee and commission to related parties with immaterial amounts.

2,602,59323,481,808

26,084,401

2,857,77023,258,958

26,116,728


36 NET INTEREST AND OTHER NET GAIN / (LOSS) ON INVESTMENTSAT FAIR VALUE THROUGH PROFIT OR LOSS

37 OTHER OPERATINGINCOME (NET)

38 PROVISIONSFOR CHARGES (NET)

2014LBP’000 2013

2014LBP’000 2013

2014LBP’000 2013

Dividends income on investment securitiesShare in profits of associates (Note 11) Foreign exchange gain Gain on disposal of assets acquired in satisfaction of loans (Note 12.1)Change in fair value of investment properties (Note 12.2)(Loss)/gain on disposal of property and equipment Other operating income – Net

TOTAL

3,545,87413,808,82126,003,538

1,247,239(4,428,962)

1,882,7564,254,983

46,314,249

Regulatory allowance for country risk – Deposit with banks (Note 6)Regulatory allowance for country risk – Loans to banks (Note 7) Impairment allowance/(write-back) of investment securities (Note 9)Impairment allowance for doubtful accounts receivable (Note 16)Provision for contingencies (Note 23)

TOTAL

(720)-

(32,728) -

2,896,836

2,863,388

Interest incomeDividends incomeNet unrealized gain/(loss)Net realized gain

TOTAL

38,238,4571,154,515 (254,582)7,738,725

46,877,115

33,176,7181,978,090

32,840,872 5,227,281

73,222,961

3,667,030 15,543,198 15,428,205

6,621,178(3,135,314)

(169,371)7,061,768

45,016,694

1,50081,88315,704 34,158

2,897,393

3,030,638


39 FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISKS

40 BALANCES / TRANSACTIONS WITH RELATED PARTIES


The guarantees and standby letters of credit and the documentaryand commercial letters of credit represent financial instrumentswith contractual amounts representing credit risk. The guaranteesand standby letters of credit represent irrevocable assurances thatthe Group will make payments in the event that a customer cannotmeet its obligations to third parties and are not different fromloans and advances on the statement of financial position.

However, documentary and commercial letters of credit, whichrepresent written undertakings by the Group on behalf of acustomer authorizing a third party to draw drafts on the Group upto a stipulated amount under specific terms and conditions, arecollateralized by the underlying shipments documents of goodsto which they relate and, therefore, have significantly less risks.

In the ordinary course of its activities, the Group conductstransactions with related parties including shareholders, directors,subsidiaries and associates. Also, the Group conducts sale andpurchase transactions of investment securities with subsidiary

banks and these transactions are made at net book value ofthe financial instruments. Balances and transactions with relatedparties are as follows:

66

171719

818

68

17181925

3232333333

2014LBP’000 2013Current accounts with banks 8,218,962 22,711,586 Term placements with banks 3,080,793 985,415 Deposits from banks 7,260 9,509 Money market deposits from banks 25,674,180 12,448,620 Borrowings 6,030,000 7,537,500 Direct facilities & credit balances

Loans and advances 33,215,974 30,080,464 Deposits at amortized cost 1,864,092,666 1,605,039,065

Indirect facilities Letters of guarantees 492,410 475,443 Letters of credit - 79,761Acceptances - 4,893,255

Accrued interest receivable: Term placements with banks 1,826 5,047 Loans and advances 22,097 5,573

Accrued interest payable: Money market deposits from banks 1,388 5,858 Deposits at amortized cost 17,477,147 16,990,850 Borrowings 10,930 12,878 Cash contribution to capital 3,282 3,282

Statement of profit or loss accounts: Interest income from deposits with banks 1,231,520 1,812,829 Interest income from loans and advances 1,377,259 3,682,936 Interest expense on deposits at amortized cost 53,805,928 16,014,911 Interest expense on borrowings from related parties 275,683 345,353 Interest expense on cash contribution to capital 1,197,972 1,197,973


Notes

41 CASH AND CASH EQUIVALENTS


2014LBP’000 2013

Some loans and advances are covered by real estate mortgageto the extent of LBP 4.9 billion (LBP 2.5 billion in 2013) and bypledged deposits of the respective borrowers to the extent ofLBP 1.7 billion (LBP 497 million in 2013) and by pledged securitiesto the extent of LBP 4.3 billion.

The remunerations to executive management amounted toLBP 37.3 billion during 2014 (LBP 36.4 billion during 2013). Thisincludes accrued remuneration payable to the Bank’s Chairmanand Vice Chairman calculated on the basis of 8% of profit beforetax.

CashCurrent accounts with Central BanksTime deposits with Central Banks (maturities of 3 months or less)Checks in course of collectionCurrent accounts with banks and financial institutionsTime deposits with banks and financial institutions (maturities of 3 months or less)

TOTAL

189,766,910 237,821,774 810,177,500

38,859,044224,577,216 712,793,908

2,213,996,352

193,048,656 335,678,434 900,873,005

43,781,015344,035,540

1,038,669,274

2,856,085,924

Cash and cash equivalents for the purpose of the statement of cash flows statement consist of the following:

The following non-cash transactions were excluded from thestatement of cash flows:

(a) Positive change in fair value of investment securities at fair valuethrough other comprehensive income of LBP 66.1 billionand related deferred tax liability of LBP 7 billion during2014 (LBP 36.2 billion and related deferred tax liabilityof LBP 3.62 billion during 2013).

(b) Foreclosed assets in settlement of loans in the amount ofLBP 15.8 billion during 2014 (LBP 27.2 billion during 2013).

(c) Transfer of LBP 207 million from property and equipmentto intangible assets (LBP 516 million during 2013).

(d) Transfer of provision for contingencies in the amountof LBP 8.3 billion to impairment allowance under loansand advances.

(e) Debit balances against credit balances in the amount ofLBP 65.9 billion.

(f ) Assets and liabilities acquired during 2014 through businesscombination (Note 15).

(g) Provision for contingencies in the amount of LBP 1.23 billionagainst deferred assets during 2013 (Note 16).

(h) Retained earnings in the amount of LBP 3.16 billion againstdeferred assets during 2013 (Note 16).

42 DISTRIBUTION BY GEOGRAPHICAL LOCATION


Below is the distribution of assets and liabilities and statement of profit or loss by geographical location of various Group entities:

42.1Distribution of Assets and Liabilities by Geographical Location


ASSETS:

Cash and banks 7,343,038,772 106,662,532 40,887,759 147,901,653 36,931,096 271,219,202 7,946,641,014

Loans to banks 279,538,571 - - - 6,997,003 - 286,535,574

Loans and advances to customers 7,426,710,131 109,082,529 335,458,924 202,369,342 65,947,830 685,462,991 8,825,031,747

Investment securities 9,961,759,831 48,924,910 50,605 268,670 6,274,623 184,419,726 10,201,698,365

Investment properties 56,402,506 - - - - - 56,402,506

Customers' liability under acceptances 138,522,410 - 23,774,512 28,125,192 - - 190,422,114

Investments in associates 59,825,856 - - - - - 59,825,856

Goodwill 55,654,472 - - - - - 55,654,472

Other assets 734,670,069 24,760,534 1,462,534 76,489,429 23,792,590 72,382,425 933,557,581

TOTAL ASSETS 26,056,122,618 289,430,505 401,634,334 455,154,286 139,943,142 1,213,484,344 28,555,769,229

LIABILITIES:

Deposits and borrowingsfrom banks 327,348,602 166,239,076 45,778,886 139,520 9,333,189 - 548,839,273

Customers' accounts at amortized cost 21,463,681,908 177,028,211 148,812,899 198,594,488 34,809,423 1,111,887,827 23,134,814,756

Customers' acceptance liability 138,522,410 - 23,774,512 28,125,192 - - 190,422,114

Other borrowings 1,402,765,867 - - - - - 1,402,765,867

Certificates of deposit 41,361,128 - - - - - 41,361,128

Subordinated loan 34,340,663 - - - - 18,160,021 52,500,684

Other liabilities and provisions 326,895,502 2,678,668 2,389,161 20,330,422 702,996 19,468,930 372,465,679

TOTAL LIABILITIES 23,734,916,080 345,945,955 220,755,458 247,189,622 44,845,608 1,149,516,778 25,743,169,501

Lebanon Syria France Algeria Belarus Cyprus Total



Belarus Cyprus TotalLebanon Syria France Algeria

ASSETS:

Cash and banks 6,602,827,245 111,670,730 36,833,748 214,102,649 46,514,293 142,443,145 7,154,391,810

Loans to banks 92,984,780 - - - - - 92,984,780


Investment securities 8,865,753,825 48,534,934 57,252 302,684 5,192,057 237,765,044 9,157,605,796

Investment properties 57,989,822 - - - - - 57,989,822

Customers' liability under acceptances 246,744,250 - 7,713,298 22,861,664 - 182,150 277,501,362

Investments in associates 46,769,853 - - - - - 46,769,853

Goodwill 52,453,762 - - - - - 52,453,762

Other assets 560,925,919 25,037,059 1,183,610 64,746,676 28,471,027 74,771,148 755,135,439

TOTAL ASSETS 22,932,223,519 307,726,879 368,118,238 519,240,084 149,843,897 1,296,659,058 25,573,811,675

LIABILITIES:

Deposits and borrowingsfrom banks 218,746,866 158,896,649 13,959,166 16,818 6,895,915 - 398,515,414

Customers' accounts at amortized cost 19,444,152,775 229,756,776 118,155,277 230,713,209 41,326,248 1,223,444,574 21,287,548,859

Customers' acceptance liability 246,744,250 - 7,713,298 22,861,664 - 182,150 277,501,362

Other borrowings 788,028,391 - - - - - 788,028,391

Subordinated loan 34,340,663 - - - - 20,545,551 54,886,214

Other liabilities and provisions 230,265,577 435,326 2,254,874 29,762,088 1,240,381 8,814,980 272,773,226

TOTAL LIABILITIES 20,962,278,522 389,088,751 142,082,615 283,353,779 49,462,544 1,252,987,255 23,079,253,466



42.2Distribution of Statement of Profit or Loss by Geographical Location

Belarus Cyprus TotalLebanon Syria France Algeria

Net interest income 428,697,907 8,457,609 9,498,257 19,914,024 9,443,275 48,047,335 524,058,407

Net fee and commission income 63,165,749 (2,461,296) 3,335,024 9,878,024 3,048,200 5,725,000 82,690,701

Investments at fair value through profit or loss 47,272,457 - - - - ( 395,342) 46,877,115

Other operating income 45,012,602 922,580 269,180 8,022,429 5,060,830 (3,511,019) 55,776,602

Impairment of loans and advances (6,157,095) (12,417,637) (3,716,267) (2,554,021) (402,915) (54,654,699) (79,902,634)

Impairment of goodwill (34,268,905) - - - - - (34,268,905)

Income originated from contractual future cash flows 77,159,472 - - - - - 77,159,472

Other expenses (295,316,556) (8,348,514) (7,223,342) (16,809,925) (10,173,100) (36,358,685) (374,230,122)

Income tax expense (42,867,016) 1,454,718 (406,118) (4,657,274) (717,118) - (47,192,808)

Deferred tax on investees undistributed profits (8,643,716) - - - - - (8,643,716)

TOTAL 274,054,899 (12,392,540) 1,756,734 13,793,257 6,259,172 (41,147,410) 242,324,112

YEAR ENDED DECEMBER 31, 2014LBP’000

Net interest income 450,734,829 6,956,142 11,669,379 14,061,658 11,294,355 57,469,302 552,185,665

Net fee and commission income 64,638,704 (455,425) 2,863,448 7,052,620 4,611,797 4,293,277 83,004,421

Investments at fair value through profit or loss 73,222,961 - - - - - 73,222,961

Other operating income 73,309,845 1,338,618 279,396 181,106 4,220,732 (2,254,549) 77,075,148

Impairment of loans and advances (20,711,311) (20,814,839) (3,583,573) 143,037 (3,708,058) (50,871,696) (99,546,440)

Income originated from contractual future cash flows 26,163,596 - - - - - 26,163,596

Other expenses (326,500,171) (7,043,504) (7,636,332) (15,177,710) (10,503,081) (34,770,424) (401,631,222)

Income tax expense (53,014,869) 4,363,988 (750,850) (1,238,378) (644,718) - (51,284,827)

Deferred tax on investees undistributed profits (7,467,965) - - - - - (7,467,965)

TOTAL 280,375,619 (15,655,020) 2,841,468 5,022,333 5,271,027 (26,134,090) 251,721,337

Lebanon Syria France Algeria Belarus Cyprus Total

LBP’000 YEAR ENDED DECEMBER 31, 2013





43 COLLATERALGIVEN

Financial assets given as collateral are as follows at December 31:

Corresponding FacilitiesRedemption Value

of Pledged Assets Nature of Facility Amount of Facility Maturity Date

Corresponding FacilitiesRedemption Value

of Pledged Assets Nature of Facility Amount of Facility Maturity Date

Treasury bills at amortized cost 11,678,000 Soft Loan 11,678,000 February 12, 2015Treasury bills at amortized cost 774,000 Soft Loan 774,000 July 2, 2015Treasury bills at amortized cost 185,000,000 Soft Loan 185,000,000 November 6, 2014Treasury bills at amortized cost 48,765,500 Soft Loan 48,765,500 August 11, 2016Treasury bills at amortized cost 17,734,000 Soft Loan 17,734,000 March 21, 2019Lebanese Government bonds at amortized cost 174,267,000 Stand-by line facility 165,825,000 Up to 5 yearsLebanese Government bonds at amortized cost 195,975,000 Stand-by line facility 188,437,500 Up to 5 yearsTreasury bills at amortized cost 15,000,000 Facilities 39,296,972 Over 5 years

TOTAL 649,193,500 657,510,972

Treasury bills at amortized cost 11,678,000 Soft Loan 11,678,000 February 12, 2015Treasury bills at amortized cost 774,000 Soft Loan 774,000 July 2, 2015Treasury bills at amortized cost 48,765,500 Soft Loan 48,765,500 August 11, 2016Treasury bills at amortized cost 17,734,000 Soft Loan 17,734,000 March 21, 2019Treasury bills at amortized cost 243,589,400 Soft Loan 243,589,400 December 21, 2017Treasury bills at amortized cost 300,000,000 Revolving loan from 300,000,000 December 31, 2015 Central Bank of LebanonLebanese Government bonds at amortized cost 174,267,000 Stand-by line facility 165,825,000 Up to 5 yearsLebanese Government bonds at amortized cost 195,975,000 Stand-by line facility 188,437,500 Up to 5 yearsTreasury bills at amortized cost 15,169,000 Facilities 174,432,681 Over 5 yearsTreasury bills at amortized cost and 230,650 Facilities 188,437,500 Over 5 yearsCertificates of deposit issued byCentral Bank of Lebanon 6,715,460

TOTAL 1,014,898,010 1,339,673,581


44 RISK MANAGEMENT OF FINANCIAL INSTRUMENTS

RISK MANAGEMENT FRAMEWORK

The Group is exposed to different types of risk mainly credit risk,liquidity risk, market risk and operational risk. These risks areinherent in the Group’s activities but are managed through anongoing process of identification, measurement, monitoringand mitigation.

The Board of Directors, the Risk Management Committee andthe Risk Management Division are responsible for overseeingthe Group’s risks, while the Internal Audit Department has theresponsibility independently to review the implemented riskmanagement process to ensure adequacy and effectiveness ofthe risk control procedures. The Risk Management Divisionensures that the capital is adequate to cover all types of risksthat the Group is exposed to and monitors compliance with riskmanagement policies, procedures and risk limits. The Groupassesses its risk profile to ensure that it is in line with the Bank’srisk strategy and objectives. The Board of Directors receivesquarterly risk reports on the Bank’s risk profile and capitalmanagement process.

CREDIT RISK

Credit risk is defined as the potential that a bank’s borrower orcounterparty fails to meet its obligations in accordance withagreed terms. The goal of Fransabank credit risk managementis to maximize Bank’s risk-adjusted rate of return by maintainingcredit risk exposure within the acceptable limits consistent withprudential thresholds stipulated by the Central Bank ofLebanon and the Banking Control Commission. Fransabank SALmanages the credit risk inherent in the entire credit portfolio aswell as the risk in individual credits. The role of credit riskmanagement is to continuously identify, measure, control,monitor, and report on credit risk to the Board.

Management of credit risk mainly includes:

a) Identifying credit risk through implementing creditprocesses related to credit origination, analysis, approvaland review.

b) Measuring credit risk by ensuring that the Bank hasenough capital to cover unexpected losses from itscredit portfolio.

c) Mitigating credit risk by ensuring the implementation of asound internal control system and that credits areadequately collateralized.

d) Monitoring credit risk by ensuring that credit exposures arewithin internal and regulatory set limits.

e) Reporting on credit risk is realized through regular andtimely escalation of credit risk reports based on the reportinglines which are evidenced by the Bank’s organizationalchart’s hierarchal levels.

MEASUREMENT OF CREDIT RISK

Loans and Advances to Customers

In measuring credit risk of loans and advances, the Bank considersthe following:

• Ability of the counterparty to honor its contractual obligationsbased on the account’s performance, recurring overduesand related reasons, the counterparty’s financial position andeffect thereto of the economic environment and marketconditions;

• Exposure levels of the counterparty and unutilized credit limitsgranted;

• Exposure levels of the counterparty with other banks;

• Purpose of the credit facilities granted to the counterparty andconformity of utilization by the counterparty.



2

In accordance with Central Bank of Lebanon circular No.58 the Group’s customers are categorized into six classifications as describedbelow:

1

3

4

5

6

STANDARD

MONITORING

FOLLOW-UP

SPECIAL

MENTION

SUBSTANDARD

DOUBTFUL

BAD

CLASSIFICATION DESCRIPTION

Indicates that borrowers are certainly able to honor their commitments.Some of the indicators related to this category are continuous cashinflows, and availability of updated financial statements.

Indicates that borrowers have an adequate ability to honortheir commitments. Major characteristics of this category areinadequate documentation regarding borrower’s activity anddeclining profitability.

Indicates that borrowers are still able to honor their commitmentswith the existence of some weaknesses that may reduce abilityto settle. Some indicators related to this category are delayedpayments (60 to 90 days), decline in profitability and cash flows,excess over limit of more than 10%, more than one time debtrescheduling and borrower highly relying on leverage and risingconflict among shareholders.

Indicates that borrowers' ability to serve their commitments is inquestion and depending on the improvement of financial andeconomic conditions on the liquidation of available collateral. Themain characteristics of this category are repetitive overduesbetween 90 and 180 days, inability to cover interest payments formore than 6 months, remarkable decrease in cash flows andlosses incurred for over three consecutive years. In this case, theGroup considers interests and commissions as unrealized but doesnot establish an allowance for impairment.

Indicates that the Group may not be able to recover loan in full. Majorindicators are no movement for over six months and borrower isunable to settle rescheduled commitments. In this case, the Groupconsiders interests and commissions as unrealized and established anallowance for impairment accordingly.

Indicates that commitments cannot be recovered. Some signals ofthis category would be inexistence of collateral low value ofcollateral and/or, losing contact with the borrower. In this case, theBank considers interests and commissions as unrealized, ceases theiraccumulation, and provides the whole amount of the exposure’sbalance.


Loans’ classifications are assessed and updated regularly.

Note 8 discloses the distribution of loans and advances to customers by classification.

Most of customers’ exposures represent credit facilities granted to corporations which do not have external credit rating.

Loans classified in categories 1, 2 and 3 include the following past due but not impaired exposures:

Less than 30 days Between 30-60 days Between 60-90 days Between 90-180 days Beyond 180 days

TOTAL

29,812,43327,598,86827,826,61346,857,692

110,316,559

242,412,165

LebanonCyprusSyria

TOTAL

200,459,4215,494,000

36,458,744

242,412,165

Above past due accounts relate to Group entities operating in the following geographies:

LIMITING OF CREDIT RISK

The Bank manages the levels of credit risk undertaken by placinglimits on the amount of risk accepted in relation to one borrower,and/or groups of related borrowers. Such risk is monitored ona revolving basis and subject to an annual or more frequentreview, when considered necessary.

Exposures to any one borrower including banks are furtherrestricted by sub-limits covering on and off-financial positionexposures. Actual exposures against limits are monitored ona regular basis.

Debt Investment Securities and Other Bills

The risk of the debt instruments included in the investment portfolio relates mainly to sovereign risk (including Central Bank ofLebanon) to the extent of 94% in 2014 and 2013.

2014LBP’000 2013

2014LBP’000 2013

39,912,259 48,795,638 52,541,23863,569,148 55,707,384

260,525,667

215,805,88824,655,000 20,064,779

260,525,667



Concentration of Credit Risk by Geographical Location (Major Financial Assets)

GulfEurope Other TotalMiddle East & AfricaLebanon North America

Financial Assets:

Cash and Central Banks 5,346,989,617 297,779,434 - 141,145,258 - - 5,785,914,309

Deposits with banks and financial institutions 215,140,819 122,323,260 104,273,788 628,290,573 281,646,994 16,802,067 1,368,477,501

Loans to banks 87,837,831 - - (7,464,963) - 12,611,912 92,984,780

Loans and advances to customers 6,195,702,437 481,565,880 3,840,668 1,064,686,660 134,494,565 98,688,841 7,978,979,051

Investments at fair value through profit or loss 480,226,501 2,359,552 1,087,682 157,830,419 61,965 - 641,566,119

Investments at amortized cost 8,034,961,223 - 45,375,839 193,021,999 26,967,008 4,938,013 8,305,264,082

Investments at fair value through other comprehensive income 199,887,036 302,684 9,175,999 190,978 1,218,898 - 210,775,595

Derivative assets held for risk management - 1,314,767 - - - - 1,314,767

TOTAL 20,560,745,464 905,645,577 163,753,976 2,177,700,924 444,389,430 133,040,833 24,385,276,204

Other specific control and mitigation measures are outlined below:

A) COLLATERAL:

The principal collateral types for loans and advances consist ofmortgages over real estate properties and bank guarantees.

The Group will seek additional collateral from the counterpartyas soon as impairment indicators are noticed for the relevantindividual loans and advances.

B) NETTING ARRANGEMENTS:

The Group enters into netting arrangements with counterpartieshaving a significant volume of transactions in order to restrict itsexposure to credit losses. These arrangements do not generallyresult in an offset of assets and liabilities balances in thestatement of financial position.

2014

Financial Assets:

Cash and Central Banks 6,108,823,393 234,914,395 - 163,708,294 - - 6,507,446,082

Deposits with banks and financial institutions 236,788,327 94,572,891 126,700,766 776,365,492 201,901,301 2,866,155 1,439,194,932

Loans to banks 277,088,926 - - 3,444,120 - 6,002,528 286,535,574


Investments at fair value through profit or loss 808,865,419 - 1,346,250 178,122,904 70,319 - 988,404,892

Investments at amortized cost 8,729,028,069 - 24,759,721 166,330,445 15,613,380 - 8,935,731,615

Investments at fair value through other comprehensive income 265,124,500 268,670 10,527,894 180,696 1,460,098 - 277,561,858

Derivative assets held for risk management - 1,832,159 - - - - 1,832,159

TOTAL 23,703,340,436 771,227,839 168,617,260 2,195,575,488 341,799,406 81,178,430 27,261,738,859

Lebanon Middle East & Africa North America Europe Gulf Other Total

LBP’000 2013

LBP’000


Assets and liabilities are segregated as follows by major currencies:

MARKET RISKS

Market risk is defined as the risk of losses in on and off-financial position, arising from adverse movements in market prices. The riskssubject to Market Risk include: Interest Rate Risk and Equity Risk in the trading book, Foreign Exchange Risk and Commodities Risk.

The overall authority for market risk is vested in ALCO.

Foreign Exchange Risk

Foreign exchange risk arises from the exposure on banking assets and liabilities, denominated in foreign currencies.

DECEMBER 31, 2014LBP USD Euro Other Total

ASSETSCash and Central Banks 2,942,773,681 2,934,649,275 424,773,871 205,249,255 6,507,446,082Deposits with banks and financial institutions 205,870,369 884,339,923 235,665,838 113,318,802 1,439,194,932Loans to banks 77,164,847 204,444,370 4,926,357 - 286,535,574Loans and advances to customers 2,035,935,759 5,413,973,330 1,061,002,785 314,119,873 8,825,031,747Investment securities 7,099,286,558 2,724,213,588 377,935,240 262,979 10,201,698,365Customers' liability under acceptances 299,999 149,224,224 33,773,282 7,124,609 190,422,114Investments in associates 38,064,508 21,761,348 - - 59,825,856Assets acquired in satisfaction of loans 48,488,116 152,250,403 - - 200,738,519Investment properties - - 56,402,506 - 56,402,506Property and equipment 305,160,323 (1,047,426) 9,773,252 77,309,960 391,196,109Intangible assets 10,277,611 - 1,302,903 1,861,398 13,441,912Goodwill 48,903,653 - 6,750,819 - 55,654,472Other assets 85,589,221 107,271,401 89,187,526 46,132,893 328,181,041

TOTAL ASSETS 12,897,814,645 12,591,080,436 2,301,494,379 765,379,769 28,555,769,229

LIABILITIESDeposits and borrowings from banks 61,942,723 365,466,489 74,231,367 47,198,694 548,839,273Customers' accounts at amortized cost 8,865,536,728 11,812,653,317 2,052,892,359 403,732,352 23,134,814,756Customers' acceptance liability 299,999 149,224,224 33,773,282 7,124,609 190,422,114Other borrowings 955,562,121 437,574,295 9,629,451 - 1,402,765,867Subordinated loan - 34,340,663 18,160,021 - 52,500,684Certificates of deposit - 41,361,128 - - 41,361,128Other liabilities 235,018,970 65,134,660 24,174,725 9,724,121 334,052,476Provisions 29,600,637 1,480,274 1,534,804 5,797,488 38,413,203

TOTAL LIABILITIES 10,147,961,178 12,907,235,050 2,214,396,009 473,577,264 25,743,169,501

NET ASSETS 2,749,853,467 (316,154,614) 87,098,370 291,802,505 2,812,599,728


LBP’000


USD Euro Other TotalLBP

ASSETSCash and Central Banks 2,314,043,192 2,882,663,457 343,442,840 245,764,820 5,785,914,309Deposits with banks andfinancial institutions 153,156,436 1,006,824,105 101,913,138 106,583,822 1,368,477,501Loans to banks 87,831,094 - 5,153,686 - 92,984,780Loans and advances to customers 1,704,257,454 4,605,494,322 1,271,563,206 397,664,069 7,978,979,051Investment securities 5,904,567,125 2,797,923,537 444,981,199 10,133,935 9,157,605,796Customers' liability under acceptances 450,000 237,835,412 26,677,211 12,538,739 277,501,362Investments in associates 18,371,141 28,398,712 - - 46,769,853Assets acquired in satisfaction of loans 49,450,205 147,951,313 - - 197,401,518Investment properties - - 57,989,822 - 57,989,822Property and equipment 242,303,103 (1,049,974) 11,963,494 81,457,583 334,674,206Intangible assets 10,638,014 - 1,421,153 1,493,071 13,552,238Goodwill 44,816,144 - 7,637,618 - 52,453,762Other assets 51,162,030 46,605,416 87,636,990 24,103,041 209,507,477

TOTAL ASSETS 10,581,045,938 11,752,646,300 2,360,380,357 879,739,080 25,573,811,675

LIABILITIESDeposits and borrowings from banks 12,808,910 325,649,338 24,391,253 35,665,913 398,515,414Customers' accounts at amortized cost 7,973,676,084 10,649,363,246 2,209,103,492 455,406,037 21,287,548,859Customers' acceptance liability 450,000 237,835,412 26,677,211 12,538,739 277,501,362Other borrowings 333,347,742 439,428,502 15,252,147 - 788,028,391Subordinated loan - 34,340,663 20,545,551 - 54,886,214Other liabilities 146,170,320 52,102,471 12,751,056 20,530,351 231,554,198Provisions 24,388,342 1,220,373 1,734,952 13,875,361 41,219,028

TOTAL LIABILITIES 8,490,841,398 11,739,940,005 2,310,455,662 538,016,401 23,079,253,466

NET ASSETS 2,090,204,540 12,706,295 49,924,695 341,722,679 2,494,558,209



Not Subjectto Interest

Less than1 Year

1 to 5Years

Over5 Years

Total

FINANCIAL ASSETS:

Cash and Central Banks 904,049,224 1,953,941,735 1,244,388,300 1,683,535,050 5,785,914,309

Deposits with banks and financial institutions 212,984,924 1,155,492,577 - - 1,368,477,501

Loans to banks 476,831 18,598,515 41,063,434 32,846,000 92,984,780

Loans and advances to customers 418,570,251 6,289,043,285 763,953,390 507,412,125 7,978,979,051

Investment securities 411,009,545 889,619,453 3,488,979,331 4,367,997,467 9,157,605,796

Derivative assets held for risk management 1,314,767 - - - 1,314,767

TOTAL 1,948,405,542 10,306,695,565 5,538,384,455 6,591,790,642 24,385,276,204

FINANCIAL LIABILITIES:

Deposits and borrowings from banks 50,312,961 348,202,453 - - 398,515,414

Customers' accounts at amortized cost 1,876,255,296 19,341,521,328 69,772,235 - 21,287,548,859

Other borrowings 2,446,729 390,981,488 300,385,681 94,214,493 788,028,391

Subordinated loan 2,470,139 16,598,160 27,849,270 7,968,645 54,886,214

TOTAL 1,931,485,125 20,097,303,429 398,007,186 102,183,138 22,528,978,878

Interest Rate Risk

Financial assets and financial liabilities are allocated by maturity bands as follows:

DECEMBER 31, 2014

FINANCIAL ASSETS:

Cash and Central Banks 940,744,104 2,280,285,809 1,768,242,420 1,518,173,749 6,507,446,082

Deposits with banks and financial institutions 355,054,215 1,084,140,717 - - 1,439,194,932

Loans to banks 538,551 224,432,073 37,241,950 24,323,000 286,535,574

Loans and advances to customers 498,481,303 7,102,179,960 796,681,241 427,689,243 8,825,031,747

Investment securities 491,521,185 942,474,751 3,661,291,849 5,106,410,580 10,201,698,365

Derivative assets held for risk management 1,832,159 - - - 1,832,159

TOTAL 2,288,171,517 11,633,513,310 6,263,457,460 7,076,596,572 27,261,738,859




Other borrowings 5,111,680 523,131,860 542,540,245 331,982,082 1,402,765,867

Subordinated loan 2,469,461 3,485,683 46,545,540 - 52,500,684

Certificates of deposit 658,628 - 40,702,500 - 41,361,128

TOTAL 2,040,672,040 22,060,351,235 747,276,351 331,982,082 25,180,281,708

Not Subjectto Interest

Less than1 Year

1 to 5Years

Over5 Years

Total



LBP’000


LIQUIDITY RISK

Liquidity risk is the risk of being unable to meet net fundingrequirements. Liquidity risk can be caused by market disruptionsor credit downgrades, which may cause certain sources offunding to dry up immediately. To face this risk, managementdistributes its sources of funding and manages its assets

according to a cash policy that seeks to preserve an adequateliquidity balance and financial instruments than can bereadily liquidated in the financial market. Managementmanages the maturities of its assets and liabilities in a wayto provide and maintain a satisfactory liquidity ratio.

Up to3 months

3 monthsto 1 year

1 to 5years

Over5 years Total



Customers' accounts at amortized cost 18,097,425,301 3,128,870,735 61,212,248 40,575 21,287,548,859

Other borrowings 9,746,055 214,088,411 469,979,431 94,214,494 788,028,391

Subordinated loan 3,823 2,466,083 23,905,935 28,510,373 54,886,214

TOTAL FINANCIAL LIABILITIES 18,473,585,761 3,377,530,061 555,097,614 122,765,442 22,528,978,878

The table below shows the allocation of financial liabilities based on the earliest possible contractual maturity (undiscountedvalues). The expected maturities vary significantly from the contractual maturities, namely with regard to customers’ deposits:

DECEMBER 31, 2014





Other borrowings 36,853,157 323,304,133 692,892,495 349,716,082 1,402,765,867

Subordinated loan 2,469,461 18,156,643 31,874,580 - 52,500,684

Certificates of deposit 658,628 - 40,702,500 - 41,361,128

TOTAL FINANCIAL LIABILITIES 20,180,211,279 3,760,551,321 889,803,026 349,716,082 25,180,281,708

Up to3 months

3 monthsto 1 year

1 to 5years Total

Over5 years

LBP’000


45 FAIR VALUE OF FINANCIAL ASSETSAND LIABILITIES

The following table shows the carrying amounts and fair valuesof financial assets and liabilities recognized in the consolidatedfinancial statements, including their levels in the fair valuehierarchy. It does not include financial assets and financial

liabilities which are not measured at fair value and wherethe directors consider that the carrying amounts of these financialassets and liabilities are reasonable approximations of their fairvalue:

DECEMBER 31, 2014

Note CarryingAmount Level 1

FAIR VALUE

Level 2 Level 3 TOTAL

FINANCIAL ASSETS MEASURED AT FAIR VALUE:

Investments at fair value through profit or loss:

Equities and preference shares 9 39,496,357 35,367,497 - 4,128,860 39,496,357Lebanese Treasury bills 9 287,574,670 - 287,574,670 - 287,574,670Lebanese Government bonds 9 25,632,031 - 25,632,031 - 25,632,031Foreign Government bonds 9 13,063,681 - 13,063,681 - 13,063,681Foreign Eurobonds issued by banks 9 182,487,388 - 182,487,388 - 182,487,388Certificates of deposit issued by Central Bank of Lebanon 9 436,648,043 - 436,648,043 - 436,648,043Mutual fund 9 3,502,722 - 3,502,722 - 3,502,722

Investments at fair value through other comprehensive income:

Quoted equities 9 11,139,141 11,139,141 - - 11,139,141Unquoted equity 9 240,533,685 - - 240,533,685 240,533,685Other unquoted equities 9 25,889,032 - - 25,889,032 25,889,032

TOTAL 1,265,966,750 46,506,638 948,908,535 270,551,577 1,265,966,750

FINANCIAL ASSETS NOT MEASURED AT FAIR VALUE:

Term placement with Central Bank of Lebanon 5 5,219,771,900 - 5,445,516,349 - 5,445,516,349Loans and advances to banks 7 286,535,574 - 278,608,712 - 278,608,712Loans and advances to customers 8 8,825,031,747 - 8,786,784,997 - 8,786,784,997

Investments at amortized cost:

Preference shares 9 17,333,235 - 17,333,235 - 17,333,235Lebanese Treasury bills 9 3,190,518,195 - 3,196,704,383 - 3,196,704,383Lebanese Government bonds 9 2,183,582,745 - 2,216,845,729 - 2,216,845,729Foreign Government bonds 9 155,768,232 - 157,328,209 358,785 157,686,994Foreign Eurobonds issued by banks 9 14,018,968 5,445,389 9,506,192 - 14,951,581Subordinated Eurobonds 9 1,605,016 - 1,605,016 - 1,605,016Certificates of deposit issued by Central Bank of Lebanon 9 3,285,206,745 - 3,329,222,519 - 3,329,222,519Certificates of deposit issued by banks 9 40,565,096 - 40,469,643 - 40,469,643Corporate bonds 9 41,449,629 - 42,326,675 - 42,326,675Asset-backed securities 9 5,683,754 - 5,683,754 - 5,683,754

TOTAL 23,267,070,836 5,445,389 23,527,935,413 358,785 23,533,739,587

FINANCIAL LIABILITIES NOT MEASURED AT FAIR VALUE:

Other borrowings 19 1,402,765,867 - 1,392,681,139 - 1,392,681,139Subordinated loan 20 52,500,684 - 54,824,495 - 54,824,495

TOTAL 1,455,266,551 - 1,447,505,634 - 1,447,505,634


LBP’000


Level 1CarryingAmount

NoteLevel 2 Level 3 TOTAL

FINANCIAL ASSETS MEASURED AT FAIR VALUE:

Investments at fair value through profit or loss:

Equities and preference shares 9 38,685,130 36,063,770 - 2,621,360 38,685,130Lebanese Treasury bills 9 262,375,164 - 262,375,164 - 262,375,164Lebanese Government bonds 9 67,885,178 - 67,885,178 - 67,885,178Foreign Government bonds 9 19,546,435 19,546,435 - - 19,546,435Foreign Eurobonds issued by banks 9 173,590,364 45,345,843 128,244,521 - 173,590,364Certificates of deposit issued by Central Bank of Lebanon 9 79,483,848 - 79,483,848 - 79,483,848

Investments at fair value through other comprehensive income:

Quoted equities 9 9,772,665 9,772,665 - - 9,772,665Unquoted equity 9 177,256,873 - - 177,256,873 177,256,873Other unquoted equities 9 23,746,057 - - 23,746,057 23,746,057

TOTAL 852,341,714 110,728,713 537,988,711 203,624,290 852,341,714

FINANCIAL ASSETS NOT MEASURED AT FAIR VALUE:

Term placement with Central Bank of Lebanon 5 4,658,090,228 - 4,899,115,440 - 4,899,115,440Loans and advances to banks 7 92,984,780 - 83,378,762 - 83,378,762Loans and advances to customers 8 7,978,979,051 - 8,001,005,020 - 8,001,005,020

Investments at amortized cost:

Preference shares 9 12,810,735 - 12,810,735 - 12,810,735Lebanese Treasury bills 9 2,301,676,984 - 2,290,512,018 - 2,290,512,018Lebanese Government bonds 9 2,213,342,034 - 2,192,465,821 - 2,192,465,821Foreign Government bonds 9 176,058,996 131,461,753 34,440,149 358,785 166,260,687Foreign Eurobonds issued by banks 9 18,796,348 14,780,226 5,354,497 - 20,134,723Subordinated Eurobonds 9 1,605,299 - 1,605,299 - 1,605,299Certificates of deposit issued by Central Bank of Lebanon 9 3,466,094,456 - 3,471,655,321 - 3,471,655,321Certificates of deposit issued by banks 9 37,905,239 - 37,970,131 - 37,970,131Corporate bonds 9 75,447,516 67,528,761 8,853,797 - 76,382,558Asset-backed securities 9 1,526,475 - 1,526,475 - 1,526,475

TOTAL 21,035,318,141 213,770,740 21,040,693,465 358,785 21,254,822,990

FINANCIAL LIABILITIES NOT MEASURED AT FAIR VALUE:

Other borrowings 19 788,028,391 - 774,795,283 - 774,795,283Subordinated loan 20 54,886,214 - 58,497,133 - 58,497,133

TOTAL 842,914,605 - 833,292,416 - 833,292,416

FAIR VALUE


There have been no transfers between Level 1, Level 2 andLevel 3 during the period.

The directors consider that the carrying amounts of cash,compulsory and other short term deposits with Central

Bank, deposits from banks and accounts payable approximatetheir fair values due to the short-term maturities of these instru-ments. For customers’ accounts, this is largely due to theirshort term contractual maturities.

Valuation techniques, significant unobservable inputs, and sensitivity of the input to the fair value

The following table gives information about how the fair values of financial instruments included in the consolidated financialstatements, are determined (Level 2 and Level 3 fair values) and significant unobservable inputs used:

FINANCIALINSTRUMENTS


DECEMBER 31, 2014Date of

ValuationValuation Technique and Key Inputs

SignificantUnobservable

Inputs

Lebanese Treasury bills 31-Dec-14 DCF at a discount rate determined based on the yield curve N/Aapplicable to Lebanese Treasury bills, adjusted for illiquidity

Certificates of deposits in LBP 31-Dec-14 DCF at a discount rate determined based on the yield curve N/Aissued by Central Bank applicable to Lebanese Treasury bills, adjusted for illiquidity

Certificates of deposits in foreign 31-Dec-14 DCF at discount rates based on observable yield curves N/Acurrencies issued by Central Bank at the measurement date

Lebanese Government bonds 31-Dec-14 DCF at discount rates determined based on the yield on USA Treasury bills N/Aand the Credit Default Swap applicable to Lebanon subject to illiquidity factor

Term deposits with 31-Dec-14 DCF at a discount rate determined based on the yield on USA Treasury bills N/ACentral Bank of Lebanon and the Credit Default Swap applicable to Lebanon subject to illiquidity factor

Loans and advances to customers 31-Dec-14 DCF at discount rates based on average rate of return of N/Athe receivables bearing fixed interest rate for more than one year

Foreign Government bonds 31-Dec-14 Quoted prices for similar assets in active markets N/A

Unquoted equity at FVTOCI 31-Dec-14 Income approach (DCF)

Other unquoted equities 31-Dec-14 N/A N/Aat FVTOCI

Other borrowings 31-Dec-14 DCF at discount rates based on average rate of return of the payables N/Abearing fixed interest rate for more than one year

Subordinated loan 31-Dec-14 DCF at discount rates based on average rate of return of the payables N/A bearing fixed interest rate for more than one year

Yearly growth rate 1%; discount rate 12%; growthrate at perpetuity 2%



The Group’s capital is split as follows:

Tier I capital: Comprises share capital after deduction of Treasuryshares, shareholders’ cash contribution to capital, preferenceshares, certain reserves from appropriation of profits, retainedearnings and non-controlling interests. Goodwill is deducted fromTier I capital.

Tier II capital: Comprises qualifying subordinated liabilities,collective impairment allowance and cumulative change in fairvalue for investment at fair value through other comprehensiveincome.

The consolidated financial statements were approved by the Bank’s Board of Directors in its meeting held on April 16, 2015.

The Group has complied with the imposed capital requirements throughout the period.

Tier I capital Tier II capitalTotal regulatory capital

Credit risk Market risk Operational risk

RISK-WEIGHTED ASSETS OF CREDIT, MARKET AND OPERATIONAL RISKS

CAPITAL ADEQUACY RATIO – TIER I

CAPITAL ADEQUACY RATIO – TIER I AND TIER II

1,993,396,000 194,599,000

2,187,995,000

13,224,139,000 412,266,000

1,225,395,000

14,861,800,000

13.41%

14.72%

The Group manages its capital to comply with the capital adequacy requirements set by the Central Bank of Lebanon, the Group’s leadregulator. The Group’s foreign entities are also required to respect particular ratios according to the competent authoritiesof supervisions.

46 CAPITALMANAGEMENT

47 APPROVAL OF THEFINANCIAL STATEMENTS

2014LBP’000 20132,174,564,000

212,580,0002,387,144,000

13,904,779,000 615,931,000

1,319,938,000

15,840,648,000

13.73%

15.07%

- Bancassurance SAL

- International Payment Network SAL

PARENT COMPANY

124 BRANCHESSUBDIVIDED AS FOLLOWS:

• 75 Fransabank branches

• 47 BLC Bank branches

• 1 branch for Fransa Invest Bank

• 1 branch for BLC Invest

- Fransabank SAL75 branches

• 20 branches in Beirut

• 26 branches in Mount Lebanon

• 11 branches in Northern Lebanon

• 7 branches in Bekaa Region

• 10 branches in Southern Lebanon

• 1 branch non-operational

SUBSIDIARIES

ASSOCIATED COMPANIES

- BLC Bank SAL (with BLC Services & BLC Finance)47 branches

• 9 branches in Beirut

• 20 branches in Mount Lebanon

• 6 branches in Northern Lebanon

• 3 branches in Bekaa Region

• 3 branches in Southern Lebanon

• 6 branches non-operational

- Fransa Invest Bank SAL (FIB)

- BLC Invest SAL

- Société Générale Foncière SAL (Sogefon)

- Lebanese Leasing Company SAL (LLC)

- Fransabank Insurance Services Company SAL

- Switch & Electronic Services SAL

- Société Express SARL

LEBANON - PARENT COMPANY, SUBSIDIARIES & ASSOCIATES

GROUP NETWORK

MOUSSAITBEH Al Lou’loua Bldg., Selim Salam Str. Tel (961) 1 308791/2/3 (961) 70 677651Fax (961) 1 305189

SAIFIAndraos Bldg., El-Arz Str.Tel (961) 1 442418 (961) 3 650703Fax (961) 1 442417

STARCOStarco Center, Bloc C,Omar Daouk Str.Tel (961) 1 367346/8Fax (961) 1 367350

TABARISSaifi 311 Bldg., Fouad Chehab AvenueTel (961) 1 203422 (961) 1 328600Fax (961) 1 201141

TARIK JDIDEKassar Bldg., Loubos Str.Tel (961) 1 702930/1 (961) 3 650705Fax (961) 1 309090

VERDUNVerdun 730 Center,Rachid Karame Str., 1st FloorTel (961) 1 788690/1/2/3/4 (961) 3 650709Fax (961) 1 788691

VERDUN (MAZRAA)Diamond Tower, Rachid Karame Str., 1st FloorTel (961) 1 797079Fax (961) 1 797082

MOUNT LEBANON

ALEYSaid Chehayeb Bldg. (DANA),Main RoadTel (961) 5 557042/3/4Fax (961) 5 557046

ANTELIAS Order Antonin Maronite Bldg.,Catholicossat Armenien Str.Tel (961) 4 417240 /1Fax (961) 4 412990

Fransabank SAL

HEADQUARTERS

Fransabank Center, Hamra Str.,

P.O.Box 11-0393

Riad El Solh Beirut 1107 2803

Lebanon

Tel (961) 1 340180/8

(961) 1 745761/4

(961) 3 650700

Fax (961) 1 354572

Cable FRANSBANK

Swift FSAB LB BX

Email [email protected]

Website www.fransabank.com

Call Center (961) 1 734000

1552

Forex Tel (961) 1 343706

(961) 1 344216

Reuters FRBK

Retail@FransabankFransabank Center,

Hamra Str., Ground Floor

Tel (961) 1 340180/8

Fax (961) 1 740281

BEIRUT

AIN EL MREISSEHNawrass Bldg., Opposite Ain El Mreisseh MosqueTel (961) 1 373240/1/2Fax (961) 1 373243

ASHRAFIEH (RMEIL)Akra Bldg., St. Louis Str., Rmeil Tel (961) 1 571844/499Fax (961) 1 446804

ASHRAFIEH (SASSINE)Notre Dame Center, Sassine SquareTel (961) 1 203466/7Fax (961) 1 200651

ASHRAFIEH (SODECO)Dakota Bldg., SodecoTel (961) 1 423573/4/5 (961) 70 677360Fax (961) 1 423577

BAB IDRISS Fransabank Bldg., (Ex. Ahli InternationalBank Bldg.), Omar Daouk Str., Bab Idriss,Beirut Central DistrictTel (961) 1 970951 Fax (961) 1 970952

BADARO Khatoun Bldg., Badaro Str.Tel (961) 1 387024 (961) 1 386900/1Fax (961) 1 390409

BASTAFransabank Bldg., Cross Roadsof Saleh Ben Yehia, Basta Str.Tel (961) 1 663116/8Fax (961) 1 663117

FOCH Focheville Bldg., Foch Str.Beirut Central DistrictTel (961) 78 809280 (961) 1 998230/240Fax (961) 1 998230

HAMRA Fransabank Center, Hamra Str.,1st FloorTel (961) 1 340180/1/8 (961) 1 750679Fax (961) 1 341413

HAMRA (RAS BEIRUT)Hoss Bldg., Emile Eddé Str., 2nd FloorTel (961) 1 340270 Fax (961) 1 742843

HAMRA (SADAT)Itani Bldg., Sadat Str.Tel (961) 1 743135/6Fax (961) 1 743138

JNAHAssaf Bldg., Adnan El Hakim Str.Tel (961) 1 857972/3/4Fax (961) 1 857972

MAR ELIASMetco Center, Moussaitbeh,Mar Elias Str.Tel (961) 1 818529/30 (961) 1 817770Fax (961) 1 300617


SARBAAntoine & Youssef Kallas Bldg.,Sarba HighwayTel (961) 9 640293 (961) 9 640060Fax (961) 9 640543

SIN EL FILKibinian & Kazangian Bldg.,Delta Center, Horch TabetTel (961) 1 510571/2/3 (961) 3 650708Fax (961) 1 481680

ZOUKZouk Mosbeh, Jeita Main RoadTel (961) 9 217271/2/3Fax (961) 9 219696

NORTH

CHEKKA Ragheb Center, Main RoadTel (961) 6 540642/3Fax (961) 6 545035

DAHR EL AIN Michel Frangieh Bldg., Main Road Dahr El Ain, KouraTel (961) 78 809580/680Fax (961) 1 340180

HALBAMarwan Ibrahim Bldg., Main RoadTel (961) 6 693330/1/2Fax (961) 6 692001

MERYATAAyoush Bldg., Ardeh Str.Tel (961) 6 255560/1/2Fax (961) 6 255564

TRIPOLI (ABOU SAMRA)Sayadi Bldg., Saadoun SquareTel (961) 6 424617/9Fax (961) 6 424611

TRIPOLI (AL MINA)Hassan & Hassane Abbas Bldg.,Bawabet Al Mina Str.Tel (961) 6 611524 (961) 6 611249/50Fax (961) 6 611250

TRIPOLI (BOULEVARD)Awkaf Bldg., Fouad Chehab Blvd.Tel (961) 6 430106 Fax (961) 6 432720

BAAKLINE Akram El Eid Center, El MarjTel (961) 5 303005 (961) 5 301267Fax (961) 5 303006

BAUCHRIEH Bakhos & Aoun Bldg., Square One CenterTel (961) 1 897490/1/2Fax (961) 1 898786

BIKFAYA Adel Dagher Bldg., Bikfaya SquareTel (961) 4 986901/2 (961) 70 910700Fax (961) 4 986903

BOURJ EL BRAJNEH Ahmad Nabbouh Bldg.,Ain El Sekkeh, Dr. Hosni Jalloul Str.Tel (961) 1 453200/1 (961) 3 740410Fax (961) 1 453203

BOURJ HAMMOUD Harboyan Center, Near St. Vartan Church, Bourj Hammoud entrance, 2nd FloorTel (961) 1 258101/2/3Fax (961) 1 264446

CHEHIMWehbe Center, Main RoadTel (961) 7 241916/7Fax (961) 7 241921

CHIYAH Tayyar Bldg., facing Moawad junctions, Ghobeiri Blvd., ChiyahNext to the Ministry of LaborTel (961) 1 279671/3 (961) 3 740412Fax (961) 1 279680

CHOUEIFAT Mahmoud El Kheshen Bldg.,Haret Al Oumara, Saida Main RoadTel (961) 5 431152 (961) 5 431178Fax (961) 5 431183

DORA Kassardjian Bldg., Dora Highway, 1st Floor Tel (961) 1 899121 Fax (961) 1 894721

ELYSSAR (MAZRAAT YACHOUH)Fransabank Bldg., Mazraat Yachouh, Bikfaya Main RoadTel (961) 4 914803/4/7Fax (961) 4 914805

FURN EL CHEBBAK Saadeh Center,Facing Planete Abraj, Beirut/Damascus Str.Tel (961) 1 293025/6Fax (961) 1 293027

GALERIE SEMAAN Hadath, Galerie Semaan Bldg. & Str. Tel (961) 5 957657 - (961) 5 954630Fax (961) 5 954632

HADATH Bechara Beik Karam Str., Al Saha, Near Al Saydeh Church, Main RoadTel (961) 5 463975/7Fax (961) 5 463980

HAZMIEH Unigroup Bldg., Sayyad SquareTel (961) 5 459602 (961) 5 450350Fax (961) 5 457312

JAL EL DIB Le Baron Center, Jal El Dib Highway,1st FloorTel (961) 1 889884/5Fax (961) 1 902959

JBEILByblos Sun Bldg., Jbeil RoundaboutTel (961) 9 945108 (961) 3 650719Fax (961) 9 540968

JDEIDEH Barbar Bou-Jawdeh Bldg. & Str., 1st FloorTel (961) 1 881680Fax (961) 1 883891

JOUNIEHSaint Paul Center, P.T.T. Str.Tel (961) 9 830190/1Fax (961) 9 830192

KASLIKDamaa Center, Zouk HighwayTel (961) 9 210769 Fax (961) 9 210773

MANSOURIEHMaalouf Center, Opposite P.T.T., Main RoadTel (961) 4 409840/1Fax (961) 4 409840

MREIJEHChahine Bldg., Hadi Nasrallah Blv.Tel (961) 1 469014/015/016 Fax (961) 1 469006

GROUP NETWORK

TYR (ABBASSIEH)Khalaf Bldg., Jal El Bahr, Main RoadTel (961) 7 740388 (961) 7 740486Fax (961) 7 740084

OFF-PREMISES ATMS

BEIRUT

Beirut Central District,Biel Convention Center

Beirut Central District, UFA Insurance

Verdun, Verdun 730 Center

Verdun, Verdun 732 Center

Adlieh, General Security

Mar Elias, Caserne El Helou

MOUNT LEBANON

Bauchrieh, Sin El Fil Blvd., Chaer Center

Bourj Hammoud, Total Medawar

Dbayeh, Club La Marina

Hazmieh, City Center Mall

Yarzeh, Ministry of Defense

Aley, Kabrechmoun, Obeid Supermarket

Faraya, Mema Gas Station

Aoukar, US Embassy

Jounieh, Caliprix Supermarket

Jbeil, Cordahi Center

Ghazir, Açaf Flora

SOUTH LEBANON

Tyr, Electricité du Liban

Nakoura, United Nations Center

BEKAA

Zahle, Tell Chiha Hospital

NORTH

Ehden, Serial Hotel Ehden

Kalamoun, Miramar Hotel

TRIPOLI (GEMMAYZAT)Fattal Bldg., Gemmayzat Str.Tel (961) 6 430012/3Fax (961) 6 625735

TRIPOLI (MAARAD)Ordre des Ingénieurs Bldg. ,« Damm et Farez » DistrictTel (961) 78 809780Fax (961) 6 411514

TRIPOLI (TELL)Gaston Habib Bldg., Kayal SquareTel (961) 6 442815 (961) 6 441881/2Fax (961) 6 441881/2

ZGHARTAEl-Kareh & Zakhia Center, Road 1,Zgharta El-AbbehTel (961) 6 667951/2/3 (961) 70 676255Fax (961) 6 667956

BEKAA

BAALBECKMohammad Said El Lakiss Bldg., Ras Al-Ayn, Main RoadTel (961) 8 378800/1/2 (961) 8 371800/1Fax (961) 8 370379

BEDNAYEL Ali Fouad Sleiman Bldg., Main RoadTel (961) 8 911124/5Fax (961) 8 911124

CHTAURAHaddad Bldg., Main RoadTel (961) 8 541988 (961) 8 542498Fax (961) 8 543843

LABOUENear Laboue Square, Main RoadTel (961) 8 230801/2/3Fax (961) 8 230805

RIYAKHosch Hala, Main RoadTel (961) 8 900333/444/555Fax (961) 8 900107

ZAHLE (BARBARA) Ghossain Bldg., St. Barbe Str.Tel (961) 8 811060 (961) 8 803715Fax (961) 8 822335

ZAHLE (WARDE) Warde Center, Main RoadTel (961) 8 803566 (961) 8 821411Fax (961) 8 810187

SOUTH

BINT JBEILFransabank Bldg., Saf El-Hawa,Main RoadTel (961) 7 450701/2/3/4 (961) 3 239092Fax (961) 7 450701

GHAZIEH Khalifeh Center, Ghazieh, Main RoadTel (961) 7 224430/60 Fax (961) 7 224480

JEZZINE St. Therese Center, Jezzine HighwayTel (961) 7 780941 (961) 7 780052Fax (961) 7 780941

MARJEYOUN Raef Abla Bldg., Main RoadTel (961) 7 830139 (961) 7 830140Fax (961) 7 830139

NABATIEHKodeih Center, Sabbah Str.Tel (961) 7 760258 (961) 7 764264Fax (961) 7 761750

NAKOURAHamzeh Bldg., Near UNIFIL, Main Road, 1st FloorTel (961) 7 460235/6/7 (961) 3 067702Fax (961) 7 460236

SAIDAFransabank Bldg., Riad El Solh Str.Tel (961) 7 722180/1 (961) 3 650701Fax (961) 7 721194

SAIDA (FAKHREDDINE)Moukhalasieh Bldg., Fakhreddine Str., 1st FloorTel (961) 7 728930Fax (961) 7 728931

TYRAbou Saleh Bldg., Senegal Str.,Tyr Main Entrance, 1st FloorTel (961) 7 345253 (961) 7 345315Fax (961) 7 345308


BLC BANK SAL

BLC Bank Bldg., Adlieh SquareP.O.Box 11-1126 Beirut, LebanonTel (961) 1 387000

(961) 1 429000Fax (961) 1 616984Email [email protected] www.blcbank.com

FRANSA INVEST BANK SAL (FIB)

Fransabank Center, Hamra Str., 1st FloorP.O.Box 11-0393 Riad El Solh Beirut

1107 2803, LebanonTel (961) 1 745978/9Fax (961) 1 351030Email [email protected] www.fibleb.com

BLC INVEST BANK SAL

Royal Tower Bldg., Nicolas Turk Str., AshrafiehP.O.Box 17-5454 Beirut, LebanonTel (961) 1 566207/8/9 Fax (961) 1 565311Email [email protected]

LEBANESE LEASING COMPANY SAL (LLC)

Fransabank Center, Hamra Str., 9th Floor P.O.Box 11-0144 Beirut, LebanonTel (961) 1 738610/1/2/3

(961) 1 750310/1Fax (961) 1 738614Email [email protected]

BANCASSURANCE SAL

Gefinor Center, Clemenceau Str., Bloc A, 2nd FloorP.O.Box 11-6729 Beirut, LebanonTel (961) 1 744403Fax (961) 1 738347Email [email protected] www.ebancassurance.com

SOCIÉTÉ GÉNÉRALE FONCIÈRE SAL (SOGEFON)

Fransabank Center, Hamra Str., 6th Floor P.O.Box 11-0393 Riad El Solh Beirut

1107 2803, LebanonTel (961) 1 749418Fax (961) 1 340180 - Ext. 1816

GROUP NETWORK

LEBANON – SUBSIDIARIES & ASSOCIATE


Headquarters & Main Branch 104, Champs-Elysées Avenue, 75008 Paris, FranceTel (33) 1 53 76 84 00Fax (33) 1 45 63 57 00Swift FRAF FR PPEmail [email protected]


Headquarters & Main Branch45B, Lot Petite Provence, Sidi Yahia, Hydra, 16405, Algiers, AlgeriaTel (213) 21 48 12 96 / 21 48 27 48 - HeadquartersTel (213) 21 48 00 29 / 21 48 02 12 - Main BranchFax (213) 21 60 66 06 Swift FSBK DZ ALEmail [email protected] www.fransabank.dz

New Headquarters & New Main Branch(under construction)Résidence des Pins, Bloc A, Commune de Chéraga, Algiers, Algeria

Oran Cité Dar El Beida, Cooperative El-Zouhour, no.12, Oran, AlgeriaTel (213) 41 46 09 06Fax (213) 41 46 07 05

ConstantineCité Ali Besbas, Lot G no 23, Sidi Mabrouk, Constantine, AlgeriaTel (213) 31 62 93 66Fax (213) 31 63 06 40

Blida (under construction)Avenue Mokhtar Kertli, Lotissement Les Palmiers no. 01, Blida, Algeria

FRANSABANK SYRIA SA

DamascusHeadquarters & Main Branch Al Mahdi Ben Barakeh Str., Al Otaki Bldg. Abou Remmaneh, Damascus, SyriaTel (963) 11 33 53 030Fax (963) 11 33 53 037Swift FSBS SY DA Email [email protected]

Baghdad StreetBaghdad Str., facing Lycée (Al Horria), Damascus, SyriaTel (963) 11 23 26 890/1 Fax (963) 11 23 26 892

Rif DamascusSit ZaynabSit Zaynab Str., Safir Hotel, Rif Damascus, SyriaTel (963) 11 64 86 011Fax (963) 11 64 86 014(Temporarily closed)

AleppoAl AziziyehAl Aziziyeh Str., Shallal Roundabout, facing Public Garden,Kurdi Bldg., Aleppo, SyriaTel (963) 21 22 42 601/2Fax (963) 21 22 42 603

FaisalFaisal Avenue, facing Georges Salem Institute, Aleppo, SyriaTel (963) 21 22 18 265/8 Fax (963) 21 22 18 270

Homs Hachem Al Atasi Avenue, Plaza Bldg., Homs, SyriaTel (963) 31 24 56 030/1Fax (963) 31 24 56 033(Temporarily closed)

Tartous Thawra Avenue, Ali Abdel Latif Ismail Bldg., Tartous, Syria Tel (963) 43 32 90 60Fax (963) 43 32 90 64

Latakia West Ridge, Latakia, Syria Tel (963) 41 45 98 29/30/31Fax (963) 41 45 99 07

Damascus Free zoneBaramkeh, Jamarek Sq., Free Zone, Damascus, SyriaTel (963) 11 23 21 008Fax (963) 11 21 33 184

FRANCE

ALGERIA

SYRIA


OVERSEAS SUBSIDIARIES

BELARUS IRAQ

FRANSABANK OJSC

MinskHeadquarters & Main Branch 95A, Nezavisimosty Avenue,220012 Minsk, Republic of BelarusTel (375) 17 389 36 36 Fax (375) 17 389 36 37Swift GTBN BY 22Email [email protected] www.fransabank.by

Branch 1 4 Kalvariyskaya Str., 220004 Minsk, Republic of BelarusTel (375) 17 389 37 59 Fax (375) 17 210 07 15

Branch 2 9 Dombrovskaya Str., 220140, Minsk, Republic of BelarusTel (375) 17 389 37 47Fax (375) 17 313 29 08

Branch 37 Jipunovitcha Str., 220124, Minsk, Republic of BelarusTel/Fax (375) 29 344 82 07

Gomel5A Krasnoarmeiskaya Str., 246017 Gomel, Republic of BelarusTel/Fax (375) 23 275 02 48

(375) 23 275 03 39(375) 23 275 02 53

Grodno 10, Dominikanskaya Str., 230023 Grodno, Republic of BelarusTel (375) 15 277 35 30Fax (375) 15 277 04 06

BrestBranch 116 Masherova Ave, 224022 Brest, Republic of BelarusTel / Fax (375) 16 253 40 34

Branch 246 Sovetskaya Str., 224005 Brest, Republic of BelarusTel/Fax (375) 16 223 56 05

Lida12, Kyaza Gedechina Blvd., 231291 Lida, Republic of BelarusTel (375) 15 452 88 58Fax (375) 15 460 61 37

FRANSABANK SAL, IRAQ BRANCHES

Erbil Headquarters & Branch100 m Str., Facing Cristal Erbil Hotel, Kurdistan Region, IraqTel (964) 771 822 9164Fax (964) 750 760 9118Email [email protected]

[email protected]

Baghdad Dr. Salman Faeq Str., Al Wahad District 902/14, Bldg. 48Karrada, Baghdad, IraqTel (964) 781 452 6312Fax (964) 771 822 9163

CYPRUS

USB BANK PLCSUBSIDIARY OF BLC BANK

Headquarters

83 Digeni Akrita Avenue, 1070 Nicosia, CyprusTel (357) 22 88 33 33Fax (357) 22 87 58 99Swift UVNK CY 2NEmail [email protected] www.usb.com.cy

14 branches subdivided into 5 branches in Nicosia3 branches in Limassol3 branches in Paphos2 branches in Famagusta 1 branch in Larnaca

GROUP NETWORK

SUDAN

UAE (ABU DHABI)

CUBA (LA HABANA)

UNITED CAPITAL BANK

Headquarters & Main Branch Plot 411, Square 65, Mamoun Beheiry Str., South the Green SquareP.O.Box 8210 Al Amarat, Khartoum, SudanTel (249) 183 24 77 00 - Headquarters & Main BranchFax (249) 183 23 50 00 - Headquarters & Main BranchSwift CBSK SD KHEmail [email protected] www.bankalmal.net

KhartoumPlot 130, Square 8, Industry Str., North Bahri, P.O.Box 1173 Khartoum, SudanTel (249) 185 32 40 01 Fax (249) 185 32 44 80

RabakPlot 390, Square 3, Khartoum Str.P.O.Box 203 Rabak, SudanTel (249) 572 82 94 81Fax (249) 572 82 94 80

Omdurman Plot 6, Square 5/4, Alarda North, South Hilal Stadium, OmdurmanP.O.Box 1173 Khartoum, SudanTel (249) 183 73 19 99 Fax (249) 183 73 19 98

FRANSABANK SAL

Calle 72 n 505 e/5ta - AVE. y 5ta A, Miramar Playa - Ciudadde la Habana - CubaTel (537) 204 92 72 / 204 93 05/6Fax (537) 204 92 73Email [email protected]

BLC BANK SAL

Khalidiya Park Bldg., 1st Floor, Khalidiya Str.,P.O. Box 6204, Abu Dhabi, UAETel (971) 2 65 05 777Fax (971) 2 65 05 778


OVERSEAS ASSOCIATE REPRESENTATIVE OFFICES

w w w . f r a n s a b a n k . c o m

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