OFFERING CIRCULARIssuance by Société Générale de Banque au Liban S.A.L.

of Series 2018/A Non-Cumulative Perpetual Convertible Preferred Shares

(the “Preferred Shares”)

2018

(“ ”)

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July 2018

2018 ����

SOCIETE GENERALE DE BANQUE AU LIBAN S.A.L (Incorporated as a joint stock company under Lebanese Laws)

List of Banks No 19. Commercial Registry: Beirut 3696 USD 125,000,000

8.33% Perpetual Non-Cumulative Redeemable Convertible Series 2018/A Preferred Shares __________________________

Number of Preferred Shares: 12,500 (Twelve Thousand Five Hundred)

Issue Size: USD 125,000,000 (United States Dollars One Hundred Twenty-Five Million). The Issue Size

may also be increased upon the Bank’s sole discretion.

Dividend Rate: 8.33% per annum before deduction of the applicable withholding tax.

Payment Date: Annually, starting from 2019 (i.e. with respect to the distribution of the prorated dividends

pertaining to the financial year ended December 31st, 2018) and so forth, subject each time to

the approval by the Bank’s Ordinary General Assembly (“OGA”) of the distribution of dividends

pertaining to the previous financial year.

Redemption: (i) at any time after the Issue Date in case of occurrence of a “Regulatory Event” (as defined

below), and

(ii) save as provided for under paragraph (i) above, for the first time, within one hundred and

fifty (150) days following the date of the OGA that will approve the Bank’s audited annual

accounts for the financial year 2022 provided that a period of five years elapses as of the date

of meeting of the Bank's Extraordinary General Assembly that shall ascertain the proper

execution of the Bank's capital increase through the issuance of the Series 2018/A Preferred

Shares, and

(iii) for the subsequent years, within one hundred and fifty (150) days following the date of each

OGA that will approve the Bank’s audited annual accounts of the preceding financial year.

Issue Price: USD 10,000 (Ten Thousand United States Dollars) per share, of which the amount equivalent to

LBP 258,000 (Two Hundred Fifty-Eight Thousand Lebanese Pounds) shall represent the Nominal

Value per preferred share (as defined below), and the balance denominated in U.S. Dollars shall

constitute the issue premium.

Nominal Value: LBP 258,000 (Two Hundred Fifty-Eight Thousand Lebanese Pounds) per preferred share.

Minimum Subscription: USD 50,000 (Fifty Thousand United States Dollars) and integral multiples of USD 10,000 (Ten

Thousand United States Dollars) in excess thereof.

Listing: The Bank has no intention to list the Series 2018/A Preferred Shares on the Beirut Stock

Exchange or on any other foreign Stock Exchange

Liquidation Preference: In the event of the winding-up and liquidation of the Bank, the holders of Series 2018/A

Preferred Shares shall be entitled to receive from the remaining assets of the Bank to be

distributed among the shareholders, prior to the settlement of any sums related to the common

shares of the Bank, an amount in Lebanese Pounds per each preferred share equaling as at

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the payment date the Issue Price denominated in United States Dollars (i.e. a sum of

US$10.000), in addition to any declared but unpaid dividends pertaining to the Series 2018/A

Preferred Shares.

Mandatory Conversion: In case of occurrence of a “Trigger Event” (as defined below), all the Series 2018/A Preferred

Shares then outstanding shall be, upon provision of a “Conversion Notice” (as defined below),

mandatorily and finally converted into common shares of the Bank without the need for the

consent of the holders of the Series 2018/A Preferred Shares, at a rate of one (1) common

share per two (2) Preferred Shares Series 2018/A subject to (i) adjustment towards reflecting

any stock split or reverse stock split affecting the Bank’s share capital (but not any other event)

(the “Adjustment Event”), and (ii) obtaining the necessary approvals from the Central Bank of

Lebanon (“Mandatory Conversion”).

In no event may the converted shares be reconverted into preferred shares after the date of

their conversion into common shares, even if the Trigger Event ceases to exist.

The occurrence of a Mandatory Conversion shall not be considered as an event of default and

may not give rise to the preferred shareholders’ right to petition for the insolvency or the

winding-up of the Bank.

Following a Mandatory Conversion, the Bank will be fully discharged and irrevocably released

from any and all obligations vis-à-vis the holders of the Preferred Shares Series 2018/A in

respect of such series of preferred shares, immediately upon the registration of the relevant

common shares with Midclear SAL which should occur within a maximum period of ninety (90)

days.

For the avoidance of doubt, the conversion of any other series of convertible preferred shares

or securities issued by the Bank shall not trigger or result in the conversion of the Series

2018/A Preferred Shares into common shares of the Bank under any circumstances

whatsoever.

Optional Distribution Cancelation: The Bank may at any time, even in case of a mandatory conversion, cancel any distribution of

dividends resolved by the OGA for any relevant year in its absolute discretion taking into

account its financial situation and its solvency. In such event, the right of the holders of Series

2018/A Preferred Shares to receive the Fixed Annual Dividend set out above shall become

void de jure and will not be carried forward to the next financial year. The cancelation of any

dividends distribution shall not be considered as an event of default and may not give rise to

the preferred shareholders’ right to petition for the insolvency or the winding-up of the Bank.

Issue Date August 30th, 2018 (Tentative).

The terms defined above shall be further detailed later in this Offering Circular, notably in section 10 thereof entitled “Description of the Share Capital of the Bank”.

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EACH RECIPIENT OF THIS OFFERING CIRCULAR ACKNOWLEDGES AND AGREES THAT THE INFORMATION CONTAINED HEREIN IS TO BE USED SOLELY FOR THE PURPOSE OF DETERMINING WHETHER TO PURCHASE THE SERIES 2018/A PREFERRED SHARES OR NOT.

AN INVESTMENT IN THE SERIES 2018/A PREFERRED SHARES INVOLVES RISKS AND POTENTIAL PURCHASERS ARE STRONGLY RECOMMENDED TO PAY PARTICULAR ATTENTION TO THE INFORMATION CONTAINED IN THIS OFFERING CIRCULAR.

BANQUE DU LIBAN AND THE CMA HAVE NOT PASSED UPON AND TAKE NO RESPONSIBILITY FOR THE INFORMATION CONTAINED IN THIS OFFERING CIRCULAR OR FOR THE MERITS OF ANY OFFERING OF SERIES 2018/A PREFERRED SHARES HEREUNDER.

______________________________________

Placement Agent :

SOCIETE GENERALE DE BANQUE AU LIBAN SAL The date of this Offering Circular is July 2018

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IMPORTANT NOTICE AND DISCLAIMER

Société Générale de Banque au Liban SAL (the “Bank”) has not authorized any person to give any information or to make any representations in connection with this Offering Circular, nor has the Bank authorized any person to give any information or make any representations other than those contained in this Offering Circular, and if given or made, such information or representations must not be relied upon as having been authorized by the Bank. This Offering Circular does not constitute an offer to sell or to buy in any jurisdiction in which such offer or solicitation would be unlawful or unauthorized by applicable laws. The use of this Offering Circular for any purpose other than an investment in Series 2018/A Preferred Shares as set out herein is unauthorized and prohibited.

NOTICE TO ELIGIBLE INVESTORS

The Bank submitted to the Board of the Capital Markets Authority (“CMA”) an authorization request to market, promote, offer and sell the Preferred Shares Series 2018/A in Lebanon in accordance with the provisions of Law No161 dated August 17, 2011 governing Capital Markets in Lebanon. THIS OFFERING CIRCULAR INCLUDES INFORMATION PROVIDED IN COMPLIANCE WITH THE REGULATIONS OF THE “CMA”. THE CMA DOES NOT ACCEPT RESPONSIBILITY FOR THE CONTENT OF THE INFORMATION PROVIDED IN THIS OFFERING CIRCULAR, INCLUDING THE ACCURACY OR COMPLETENESS THEREOF. THE LIABILITY FOR THE CONTENT OF THIS OFFERING CIRCULAR LIES WITH THE ISSUER, ITS DIRECTORS AND SUCH OTHER PERSONS WHOSE OPINIONS ARE INCLUDED IN THE OFFERING CIRCULAR WITH THEIR CONSENT. THE CMA HAS NOT ASSESSED THE SUITABILITY OF THE SECURITIES COVERED BY THIS OFFERING CIRCULAR FOR ANY PARTICULAR INVESTOR OR TYPE OF INVESTOR. This Offering Circular is compliant with the requirements of Law No161 (the Capital Markets Law) dated August 17, 2011 and the CMA Series 6000 regulation, relating to the Offers of Securities, dated July 27, 2017.

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The information in this Offering Circular has been provided by Société Générale de Banque au Liban SAL (the “Bank”) in connection with the issuance of Series 2018/A Preferred Shares. The Bank having made all reasonable enquiries, hereby confirms that to the best of its knowledge and belief, as at the date of this Offering Circular:

(a) This Offering Circular contains all information regarding the Bank, which is material in connection with the issuance of Series 2018/A Preferred Shares; and

(b) The information and data provided by the Bank in this Offering Circular are true, accurate and not misleading in all material respects; and

(c) The information and data derived from sources prepared by third parties have been accurately reproduced in this Offering Circular; and

(d) There is no material omission of any other information and data which would make any part of this Offering Circular incorrect or misleading.

The Bank, including its Board of Directors, is responsible for the information contained in this Offering Circular and believes that, to the best of its knowledge, such information does not omit any material facts the omission of which would make any statements of fact or opinion relating thereto and contained herein inaccurate. Statements in this Offering Circular are made as of the date of the initial publication or distribution of this Offering Circular. Unless stated otherwise herein, neither the delivery of this Offering Circular at any time, nor any sale hereunder, shall under any circumstances create a representation, warranty or commitment by the Bank that the information contained herein is correct as of any time subsequent to such date. This Offering Circular includes certain estimates and projection reports thereon derived from sources prepared by the Bank and other parties with respect to the “Banking Sector and Banking Regulations” and the “Economic Environment in Lebanon”. Such information estimates and projections or reports have been included solely for indicative purposes and have been accurately reproduced in this Offering Circular. This Offering Circular summarizes the provisions of any other document in connection with the issuance by the Bank of Series 2018/A Preferred Shares which are appended hereto as an integral part thereof. All information provided by this Offering Circular shall supersede any other information, documents and materials supplied to the recipient in connection with the issuance of Series 2018/A Preferred Shares. Furthermore, by taking possession of this Offering Circular, the recipient acknowledges and agrees, and is deemed to have acknowledged and agreed, that he will not rely on any other information supplied by the Bank. No person has been authorized to give any information or make any representation other than those contained in this Offering Circular and, if given or made, such information or representation must not be relied upon as having been authorized The Series 2018/A Preferred Shares are not, and will not be, registered under the United States Securities Act of 1933, as amended (the “Securities Act”), the United Kingdom Financial Services & Markets Act 2000, as amended, or under the securities laws of any other jurisdiction. Any offer, sale, resale or delivery of the Series 2018/A Preferred Shares within the United States and/or the United Kingdom, or to, or for the account or benefit of, any US or UK person prohibited from purchasing preferred shares pursuant to the Regulation S of the Securities Act and/or the United Kingdom Financial Services & Markets Act 2000, as amended, would constitute a violation of the US laws and/or the UK laws (as the case may be) unless made pursuant to an exemption therefrom. A potential purchaser should not treat the contents of this Offering Circular as a tax, accounting or legal advice or solicitation provided by the Bank. Furthermore, investment in Series 2018/A Preferred Shares is only adapted for investors having the financial ability and willingness to accept the risks of investing for an undetermined period and the lack of liquidity which are characteristics of the investment described herein. There will be no public market for Series 2018/A Preferred Shares as the Bank has no intention to list the shares on the Beirut Stock Exchange or on any other foreign stock exchange. POTENTIAL PURCHASERS ARE STRONGLY RECOMMENDED TO PAY PARTICULAR ATTENTION TO THE INFORMATION CONTAINED IN THE SECTION HEADED “INVESTMENT CONSIDERATIONS” OF THIS OFFERING CIRCULAR.

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DETAILED OVERVIEW

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TABLE OF CONTENTS

1. GLOSSARY OF DEFINED TERMS 10

2. OFFERING SUMMARY 13

3. SUBSCRIPTION TIMETABLE AND PROCEDURES 26

4. INVESTMENT CONSIDERATIONS 29

1. CONSIDERATIONS RELATING TO THE LEBANESE POLITICAL AND ECONOMIC ENVIRONMENT ...................................................... 291.1. POLITICAL CONSIDERATIONS ........................................................................................................................................................ 291.2. ECONOMIC CONSIDERATIONS ....................................................................................................................................................... 302. EXPOSURES OF THE BANK AND THE LEBANESE BANKING SECTOR ............................................................................................... 352.1. LEBANESE SOVEREIGN RISK .................................................................................................................................................................... 352.2. CURRENCY CONSIDERATIONS AND DEVALUATION RISK ......................................................................................................................... 352.3. CREDIT RISK ................................................................................................................................................................................. 362.4. OPERATIONAL RISK: ..................................................................................................................................................................... 362.5. LENDING PROCESS ......................................................................................................................................................................... 362.6. LIQUIDITY AND MATURITY MISMATCHING ............................................................................................................................................. 372.7. INTEREST RATE SENSITIVITY ................................................................................................................................................................... 372.8. TAXATION ................................................................................................................................................................................................ 372.9. CONSIDERATIONS RELATING TO THE OFFERING OF SERIES 2018/A PREFERRED SHARES ........................................................................ 382.10.LITIGATION ............................................................................................................................................................................................. 382.11.COMPETITION ......................................................................................................................................................................................... 38

5. USE OF PROCEEDS 40

6. STATEMENT OF CAPITAL RESERVES AND LONG TERM LIABILITIES AND DIVIDEND POLICY ............................. 40

7. SELECTED FINANCIAL INFORMATION AND OPERATIONAL DATA ................................................................................ 42

8. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL INFO ................................................................................ 46

9. SELECTED FINANCIAL DATA 52

10. DESCRIPTION OF THE SHARE CAPITAL OF THE BANK ..................................................................................................... 64

11.OVERVIEW OF THE BANK 76

A.DESCRIPTION OF THE BANK ........................................................................................................................................................................ 761. Synopsis 762. Strategy 763.History of the Bank ..................................................................................................................................................................................... 774. The Bank’s Shareholding ........................................................................................................................................................................... 785. SGBL’s Organization Chart ...................................................................................................................................................................... 796. Statutory Auditors ...................................................................................................................................................................................... 80B.AFFILIATED COMPANIES ..................................................................................................................................................................... 801.Société Générale de Banque - Jordanie (SGBJ) ......................................................................................................................................... 812. Société Générale Bank Cyprus (SGBCy) ................................................................................................................................................... 813.SGBL Insurance sal .................................................................................................................................................................................... 814.Sogelease Liban sal ..................................................................................................................................................................................... 825.Fidus sal 826.Centre de Traitement Monétique (CTM) sal ............................................................................................................................................... 827.Liberty International Bank Limited (LIB) ................................................................................................................................................... 828. Other Affiliated Companies ....................................................................................................................................................................... 83

C.THE BANK’S CORE BUSINESS LINES 83

1. RETAIL BANKING .......................................................................................................................................................................... 841.1.Retail banking is historically the backbone of SGBL’s business ............................................................................................................. 841.2.Branch Network ....................................................................................................................................................................................... 841.3. Customer Accounts ................................................................................................................................................................................. 841.4. Personal Loans ....................................................................................................................................................................................... 851.5. Small & Medium Sized Companies and Professional Clients ................................................................................................................ 861.6.Insurance Products .................................................................................................................................................................................. 861.7. Electronic Banking Services ................................................................................................................................................................... 862. PRIVATE BANKING ........................................................................................................................................................................ 873. CORPORATE BANKING .................................................................................................................................................................. 873.1. Financing Operations ............................................................................................................................................................................. 873.2. Financing International Transactions .................................................................................................................................................... 873.3. Financing Investments ............................................................................................................................................................................ 873.4. Project Finance and Investment Banking ............................................................................................................................................... 883.5. Correspondent Banking and Capital Markets ........................................................................................................................................ 883.6.Treasury and Branch Cash Management ................................................................................................................................................ 88

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12. MANAGEMENT 89

1. BOARD OF DIRECTORS .................................................................................................................................................................. 892.EXECUTIVE TEAM ........................................................................................................................................................................................ 903. SENIOR MANAGEMENT ................................................................................................................................................................. 914.CORPORATE GOVERNANCE FRAMEWORK .................................................................................................................................................... 935.INTERNAL AUDIT ......................................................................................................................................................................................... 966.ANTI-MONEY LAUNDERING POLICIES AND PROCEDURES ........................................................................................................................... 966.1 Introduction: combating money laundering and terrorism financing ..................................................................................................... 966.2 AML at SGBL ........................................................................................................................................................................................... 967. HUMAN RESOURCES ..................................................................................................................................................................... 988. INSURANCE ................................................................................................................................................................................... 98

13. THE BANKING SECTOR AND BANKING REGULATIONS IN LEBANON ........................................................................... 99

1. CENTRAL BANK AND BANKING CONTROL COMMISSION .............................................................................................................. 992. THE LEBANESE BANKING SECTOR ................................................................................................................................................ 993. BANKING REGULATIONS ............................................................................................................................................................... 993.1.Related Party Transactions ...................................................................................................................................................................... 993.2.Reserve Requirements ............................................................................................................................................................................ 1003.3. Liquidity Requirements ......................................................................................................................................................................... 1003.4.Capital Adequacy Requirements ............................................................................................................................................................ 1003.5. Corporate Governance ......................................................................................................................................................................... 1013.6.Tier I and Tier II Capital ....................................................................................................................................................................... 1013.7.Foreign Exchange Trading .................................................................................................................................................................... 1013.8.Credit Limits .......................................................................................................................................................................................... 1023.9.Loan Classification ................................................................................................................................................................................ 1023.10. Credit Losses and Provisions for Doubtful Loans .............................................................................................................................. 1023.11. Reserves for General Banking Risks ................................................................................................................................................... 1023.12. Accounting Standards ......................................................................................................................................................................... 1023.13. AML/CFT Laws and regulations ........................................................................................................................................................ 1033.14. Implementation of FATF Recommendation 6 concerning UN Security Council Resolutions 1267 (1999), 1988 (2011), 1989 (2011), and any related successor resolutions ....................................................................................................................................................................... 1033.15. Adoption of the Common Reporting Standards .................................................................................................................................. 1033.16. Relationship between Banks and Financial Institutions and their correspondents ............................................................................ 1033.17. Real Time Gross Settlement System “BDL-RTGS” ............................................................................................................................ 1043.18. Bank Share Issuing and Trading, Investments and Participations (Prohibitions related to Bearer Shares) ..................................... 1043.19. Prohibition of Exploitation of Inside Non-Public Information ........................................................................................................... 1044. CAPITAL MARKETS AUTHORITY’S (CMA) REGULATIONS .......................................................................................................... 1044.1. Brokerage Activities .............................................................................................................................................................................. 1044.2. Financial Instruments and Products ..................................................................................................................................................... 1044.3. Other CMA decisions ............................................................................................................................................................................ 104

14. TAXATION 105

1. TYPES OF TAXES .......................................................................................................................................................................... 1052. DISTRIBUTION TAX ..................................................................................................................................................................... 1053. CAPITAL GAIN TAX ..................................................................................................................................................................... 105

15. GENERAL INFORMATION 106

16. EXHIBIT A - SUBSCRIPTION APPLICATION 107

17.CONSOLIDATED FINANCIAL STATEMENTS 121

1- AUDITED ANNUAL CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2017 .................................. F.12- AUDITED ANNUAL CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2016 ................................ F.893- AUDITED ANNUAL CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2015 ............................. F. 179

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1. GLOSSARY OF DEFINED TERMS For the purposes of this Offering Circular, the following terms shall have the meanings set forth below: “Adjustment Event” means any stock split or reverse stock split affecting the Bank’s share capital (but not any other event) (the “Adjustment Event”) “Bank” means Société Générale de Banque au Liban SAL, a joint stock company incorporated under the laws of the Republic of Lebanon. “Banking Control Commission” means the Banking Control Commission of Lebanon. “Basel Accords” means the guidelines of the Committee on Banking Regulation and Supervisory Practices of the Bank for International Settlements, in effect from time to time, including the Basel I Accord, the Basel II Accord and the Basel III Accord. “Board of Directors” means the Board of Directors of the Bank. “Bylaws” means the Articles of Association of the Bank. “Calculation Date” means the last Beirut business day of any calendar quarter. “Central Bank” or “CBL” means Banque du Liban i.e. the Central Bank of Lebanon. “CMA” means the Capital Markets Authority of Lebanon. “Common Shares” means the common shares of the Bank, with a par value of LBP 258,000 each. “Confirmation EGA” means the Extraordinary General Assembly of the Bank which is expected to be held to confirm and ascertain the Bank’s capital increase following the issuance of the Series 2018/A Preferred Shares. “Conversion Notice” means the notice that shall be given by the Bank no later than two Beirut business days from the occurrence of a Trigger Event to the holders of the Preferred Shares Series 2018/A whereby it shall clarify the nature of the relevant Trigger Event. “Eligible Investor” is any individual or legal entity other than the Chairman, or any member of the Board of Directors or General Managers of the Bank, or the spouse or any minor children of any such person, or any person acting on their behalf, or any US or UK person expressly prohibited from purchasing the Series 2018/A Preferred Shares pursuant to the US Securities Act (Regulation S) and/or the United Kingdom Financial Services & Markets Act 2000, as amended. Furthermore, neither the Bank nor its “Subsidiaries” nor its “Associates” as more particularly defined in the Central Bank of Lebanon’s Basic Circular No 44, shall be entitled to purchase or subscribe to or to finance the purchase or the subscription to the Series 2018/A Preferred Shares, either directly or indirectly. In general, an Eligible Investor shall be any individual or legal entity that is not prohibited under applicable laws from owning preferred shares. “Escrow Agent” means the Bank, in its capacity as escrow agent for the Subscription Amount paid by each Eligible Investor in connection with its subscription for Series 2018/A Preferred Shares. “First EGA” means the Extraordinary General Assembly of the Bank held to decide inter alia on the Bank’s capital increase through the issuance of the Series 2018/A Preferred Shares. “Government” means the government of Lebanon. “IAS” means the International Accounting Standards. “IFRS” means the International Financial Reporting Standards. “Issue Date” means August 30th, 2018 (tentative) or such other date as shall be determined by the Bank following the fulfillment of all conditions precedent to the issuance of the Series 2018/A Preferred Shares. “Issue Price” means USD 10,000 (ten thousand United States Dollars) per share. “Law 308” means Law № 308 of Lebanon, dated April 3, 2001, governing Bank Share Issuing and Trading, Bank Bond Issuing and Bank Ownership of Real Estate. “Lebanon” means the Republic of Lebanon.

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“Liquidation Preference” means the right of the holders of Series 2018/A Preferred Shares to receive payments out of the assets of the Bank upon any winding-up and liquidation thereof, which shall rank (i) senior to the Bank's common shares in respect of (a) the right to receive dividends, if any, pertaining to any financial year such that no dividends may be paid to the common shareholders with respect to a given year unless the amount due to the holders of preferred shares for that same year has been paid, and (b) the right to receive payments out of the assets of the Bank upon any winding-up and liquidation of the Bank, (ii) junior to the Bank’s creditors who are entitled to be reimbursed prior to the holders of any series of preferred shares, and, and (iii) pari passu with Series 2012, Series 2013 and Series 2015 Preferred Shares and any future series of preferred shares that may be issued by the Bank regarding (a) the distribution of dividends, (b) the preemption right to subscribe to any new preferred shares issued by the Bank in the future, and (c) the right to receive payments out of the Bank’s assets upon any winding-up and liquidation of the Bank. In such event, the holders of Series 2018/A Preferred Shares shall be entitled to receive from the remaining assets of the Bank to be distributed among the shareholders, prior to the settlement of any sums related to the Bank’s common shares and on the same pari passu basis as set out in paragraph (iii)(c) above, an amount in Lebanese Pounds for each preferred share equaling as at the payment date the Issue Price denominated in United States Dollars (i.e. a sum amounting to US$10.000) in addition to any declared but unpaid dividends pertaining to the Series 2018/A Preferred Shares. Should the Bank’s assets available for distribution to its shareholders upon any winding-up and liquidation of the Bank be insufficient to cover the liquidation preference pertaining to the Series 2018/A Preferred Shares set out herein and the liquidation preferences payable to the holders of any issued Series of Preferred Shares or any future series of preferred shares of the Bank that may rank pari passu with the already issued series of Preferred Shares, the amounts payable to such holders will be reduced on a pro rata basis. “Mandatory Conversion” means the final and mandatory conversion of the Series 2018/A Preferred Shares into common shares in case of occurrence of a “Trigger Event” as described later in this Offering Circular. “Midclear” means Midclear SAL, a joint stock company organized under the laws of Lebanon, which is 99.0% owned by the Central Bank and acting as the central depositary and clearing house in Lebanon. “Official Subscription Period” means the period from and including August 16th, 2018 (tentative) through, and including, August 18th, 2018 (tentative) at 12:00 noon, Beirut time, or such other period as the Bank shall designate for the purpose of receiving subscriptions to Series 2018/A Preferred Shares following the approval by the Central Bank of the issuance thereof. “Offering Circular” means this offering circular. “Placement Agent” means the Bank in its capacity as placement agent for the offering of the Series2018/A Preferred Shares. “Preferred Shares” means the Tier 1 Non-Cumulative Perpetual Redeemable Convertible Series 2018/A Preferred Shares of the Bank, each with a par value of LBP 258,000 (two hundred fifty-eight thousand Lebanese Pounds), as described in this Offering Circular. “Regulation S” means Regulation S under the Securities Act. “Regulatory Event” means a change occurring after the Issue Date in any applicable laws or regulations, including any regulations published by the Central Bank or the Banking Control Commission, which could be interpreted or applied in such a way that (i) any portion of the aggregate Issue Price of the Series 2018/A Preferred Shares would no longer be included in the Bank’s Additional Tier 1 Capital or (ii) the Bank would not be permitted to maintain the Issue premium in foreign currency, although the Bank is not obliged to do so. “Securities Act” means the U.S. Securities Act of 1933, as amended. “Series 2012 Preferred Shares” means the Tier 1 Non-Cumulative Perpetual Redeemable Series 2012 Preferred Shares of the Bank, each with a par value of LBP 258,000. “Series 2013 Preferred Shares” means the Tier 1 Non-Cumulative Perpetual Redeemable Series 2013 Preferred Shares of the Bank, each with a par value of LBP 258,000. “Series 2015 Preferred Shares” means the Tier 1 Non-Cumulative Perpetual Redeemable Series 2015 Preferred Shares of the Bank, each with a par value of LBP 258,000. “Series 2018/A Preferred Shares” means the Tier 1 Non-Cumulative Perpetual Redeemable Convertible Preferred Shares which are intended to be issued in accordance with the provisions of this Offering Circular and relevant documentation. “Subscription Amount” means, with respect to the Series 2018/A Preferred Shares subscribed to by an Eligible Investor, the amount, in U.S. Dollars, equal to the product of the number of such Series 2018/A Preferred Shares times the Issue Price.

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“Subscription Application Form” means a purchase application, in the prescribed form, for the subscription of Series 2018/A Preferred Shares, a copy of which is attached to this Offering Circular as Exhibit A. “Subscription Dedicated Account” means the account opened with and maintained by the Escrow Agent for the purpose of transferring the Subscription Amounts thereto, as more particularly defined later in this Offering Circular. “Tier 1 Capital” means the Bank’s Tier 1 capital (which composed of the Common Equity Tier 1 and the Additional Tier 1 Capital), as set out in accordance with IFRS and applicable rules and regulations of the Central Bank, which are based generally on the Basel Accords, being paid-up share capital, issue premium, shareholders’ cash contributions to capital (effectively a pre-payment of capital booked in a foreign currency until such time as it is converted into local currency share capital), legal and statutory reserves (including reserves for unspecified banking risks, but excluding reserves allocated for liquidation of real properties), retained earnings non-cumulative perpetual preferred shares, funds allocated for investment in real properties and financial instruments that (i) are issued and fully paid, (ii) are eligible to cover the Bank’s losses on a going concern basis, (iii) have non-cumulative revenues and (iv) are permanent, subject to early redemption at the Bank’s discretion after five years from their issue date and by the exchange of such instruments for equivalent financial instruments. “Tier 2 Capital” means the Bank’s Tier 2 capital, as determined in accordance with IFRS and applicable rules and regulations of the Central Bank, which are based generally on the Basel Accords, being preferred shares (other than preferred shares, which are both perpetual and non-cumulative), certain subordinated loans and any favorable change in fair value of available-for-sale securities, the revaluation surplus of the bank’s properties, subject to the Central Bank’s approval, and general provisions for unspecified risks. “Trigger Event” shall mean either (i) the drop in the Bank’s Common Equity Tier 1 Capital to its risk weighted assets under 66.25% (sixty-six point twenty-five per cent.) of the minimum ratios set out in the regulations issued by the Central Bank of Lebanon, notably Basic Decision No 6939 dated 25 March 1998, as at any Calculation Date, or (ii) the written notification by the Central Bank of Lebanon to the Bank informing the latter that it may not continue to conduct its banking business unless it proceeds to the conversion of the Preferred Shares Series 2018/A into common shares of the Bank. “United States” and “U.S. Persons” have the meanings assigned to such terms in Regulation S

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2. OFFERING SUMMARY ISSUANCE BY SOCIETE GENERALE

DE BANQUE AU LIBAN S.A.L.

OF SERIES 2018/A NON-CUMULATIVE PERPETUAL CONVERTIBLE PREFERRED SHARES

OFFERING SUMMARY∗ July 2018

إصدار من قبل بنك سوسيته جنرال في لبنان ش.م.ل

/ أ 2018ألسهم تفضيلية فئة وقابلة للتحويل غير تراكمية وغير محددة المدة

∗موجز اإلصدار 2018تموز

1- Issuer: 1- المصدر:

Société Générale de Banque au Liban S.A.L. (the « Bank »), a non-rated Lebanese bank.

، وهو مصرف ")البنك(" .ل.بنك سوسيته جنرال في لبنان ش.م لبناني غير مصنف.

2- Type of Shares: 2- نوع األسهم:

Non-Cumulative Perpetual Redeemable Convertible Preferred Shares with a par value of LBP 258,000 (Lebanese Pounds Two Hundred Fifty-Eight Thousand) per each share.

وقابلة للتحويل أسهم تفضيلية غير تراكمية وغير محددة المدة/ (ليرة لبنانية 258,000تبلغ القيمة اإلسمية للسهم الواحد ل.ل. /

مايتان وثمانية وخمسون ألف).

3- Form: 3- شكل األسهم:

The Series 2018/A Preferred Shares shall be issued in registered form, registered in the respective names of the subscribers in the Bank’s registry maintained with Midclear S.A.L. Final share certificates for Series 2018/A Preferred Shares will not be issued.

أسهم بشكل / أ2018ألسهم التفضيلية فئة اسوف يتم إصدار مسجلة على أسماء المكتتبين المعنيين في سجل "البنك" إسمية

.الممسوك لدى شركة ميدكلير ش.م.ل

/ أ.2018لن يتم إصدار شهادات نهائية لألسهم التفضيلية فئة

4- Expected Issue Size and Use of Proceeds: 4- وتخصيص المبالغ المكتتب بها صدار المتوقعحجم اإل:

A minimum of USD 125,000,000 (United States Dollars One Hundred Twenty-Five Million).

The amounts which are subscribed in the context of the Bank’s capital increase through the issuance of non-cumulative perpetual convertible Series 2018/A Preferred Shares will be included in the Bank’s Additional Tier I Capital according to the Central Bank of Lebanon regulations.

ماية وخمسون وعشرون / (دوالر أميركي 125,000,000أ/0د .كحد أدنى )مليون

إن المبالغ المكتتب بها في إطار زيادة رأسمال "البنك" عن طريق وقابلة إصدار األسهم التفضيلية غير التراكمية وغير المحددة المدة

أموال المصرف الخاصة ضمن تخصصف سو / أ2018 فئةللتحويل األساسية اإلضافية وفقا ألنظمة مصرف لبنان.

في سياق خططه التطويرية ينوي "البنك" زيادة رأسماله المستقبلية وذلك على الصعيدين المحلي والدولي.

∗ The following Offering Summary is set forth for indicative purposes only and is qualified in its entirety by the detailed information included in the Offering Circular pertaining to the issuance of Series 2018/A Preferred Shares. Therefore, it should be read in conjunction with the full text of the Offering Circular, as it only contains some of the principal terms of the issuance. Potential purchasers of Series 2018/A Preferred Shares are strongly recommended to review the entire sections of the Offering Circular containing the terms and conditions of the Preferred Shares issuance and the principal risk factors pertaining thereto. Copies of the Offering Circular which includes the Offering Summary and the Subscription Application Form are made available at the Head Office and branches of the Bank.

إن "موجز اإلصدار" الحاضر قد وضع على سبيل المعلومات فقط وهو جزء ال يتجزأ من ∗صدار" المتعلق بإصدار األسهم التفضيلية فئة المعلومات المفصلة الواردة في "كتيب اإل

/ أ. لذلك، فإنه يقتضي قراءة هذا الموجز باإلستناد إلى النص الكامل الوارد في "كتيب 2018اإلصدار" إذ ان األحكام الحاضرة ال تتضمن سوى جزء من األحكام األساسية لإلصدار. كما يطلب

كامل ، اإلطالع بصورة خاصة ب / أ2018يلية فئة بإلحاح من الشارون المحتملون لألسهم التفضأجزاء "كتيب اإلصدار" المتضمنة شروط وأحكام إصدار األسهم التفضيلية وعوامل المخاطر األساسية المتعلقة بهذا اإلصدار. ويمكن اإلطالع على "كتيب اإلصدار" المرفق به "موجز

سية للمصرف وفي فروعه.اإلصدار" و"إستمارة طلب اإلكتتاب" في المكاتب الرئي

13

The Bank seeks to raise its equity capital in the framework of its future development plans, both at the domestic and at the international levels. Strengthening the Bank’s capital base is key to enabling the Bank to maintain an ambitious growth trend while remaining compliant with all banking regulations in force, namely capital adequacy regulations in the framework of Basel III requirement.

إن تعزيز رأسمال "البنك" هو أساسي من أجل تمكين "البنك" من النمو مع التقيد بجميع األنظمة المحافظة على نمط عال من

المصرفية المرعية اإلجراء، السيما تلك المتعلقة بكفاية رأس المال وفقا لمتطلبات اتفاقية بازل الثالثة.

5- Maturity: 5- اإلستحقاق:

Perpetual, but subject to redemption at the Bank’s sole discretion as detailed in this Offering Summary.

غير محددة المدة، إنما قابلة لإلسترداد وفقا الستنساب البنك المنفرد كما هو محدد في "موجز اإلصدار" الحاضر.

6- Total Number of Preferred Shares Offered: 6- عدد "األسهم التفضيلية" المعروضة:

12,500 (Twelve Thousand Five Hundred) Series 2018/A Preferred Shares.

) سهم تفضيلي فئةوخمسماية / (إثني عشر ألف12،500/ ./ أ2018

7- Issue Price: 7- ثمن اإلصدار:

USD 10,000 (Ten Thousand United States Dollars) per share, of which the amount equivalent to LBP 258,000 (Lebanese Pounds Two Hundred Fifty-Eight Thousand) shall represent the par value for each share, and the balance, denominated in U.S. Dollars, shall constitute the issue premium (the "Issue Premium").

/ (دوالر أميركي عشرة آالف) للسهم الواحد وهو 10،000أ/0دوثمانية / (ليرة لبنانية مايتان258,000مؤلف من مبلغ ل.ل/

وخمسون ألف) يمثل القيمة اإلسمية لكل سهم والرصيد الذي يمثل عالوة اإلصدار ("عالوة اإلصدار") المحررة بالدوالر األميركي.

8- Minimum Subscription: 8- الحد األدنى لإلكتتاب:

Minimum USD 50,000 (Fifty Thousand United States Dollars) and integral multiples of USD 10,000 (Ten Thousand United States Dollars) in excess thereof.

/ (دوالر أميركي خمسون آالف) مع العلم بأن اإلكتتاب 50،000أ /0د/ 10،000أ/0بأي مبلغ إضافي سيتم على أساس أضعاف مبلغ د

(دوالر أميركي عشرة آالف).

9- Selling period: 9- :فترة البيع

From July 10th until August 16th, 2018 (tentative) and may be extended up to a maximum period of thirty (30) working days at the Bank’s sole discretion.

10- Issue Date: August 30th, 2018 (tentatively).

Issuance of the Series 2018/A Preferred Shares is subject to the approval of (i) the Bank’s Extraordinary General Meeting of Shareholders and (ii) the Central Bank of Lebanon. Moreover, the offering of the Series 2018/A Preferred Shares is subject to the approval of the Capital Markets Authority in Lebanon (“CMA”).

(مبدئيا) 2018 آب 16ولغاية تاريخ 2018 تموز 10ابتداء من تاريخ / يوم عمل وفقا 30لفترة أقصاها ثالثون / قابلة للتمديد

الستنساب "البنك" المطلق.

:تاريخ اإلصدار -10 ).مبدئيا( 2018آب 30

) الجمعية iلموافقة ( / أ2018يخضع إصدار األسهم التفضيلية فئة ) مصرف لبنان. كما يخضع ترويج iiر العادية "للبنك" و(العمومية غي

لترخيص هيئة األسواق المالية / أ2018األسهم التفضيلية فئة في لبنان.

14

11- Governing Documents: 11- المستندات التي ترعى االصدار:

The issuance of Series 2018/A Preferred Shares shall be governed by the following documents and approvals:

(i) the Offering Circular; and

(ii) the minutes of meeting of the Bank’s Extraordinary General Assembly resolving the issuance of Series 2018/A Preferred Shares; and

(iii) the relevant approvals by the Central Bank of Lebanon; and

(iv) the offering of Series 2018/A Preferred Shares is subject to the approval of the CMA.

للمستندات / أ2018األسهم التفضيلية فئة يخضع إصدار والموافقات التالية:

"كتيب اإلصدار"؛ )أ

ومحضر اجتماع الجمعية العمومية غير العادية "للبنك" )ب

/ أ2018تقرر إصدار األسهم التفضيلية فئة سوف التي

؛

موافقات مصرف لبنان الالزمة لهذه الجهة؛و )ت

/ أ2018م التفضيلية فئة كما يخضع ترويج األسه )ث

لترخيص هيئة األسواق المالية في لبنان.

12- Applicable Laws and Regulations: 12- القوانين واألنظمة المطبقة:

Law No 308 dated April 3, 2001 (“Law 308”), Central Bank of Lebanon’s Decisions N° 7814 dated May 11, 2001 and N° 6939 dated March 25, 1998, and Law No 161 dated August 17th, 2011 and CMA Regulations, and their subsequent amendments

")، قراري 308("القانون 2001نيسان 3تاريخ 308القانون رقم 25تاريخ 6939ورقم 2001أيار 11تاريخ 7814مصرف لبنان رقم

وأنظمة هيئة 2011آب 17تاريخ 161، والقانون رقم 1998آذار . مع تعديالتها الالحقةاألسواق المالية

13- Listing: 13- اإلدراج:

The Bank has no intention to list the Series 2018/A Preferred Shares on the Beirut Stock Exchange or on any other foreign Stock Exchange.

في بورصة / أ2018فئة األسهم التفضيليةال ينوي "البنك" إدراج بيروت أو في أية بورصة أجنبية أخرى.

14- Dividends: 14- أنصبة األرباح:

A Fixed Annual Dividend payment of 8.33% (Eight point thirty three per cent.) of the Issue Price shall be paid in US Dollars to holders of Series 2018/A Preferred Shares each prorate to his participation in the Issue Size subject to the availability of sufficient distributable net profits for the relevant year, after tax payment and deduction of reserves in accordance with such applicable laws, the Bank’s articles of association, and the regulations of both the Central Bank of Lebanon and the Banking Control Commission, and subject to adjustment towards reflecting any stock split or reverse stock split affecting the Bank’s share capital (but not any other event) (the “Adjustment Event”).

أنصبة أرباح / أ 2018األسهم التفضيلية فئة لمالكييتم دفع (ثمانية فاصل ثالثة وثالثون بالمئة) من %8.33بنسبة ثابتة سنوية

بنسبة ما تمثله أسهمه من ، كل بالدوالر األميركي "ثمن اإلصدار"أرباح صافية قابلة للتوزيع حسب توفر أو عدم توفر اإلصدار،حجم

وعائدة للسنة المعنية، وذلك بعد اقتطاع الضرائب المتوجبة وحسم وفقا ألحكام القوانين المرعية اإلجراء، ولنظام البنك اتاإلحتياط

،األساسي، وألنظمة مصرف لبنان ولجنة الرقابة على المصارفهما من شأنتعكس أي تجزئة أو ضم لألسهم لوهي قابلة للتصحيح

حدث (فيما يلي " (دون أية حالة أخرى) "البنك" رأسمالالتأثير على . ")يتصحيح

However, the Fix Annual Dividend will be calculated on pro rata basis for the financial year during which they were issued i.e. for the financial year ended December 31st, 2018, subject to the terms and conditions set out in the previous paragraph.

المشار إليها أعاله سوف الثابتةغير أن أنصبة األرباح السنوية تحتسب على أساس نسبي بالنسبة للسنة المالية التي يتم خاللها

، مع 2018كانون األول 31اإلصدار، أي السنة المالية المنتهية في اعاة شروط وأحكام الفقرة السابقة.مر

Therefore, the distribution of the Fix Annual Dividend shall be made on a yearly basis starting from the year 2019 (i.e. with respect to the distribution of the prorated dividends pertaining to the financial year ended December 31st, 2018) and so forth, subject each time to the approval by the Bank’s Ordinary General Assembly (“OGA”) of the distribution of dividends pertaining to the previous financial year.

ر اآلنفة الذك الثابتةأنصبة األرباح السنوية بالتالي، سوف يتم توزيع (أي بالنسبة لتوزيعات أنصبة األرباح 2019العام سنويا ابتداء من

كانون األول 31المنتهية في الماليةالنسبية العائدة للسنة ) وهكذا دواليك، شرط اإلستحصال في كل مرة على موافقة 2018

الجمعية العمومية العادية لـ "البنك" على توزيع األرباح العائدة السابقة. للسنة المالية

15

Should the Bank’s Annual Ordinary General Assembly (“OGA”) resolve to distribute dividends, such distributions shall be paid annually within a maximum period of sixty (60) days following the date of approval by the OGA of the Bank’s annual audited accounts. The effective date of payment of such dividends shall be announced in two local renowned newspapers, three days at least prior to payment date.

في حال قررت الجمعية العمومية العادية السنوية "للبنك" توزيع خالل مهلة أقصاها ستون أنصبة األرباح، سوف تدفع هذه األنصبة

) يوما ابتداء من تاريخ موافقة الجمعية العمومية العادية على 60(ويعلن عن التاريخ الفعلي للدفع عن حسابات "البنك" المدققة.

طريق النشر في صحيفتين محليتين واسعتي االنتشار، وذلك ثالثة .أيام على األقل قبل تاريخ الدفع

The Bank may at any time, even in case of a Mandatory Conversion, cancel any distribution of dividends for any relevant year in its absolute discretion taking into account its financial situation and its solvency. In such event, the right of the holders of Series 2018/A Preferred Shares to receive the Fixed Annual Dividend set out above arising from the relevant financial year, shall become void de jure and will not be carried forward to the next financial year. The cancelation of any dividends distribution shall not be considered as an event of default and may not give rise to the preferred shareholders’ right to petition for the insolvency or the winding-up of the Bank.

التحويل "يحق "للبنك" في أي وقت كان وحتى في حاالت ا اإللزامي"، أن يلغي عملية توزيع أية أرباح عن سنة معينة وفق

الستنسابه المطلق، وذلك بعد األخذ بعين اإلعتبار حالته المالية ومالءته. وفي هذه الحالة، يسقط حق مالكي األسهم التفضيلية

عن المحددة أعالهالثابتة بإستيفاء األرباح السنوية / أ 2018فئة الالحقة. المالية ، وال يضم إلى السنة حكما السنة المالية المعنية

لغاء عملية توزيع أية أرباح ال يشكل أي إخالل وال يخول مالكي إن إ األسهم التفضيلية طلب إفالس أو تصفية المصرف.

No dividends distributions pertaining to the redeemed preferred shares shall be made for the year during which the redemption would have occurred.

لن يتم دفع أي توزيعات لألسهم المستردة عن السنة التي يجري .خاللها اإلسترداد

15- Non-Cumulative Distributions: 15- توزيعات غير تراكمية

Series 2018/A Preferred Shares are non-cumulative, and accordingly, the holders of such shares cannot benefit from the accumulation of dividends that are in arrears. Therefore, should distributions of dividends not be declared for any year or paid, for any reason whatsoever, holders of Series 2018/A Preferred Shares will not be entitled to receive distributions even if funds are or become subsequently available.

هي غير تراكمية، وبالتالي فال / أ 2018إن األسهم التفضيلية فئة هذه االسهم من تراكم أنصبة األرباح مالكييمكن أن يستفيد

بالتالي، في حال لم يتم إقرار وتوزيع المتعلقة بالسنوات السابقة.، لن يحق لمالكي كانأنصبة أرباح لسنة مالية معينة ألي سبب

قبض أية أنصبة أرباح عن تلك / أ 2018فئة األسهم التفضيلية حتى في حال كانت متوفرة أو أضحت متوفرة الحقا.السنة المالية

16- Ranking and Liquidation Preference: 16- وحق األفضلية في التوزيع الرتبة:

The Series 2018/A Preferred Shares shall rank junior to the Bank’s depositors and/or the other creditors of the Bank including the loan investors, subordinated notes and any other instruments which are accepted within the Tier Two Capital.

مرؤوسة تجاه / أ 2018يجب أن تكون األسهم التفضيلية فئة ي المصرف بمن فيهم المودعين و/أو الدائنين اآلخرين ف

المستثمرين في القروض وسندات الدين المرؤوسة واألدوات . األخرى المقبولة ضمن األموال الخاصة المساندة

Furthermore, and subject to the provisions of section 21 below “Mandatory Conversion of the Preferred Shares into Common Shares”, the Series 2018/A Preferred Shares shall rank (i) senior to the Bank's common shares in respect of (a) the right to receive dividends, if any, pertaining to any financial year such that no dividends may be paid to the common shareholders with respect to a given year unless the amount due to the holders of preferred shares for that same year has been paid, and (b) the right to receive payments out of the assets of the Bank upon any winding-up and liquidation of the Bank, (ii) junior to the Bank’s creditors who are entitled to be reimbursed prior to the holders of any series of preferred

"التحويل أدناه 21إضافة إلى ذلك، ومع مراعاة أحكام البند األسهم تعتبر، اإللزامي لألسهم التفضيلية إلى أسهم عادية"

) برتبة ممتازة بالنسبة لألسهم العادية i( / أ 2018التفضيلية فئة لجهة حق استيفاء أنصبة األرباح المتعلقة بأي سنة (أ) "للبنك"

حيث ال يجوز أن تدفع أية أنصبة أرباح مالية في حال توفرها، بسهم العادية عن سنة معينة إال بعد دفع المبلغ العائد مالكي األل

لمالكي األسهم التفضيلية عن تلك السنة، (ب) كما ولجهة استيفاء المبالغ المتأتية عن موجودات "البنك" في حال حل

البنك" ) برتبة الحقة بالنسبة لدائني "iiتصفية هذا األخير، و(وقبل مالكي األسهم التفضيلية الذين يحق لهم استيفاء ديونهم

) بنفس رتبة مالكي األسهم التفضيلية فئة iiiو( ،من أية فئة كانتأسهم تفضيلية يتم فئة وأية 2015وفئة 2013فئة و 2012

لتوزيع أنصبة (أ) إصدارها مستقبليا من قبل "البنك" وذلك بالنسبة

16

shares, and (iii) pari passu with Series 2012, Series 2013 and Series 2015 Preferred Shares and any future series of preferred shares that may be issued by the Bank regarding (a) the distribution of dividends, (b) the preemption right to subscribe to any new preferred shares issued by the Bank in the future and (c) the right to receive payments out of the Bank’s assets upon any winding-up and liquidation of the Bank.

االفضلية في االكتتاب بأية اسهم تفضيلية لحق(ب) و ،األرباحلحق استيفاء الدفعات (ج) و ،جديدة قد يصدرها البنك مستقبلا

تصفيته. والمتأتية عن موجودات "البنك" في حال حله

In the event of the winding-up and liquidation of the Bank, the holders of Series 2018/A Preferred Shares shall be entitled to receive from the remaining assets of the Bank to be distributed among the shareholders, prior to the settlement of any sums related to the Bank’s common shares and on the same pari passu basis as set out in paragraph (iii)(c) above, an amount in Lebanese Pounds for each preferred share equaling as at the payment date the Issue Price denominated in United States Dollars (i.e. a sum amounting to US$10.000) subject to any Adjustment Event, in addition to any declared but unpaid dividends pertaining to the Series 2018/A Preferred Shares.

في حال جرى حل وتصفية البنك، يحق لمالكي األسهم التفضيليةاستيفاء من أصول البنك المتبقية للتوزيع على / أ 2018 فئة

وعلى المساهمين، قبل دفع أي مبلغ عائد لألسهم العادية للبنك (ج) (iii)الفقرة في أساس نفس قاعدة المساواة المنصوص عليها

، عن كل سهم تفضيلي مبلغا بالليرة اللبنانية يساوي بتاريخ أعالهالدفع، ثمن إصدار السهم بالدوالر االميركي (أي مبلغ قدره

، إضافة مع مراعاة أي "حدث تصحيحي" / دوالر أميركي)10,000/إلى كافة التوزيعات المعلنة إنما غير المدفوعة والعائدة لألسهم

./ أ 2018لتفضيلية فئة ا

Should the Bank’s assets available for distribution to its shareholders upon any winding-up and liquidation of the Bank be insufficient to cover the liquidation preference pertaining to the Series 2018/A Preferred Shares set out herein and the liquidation preferences payable to the holders of any issued Series of Preferred Shares or any future series of preferred shares of the Bank that may rank pari passu with the already issued series of preferred shares, the amounts payable to such holders will be reduced on a pro rata basis.

موجودات "البنك" المتوفرة للتوزيع على نفي حال لم تكوتصفيته كافية لتغطية حق التوزيع والمساهمين لدى حله

المنصوص / أ 2018لألسهم التفضيلية فئة العائد باألفضلية عليه في البند الحاضر أو حقوق التوزيع باألفضلية العائدة لمالكي

أو أية فئات من األسهم أية فئة من األسهم التفضيلية المصدرة التفضيلية التي سوف تصدر الحقا برتبة موازية لألسهم التفضيلية الموجودة، عندها تخفض المبالغ القابلة للدفع لهؤالء المالكين كل

بنسبة مساهمته في رأس المال.

The Series 2018/A Preferred Shares are neither secured nor covered by any guarantee from the Bank or any related party or any other party. Accordingly, the Series 2018/A Preferred Shares do not benefit from any legal or economical privileges that may affect its ranking as junior to the depositaries and other creditors of the Bank.

غير مكفولة وغير مضمونة من / أ 2018ألسهم التفضيلية فئة إن اقبل البنك أو أي جهة مرتبطة به أو من أي فريق آخر. بالتالي، فإن

ال تتمتع بأي امتيازات قانونية أو / أ 2018األسهم التفضيلية فئة اقتصادية نتيجة أي اتفاقات أو عقود جانبية أو منفصلة من شأنها

سيتها تجاه المودعين و/أو باقي الدائنين. أن تقلل من مرؤو

In addition to the foregoing, Series 2012, Series 2013, Series 2015 and Series 2018/A Preferred Shares shall be governed by their respective specific terms with respect to distributions, liquidation preferences and otherwise.

وفئة 2012فضال" عن ذلك، سوف تخضع األسهم التفضيلية فئة ألحكام وشروط خاصة بكل منها / أ 2018وفئة 2015وفئة 2013

في ما يتعلق بالتوزيعات وبحق األفضلية في التوزيع وغيرها من المسائل.

17- Priority Subscription Rights: 17- :االفضلية في حق االكتتاب

Holders of the Bank’s Series 2012, Series 2013 and Series 2015 Preferred Shares shall have a first refusal right to subscribe into the Series 2018/A Preferred Shares on first priority basis and irreducibly pro rata to their holdings of the total number of Series 2012, Series 2013 and Series 2015 Preferred Shares (i.e. based on the ratio between the aggregate Issue Size of the Series 2012, the Series 2013 and the Series 2015 Preferred Shares and the Issue Size of the Series 2018/A Preferred Shares).

وفئة 2013وفئة 2012يعود لمالكي األسهم التفضيلية فئة 2018حق األفضلية في االكتتاب باألسهم التفضيلية فئة 2015

بصورة غير قابلة للتخفيض كل بنسبة مساهمته من مجموع / أ(وذلك 2015وفئة 2013وفئة 2012األسهم التفضيلية فئة

هم التفضيلية على أساس النسبة بين إجمالي حجم إصدار األسوإجمالي حجم إصدار األسهم 2015وفئة 2013وفئة 2012فئة

)./ أ 2018 فئة التفضيلية

In the event the first priority subscription right is not exercised by all or part of Series 2012, Series 2013 and Series 2015 Preferred Shares holders, subscribers who are subject to irreducible subscription shall then be entitled to subscribe to the Series 2018/A Preferred Shares in a reducible manner each pro rata to his shareholding and within the limits of his request which can

ا الحق من قبل كل أو بعض مالكي وفي حال عدم ممارسة هذ، يحق 2015وفئة 2013وفئة 2012فئة األسهم التفضيلية

عندها للمكتتبين بصورة غير قابلة للتخفيض االكتتاب بصورة قابلة للتخفيض كل بنسبة مساهمته وضمن حدود طلباته القابلة

للتخفيض.

17

be reduced.

In the event the Series 2018/A Preferred Shares are not entirely subscribed either irreducibly or reducibly by the holders of Series 2012, Series 2013 and Series 2015 Preferred Shares as set out above, the subscription shall then be made available for third parties including holders of common shares subject to the provisions of article (2) paragraph (3) of Law No 308/2001.

/ أ 2018سهم التفضيلية فئة وفي حال لم يتم االكتتاب بجميع األبصورة غير قابلة للتخفيض و / أو قابلة للتخفيض من قبل مالكي

وفقا لما 2015وفئة 2013وفئة 2012فئة األسهم التفضيلية ورد أعاله، يفتح باب االكتتاب للغير بمن فيهم مالكي االسهم

من المادة الثانية من القانون 3الفقرة العادية شرط مراعاة أحكام .308/2001رقم

In order to exercise priority subscription rights for the purchase of Series 2018/A Preferred Shares, a holder of Series 2012 and/or Series 2013 and/or Series 2015 Preferred Shares must submit a duly completed Subscription Application Form to the Bank, including an indication that such holder is exercising his/her subscription rights and a confirmation of the number of Series 2012 and/or Series 2013 and/or Series 2015 Preferred Shares held by him, no later than the date of expiration of the Official Subscription Period that will be set by the Bank. Holders of Series 2012, Series 2013 and Series 2015 Preferred Shares who fail to notify the Bank within such term, of their intention to exercise their priority subscription right to purchase Series 2018/A Preferred Shares will be deemed to have finally and irrevocably waived such right.

و/أو 2013و/أو فئة 2012على كل مالك أسهم تفضيلية فئة راغبا بممارسة حقه باإلكتتاب بأسهم تفضيلية فئة 2015فئة

، أن يتقدم من "البنك" "بإستمارة طلب باألفضلية / أ 2018االكتتاب" يؤكد فيها بصورة صريحة على أنه يمارس حقه باإلكتتاب

و/أو فئة 2012باألفضلية كما وعدد األسهم التفضيلية فئة التي يملكها، وذلك ضمن مهلة اقصاها 2015و/أو فئة 2013

لبنك" تاريخ إنتهاء مهلة اإلكتتاب الرسمية التي سوف يحددها "اوفئة 2012في هذا اإلطار. يعتبر مالكو األسهم التفضيلية فئة

"البنك" نيتهم عن إبالغ نيتخلفو الذين 2015وفئة 2013بممارسة حقهم باإلكتتاب باألسهم التفضيلية الجديدة باألفضلية

بصورة نهائية ال ضمن المهلة المذكورة، متنازلين عن هذا الحق .رجوع عنها

Holders of Series 2018/A Preferred Shares shall also be entitled to participate on a priority basis and equally with holders of Series 2012, Series 2013 and Series 2015 Preferred Shares or any other existing preferred shares, to any increase of capital of the Bank made by way of issuing new series of preferred shares, each pro rata to his holdings of the total number of existing preferred shares.

، وعلى قدم / أ 2018يكون لمالكي األسهم التفضيلية فئة 2013وفئة 2012فئة المساواة مع مالكي االسهم التفضيلية

أو أية أسهم تفضيلية أخرى مصدرة في حينه، الحق 2015وفئة في اإلكتتاب باألفضلية في زيادات رأسمال البنك التي تتم عن

بنسبة مساهمته طريق إصدار أسهم تفضيلية جديدة وذلك كل من مجموع االسهم التفضيلية المصدرة في حينه.

Holders of Series 2018/A Preferred Shares shall not be granted any priority rights to participate in any increase of the Bank’s capital by way of issuing new common shares.

بأي حق أفضلية / أ 2018فضيلية فئة ال يتمتع مالكو االسهم التفي اإلكتتاب في زيادات رأسمال البنك التي تتم عن طريق اصدار

أسهم عادية.

18- Absence of Pre-emptive Rights for Common Shares Holders:

عدم تمتع المساهمين العاديين بحق االكتتاب بأسهم -18 تفضيلية باألفضلية:

Pursuant to “Law 308”, holders of Common Shares do not have pre-emptive rights with respect to the issuance of any preferred shares, such as the Series 2018/A Preferred Shares.

، ال يحق لمالكي األسهم العادية 308عمال" بأحكام القانون رقم تفضيلية يصدرها "للبنك" أن يكتتبوا باألفضلية بأية أسهم

./ أ 2018"البنك"، ال سيما األسهم التفضيلية فئة

19- Eligible investors: 19- ؤهلونالمستثمرون الم:

An “Eligible Investor” is any individual or legal entity other than the Chairman, or any member of the Board of Directors or General Managers of the Bank, or the spouse or any minor children of any such person, or any person acting on their behalf, or any US or UK person expressly prohibited from purchasing the Series 2018/A Preferred Shares pursuant to the United States Securities Act of 1933 (Regulation S) as amended, and/or the United Kingdom Financial Services & Markets Act 2000 as amended.

"المستثمر المؤهل" لإلكتتاب هو أي شخص طبيعي أو معنوي غير رئيس مجلس اإلدارة، أو أي عضو لمجلس اإلدارة أو المديرين العامين أو زوجة أو األوالد القاصرين لهؤالء األشخاص، أو أي

، أو أي شخص أميركي أو بريطاني يكون محظر عليه شخص يمثلهموفقا ألحكام القانون / أ 2018تفضيلية فئة اأسهمشراء

United States Securities Act of 1933األميركي المعروف بـ (Regulation S) و/أو القانون اإلنكليزي المعروف بـ وتعديالته

United Kingdom Financial Services & Markets Act 2000 .هتوتعديال

Furthermore, neither the Bank nor its “Subsidiaries” nor its الوحدات التابعة" أو "الوحدات "ال يمكن للمصرف وألي من و

18

“Associates” as more particularly defined in the Central Bank of Lebanon’s Basic Circular No 44, shall be entitled to purchase or subscribe to or to finance the purchase or the subscription to the Series 2018/A Preferred Shares, either directly or indirectly.

In general, an Eligible Investor shall be any individual or legal entity that is not prohibited under applicable laws from owning preferred shares.

المشاركة" المعرف عنها في تعميم مصرف لبنان األساسي رقم أو تمويل / أ 2018، شراء أو اإلكتتاب باألسهم التفضيلية فئة 44

شرائها أو اإلكتتاب بها، بشكل مباشر أو غير مباشر.

كتتاب هو أي شخص وبشكل عام، إن "المستثمر المؤهل" لإلغير محظر عليه بموجب القوانين المرعية اإلجراء طبيعي أو معنوي

تملك أسهما تفضيلية.

20- Redemption: 20 - حق اإلسترداد:

Subject to (1) compliance with applicable Central Bank of Lebanon and Banking Control Commission ratios and regulations, including the availability of free reserves for the purpose, (2) verification of such compliance by the Banking Control Commission, and (3) the approval of the Central Bank of Lebanon, the Bank shall have the right to decide, at its sole discretion, to redeem whole or part of the aggregate number of Series 2018/A Preferred Shares (by tranches of 25% of the initial number of Series 2018/A Preferred Shares at least) (i) at any time after the Issue Date in case of occurrence of a “Regulatory Event” (as defined in the next paragraph here below), and (ii) save as provided for under paragraph (i) above, for the first time, within one hundred and fifty (150) days following the date of the OGA that will approve the Bank’s audited annual accounts for the financial year 2022 provided that a period of five years elapses as of the date of meeting of the Bank's EGA that shall ascertain the proper execution of the Bank's capital increase through the issuance of the Series 2018/A Preferred Shares, and (iii) for the subsequent years, within one hundred and fifty (150) days following the date of each OGA that will approve the Bank’s audited annual accounts of the preceding financial year.

) التقيد بالنسب وبأنظمة مصرف لبنان ولجنة الرقابة على 1( شرطبما فيها توفر احتياطات حرة مخصصة المصارف المرعية االجراء،

) 3) تحقق لجنة الرقابة على المصارف من ذلك، و(2لهذا الغرض، و(يحق "للبنك"، وفقا االستحصال على موافقة مصرف لبنان،

باسترداد كل أو جزء من مجموع بأن يقررالستنسابه المنفرد، من %25 تها(بموجب شطور نسب / أ 2018األسهم التفضيلية فئة

) iعلى األقل) ( / أ 2018العدد األساسي لألسهم التفضيلية فئة في أي وقت بعد تاريخ اإلصدار في حال حصول أي "حدث تنظيمي"

) باستثناء iiو((وفق التعريف المبين في الفقرة الالحقة أدناه)، ) أعاله، للمرة األولى، خالل iالحالة المنصوص عنها في الفقرة (

يوما إبتداء من تاريخ انعقاد الجمعية )150مائة وخمسون (مهلة العمومية العادية التي سوف تصادق على حسابات "البنك"

، شرط انقضاء فترة خمس 2022المدققة العائدة للسنة المالية سنوات على تاريخ انعقاد الجمعية العمومية غير العادية "للبنك"

البنك عن التي سوف تتحقق من صحة تنفيذ عملية زيادة رأسمال) بالنسبة للسنوات iiiو(، / أ 2018 طريق إصدار أسهم تفضيلية فئة

يوما إبتداء من تاريخ )150مائة وخمسون (الالحقة، خالل مهلة انعقاد كل جمعية عمومية عادية سوف تصادق على حسابات

."البنك" المدققة والعائدة لكل سنة مالية منصرمة

A “Regulatory Event” shall mean a change occurring after the Issue Date in any applicable laws or regulations, including any regulations published by the Central Bank of Lebanon or the Banking Control Commission, which could be interpreted or applied in such a way that (i) any portion of the aggregate Issue Price for the Series 2018/A Preferred Shares would no longer be included in the Bank’s Additional Tier 1 Capital or (ii) the Bank would not be permitted to maintain the Issue premium in foreign currency, although the Bank is not obliged to do so.

إن عبارة "حدث تنظيمي" تعني تغييرا بعد تاريخ اإلصدار في القوانين النافذة أو في األنظمة بما فيها األنظمة المنشورة من قبل مصرف لبنان أو لجنة الرقابة على المصارف والتي من المحتمل أن تفسر أو تطبق بطريقة تؤدي الى عدم احتساب أي جزء من ثمن

من ضمن / أ 2018إلصدار اإلجمالي لألسهم التفضيلية فئة اأموال المصرف الخاصة األساسية اإلضافية أو التي تؤدي الى عدم السماح للمصرف باإلبقاء على عالوة اإلصدار بالعملة األجنبية

بالرغم من أن المصرف غير ملزم بذلك.

Should the Bank resolve to exercise the call option, the holders of Series 2018/A Preferred Shares shall be informed of the Bank’s decision to redeem whole or part of the issued Series 2018/A Preferred Shares through notices published in two local newspapers by the Bank thirty (30) days prior to such redemption date. In such case, the redemption by the Bank of Series 2018/A Preferred Shares shall be executed as follows:

في حال قرر "البنك" استعمال حقه باإلسترداد، يعلم "البنك" بقراره باسترداد كل أو جزء / أ 2018مالكي األسهم التفضيلية فئة

، بموجب إعالن ينشر في / أ 2018التفضيلية فئة من األسهم (ثالثون) يوما قبل تاريخ هذا اإلسترداد. في 30جريدتين محليتين

من قبل / أ 2018األسهم التفضيلية فئة هذه الحالة يتم استرداد "البنك" على الشكل التالي:

(1) If the redemption results from a “Regulatory Event”, such redemption shall be executed in exchange of an amount equal to the Issue Price subject to any Adjustment Event;

نتيجة أي "حدث تنظيمي"، يتم في حال جرى اإلسترداد )1(مع اإلسترداد المذكور لقاء مبلغا يوازي "ثمن اإلصدار"

؛مراعاة أي "حدث تصحيحي"

(2) If the redemption results from the Bank’s decision for any reason other than a “Regulatory Event”, such redemption shall be executed in exchange of an amount equal to the Issue Price of the

ميع حاالت اإلسترداد األخرى المقررة من قبل أما في ج )2( –"حدث تنظيمي" أي غير تلك الناتجة عن أي -"البنك"

يتم اإلسترداد المذكور لقاء مبلغ يوازي "ثمن اإلصدار" مع مراعاة أي "حدث تصحيحي"، لألسهم المستردة

19

redeemed preferred shares subject to any Adjustment Event, in addition to a premium of 3% (three per cent.) of the Issue Price per share (the “Redemption Price”) and to the dividends declared but unpaid;

بالماية) من ثمن ثالثة( %3مضافا اليه عالوة بنسبة ن اإلسترداد") وأنصبة األرباح إصدار كل سهم ("ثم المعلنة وغير المدفوعة؛

(3) No dividends distributions pertaining to the redeemed preferred shares shall be made for the year during which the redemption would have occurred.

لألسهم المستردة عائدةأية أنصبة أرباح لن يتم توزيع )3( .لسنة التي يجري خاللها اإلستردادعن ا

In the event that the Bank redeems only a part of Series 2018/A Preferred Shares, such redemption will be executed on pro rata basis. The outstanding Series 2018/A Preferred Shares then remaining may grant to their holders, dividends pertaining to the year during which the redemption was executed.

في حال لم يسترد "البنك" سوى جزء من األسهم التفضيلية فئة ، يجري اإلسترداد على أساس نسبة مساهمة كل مالك / أ 2018

المتبقية، / أ 2018ألسهم تفضيلية. أما األسهم التفضيلية فئة تعطي مالكيها حق استيفاء أنصبة أرباح عن السنة فيمكن أن

.المالية التي تم خاللها اإلسترداد

As for the holders of Series 2018/A Preferred Shares, they shall not benefit from any put option to redeem and cancel their Series 2018/A Preferred Shares in whole or in part.

No fees shall be payable by the holders of Series 2018/A Preferred Shares as a result of the Redemption of all or part thereof.

، فال يتمتعون بحق / أ 2018األسهم التفضيلية فئة أما مالكي 2018األسهم التفضيلية فئة بعض أو كل مطالبة البنك باسترداد

تي يملكونها.ال / أ

تسديد / أ 2018لن يتوجب على مالكي األسهم التفضيلية فئة أية رسوم من جراء عملية استرداد كل أو بعض هذه األسهم

التفضيلية.

21- Mandatory Conversion of the Preferred Shares into Common Shares:

:ديةالتحويل اإللزامي لألسهم التفضيلية إلى أسهم عا -21

In case of occurrence of a “Trigger Event” (as defined below), all the Series 2018/A Preferred Shares then outstanding shall be, upon provision of a “Conversion Notice” (as defined below), mandatorily and finally converted into common shares of the Bank without the need for the consent of the holders of the Series 2018/A Preferred Shares, at a rate of one (1) common share per two (2) Preferred Shares Series 2018/A subject to (i) any Adjustment Event, and (ii) obtaining the necessary approvals from the Central Bank of Lebanon (“Mandatory Conversion”). All appropriate steps and measures required towards securing the stability of the Bank’s share capital in the context of a Mandatory Conversion will be set out by the Bank’s Extraordinary General Assembly that shall be convened to this effect, including inter alia amending the nominal value of the then outstanding shares or take such other measure that would be agreed upon by the Central Bank of Lebanon. In no event may the converted shares be reconverted into preferred shares after the date of their conversion into common shares, even if the Trigger Event ceases to exist.

(كما هو محدد Trigger Event" حدث موجبفي حال حصول "في القائمة / أ 2018األسهم التفضيلية فئة جميع أدناه)، تحول

"بتحويل إلزامي إشعار" ، فور إرسالةونهائيحينه بصورة إلزامية ، دونما حاجة لـ "البنك" (كما هو محدد أدناه) إلى أسهم عادية

/ 2018الكي األسهم التفضيلية فئة لإلستحصال على موافقة مفئة سهمين تفضيليينوذلك بمعدل سهم عادي واحد لكل أ،

أن ، و(ب) شرط "حدث تصحيحي"أي وذلك (أ) مع مراعاة، / أ 2018مصرف لبنان الالزمة لهذه الغاية موافقات يتم اإلستحصال على

.")التحويل اإللزامي("

يبقى الخطوات الالزمة كي جميع اإلجراءات ويتم تحديد سوفاآلنفة "التحويل اإللزامي" في إيطار عملية رأسمال "البنك" ثابتا

من قبل الجمعية العمومية غير العادية "للبنك" التي سوف الذكر ، بما فيه تعديل القيمة اإلسمية لألسهم تنعقد لهذه الغاية

فق عليه القائمة في حينه أو اتخاذ أي إجراء قانوني آخر يكون موا من قبل مصرف لبنان.

ال يجوز، في مطلق األحوال، إعادة تحويل األسهم المحولة إلى أسهم تفضيلية، بعد أن يكون قد تم تحويلها إلى أسهم عادية،

الحدث الموجب"."حتى في حال انتهاء وانتفاء

Except for the events constituting a “Trigger Event”, the Preferred Shares Series 2018/A are not convertible into Common Shares of the Bank.

غير قابلة للتحويل / أ 2018األسهم التفضيلية فئة هذا علما بأن التي تشكل "حدث في غير الحاالت لـ "البنك"إلى أسهم عادية

.موجب"

20

“Trigger Event” shall mean either (i) the drop in the Bank’s Common Equity Tier 1 Capital to its risk weighted assets under 66.25% (sixty-six point twenty-five per cent.) of the minimum ratios set out in the regulations issued by the Central Bank of Lebanon, notably Basic Decision No 6939 dated 25 March 1998, as at any Calculation Date, where “Calculation Date” shall mean the last Beirut business day of any calendar quarter; or (ii) the written notification by the Central Bank of Lebanon to the Bank informing the latter that it may not continue to conduct its banking business unless it proceeds to the conversion of the Preferred Shares Series 2018/A into common shares of the Bank.

تدني معدل (أ) إما Trigger Event" حدث موجبيعنى بعبارة "األموال الخاصة األساسية إلى مجموع الموجودات المثقلة

وستون فاصل خمسة وعشرون بالمئة) ستة ( ٪66.25عن بالمخاطرمن الحدود الدنيا المعتمدة بموجب األنظمة الصادرة عن مصرف

، 1998اذار 25تاريخ 6939لبنان، ال سيما القرار األساسي رقم تاريخ وذلك في أي تاريخ احتساب، هذا علما بأنه يعنى بـ "

؛ أو (ب) في بيروت تقويمي " آخر يوم عمل من أي فصلاحتسابقيام مصرف لبنان بإعالم البنك، خطيا، أن هذا األخير غير قابل

بتحويل األسهم في نشاطه المصرفي ما لم يقم لالستمرار ."البنك" م عادية لـهإلى أس / أ 2018التفضيلية فئة

A “Conversion Notice” shall mean the notice that shall be given by the Bank no later than two Beirut business days from the occurrence of a Trigger Event to the holders of the Preferred Shares Series 2018/A whereby it shall clarify the nature of the relevant Trigger Event.

اإلشعار الموجه من "البنك" إلى بتحويل إلزامي" إشعاريعنى بـ "ضمن مهلة أقصاها / أ 2018األسهم التفضيلية فئة الكي م

يعلمهم يومي عمل في بيروت من تاريخ حصول "حدث موجب" بموجبه عن طبيعة "حدث الموجب" المذكور.

The occurrence of a Mandatory Conversion shall not be considered as an event of default and may not give rise to the preferred shareholders’ right to petition for the insolvency or the winding-up of the Bank.

إخالل ولن يخول حالة "تحويل إلزامي" لن يشكل حصول أي إن مالكي األسهم التفضيلية طلب إفالس أو تصفية المصرف.

Following a Mandatory Conversion, the Bank will be fully discharged and irrevocably released from any and all obligations vis-à-vis the holders of the Preferred Shares Series 2018/A in respect of such series of preferred shares, immediately upon the registration of the relevant common shares with Midclear SAL which should occur within a maximum period of ninety (90) days from the last approval by the Central Bank of Lebanon of the conversion of the Preferred Shares Series 2018/A into Common Shares and the amendment of the Bank’s Articles of Association to this effect.

"تحويل إلزامي"، سوف تبرأ ذمة "البنك" تجاه تبعا لحصول أي حالة بصورة نهائية وغير قابلة / أ 2018مالكي األسهم التفضيلية فئة هذه الفئة من األسهم يتعلق بللرجوع عنها من أي موجب

لدى شركة المعنية التفضيلية، وذلك فور تسجيل األسهم العادية تسعون أقصاها خالل مهلة الذي يجب أن يتم .م.ل.ميدكلير ش

آخر موافقة لمصرف لبنان على عملية تحويل األسهم من ) يوم90(إلى أسهم عادية كما وعلى تعديل / أ 2018التفضيلية فئة

. النظام األساسي لـ "البنك" لهذه الغاية

If a holder of Preferred Shares Series 2018/A requires the approval of the Central Bank of Lebanon in order to become the owner of common shares of the Bank but fails to obtain such approval for any reason whatsoever, then it shall be such holder’s responsibility to arrange for the transfer of its entitlement to the relevant common shares to a person who does not require the approval of the Central Bank of Lebanon to this effect.

/ أ 2018مالك أسهم تفضيلية فئة في حال توجب على أي اإلستحصال على موافقة مصرف لبنان لكي يصبح مالكا ألسهم عادية لـ"البنك" وإنما عجز عن اإلستحصال على الموافقة المذكورة ألي سبب كان، عندها سوف يقع على عاتق المساهم المذكور أن

ادية المعنية لصالح أي يتنازل عن حقه في ملكية األسهم العلهذه شخص غير ملزم باإلستحصال على موافقة مصرف لبنان

. الغاية

The holders of the Preferred Shares Series 2018/A undertake to bear all applicable stamp duties, transfer, registration and similar taxes and duties, together with any value added or other tax thereon arising in connection with the transfer of their entitlement to the common shares (where applicable) and comply with all applicable laws and regulations relating thereto. The holders of the Preferred Shares Series 2018/A further undertake to cooperate with the Bank towards facilitating the completion of all required formalities in due course, and to sign all needed documents and instruments as may be required by Midclear SAL and/or the Central Bank of Lebanon to execute the transfer of their entitlement to the common shares to the transferee.

الرسوم جميع/ أ 2018األسهم التفضيلية فئة ومالكيتحمل عن حقهم في ملكية األسهم من جراء عملية التفرغ المتوجبة

العادية (عند اإلقتضاء)، من رسم الطابع المالي ورسوم الفراغ من الرسوم والضرائب المماثلة، باإلضافة إلى وسواهاوالتسجيل

الضريبة على القيمة المضافة أو أية ضريبة أخرى متوجبة لهذه الجهة، كما أنهم يتعهدون بالتقيد بكافة القوانين واألنظمة

األسهم ومالككما يتعهد .المرعية اإلجراء والمتعلقة بهذا التفرغمع "البنك" من أجل تسهيل بالتعاون/ أ 2018التفضيلية فئة

كافة توقيع والالزمة ضمن أسرع وقت، إنجاز جميع المعامالت المطلوبة من قبل شركة ميدكلير ش.م.ل. المستندات والصكوك

األسهم في ملكية همحقالتفرغ عن إتمام بغيةو/أو مصرف لبنان العادية للمتفرغ له.

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For the avoidance of doubt, the conversion of any other series of convertible preferred shares, or securities issued by the Bank shall not trigger or result in the conversion of the Series 2018/A Preferred Shares into common shares of the Bank under any circumstances whatsoever.

اس، فإن تحويل أية فئة أخرى من األسهم التفضيلية تبلومنعا ألي ا ،بل "البنك"قمصدرة من أخرى أدوات مالية ةحويل أو أيتالقابلة لل

أسهم / أ إلى 2018األسهم التفضيلية فئة لن يؤدي إلى تحويل .من األشكالعادية لـ "البنك" بأي شكل

22- Withholding tax: 22- الضريبة المقتطعة:

Distributions of dividends are subject to a 10% (ten per cent) withholding tax unless in case of any amendment of the applicable law in this respect.

%10تخضع توزيعات األرباح لضريبة تقتطع عند المنبع بنسبة اإلجراء ما لم يصدر أي تعديل في القانون المرعي (عشرة بالماية)

لهذه الجهة.

23- Voting: 23- التصويت:

Holders of Series 2018/A Preferred Shares shall not have the right to participate in the discussions and to vote in the Bank’s General Assemblies except in the cases provided for in paragraph (5) of Article (2) of Law 308, as follows:

1) The holders of preferred shares may participate in the debate and vote pro rata to their participation in the Bank’s share capital during the meetings of the General Assemblies convened to decide on the following matters (i) the change in the Bank’s object or legal form; (ii) the paying-up in kind of a capital increase; (iii) the winding-up of the Bank before its term; or (iv) a merger or acquisition scheme in which the Bank is a party;

المناقشة / أ 2018ال يحق لمالكي األسهم التفضيلية فئة والتصويت في الجمعيات العمومية للمصرف اال في الحاالت

في الفقرة الخامسة من المادة الثانية من عليهاالمنصوص ، أي في الحاالت التالية:"308القانون "

االسهم التفضيلية المشاركة في النقاش مالكيل يحق )1 "البنك"تمثله اسهمهم في رأسمال ة ماوالتصويت بنسب

"البنك"تغيير موضوع المتعلقة بالجمعيات العمومية خاللو أجل ه قبل األحلب او تحرير زيادة رأسماله عينابو أو شكله أ

؛بعمليات الضم او الدمج التي يكون طرفا فيها

2) In the event that the Extraordinary General Assembly referred to in Paragraph 1 of Article 2 of Law 308 resolves the distribution to the holders of preferred shares of a minimum percentage of profits each year, and the Bank fails to proceed to the full payment of such percentage during three financial years, the holders of the said preferred shares shall then enjoy the same voting rights as the other shareholders during the Bank’s General Assemblies. Such voting rights shall remain in force and effect until the end of the financial year during which the dividends pertaining to such preferred shares as due for the said year and all previous years, are paid in full.

3) In the event that the Bank fails to provide any privileges, rights or benefits attached to the preferred shares as decided by the Bank’s Extraordinary General Assembly, the holders of the said preferred shares shall then enjoy the same voting rights as the other shareholders during the Bank’s General Assemblies and such voting rights shall remain in force and effect until the Bank provides them with the relevant privileges, rights or benefits.

في حال حددت الجمعية العمومية غير العادية المشار اليها )2 " حدا308القانون ") من المادة الثانية من 1في الفقرة (

ادنى لنسبة االرباح التي يقتضي دفعها سنويا لالسهم التفضيلية ولم يتم دفع كامل هذه النسبة من االرباح

ث سنوات مالية، يكتسب اصحاب هذه المترتبة عن ثال حقا بالتصويت في الجمعياتالتفضيلية عندها االسهم

مساوية لحق سائر المساهمين و لـ "البنك" العمومية انقضاء السنة المالية التي يبقى هذا الحق قائما لغاية

االسهم يتم فيها دفع كامل انصبة االرباح عن هذهنة وعن كافة السنوات والمترتبة عن تلك السالتفضيلية

؛السابقة

في حال تخلف "البنك" عن تأمين إفادة االسهم )3التفضيلية من سائر االمتيازات أو الحقوق أو األولويات

، لـ "البنك"المقررة من قبل الجمعية العمومية غير العادية يكتسب مالكي هذه االسهم التفضيلية حقا بالتصويت

ق سائر المساهمين، في الجمعيات العمومية مساويا لحهذا الحق قائما طالما لم تؤمن للمستفيدين ويبقى

االمتيازات او الحقوق أو االولويات المقررة.

Law 308 further provides for the automatic establishment of an association of holders of Series 2018/A Preferred Shares in charge of the protection of the holders’ interests. Such association shall designate one or more representative(s) who may attend the shareholders meetings, but not participate in discussions or vote in respect of matters presented therein.

شكيل هيئة لمالكي " على أنه يتم ت308كما ينص "القانون صورة تلقائية، تكون مسؤولة ب / أ 2018األسهم التفضيلية فئة

عن رعاية مصالح مالكي هذه األسهم. وتعين هذه الهيئة ممثلا أو أكثر لها، يكون مخولا بحضور الجمعيات العمومية "للبنك" دون حق

المشاركة بالنقاش أو بالتصويت في األمور المتداول فيها.

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24- Investment Considerations & Risk Factors: 24- عوامل المخاطر:اإلعتبارات المتعلقة باإلستثمار و

Investment in Series 2018/A Preferred Shares entails a significant degree of risk.

يتضمن درجة / أ 2018األسهم التفضيلية فئة إن اإلستثمار في عالية من المخاطر.

Therefore, and before purchasing Series 2018/A Preferred Shares, prospective investors should carefully consider the following investment considerations, in light of their own financial situation and investment objectives.

، يقتضي على / أ 2018فئة أسهم تفضيلية قبل شراء أي لذلك، والمستثمرين المحتملين األخذ بصورة دقيقة ووافية بجميع االعتبارات االستثمارية المذكورة في الفقرة التالية، وذلك على

ضوء أوضاعهم المالية وأهدافهم االستثمارية.

Risk factors in connection with Series 2018/A Preferred Shares consist of the following risks: risks relating to the Issuer, risks related to the banking industry, political risks, economic risks, Lebanese sovereign risk, risks related to foreign exchange and monetary policy, risks related to liquidity, credit risk, operational risk, interest-rate sensitivity risk, risks associated with the essential characteristics of the Series 2018/A Preferred Shares (including all rights attached thereto) and legal risks, as further detailed in section 4 of the Offering Circular (“Investment Considerations”).

Furthermore, the prospective investors hereby acknowledge that this Offering Summary is set forth for indicative purposes only and is qualified in its entirety by the detailed information included in the Offering Circular pertaining to the issuance of Series 2018/A Preferred Shares. Accordingly, it should be read in conjunction with the full text of the Offering Circular, as it only contains some of the principal terms of the issuance. Therefore, potential purchasers of Series 2018/A Preferred Shares are strongly recommended to review the sections of the Offering Circular which contain the terms and conditions of the Series 2018/A Preferred Shares issuance and the principal risk factors pertaining thereto.

/ أ 2018سهم التفضيلية فئة إن عوامل المخاطر المتعلقة باألالمخاطر التالية: المخاطر المرتبطة بالمصدر، المخاطر العائدة ب تكمن

المخاطر للحقل المصرفي، المخاطر السياسية، المخاطر االقتصادية، المخاطر المتعلقة بتقلب أسعار العمالت السيادية المتعلقة بلبنان،

، مخاطر التسليف، يولةاألجنبية والسياسة النقدية، مخاطر السالمخاطر التشغيلية، مخاطر تقلب سعر الفائدة، المخاطر المرتبطة

/ أ (بما فيه 2018خصائص الجوهرية لألسهم التفضيلية فئة بال، وفقا لما هو محدد والمخاطر القانونية الحقوق المتصلة بها)

Investment“)من "كتيب اإلصدار" 4بالتفصيل في القسم Considerations”).

ن "موجز إضافة إلى ذلك، لقد أخذ المستثمرون المحتملون علما بأفقط وبأنه يشكل جزءا ال البياناإلصدار" الحاضر قد وضع على سبيل

يتجزأ من المعلومات المفصلة في "كتيب اإلصدار" المتعلق بإصدار ة هذا . لذلك، فإنه يقتضي قراء/ أ 2018األسهم التفضيلية فئة

الموجز باالستناد إلى النص الكامل لـ "كتيب اإلصدار" إذ ان األحكام الحاضرة ال تتضمن سوى جزءا من األحكام األساسية لإلصدار.

ن لألسهم التفضيلية فئة يبالتالي، يطلب من الشارين المحتمل، االطالع بصورة خاصة ببنود "كتيب اإلصدار" المتعلقة / أ 2018

وبعوامل / أ 2018كام إصدار األسهم التفضيلية فئة بشروط وأح المخاطر األساسية العائدة لهذا اإلصدار.

25- Transfer of Preferred Shares: 25- التفرغ عن األسهم التفضيلية:

The transfer of preferred shares may only be made in favor of an Eligible Investor as defined in the Offering Circular. The Bank may also refuse at all time any preferred share transfer in its sole and absolute discretion, notably for compliance considerations.

The transfer of ownership of the assigned preferred shares shall be executed through the Bank, which shall inform Midclear SAL of the same to take the appropriate steps.

إلا لصالح "مستثمرين لتفرغ عن األسهم التفضيليةا ال يجوز .مؤهلين" كما هو معرف عنهم في "كتيب اإلصدار"

كما أنه يحق لـ "البنك" أن يرفض في أي وقت كان أي تفرغ عن أسهم تفضيلية وفقا الستنسابه المطلق، ال سيما ألعتبارات تعود

.(”compliance“)إلجراءات اإلمتثال

سوف يتم نقل ملكية األسهم التفضيلية المتفرغ عنها من خالل "البنك" على أن يقوم هذا األخير بإعالم شركة ميدكلير ش.م.ل.

بذلك إلجراء المقتضى.

26- Subscription Application Cancelation: 26- استمارة طلب اإلكتتاب"إلغاء" :

The investor/subscriber shall not be entitled to withdraw his offer to subscribe to the 2018/A Preferred Shares unless in the event of major and substantial discrepancies between the final terms of the Issuance as described in the Offering Circular (and the relevant documentation) and any amended terms thereof as may be resolved by the Bank’s EGA before the Issue Date, which may adversely affect the investor’s subscription. In such event, no fees or

ال يمكن للمستثمر/المكتتب أن يسحب عرضه باإلكتتاب باألسهم ، إال في حال وجود فوارق أساسية / أ 2018فئة التفضيلية

وجوهرية بين األحكام النهائية "لإلصدار" كما هي مبينة في وتلك التي قد يتم (وفي المستندات التابعة له) "كتيب اإلصدار"

بل الجمعية العمومية غير تعديلها قبل تاريخ "اإلصدار" من قوفي .اكتتاب المستثمرعلى العادية "للبنك"، والتي قد تؤثر سلبا

لمستثمر/المكتتب دفع أية رسوم أو ا هذه الحالة، لن يتوجب على تعويض.

23

compensation shall be payable by the investor/subscriber.

The Bank shall notify each investor in writing of the existence of such major and substantial discrepancies. If the Bank does not receive from the investor a written request to withdraw his offer to subscribe to the 2018/A Preferred Shares due to such discrepancies within a maximum period of seven (7) calendar days as of the date of service of the aforesaid notice, the Subscription Application of such investor shall be deemed binding and irrevocable and, accordingly, the Subscription Amount will not be refunded to the investor.

"البنك" كل مستثمر خطيا بوجود الفوارق األساسية يعلمسوف في حال لم يتبلغ "البنك" طلبا خطيا والجوهرية المذكورة أعاله.

فئة عرضه باإلكتتاب باألسهم التفضيلية من المستثمر بسحب ) أيام 7( سبعةخالل مهلة أقصاها بسبب تلك الفوارق / أ 2018

، سوف تعتبر "استمارة البنك" اآلنف الذكرمن تاريخ إبالغه كتاب "طلب اإلكتتاب" العائدة لهذا المستثمر ملزمة وغير قابلة للرجوع

من قبل المستثمر عنها، دون إمكانية استرجاع "مبلغ اإلكتتاب" تبعا لذلك.

27- Subscription Fees 27- :رسوم اإلكتتاب

No subscription fees are due to the Bank. ية رسوم إكتتاب لصالح "البنك". ال يتوجب أ

28- Clearing Agent: 28- الوديع المركزي:

Midclear SAL will perform clearing and settlement for the Series 2018/A Preferred Shares. The Series 2018/A Preferred Shares will be deposited, upon their issuance, in the Bank’s account with Midclear SAL (Account No. 19/20).

والتسويةبأعمال المقاصة .ل.م.شركة ميدكلير شسوف تقوم يتم إيداع "األسهم و. / أ 2018العائدة لألسهم التفضيلية فئة

التفضيلية" فور إصدارها في حساب "البنك" لدى شركة ميدكلير ). 19/20حساب رقم (الش.م.ل.

Ownership of the Series 2018/A Preferred Shares will be shown only on, and transfers thereof may be effected only through, the book-entry system maintained by Midclear SAL and its participants, including the Bank .

وأية تفرغات الحقة أ / 2018ألسهم التفضيلية فئة تدون ملكية الها، فقط في النظام المعلوماتي المحاسبي لشركة ميدكلير

ش.م.ل. والمشتركين فيه، بما فيه "البنك".

29- Placement Agent: :موزع اإلصدار -29

Société Générale de Banque au Liban S.A.L. ل.م.بنك سوسيته جنرال في لبنان ش

30- Legal Advisors: :المستشارون القانونيون -30

Société Civile Professionnelle – SCP Law Firm شركة مدنية – أس سي بي (مكتب محاماة)شركة

31- Statutory Auditors

مفوضو المراقبة -31

BDO, Semaan , Gholam & Co

Ernst & Young P.C.C.

BDO, سمعان , غالم وشركاهم

غإرنست ويون

32- Disclaimer: 32- بند عدم مسؤولية:

Each potential purchaser of Series 2018/A Preferred Shares hereby confirms that he is fully aware that the Series 2018/A Preferred Shares are issued solely by the Bank.

Accordingly, the Bank shall bear all liabilities in connection with the issuance of the Series 2018/A Preferred Shares howsoever the same arise from its own and direct actions.

أنه على / أ 2018يؤكد كل شاري محتمل ألسهم تفضيلية فئة هي مصدرة من قبل / أ 2018يقين بأن األسهم التفضيلية فئة

اه."البنك" دون سو

بالتالي، يتحمل "البنك" كامل المسؤولية المتعلقة بإصدار والناتجة عن أفعاله المباشرة. / أ 2018األسهم التفضيلية فئة

24

Furthermore, and subject to the Lebanese laws governing the board members’ liability arising from their management of the Bank, potential purchasers of Series 2018/A Preferred Shares agree, represent and warrant that they shall not be entitled to claim any right or compensation whatsoever from Societe Générale (France) S.A. (“SG France”) or from its representatives, officers, directors, advisors and agents in the Bank which are not concerned or engaged, or bound by the present issuance and assume and accept no obligation or liability whatsoever in connection thereto.

التي ترعى مسؤولية اللبنانية فضلا عما تقدم، ومع مراعاة القوانين أعضاء مجلس اإلدارة عن إدارتهم "للبنك"، يوافق ويضمن الشارون

ويؤكدون بأنه لن / أ 2018المحتملون لألسهم التفضيلية فئة يحق لهم المطالبة بأي حق أو تعويض من أي نوع كان تجاه بنك

") أو أي من ممثليها، SG France(" .) ش.مسوسيته جنرال (فرنساومدرائها، وأعضاء مجلس إدارتها، ومستشاريها ووكالئها لدى "البنك" إذ أنهم غير معنيين أو مرتبطين أو ملزمين باإلصدار الحاضر،

كما أنهم ال يتحملون أية موجبات أو مسؤولية لهذه الجهة.

Therefore, potential purchasers of Series 2018/A Preferred Shares hereby release, discharge, and hold SG France, its representatives, officers, directors, advisors and agents whether acting as (i) members of the Bank’s Board of Directors or (ii) the Bank’s managers, harmless of any responsibility, liability, claim, right, lawsuit, damage, or compensation whatsoever arising out of or directly or indirectly in connection with the terms of this Offering Summary and with the purchase of Series 2018/A Preferred Shares.

، / أ 2018لذلك، يبرئ الشارون المحتملون لألسهم التفضيلية فئة " وممثليها وموظفيها وأعضاء مجلس إدارتها SG Franceذمة "

) أعضاء في مجلس إدارة iومستشاريها ووكالئها سواء كانوا () مدراء في إدارة "البنك"، ويعفونهم من أية ii"البنك" أو (

أو ضرر أو تعويض من أي نوع مسؤولية أو مطلب أو حق أو دعوى كان ناتج عن أو متعلق سواء مباشرة أو غير مباشرة بأحكام "موجز

./ أ 2018اإلصدار" الحاضر وبشراء أسهم تفضيلية فئة

Potential purchasers also acknowledge that SG France and its representatives, officers, directors, advisors and agents in the Bank have not reviewed and accept no responsibility for any information contained in this Offering Summary or for the merits of any offering in connection either directly or indirectly with the Series 2018/A Preferred Shares.

وممثليها ”SG France“لون علما بأن كما يأخذ الشارون المحتمومدرائها وأعضاء مجلس إدارتها ومستشاريها ووكالئها لدى "البنك" لم يطلعوا وال يتحملون أية مسؤولية بالنسبة للمعلومات الواردة في "موجز اإلصدار" الحاضر أو بالنسبة ألي عرض يتعلق

./ أ 2018مباشرة أو غير مباشرة باألسهم التفضيلية فئة بصورة

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3. SUBSCRIPTION TIMETABLE AND PROCEDURES

Timetable and authorizations The following is a summary timetable and schedule of authorizations relating to the offering of the Series 2018/A Preferred Shares. Potential purchasers should note that this timetable is tentative and subject to change. Nevertheless, subject only to the right of subscribers to withdraw their Subscription Application as set out in the Subscription Application Form and in this Offering Circular, each Subscription Application Form is final and irrevocable under all circumstances, regardless of delays in the closing of the contemplated issuance. 26 March 2018 Letter was sent by the Bank to the Governor of the Central Bank seeking approval in

principle to issue the Series 2018/A Preferred Shares.

17 April 2018 Date on which the Bank’s Board of Directors was held to: (i) approve the capital increase of the Bank through the issuance of the Series 2018/A Preferred Shares, (ii) set out all the terms and conditions for the offering of the Series 2018/A Preferred Shares, (iii) approve the draft of the Offering Circular to be submitted to the CMA , (iv) grant the Chairman General Manager, the Deputy Chief Executive Officer, the Deputy General Managers, acting jointly or severally, the broadest powers to sign on behalf of the Directors, the “Declaration” to be addressed to the CMA , and (v) grant the Chairman General Manager the broadest powers to call an Extraordinary General Assembly of the Bank for the purpose of increasing the Bank’s capital through the issuance of the Series 2018/A Preferred Shares.

27April 2018 Date on which a letter was sent by the Governor of the Central Bank approving in principle the issuance of the Series 2018/A Preferred Shares.

28 April 2018 Date on which a letter was sent by the Bank to the CMA seeking approval for the offering of the Series 2018/A Preferred Shares.

11 July 2018

Date on which a letter was received by the Bank from the CMA approving the offering of the Series 2018/A Preferred Shares.

2 July 2018

Date on which the Bank’s EGA was held to: (i) approve the Bank’s capital increase through the issuance of the Series 2018/A Preferred Shares; (ii) set out the issue size and the terms of the Series 2018/A Preferred Shares; (iii) amend the Bylaws accordingly; and (iv) grant the Board of Directors the broadest powers to (A) set the Official Subscription Period, and (B) approve the allotment of the Preferred Shares, and (C) accept new preferred shareholders.

4 July 2018

Date on which a letter was sent by the Bank to the Governor of the Central Bank with a copy of the minutes of meeting of the aforementioned EGA, seeking the approval of Bank’s capital increase through the issuance of the Series 2018/A Preferred Shares.

31 July 2018 (tentative)

Date on which the Central Council of the Central Bank is expected to grant its final approval regarding the Bank’s capital increase through the issuance of the Series 2018/A Preferred Shares.

14 August 2018 (tentative)

Date on which the Bank’s Board of Directors is expected to be held to inter alia (i) set the Official Subscription Period, and (ii) grant the Chairman General Manager, the Deputy Chief Executive Officer, the Deputy General Managers, acting jointly, the broadest powers to approve the allotment of the Preferred Shares and accept the new preferred shareholders.

16 August 2018 through 18 August 2018 (tentative)

Official Subscription Period: Prospective Eligible Investors desirous to subscribe to Series 2018/A Preferred Shares should submit duly completed Subscription Application Forms to the Bank in accordance with the terms contained therein no later than 12:00 noon, Beirut time, on the last day of the Official Subscription Period (i.e. August 18th, 2018).

24 August 2018 (tentative)

A meeting of the Bank’s Board of Directors is expected to be held to inter alia, (i) approve the allotment of the Series 2018/A Preferred Shares and set its final date (the “Final Allotment Date”), and (ii) to call the Confirmation EGA.

30 August 2018 (tentative)

Date on which the Confirmation EGA is expected to be held and which shall correspond to the issue date of the Series 2018/A Preferred Shares (the “Issue Date”)

October 2018 (tentative)

Date on which the Bank’s Board of Directors is expected to be held to call the first Special General Assembly of the body of holders of Series 2018/A Preferred Shares.

October 2018 (tentative)

Tentative date of the first meeting of the Special General Assembly of the body of holders of Series 2018/A Preferred Shares.

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Procedures for subscription Applications for Subscription: Acceptance by the Bank Eligible Investors desirous to subscribe to Series 2018/A Preferred Shares must submit to the Bank a Subscription Application Form, substantially in the prescribed form, a copy of which is attached to this Offering Circular as Exhibit A. Copies of this Offering Circular and the Subscription Application Form are also available at the Head Office and branches of the Bank. A Subscription Application Form must be duly completed in full in accordance with the terms contained therein, signed by an Eligible Investor and submitted to the Bank in two copies. Subscription Application Forms submitted by corporations must be signed by a duly authorized representative in accordance with the corporate documents thereof. A Subscription Application Form shall be deemed accepted only if (i) executed by the Eligible Investor (ii) the relevant Subscription Amount is paid in full, and (iii) accepted by the Bank, such acceptance to be evidenced by the delivery of a fully executed copy of the Subscription Application Form to the Eligible Investor, provided for the number of Series 2018/A Preferred Shares allotted to the Eligible Investor. Subject to the preemption rights granted to the holders of the Series 2012 Preferred Shares, the Series 2013 Preferred Shares and the Series 2015 Preferred Shares, the Bank may, in its sole discretion, reject any Subscription Application Form in whole or in part or reduce the number of Series 2018/A Preferred Shares included in any Subscription Application Form submitted by an Eligible Investor. Furthermore, the Bank may, in its sole and absolute discretion, accept or decline any Subscription Application Form in whole or in part, without being under any obligation neither to justify nor to motivate such decision, or reduce the number of Preferred Shares requested by the Eligible Investors as it shall deem appropriate. The Subscription Application Forms may be declined even after their acceptance by the Bank, in case the banking regulatory or supervisory authorities express any reservations or objections on the Eligible Investor. In such case, the Eligible Investor/subscriber undertakes to transfer the preferred shares allotted to him to another Eligible Investor upon the Bank’s first demand. Exercise of Preemptive Rights – Priority Subscription Rights Exercise Period

Holders of the Bank’s Series 2012, Series 2013 and Series 2015 Preferred Shares shall have a first refusal right to subscribe into the Series 2018/A Preferred Shares on first priority basis and irreducibly pro rata to their holdings of the total number of Series 2012, Series 2013 and Series 2015 Preferred Shares (i.e. based on the ratio between the aggregate Issue Size of the Series 2012, the Series 2013 and the Series 2015 Preferred Shares and the Issue Size of the Series 2018/A Preferred Shares). In the event the first priority subscription right is not exercised by part or all of Series 2012, Series 2013 and Series 2015 Preferred Shares holders, subscribers who are subject to irreducible subscription shall then be entitled to subscribe to the Series 2018/A Preferred Shares in a reducible manner each pro rata to his holding and within the limits of his request which can be reduced. In the event the Series 2018/A Preferred Shares are not entirely subscribed either irreducibly or reducibly by the holders of Series 2012, Series 2013 and Series 2015 Preferred Shares as set out above, the subscription shall then be made available for third parties including holders of common shares subject to the provisions of article (2) paragraph (3) of Law No 308/2001.

In order to exercise priority subscription rights for the purchase of Series 2018/A Preferred Shares, a holder of Series 2012 and/or Series 2013 and/or Series 2015 Preferred Shares must submit a duly completed Subscription Application to the Bank, including an indication that such holder is exercising his/her subscription rights and a confirmation of the number of Series 2012 and/or Series 2013 and/or Series 2015 Preferred Shares held by him, no later than the date of expiration of the Official Subscription Period that will be set by the Bank. Holders of Series 2012, Series 2013 and Series 2015 Preferred Shares who fail to notify the Bank within such term, of their intention to exercise their priority subscription right to purchase Series 2018/A Preferred Shares will be deemed to have finally and irrevocably waived such right. Eligible Investors desirous to subscribe for Series 2018/A Preferred Shares should submit a completed Subscription Application Form to the Bank in accordance with the terms contained therein no later than 12:00 noon, Beirut time, on August 18th, 2018, which is expected to be the last day of the Official Subscription Period. Official Subscription Period The Official Subscription Period is expected to begin on or about August 16th, 2018, and expected to end at 12:00, noon (Beirut time), on or about, August 18th, 2018 (tentative). Subscription Application Forms submitted by an Eligible Investor must be received by the Placement Agent no later than 12:00 noon, Beirut time, on, August 18th, 2018 (tentative). Payment of the Subscription Amount Upon signing the Subscription Application Form, each Eligible Investor undertakes and covenants to pay the Subscription Amount by wire transfer in U.S. Dollars to the Subscription Dedicated Account opened with the Bank. In the event that the offering of the Series 2018/A Preferred Shares is terminated or if a Subscription Application Form is rejected, in whole or in part, the Subscription Amount (or a corresponding portion thereof) received by the Bank from the relevant Eligible Investor will be promptly refunded to him, together with interest, if any, accrued thereon. At the end of the Official Subscription Period, and before transferring the amount of the capital increase to the Central Bank, the Bank shall convert that portion of the funds it has received in respect of the aggregate nominal value of the Series 2018/A Preferred Shares (i.e. the U.S. Dollar-equivalent of LBP 258,000 per Series 2018/A Preferred Share), into Lebanese Pounds at the USD/LBP spot rate of exchange applicable on the first business day following the date on which the Bank’s Board of Directors shall decide on the opening of the Official Subscription Period, and thereafter irrevocably transfer the Lebanese Pounds so obtained,

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to the relevant subscription account at the Central Bank for application to purchase Series 2018/A Preferred Shares on the Issue Date, on behalf of the relevant Eligible Investors whose Subscription Application Forms have been accepted. The Lebanese Pound amount transferred to the Central Bank shall be credited to the Bank’s share capital account, while the U.S. Dollar balance of the subscription funds shall be applied to the Bank’s issue premium account. Each Eligible Investor shall be entitled to receive interests on the Subscription Amount paid by him, calculated from the date on which the funds are deposited in the Subscription Dedicated Account until the date of their transfer to the account that will be opened by the Bank at the Central Bank towards depositing the funds needed for the Bank’s capital increase and the issuance of the Preferred Shares (or any earlier date on which all or any portion of such amount is refunded to the subscriber in accordance with the provisions set out herein), at a rate of 6% (six per cent.) per annum as due and payable by the Bank. Allotment The Series 2018/A Preferred Shares will be allotted first to existing holders of Series 2012, Series 2013 and the Series 2015 Preferred Shares exercising their priority subscription rights on a pro rata basis to the extent of their entitlements. Thereafter, to the extent remaining, the Series 2018/A Preferred Shares will be allotted to Eligible Investors who have submitted valid Subscription Application Forms that have been accepted, in whole or in part, by the Bank in its sole and absolute discretion. Any Series 2018/A Preferred Shares not subscribed by holders of Series 2012, Series 2013 and the Series 2015 Preferred Shares through exercise of their priority subscription rights, will be allotted by the Bank in its sole and absolute discretion. It is expected that all allotments of Series 2018/A Preferred Shares will be completed on or about August 20th, 2018 (tentative). If the aggregate amount of Series 2018/A Preferred Shares subscribed for by Eligible Investors exceeds the maximum aggregate amount of Series 2018/A Preferred Shares being offered, the Series 2018/A Preferred Shares will be allotted among the Eligible Investors by the Bank in its sole discretion, prior to the Issue Date. The Bank will send notices of allotment to the Eligible Investors promptly following the end of the Official Subscription Period once the final allotments have been made. Until the Final Allotment Date, no subscriber, whether or not exercising priority subscription rights, shall have any right or interest in any Series 2018/A Preferred Shares. Subscription Application Cancelation Whether or not the Subscription Application Form has been accepted by the Issuer, the investor/subscriber shall not be entitled to withdraw his offer to subscribe to the 2018/A Preferred Shares unless in the event of major and substantial discrepancies between the final terms of the Issuance as described in the Offering Circular (and the relevant documentation) and any amended terms thereof as may be resolved by the Bank’s EGA before the Issue Date, which may adversely affect the investor’s subscription. In such event, no fees or compensation shall be payable by the investor/ subscriber. The Bank shall notify each investor in writing of the existence of such major and substantial discrepancies. If the Bank does not receive from the investor a written request to withdraw his offer to subscribe to the 2018/A Preferred Shares due to such discrepancies within a maximum period of seven (7) calendar days as of the date of service of the aforesaid notice, the Subscription Application of such investor shall be deemed binding and irrevocable and, accordingly, the Subscription Amount will not be refunded to the Eligible Investor. Powers of Attorney and Authorizations Pursuant to its Subscription Application, each prospective Eligible Investor will be required to grant to each duly authorized representative of the Bank, acting singly (but without any liability or responsibility on the part of any such representative in his or her individual capacity), a power of attorney to complete, execute and deliver, on behalf of such Eligible Investor, any and all applications, subscription forms and other documents needed or appropriate for the acceptance and registration by the CBL of such purchaser. Additionally, by signing and submitting the Subscription Application Form, the Eligible Investors are authorizing the Bank to take any and all steps needed towards redeeming and canceling the 2018/A Preferred Shares and converting the same into common shares in accordance with the mechanism set out in the Offering Summary (where applicable), including inter alia the power to instruct and authorize Midclear S.A.L. to proceed with such redemption, cancellation and conversion (as the case may be). Delivery of Series 2018/A Preferred Shares The Series 2018/A Preferred Shares will be issued in registered form, registered in the respective names of the purchasers thereof in the share registry maintained by Midclear in respect of the Bank’s share capital. The Series 2018/A Preferred Shares will be delivered, upon issuance, by deposit to the Midclear account of the Bank (Account No 19/20) and the Bank will hold the Series 2018/A Preferred Shares in custody for the benefit of the respective Eligible Investor in compliance with its standard custody arrangements. Ownership of the Series 2018/A Preferred Shares will be shown only on, and transfers thereof may be effected (subject as provided herein) only through, the book-entry system maintained by Midclear and its participants, including the Bank. Neither the Bank nor person acting on its behalf shall have any responsibility or liability for any aspect of the records relating to payments made on account of interests in the Series 2018/A Preferred Shares or for maintaining, supervising or reviewing any records relating to ownership of Series 2018/A Preferred Shares.

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4. INVESTMENT CONSIDERATIONS An investment in Series 2018/A Preferred Shares involves risks and should only be made by potential purchasers who are able to bear the economic risk inherent to an investment in the Lebanese banking industry in general and in Series 2018/A Preferred Shares in particular. Prior to making an investment decision, prospective investors should consider carefully, in light of their own financial circumstances and investment objectives, all the information set forth herein and, in particular, the risk factors set forth below. It is strongly recommended that potential purchasers of Series 2018/A Preferred Shares also consult their own tax and legal advisors and accountant regarding tax, accounting and legal matters in connection with the purchase, holding and sale of Series 2018/A Preferred Shares.

1. Considerations relating to the Lebanese Political and Economic Environment

The Bank operates mainly in Lebanon, but also in Jordan, Cyprus and United Arab Emirates through its banking subsidiaries. Still, given that the bulk of the Bank’s activity is based in Lebanon, its performance and business prospects are closely related to evolutions taking place on the political and economic front in Lebanon and, to a lesser extent, in Jordan, Cyprus and the Golf area. It is to be noted that the Bank has ceased all activity in Syria and fully disengaged from this market since 2010. At the date of this Offering, Lebanon’s recent history and outlook at the political and economic levels can be summarized as follows.

1.1. Political Considerations Historical overview

Lebanon’s financial environment is related to the overall political, social and economic situation in Lebanon, which, in turn, is tied to the absence of military conflict in Lebanon and in its neighboring countries, as well as internal stability. A combination of internal and external factors led to a heavily militarized conflict, which lasted from April 1975 until October 1990. Successive rounds of fighting took place, aggravated by two Israeli military invasions in 1978 and 1982. The conflict resulted in significant human losses, a substantial decline in GDP and reduction of economic activity, a significant reduction of Government authority, substantial physical and infrastructure damage, and a large public sector deficit and capital outflows. The post-conflict era has been characterized by large reconstruction efforts, which resulted in large public sector deficits and setbacks in the implementation of political and economic reforms due, among other matters, to differences in views between political leaders and disagreements within the executive branch of the Government. The post-conflict era has also witnessed a series of adverse events, which have led to significant political and social unrest and negatively affected the country and the finances of the Government, including:

• the assassination of the former Prime Minister Rafik Hariri in February 2005; • the inflow of over 1.5 million Syrian refugees • a series of assassinations and attempted assassinations of other political leaders and public figures; • the adoption of a series of U.N. Security Council Resolutions, including Resolution 1757, which established the Special Tribunal for

Lebanon to prosecute persons responsible for the bombing that killed former Prime Minister Hariri • armed conflicts involving Lebanon’s neighbors, especially the “July 2006 War”, during which Israel waged war on Lebanon following

the kidnapping by Hezbollah of two Israeli soldiers • internal armed clashes, which took place at several points in time since May 2008, in Beirut, northern Lebanon, the Bekaa Valley,

the Chouf mountains, Sidon, etc. • various instances of political instability, including the resignations of ministers, the failure of Parliament to convene and delays in

forming governments; and • popular protests, demonstrations and general unrest.

The aforementioned events, as well as similar events in the surrounding region (especially Syria) that have an impact on Lebanon, have, on occasion, escalated into violence, sometimes of a general nature and more often with particular political or civil targets. They have also contributed to loss of confidence in business investment in Lebanon.

Parliamentary elections Lebanon has not held parliamentary elections since 2009, but recently passed a new proportional representation law under which the forthcoming elections will be held. The new electoral law still preserves the country’s delicate sectarian balance, but uses a considerably more complex formula for selecting winners, adding to uncertainty over the ability of any alliance to garner enough seats in the legislature to form a strong governing coalition. A rare political deal had paved the way for presidential elections to take place in October 2016, followed by the formation of a new Cabinet at the end of the same year, after more than 2.5 years of political paralysis.

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Conflict in Syria Meaningful financial support for Lebanon and revival of the democratic process would indeed reflect positively on the Lebanese economy. The country has been heavily affected by the Syrian conflict next door, and the influx of close to 1.5 million refugees has severely strained infrastructure and public services. The easing intensity of the conflict in Syria should help relieve some of the pressures on public services, but the majority of refugees are unlikely to return to Syria before a clear resolution to the conflict. In the meantime, Lebanon is appealing for $2.7bn in international aid for refugees and their host communities in 2018, slightly less than its appeal in 2017.

1.2. Economic Considerations Economic Outlook

Lebanon’s economy kicks off 2018 with significant promise for an economic revival, while regional and domestic challenges, especially parliamentary elections scheduled for May, will continue to pose challenges to a full recovery in the short-term. Blocked land trade routes with Syria and Iraq are expected to be re-opened by mid-2018 following the defeat of ISIS, which could drive some recovery in exports, predicted the Institute of International Finance (IIF). Growth in exports and a pickup in investment are likely to help lift Lebanon’s real GDP growth to 3.1% in 2018, its fastest pace in eight years, according to the IIF. Goods exports are projected by the IIF to climb significantly in 2018, along with a rise in foreign direct investment, reaching their highest level in over seven years. Meanwhile, the Lebanese government announced plans to organize an international aid conference in April with the aim of raising $16bn-$22.5bn to revamp the country’s infrastructure over the next decade. Private consumption will likely be the leading driving force behind economic growth in 2018. Higher public sector salaries will pump an additional $910m into the economy during the year, in addition to salaries for an expected minimum of 2,000 more hires in security agencies. Consumer confidence surged to 122.7 points in the 12 months through January 2018, its highest level for the period in the post-Syrian conflict years. Improving confidence has also restored momentum to the new car market in 2017 and at the start of 2018. The number of new registered passenger cars grew by 2.7% yoy to 2,636 vehicles in January 2018, following an increase of 2.5% to 39,863 vehicles in the full year 2017. Furthermore, Lebanon is starting 2018 against the backdrop of more favorable global economic trends. The world economy appears to have entered a new phase of moderately stronger growth, as global GDP growth is likely to have accelerated to 3.1% in 2017 and is projected to quicken further to 3.4% in 2018, some nine years into the global economic expansion, according to Citi, a US-based investment bank. Higher regional oil liquidity will also have a positive impact on the Lebanese economy, according to the Economist Intelligence Unit. Brent crude oil prices traded at $70 per barrel in January 2018, two years after reaching a low of $26 per barrel in January 2016. As a result, public finances of Gulf Cooperation Council economies are slated to improve in 2018, which may help raise financial inflows and workers’ remittances to Lebanon.

Besides typical economic factors, Lebanon faces a handful of exceptional events in 2018. Italy is scheduled to host a Rome II conference on March 15 for the support of the Lebanese Army and Security Forces. The conference aims to rally political, technical, military, and financial support for Lebanon to help the country bolster its armed forces. The Lebanese government will then be looking to raise billions of dollars in development finance loans at an international aid conference slated to be held in Paris ahead of Parliamentary elections, which are scheduled to take place on May 6th.

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TABLE OF SELECTED LEBANESE ECONOMIC INDICATORS

2013 2014 2015 2016 2017e 2018f

The economy Nominal GDP (LL billions) 69,366 72,109 74,560 75,373 80,388 86,102

Nominal GDP (U.S.$ billions) 46 47.8 49.5 50 53.3 57.1 Real GDP growth rate (%) 3 2 0.8 1.8 2.2 3.1

CPI % change average 5.6 1.1 -3.8 -0.8 4.2 4.6

Balance of payments

Current account balance (U.S.$ millions) -11,489 -11,697 -8,056 -9,828 -8,752 -8,773 % of GDP -25 -24.5 -16.3 -19.7 -16.4 -15.4

Balance of payments (U.S.$ millions) -1,128 -1,408 -3,354 1,238 -156

Reserves Gross foreign currency reserves (U.S.$ millions) 36,748 39,547 38,756 43,338 43,563 44,063

Gold (U.S.$ millions) 11,104 11,670 10,704 11,518 11,647 11,182

Gold (million Troy Ounces) 9.22 9.22 9.22 9.22 9.22 9.22

Public finance (LL billions)

Government revenues 14,201 16,400 14,435 14,959 17,104 17,999 Government expenditures 20,563 21,032 20,393 22,412 23,264 25,590

Government overall deficit -6,362 -4,632 -5,958 -7,453 -6,160 -7,591

Public debt

Gross public debt (LL billions) 95,712 100,364 106,031 112,910 118,870 126,111

Gross public debt to GDP (%) 138 139 142 150 147.9 146.5 Government domestically issued debt (LL billions) 56,312 61,752 65,195 70,785 75,405 81,098

Government foreign issued debt (LL billions) 39,398 38,604 40,819 42,682 44,222 46,120

Monetary aggregates (LL billion, unless otherwise indicated)

Claims on government 59,488 63,150 70,616 76,521 82,681 90,272 Claims on the private sector 65,949 71,217 75,695 80,188 84,029 88,782

Claims on the private sector % change 11 8 6 6 4.8 5.7

Broad money (M2) % change 7 6 5 7 5.6 6.5

Employment and earnings

Unemployment rate (%) 8.1 8.5 8.9 9.4 9.7 10 Per capita $ GDP 10,019 10,161 10,250 10,109 10,519 10,992

Interest rates (% average)

Lending rate 7.4 7.3 7.1 8.4 8.7 9.1 Deposit rate 5.8 5.9 6 5.9 6.3 6.8

Real deposit rate 0.3 4.7 10.1 6.8 2 2.1

Source: The Institute of International Finance Report Estimated figures for 2017 and Forecast figures for 2018

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Consumer prices accelerating on local and foreign pressures Lebanon’s Consumer Price Index (CPI) surged by an average of 4.5% in 2017 after two consecutive years in decline. Inflation gained considerable momentum in the final months of the year, buoyed by a series of domestic and global factors including higher oil prices and taxes, and appreciation in the Euro.

Oil Brent crude oil prices gained 24.6% in 2017, lifting retail gasoline prices in Lebanon and seeping into utilities and other non-fuel intensive sectors. Import prices also likely drove part of the acceleration in consumer prices following an appreciation of 13.9% in the Euro against the US dollar by the end of 2017. At the same time, a series of higher and new taxes on businesses and consumers likely prompted an upward adjustment in end-user prices in the last four months of the year. The government had approved in October increases in the corporate tax rate to 17% from 15% and in the Value Added Tax to 11% from 10% along with a series of other tax measures. Consumption, Inflation Consumer prices in the transportation sector, which accounts for 13.1% of an average household’s budget, rose by 5.6% during the year, their fastest pace in seven years. Meanwhile, prices of clothing and footwear posted the fastest growth among the 12 main spending categories, rising by 12.9% in 2017. Similarly, rent inflation for contracts signed after 1992 also accelerated to 3.3% in 2017, even as property prices have likely softened over the period. Rising rent prices reflect a similar upward trend in the hospitality sector where the average room rate at Beirut’s 4- and 5-star hotels grew by 7.8% yoy to $152 in the first 11 months, according to survey data by Ernst & Young. Accelerating inflation is also getting some lift from strengthening economic activity in the country, particularly consumer spending. Imports of vegetable products and live animals, a proxy for food demand, rose by 9.2% to $1.9bn in 2017, their first increase in three years. Different regions in the country, however, displayed divergent trends in consumer prices. Much of the inflationary pressures appear to be concentrated outside the capital Beirut and its neighboring area of Mount Lebanon. Inflation is projected to accelerate further to 4.6% in 2018 before receding to 3.8% in 2019, according to the Institute of International Finance. Retail gasoline prices already rose by another 4.9% in January and the Euro gained another 2.9% during the month through January 29, likely adding further tailwind to consumer prices in Lebanon. Outlook for tourism brightens on stable security

Lebanon’s tourism sector witnessed a momentous rebound in activity in 2017, proving the country still has considerable tourism pull despite elevated regional political tensions and occasional domestic shocks. Hotel occupancy rates at Beirut’s 4- and 5-star hotels increased by 5.7% yoy to an average of 64.8% through November 2017, and revenues per available room (RevPAR) grew by 18.1% yoy to $99 over the same period, boosting hotel cash flows. A stronger showing by the hotel industry reflected in part sustained growth in tourist arrivals to the country. Arrivals increased by 10% yoy to 1.9 million visitors in 2017, the second highest on record, lifting tourist spending by an estimated 5.5%, tax refund data by Global Blue showed. European visitors topped the list of arrivals during the year, and the country witnessed a sustained influx of Iraqi and Egyptian tourists lured by stable security in the country amid heightened tensions at home. A weaker US dollar will likely further improve Lebanese hotels’ competitiveness and their appeal to Europeans. Meanwhile, passenger traffic at Beirut’s airport broke its previous record to reach 8.2 million passengers in 2017, half a million more passengers than in 2016, and two million more than the airport’s designed capacity. Risks of security spillovers have receded since the start of the year, and the abatement of the conflict in Syria could pave the way for improvement in business visitor arrivals, with the country widely viewed as a launch pad for the reconstruction of Syria. Travel receipts are projected to increase by 10% to $8.4bn in 2018, according to the IIF. Growth in tourism spending is also expected to remain strong in the next decade, with average growth of 6.1% through 2027, according to the World Travel & Tourism Council. Real estate More money poured into Lebanon’s property market in 2017, after a political breakthrough in late 2016 helped lift both domestic and foreign investor appetite. The value of real estate sales registered with the General Directory of Land Registry and Cadastre grew by 17.4% to $10bn during the year, breaking the previous record of $9.4bn registered in 2010. Softer property prices and record low interest rates also likely contributed to the pick-up in demand from locals, particularly within the category of subsidized housing. Housing loan production grew by 15.8% yoy to $942.5m in the first nine months of 2017, buoyed by demand from public sector security personnel who benefit from several special protocols with the banking sector. Outstanding loans under the protocol between banks and the Directorate General of the Internal Security Forces grew by 44.3% yoy to $241.3m at the end of September, and those extended under the protocol with General Security surged by 53.1% yoy to $102.5m. Similar protocol-based housing loans to military volunteers also posted healthy growth of 16.5% yoy to cross $1bn by September.

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Housing loan production will continue to benefit from BdL’s stimulus packages. The Central Bank is making more than $500m in local currency stimulus funds available for housing loans in 2018, broadly in line with the amount in 2017, even as it changed the structures of the incentives and interest rates for banks and consumers respectively. The rising number of property sales points to broadening demand, not a handful of large transactions. The total number of registered sales transactions grew by 14.5% to 73,514 transactions in 2017, with foreigners reporting 1,364 property acquisitions, 21.4% more than in 2016. More buoyant transactions activity is also paying off for the government. Real estate registration fees rose by $98m yoy to $517.8m in the first 10 months of 2017, the latest period for which data are available. Construction activity was mixed in 2017, with major urban centers showing generally more vibrancy. Cement deliveries, a coincident indicator of construction activity, slipped 2.2% to 5.2 million tons during the year, as more projects reach their final phases, requiring less cement and more finishing material. Construction permits issued for projects in Beirut and in North Lebanon increased by 38.6% and 7.8% respectively in 2017, but fell in each of the other five main districts. Building activity is likely to gain even more steam in urban areas in North Lebanon. Public finances- debt challenges Lebanon’s fiscal deficit contracted by $830.7m to $2.5bn in the first 10 months of 2017, data by the Ministry of Finance showed. The country’s primary surplus, which excludes debt service, reached $1.6bn through October, it’s second highest on record for the period. Lebanon’s budget law for 2017, its first in over 12 years, authorized up to $5bn in deficit spending during the year. Until a new budget law is passed for 2018, the government will be constrained by the spending limit approved in the 2017 budget, divided equally over the months of the year. Cash revenues surged by 13.7% yoy to a record $9.6bn during the period supported by extraordinary gains in income taxes resulting from the Central Bank’s financial engineering operations in 2016. Revenues from the Value Added Tax climbed by 7.4% yoy to a record $2.1bn, $142m more the corresponding period in 2016, signaling more robust consumption growth. Meanwhile, spending inched by just 2.5% yoy to $12.1bn through October, driven largely by mounting transfers to Electricité du Liban and by growing debt service costs. Higher public sector salaries have yet to be fully reflected in fiscal performance results, but will likely add an estimated $910m per year to payroll spending starting in 2018. Rising debt service costs reflected the expanding stock of public debt after years of persistent deficits. Gross public debt grew by 6.2% yoy to $79.5bn in 2017, 38.2% of which denominated in foreign currency. As a result, debt service payments reached a record $5bn in the 12 months through October 2017, but, by historical norms, they remain relatively contained at 44.6% of revenues. Lebanon has Eurobonds worth $2.26bn maturing in 2018, including $700m in June and $1.56bn in November, both of which were issued in 2012 at a coupon rate of 5.15%. In 2016, the government issued a $500m 6-year Eurobond at 6.25%, reflecting the higher cost of financing and the country’s more elevated risk profile. Still, the country’s overall cost of debt remains highly competitive. The weighted average interest rate on Lebanese Eurobonds has been stable at around 6.49% since 2013, even though the weighted life has increased to 7 years from 5.6 years. Similarly, the government has more than doubled the average life of its Treasury bills since 2010 but reduced their weighted yield to 7% at the end of 2017 from 7.7% in 2010. Despite its volatility, investors’ risk perception of Lebanese debt has also improved at the start of 2018. Five-year Credit Default Swap spreads, the cost to insure against a possible sovereign default, fell to 435 basis points in the first week of February from 562 points at the end of November 2017. Revival of public sector institutions in late 2016 marked a positive turning point for Lebanon’s public finances and credit ratings. The end of the political vacuum and slightly better economic activity may improve the government's revenues, even though the general government’s debt burden will remain very high through 2020, according to S&P, which maintains a “B-” rating for Lebanon’s sovereign foreign currency debt with a stable outlook. Renewed fiscal activity led Parliament to pass in 2017 a series of new taxes aimed at covering, at minimum, the cost of the new public sector salary scale. According to Moody’s Investors Service, the revenue package approved in late 2017 is credit positive as it demonstrates the emerging consensus among decision-makers. In particular, the government raised the Value Added Tax to 11% from 10% and imposed a tax on cement production of $4 per ton. The corporate tax rate and interest income tax were also hiked to 17% from 15% and to 7% from 5% respectively. The impact of the new corporate tax rates on public revenues, however, will only be fully felt starting in 2019, according to Fitch Ratings. Fitch expects the fiscal deficit to widen slightly to 8.2% in 2018, and to decrease by 2019 assuming the full raft of new tax measures is implemented Lebanon’s infrastructure The Lebanese government announced plans to organize an international aid conference by April, dubbed Cedar I, with the aim of raising an estimated $16bn-$22.5bn in funds to revamp the country’s infrastructure over the next decade. The government’s national capital investment program would allocate an estimated $5bn for the transportation sector, $4bn for electricity projects, and $3bn for dams over the entire period.

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The program is divided into three stages, the first of which is expected to cost $10.6bn, with the lion’s share going to the electricity, water, and transport sectors. The program aims to raise nearly half the funds from the European Union and the World Bank and another 25% from Arab and international donor funds in the form of 30-year concessional loans at 1.5% with a 10-year grace period. The remaining 25% would be financed by the local banking sector through Public-Private Partnerships. Cedar I (Paris IV) follows three similar conferences held in Paris in the post-war period. In early 2008, Lebanon had $5.2bn in outstanding concessional Eurobonds and loans that the country received as part of the Paris II and Paris III conferences. By September 2017, Lebanon had paid off all but $524.1m, offering the government some room to raise more funds from the new aid meeting. Donor aid will likely be accompanied by a reform plan that would put the country’s economy and debt back on a sustainable path. Any scaling up of public investment will need to be grounded in an adjustment plan that stabilizes debt as a share of GDP and then places it on a clear downward path, stated the IMF in February. In particular, the IMF called for increasing VAT rates, while limiting exemptions and refunds and improving compliance, reinstating gasoline excise and fuel taxes to levels that prevailed before 2012, and gradual elimination of the electricity subsidy. Lebanese exports Lebanon’s goods exports to Gulf Cooperation Council (GCC) countries staged a major comeback in the last quarter of 2017, helping soften the drop in aggregate export activity during the year. Sales to the GCC increased by 6.6% in 2017, led by exports to the United Arab Emirates. Lebanese businesses appear to be reaping some benefits from the Saudi-led embargo on Qatar which started in mid-2017. Exports to Qatar jumped by 30.3% to a seven-year high of $98.6m in 2017. Sales to Kuwait and to Oman also grew by 21.4% and 18.5% respectively, their fastest pace in the post-Syrian conflict period. On the other hand, demand from Saudi Arabia and from Bahrain resumed its decline, reflecting partly sluggish economic activity in the two countries. In particular, exports to Saudi Arabia fell by 8.8% to a multi-year low of $243.2m, offsetting much of the gains in exports to the rest of the GCC. Meanwhile, a pickup in economic activity in Lebanon and rising import prices lifted the total value of Lebanon’s imports by an estimated 2.3% to $19.1bn in 2017. Import figures exclude nearly $4.2bn in fuel consignments for Electricité du Liban covering the period between 2011 and 2017. Imports of vehicles also rebounded during the year on the back of improving private consumption demand. Goods exports are projected to improve by 7.6% in 2018, supported by re-opening the blocked trade routes by mid-2018 with Syria and Iraq following the defeat of ISIS. The financial sector The banking sector is by far the most renowned engine of the Lebanese economy when it comes to reputation as well as to performance. As the world’s largest economies were shaken by the 2008-2009 financial crisis that relentlessly moved on to destabilize most of the economic sectors, Lebanon’s banks revealed their very strong resilience to external shocks. From 2008 through 2010, the strength and very good performance of Lebanon’s banking sector have earned the country an undisputed international reputation for resiliency and stability. Besides good performance and a level of services that is comparable to that in the most developed economies, the Lebanese banking sector enjoys the strong backing of the Central Bank of Lebanon. Since the early nineties, the monetary authorities have indeed been sparing no effort to set up and support a strong financial sector that abides by international standards. Postwar periods of economic growth have also enabled the Central Bank to acquire significant foreign reserves. These reserves are the main instrument occasionally used to ensure monetary stability and especially, the peg of the domestic currency to the US dollar. Lebanese commercial banks made a full V-shaped recovery in recent weeks, shrugging off the political crisis of November 2017 and resuming the upward trend in indicators of banking activity. Private sector deposits had fallen by $2.6bn in November 2017, but quickly reversed course to increase by $1.9bn in December to $186.7bn, reflecting sustained strategic confidence in Lebanon’s financial sector and the short-term tactical nature of depositors’ response to political shocks. Credit activity was equally buoyant at the end of the year, with claims on the resident private sector climbing by $740m in December to finish the year up 6.1% to $54.2bn, their biggest monthly increase since 2010. Stronger banking activity was buoyed by the Central Bank’s decisive interventions in November and December to protect the currency peg to the US dollar and restore investor confidence. BdL appears to have successfully weathered the spillovers from the political crisis in November, growing its foreign assets by $1.1bn in the two months since then to reach a near-record high of $43bn at the end of January 2018. Lebanon’s Central Bank overcame a series of severe political and security shocks over the past several years, but still managed to increase its foreign assets by 40% or $12.3bn since the start of the Arab Spring in late 2010. In addition, BdL continued to hold 9.22 million ounces in gold reserves valued at $12.4bn at the end January. Confidence in the Lebanese pound will remain strong and the peg to the dollar will be maintained, supported by ample international reserves, a strong banking system, and loyal depositors from Lebanese Diaspora. The cost of the peg, however, will be paid by higher interest rates on both loans and deposits. Banks hiked their local currency deposit rates to an average of 6.4% by December 2017 in a bid to stem the outflow of deposits in addition to conversions to the US dollar. As a result, borrowing rates in Lebanon are projected to rise to an average of 9.1% in 2018 from 8.7% in 2017, but a stimulus package of $1bn announced by the Central Bank in February may help maintain the affordability of housing loans and credit to productive sectors, particularly industry.

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While deposits and loans are projected to post robust growth in 2018, profits are likely to face some headwinds from tax measures introduced by Parliament in late 2017. The government hiked the corporate tax rate to 17% from 15%, which is likely to somewhat weigh on banks’ profitability. On the other hand, several Lebanese banks may get some lift from their regional and international subsidiaries starting 2018 in line with the global economic recovery. Lebanon’s Alpha Group banks, the 14 lenders with over $2bn in deposits, had grown their net profits by 21.4% yoy to a record $2bn in the first nine months of 2017, despite drag from weakness in core activities and in foreign operations, according to data compiled by Bankdata Financial Services. The majority of Alpha banks appear cautious, even in their home market, amid scarce investment opportunities, leaving a handful of banks to dominate deposit-taking and lending activities in the country in the first three quarters of 2017.

Fig 30: Change in domestic deposits/loans (Jan-Sep 17, $m)

Deposits Loans BLOM 1,871 Audi 486

SGBL 1,347 BLOM 349

Byblos 821 SGBL 328 Bankmed 658 Credit Libanais 172

Fransabank 399 Fransabank 170

FNB 284 Bank of Beirut 113

BBAC 268 Byblos 107

Bank of Beirut 204 FNB 90

Creditbank 199 BBAC 72

LGB 191 BLF 58

IBL 162 Bankmed -3

Credit Libanais 157 Creditbank -8

BLF 149 LGB -45

Audi 43 IBL -80

Source: Bankdata Financial Services, Economena, SGBL Research Overall, the banking sector remains resilient despite the challenging environment, thanks to loyal depositors, stable remittance inflows from the large Lebanese Diaspora, and favorable interest rates that banks pay on deposits both in local currency and in US dollars. The country’s banking sector aggregate assets represent over 4.2 times the country’s GDP and maintains high liquidity levels as per international standards. Lebanon’s Central Bank has indeed set a strict regulatory framework to ensure high liquidity and solvency ratios ahead of the international implementation deadline of the Basel III accords. It is worth mentioning that Lebanese banks have been directly concerned by the Syrian conflict – as several larger banks are directly present in Syria, as well as by the financial crisis in Cyprus. The impact of both these adverse situations has been constrained thanks to adequate provisioning levels monitored by the Central Bank.

2. Exposures of the Bank and the Lebanese Banking Sector Cautiousness prevails in the framework of the Bank’s risk policy, and our institution gives the utmost importance to maintaining an investment strategy that is sound and founded on moderate risk and close risk monitoring. Risk management is, in itself, directly under Societe Generale’s (France) supervision, and the Bank’s procedures in this regard follow closely Societe Generale’s directives.

2.1. Lebanese Sovereign Risk The Bank carries Lebanese sovereign paper denominated in Lebanese Pounds as well as in foreign currency. Its exposure to sovereign risk, in both domestic and foreign currency, is comparable to its peers. The Bank’s strategy regarding sovereign risk is in line with that of the leading banks in the market. The Bank’s risk policy sets limits and ratios on exposures to specific risks, and these limits are strictly respected.

2.2. Currency Considerations and Devaluation Risk Lebanon’s outstanding resilience and good economic performance in the backdrop of the global financial crisis that undermined the stability of major economies around the world, have dismissed the specter of any devaluation of the local currency in the short and medium terms. This situation prevails and confidence in the local currency remains high even in the framework of the political tensions that prevail on the domestic and regional scenes.

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Although the market does occasionally witness pressures on the Lebanese Pound in the aftermath of a political event or of security issues such as the recent events in November 2017, still, the domestic currency’s peg to the US dollar remains unthreatened and devaluation risk is unlikely to materialize in the near future – a statement that is endorsed by international organizations such as the IMF, the World Bank and the Institute of International Finance. Confidence in the Lebanese Pound remains solid, as the market continues to enjoy ample liquidity and as interest rates remain fairly stable, although on a slight uptrend, mainly due to global recovery, especially in the USA. The dollarization rate of deposits has remained relatively stable over the past months (66.7% as at end 2017), despite the recent crisis in November 2017. The Central Bank’s foreign reserve buffer represents USD 35.8 billion as at end of 2017, thus a coverage ratio of 68.2% of LP money supply M2.

2.3. Credit Risk The Bank’s credit policy is focused on lending to the private sector, in other words privileging real commercial banking activities. As at September 30, 2017, the Bank’s Loans to Deposits ratio stood at 30.23%, as compared to an average ratio for Alpha Group peer banks of 36.57%. The Bank’s loan-to-deposit ratio in Lebanese Pounds stands at 28.41% vs. 27.21% for peers on average. In foreign currency, SGBL’s ratio stands at 31.01% vs. 40.47% for peers. Besides, the Bank’s credit policy is based on a very close and efficient risk monitoring system. Furthermore, the Bank’s loan portfolio is well diversified over the various sectors of the economy, in addition to being well balanced between retail and corporate loans. This distribution at the level of lending activities acts in favor of the Bank’s stability and reinforces its resilience to exogenous shocks

2.4. Operational Risk: Operational risk is the risk of loss resulting from inadequate or failed internal processes, people and systems or from external events, including events of low probability of occurrence, but with a risk of high . An efficient monitoring process is set in place. The collection of internal operational risk events meets several objectives:

- Improving and strengthening the control system in order to reduce the losses’ occurrence arising from operational risk events which have been incurred.

- Collection of reliable and complete data - Monitor the cost of these operational risk related either to operational failures or to external events - Analyze the causes of losses in order to identify and set up the necessary corrective measures - Compiling a historical database to include the data used in the model to calculate regulatory equity capital for operational risk

2.5. Lending process The bank adopts its own rigorous and accurate process for credit lending in order to minimize risk complying with the applicable laws and regulations. The Central Bank Decision Nº 7055 dated August 13th, 1998 sets the maximum allowable weighted credit limit for loans to a single borrower or group of related borrowers at (a) 20.0% of the Bank’s Tier 1 capital with respect to loans extended to a single borrower (or a group of related borrowers) the proceeds of which are to be used in Lebanon or outside Lebanon, or (b) 10.0% of the Bank’s Tier 1 capital with respect to loans extended to a single borrower (or a group of related borrowers) the proceeds of which are to be used in countries with sovereign ratings. Credits are granted to fully capable clients taking into consideration any limits or restrictions on their ability to borrow and provide mortgage, pledge and guarantees against the credits Risk rating is an important and integral requirement of credit approval process. The Bank rates its clients according to Central Bank and the Banking Control Commission of Lebanon regulations. Lebanese banks are required to adopt in addition to the supervisory classification, their own loan grading system in order to manage their credit risk. In this context, Lebanese banks are required to classify the loan into ten categories: Excellent, Strong, Good, Satisfactory, Adequate, Marginal, Vulnerable, Substandard, Doubtful and Loss. According to Basel II requirements, the Bank classifies clients into retail, professional, small and medium enterprises and corporate clients depending on the activity and the turnover of the customers. The lending process begins at the commercial level where credit applications are usually received. Credit granting is performed through comprehensive study of the client based on quantitative and qualitative information in order to constitute a complete file complying with the procedures and regulations:

- Filling out a Know your customer - Performing a background check on the potential client - Filling out the credit application

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- Obtaining the audited financial statements , …

The basic elements required for a credit file are outlined in the Circular No 238 of the Banking Control Commission The credit analysis report follows a specific methodology aimed to identify risk. The file risk analysis takes into consideration many additional information including some key elements: the activity of the borrower, the purpose of the financing, the source of the repayments, the cotation of the borrower, the borrower’s credit history, commercial and personal reputation.. Analysis of main financial indicators is required including ratio, liquidity, solvability, cash flow, SWOT analysis. A credit guarantee or collateral may be required in order to cover defaults of payment. Approval limits are set for the commercial divisions in order to grant loans to customers Credit Committees, divided into 3 levels depending on the credit amount, approve loans which exceed the approval limits set for the commercial divisions. The bank maintains continuous monitoring of its portfolio to assess credit quality. In order to measure the changes in the portfolio credit risk and to maintain it at an acceptable level, the Bank has defined internal control procedures to detect alerts related to overdrafts, default or other warning signals in order to resolve them efficiently and effectively. Commercial borrower’s files are subject to renewal process once a year to provide an independent judgment of asset quality and to ensure that all information and documentation is up to date. In order to minimize the concentration risk within its credit portfolio, the Bank diversifies the portfolio over different economic sectors, products, group of clients and client’s profession.

2.6. Liquidity and Maturity Mismatching The Bank maintains a high level of liquidity and has severe limitations on mismatching. Since the Lebanese banking sector traditionally has short-term deposits, the Bank’s excess liquidity is placed with prime international banks. The Bank’s placements with other banks – besides deposits with Société Generale Group and subsidiaries, are mainly dedicated to liquidity management, facilities for international money transfers, and trade finance, namely documentary credit business with correspondent banks. The Bank holds an important and largely diversified deposit base. This base stands for a permanent source of funds enabling the Bank to maintain a satisfactory level of liquidity surplus. The Bank’s liquidity ratio in foreign currency stood at 53.65% as at 31 Dec. 2017, well above the 10% regulatory minimum. Besides, the Bank’s securities portfolio enjoys high liquidity.

2.7. Interest Rate Sensitivity

As a result of the maturity mismatch between its deposits and assets, the Bank, in common with most Lebanese banks, is exposed to the risk of any sharp increase in short term interest rates. Like most commercial banks in Lebanon and the MENA region, the Bank realizes income from the margin between interest earned on its assets and interest paid on its liabilities. Because many of the Bank’s assets and liabilities reprice at different times, the Bank is vulnerable to fluctuations in market interest rates. Typically, the Bank’s liabilities reprice substantially more frequently than its assets and, as a result, if interest rates rise, the Bank’s interest expense will increase more rapidly than its interest income, which could negatively affect interest margins and result in liquidity problems. The Bank is limited in its ability to re-price assets more frequently and to mitigate this risk since many of the securities held in the Bank’s investment portfolio either have fixed interest rates or longer-term variable interest rates. As a result, volatility in interest rates could have a material adverse effect on the Bank’s business, liquidity, results of operations, financial condition and prospect

2.8. Taxation There are no disputes or pending issues or payments between the Bank and the Tax Authorities. The Bank's accounts were reviewed by the Income Tax Authorities up to the year 2014 (included). Tax returns for the years 2015 and 2016 remain subject to examination and acceptance by the Income Tax Authorities. The ultimate outcome of any review cannot be presently determined, however, the Bank's management does not expect any adverse adjustments to result from such a review which may have a material effect on the financial position of the Bank.

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2.9. Considerations relating to the Offering of Series 2018/A Preferred Shares The investment in Series 2018/A Preferred Shares consists of an investment in the equity of the Bank (For additional details, please refer to the section headed “Description of Series 2018/A Preferred Shares”): § Distribution of dividends is not mandatory, and holders of Series 2018/A Preferred Shares shall not have creditor rights against the Bank

in this respect including for any non-payment of distributions. Moreover, and since Series 2018/A Preferred Shares are non-cumulative, should distributions not be declared or paid for any reason whatsoever, holders of Series 2018/A Preferred Shares will not be entitled to receive distributions even if funds become subsequently available.

§ Although holders of Series 2018/A Preferred Shares are entitled to a redemption premium in the event the Bank exercises its redemption right, as provided in the Offering Summary, no dividends distributions pertaining to the redeemed preferred shares shall be made for the year during which the redemption would have occurred. The right to the payment of Dividends arising from the Series 2018/A Preferred Shares shall not be cumulative. If Dividends are not declared or paid for any reason whatsoever, holders of Series 2018/A Preferred Shares will not be entitled to receive such Dividends whether or not funds are or subsequently become available.

§ The Bank may at any time, even in case of a Mandatory Conversion, cancel any distribution of dividends for any relevant year in its absolute discretion taking into account its financial situation and its solvency. In such event, the right of the holders of Series 2018/A Preferred Shares to receive the Fixed Annual Dividend set out above shall become void de jure and will not be carried forward to the next financial year. The cancelation of any dividends distribution shall not be considered as an event of default and may not give rise to the preferred shareholders’ right to petition for the insolvency or the winding-up of the Bank.

§ The Bank has the option, but is under no obligation, to redeem and cancel the Series 2018/A Preferred Shares. Since the Shares are of perpetual existence and have no fixed redemption date, purchasers of Series 2018/A Preferred Shares should accept and be able to maintain their investment in the long term.

§ In case of occurrence of a “Trigger Event” (as defined in this Offering Circular), the Series 2018/A Preferred Shares shall be, upon provision of a “Conversion Notice” (as defined below), mandatorily and finally converted into common shares of the Bank without the need for the consent of the holders of the Series 2018/A Preferred Shares, at a rate of one (1) common share per two (2) Preferred Shares Series 2018/A subject to (i) adjustment towards reflecting any stock split or reverse stock split affecting the Bank’s share capital and (ii) obtaining the necessary approvals from the Central Bank of Lebanon (“Mandatory Conversion”).

§ Holders of Series 2018/A Preferred Shares have no right to receive or participate in any distribution in respect of the Bank’s capital other than annual dividends distributions pertaining to Series 2018/A, if and when declared and approved by the Bank’s General Assembly, and, upon liquidation, the Series 2018/A Liquidation Preference. Accordingly, without limitation of the generality of the foregoing and unless otherwise provided for under applicable laws, holders of Series 2018/A Preferred Shares have no right to receive any distributions in respect of the Bank’s reserves or any distributions effected through an increase of the Bank’s capital realized by incorporation of the Bank’s retained earnings or reserves.

§ The Series 2018/A Preferred Shares will be non-voting, except for the limited rights of holders of Series 2018/A Preferred Shares to vote on any proposed amendments to the object or legal form of the Bank, any capital increase by way of a contribution in kind of assets or any winding-up or liquidation of the Bank or any merger scheme in which the Bank is a party or in the event that (i) distributions are not paid in full for three financial years, or (ii) the Bank shall be in default in the provision of any of the rights or benefits attached to the Series 2018/A Preferred Shares.

§ The Bank and its subsidiaries have been, and will continue to be, involved in many aspects of the transactions relating to the issuance of Series 2018/A Preferred Shares, including in their capacities as Issuer, Placement Agent and Escrow Agent, without the advice of separate legal counsel in respect of these various roles. It is possible that the Bank and such subsidiaries may be subject to competing interests in its relationships with the holders of Series 2018/A Preferred Shares. The various roles of the Bank and its affiliates raise potential conflicts of interest whose prospective purchasers of Series 2018/A Preferred Shares should carefully consider.

§ There will be no public market for Series 2018/A Preferred Shares on the Beirut Stock Exchange (BSE) as the Bank does not intend to list them on the BSE or on any other stock exchange. As a result, an investment in Series 2018/A Preferred Shares might have limited liquidity.

2.10.Litigation There are no litigation or arbitration proceedings against or affecting the Bank or its assets, nor is the Bank aware of any pending or threatened proceedings which have a materially adverse effect on the Bank or on its operations or which are, or might be, material in the context of the issuance of Series 2018/A Preferred Shares.

2.11.Competition The Bank faces strong competition from both domestic and foreign banks operating in Lebanon. The Bank’s main competitors in Lebanon are the banks that are classified in the peer group, i.e. the Alpha Group of banks. Alpha banks are those banks with deposits over USD2 billion. As at Sept. 30, 2017, the 14 Alpha Group banks had aggregate assets representing USD226.98 billion, vs. USD214.15 billion one year earlier, thus a year-on-year growth of 6%.

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The following tables present the ranking of Alpha Group banks according to assets, deposits, loans and advances, and net profits, based on their consolidated accounts.

Source: Bankdata Financial Services wll Note: (1) Some of the figures shown above are unaudited figures published by Bankdata; they may therefore differ slightly from the banks' audited financial statements. (2) Alpha Group bank financials as shown above are based on consolidated financial statements

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5. USE OF PROCEEDS The subscription amount for the increase of the Bank’s capital through the issuance of non-cumulative perpetual convertible Series 2018/A Preferred Shares will be included in the Bank’s Additional Tier I Capital according to Central Bank regulations. The Bank seeks to raise its equity capital in the framework of its future development plans, both at the domestic and at the international level. Strengthening the Bank’s capital base is key to enabling the Bank to maintain an ambitious growth trend while remaining compliant with all banking regulations in force, namely capital adequacy regulations in the framework of Basel III requirements. The Bank believes that the proceeds of the issuance are sufficient to cover the Bank’s intended use for such proceeds as described herein.

6. STATEMENT OF CAPITAL RESERVES AND LONG TERM LIABILITIES AND DIVIDEND POLICY The below table presents a breakdown of the Bank’s Capital for the years ended 31 December 2017, 2016 and 2015 respectively:

In compliances with the Central Bank of Lebanon intermediate circular no. 446 dated 30 December 2016, the Bank should appropriate the gain realized from the sale of treasury bills and certificates of deposits denominated in LL and the simultaneous purchase of Eurobonds and certificates of deposit denominated in US$ to the reserve for capital increase. As a result of these operations with the Central Bank of Lebanon, SGBL elected to recognize LL 404,801 million net of taxes, directly in non-distributable reserves within equity. The Group manages its capital structure and makes adjustments to it in the light of changes in economic conditions and the risk characteristics of its activities. In order to maintain or adjust the capital structure, the Group may adjust the amount of dividend payment to shareholders, return capital to shareholders or issue capital securities. No changes were made in the objectives, policies and processes from the previous years; however, they are under constant scrutiny of the Board. Dividends paid to equity holders of the parent The payment of dividends for preferred shareholders is dependent on: (1) The availability of non-consolidated net income for a specific year after appropriation of legal and other regulatory reserves; (2) The continuous compliance with regulations issued by the Central Bank of Lebanon and the Banking Control Commission; and (3) The approval of the ordinary general assembly of shareholders to distribute those dividends. According to the resolution of the ordinary general assembly of shareholders held on 25 April 2017 the following dividends were declared and paid:

2017 2016 2015LL million LL million LL million

Share capital – common shares 14,586 14,586 14,586Share capital – preferred shares 9,675 9,675 9,675Share premium – common shares 149,349 149,349 149,349Share premium – preferred shares 563,200 561,171 559,161Cash contribution by shareholders 106,746 106,746 106,746Non distributable reserves 961,685 864,648 391,134Distributable reserves 29,460 20,532 19,442Revaluation reserve of property 3,934 3,934 3,934Cumulative change in fair value of financial assets at fair value through other comprehensive income

-11,678 -218 -477

Profit for the year 330,768 286,259 250,844Foreign currency translation reserve -4,618 -18,862 -16,769Retained earnings 573,600 496,250 351,552Equity attributable to equity holders of parent 2,726,707 2,494,070 1,839,177Non-controlling interests 52,966 65,689 52,502Total equity 2,779,673 2,559,759 1,891,679

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According to the resolution of the ordinary general assembly of shareholders held on 25 April 2016 the following dividends were declared and paid:

According to the resolution of the ordinary general assembly of shareholders held on 24 April 2015 the following dividends were declared and paid:

Number of shares

Dividend per share

Total

in LL LL millionDividends for preferred shares – 2012 issue 12,500 1,060,325 13,255Dividends for preferred shares – 2013 issue 15,000 1,060,325 15,905Dividends for preferred shares – 2015 issue 10,000 1,060,325 10,603Dividends for common shares 56,535 1,071,700 60,588

100,351

2017

Number of shares

Dividend per share

Total

in LL LL millionDividends for preferred shares – 2012 issue 12,500 1,055,250 13,191Dividends for preferred shares – 2013 issue 15,000 1,055,250 15,829Dividends for preferred shares – 2015 issue 10,000 526,185 5,262

34,281

2016

Number of shares

Dividend per share

Total

in LL LL million

Dividends for preferred shares – 2010 issue 10,000 1,168,313 11,683Dividends for preferred shares – 2012 issue 12,500 1,055,250 13,190Dividends for preferred shares – 2013 issue 15,000 1,055,250 15,829

40,702

2015

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7. SELECTED FINANCIAL INFORMATION AND OPERATIONAL DATA The financial information of the Bank is derived from the audited consolidated financial statements of the Bank for the years ended 31 December 2017 (including a comparison with 2016), 31 December 2016 (including a comparison with 2015) and 31 December 2015 (including a comparison with 2014) which are contained elsewhere in this Offering Circular. Balance Sheet

Foreign currencies in Total

Foreign currencies in

Total Foreign currencies in

Total

LL million LL million LL million LL million LL million LL million LL million LL million LL million

ASSETS

Cash and balances w ith the Central Banks 6,174,830 7,084,574 13,259,404 3,898,288 4,645,726 8,544,014 1,121,440 4,696,286 5,817,726

Due from banks and f inancial institutions 38,573 815,653 854,226 36,106 762,523 798,629 55,876 642,388 698,264

Amounts due from aff iliated banks and f inancial institutions 11 590,374 590,385 0 918,608 918,608 0 777,435 777,435

Reverse repurchase agreements 0 0 0 0 0 0 0 416,910 416,910

Loans to banks and f inancial institutions - 8,397 8,397 0 8,397 8,397 0 8,397 8,397

Derivative f inancial instruments - 9,197 9,197 0 2,472 2,472 0 2,969 2,969

Financial assets at fair value through profit or loss 6,094 195,593 201,687 9,987 170,283 180,270 9,985 229,821 239,806

Loans and advances to customers at amortized cost 2,162,990 5,181,626 7,344,616 1,739,795 4,887,854 6,627,649 1,486,516 4,443,442 5,929,958

Loans and advances to related parties at amortized cost 1,702 109,363 111,065 161 100,576 100,737 36,296 117,250 153,546

Debtors by acceptances - 445,375 445,375 0 211,715 211,715 0 169,491 169,491

Financial assets at amortized cost 1,967,097 6,675,167 8,642,264 3,572,735 6,903,612 10,476,347 5,444,489 4,060,095 9,504,584Financial assets at fair value through other comprehensiveincome

521 160,993 161,514 521 24,687 25,208 521 26,039 26,560

Property and equipment 233,319 252,011 485,330 198,342 235,443 433,785 143,824 70,521 214,345

Intangible assets 45,031 2,988 48,019 46,139 3,178 49,317 38,746 2,199 40,945

Investment properties - 1,478 1,478 0 1,483 1,483 0 1,480 1,480

Non-current assets held for sale 5,958 180,546 186,504 5,315 170,604 175,919 7,991 177,327 185,318

Other assets 75,988 58,096 134,084 58,149 51,651 109,800 64,819 36,052 100,871

Goodw ill -33,427 36,832 3,405 -147,056 150,461 3,405 1,012 166,028 167,040

TOTAL ASSETS 10,678,687 21,808,263 32,486,950 9,418,482 19,249,273 28,667,755 8,411,515 16,044,130 24,455,645

LIABILITIES

Due to the Central Banks 1,576,640 45,567 1,622,207 405,995 25,770 431,765 578,548 31,413 609,961

Loans and repurchase agreements - 1,681,384 1,681,384 0 2,062,317 2,062,317 401,979 1,714,185 2,116,164

Due to banks and f inancial institutions 1,465 477,752 479,217 188 568,760 568,948 44,472 567,810 612,282

Amounts due to aff iliated banks and f inancial institutions 19 6,825 6,844 9 1,420 1,429 81 21,104 21,185

Derivative f inancial instruments - 164 164 0 9,507 9,507 0 4,450 4,450

Customers’ deposits at amortized cost 7,119,998 17,570,510 24,690,508 6,774,394 15,013,940 21,788,334 6,361,552 12,318,325 18,679,877

Related parties’ deposits at amortized cost 5,720 159,562 165,282 90,286 90,921 181,207 8,687 124,084 132,771

Engagements by acceptances - 445,375 445,375 0 211,715 211,715 0 169,491 169,491

Other liabilities 267,096 100,280 367,376 484,053 105,711 589,764 52,196 89,852 142,048

Provision for risks and charges 122,314 126,606 248,920 220,882 42,128 263,010 43,256 32,481 75,737

TOTAL LIABILITIES 9,093,252 20,614,025 29,707,277 7,975,807 18,132,189 26,107,996 7,490,771 15,073,195 22,563,966

31/12/201531/12/2017 31/12/2016

42

Income Statement:

2017 2016 2015LL million LL million LL million

Interest and similar income 1,648,668 1,350,541 1,204,837Interest and similar expense -1,210,167 -954,170 -810,987

NET INTEREST INCOME 438,501 396,371 393,850

Fee and commission income 98,024 102,433 102,211Fee and commission expense -39,781 -33,163 -31,222

NET FEE AND COMMISSION INCOME 58,243 69,270 70,989

Net gain from financial assets at fair value through profit or loss

12,476 18,668 23,522

Revenue from financial assets at fair value through other comprehensive

1,715 1,012

incomeNet gain from sale of financial assets at amortized cost

182,556 579,708 105,963

Other operating income 34,114 31,653 25,338

TOTAL OPERATING INCOME 727,605 1,096,308 620,674

Net credit losses -12,285 -19,511 -27,824

NET OPERATING INCOME 715,320 1,076,797 592,850

Personnel expenses -142,058 -133,379 -123,278Other operating expenses -160,336 -167,954 -140,573Depreciation of property and equipment -11,955 -11,269 -10,932Amortization of intangible assets -3,336 -3,210 -3,040Impairment of goodwill 0 -163,158 0

TOTAL OPERATING EXPENSES -317,685 -478,970 -277,823

OPERATING PROFIT 397,635 597,827 315,027

Provisions for risks and charges 0 -165,825 -Net gain from sale and write-off of other assets

0 19 283

PROFIT BEFORE TAX 397,635 432,021 315,310

Income tax expense -64,573 -128,999 -56,998

PROFIT FOR THE YEAR 333,062 303,022 258,312

638

43

Main Financial Ratios and Statistics:

The members of the Board of Directors consider that in their opinion, the working capital is sufficient to meet the Bank’s current requirements.

2017 2016 2015Main Financial Indicators (MLBP) (MLBP) (MLBP)

Total Assets 32,486,950 28,667,755 24,455,645Customer Deposits 24,855,790 21,969,541 18,812,648Net Loans 7,455,681 6,728,386 6,083,504Shareholders' Equity 2,779,673 2,559,759 1,891,679Total Operating Income 727,605 1,096,308 620,674Net Profit 333,062 303,022 258,312Number of Branches 90 90 88Number of ATM's 148 140 135Number of Employees 2,150 2,013 1,946Profitability & Efficiency Ratios (% )ROAA 1.09% 1.13% 1.08%ROAE 12.46% 13.47% 14.26%Spread 1.48% 1.57% 1.76%Cost / Income 42.69% 43.09% 44.08%Assets Quality Ratios (% )Gross Non Performing loans / Gross Loans 9.76% 10.71% 10.93%Coverage ratio 76.25% 80.26% 82.27%Liquidity & Funding Ratios (% )Net Loans / Assets 22.95% 23.47% 24.88%Primary Liquidity/ Assets 51.49% 39.89% 32.93%Customer Deposits / Assets 76.51% 76.64% 76.93%Loans / Deposits 30.00% 30.67% 33.18%Capital Adequacy Ratios (% )Total Capital Adequacy Ratio (CAR) 17.66% 18.50% 13.12%% Growth SGBLAssets 13.32% 17.22% 10.76%Deposits 13.14% 16.78% 10.33%Net Loans 10.81% 10.60% 11.32%Shareholders' Equity 8.59% 35.32% 11.98%Net Profit 9.91% 17.31% 10.45%% Growth Alpha GroupAssets 7.41% 6.51% 4.71%Deposits 4.37% 3.89% 4.54%Net Loans 2.05% 2.18% 5.74%Shareholders' Equity 6.89% 11.96% 6.00%Net Profit 5.74% 11.91% 8.26%

Ranking SGBL 2017 2016 2015Assets 5 5 5Deposits 5 5 5Loans and advances 6 7 7Shareholders' Equity 6 6 7Total Operating Income 4 3 7Net Profit 3 4 5

As at December 31

As at December 31

44

March 2018 figures The following are selected financial information for the Bank as at March 31, 2018 - Consolidated Financial statements as at 31.03.2018 are prepared by the Bank: Balance Sheet Unaudited Audited 31 March 2018 31 December 2017 LL million LL million ASSETS Cash and balances with the Central Banks 13,872,155 13,259,404 Due from banks and financial institutions 782,210 854,226 Amounts due from affiliated banks and financial institutions 679,003 590,385 Reserve repurchase agreements 110,236 - Loans to banks and financial institutions 8,397 8,397 Derivative financial instruments 6,841 9,197 Financial assets at fair value through profit or loss 144,089 201,687 Loans and advances to customers at amortized cost 7,483,048 7,344,616 Loans and advances to related parties at amortized cost 111,072 111,065 Debtors by acceptances 643,848 445,375 Financial assets at amortized cost 8,656,314 8,642,264 Financial assets at fair value through other comprehensive income 279,181 161,514 Property and equipment 489,198 485,330 Intangible assets 48,353 48,019 Investment properties 1,479 1,478 Non-current assets held for sale 198,793 186,504 Other assets 167,820 134,084 Goodwill 3,405 3,405 _______________ _______________ Total assets 33,685,442 32,486,950 _______________ _______________ LIABILITIES AND EQUITY LIABILITIES Due to the Central Banks 1,622,778 1,622,207 Loans and repurchase agreements 1,468,233 1,681,384 Due to banks and financial institutions 535,752 479,217 Amounts due to affiliated banks and financial institutions 4,293 6,844 Derivative financial instruments 1,317 164 Customers' deposits at amortized cost 25,785,442 24,690,508 Related parties’ deposits at amortized cost 161,434 165,282 Engagements by acceptances 643,848 445,375 Other liabilities 360,143 367,376 Provision for risks and charges 277,267 248,920 _______________ _______________ Total liabilities 30,860,507 29,707,277 _______________ _______________ EQUITY Share capital – common shares 14,586 14,586 Share capital – preferred shares 9,675 9,675 Share premium – common shares 149,349 149,349 Share premium – preferred shares 563,200 563,200 Cash contribution by shareholders 106,746 106,746 Non distributable reserves 952,194 961,685 Distributable reserves 29,460 29,460 Revaluation reserve of property 3,934 3,934 Cumulative change in fair value of financial assets at fair value through other comprehensive income 1,180 (11,678) Profit for the period / year 62,617 330,768 Foreign currency translation reserve (1,698) (4,618) Retained earnings 880,036 573,600 _______________ _______________ Equity attributable to equity holders of parent 2,771,279 2,726,707 Non-controlling interests 53,656 52,966 _______________ _______________ Total equity 2,824,935 2,779,673 ________________ ________________ Total liabilities and equity 33,685,442 32,486,950 _______________ _______________

45

Profit and Loss Statement

Unaudited Unaudited 31 March 2018 31 March 2017 LL million LL million Interest and similar income 508,874 386,061 Interest and similar expense (362,538) (277,285) ____________ ____________ NET INTEREST INCOME 146,336 108,776 ____________ ____________ Fee and commission income 30,951 23,391 Fee and commission expense (9,927) (6,090) ____________ ____________ NET FEE AND COMMISSION INCOME 21,024 17,301 Net (loss) gain from financial instruments at fair value through profit or loss 5,017 (5,811) Revenue from financial assets at fair value through other comprehensive income 44 32 Net gain from sale of financial assets at amortized cost - 9,257 Other operating income 1,151 11,356 ____________ ____________ TOTAL OPERATING INCOME 173,572 140,911 Net write-back of credit losses (credit losses) (16,123) 3,847 ____________ ____________ NET OPERATING INCOME 157,449 144,758 ____________ ____________ Personnel expenses (38,573) (34,041) Other operating expenses (36,028) (32,910) Depreciation of property and equipment (3,052) (2,932) Amortization of intangible assets (830) (851) ___________ ___________ TOTAL OPERATING EXPENSES (78,483) (70,734) OPERATING PROFIT 78,966 74,024 Net gain from sale and write-off of other assets - - ___________ ___________ PROFIT BEFORE TAX 78,966 74,024 Income tax expense (15,640) (10,841) ___________ ___________ PROFIT FOR THE PERIOD 63,326 63,183 Attributable to: Equity holders of the parent 62,617 61,394 Non-controlling interests 709 1,789 ___________ ___________ 63,326 63,183

8. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL INFO Basis of Presentation The consolidated financial statements are prepared under the historical cost basis except for the restatement of certain tangible real estate properties in Lebanon according to the provisions of law No 282 dated 30 December 1993, and for the measurement at fair value of investment properties, derivative financial instruments, financial assets at fair value through profit or loss and financial assets at fair value through other comprehensive income.

The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB), and the regulations of the Central Bank of Lebanon and the Banking Control Commission. Overview The Bank’s total assets grew by 13.32% as of end of December 2017 compared to December 2016, with a compounded annual growth of 10.93% for the period extending from December 31, 2011 to year-end 2017.

46

As at December 31, 2017, total shareholders’ equity was LBP 2,779,673 million which increased by 8.59% compared to December 31, 2016. The Bank’s consolidated capital adequacy ratio as per Basel III was 17.66% in 2017, exceeding the 14.5% prudential requirement of BDL. In September 2017, Antoun Sehnaoui, Chairman of Societe Generale de Banque au Liban SGBL in Beirut, acquired Pikes Peak National from the Georgeson family, which has owned the bank for nearly 40 years to make the Colorado Springs financial institution a hub for expansion across the U.S. and possibly internationally. Pikes Peak National’s is intended to grow its activities in the US and Latin America, which is home to a major Lebanese diaspora. Pikes Peak has three branches with combined assets of $88.9 million and about 30 employees. In 2017, SGBL expanded its network to Abu Dhabi Global Market (“ADGM”), UAE, opening its new premises: Liberty International Bank Limited -under incorporation- (“LIBL”) as a Private Company Limited by Shares. LIBL is fully-owned subsidiary of SGBL. In December 2017, SGBL signed an agreement with KBL European Private Bankers (KBL epb) concerning the acquisition by SGBL of KBL Richelieu bank in France and KBL bank Monaco. This transaction is part of SGBL's international development strategy. Through this project, the ambition of SGBL, headquartered in Lebanon, is to launch from France, a recognized financial center with strong cultural proximity, the construction of a leading international banking platform. This acquisition will give birth to a new group, Compagnie Financière Richelieu, which will be 100% owned by SGBL group, and which will own Banque Richelieu France, Richelieu Gestion and Banque Richelieu Monaco. The acquisition by SGBL of KBL Richelieu and KBL Monaco is expected to be finalized in the first half of 2018, subject to the approval of competent regulatory authorities. In addition to its core business of private banking, the group extends a range of additional services through its Asset Servicing divisions (including Fund Administration and Global Custody), Global Markets and Asset Management. Net Income Net income after tax for the year ended 31 December 2017 amounted to LBP 333,062 million as compared to LBP 303,022 million for the year ended 31 December 2016. For the year ended 31 December 2017, return on average equity (ROAE) reached 12.46%, and return on average assets (ROAA) 1.09%, as compared to an ROAE and an ROAA of 13.47% and 1.13%, respectively, for the year ended 31 December 2016. Interest Income The Bank’s interest income amounted to LBP 1,648,668 million for the year ended 31 December 2017, as compared to LBP 1,350,541 million for the year ended 31 December 2016 and to LBP 1,204,837 million for the year ended 31 December 2015. The below table presents a breakdown of the Bank’s interest income for the years ended 31 December 2017, 2016 and 2015 respectively:

Interest and similar income Amount

% TotalInterest Income

Amount

% TotalInterest Income

Amount

% TotalInterest Income

2017/2016 2016/2015

LL million % LL million % LL million % % %Financial assets at amortized cost 504,528 30.60% 586,604 43.43% 577,244 47.91% -13.99% 1.62%Loans and advances to customers at amortized cost 440,477 26.72% 392,846 29.09% 356,076 29.55% 12.12% 10.33%Balances with the Central Banks 601,578 36.49% 306,194 22.67% 241,145 20.01% 96.47% 26.98%Financial assets at amortized cost pledged as collateral 86,035 5.22% 42,287 3.13% 9,663 0.80% 103.45% 337.62%Reverse repurchase agreements 122 0.01% 11,924 0.88% 7,435 0.62% -98.98% 60.39%Loans and advances to related parties at amortized cost 5,696 0.35% 5,044 0.37% 8,159 0.68% 12.92% -38.17%Due from banks and financial institutions 7,423 0.45% 4,975 0.37% 4,684 0.39% 49.21% 6.20%Amounts due from affiliated banks and financial institutions 2,810 0.17% 665 0.05% 433 0.04% 322.31% 53.59%

1,648,668 1,350,541 1,204,838 22.07% 12.09%

31/12/2017 31/12/2016 31/12/2015

47

Interest Expense The Bank’s interest expense amounted to LBP 1,210,167 million for the year ended 31 December 2017, as compared to LBP 954,170 million for the year ended 31 December 2016 and to LBP 810,986 million for the year ended 31 December 2015. The increase is mainly due to an increase in customer deposits. Interest expense on client deposits reached LBP 1,079,985 million as at 31 December 2017 compared to LBP 825,378 million as at 31 December 2016 and to 725,130 million as at 31 December 2015. The below table presents a breakdown of the Bank’s interest expense for the years ended 31 December 2017, 2016 and 2015 respectively: Fee and commission income Slight decrease in fee and commission income by 4.3% in 2017 compared to 2016, whereas fee and commission expenses increased by 19.96% in 2017 to reach LBP 39,781 million in 2017 compared to LBP 33,163 in 2016

Net gain from sale of. debt instruments at amortized cost The schedule below details the net gain from sale of financial assets at amortized cost:

31/12/2017 31/12/2016 31/12/2015 2017/2016 2016/2015LL million LL million LL million % %

Fee and commission income 98,024 102,432 102,211 -4.30% 0.22%Fee and commission expense -39,781 -33,162 -31,221 19.96% 6.22%Net fees and commission income 58,243 69,270 70,990 -15.92% -2.42%

Net gain from financial assets at fair value through profit or loss

12,476 18,668 23,522 -33.17% -20.64%

Revenue from financial assets at fair value through other comprehensive income

1,715 638 1,012168.81% -36.96%

Net gain from sale of financial assets at amortized cost 182,556 579,708 105,963 -68.51% 447.09%Other operating income 34,114 31,653 25,338 7.77% 24.92%Other income 230,861 630,667 155,835 -63.39% 304.70%

Total 289,104 699,937 226,825 -58.70% 208.58%

Gains Losses Net Gains Losses Net Gains Losses Net

LL million LL million LL million LL million LL million LL million LL million LL million LL million

Lebanese sovereign and Central Bank of Lebanon Certificates of deposit 20,737 0 20,737 393,732 -13,102 380,630 73,130 0 73,130 Treasury bills 140,288 -98 140,190 214,497 0 214,497 25,053 0 25,053 Eurobonds 15,633 -962 14,671 662 -23,110 -22,448 737 0 737

176,658 -1,060 175,598 608,891 -36,212 572,679 98,920 0 98,920

Other sovereign Other governmental securities 6,958 0 6,958 7,262 0 7,262 7,043 0 7,043

Private sector and other securities Corporate and other debt instruments 0 0 0 1,675 -1,908 -233 0 0 0

Total 183,616 -1,060 182,556 617,828 -38,120 579,708 105,963 0 105,963

2017 2016 2015

Interest and similar expense Amount

% TotalInterest Expense

Amount

% TotalInterest Expense

Amount

% TotalInterest Expense

2017/2016 2016/2015

LL million % LL million % LL million % % %Customers’ deposits at amortized cost 1,079,985 89.24% 825,378 86.50% 725,130 89.41% 30.85% 13.82%Due to banks and financial institutions 83,111 6.87% 74,557 7.81% 45,575 5.62% 11.47% 63.59%Due to the Central Banks 38,048 3.14% 50,185 5.26% 35,301 4.35% -24.19% 42.16%Related parties’ deposits at amortized cost 7,021 0.58% 3,939 0.41% 4,954 0.61% 78.23% -20.48%Amounts due to affiliated banks and financial institutions 2,002 0.17% 111 0.01% 26 0.00% 1696.46% 325.03%

1,210,167 954,171 810,986 26.83% 17.66%

31/12/2017 31/12/2016 31/12/2015

48

During 2017, the Group entered into certain financial transactions with the Central Bank of Lebanon relating to treasury bills denominated in Lebanese Lira, whereby the Central Bank purchased treasury bills denominated in LL with a nominal of LL 1,950,000 million. As a result of this sale, the Group realized a gain of LL 131,248 million in the consolidated income statement and deposited US$ 1,300 million with the Central Bank of Lebanon. During 2016, the Group entered into certain financial transactions with the Central Bank of Lebanon. These transactions were available to banks provided that they are able to reinvest an amount equivalent to the nominal value of the sold instruments in Eurobonds issued by the Lebanese Republic or Certificates of Deposit issued by the Central Bank of Lebanon denominated in US Dollars and purchased at their fair values. The net gains from such trades in excess of the fair value of the financial instruments sold amounted to LL 1,272,142 million, of which LL 734,253 million was not realized in the consolidated income statement. Operating Expenses Total operating expenses decreased by LBP 161,285 million to reach LBP 317,685 million for the year ended 31 December 2017, with a year-on-year decrease of 33.67% and increase of 72.4% between 2016 and 2015. The increase in 2016 is mainly due to the impairment of goodwill. The below table presents a breakdown of total operating expenses for the years ended 31 December 2017, 2016 and 2015 respectively:

Impairment of goodwill . The recoverable amount of Société Générale Bank - Cyprus Ltd CGU amounted to LL 93,350 million compared to a book value of LL 108,446 million. Accordingly, the Bank booked an impairment loss on goodwill of LL 15,090 million. The recoverable amount of the retail CGU amounted to LL 91,653 million compared to a book value of LL 167,036 million. Accordingly, the Bank booked an impairment loss on goodwill of LL 75,713 million. The recoverable amount of the corporate CGU amounted to LL 283,797 million compared to a book value of LL 356,308. Accordingly, the Bank booked an impairment loss on goodwill of LL 72,355 million. Provision for risks and charges – IFRS9 Provision On 8 November 2016, the Central Bank of Lebanon issued Intermediate Circular number 439 which required banks operating in Lebanon to constitute additional collective provisions. As such, provisions for risks and charges as at 31 December 2017 and 31 December 2016 include an amount of LL 165,825 million in excess of the provisioning requirements of IAS 39. Income Tax Income tax expense for the year ended 31 December 2017 reached LBP 64,573 million as compared to LBP 128,999 million for the year ended 31 December 2016. Statement of Financial Position

31/12/2017 31/12/2016 31/12/2015 2017/2016 2016/2015LL million LL million LL million % %

Personnel expenses -142,058 -133,379 -123,278 6.51% 8.19%Other operating expenses -160,336 -167,954 -140,573 -4.54% 19.48%Depreciation of property and equipment -11,955 -11,269 -10,932 6.09% 3.08%Amortization of intangible assets -3,336 -3,210 -3,040 3.93% 5.59%Impairment of goodwill 0 -163,158 0 -100.00% 0.00%Total operating expenses -317,685 -478,970 -277,823 -33.67% 72.40%

49

Total Assets The below table presents a breakdown of the Bank’s total assets for the years ended 31 December 2017, 2016 and 2015 respectively:

The Bank’s total assets reached LBP 32,486,950 million as at 31 December 2017 as compared to LBP 28,667,755 million as at 31 December 2016, and to LBP 24,455,645 million as at 31 December 2015 reflecting a year-on-year increase of 13.32% between 2017 and 2016. During 2016, the Bank acquired the total shares and the amounts due from the former shareholders of Fonciere 415 Saifi SAL for LL 151,400 million after obtaining the approval of the Central Bank of Lebanon on 30 November 2016. This company owns a plot of land where the Bank’s new headquarters will be constructed. Total Liabilities The Bank’s total liabilities increased by 13.79% in 2017 compared to 2016 to reach LBP 29,707,277 million as at 31 December 2016 as compared to LBP 26,107,996 million as at 31 December 2016. The Bank’s customers’ and related parties deposits reached LBP 24,855,790 million as at 31 December 2017, as compared to LBP 21,969,541 million as at 31 December 2016, with a year-on-year increase of 13.14%, representing 83.67% of total liabilities in 2017 compared to 84.15% in 2016. The below table presents a breakdown of the Bank’s total liabilities for the years ended 31 December 2017, 2016 and 2015 respectively:

LL million % of total % of

growthLL million % of total % of

growthLL million % of total

Cash and balances with the Central Banks 13,259,404 40.81% 55% 8,544,014 29.80% 47% 5,817,726 23.79%Due from banks and financial institutions 854,226 2.63% 7% 798,629 2.79% 14% 698,264 2.86%Amounts due from affiliated banks and financial institutions 590,385 1.82% -36% 918,608 3.20% 18% 777,435 3.18%

Reverse repurchase agreements 0 0.00% 0% 0 0.00% -100% 416,910 1.70%Loans to banks and financial institutions 8,397 0.03% 0% 8,397 0.03% 0% 8,397 0.03%Derivative financial instruments 9,197 0.03% 272% 2,472 0.01% -17% 2,969 0.01%Financial assets at fair value through profit or loss 201,687 0.62% 12% 180,270 0.63% -25% 239,806 0.98%Loans and advances to customers at amortized cost 7,344,616 22.61% 11% 6,627,649 23.12% 12% 5,929,958 24.25%Loans and advances to related parties at amortized cost 111,065 0.34% 10% 100,737 0.35% -34% 153,546 0.63%

Debtors by acceptances 445,375 1.37% 110% 211,715 0.74% 25% 169,491 0.69%Financial assets at amortized cost 8,642,264 26.60% -18% 10,476,347 36.54% 10% 9,504,584 38.86%Financial assets at fair value through other comprehensive income 161,514 0.50% 541% 25,208 0.09% -5% 26,560 0.11%

Property and equipment 485,330 1.49% 12% 433,785 1.51% 102% 214,345 0.88%Intangible assets 48,019 0.15% -3% 49,317 0.17% 20% 40,945 0.17%Investment properties 1,478 0.00% 0% 1,483 0.01% 0% 1,480 0.01%Non-current assets held for sale 186,504 0.57% 6% 175,919 0.61% -5% 185,318 0.76%Other assets 134,084 0.41% 22% 109,800 0.38% 9% 100,871 0.41%Goodwill 3,405 0.01% 0% 3,405 0.01% -98% 167,040 0.68%Total assets 32,486,950 100% 13% 28,667,755 100% 17% 24,455,645 100%

31/12/2017 31/12/2016 31/12/2015

LL million % of total % of growth

LL million % of total % of growth

LL million % of total

Due to the Central Banks 1,622,207 5.46% 275.72% 431,765 1.65% -29.21% 609,961 2.70%Loans and repurchase agreements 1,681,384 5.66% -18.47% 2,062,317 7.90% -2.54% 2,116,164 9.38%Due to banks and financial institutions 479,217 1.61% -15.77% 568,948 2.18% -7.08% 612,282 2.71%Amounts due to affiliated banks and financial institutions 6,844 0.02% 378.94% 1,429 0.01% -93.25% 21,185 0.09%

Derivative financial instruments 164 0.00% -98.27% 9,507 0.04% 113.64% 4,450 0.02%Customers' deposits at amortized cost 24,690,508 83.11% 13.32% 21,788,334 83.45% 16.64% 18,679,877 82.79%

Related parties’ deposits at amortized cost 165,282 0.56% -8.79% 181,207 0.69% 36.48% 132,771 0.59%

Engagements by acceptances 445,375 1.50% 110.37% 211,715 0.81% 24.91% 169,491 0.75%Other liabilities 367,376 1.24% -37.71% 589,764 2.26% 315.19% 142,048 0.63%Provision for risks and charges 248,920 0.84% -5.36% 263,010 1.01% 247.27% 75,737 0.34%Total liabilities 29,707,277 100% 14% 26,107,996 100% 16% 22,563,966 100%

31/12/201531/12/2017 31/12/2016

50

Shareholders’ Equity and Capital Adequacy As a result of the operations with the Central Bank of Lebanon done during 2016, a total of LL 404,801 million net of taxes, was directly recognized in non-distributable reserves within equity

The Bank’s consolidated capital adequacy ratio as per Basel III was 17.66% in 2017, exceeding the 14.5% prudential requirement of BDL. Regulatory capital

At 31 December 2017, 2016 and 2015, regulatory capital consists of the following:

Capital adequacy ratio At 31 December 2017, 2016 and 2015, regulatory capital consists of the following:

The Bank does not have any significant restrictions on the use of its capital resources that have or could materially affect operations other than those resulting from regulatory limit set out in Article 153 of Code of Money and Credit. All Bank’s investment are in line with this regulatory limit. At the time of this offering circular, no holdings in significant undertakings that are material to SGBL’s financial position, profits or losses.

2017 2016 2015LL million LL million LL million

Share capital – common shares 14,586 14,586 14,586Share capital – preferred shares 9,675 9,675 9,675Share premium – common shares 149,349 149,349 149,349Share premium – preferred shares 563,200 561,171 559,161Cash contribution by shareholders 106,746 106,746 106,746Non distributable reserves 961,685 864,648 391,134Distributable reserves 29,460 20,532 19,442Revaluation reserve of property 3,934 3,934 3,934Cumulative change in fair value of financial assets at fair value through other comprehensive income

-11,678 -218 -477

Profit for the year 330,768 286,259 250,844Foreign currency translation reserve -4,618 -18,862 -16,769Retained earnings 573,600 496,250 351,552Equity attributable to equity holders of parent 2,726,707 2,494,070 1,839,177Non-controlling interests 52,966 65,689 52,502Total equity 2,779,673 2,559,759 1,891,679

2017 2016 2015 2017 2016 2015LL million LL million LL million LL million LL million LL million

Common Tier 1 capital 1,712,340 1,550,591 776,404 2,003,237 1,796,819 991,949Additional Tier 1 capital 577,777 574,769 571,067 577,777 574,769 571,067Tier 2 capital 191,776 225,496 6,277 191,776 225,496 6,277

Total capital 2,481,893 2,350,856 1,353,748 2,772,790 2,597,084 1,569,293

Excluding profit for the year Including profit for the year less proposed dividends

2017 2016 2015 2017 2016 2015

Common Tier 1 capital 10.91% 11.04% 6.49% 12.76% 12.80% 8.30%

Total Tier 1 capital ratio 14.59% 15.14% 11.27% 16.44% 16.89% 13.07%

Total capital ratio 15.81% 16.74% 11.32% 17.66% 18.50% 13.12%

Excluding profit for the year Including profit for the year less proposed dividends

51

9. SELECTED FINANCIAL DATA Loans and advances The Bank’s net loans and advances increased by 10.81% in 2017 compared to 2016 to reach LBP 7,455,681 million as at 31 December 2017 as compared to LBP 6,728,386 million as at 31 December 2016. The Bank’s loans and advances are denominated in both Lebanese Lira (LL million) and foreign currencies, primarily US$. In 2017, Bank’s loans represented 29.03% in LBP and 70.97% in FCY (2016: 25.86% LBP and 74.14% FCY). The Bank’s loans-to-deposits ratio stood at 30% end of 2017, compared to 30.67% and 33.18% respectively for 2016 and 2015. In Parallel, the strict application of the risk measures and procedures set as per the Bank’s Risk Strategy has allowed to preserve the quality of the loan portfolio, thus the NPL/Gross loans ratio is 9.76% for 2017 with an improvement compared to 10.71% in 2016 and 10.93% in 2015. Compared to the sector, the Alpha Group’s loans-to-deposits ratio stood at 36.42% end of 2017, compared to 37.26% and 37.88% respectively for 2016 and 2015 and NPL/Gross loans ratio is stable around 7% for 2017, 2016 and 2015. Breakdown of the Bank’s loans by Nature of Borrower The below table presents a breakdown of the composition of the Bank’s loans portfolio for the years ended 31 December 2017, 2016 and 2015 respectively:

Loans by geographical location The following table shows the maximum exposure to credit risk for the loans and advances to customers and related parties, by geography of counterparty before the effect of mitigation through the use of master netting and collateral agreements. Geographic analysis

As at December 31, 2017, the breakdown per geographic concentration shows an activity that is stable over the last 3 years in terms of concentration used to mitigate the risk.

31/12/2017 31/12/2016 31/12/2015 2017/2016 2016/2015LL million LL million LL million % %

Corporate lending 4,800,919 4,254,325 3,834,747 12.85% 10.94%Retail lending 3,123,666 2,985,287 2,676,593 4.64% 11.53%Gross loans and advances 7,924,585 7,239,612 6,511,340 9.46% 11.18%

Less: Unrealized interest -351,633 -380,513 -371,634 -7.59% 2.39%Less: Allowance for impairment losses -228,336 -231,450 -209,748 -1.35% 10.35%

Net loans and advances 7,344,616 6,627,649 5,929,958 10.82% 11.77%

2015

Lebanon Outside Lebanon Total Lebanon Outside Lebanon Total Lebanon Outside Lebanon Total

LL million LL million LL million LL million LL million LL million LL million LL million LL million

Loans and advancesLoans and advances to customers atamortized cost

5,126,100 2,218,516 7,344,616 4,696,755 1,930,894 6,627,649 4,231,317 1,698,641 5,929,958

Loans and advances to related parties atamortized cost

79,957 31,108 111,065 72,136 28,601 100,737 79,419 74,127 153,546

5,206,057 2,249,624 7,455,681 4,768,891 1,959,495 6,728,386 4,310,736 1,772,768 6,083,504

% of Total 69.83% 30.17% 100.00% 70.88% 29.12% 100.00% 70.86% 29.14% 100.00%

2017 2016

52

Loans by Currency The table below shows an analysis of loans and advances by currency for the years ended 31 December 2017, 2016 and 2015 respectively: As at December 31, 2017, loans in LBP represents 29% of the total portfolio for a total of LBP 2,164,692 million with loans in Foreign Currencies representing 71% of the total and amounting to LBP 5,290,989 million. The loans in foreign currencies are mainly in US dollars. The Sector’s proportion of loans denominated in LBP remains stable over the past 3 years at around 20%, and loans in foreign currencies, mainly in US dollars, were around an average of 80%. Loans by Maturity The table below shows an analysis of loans and advances analyzed according to when they are expected to be recovered or settled for the years ended 31 December 2017, 2016 and 2015 respectively:

As at December 31, 2017, the Bank’s loans portfolio was divided between loans with a maturity of less than one year (57.2%) and loans with a maturity of over one year (42.8%). As at December 31, 2016, the Bank’s loans portfolio was divided between loans with a maturity of less than one year (57.9%) and loans with a maturity of over one year (42.1%). As at December 31, 2015, the Bank’s loans portfolio was divided between loans with a maturity of less than one year (47.5%) and loans with a maturity of over one year (52.5%). Loans by Collateral The following table shows the maximum exposure to credit risk of loans and advances. It further shows the total fair value of collateral, capped to the maximum exposure to which it relates and the net exposure to credit risk for the years ended 31 December 2017, 2016 and 2015 respectively:

2015Less than one year

More than one year

TotalLess than one year

More than one year

TotalLess than one year

More than one year

Total

LL million LL million LL million LL million LL million LL million LL million LL million LL million

Loans and advances to customers at amortized cost

4,173,844 3,170,772 7,344,616 3,807,450 2,820,199 6,627,649 2,772,966 3,156,992 5,929,958

Loans and advances to related parties at amortized cost

94,171 16,894 111,065 89,337 11,400 100,737 118,432 35,114 153,546

Loans and advances by maturity 4,268,015 3,187,666 7,455,681 3,896,787 2,831,599 6,728,386 2,891,398 3,192,106 6,083,504

2017 2016

2015Foreign

currencies in Total

Foreign currencies in

TotalForeign

currencies in Total

LL million LL million LL million LL million LL million LL million LL million LL million LL million

Loans and advances to customers at amortized cost

2,162,990 5,181,626 7,344,616 1,739,795 4,887,854 6,627,649 1,486,516 4,443,442 5,929,958

Loans and advances to related parties at amortized cost

1,702 109,363 111,065 161 100,576 100,737 36,296 117,250 153,546

Loans and advances by currency 2,164,692 5,290,989 7,455,681 1,739,956 4,988,430 6,728,386 1,522,812 4,560,692 6,083,504

% of Total 29.03% 70.97% 100.00% 25.86% 74.14% 100.00% 25.03% 74.97% 100.00%

2017 2016

53

Related Party Transactions According to Central Bank decision No 11717 Dated March 8th , 2014, a transaction with a related party must be formally authorized by the general assembly of the bank’s shareholders and approved by the bank’s board of directors. The decision also provides that advances and credit facilities to directors, managers and companies having common directors with a bank should not exceed 2% of shareholders’ equity. The Central Bank Decision No 7156 Dated November 10th, 1998 provides that inter-bank deposits and placements among banks and foreign affiliated companies (whether or not financial institutions) may not exceed 25% of Tier I Capital.

31/12/2017Maximum

exposureCash Securities

Real estate

Letters of credit / guarantees

Net credit exposure

LL million LL million LL million LL million LL million LL million

Loans and advances to customers at amortized cost:

7,344,616 -811,529 -9,321 -3,326,750 0 3,197,016

Retail loans 2,890,411 -366,194 -383 -1,694,907 0 828,927 Corporate loans 4,454,205 -445,335 -8,938 -1,631,843 0 2,368,089Loans and advances to relatedparties amortized cost:

111,065 -2,316 -76 -14,885 0 93,788

Retail loans 47,176 0 0 -2,523 0 44,653 Corporate loans 63,889 -2,316 -76 -12,362 0 49,135

31/12/2016Maximum

exposureCash Securities

Real estate

Letters of credit / guarantees

Net credit exposure

LL million LL million LL million LL million LL million LL million

Loans and advances to customers at amortized cost:

6,627,649 -672,598 -263 -2,901,934 -121,791 2,931,063

Retail loans 2,781,322 -332,586 -260 -1,546,396 -105,890 796,190 Corporate loans 3,846,327 -340,012 -3 -1,355,538 -15,901 2,134,873Loans and advances to relatedparties amortized cost:

100,737 -2,350 -91 -12,468 0 85,828

Retail loans 38,772 -36 0 -106 0 38,630 Corporate loans 61,965 -2,314 -91 -12,362 0 47,198

31/12/2015Maximum

exposureCash Securities

Real estate

Letters of credit / guarantees

Net credit exposure

LL million LL million LL million LL million LL million LL million

Loans and advances to customers at amortized cost:

5,929,958 -693,633 -231,631 -2,649,944 -10,829 2,343,921

Retail loans 2,515,180 -272,006 -174495 -1,392,535 -10,829 665,315 Corporate loans 3,414,778 -421,627 -57136 -1,257,409 0 1,678,606Loans and advances to relatedparties amortized cost:

153,546 -2,335 0 -12,468 0 138,743

Retail loans 40,781 0 0 -106 0 40,675 Corporate loans 112,765 -2,335 0 -12,362 0 98,068

Collateral

Collateral

Collateral

54

Pursuant to Article 152 of the Code of Money and Credit, the Board of Directors of the Bank must authorize all credit facilities granted directly or indirectly to major shareholders, Board members and Management, as well as to their respective family members and related companies. The authorization of the Board of Directors must specify the amount and terms of the facilities granted, which should thereafter be submitted to the General Assembly for approval as required. Loans Classification and Provisioning The Group rates its counterparties according to the six rating classes defined by the Central Bank and the Banking Control Commission of Lebanon requirements as follows: - Low fair risk / Normal and follow up (grades 1 and 2) – types of loans that are expected to be repaid on a timely and consistent basis; for grade 2, the client file is not complete. - Watch / Special mention (grade 3) – type of loan that is expected to be repaid but current conditions lead to believe that the probability of repayment would be lowered; - Substandard (grade 4) – type of loan where the client is witnessing a difficult financial condition and might not be in a position to settle the loan in full; - Doubtful (grade 5) – type of loan where there is no movement in the clients' balance; - Bad (grade 6) – type of loan where the probability of repayment is low and almost nil. The Central Bank Decision No. 7159, dated November 10, 1998, as amended among others, by No. 12256 dated May 4th, 2016 introduces specific rules relating to loan classification and provisioning in accordance with the Basel Committee regulations. Specifically, it differentiates between the Retail Loans - which include the consumer loans, the revolving credits, and the housing loans - and the commercial loans such as the corporate or SME loans. It also divides loan facilities into six categories: regular loans, follow up loans, watch list loans, substandard loans, doubtful loans, and bad debt loans. Lebanese banks are required to adopt in addition to the supervisory classification, their own loan grading system in order to manage their credit risk. In this context, Lebanese banks are required to classify the loan into ten categories: Excellent, Strong, Good, Satisfactory, Adequate, Marginal, Vulnerable, Doubtful, Substandard and Loss. The BCC requires specific provisions to be established for identified credit losses. Full or partial provisions must be made for non-performing loans in accordance with applicable Central Bank regulations. Furthermore, non-performing loans must be put on a non-accrual basis and any interest subsequently received booked on a cash basis, as and when received. Non-performing loans are those which the Bank’s Credit Committee has deemed the borrower as unable to meet his repayment obligations, or whose performance is otherwise unsatisfactory. The table below shows the classification of loans and advances to customers and related parties at amortized cost as in accordance with the ratings of Central Bank of Lebanon circular 58 are for the years ended 31 December 2017, 2016 and 2015 respectively:

Reverse repurchase agreements

Gross balance

Net balance % Gross

balance Net balance %

Gross balance

Net balance %

LL million LL million of Total LL million LL million of Total LL million LL million of Total

Regular 6,427,102 6,427,102 86% 5,800,273 5,800,273 86% 5,120,710 5,120,710 84%Follow up 513,069 513,069 7% 484,561 484,561 7% 520,129 520,129 9%Follow-up and regularization

328,707 328,707 4% 287,892 287,892 4% 313,170 313,170 5%

Substandard 103,479 67,574 1% 86,442 48,878 1% 83,403 44,069 1%Doubtful 493,980 146,757 2% 512,120 135,332 2% 488,590 107,176 2%Bad 188,992 3,457 0% 190,109 2,625 0% 158,358 2,331 0%

8,055,329 7,486,666 7,361,397 6,759,561 6,684,360 6,107,585Collective impairment 0 -30,985 0 -31,175 0 -24,081Total 8,055,329 7,455,681 7,361,397 6,728,386 6,684,360 6,083,504

2017 2016 2015

2017 2016 2015LL million LL million LL million

Financial institution - - 416,910

55

The Group has a programme to purchase securities under agreements to resell (reverse repos). The Group has an obligation to return the securities and the counterparty retains substantially all the risks and rewards of ownership. Consequently, the securities are not recognized by the Group, which instead record a separate asset under reverse repurchase agreements reflecting the transaction’s economic substance as a loan by the Group. During 2015, the Group bought Certificates of Deposit issued by the Central Bank of Lebanon from a financial institution under the agreement to resell them. Financial instruments at fair value through profit or loss The table below shows the composition of the Bank’s portfolio of financial instruments at fair value through profit or loss for the years ended 31 December 2017, 2016 and 2015 respectively:

Financial assets at fair value through other comprehensive income The table below shows the composition of the Bank’s portfolio of financial instruments at fair value through other comprehensive income for the years ended 31 December 2017, 2016 and 2015 respectively:

2017 2016 2015LL million LL million LL million

Quoted Shares 77,294 94,196 74,866 Funds 23,720 20,376 18,542 Lebanese treasury bills – Eurobonds 11,418 3,688 17,540Total quoted 112,432 118,260 110,948

2017 2016 2015LL million LL million LL million

Unquoted Shares 50,477 23,228 21,526 Lebanese treasury bills – denominated in LL 1,091 1,094 1,093Certificates of deposit – EuroCDs 0 0 0 Debt securities issued by banks 37,688 37,688 37,688 Foreign governmental debt securities 0 0 68551Total unquoted 89,256 62,010 128,858Total 201,688 180,270 239,806

2017 2016 2015LL million LL million LL million

Quoted Shares 148,418 12,593 13,935

Unquoted Shares 13,096 12,615 12,625

Financial assets at fair value through othercomprehensive income 161,514 25,208 26,560

56

Dividend income recognized in the consolidated income statement from financial assets at fair value through other comprehensive income is as follows:

Financial assets at amortized cost The table below shows the composition of the Bank’s portfolio of financial instruments at amortized cost for the years ended 31 December 2017, 2016 and 2015 respectively:

Sources of Funds The Bank’s strategy over the past years consisted on diversifying the sources of funds. The customer deposits represent still the main source of funds and constitutes 77% of the total Balance sheet over the past 3 years. In line with its strategy, the Bank relies as well on different sources of funding, from Repurchase agreements with the Central Bank, and other international financial institutions, as well as issuing equity securities such as preferred shares. The following table sets out a breakdown of the Bank’s sources of funding, as at December 31, 2017, 2016 and 2015:

2017 2016 2015LL million LL million LL million

Dividend income from equity instruments 1,715 638 1,012Dividend income from financial assetsderecognized or redeemed during the year

0 0 0

Dividend income 1,715 638 1,012

2017 2016 2015LL million LL million LL million

Quoted Lebanese treasury bills – Eurobonds 62,642 40,284 871,752 Lebanese treasury bills – Eurobonds pledged as collateral against repurchase agreements 2,176,089 2,582,749 1,664,449 Foreign governmental debt securities - 33,222 1,710 Foreign governmental debt securities pledged as collateral against repurchase agreements 25,290 25,194 81,930 Debt securities issued by banks 9,204 9,028 11,280 Debt securities issued by banks pledged as collateral against repurchase agreements 0 0 73,487 Corporate bonds pledged as collateral against repurchase agreements 42,261 42,980 125,402Gross quoted investments at amortized cost 2,315,486 2,733,457 2,830,010

Provision for impairment (i) 0 0 -8,442Total quoted 2,315,486 2,733,457 2,821,568

Unquoted Lebanese treasury bills – denominated in LL 996,572 2,877,681 2,773,197

Lebanese treasury bills – denominated in LL mortgaged in favour of the Central Bank ofLebanon (i)

617,216 181,885 739,072

Certificates of deposit – denominated in LL 333,754 513,170 1,932,221 Certificates of deposit – EuroCDs 2,289,792 2,443,352 349,993Certificates of deposits issued by foreign Central Banks 52,126 0 141,515 Certificates of deposit – EuroCDs pledged as collateral against repurchase agreements 45390 45,390 46,311

Certificates of deposit – denominated in LL mortgaged in favour of the Central Bank ofLebanon (ii)

19,554 0 0

Certificates of deposit – EuroCDs mortgaged in favour of the Central Bank of Lebanon (ii) 309,388 309,388 0 Certificates of deposit – EuroCDs mortgaged in favour of a customer (iii) 669,674 412,723 0 Corporate bonds 21,723 22,013 22,025Governmental bonds mortgaged against deposits from Social Security of Jordan 400,424 270,574 238,272Governmental bonds mortgaged in favor of the Central Bank of Jordan 2,318 857 1,797 Foreign governmental debt securities 569,930 656,675 429,212 Certificates of deposit issued by banks 0 10,566 10,554Gross unquoted investments at amortized cost 6,327,861 7,744,274 6,684,169

Provision for impairment (i) -1,083 -1,384 -1,153Total unquoted 6,326,778 7,742,890 6,683,016

Total 8,642,264 10,476,347 9,504,584

57

Due to Central Banks

Term soft loans include: - Term loan amounting to LL 483 million as at 31 December 2017 (2016: LL 10,228 million) were granted by the Central

Bank of Lebanon to cover 60% of the replacement costs of the Bank’s damaged buildings and installations and to cover 60% of the Bank’s credit losses relating to debtors directly affected by July 2006’s war. The effective interest rate for 2017 was 2.28% (2016: 3.04%). The loan is secured by the pledge on Lebanese treasury bills with a nominal of LL 483 million (2016: LL 10,228 million) included under financial assets at amortized cost.

- Term loan amounting to LL 170,000 million granted during June 2012 from the Central Bank of Lebanon after the

acquisition of the assets and liabilities of the Lebanese Canadian Bank SAL for a ten years period. The effective interest rate is 2% for the first 5 years and 1.85% for the remaining 5 years. The loan is secured by the pledge on Lebanese treasury bills with a nominal of LL 170,000 million (2016: LL 170,000 million) included under financial assets at amortized cost.

- Term loan amounting to LL 150,000 million granted during October 2013 from the Central Bank of Lebanon for a three

years period to cover the additional losses resulting from the acquisition of the assets and liabilities of the Lebanese Canadian Bank SAL. The effective interest rate is 1.97% for the first two years and will be revised for the third year by the Central Bank of Lebanon. The loan matured during 2016.

- Term loans totaling to LL 292,990 million as at 31 December 2017 (2016: LL 222,997 million) were granted by the Central

Bank of Lebanon to subsidize the loans granted to customers under circular 313 of the Central Bank of Lebanon. The term loans are subject to a 1% interest rate payable on a monthly basis. Part of these term loans are secured by the pledge on Lebanese treasury bills with a nominal of LL 2,050 million (2016: LL 430 million) and certificates of deposits denominated in LL with a nominal of LL 15,000 million as at 31 December 2017 (2016: nil). These instruments are included under financial assets at amortized cost.

- Term loans totaling to LL 1,108,583 million as at 31 December 2017 (2016: nil) were granted by the Central Bank of

Lebanon. The term loans are subject to a 2% interest rate payable on a monthly basis. These term loans are secured by the pledge on Lebanese treasury bills with a nominal of LL 436,783 million included under financial assets at amortized cost and the pledge of long-term placements held with the Central Bank of Lebanon amounting to LL 674,437 million.

Loans and repurchase agreements

The Group has a program to sell securities under agreements to repurchase (‘repos’). The securities sold under agreements to repurchase are transferred to third parties and the Group receives cash in exchange. If the securities decrease in value, the Group may be required to pay additional cash collateral. The Group has determined that it retains substantially all the risks and rewards of these securities, which include credit risk and market risk, and therefore has not derecognized them. In addition, it recognizes a financial liability for cash received as collateral.

2017 2016 2015LL million LL million LL million

Currentaccount 14 33 554Termsoftloans 1,617,526 428,855 604,991Accruedinterest 4,667 2,877 4,416

DuetoCentralBanks 1,622,207 431,765 609,961

2017 2016 2015LL million LL million LL million

Central Bank of Lebanon 431,476 582,452 982,973Banks and financial institutions 1,249,908 1,479,865 1,133,191Loans and repurchase agreements 1,681,384 2,062,317 2,116,164

58

The carrying amount and fair value of securities sold under agreements to repurchase at 31 December 2017 was LL 2,289,030 million and LL 2,246,197 million respectively (2016: LL 2,696,313 million and LL 2,648,811 million respectively). Those securities are presented in the statement of financial position under “Financial assets at amortized cost”. Due to banks and financial institutions

Customer deposits The compounded annual growth of customer deposits (including related parties) reached 9.65% for the period extending from December 31, 2011 to year-end 2017. Customer deposits by type of deposit Retail deposits represent 74% of total customer deposits as at 31 December 2017 and grew by 10% compared to 2016, whereas Corporate deposits represent 26% end of 2017 and increased by 24% compared to December 2016.

Included in customers’ deposits as at 31 December 2017 are coded accounts amounting to LL 55,521 million (2016: LL 37,489 million). These accounts are opened in accordance with article 3 of the Banking Secrecy Law dated 3 September 1956.

Included under customers’ deposits an amount of LL 583,073 million maturing during 2018, 2019 and 2020 guaranteed by certificates of deposit with a carrying amount of LL 669,674 (2016: deposits amounting to LL 376,884 million maturing during 2018 and 2019 guaranteed by certificates of deposit with a nominal amount of LL 412,723). Customer deposits by currency The table below shows an analysis of deposits by currency for the years ended 31 December 2017, 2016 and 2015 respectively:

2017 2016 2015LL million LL million LL million

Sight deposits 110,698 162,888 107,081Time deposits 368,519 406,060 505,201Due to banks and financial institutions 479,217 568,948 612,282

2015Corporate Retail Total Corporate Retail Total Corporate Retail TotalLL million LL million LL million LL million LL million LL million LL million LL million LL million

Sight deposits 765,575 1,307,593 2,073,168 934,722 1,337,031 2,271,753 790,406 1,203,261 1,993,667Net creditor accounts against debtoraccounts

763 1,147 1,910 0 988 988 0 1,476 1,476

Blocked margins 326,064 161,216 487,280 307,891 186,640 494,531 307,419 265,355 572,7741,092,402 1,469,956 2,562,358 1,242,613 1,524,659 2,767,272 1,097,825 1,470,092 2,567,917

Time deposits 5,084,658 10,276,492 15,361,150 3,676,276 9,057,654 12,733,930 3,079,761 7,077,464 10,157,225Savings accounts 352,704 6,414,296 6,767,000 357,438 5,929,694 6,287,132 211,020 5,743,715 5,954,735Customers' deposits at amortized cost 6,529,764 18,160,744 24,690,508 5,276,327 16,512,007 21,788,334 4,388,606 14,291,271 18,679,877

2017 2016

2015Corporate Retail Total Corporate Retail Total Corporate Retail TotalLL million LL million LL million LL million LL million LL million LL million LL million LL million

Sight deposits 2,102 10,543 12,645 618 3,835 4,453 8713 632 9,345Time deposits 10,283 142,354 152,637 3,973 172,781 176,754 79,291 44,135 123,426Related parties deposits at amortizedcost

12,385 152,897 165,282 4,591 176,616 181,207 88,004 44,767 132,771

2017 2016

59

Customer deposits are denominated in both Lebanese Lira (LL million) and foreign currencies, primarily US$. In 2017, Bank’s deposits represented 28.67% in LBP and 71.33% in FCY (2016: 31.25% LBP and 68.75% FCY). Assets and Liabilities Management The assets and liabilities management monitors and controls the size and concentration of risk arising from liquidity, interest rate sensitivity, exchange rate exposure, credit and other risks. The Bank’s Asset-Liability Committee (ALCO) supervises assets and liabilities management to ensure compliance with applicable Central Bank’s regulation including inter alia those relating to reserve requirements and foreign exchange trading. Regarding foreign exchange risk, ALCO sets limits on the level of exposure the Bank is permitted to take by currency and in total both for overnight and intra-day positions. These limits are in line with applicable laws and regulations set out by the Central Bank. The Bank hedges itself against credit risk through its conservative lending policy and the diversification of its lending activities, avoiding concentrations of credit risk with a particular individual, group of customers, or a specific business sector. Furthermore, the Bank controls its credit risk exposure by regularly monitoring, through its credit committees, the creditworthiness of its clients and the appropriate collateral to be secured. Interest Rate Sensitivity and Liquidity The following table demonstrates the sensitivity to a reasonable possible change in interest rates, with all other variables held constant, of the Group’s consolidated income statement. The sensitivity of the consolidated income statement is the effect of the assumed changes in interest rates on the profit or loss for the year, based on the floating rate financial assets and financial liabilities held at 31 December, including the effect of hedging instruments. Interest sensitivity gap The table below analyses the Group’s interest risk exposure on financial assets and liabilities. The Group’s assets and liabilities are included at carrying amount and categorized by the earlier of contractual repricing or maturity dates. 2017 (LL million) Non Up to 1 1 to 3 3 months 1 to 2 2 to 5 Over 5 interest month months to 1 year years years years bearing Total ASSETS Cash and balances with the Central Banks 1,359,190 801,990 54,198 37,688 987,564 9,255,743 763,031 13,259,404 Due from banks and financial institutions 547,284 31,667 34,409 - - 6,301 234,565 854,226 Amounts due from affiliated banks and financial institutions 57,919 37,920 54,418 - - - 440,128 590,385 Loans to banks and financial institutions 8,397 - - - - - - 8,397 Derivative financial instruments - - - - - - 9,197 9,197 Financial assets at fair value through profit or loss - - - 483 38,754 10,868 151,582 201,687 Loans and advances to customers at amortized cost 2,019,588 1,211,471 3,170,881 335,725 137,530 458,884 10,537 7,344,616 Loans and advances to related parties at amortized cost 61,362 1,893 47,810 - - - - 111,065 Financial assets at amortized cost 52,126 3,629 146,140 1,210,859 2,735,073 4,377,940 116,497 8,642,264 Financial assets at fair value through other comprehensive income - - - - - - 161,514 161,514 ___________ __________ __________ __________ __________ _________ ________ _________ TOTAL ASSETS 4,105,866 2,088,570 3,507,856 1,584,755 3,898,921 14,109,736 1,887,051 31,182,755 ___________ __________ __________ __________ __________ _________ ________ _________ LIABILITIES Due to the Central Banks 128 30 2,042 3,872 247,674 1,340,837 27,624 1,622,207 Loans and repurchase agreements - 445,768 244,441 874,892 84,081 22,172 10,030 1,681,384 Due to banks and financial institutions 252,812 43,001 108,871 - 9,267 34,965 30,301 479,217 Amounts due to affiliated banks and financial institutions 6,326 - - - - - 518 6,844 Customers’ deposits at amortized cost 12,634,299 3,365,899 4,977,246 1,072,430 405,955 299,509 1,935,170 24,690,508 Related parties’ deposits at amortized cost 144,643 288 3,987 - - 1,135 15,229 165,282 Derivative financial instruments - - - - - - 164 164 ___________ __________ __________ __________ __________ _________ ________ _________ TOTAL LIABILITIES 13,038,208 3,854,986 5,336,587 1,951,194 746,977 1,698,618 2,019,036 28,645,606 ___________ __________ __________ __________ __________ _________ ________ _________ Total interest sensitivity gap (8,932,342) (1,766,416) (1,828,731) (366,439) 3,151,944 12,411,118 (131,985) 2,537,149 ___________ __________ __________ __________ __________ _________ ________ _________

2015Foreign

currencies in Total

Foreign currencies in

TotalForeign

currencies in Total

LL million LL million LL million LL million LL million LL million LL million LL million LL million

Customers’ deposits at amortized cost 7,119,998 17,570,510 24,690,508 6,774,394 15,013,940 21,788,334 6,361,552 12,318,325 18,679,877Related parties’ deposits at amortized cost 5,720 159,562 165,282 90,286 90,921 181,207 8,687 124,084 132,771Deposits by currency 7,125,718 17,730,072 24,855,790 6,864,680 15,104,861 21,969,541 6,370,239 12,442,409 18,812,648

2017 2016

60

2016 (LL million) Non Up to 1 1 to 3 3 months 1 to 2 2 to 5 Over 5 interest month months to 1 year years years years bearing Total ASSETS Cash and balances with the Central Banks 993,461 815,306 47,889 - 1,252,750 4,623,881 810,727 8,544,014 Due from banks and financial institutions 326,844 164,378 24,578 - - 6,301 276,528 798,629 Amounts due from affiliated banks and financial institutions 545,403 12,340 47,889 - - - 312,976 918,608 Loans to banks and financial institutions 8,397 - - - - - - 8,397 Derivative financial instruments - - - - - - 2,472 2,472 Financial assets at fair value through profit or loss - 541 - 478 1,076 40,314 137,861 180,270 Loans and advances to customers at amortized cost 862,730 2,001,541 2,972,104 297,901 103,523 376,900 12,950 6,627,649 Loans and advances to related parties at amortized cost 47,362 377 52,970 - - - 28 100,737 Financial assets at amortized cost 40,646 337,679 580,609 1,204,004 2,712,749 5,448,747 151,913 10,476,347 Financial assets at fair value through other comprehensive income - - - - - - 25,208 25,208 ___________ __________ __________ __________ __________ _________ ________ _________ TOTAL ASSETS 2,824,843 3,332,162 3,726,039 1,502,383 4,070,098 10,496,143 1,730,663 27,682,331 ___________ __________ __________ __________ __________ _________ ________ _________ LIABILITIES Due to the Central Banks - 10,410 176,017 1,458 6,500 234,472 2,908 431,765 Loans and repurchase agreements 152,165 649,280 267,054 - 958,973 22,172 12,673 2,062,317 Due to banks and financial institutions 398,504 77,080 29,536 1,131 12,004 9,112 41,581 568,948 Amounts due to affiliated banks and financial institutions 965 - - - - - 464 1,429 Customers’ deposits at amortized cost 10,984,269 3,416,185 3,774,424 801,615 187,617 322,388 2,301,836 21,788,334 Related parties’ deposits at amortized cost 170,770 26 2,664 - - 1,137 6,610 181,207 Derivative financial instruments - - - - - - 9,507 9,507 ___________ __________ __________ __________ __________ _________ ________ _________ TOTAL LIABILITIES 11,706,673 4,152,981 4,249,695 804,204 1,165,094 589,281 2,375,579 25,043,507 ___________ __________ __________ __________ __________ _________ ________ _________ Total interest sensitivity gap (8,881,830) (820,819) (523,656) 698,179 2,905,004 9,906,862 (644,916) 2,638,824 ___________ __________ __________ __________ __________ _________ ________ _________ 2015 (LL million) Non Up to 1 1 to 3 3 months 1 to 2 2 to 5 Over 5 interest month months to 1 year years years years bearing Total ASSETS Cash and balances with the Central Banks 1,379,846 909,210 - - 813,750 2,111,434 603,486 5,817,726 Due from banks and financial institutions 389,382 16,500 145,678 - 3,724 11,653 131,327 698,264 Amounts due from affiliated banks and financial institutions 383,867 4,449 56,930 - - - 332,189 777,435 Loans to banks and financial institutions 8,397 - - - - - - 8,397 Derivative financial instruments - - - - - - 2,969 2,969 Financial assets at fair value through profit or loss - - 24,558 36,299 16,597 47,146 115,206 239,806 Loans and advances to customers at amortized cost 1,184,697 1,299,065 2,594,090 301,377 171,065 368,582 11,082 5,929,958 Loans and advances to related parties at amortized cost 59,145 507 82,445 488 1,602 9,311 48 153,546 Financial assets at amortized cost 151,326 43,073 351,993 826,894 2,708,371 5,103,309 130,996 9,504,584 Financial assets at fair value through other comprehensive income - - - - - - 26,560 26,560 Reverse repurchase agreements - 197,175 219,235 - - - 500 416,910 ___________ __________ __________ __________ __________ _________ ________ _________ TOTAL ASSETS 3,556,660 2,469,979 3,474,929 1,165,058 3,715,109 7,840,057 1,354,363 23,576,155 ___________ __________ __________ __________ __________ _________ ________ _________ LIABILITIES Due to the Central Banks 696 7,295 162,422 179,745 0 255,436 4,367 609,961 Loans and repurchase agreements 152,165 996,518 18,316 75,375 685,638 178,115 10,037 2,116,164 Due to banks and financial institutions 369,634 41,259 169,846 1,570 7,266 18,960 3,747 612,282 Amounts due to affiliated banks and financial institutions 19,774 - - - - - 1,411 21,185 Customers’ deposits at amortized cost 10,759,485 3,415,148 2,168,775 23,420 25,147 303,515 1,984,387 18,679,877 Related parties’ deposits at amortized cost 92,119 26,151 1,348 907 - 43 12,203 132,771 Derivative financial instruments - - - - - - 4,450 4,450 ___________ __________ __________ __________ __________ _________ ________ _________ TOTAL LIABILITIES 11,393,873 4,486,371 2,520,707 281,017 718,051 756,069 2,020,602 22,176,690 ___________ __________ __________ __________ __________ _________ ________ _________ Total interest sensitivity gap (7,837,213) (2,016,392) 954,222 884,041 2,997,058 7,083,988 (666,239) 1,399,465 ___________ __________ __________ __________ __________ _________ ________ _________

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Property and Plant The table below shows property, plant and equipment owned by the Bank for the years ended 31 December 2017, 2016 and 2015 respectively:

Further to the acquisition in 2016 of the total share capital of “ Foncière 415 Saifi SAL” which owns a land in Saifi area, the Bank started the construction of its new headquarter .In addition to the continuation of the remodeling and renovation of its branches to the new identity template Intangible assets The table below shows intangible owned by the Bank for the years ended 31 December 2017, 2016 and 2015 respectively:

Customer relationships represent the intangibles resulting from the acquisition of assets and liabilities of the Lebanese Canadian Bank SAL (under liquidation) in prior years.

31/12/2017

Advances on purchase of property

and equipment

Land and buildings

Furniture and fixtures Installations Vehicles Total

LL million LL million LL million LL million LL million LL millionCost 123,243 293,668 131,926 82,587 2,639 634,063Accumulated depreciation 0 -26,225 -75,361 -44,136 -1,654 -147,376Impairment 0 -1,357 0 0 0 -1,357Net carrying amount 123,243 266,086 56,565 38,451 985 485,330

31/12/2016Advances on

purchase of property and equipment

Land and buildings

Furniture and fixtures Installations Vehicles Total

LL million LL million LL million LL million LL million LL millionCost 86,204 282,999 124,567 73,843 2,282 569,895Accumulated depreciation 0 -23,601 -69,079 -40,681 -1,392 -134,753Impairment 0 -1,357 0 0 0 -1,357Net carrying amount 86,204 258,041 55,488 33,162 890 433,785

31/12/2015Advances on

purchase of property and equipment

Land and buildings

Furniture and fixtures Installations Vehicles Total

LL million LL million LL million LL million LL million LL millionCost 64,415 127,355 83,403 63,297 2,122 340,592Accumulated depreciation 0 -21,206 -63,708 -38,575 -1,401 -124,890Impairment 0 -1,357 0 0 0 -1,357Net carrying amount 64,415 104,792 19,695 24,722 721 214,345

31/12/2017Advances on

intangible assets

Customerrelationships Key money

Licenses and software Total

LL million LL million LL million LL million LL million

Cost 32,500 20,600 2,196 21,828 77,124Amortization 0 -10,301 -1,934 -16,870 -29,105Net book value 32,500 10,299 262 4,958 48,019

31/12/2016Advances on

intangible assets

Customerrelationships Key money

Licenses and software Total

LL million LL million LL million LL million LL million

Cost 24,084 20,600 9,861 20,257 74,802

Amortization 0 -8,584 -1,934 -14,967 -25,485

Net book value 24,084 12,016 7,927 5,290 49,317

31/12/2015Advances on

intangible assets

Customerrelationships Key money

Licenses and software Total

LL million LL million LL million LL million LL million

Cost 15,621 20,600 9,861 17,202 63,284

Amortization 0 -6,867 -1,934 -13,538 -22,339

Net book value 15,621 13,733 7,927 3,664 40,945

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Related Party Transactions Parties are considered to be related if one party has the ability to control the other party or exercise significant influence over the other party in making financial or operation decisions, or one other party controls both. The definition includes subsidiaries, key management personnel and their close family members, as well as entities controlled or jointly controlled by them. Key Management Personnel are defined as those persons having authority and responsibility for planning, directing and controlling the activities of the Group, directly or indirectly, including the Directors of the Bank and the Officers of the Group. Terms and conditions of transactions with related parties The Group enters into transactions with major related parties in the ordinary course of business at normal commercial interest and commission rates. As at 31 December 2017, the Group has made provisions and suspended interest for doubtful debts relating to amounts owed by related parties totaling LL 19,679 million (2016: LL 21,048 million). The following table provides the total amount of transactions and the amount of outstanding balances (including commitments) with related parties for the relevant financial year.

Technical assistance fees paid to Société Générale – Paris, shareholder, amounted to LL 755 million for the year ended 31 December 2017 (2016: LL 754 million ; 2015: LL 754 million). The bank rented offices from board members for LL 511 million for the year ended 31 December 2017 (2016: LL 510 million; 2015: LL 509 million). SGBJ’s Certificate of Deposits SGBJ made several issuance of certifates of deposits during the last years , these issuances are summarized as follows

Outstanding balance

Income (expense)

Outstanding balance

Income (expense)

Outstanding balance

Income (expense)

LL million LL million LL million LL million LL million LL million

Key management personnel Net loans and advances 105,116 4,792 95,260 4,220 139,848 5,594Deposits 109,126 -5,238 126,267 -2,114 44,372 -1,939Guarantees given 1,524 0 1,144 0 433 0Commitments 14 0 360 0 754 0

Entities under common directorshipNet loans and advances 5,870 904 5,386 824 13,602 2565Deposits 54,990 -1,788 53,501 -1,828 87,203 -3,041Guarantees given 137 0 617 0 189 0Commitments 0 0 0 0 20405 21

Shareholder – BankNet loans and advances 588,834 1,211 915,847 665 772,566 433Deposits 492 -9 476 0 17973 0Guarantees given 19,616 0 34,466 0 145,654 0Guarantees received 443 0 35 0 0 0Commitments 0 0 438 -51 0 0

AssociateDeposits 679 -18 1,220 -22 854 -22

20152017 2016

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Description type Issue date Maturity date Interest Average

Nominal Amount in JOD

Certificate Of Deposit-jod 4/3/2016 1/29/2019 4.162 5,583,009.00

Certificate Of Deposit-USD 7/17/2016 1/29/2019 1.843 611,359.51

EVOLUATIONS 2 /2ND EDITION-JOD 9/17/2017 6/27/2019 4.514 5,565,174.33 Evolution2/clients CDs-JOD 4/18/2017 1/31/2018 4.846 15,721,212.79 Evolution2/clients CDs-USD 11/22/2017 1/26/2018 2.75 425,400.00

27,906,155.63

10. DESCRIPTION OF THE SHARE CAPITAL OF THE BANK

The following summary is not complete and refers to certain provisions of the Lebanese Code of Commerce (“LCC”) and the Bank’s Bylaws and should be read in conjunction with the full text of each such documents. General As of the date of this Offering Circular, the Bank’s share capital consists of LBP /24,261,030,000/ (Lebanese Pounds) divided into /94,035/ shares (the “Shares”) with a par value of LBP/258,000/ per share all of which are fully paid up, and detailed as follows:

- /56,535/ common shares; - /12,500/ Series 2012 Preferred Shares issued on March 28, 2013 at an issue price of USD 10,000 per share, and

may, subject to certain conditions, be redeemed by the Bank; - /15,000/ Series 2013 Preferred Shares issued on September 13, 2013 at an issue price of USD 10,000 per share,

and may, subject to certain conditions, be redeemed by the Bank; - 10,000/ Series 2015 Preferred Shares issued on July 2, 2015 at an issue price of USD 10,000 per share, and may,

subject to certain conditions, be redeemed by the Bank.

The Bank’s share capital is consolidated into two categories of Shares governed by a same legislation with respect to ownership and trading in compliance with the provisions of Law 308 which eliminated the class distinction among Lebanese banks’ common shares.

All bank shares in Lebanon are registered and safeguarded with Midclear. Evidence of ownership, trading operations, share pledging, and the institution of other rights over banks’ shares shall be effected through the registration in Midclear’s register.

The Shares of the Bank are neither listed nor traded on the Beirut Stock Exchange.

Changes in Share Capital The share capital of the Bank may be increased only with the approval of the Bank’s Extraordinary General Assembly and the authorization of the Central Bank, upon the recommendation of the Board of Directors. The Bank’s Extraordinary General Assembly shall also determine the conditions of issue of new shares. Increases in share capital may be effected either by the issue of new shares, by incorporation of retained earnings or free reserves or by any other legally authorized means. New shares may be issued for cash or, in limited instances, for assets contributed in kind. Under Lebanese law, the share capital of the Bank may not be reduced in any circumstances; however, in common with other Lebanese banks, the Bank is authorized to buy back its own shares and cancel them subject to certain conditions, including the adjustment of the par value of each of the remaining shares then constituting the outstanding share capital of the Bank, irrespective of the class thereof, or the distribution of free common shares to holders of common shares or any other legal measure acceptable by the Central Bank, as resolved by the Bank’s General Assembly. The Bank has undertaken the following changes in its share capital throughout the past ten (10) years: § On June 30, 2008, the Bank’s Extraordinary General Assembly resolved to increase the Banks’s share capital through the

issuance of 9,000 Series 2008 Preferred Shares, at an Issue Price of US$ 10,000 (Ten Thousand United States Dollars) per share. The Issue Premium was denominated in U.S. Dollars and represented the difference between the Issue Price and the nominal value of the share which was equivalent to LBP 212,400 (Two Hundred Twelve Thousand and Four

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Hundred Lebanese Pounds) pursuant to Law 308. The Central Bank approved the capital increase and the amendments made to the Bank’s Bylaws on July 22, 2008 accordingly.

§ On December 30, 2009, the Bank’s Extraordinary General Assembly resolved to increase the Bank’s share capital through

the issuance of 10,000 Series 2010 Preferred Shares, at an Issue Price of US$ 10,000 (Ten Thousand United States Dollars) per share. The Issue Premium was denominated in U.S. Dollars and represented the difference between the Issue Price and the nominal value of the share which was equivalent to LBP 212,400 (Two Hundred Twelve Thousand and Four Hundred Lebanese Pounds) pursuant to Law 308. The Central Bank approved the capital increase and the amendments made to the Bank’s Bylaws on February 23, 2010 accordingly.

§ On November 9, 2012, the Bank’s Extraordinary General Assembly resolved to increase the Bank’s share capital through

the issuance of 6,535 common shares, at an Issue Price of US$ 15,300.92 per share. The Issue Premium was denominated in U.S. Dollars and represented the difference between the Issue Price and the nominal value of the share which was equivalent to LBP 212,400 (Two Hundred Twelve Thousand and Four Hundred Lebanese Pounds). The Central Bank approved the capital increase and the amendments made to the Bank’s Bylaws on December 4, 2012 accordingly.

§ On December 15, 2012, the Bank’s Extraordinary General Assembly resolved to increase the Bank’s share capital through

the issuance of 12,500 Series 2012 Preferred Shares, at an Issue Price of US$ 10,000 (Ten Thousand United States Dollars) per share. The Issue Premium was denominated in U.S. Dollars and represented the difference between the Issue Price and the nominal value of the share which was equivalent to LBP 212,400 (Two Hundred Twelve Thousand and Four Hundred Lebanese Pounds) pursuant to Law 308. The Central Bank approved the capital increase and the amendments made to the Bank’s bylaws on February 19, 2013 accordingly.

§ On July 23, 2013, the Bank’s Extraordinary General Assembly resolved to increase the Bank’s share capital through the

issuance of 15,000 Series 2013 Preferred Shares, at an Issue Price of US$ 10,000 (Ten Thousand United States Dollars) per share. The Issue Premium was denominated in U.S. Dollars and represented the difference between the Issue Price and the nominal value of the share which was equivalent to LBP 212,400 (Two Hundred Twelve Thousand and Four Hundred Lebanese Pounds) pursuant to Law 308. The Central Bank approved the capital increase and the amendments made to the Bank’s Bylaws on August 6, 2013 accordingly.

§ On August 13, 2013, the Board of Directors resolved to cancel and redeem all the outstanding Series 2008 Preferred

Shares, subject to the satisfaction of certain conditions precedent (including the approval of both the Central Bank and the Bank’s shareholders). The Series 2008 Preferred Shares were thus redeemed in September 2013 and the nominal value per common share and preferred share was subsequently increased to LBP 233,000.

§ On March 20, 2015, the Bank’s Extraordinary General Assembly resolved to increase the Bank’s share capital through the

issuance of 10,000 Series 2015 Preferred Shares, at an Issue Price of US$ 10,000 (Ten Thousand United States Dollars) per share. The Issue Premium was denominated in U.S. Dollars and represented the difference between the Issue Price and the nominal value of the share which was equivalent to LBP 233,000 pursuant to Law 308. The Central Bank approved the capital increase and the amendments made to the Bank’s Bylaws on May 19, 2015 accordingly.

§ On April 24, 2015, the Board of Directors resolved to cancel and redeem all the outstanding Series 2010 Preferred Shares,

subject to the satisfaction of certain conditions precedent (including the approval of both the Central Bank and the Bank’s shareholders). The Series 2010 Preferred Shares were thus redeemed in June 2015 and the nominal value per common share and preferred share was subsequently increased to LBP 258,000.

No other changes in the Bank’s share capital have been effected in the last ten years. Dividends At the annual General Meeting of Shareholders held on April 26th, 2018, the Bank’s Shareholders approved the payment of dividends, out of the Bank’s unconsolidated distributable net income for the year ended December 31, 2016, to the holders of preferred shares, as follows:

- The holders of Series 2012 Preferred Shares, an aggregate amount of LBP 13,256,250,000 (i.e. USD 8,750,000) corresponding to an amount of USD 700 per Series 2012 Preferred Shares,

- The holders of Series 2013 Preferred Shares, an aggregate amount of LBP 15,907,500,000 (i.e. USD 10,500,000) corresponding to an amount of USD 700 per Series 2013 Preferred Shares,

- The holders of Series 2015 Preferred Shares an aggregate amount of LBP 10,605,000,000 (USD 7,000,000) corresponding to an amount of USD 700 per Series 2015 Preferred Shares,

in each such cases, before dividend distribution tax of 10%.

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At the same General Meeting of Shareholders held on April 26th, 2018, the Bank’s Shareholders approved the payment of dividends to the holders of holders of preferred shares amounting to LBP 75,751,246,500 corresponding to an amount of LBP 1,339,900 per share, before dividend distribution tax of 10%. Total dividends distributed in respect of FY 2017 corresponded to 38% of the Bank’s net earnings for that fiscal year. Directors’ Interests The following table sets out information on the direct holdings of common shares by the members of the Bank’s Board members as at March 31st, 2018:

Name Number of common shares

% holding

Antoun Sehnaoui 29,198 51.65% Nabil Sehnaoui 5 0.01% Pierre Frédéric Kamel 20 0.03% Kafinvest Holding Lebanon SAL 10,882 19.25% NSKINV Ltd 6,897 12.2% Société Générale SA 9,490 16.78% Grégoire Lefebvre (*) 5 0.01% Jean-Louis Mattei 5 0.01% Jean-Pierre Ducroquet 5 0.01% Ishaac Mazen Hanna 5 0.01%

(*) In February 2018, Mr. Lefebvre resigned from the Board of Directors and the General Assembly held in March 2018 elected Mr. Eric Wormser as a new Board member. The election of Mr. Eric Wormser is subject to the approval of the Central Bank. Pursuant to the provision of Article 2 of Law no 308/2001, the chairman and Board members, the general managers, their spouses and their children under age are prohibited from holding preferred shares, either directly or indirectly, or under the umbrella of a natural or moral person, or by any other means. Description of the Common Shares The following description of the Bank’s common shares and the rights relating thereto does not purport to be complete and is qualified in its entirety by reference to the Lebanese law and the Bylaws. General As at the date of this Offering Circular, the Bank’s share capital includes 56,535 Common Shares, each with a par value of LL 258,000 all of which are issued and fully paid. Rights Attached to the Shares Each share grants its holder a right proportional to the equity it represents in the ownership of the Bank’s assets and in its profits. The ownership of a Share involves full consent to the Bylaws and to the decisions of the General Assemblies. It confers upon him more particularly the rights to (i) receive dividends pro rata to his participation in the Bank’s capital, (ii) recover the nominal value of the Share in the event of the winding-up and liquidation of the Bank and of apportionment of its assets, (iii) participate in the debates and to vote in the Bank’s General Assemblies, (iv) acquire double-voting rights for shares fully paid and held for more than two years, (v) transfer the Shares in accordance with Central Bank’s and the Banking Control Commission’s regulations and ratios, and (vi) subscribe to the Bank’s capital increases in accordance with the Central Bank’s and the Banking Control Commission’s regulations and ratios. A shareholder’s liability shall be limited to the value of the Shares he holds. No claim may be made against him for payment in excess of that value. The rights and obligations attached to the Share are transferred to the transferee upon the Share’s transfer. The ownership of a Share involves full approval by its holder of the Bylaws and the resolutions of the General Assemblies.

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Dividends Article 34 of the Bank’s Bylaws provides that the net profits are composed of the revenues further to the deduction of overheads, taxes, financial charges, other expenses, depreciations, and reserves and that such net profits shall be distributed to the shareholders as dividends by the Bank’s Ordinary General Assembly which shall be held to approve the annual audited accounts in accordance with applicable laws. Payment of dividends shall be executed at the time and place decided upon by the Bank. The Bank has to deduct each year an amount equivalent to 10% (ten per cent.) from its net profits after taxation for the legal reserve fund according to the provisions of the LCC, unless in the event of any legislation amendment in this respect. The Bank is also required according to the Central Bank’s regulations to allocate on a yearly basis a reserve (to be included in Tier I Capital) for unspecified banking risks out of net profits in an amount equal to a minimum of 0.2% and a maximum of 0.3% of risk-weighted assets and a special reserve for profits realized from the transfer of real estate acquired in satisfaction of debts. Further to the deduction of the required reserves, the Bank’s Ordinary General Assembly that will approve the annual audited accounts may decide, upon the suggestion of the Board of Directors, to allocate, all or a part of its net profits among the following categories: - Transfer to retained earnings. - Transfer to a depreciation fund. - Transfer to a reserve fund. - Distribution of the Fixed Annual Dividend to the holders of any series of Preferred Shares issued by the Bank on pro rata basis in preference over the holders of common Shares. - Distribution of the balance to the holders of common Shares pro rata to their participation in the Bank’s capital. Dividends that are not claimed within five years from the date of payment become barred by the statute of limitation and revert to the Bank’s income subject to taxation at the rate of 50% according to applicable Lebanese laws. Quorum Majority and Notice in the General Assemblies According to the LCC, there are three types of general assembly meetings: Constitutive, Ordinary and Extraordinary. The General Assembly meetings legally represent all the shareholders, and the decisions they take are binding to all shareholders, even to the absent and dissenting among them. 1) The Constitutive Assembly is convened by the founders, to ensure that all necessary conditions and legal requirements pertaining to the formation of the Bank have been complied with and completed. 2) The Ordinary General Assembly elects or dismisses the Board members of the Bank and gives them the discharges and required authorizations in compliance with the provisions of Articles 158 and 159 of the LCC, reviews the Board of Directors’ and the auditors’ reports regarding the Bank’s activities, approves the annual accounts, declares dividends for distribution, determines the reserves, appoints the auditor, determines the allowances to be granted to the Board Members and the auditors, and gives recommendations to the Board of Directors. The quorum at any Ordinary General Assembly is met by the presence or representation of shareholders owning at least one third of the Bank’s share capital during the first meeting, and by any number of attendees during the second meeting, regardless of the portion of capital represented. The resolutions of the Ordinary General Assemblies are taken by the absolute majority of votes of shareholders present or represented. 3) The Extraordinary General Assembly is required for approval of matters such as amendments of the Bank's Bylaws (subject to the approval of the Central Bank), mergers, increases in the Bank share capital, creation of a new class of shares, authorization of the issuance of bonds convertible into or exchangeable for shares, extension or reduction of the Bank’s duration and liquidation of the Bank prior to the end of its statutory term. Subject to the Central Bank’s approval, the Extraordinary General Assembly may issue preferred shares in compliance with the provisions of Law 308. Resolutions proposing a modification of the Bank's form or object require a quorum of at least three-quarters of the Bank's voting capital. Resolutions put forward at an Extraordinary General Assembly proposing other changes require a quorum of at

67

least two-thirds of the Bank's voting capital. If the two-thirds required quorum is not satisfied at the first meeting of shareholders, holders of at least one-half of the Bank's voting capital must be present or represented at the second consecutive meeting of shareholders, and at least one-third at the third consecutive Extraordinary General Assembly’s Meeting. Decisions of the Extraordinary General Assembly are taken in any case by a majority of two-thirds of votes of the shareholders present or represented. The Ordinary and Extraordinary General Assemblies are convened by the Board of directors. The annual Ordinary General Assembly should be convened by the Board of Directors to hold a meeting within six months of the end of the Bank's financial year for approval of the annual accounts and reports of the Board of Directors. The Board of Directors must convene the General Assembly, otherwise the auditors shall carry out this task when so requested by a category of shareholders representing at least fifth of the Bank’s capital and in this case the agenda of the meeting shall list the matters required for discussion by the above-mentioned group of shareholders. Said notice shall have to take place within two months from the date of request. The notice shall include the day, the hour and the place of the meeting and should be made at least 15 days prior to the date of any General Assembly’s Meeting. The notice must be published in two local daily newspapers. The 15 days period can be reduced to 8 days for a General Meeting which is convened for the second or third time. However, the General Assembly may be convened without prior notice if the entire capital is present or represented Each Share confers on the holder thereof the right to one vote. However, each fully paid Share, which has been registered in the name of the same shareholder for at least two years prior to any meeting of shareholders, shall carry two votes. A shareholder may not vote in person, or by proxy, on any matter in which he has a vested interest, or in respect of a dispute between him and the Bank. Preemptive Rights According to the Bylaws and the provisions of the LCC, when the increase of the Bank’s capital is made through the issuance of new shares payable in cash, the existing shareholders have a preemptive right over these new shares, each in proportion to the number of Shares he owns. In the event that some of the shareholders do not exercise this preemptive right, said right shall be transferred to all other shareholders, each in proportion to his Shares. The Extraordinary General Assembly may also decide that the right of subscription shall not be reserved to the existing shareholders, or shall be only partially reserved to them, or that it shall not be reserved in proportion to their Shares. In this case any allocation of new shares, which are not subject to the shareholders’ preemptive right, to the benefit either of non-shareholders of the Bank or to a category of shareholders, shall be subject to verification in accordance with the provisions of Article 113 of the LCC failing which the increase of capital shall be deemed null and void. However, and in compliance with the provisions of Law 308 no preemptive rights shall be granted to the holders of common Shares in the event of an increase of the Bank’s capital through the issuance of preferred shares. Transfer of Shares Under the provisions of the LCC and the Bylaws, common Shares are freely transferable subject to provisions of Article 4 of Law 308 that submit the transfer and subscription to Lebanese banks’ shares to the prior approval of the Central Bank in the following cases: a) When the subscriber or the transferee acquires directly, or through a fiduciary contract in accordance with Law N°520 of June 6, 1996 (“Law 520”), more than 5% (five percent) of the total shares of the Bank or of the voting rights, whichever is higher. b) When, upon transfer of the shares, the transferee holds 5% (five percent) or more of the Bank’s total shares or the voting rights, whichever is higher. The percentage of 5 %( five percent) includes the participation of the spouse and children under age, as well as the participation of any economic entity, as defined by the Central Bank’s regulations. c) When the transferor or the transferee is a member in function or an elected member of the board of directors. The provisions of Article 4 of Law 308 are not applicable to the transfer of preferred shares, even if such transfer is made through a fiduciary contract in accordance with Law 520. Moreover, preferred shares are not included in the computation of the percentage of 5 % specified in Paragraphs (a) and (b) above.

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Liquidation In the event of liquidation of the Bank, for any reason whatsoever, the General Assembly shall designate one of more liquidator(s) and shall determine the mode of liquidation, the powers of the liquidator(s) and his /their remuneration(s). The net proceeds of the liquidation after paying off the liabilities (including the liquidation preference in respect of the Preferred Shares) shall be used to reimburse the par value of the common shares. The balance shall be distributed to all shareholders in proportion to their shares. Description of Series 2018/A Preferred Shares General The Bank is offering 12,500 (Twelve Thousand Five Hundred) Series 2018/A Preferred Shares for a total amount of USD 125,000,000 (One Hundred Twenty-Five Million United States Dollars) at an Issue Price of USD 10,000 (Ten Thousand United States Dollars) per share. The Issue Premium shall be denominated in U.S. Dollars and shall represent the difference between the Issue Price and the nominal value of the share which is equivalent to LBP 258,000 (Two Hundred Fifty-Eight Thousand Lebanese Pounds) for each share. Authorizations The issuance of Series 2018/A Preferred Shares by the Bank is governed by Law No.308 dated April 3, 2001 (“Law 308”) and is subject to the following corporate and regulatory authorizations: 1°) Corporate Authorizations

- The authorization by the Bank’s Extraordinary General Assembly of Shareholders (“EGA”) resolving the increase the Bank’s capital through the issuance of preferred shares, which also determined the terms and conditions of such issuance.

- The verification by the Bank’s EGA - which will be held later - of the validity of the Series 2018/A Preferred Shares’ subscriptions.

2°) Authorization from the Central Bank The approval by the Central Bank of Lebanon (the “Central Bank”) of the issuance of the Series 2018/A Preferred Shares and the confirmation of receipt by the latter, of the amount pertaining to the increase of capital.

3°) Authorization from the CMA The offering of Series 2018/A Preferred shares is subject to the approval of the Capital Markets Authority.

Dividends

Series 2018/A Preferred Shares are non-cumulative and should be included in the Bank’s Additional Tier I capital in accordance with the Central Bank’s regulations. Consequently, the holders of such shares cannot benefit from the accumulation of dividends that are in arrears Therefore, should distributions of dividends not be declared for any year or paid, for any reason whatsoever, holders of Series 2018/A Preferred Shares will not be entitled to receive distributions even if funds are or become subsequently available. A Fixed Annual Dividend payment of 8.33% (eight point thirty three per cent) of the Issue Price shall be paid in U.S. Dollars to holders of Series 2018/A Preferred Shares – each prorate to his participation in the Issue Price – and will be calculated on pro rata basis for the financial year during which they were issued, subject to: 1) The availability of sufficient distributable net profits, after tax payment and deduction of reserves (“Distributable Net Profits”) for the relevant year in accordance with such applicable laws, the Bank’s Bylaws, and the regulations of both the Central Bank of Lebanon and the Banking Control Commission. 2) The Bank’s continued compliance with all applicable Central Bank and Banking Control Commission ratios and regulations; and 3) The approval of the payment of said Distributable Net Profits by the Bank’s common shareholders. 4) Adjustment towards reflecting any stock split or reverse stock split affecting the Bank’s share capital (but not in any other event) (the “Adjustment Event”) The Bank may at any time, even in case of a mandatory conversion, cancel any distribution of dividends for any relevant year in its absolute discretion taking into account its financial situation and its solvency. In such event, the right of the holders

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of Series 2018/A Preferred Shares to receive the Fixed Annual Dividend set out above shall become void de jure and will not be carried forward to the next financial year. The cancelation of any dividends distribution shall not be considered as an event of default and may not give rise to the preferred shareholders’ right to petition for the insolvency or the winding-up of the Bank. No dividends distributions pertaining to the redeemed preferred shares shall be made for the year during which the redemption would have occurred. Any distribution of the Fixed Annual Dividend resolved by the Bank’s Annual Ordinary General Assembly of Shareholders (“OGA”) shall be paid annually within a maximum period of 60 days following the date of approval of the Bank’s annual audited accounts by such OGA. The holders of Series 2018/A Preferred Shares shall be informed of the Bank’s intention to distribute the Fixed Annual Dividend by written notice, inserted in two local newspapers three (3) days prior to the date of distribution. The Bank shall not declare or pay dividends to the holders of common shares unless Distributable Net Profits have been declared and paid for the holders of Series 2012, Series 2013, Series 2015 and Series 2018/A Preferred Shares.Holders of Series 2018/A Preferred Shares shall not have any right to claim the payment of interest on any unclaimed or unpaid Fixed Annual Dividend. If no profits are made during a specific year or if the total amount of the Bank’s non-consolidated net profits is insufficient during the said year for the payment of all the annual dividends pertaining to the Series 2012, Series 2013, Series 2015 and Series 2018/A Preferred Shares, holders of such Preferred Shares shall not be entitled then to collect any dividends in this respect, provided that such shareholders shall not be entitled to claim any right arising out of such year when the Bank will proceed to the distributions pertaining to the subsequent years. Any dividends outstanding after the payment of the Fixed Annual Dividend to the holders of Series 2012, Series 2013, Series 2015 and Series 2018/A Preferred Shares shall be distributed to the holders of common shares on a pro rata basis. Under applicable Lebanese Laws, the statute of limitation with respect to the right to claim dividends is 5 years starting from the date of payment of the Fixed Annual Dividend by the Ordinary General Assembly. At the expiration of this period, holders of Series 2018/A Preferred Shares shall not be able to claim any payment from the Bank. Rights of Holders of Preferred Shares 1°) Ownership

Holders of Series 2018/A Preferred Shares shall enjoy all the rights provided for by Article 105 of the Lebanese Code of Commerce (“LCC”) with respect to the ownership of a common share, except for (i) the right to vote at the Bank’s shareholders’ meetings (see “Voting Rights” below), and (ii) the right to be elected as member of the Bank’s board of directors. The Bank’s management, however, must provide the owners of Series 2018/A Preferred Shares with all the information and documents that are available to the other shareholders.

According to Article 2-3 of Law 308 the Bank’s Chairman, the Board Members, the General Managers, their spouses and children under age are prohibited from holding or acquiring preferred shares, either directly or indirectly.

2°) Voting Rights Holders of Series 2018/A Preferred Shares shall have the right to participate in the discussions and to vote in the Bank’s General Assemblies as restrictively provided for in paragraph (5) of Article (2) of Law No. 308/2001. Law 308 further provides for the automatic establishment of an association of holders of Series 2015 Preferred Shares in charge of the protection of the holders’ interests. Such association shall designate one or more representative(s) who may attend the shareholders meetings, but not participate in discussions or vote in respect of matters presented therein, except under the limited circumstances set forth above. Ranking The Series 2018/A Preferred Shares shall rank junior to the Bank’s depositors and/or the other creditors of the Bank including the loan investors, subordinated notes and any other instruments which are accepted within the Tier Two Capital. Furthermore, and subject to the provisions of section 21 below “Mandatory Conversion of the Preferred Shares into Common Shares”, the Series 2018/A Preferred Shares shall rank (i) senior to the Bank's common shares in respect of (a) the right to

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receive dividends, if any, pertaining to any financial year such that no dividends may be paid to the common shareholders with respect to a given year unless the amount due to the holders of preferred shares for that same year has been paid, and (b) the right to receive payments out of the assets of the Bank upon any winding-up and liquidation of the Bank, (ii) junior to the Bank’s creditors who are entitled to be reimbursed prior to the holders of any series of preferred shares, and (iii) pari passu with Series 2012, Series 2013 and Series 2015 Preferred Shares and any future series of preferred shares that may be issued by the Bank regarding (a) the distribution of dividends, (b) the preemption right to subscribe to any new preferred shares issued by the Bank in the future and (c) the right to receive payments out of the Bank’s assets upon any winding-up and liquidation of the Bank. In the event of the winding-up and liquidation of the Bank, the holders of Series 2018/A Preferred Shares shall be entitled to receive from the remaining assets of the Bank to be distributed among the shareholders, prior to the settlement of any sums related to the Bank’s common shares and on the same pari passu basis as set out in paragraph (iii)(c) above, an amount in Lebanese Pounds for each preferred share equaling as at the payment date the Issue Price denominated in United States Dollars (i.e. a sum amounting to US$10.000) subject to any Adjustment Event, in addition to any declared but unpaid dividends pertaining to the Series 2018/A Preferred Shares. Should the Bank’s assets available for distribution to its shareholders upon any winding-up and liquidation of the Bank be insufficient to cover the liquidation preference pertaining to the Series 2018/A Preferred Shares set out herein and the liquidation preferences payable to the holders of any issued Series of Preferred Shares or any future series of preferred shares of the Bank that may rank pari passu with the already issued series of Preferred Shares, the amounts payable to such holders will be reduced on a pro rata basis. The Series 2018/A Preferred Shares are neither secured nor covered by any guarantee from the Bank or any related party or any other party. Accordingly, the Series 2018/A Preferred Shares do not benefit from any legal or economical privileges that may affect its ranking as junior to the depositaries and other creditors of the Bank. In addition to the foregoing, Series 2012, Series 2013, Series 2015 and Series 2018/A Preferred Shares shall be governed by their respective specific terms with respect to distributions, liquidation preferences and otherwise.

Redemption Subject to (1) compliance with applicable Central Bank of Lebanon and Banking Control Commission ratios and regulations, including the availability of free reserves for the purpose, (2) verification of such compliance by the Banking Control Commission, and (3) the approval of the Central Bank of Lebanon, the Bank shall have the right to decide, at its sole discretion, to redeem whole or part of the aggregate number of Series 2018/A Preferred Shares (by tranches of 25% of the initial number of Series 2018/A Preferred Shares at least) (i) at any time after the Issue Date in case of occurrence of a “Regulatory Event” (as defined in the next paragraph here below), and (ii) save as provided for under paragraph (i) above, for the first time, within one hundred and fifty (150) days following the date of the OGA that will approve the Bank’s audited annual accounts for the financial year 2022 provided that a period of five years elapses as of the date of meeting of the Bank's EGA that shall ascertain the proper execution of the Bank's capital increase through the issuance of the Series 2018/A Preferred Shares, and (iii) for the subsequent years, within one hundred and fifty (150) days following the date of each OGA that will approve the Bank’s audited annual accounts of the preceding financial year. . A “Regulatory Event” shall mean a change occurring after the Issue Date in any applicable laws or regulations, including any regulations published by the Central Bank of Lebanon or the Banking Control Commission, which could be interpreted or applied in such a way that (i) any portion of the aggregate Issue Price for the Series 2018/A Preferred Shares would no longer be included in the Bank’s Additional Tier 1 Capital or (ii) the Bank would not be permitted to maintain the Issue premium in foreign currency, Should the Bank resolve to exercise the call option, the holders of Series 2018/A Preferred Shares shall be informed of the Bank’s decision to redeem whole or part of the issued 2018/A Preferred Shares through notices published in two local newspapers by the Bank thirty (30) days prior to such redemption date. In such case, the redemption by the Bank of Series 2018/A Preferred Shares shall be executed as follows:

1- If the redemption results from a “Regulatory Event”, such redemption shall be executed in exchange of an amount equal to the Issue Price subject to any Adjustment Event;

2- If the redemption results from the Bank’s decision for any reason other than a “Regulatory Event”, such redemption

shall be executed in exchange of an amount equal to the Issue Price of the redeemed preferred shares, subject to any Adjustment Event, in addition to a premium of 3% (three per cent.) of the Issue Price per share (the “Redemption Price”) and to the dividends declared but unpaid;

3- No dividends distributions pertaining to the redeemed preferred shares shall be made for the year during which the

redemption would have occurred.

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In the event that the Bank redeems only a part of Series 2018/A Preferred Shares, such redemption will be executed on pro rata basis. The outstanding Series 2018/A Preferred Shares then remaining may grant to their holders, dividends pertaining to the year during which the redemption was executed. As for the holders of Series 2018/A Preferred Shares, they shall not benefit from any put option to redeem and cancel their Series 2018/A Preferred Shares in whole or in part. The Bank has no obligation to redeem and cancel Series 2018/A Preferred Shares, and the holders of Series 2018/A Preferred Shares shall not be entitled for any reason whatsoever to request the Bank to redeem their shares. No fees shall be payable by the holders of Series 2018/A Preferred Shares as a result of the Redemption of all or part thereof. Mandatory Conversion into Common Shares In case of occurrence of a “Trigger Event” (as defined below), all the Series 2018/A Preferred Shares then outstanding shall be, upon provision of a “Conversion Notice” (as defined below), mandatorily and finally converted into common shares of the Bank without the need for the consent of the holders of the Series 2018/A Preferred Shares, at a rate of one (1) common share per two (2) Preferred Shares Series 2018/A subject to (i) any Adjustment Event, and (ii) obtaining the necessary approvals from the Central Bank of Lebanon (“Mandatory Conversion”). . All appropriate steps and measures required towards securing the stability of the Bank’s share capital in the context of a Mandatory Conversion will be set out by the Bank’s Extraordinary General Assembly that shall be convened to this effect, including inter alia amending the nominal value of the then outstanding shares or take any other measure that would be agreed upon by the Central Bank of Lebanon. In no event may the converted shares be reconverted into preferred shares after the date of their conversion into common shares, even if the Trigger Event ceases to exist. Except for the conversion events set out above constituting a “Trigger Event”, the Preferred Shares Series 2018/A are not convertible into Common Shares of the Bank. “Trigger Event” shall mean either (i) the drop in the Bank’s Common Equity Tier 1 Capital to its risk weighted assets under 66.25% (sixty-six point twenty-five per cent.) of the minimum ratios set out in the regulations issued by the Central Bank of Lebanon, notably Basic Decision No 6939 dated 25 March 1998, as at any Calculation Date, where “Calculation Date” shall mean the last Beirut business day of any calendar quarter; or (ii) the written notification by the Central Bank of Lebanon to the Bank informing the latter that it may not continue to conduct its banking business unless it proceeds to the conversion of the Preferred Shares Series 2018/A into common shares of the Bank. A “Conversion Notice” shall mean the notice that shall be given by the Bank no later than two Beirut business days from the occurrence of a Trigger Event to the holders of the Preferred Shares Series 2018/A whereby it shall clarify the nature of the relevant Trigger Event. The occurrence of a Mandatory Conversion shall not be considered as an event of default and may not give rise to the preferred shareholders’ right to petition for the insolvency or the winding-up of the Bank. Following a Mandatory Conversion, the Bank will be fully discharged and irrevocably released from any and all obligations vis-à-vis the holders of the Preferred Shares Series 2018/A in respect of such series of preferred shares, immediately upon the registration of the relevant common shares with Midclear SAL which should occur within a maximum period of ninety (90) days from the last approval by the Central Bank of Lebanon of the conversion of the Preferred Shares Series 2018/A into Common Shares and the amendment of the Bank’s Articles of Association to this effect . If a holder of Preferred Shares Series 2018/A requires the approval of the Central Bank of Lebanon in order to become the owner of common shares of the Bank but fails to obtain such approval for any reason whatsoever, then it shall be such holder’s responsibility to arrange for the transfer of its entitlement to the relevant common shares to a person who does not require the approval of the Central Bank of Lebanon to this effect. The holders of the Preferred Shares Series 2018/A undertake to bear all applicable stamp duties, transfer, registration and similar taxes and duties, together with any value added or other tax thereon arising in connection with the transfer of their entitlement to the common shares (where applicable) and comply with all applicable laws and regulations relating thereto. The holders of the Preferred Shares Series 2018/A further undertake to cooperate with the Bank towards facilitating the completion of all required formalities in due course, and to sign all needed documents and instruments as may be required by Midclear SAL and/or the Central Bank of Lebanon to execute the transfer of the common shares to the transferee. .

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For the avoidance of doubt, the conversion of any other series of convertible preferred shares, or securities issued by the Bank shall not trigger or result in the conversion of the Series 2018/A Preferred Shares into common shares of the Bank under any circumstances whatsoever. The valuation of the bank was done based on the assumption of its value today using a free cash flow model to actualize the amounts. As indicated in the table below, the financial projections of the bank for 5 years and its corresponding terminal value, leads to a conversion of one (1) common share per two (2) Preferred Shares Series 2018/A.

Priority Subscription Rights Holders of the Bank’s Series 2012, Series 2013 and Series 2015 Preferred Shares shall have a first refusal right to subscribe into the Series 2018/A Preferred Shares on first priority basis and irreducibly pro rata to their holdings of the total number of Series 2012, Series 2013 and Series 2015 Preferred Shares (i.e. based on the ratio between the aggregate Issue Size of the Series 2012, the Series 2013 and the Series 2015 Preferred Shares and the Issue Size of the Series 2018/A Preferred Shares). In the event the first priority subscription right is not exercised by all or part of Series 2012, Series 2013 and Series 2015 Preferred Shares holders, subscribers who are subject to irreducible subscription shall then be entitled to subscribe to the Series 2018/A Preferred Shares in a reducible manner each pro rata to his shareholding and within the limits of his request which can be reduced. In the event the Series 2018/A Preferred Shares are not entirely subscribed either irreducibly or reducibly by the holders of Series 2012, Series 2013 and Series 2015 Preferred Shares as set out above, the subscription shall then be made available for third parties including holders of common shares subject to the provisions of article (2) paragraph (3) of Law No 308/2001. In order to exercise priority subscription rights for the purchase of Series 2018/A Preferred Shares, a holder of Series 2012 and/or Series 2013 and/or Series 2015 Preferred Shares must submit a duly completed Subscription Application to the Bank, including an indication that such holder is exercising his/her subscription rights and a confirmation of the number of Series 2012 and/or Series 2013 and/or Series 2015 Preferred Shares held by him, no later than the date of expiration of the Official Subscription Period that will be set by the Bank. Holders of Series 2012, Series 2013 and Series 2015 Preferred Shares who fail to notify the Bank within such term, of their intention to exercise their priority subscription right to purchase Series 2018/A Preferred Shares will be deemed to have finally and irrevocably waived such right.

In KUSD 2017 2018 2019 2020 2021 2022Regulatory Common equity ratio 10.00% 10.00% 10.00% 10.00% 10.00% 10.00%SGBL Common Equity 1,264,309 1,442,191 1,618,794 1,797,475 1,978,256 2,161,156SGBL Common Equity ratio 12.14% 12.68% 12.31% 11.83% 11.28% 10.69%Regulatory Common Equity needed 1,041,274 1,197,465 1,377,084 1,583,647 1,821,194 2,094,373Shortage / Excess of common equity 223,035 214,148 210,926 182,836 125,860 35,369

0 0 0 0 0 0Free Cash Flows 223,035 214,148 210,926 182,836 125,860 35,369Period 0.00 1.00 2.00 3.00 4.00 5.00Net Present Value Free Cash flow 223,035 185,667 158,551 119,158 71,116 17,327

Terminal Value 1,394,834NPV Terminal Value 683,318

Total FCF NPV 551,819

SGBL value common Shares 1,235,137SGBL common value per share in USD 21,847

Cash Flows PS 10,413 10,413 10,413 10,413 139,163Period 0.00 1.00 2.00 3.00 4.00 5.00Net Present Value PS Cash flow 0 9,289 8,287 7,392 6,595 78,627Total NPV PS cash flow 110,190

Total value PS 110,190Total value SGBL Common Shares 1,235,137Percentage amount 8.92%

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Holders of Series 2018/A Preferred Shares shall also be entitled to participate on a priority basis and equally with holders of Series 2012, Series 2013 and Series 2015 Preferred Shares or any other existing preferred shares, to any increase of capital of the Bank made by way of issuing new series of Preferred Shares, each pro rata to his holdings of the total number of existing Preferred Shares. Holders of Series 2018/A Preferred Shares shall not be granted any priority rights to participate in any increase of the Bank’s capital by way of issuing new common shares. Registration and Transfer In accordance with the provisions of Law 308, the Series 2018/A Preferred Shares will be upon issuance deposited in the Bank’s Midclear account, Account No.19/20. Moreover the holders of Series 2018/A Preferred Shares are deemed to have instructed the Bank to hold the Preferred Shares purchased by them hereunder in custody for their benefit, in compliance with its standard custody arrangements. In the event of any transfer or redemption or cancellation of the Series 2018/A Preferred Shares, or conversion the same into common shares in accordance with the mechanism set out in the Offering Summary, Midclear shall take appropriate measures upon the Bank’s instructions to reflect such ownership changes in its records. The transfer of preferred shares may only be made in favor of an Eligible Investor as defined in the Offering Circular. The Bank may also refuse at all-time any preferred share transfer in its sole and absolute discretion, notably for compliance considerations.The transfer of ownership of the assigned preferred shares shall be executed through the Bank, which shall inform Midclear SAL of the same to take the appropriate steps. Subscription Application Cancelation Whether or not the Subscription Application Form has been accepted by the Issuer, the investor/subscriber shall not be entitled to withdraw his offer to subscribe to the 2018/A Preferred Shares unless in the event of major and substantial discrepancies between the final terms of the Issuance as described in the Offering Circular (and the relevant documentation) and any amended terms thereof as may be resolved by the Bank’s EGA before the Issue Date, which may adversely affect the investor’s subscription. In such event no fees or compensation shall be payable by the investor/ subscriber. The Bank shall notify each investor in writing of the existence of such major and substantial discrepancies. If the Bank does not receive from the investor a written request to withdraw his offer to subscribe to the 2018/A Preferred Shares due to such discrepancies within a maximum period of seven (7) calendar days as of the date of service of the aforesaid notice, the Subscription Application of such investor shall be deemed binding and irrevocable and, accordingly, the Subscription Amount will not be refunded to the Eligible Investor. Listing The Bank has no intention to list the Series 2018/A Preferred Shares on the Beirut Stock Exchange or on any other foreign stock exchange. Liquidation Rights In the event of the winding-up and liquidation of the Bank, the holders of Series 2018/A Preferred Shares shall be entitled to receive from the remaining assets of the Bank to be distributed among the shareholders, prior to the settlement of any sums related to the Bank’s common shares and on the same pari passu basis as set out in paragraph (iii)(c) above, an amount in Lebanese Pounds for each preferred share equaling as at the payment date the Issue Price denominated in United States Dollars (i.e. a sum amounting to US$10.000) subject to any Adjustment Event, in addition to any declared but unpaid dividends pertaining to the Series 2018/A Preferred Shares.. Description of Series 2015 Preferred Shares General As of the date of this Offering Circular, the Bank’s preferred shares capital includes 10,000 Series 2015 Preferred Shares, each with a par value of LBP 258,000 which were issued in July 2015 at an issue price of U.S. $ 10,000 per share. The Series 2015 Preferred Shares may (subject to certain conditions) be redeemed by the Bank at U.S. $ 10,000 per share if such redemption is caused by a Regulatory Event or at a redemption price of U.S. $ 10,150 per share if the redemption is decided by the Bank for any reason other than a Regulatory Event. All the Series 2015 Preferred Shares are issued and fully paid.

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The principal terms of the Series 2015 Preferred Shares are identical to the principal terms of the Series 2018/A Preferred Shares, except for certain differences with respect to the ability of the Bank to call the Series 2018/A Preferred Shares, the Mandatory Conversion provisions, the priority subscription right and the Series 2018/A Preferred Shares Distributions.

Description of Series 2013 Preferred Shares General As of the date of this Offering Circular, the Bank’s preferred share capital includes 15,000 Series 2013 Preferred Shares, each with a par value of LBP 258,000 which were issued in September 2013 at an issue price of U.S. $ 10,000 per share. The Series 2013 Preferred Shares may (subject to certain conditions) be redeemed by the Bank at a redemption price of U.S. $ 10,200 per share. All the Series 2013 Preferred Shares are issued and fully paid.

The principal terms of the Series 2013 Preferred Shares are identical to the principal terms of the Series 2018/A Preferred Shares, except for certain differences with respect to the ability of the Bank to call the Series 2018/A Preferred Shares, the Mandatory Conversion provisions, the priority subscription right and the Series 2018/A Preferred Shares Distributions.

Description of Series 2012 Preferred Shares General As of the date of this Offering Circular, the Bank’s preferred share capital includes 12,500 Series 2012 Preferred Shares, each with a par value of LBP 258,000 which were issued in March 2013 at an issue price of U.S. $ 10,000. The Series 2012 Preferred Shares may (subject to certain conditions) be redeemed by the Bank at a redemption price of U.S. $ 10,125 per share.

All the Series 2012 Preferred Shares are issued and fully paid.

The principal terms of the Series 2012 Preferred Shares are identical to the principal terms of the Series 2018/A Preferred Shares, except for certain differences with respect to the ability of the bank to call the Series 2018/A Preferred Shares, the Mandatory Conversion provisions, the priority subscription right and the Series 2018/A Preferred Shares Distributions.

The trading volume of SGBL Preferred Shares in the market during the last 12 months can be summarized as follows:

Preferred Shares Series

Number of Preferred Shares

Amount in USD

2012 73 730.000 2013 262 2.620.000 2015 99 990.000

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11.OVERVIEW OF THE BANK

A.Description of the Bank

1. Synopsis Société Générale de Banque au Liban sal (SGBL) is a joint stock company incorporated in 1953, with a term of 99 years, and is a non-rated Lebanese Bank. It is registered with the Commercial Registry of Beirut under No. 3696 and registered under No.19 on the list of banks licensed by Banque du Liban, the Central Bank of Lebanon. SGBL’s head office is located on Riad El–Solh Street, Beirut (Lebanon). The Bank’s headquarters are, however, located on Saloume Square, Sin El Fil (Lebanon). The central phone number is +961 1 483001.The e-mail of the Bank is: sgbl@sgbl.com, and its website is sgbl.com.lb. SGBL is subject to regulation and supervision by the Central Bank of Lebanon and the Banking Control Commission. In addition, certain operations conducted by the Bank are subject to regulation by the Capital Markets Authority, which is a regulatory body responsible for the regulation of the capital markets in Lebanon. SGBL is the parent company of SGBL Group, which encompasses subsidiaries whose businesses include a broad range of financial and non-financial services, among which: leasing, brokerage and trading, wealth management, insurance, retail, corporate and investment banking, as well as credit card processing. With its core business anchored in Lebanon, SGBL Group also operates in Jordan and Cyprus. Some of the company’s subsidiaries are therefore subject to supervision and examination by the authorities in their respective countries and/or lines of business. As at December 31, 2017, SGBL Group had 2150 full-time employees in Lebanon, Jordan, Cyprus and Abu Dhabi. SGBL ranks 5th among the Alpha Group banks, Lebanon’s 14 largest banks in terms of customer deposits (over USD2 billion). SGBL Group enjoys a prime position in the financial markets of the Middle East, and is set to grow beyond these frontiers. The Group’s affiliation to Société Générale Group further broadens its outreach beyond its primary markets.

2. Strategy Our strategy is based primarily on the vision of our institution and is focused on our own values. Our vision and mission Our ambition is to make SGBL THE reference relational bank for our clients and our partners around the world. With this in mind, we strive for excellence to serve our customers and we are committed to supporting them throughout their lives and in all their projects. Our ambition is resolutely turned towards innovation, SGBL’s teams being our main asset in achieving our objectives; it also relies on our financial strength and the quality of our risk management. Our values At SGBL, we are proud to share the values of Responsibility, Commitment, Innovation and Team Spirit. These values translate into our bank’s unwavering commitment to developing the economies in which we operate along with the people, businesses and communities that we serve. Our strategy 2018-2020 The bank’s 2018-2020 strategy relies on six fundamental pillars. These are based on the deep conviction that digital today plays a central role in the banking business and that the customer must remain at the heart of any initiative. 1- The development of our acquisition and distribution channels is central; it will result in the consolidation of our omnichannel approach. The interaction with the customer now goes through a network of branches whose effectiveness is associated with the growing importance of the call center, social networks and digital channels. 2- Our strategy is furthermore anchored or strengthening our relationship with the customer who must become central to everything we do: The management of customer relationship will hence become professional: it will be based on an evolution of approaches as well as on the implementation of specialized tools. To ensure success of all our actions, the bank will provide the necessary means to achieve its strategic goals. These measures will be added to the new capabilities that we will have with our new core banking system and our mobile banking app. 3- The human element will have a key role in our evolution. The transformation of our human resources project will lead to greater efficiency in HR management, from recruitment to career paths.

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4- Since data has become a resource and an essential element of banking activity, a data management system is planned to be implemented. 5- As for our methods and our way of doing things, our strategy will be to revise them in depth in order to gain agility. 6- Finally, we will put innovation and the promotion of creativity back on the agenda-especially in our commercial and organizational approach. This 2018-2020 strategy is our main condition for success.

3.History of the Bank 1953: The Bank is incorporated as Banque Belgo-Libanaise sal, a partnership between Michel Sehnaoui & Sons, Banque Belge pour l’Etranger and Compagnie Belge de Banque et de Gestion. 1969 : Societe Generale acquires a 25% stake in Banque Belgo-Libanaise, establishing Société Générale Libano-Européenne de Banque sal (SGLEB). 1991: Societe Generale purchases the shares of Société Générale de Banque Belgique in Lebanon and Cyprus. Societe Generale’s stake in SGLEB rises to 50%. 1992: SGLEB acquires Globe Bank sal 1996: Sogelease Liban sal (financial institution specialized in leasing) is incorporated as a subsidiary of SGLEB. 1997: SGLEB acquires Banque J. Geagea sal 1999: The Bank acquires a majority stake in Fidus sal, a leading financial institution in Lebanon, which specializes in brokerage, consulting, and portfolio management. 2000: SGLEB is the first banking institution in Lebanon to enter the Jordanian market by acquiring a 37.3% stake in the Middle East Investment Bank (MEIB) and taking control of its management. SGLEB acquires Inaash Bank sal. Sogecap sal, a subsidiary specialized in life insurance activities, is incorporated. 2001 :Société Générale Libano-Européenne de Banque sal becomes Société Générale de Banque au Liban sal (SGBL). The Bank starts an offshore branch in the free zone in Syria. Centre de Traitement Monétique (CTM), a card processing company, is established by the Bank (50%) and Banque Libano-Française (50%). 2002: Société Générale Cyprus, the Bank’s sister company, starts operating as an onshore bank. 2003: SGBL becomes the majority shareholder of MEIB; the subsidiary’s name becomes Société Générale de Banque – Jordanie (SGBJ). 2006: Despite the ongoing strategic partnership binding SGBL to Societe Generale, Societe Generale France deconsolidates its Lebanese subsidiary’s accounts from Societe Generale Group. In this framework, Sehnaoui Group increases its shareholding from 50% to 81%. 2007: The Bank’s board of directors appoints Mr. Antoun Sehnaoui as the new Chairman and CEO of SGBL, following a redistribution of shares among the Sehnaoui family members. 2009: SGBL acquires a majority stake (57.7%) in Société Générale Cyprus which becomes Société Générale Bank – Cyprus (SGBCy). 2010: SGBL raises its stake in SGBCy to 100%, and in SGBJ, its Jordanian subsidiary, to 85%. SGBL ceases all operations in Syria. 2011: SGBL acquires the share of the assets and liabilities of Lebanese Canadian Bank that were deemed to be sound. The domestic branch network expands from 43 to 68 branches. 2011-2013: Capital injections are made in SGBJ (Jordan) and SGBCy (Cyprus) to strengthen shareholders’ equity in order to remain compliant with local regulations and prudential ratios. SGBL increases its equity by USD325 million through the incorporation of profits, the injection of fresh capital by the main shareholders, and the issuance of USD125 million in preferred shares.

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2017: SGBL opened a subsidiary within Abu Dhabi Global Market (ADGM) with an initial capital of USD50 million. The choice of Abu Dhabi Global Market stems from the opportunity and incentives offered by this market as pertaining to the competitive leading legal and regulatory framework and the increased contribution of the Abu Dhabi market to the global economy. SGBL announces the signature of an agreement with KBL European Private Bankers (KBL epb) concerning the acquisition by SGBL of KBL Richelieu bank in France and KBL bank Monaco. Through this project, the ambition of SGBL, headquartered in Lebanon, is to launch from France, a recognized financial center with strong cultural proximity, the construction of a leading international banking platform. The acquisition by SGBL of KBL Richelieu and KBL Monaco is expected to be finalized in the first half of 2018, subject to the approval of the competent regulatory authorities.

4. The Bank’s Shareholding Holders of common shares (as at December 31, 2017) % of common shares

Antoun N.SEHNAOUI 51.65

Kafinvest Holding Lebanon SAL 19.25

Societe Generale SA (France) 16.78

NSKINV Ltd 12.2

Pierre Frédéric KAMEL 0.03

Najib EL SAAD 0.02

Holding APY Sehnaoui SAL 0.02

Jean-Louis MATTEI 0.01

Nabil SEHNAOUI 0.01

Jean-Pierre DUCROQUET 0.01

Ishac MAZEN HANNA 0.01

Grégoire LEFEBVRE 0.01

TOTAL 100.00

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6. Statutory Auditors In accordance with Lebanese banking regulations, the Bank is required to have a statutory auditor selected by the shareholders at a General Meeting. Audits are conducted in compliance with International Standards on Auditing and banking regulations in Lebanon. Ernst & Young p.c.c. and BDO, Semaan, Gholam & Co., both of which are members of the Lebanese Association of Certified Public Accountants, are the auditors of the Bank. Under applicable Lebanese law, the term of appointment for banks is three years.

B.AFFILIATED COMPANIES

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1.Société Générale de Banque - Jordanie (SGBJ) • Chairman : SGBL represented by Mr. Hassan Hamdi MANGO

• General Manager : Mr. Nadim ABAOUAT

SGBJ joined SGBL Group in the year 2000. SGBL presently owns 88% of SGBJ’s shares. The remaining portion is owned by strategic investors (around 7%) and by the public as SGBJ is listed on the Amman Stock Exchange. Similarly to its parent companies Societe Generale and SGBL, SGBJ is a universal bank that focuses on the mainstream business lines of the Jordanian market.

§ Retail Banking: SGBJ operates 17 branches and 20ATMs and the network is set to grow. Since 2003, the Bank markets a wide range of classic Societe Generale retail products which are tailored to the needs of the Jordanian market.

§ Corporate Banking: Corporate banking at SGBJ is based on a privileged partnership with first class customers. Corporate banking services target corporate as well as SME’s, thus covering a broad range of industries and financial needs.

§ Private Banking at SGBJ is developed in close cooperation with SGBL and supported by both SGBL and Societe Generale international platforms. Private Banking services target mainly high net worth individuals who are seeking quality wealth management and advisory services of international standard.

§ Brokerage activities, with a representative office at the Amman Stock Market.

As part of the worldwide Societe Generale network, SGBJ distinguishes itself in Jordan by its correspondent banking activity. Moreover, its capital markets division offers several instruments enabling customers to hedge against exchange risks. As at December 31, 2017, SGBJ had total assets of KUSD 1,920,423 as compared to KUSD 1,844,954 for 2016. In 2017, SGBJ recorded net profit of KUSD 11,012 as compared to KUSD 15,382 for 2016.

2. Société Générale Bank Cyprus (SGBCy) SGBCy joined SGBL Group in early 2010. SGBCy is fully owned by SGBL. • Chairman : Mr. Mr Nicolas MACRIS

• CEO : Mr. Khalil LETAYF

SGBCy operates 4 branches across the island of Cyprus. It operates based on the universal banking model of Societe Generale and caters to resident and non-resident clients. SGBCy caters to local and foreign clientele, in all of the retail, the corporate and the private banking markets. The Bank is also very active on the international banking front, supplying a wide range of financial services to international companies that take advantage of Cyprus’s favorable tax framework at the heart of the EU. As part of SGBL Group, SGBCy is supported by Societe Generale network, especially in the framework of international banking operations. As at December 31, 2017, SGBCy had total assets of KUSD 695,042 as compared to KUSD 655,192 for 2016. In 2017, SGBJ recorded net profit of KUSD 1,072 as compared to KUSD 2,930 for 2016.

3.SGBL Insurance sal • Chairman : Mr. Georges SAGHBINI

• Deputy General Manager : Mr. Michel FIANI

Totally owned by SGBL, SGBL INSURANCE is the Group’s life insurance company. . The company ranks 7th among life insurance companies in Lebanon in terms of total issued premiums and assets under management. With USD 35.96 million in premiums for 2017, SGBL INSURANCE registered a year-on-year increase of 7.9%. The number of contracts under management reached more than 180,000 policies at the end of 2017, while assets under management reached 100 million USD. In 2016, SGBL Insurance was the 3rd insurance company in term of ROE, showing a solid ratio of 30% which reflects an efficient use of its assets. SGBL INSURANCE is operating in Lebanon since 2000. The range of products offered has since been significantly developed. With regards to protection, coverage has been made accessible to a broader range of customers. Regarding capitalization, unit-linked products allow the client to take advantage of stock exchange performances.

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Today, SGBL INSURANCE has a complete range of life insurance products including term life and endowment products with various options (accidental, critical illness or passive war risk). The medium-term objectives pursued by the company focus on the development related to the high-end customers and corporate customers especially with the development of pension plan schemas. As at December 31, 2017, SGBL Insurance had total assets of KUSD 166,853 as compared to KUSD 142,897 for 2016. In 2017, SGBJ recorded net profit of KUSD 15,247 as compared to KUSD 9,499 for 2016.

4.Sogelease Liban sal • Chairman : Mr. Tarek CHEHAB

• General Manager : Mr. Waddah OLABI

Established in 1996, Sogelease Liban enjoys an active presence in the Lebanese market. The company is part of Societe Generale Group’s worldwide network of leasing companies. Leader in financial leasing solutions in the regional market, Sogelease Liban offers professionals, craftsmen, and enterprises of all sizes, solutions for financing their equipment with collateral that is mainly related to the equipment financed. Equipment lease solutions are designed to suit corporate, small and medium-sized companies, and sometimes even retail banking customers. As at December 31, 2017, Sogelease had total assets of KUSD 28,222 as compared to KUSD 27,144 for 2016. In 2017, SGBJ recorded net profit of KUSD 546 as compared to KUSD 431 for 2016.

5.Fidus sal

• Chairman and CEO : Mr. Antoun SEHNAOUI

• Deputy General Manager : Mr. Jean HANNA

: Mr. Ziad ABOU JAMRA

Fidus, the Group’s institution specializing in financial market operations, is one of the leading brokerage/asset management firms in the region, catering to private and institutional clients both locally and internationally. A wide spectrum of products and services, covering the major asset classes, are made available to a sophisticated and high net worth clientele base, by a team of professionals dedicated to deliver the best service and advice, within a highly competitive environment. Timely execution on all major markets -including but not limited to equities, bonds, derivatives, foreign exchange etc.- is guaranteed by a 24-hour service that is always eagerly willing and vigilant to the client’s needs. Wealth Management and Advisory Services on portfolio building are also provided on a customized basis for each client individually, taking into account particular risk tolerance and yield requirements. Within this context, structuring of tailor made financial products on diverse types of underlying instruments is something that Fidus has come to excel in. As at December 31, 2017, Fidus had total assets of KUSD 132,407 as compared to KUSD 195,435 for 2016. In 2017, SGBJ recorded net profit of KUSD 323 as compared to KUSD 13,431 for 2016.

6.Centre de Traitement Monétique (CTM) sal • Chairman : Mr Sleiman MAARAOUI

• Deputy General Manager : Mr. Mohammad ITANI

Centre de Traitement Monétique (CTM) is an electronic card processing company that is a joint venture between SGBL and Banque Libano-Française sal.

7.Liberty International Bank Limited (LIB) • Chairman : Mr Antoun Sehnaoui

• Senior Executive Officer: Mr. Georges Saghbini

LIB operates in Abu Dhabi Global Market (ADGM). It offers corporate, institutional and private banking products and services exclusively for corporate clients and market counterparties. The products of LIB are varied, such as current accounts and term accounts, loans (professional loans, corporate loans, cash advance), financing services or foreign exchange transactions.

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8. Other Affiliated Companies

§ SGBL Courtage Assurance: undertakes exclusively insurance activities as well as any operation relating to or complementing its principal activity.

§ Société Générale Libanaise Foncière - SGLF: specializes in commercial and real estate operations § Société Générale de Service d’Investissements – SGSI :

ü Analyzes industrial, commercial and real estate markets in Lebanon and abroad. ü Provides information to banks and financial institutions relating to investment opportunities. ü Provides investment advisory services, but is not allowed to take out any financial operations on behalf of third parties. ü Société d’Investissements de Services S.A.L. SIS :undertakes mainly the following activities: ü Market studies in Lebanon and abroad ü Provides service agreements in investment and placement in Lebanon and abroad ü Real estate acquisition

C.THE BANK’S CORE BUSINESS LINES

SGBL has adopted the universal banking model as early as the 1990’s, in line with Societe Generale’s business model. This strategy focuses on continuously developing market segments by catering to each market category’s evolving needs. Innovation and quality are the drivers of the Bank’s strategy for developing the most appropriate and best targeted products and services and marketing them at the right time. Universal banking services address three main categories of customers and encompass a wide range of diversified, standard and tailor-made services that are conceived to answer the broadest range of our customers’ needs. Corporate banking at SGBL is backed by the skills and the expertise of the Bank’s Corporate Banking teams, fully dedicated to set up the best tailor-made solutions for their customers. SGBL takes pride in counting Lebanon’s and the region’s largest corporations among its customers. More than just clients, the Bank’s corporate clients are long term partners whose business and endeavors are strongly supported by the Bank. SGBL is also very active on the SME market segment. The product range offered to small and medium sized enterprises is built on the Bank’s know-how regarding this category of clients. Services focus on accompanying companies in their development and expansion phases, supplying them with specific loans, cash management services, as well as additional services that support the Bank’s development strategy. Like corporate clients, SME’s are perceived as SGBL’s partners in acquiring new customers and developing customer loyalty thanks to services provided by the Bank to the companies’ employees. At the level of wealth management, SGBL’s development strategy is based on comprehensive advisory services within the framework of a global client approach and an innovative and tailor-made offer, supported by close collaboration between our Private banking teams, Fidus (the Group’s financial brokerage company) and Societe Generale Group. SGBL’s Private banking teams are fully dedicated to ensure that the Bank’s high net worth clients have access to qualified advice and to a broad range of services and products across international financial markets.

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1. Retail Banking

1.1.Retail banking is historically the backbone of SGBL’s business In the mid-nineties, SGBL was the first bank in Lebanon to have entered the retail business as it is understood today, by launching an extensive range of products targeting individual clients. The Bank’s retail product mix has been continuously developing since, as a response to new needs in a rapidly growing market. The retail business addresses individuals / consumers and makes up around half of the Bank’s portfolio. Retail banking business is mainly developed through salary domiciliation which attract new customers. This development is fostered by the wide range of retail products and services that the Bank offers, such as personal loans, electronic cards, insurance products, electronic banking services as well as packaged accounts. Youth is a privileged market segment within retail. The Bank was the first bank to have tackled the youth market in which it holds a leading position. Accordingly, the Bank’s investment in this market segment has rapidly grown profitable. Recently, the Bank has developed a new range of youth-targeted products intended to cater to constantly changing needs in this market, and to reinforce the Bank’s penetration rate on this market segment. The professional market segment, servicing the clientele of liberal professions and self-employed professionals, as well as small enterprises having a financial turnover below USD500,000, is developed through professional loans as well as electronic banking services, credit cards and insurance products. The Bank’s approach to this market segment is growing increasingly systematized. It is furthermore being developed through strategic partnerships with institutions that support private sector and small enterprise development (among which the Economic and Social Fund for Development, a private sector supporting arm of Lebanon’s Council for Development and Reconstruction).

1.2.Branch Network With 69 branches and 124 ATM’s, the Bank covers a large part of the Lebanese territory. This network has expanded considerably in 2011, namely as a consequence of the acquisition of Lebanese Canadian Bank’s network, bringing SGBL even closer to its customers. In 2012, the domestic branch network was restructured. Ten regional poles were created to bring the Bank closer to its customers, as well as to promote decentralization and foster shorter and more efficient business processes.

1.3. Customer Accounts Despite the unstable political and economic situation in Lebanon, especially since 2005, the Bank’s activity reflects a continuous increase in the number of retail customers. This growth was fostered by the continuous progress of the Bank’s retail business in Lebanon, namely driven by salary domiciliation of private sector employees, by the growing appetite for consumer loans (with housing on top of the list) and by the broad range of products and services that the Bank supplies in order to best cater to new demand trends. The Bank grew its deposits by 14.2% over the past year (2016 through 2017). The growth in the number of customers is also taken of customer loyalty and of the Bank’s ability to continuously attract new clients due to its attractive and competitive offer. SGBL Group currently has over 300,000 customers. As for the number of products per customer (known as ‘equipment rate’), it stands at 3.13 products per customer in December 2017, up from 2.98 products one year earlier. The bank offers a wide range of client deposit and saving accounts tailored to satisfy client needs: Galaxie is a current package account in LBP or USD providing the customer lot of benefits mainly:

- Free International card - Domiciliation of an unlimited number of bills (Electricity, telephone, Internet, etc.) - Free Receipt of transfers - Checkbook request - Remote banking services , online banking service and SGBL mobile application - SMS Secuspend service with Debit Platinum to track card transactions

Galaxy Pro is a current account package for self-employed professionals over 18 years old, resident or non-resident. It provides the client lot of benefits mainly:

- Free domiciliation of an unlimited number of bills - Free Debit Platinum card & Bonifika credit card - Free 2 checkbooks request /year - eSGBL online banking & SGBL mobile app - SMS secuspend to track cards transactions - Life insurance underwritten by a partner insurer - Reduced fees on counter operations

I Live is a current account in LBP or USD for young customers aged between 18 and 25 years. It offers lot of benefits mainly:

- Free international debit card - Free on line banking - Free SMS service to track cards transactions

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- Free E-Surf card Just married account in LBP or USD is a current account for 12 months, where family and friends can deposit money for the wedding list. The main characteristics are:

- Preferential credit annual interest rate:- 3% on LBP account and 1% on USD account - A free debit card for withdrawals and purchases around the world - Preferential conditions on SGBL products and services, including loans - Frees Subscription to SMS SECUSPEND for immediate tracking of card transactions - Subscription for 24/7 tracking of your account and card transactions - Take advantage of our loyalty program Super Rewards

Select account tailored to target high end clients offers lot of characteristics like :

- free domiciliation of unlimited number of bills, - free debit card - free life insurance - free on line banking - free check book - privilege rate conditions for the high end loans

Saving accounts offers attractive interests rates based on balance and maturities. The main characteristics are:

- No minimum deposit required - 1, 3, 6 or 12 months blocked savings, with a minimum USD 2,000 or c/v to get remunerated - Multi-currency account - Interest rate depends on account's balance, maturity date and currency - Possibility to open a joint with only one savings book granted to account holders - 24/7 remote access to check balance and savings account movements through our online banking eSGBL and mobile app SGBL

1.4. Personal Loans SGBL’s range of loans to individuals caters to a variety of consumer needs. Growth in this market has been accompanying the boom of consumer loans in Lebanon. Housing loans for instance have increased by 7.5% over the past year (end of 2016 through end of 2017). SGBL’s personal loans are secured by complementary insurance products tailored to meet the customers’ needs. Life insurance products are supplied by SGBL’s subsidiary SGBL Insurance, while other forms of insurance services are supplied by reputable partner insurance companies. The main retail product lines and services currently offered are: Sogeloan allows the client to finance its personal needs. The main characteristics of Sogeloan are:

- Amount allocated between USD 2,000 and USD 40,000 or its c/v in LBP - Fixed interest rate in USD and LBP - Privileged conditions for the domiciliated employees - Every employee, between18 and 64 years old at maturity of the loan, having a stable revenue can benefit from Sogeloan

Sogecar allows the client to buy a new or used car in USD. The main characteristics of this loan are:

- Fixed annual flat interest rate starting 3.9 % for new cars and 5% flat annual interest rate for used car. - Personal contribution: starting 25% of the car's price - Flexible repayment duration that can extend from 1 to 6 years

Sogeschool is designed to to finance all the back to school expenses, from registration fees to stationary etc... The main characteristics of this loan are:

- Allocated amount per child varies between LBP 1.5 million and LBP 6 million - SOGESCOOL LBP can finance all sorts of expenses: (school, bus, books, computers and others) without the need for payment

proof - 0% interest plus one month's grace period

Sogeschool Spécialisé is designed to finance the 3rd cycle university studies as MBA or specialization in medicine. The main characteristics of this loan are:

- Allocated amount varies between USD 5,000 and USD 30,000 or its c/v LBP - Financing 70% of the tuition amount, paid to the university - Interest rate in USD: Libor 6 months + 6% (current rate applied is 7.9%) - Interest rate in LBP: Lebanese Treasury Bills rate (2 years) + 3% (current rate applied is 10.74%) - Flexible repayment, up to 84 months

Sogehome is granted to buy, build or renovate a main residential house. The loan is denominated in USD. Sogehome has the main following features:

- High financing amount, with a minimum of 20,000 USD - Up to 30 years repayment period - Required down payment:

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for residents: 25% of the residence price for expatriates: 40% of the residence price (for a maximum loan period of 15 yrs)

- Variable interest rate of "6 months Libor + 5%" and a floor rate of 8% is applicable Sogehome Lebneneh is granted in LBP to buy, build or renovate a main or secondary residential house. The main characteristics of this loan are:

- Financing amount is based on the client's need and on his financial capacity - Required down payment

o for residents: 25% of the residence price o for expatriates: 40% of the residence price

- Variable interest rate : Beirut Reference Rate + 1% with a minimum of 10%

1.5. Small & Medium Sized Companies and Professional Clients Professional clients and SME’s have been at the heart of SGBL’s retail policy in recent years. Indeed, self-employed professionals and companies with less than 10 employees represent more than 95% of economic activity in Lebanon. The development of services to this target market was achieved with a constant concern for sound risk management practices. The introduction of loan products tailored to the needs of professional clients (“Sogeloan Pro” and “Sogehome Pro”) has been a driving force on this market segment. By combining loans and insurance and streamlining application procedures, SGBL has enabled professionals to rapidly secure the financing required for their projects. SGBL Sogeloan Pro is designed for self- employed professional to finance small investments or cover working capital shortage.

- The loan is denominated in LBP and USD. - Allocated amount between USD 2,000 and USD 100,000 or its c/v in LBP - Up to 5 years flexible repayment period - Partial grace period between 3 and 6 months - Variable interest rates, depending on the guarantee provided to the bank (without garantee, personal guarantee, cash collateral,

etc.) Sogehome Pro is designed to buy, build or renovate the business premises. The loan is denominated in LBP or USD. The loan has the main following characteristics:.

- Personal contribution reduced to 40% of property price - Unlimited amount of funding - Repayment over a period of 15 years including a grace period (optional) between 3 and 12 months - Variable interest rate in USD: Beirut Rate Reference +2.5%(with a minimum 9%) Variable interest rate in LBP : Beirut Reference

Rate + 1 % with a floor rate of 10% Although the deterioration of the political, economic and security situation in recent years have had a negative impact on the private sector in Lebanon overall, SGBL’s portfolio of loans to SME’s and to professionals has been increasing steadily with no compromise at the level of risks. Despite domestic economic sluggishness and a close monitoring of the Bank’s risks, loans to SMEs and professionals have increased by 15%, in line with the Bank’s baseline strategy of continuously supporting the private sector. Furthermore, the SME segment directly benefited from a finance agreement for a 15-million Euro envelope was signed in 2012 between SGBL and the European Investment Bank (EIB) whereby access to medium and long-term funds at concessional interest rates was made available to a broad range of investment projects. A new contract was signed in 2017 with EIB for a total of 60-million EUR. SGBL’s commitment to sustainable development materialized in 2003 with the introduction of lending to micro and very small businesses. SGBL was the first bank to embark on a partnership with the Economic and Social Fund for Development (ESFD), a national scale project funded by the European Union, which aims to create jobs through improved access to loans for small and micro companies. In 2010, SGBL and the ESFD have further developed their joint efforts to support Lebanese SME’s by signing a new agreement whereby the Bank and the ESFD would launch a new loan program based on a risk-sharing scheme. The marketing of the new loan started in 2011. Thousands of beneficiaries were served under this program, across Lebanese regions.

1.6.Insurance Products Today, SGBL Insurance has a complete range of life insurance products including term life and endowment products with various options (accidental, critical illness or passive war risk). It offers to its customers tailored solutions in terms of life insurance, as well as savings and retirement plans. Bancassurance products have registered a 5% increase over the past year and are expected to keep progressing as demand for insurance products tends to increase.

1.7. Electronic Banking Services

As part of its digital transformation strategy, SGBL launched in December 2017 new internet and mobile banking systems with a further regional roll-out planned for subsidiaries in Jordan, Cyprus and UAE.

With its powerful Omni-channel Digital Banking Platform and a multi-factor authentication system, SGBL brings its Retail and

Corporate customers all the digital capabilities expectations by offering easy-to-use environments, real time transactions, enhanced user

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experience, faster time to market, increased security, online customer origination, 24/7 banking services, and consistent service quality and scope across branches and digital channels.

2. Private Banking The strategy for developing private banking activities at SGBL is focused on supplying customized financial consultancy and services. This strategy is a major pillar of the global approach to wealth management and a primary objective for growth in this market segment. Private banking at SGBL is structured around five criteria:

(i) A diversified offer of innovative products and investment strategies in order to best meet customers’ needs

(ii) Customized consulting services within a global approach of clients’ investment profiles

(iii) Know-how pooling with Fidus, the wealth management and brokerage arm of the Group, in coordination with Societe Generale Group other business lines

(iv) A global approach to the client relationship based on financial planning and engineering, with a focus on the client’s needs and preferences

(v) Innovation through launching new investment opportunities and in-house managed funds.

Growth on this segment was enhanced thanks to a high level of synergy and coordination between the private banking teams in Lebanon, Jordan and Cyprus as well as Fidus and Societe Generale Private Banking in Paris, Geneva and Luxembourg. SGBL’s development strategy over the coming few years sets private banking development at the heart of the Bank’s growth.

3. Corporate Banking The Corporate Banking division caters to the various needs of large companies and financial institutions. The organization of this division allows for human and financial resources to: • Optimize relations with existing customers in order to provide a high-quality service and be in a position to answer their needs at all times. • Develop new relations with a diversified client base, covering the different economic sectors in Lebanon and in the region. The Bank is recognized as a provider of innovative solutions and as a privileged business partner, offering a wide range of products and services, and especially, access to and support from Societe Generale Group’s international network and financial platform. The Bank proved an ongoing support of economic activities that lead to national prosperity and continuous progress through its partnerships and engagements with well-known Lebanese companies and brands. In the framework of its corporate and SME banking, the Bank has had financing and/or risk sharing agreements with several major international organizations that support private sector development, among which the International Finance Corporation (IFC), the European Investment Bank (EIB), the French Development Agency (AFD) and Arab trade finance program (ATFP). Corporate loans have progressed by 13% over the year period extending from beginning 2016 until end of 2017.

3.1. Financing Operations In addition to day-to-day banking services, SGBL offers a wide range of short term loans, bank guarantees, and other credit facilities enabling companies to finance their daily operations and to efficiently manage their businesses.

3.2. Financing International Transactions In order to finance the production cycle and the marketing process, the Bank offers its customers payment, collection, and guarantee instruments that enable them to carry out import and export operations under the best conditions (trade finance: documentary credits, documentary remittances, stand-by letters of credit, pre-financing and post-financing of exports, back-to-back documentary credits). Moreover, in addition to the regular exchange operations, SGBL offers a range of hedging instruments against exchange risks (forward exchange transactions, options, etc.). SGBL’s relationship with its corporate clients goes beyond mere banking services. The Bank builds on true partnerships with its clients and often acts as advisor. For example, in collaboration with its subsidiaries, namely Société Générale de Banque - Jordanie (SGBJ), Societe Generale Bank – Cyprus (SGBCy) and Liberty International (LIB), SGBL Group assists its customers in their regional expansion.

3.3. Financing Investments The Bank offers advanced financial engineering services adapted to each company’s environment, by proposing, on a standalone basis or through banking syndicates, various investment financing solutions. These solutions aim to secure:

• The financing of equipment, namely through Sogelease, its leasing subsidiary • The financing of real estate, industrial, food, tourism, and telecommunication projects • Access to long term international financing (such as loans refinanced by the European Investment Bank in order to improve

companies’ competitiveness)

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• Access to loans subsidized by the Central Bank.

3.4. Project Finance and Investment Banking The Bank has developed its project finance, investment and consulting banking skills, which are intended for both the private and public sector. Thanks to its know-how, SGBL has conducted and organized merger and acquisition operations as well as capital operations by targeted investment. Among other missions, the Bank, in collaboration with Societe Generale (France), was entrusted with a consulting operation for the Lebanese government for the privatization of the water and wastewater sectors in Lebanon. In November 2009, the Bank has co-lead managed, together with Bank of Beirut and Citibank, a USD500 million Eurobond issuance for the Republic of Lebanon. In early 2015, the Bank co-lead, with BLOM Bank and Citi, the Eurobond issue (February) of the Republic of Lebanon, for a total amount of USD2.2 billion. In November 2015, the Bank lead the Eurobond issue of the Republic of Lebanon, for a total amount of USD1.6 billion. In March 2017, SGBL was lead manager of Eurobond issuance for the Republic of Lebanon for a total of USD3 billion. On the private sector level, SGBL has put its skills at the service of its customers, assisting them in their companies’ restructuring and the improvement of their financial situation, even amidst an often difficult economic environment. In the field of Corporate Banking, one of the Group’s strategic growth priorities, SGBL has led several large scale operations: The Bank is one of the first banks that embarked on equity financing in the framework of what is known as Central Bank’s Intermediary Circular 331 which promotes banks’ investment in startups, and namely those Lebanese companies operating in the field of knowledge economy. (Berytech, Cedar Mundi, Amethis Finance Luxembourg, Phoenician Fund 1 and Leap Investment I).

3.5. Correspondent Banking and Capital Markets The Bank maintains a prevailing position with local and regional financial institutions. The Bank’s Capital Markets division is active on all international markets and operates through a client-based approach offering value-added solutions. Capital Markets provide:

• Foreign Exchange activity: achieved through our in-house dealing room

• Tailor-made quality services to private customers as well as to numerous banks and financial institutions

• Money market services

• Technical analysis

• Client Advisory services

3.6.Treasury and Branch Cash Management The Bank’s treasury and branch cash management operations consist mainly of the investment of unutilized foreign currency funds in deposits with its parent company overseas (and recently, to a limited extent, in Lebanese sovereign Eurobonds), and the investment of surplus Lebanese Pound in Lebanese Treasury bills and in certificates of deposit with the Central Bank. The Bank’s operations in the Lebanese interbank market are carried out only with prime banks and are subject to individual limits set by the Bank. The main objective of the Bank’s treasury operations is to achieve efficient management of liquidity, interest rate and market risk through foreign exchange and money markets operations, thus managing foreign currency exposure and funding costs. The Treasury Department calculates the Bank’s cash position on a daily basis and provides management with daily reports on the Bank’s liquidity and cash flow. Cash management is monitored daily by the Asset-Liability Committee and decisions are taken according to the prevailing economic and political conditions in Lebanon and other countries where the Bank operates, taking into consideration the maturities of assets and liabilities and the customers’ needs. As mentioned previously, the Bank’s excess liquidity in Lebanese Pounds is mainly invested in Lebanese Treasury bills as the demand for local currency loans is generally low. As for the Bank’s foreign currency liquidity, it is mainly placed with our parent company Societe Generale France as well as other Societe Generale Group banks, along with a certain portion in bonds (both local and foreign).

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12. MANAGEMENT

1. Board of Directors The management of the Bank is vested in the Board of Directors. The members of the Board of Directors are elected by the General Assembly of Shareholders for a period of three years, renewable at the end of their term. The Bank is managed by a Board of Directors that must be composed of a minimum of three members and a maximum of twelve members elected by the Ordinary General Assembly from among its shareholders fulfilling the conditions stated in the Code of Commerce and the Code of Money and Credit. At least three of the Board members of the Bank shall be non-executive directors amongst whom two shall be independent. These directors are independent parties with no vested interest in the Bank so as to ensure objectivity. Lebanese law stipulates that the Board of Directors must be composed of a majority of Lebanese nationals. Board members are, subject to certain exceptions, jointly and severally liable to the Bank, shareholders and third parties for violations of the law, the Bank’s By-laws or regulations and for any damage caused by fraud, abuse of authority or gross negligence. In addition, Board members are liable to the Bank and the shareholders for improper performance of their duties. Central Bank Basic Decision N° 9956 dated July 21, 2008, as amended from time to time, relating to Board of Directors and Board Committees in Lebanese banks, requires that at least four Board of Directors meetings be held annually of which at least two must be held in Lebanon. The shareholders are empowered, by resolution adopted at an ordinary meeting of shareholders, to remove Board members. Board members are not permitted to carry out similar functions in a competing company without the authorization of the shareholders, which authorization must be renewed at each annual meeting of shareholders. The Board of Directors appoints one of its members as Chairman. According to the Code of Commerce, the Chairman of the Board of Directors also acts as General Manager of the Bank and has extensive powers to execute resolutions adopted by the Board of Directors, to carry out operations necessary for the daily functioning of the Bank and generally to represent the Bank in its commercial activities. The Chairman may delegate some or all of his authority as General Manager to another person or persons, who act under the supervision of the Chairman, the Chairman remains responsible for the acts of all his delegates. The duties and roles of the Board include, among other things, the following:

§ To execute the resolutions of the General Assembly; § To define, when this role is conferred upon it by law, and follow up the implementation of the SGBL’s strategic orientations while

making sure its business is developing in the proper conditions of security § To check and approve the management (business activities, results, human and technical resources, investments, etc.) by relying

as much as necessary on the work of the reporting committees from which it regularly receives information and to which it may assign tasks where necessary

§ To validate and review the risk internal control policies. § To validate the remuneration policy and review it in order to ensure its adequacy with the Bank's strategy and the evolution of its

activities § To implement the staff performance appraisal system § To give an opinion on the remuneration of the external auditors § To validate the policy related to the execution of banking and financial operations with the clients § To suggest to the General Assembly, the shareholders or to the Board of Directors itself to appoint, according to applicable local

rules, the Company Representatives who shall manage the bank, § To make sure the information given to the banking and market authorities and to shareholders are reliable. Therefore, it draws up

the financial statements then presents them to the shareholders' meeting for approval.

The Board appoints one of its members as Chairman. The Chairman of the Board of Directors, in his capacity as General Manager, has extensive powers to execute the resolutions adopted by the General Assembly, undertake operations necessary for the daily functioning of the Bank and generally represent the Bank in its commercial activities. The composition of the Boards of Directors of the Group and the Bank is identical. As at the date of this Offering Circular, the members of the Bank’s Board of Directors are:

Name Expiry of term of office: Shareholders General Assembly that approves the accounts of the year:

Mr. Antoun SEHNAOUI – Chairman General Manager 2018 Mr. Nabil SEHNAOUI 2019 KAFINVEST HOLDING LEBANON SAL 2018 NSKINV SAL 2018 Mr Eric WORMSER (*) 2019 Mr. Ishac Mazen HANNA 2018 SOCIETE GENERALE (France) represented by Mr. Alexandre MAYMAT

2019

Mr. Jean-Louis MATTEI 2019 Mr. Jean-Pierre DUCROQUET 2018

(*) Mr Eric Wormser is a non-executive Board member of the Bank elected by the AGM in March 2018, and whose election remains subject to the approval of the Central Bank.

Mr Antoun Sehnaoui is the Chairman and the CEO of the Bank since 2007. He is also the chairman of Fidus, the Group’s Lebanon-based financial brokerage firm since 2002. He is the Chairman of Liberty International Bank Limited LIB since 2017.

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Mr. Sehnaoui holds a BA in Business Administration – major in International Finance and Banking from the University of Southern California (USA) and is a member of the Board of Directors of the Association of Banks in Lebanon. Mr Nabil Sehnaoui has been a Board member of SGBL Board of Directors for over 35 years. He is a Director in several companies of Sehnaoui Group. He is a major landlord in Sehnaoui Group Framework. Kafinvest Holding Lebanon SAL is a board member of the Bank since 2007 and is represented by Mr. Pierre Frederic Kamel . Kafinvest Holding Lebanon SAL was incorporated on February 18, 2003 and registered in Beirut under No 1900075. Kafinvest Holding Lebanon SAL has a total share capital of LBP 9,048,000,000 and is owned by Mr Pierre Frederic Kamel (99%) NSKINV SAL is a board member of the Bank since 2013.and is represented by Mr Antoun Sehnaoui. NSKINV SAL was incorporated on May 24, 2012 and registered in British Virgin Islands under No 1714151 . NSKINV SAL is owned by Mr Antoun Sehnaoui ( 72.84%) and Kafinvest Holding Lebanon SAL (27.16%) . Mr Pierre Frédéric Kamel is a non-executive board member of SGBL since 2007. He was the CEO of DNL Capital Holding SAL from 2002 till 2007. He is since 2007 the Chairman and CEO of Mina Holdings SAL-Beirut. He is also Board member of la Société Libanaise pour le développement et la reconstruction du centre-ville de Beyrouth (Solidere) since 2014. Mr Ishak Mazen HANNA currently is an independent board member of the Bank since 2010. He is the Chairman of the Risk Committee of SGBL and Chairman of the Remuneration Committee;.He acts as Board Member of SGBCy and he has been advising on international and domestic macroeconomics and microeconomics since 1990. Mr Jean Pierre Ducroquet is an independent board member of the Bank since 2013. He joined Société Générale (« SG ») Group in 1968. He has since occupied several executive positions in the SG Group and within the SGBL Group, including acting as the COO of SGBL from 2005 till 2008. He is the Chairman of the Audit Committee of SGBL; and he acts as Board Member of SGBCy . Société Générale France SA is a board member of the Bank and is represented by Mr. Alexandre Maymat.. Société Générale is one of the largest and leading international banking and financial services groups operating in 67 countries worldwide serving 31 million customers Mr. Alexandre Maymat gained wide experience through his different tenures in the public and private sectors. Mr Jean Louis Mattei is a board member of the Bank since 1996. He joined Société Générale in 1973, and he gained wide experience through his tenures in SG network. He was a board member and Chairman of the Risk Committee of the Group Mauritius Commercial Bank. Actually he is the Chairman of AML/CFT Committee. The business address of all the Directors is SGBL, Dekouane, Saloume, Lebanonm SGBL building.

2.Executive team The Bank’s Executive Committee comprises: the Chairman and Chief Executive Officer, the General Manager and the Deputy General Managers. The Bank’s Executive Committee implements the strategy approved by the Board of Directors, delegates tasks and establishes an organizational structure that allows for appropriate operations; it monitors the responsibilities, and it is ultimately responsible before the Board for the effective operation of the Bank. As at the date of this Offering, the executive team of the Bank is composed from: Antoun Sehnaoui, Chairman & CEO Born in 1972. He is the Chairman and CEO of the Bank since 2007. He is also the chairman of Fidus, the Group’s Lebanon-based financial brokerage firm. Mr. Sehnaoui holds a BA in Business Administration – major in International Finance and Banking from the University of Southern California (USA) and is a member of the Board of Directors of the Association of Banks in Lebanon. Philippe DUBOIS, Deputy Chief Executive Officer Born in 1968. Mr. Dubois joined SGBL Group in 2014 and was appointed Deputy CEO by the board in March 2015. Prior to that, he was with Société Générale Group where he held several positions in Sociéte Genérale’s network in France, before taking up executive positions within the international network (French Polynesia and Serbia) and later on, supervising the Retail banking activity in Russia. Mr. Dubois graduated from French business school ESLSCA and holds a Master’s Degree in management control. Tarek Chehab, Deputy General Manager Head of the Commercial Division - Retail, Corporate and Private Banking Born in 1966. Mr. Chehab holds a Master’s degree in Management – major in Finance, from the University of Dauphine in Paris. Before joining SGBL Group in 1999 as General Manager of Fidus, Mr. Chehab held several executive positions in France in industrial and consulting businesses. Within SGBL Group, he is also chairman of Sogelease Liban, the Group’s leasing company. Georges Saghbini, Deputy General Manager Group CFO, Head of Business Development, Strategy, Finance and Corporate Secretariat Born in 1971. He joined SGBL Group in 1996. He has since occupied several executive positions in the Bank and within the Group. Mr. Saghbini is also board member of SGBJ and SGBCy, the Group’s subsidiary banks in Jordan and Cyprus. He holds a Master’s degree in Economics from the Paris I - Sorbonne University and from Ecole Normale Supérieure in Paris, as well as a Post graduate diploma in Money,

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Banking & Finance from the Sorbonne University. Within SGBL Group, Mr. Saghbini is also chairman of SGBL Insurance, the Group’s life insurance company. Sleiman MAARAOUI, Deputy General Manager Head of the Systems, Projects and Infrastructure Division Born in 1968. He holds a Master’s degree in Economics – major in Finance from the University of Amiens (France). Mr. Maaraoui held several executive positions in the banking sector in France before joining SGBL Group in 2001. Prior to heading the Systems, Projects and Infrastructure Division, Mr. Maaraoui was SGBL’s head of Internal Audit and Inspection. Khalil LETAYF, Deputy General Manager CEO of Societe Generale Bank – Cyprus Ltd K. Letayf joined SGBL group in 2008. Prior to that, he held different managerial positions in the e-payment and banking businesses in both France and Lebanon. Within SGBL group, and prior to heading SGBL’s subsidiary in Cyprus, Mr. Letayf acted as SGBL’s Head of the Resources and Services division and occupied, on rotating presidency basis, the position of Chairman of CTM, the credit card processing company that is 50% owned by SGBL. He holds a degree in Engineering from Ecole Centrale de Paris.

3. Senior Management

As at the date of this Offering, the Senior Management of the Bank is composed from:

Name Position Mr. Philippe Dubois Deputy Chief Executive Officer Mr.Tarek Chehab Deputy General Manager Mr. Georges Saghbini Deputy General Manager Mr. Sleiman Maaraoui Deputy General Manager Mr Khalil Lteif Deputy General Manager

Mrs. Noha Abou Saad Head of general management office and deputy head of the strategy, finance and general secretariat division

Mr. Najib Ghantous Head of retail banking and branches network Mr. Michel Geammal Head of small and medium enterprises banking M. Elie Jeffy Head of private banking Mr Sami Bou Khalil Head of execution, control of credits and operations Mrs Daniele Haddad Head of planning, project management and organization Mr Elie Rizk Head of information technology, systems and services Mr. Habib Khoury Head of strategy and marketing Mrs Sarita Chaanine Head of finance Mr.Karim Khoury Head of treasury and financial markets Mr. Michel Fiani Head of insurance business line Mr. Henry Hachem Head of human resources Mrs Carole Karkour Head of core banking application Mr Fady Bou Samra Head of risks Mr Pierre Dinet Chargé de mission -Risk Group Mrs Karen Zablosky Head of compliance Mr Nadim Abaout SGBJ General manager

The business address of all the Senior Management is Dekouane, Saloume, SGBL building. Ms Noha Abou Saad has joined SGBL in 1988, she is head of general management office and deputy head of the strategy, finance and general secretariat division. She also represents SGBL Insurance in SGBJ Board of Directors. She held several managerial positions in SGBL as Head of Human Resources, Head of the Organization department,…. She holds a Master degree in Economics . Mr Najib Ghantous has joined SGBL in 2009 as head of small and medium enterprises department. Since 2014, he is the Head of retail banking and branches network. Prior to joining SGBL, he occupied several managerial positions in the banking sector. He has a high studies degree in banking. Mr. Michel Geammal joined SGBL in 2014 as Head of small and medium enterprises department. He has occupied several managerial positions in the banking sector before joining SGBL. He holds a Master degree in Finance. Mr Elie Jeffy joined SGBL in 2011 as Head of private banking. He occupied several positions in the private banking domain in several other banks before joining SGBL. Mr Sami Bou Khalil joined the audit department of SGBL in 2001. He is Head of execution, control of credits and operations department. He occupied several positions in the banking sector before. Mrs Daniele Haddad is Head of planning, project management and organization. She joined SGBL in 2011 as a senior auditor. She occupied managerial positions in the banking sector before.

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Mr Elie Rizk is Head of information technology, systems and services. He joined SGBL in 2015 as Project Manager for Change of Core banking application department. He occupied managerial positions in the banking sector abroad. He holds an MBA in Industrial software system. Mr Habib Khoury joined SGBL in 1992. He is Head of strategy and marketing. He was appointed head of retail and private banking in SGBJ in 2010 for 4 years. He holds a Master degree in Finance. Mrs Sarita Chaanine joined SGBL in 2001 in the Finance department. .She’s currently SGBL‘s Chief Financial Officer. She holds a Master degree in Finance. Mr Karim Khoury is Head of treasury and financial markets. He joined SGBL in 1989. He holds a Master degree in Finance. Mr Michel Fiani is Head of the insurance business line. He joined SGBL in 2000 and occupied several managerial positions as Head of Organization, head of Marketing, …. He holds a Master degree in Computer sciences. Mr Henry Hachem is Head of human resources. He joined SGBL in 1989 and occupied several managerial positions as Head of credit analysts, Corporate Relationship manager,.. He holds a Master degree of Business Administration. Mrs Carole Karkour is Head of change of core banking application for SGBL . She occupied several managerial positions in SGBL. She joined SGBL in 1993. She was Head of IT and organization in SGBJ. She holds a degree in Economics. Mr Fadi Abou Samra is Head of SGBL Risk. He joined SGBL in 1991.. He holds a Master degree of Business administration. Mr Pierre Dinet is the head of risk group at SGBL since 2016. He joined Société Générale in 1981 where he got managerial banking experience in several countries. He holds a degree in Economics. Mrs Karen Zablosky is head of compliance in SGBL. She joined SGBL in 1999. She got experience in credit risk, compliance and operational risk. She holds a degree in money and banking. Mr Nadim Abaouat joined SGBL in 1994. He is SGBJ’s General Manager. He occupied several managerial positions in the Bank. Key persons’ compensation The total remuneration and benefits paid to key persons for 2017 in millions LBP are the followings:

Millions of Lebanese Pounds

Category of Key Persons Number of Beneficiaries Total Remuneration

Total of amount set aside or accrued for pensions,

retirement or similar benefits

1- President and executive members of the Board 2 1,279

-

2- The non-executive members of the Board 8 196

-

3- Persons in charge of departments and units entrusted with executive functions

13 14,515 1,033

4- Persons in charge of departments and units entrusted with control functions

5 1,206 900

5- People in charge of other departments 7 1,705

1,727

No prior conviction or disqualification In the five years prior to the date of this Offering Circular, none of the key persons were:

i. convicted of violating laws relating to fraud or financial services industries; ii. associated with an entity in bankruptcy, liquidation or receivership; iii. publicly sanctioned or found in violation of any rules or regulations imposed by statutory, regulatory or professional bodies; or, iv. disqualified from acting as a director or officer of a company.

There are no conflicts of interests between any of the key persons and the Bank. In addition, no key person of the Bank has an interest in any contract, arrangement or transaction entered into by the Bank or its subsidiaries, which is or was unusual in its nature or conditions or significant in relation to the business of the Bank. There are no restrictions on disposal of securities by key persons other than those set out by applicable laws.

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4.Corporate governance framework

The implementation of appropriate Corporate Governance guidelines allows for consolidating the Bank’s universal banking model that is geared towards customers, expanding the customer base, improving operational efficiency and developing human capital. In addition to its obligations towards its shareholders, SGBL group has the obligation of fulfilling its responsibilities towards the depositors and other stakeholders. Setting up a sound corporate governance framework earns and maintains the trust and confidence of the public. A Corporate Governance Charter was developed at SGBL in 2008. It evolves continuously in accordance with new local and international regulations, with the latest amendments introduced in 2013, 2015 and 2017 in line with the Central Bank’s recently issued guidelines. The organizational structure that was set up promotes the sound and proper functioning of the Bank while remaining in line with SGBL group’s corporate culture, objectives and strategy and in compliance with the fundamental principles of sound Corporate Governance. This structure is based on:

1. Internal stakeholders, primarily the Board of Directors, Senior Management Executives, Internal Audit, Risk Management, and Compliance divisions for which a clear definition of roles and responsibilities is established while respecting the principle of the separation of powers through the creation of several committees serving that purpose;

2. The committees of the deliberative and decision making bodies as well as those deriving from these bodies, namely the Audit, Risk, Governance, Remuneration and AML/CFT Committees;

3. External stakeholders, mainly shareholders, supervisory authorities and external auditors; 4. A risk management system stemming from the implementation of an overall risk management policy. This policy has been devised

in accordance with the provisions of the Banking Control Commission circulars. Furthermore, this policy has been detailed for each specific risk: credit risk, concentration risk, market risk and interest rate risk, liquidity risk and operational risks;

5. An internal monitoring system built on formal procedures, both at the continuous monitoring level (daily security and formal supervision) and at the level of periodic internal audit.

6. An efficient system of communication and information specifying the communication channels between all levels of the hierarchy as well as the reporting process enabling all stakeholders to be up to date with policies, procedures and internal control systems adopted by the Bank.

The Board and its committees are governed by their own specific internal regulations. Moreover, each Director acknowledges and agrees to comply with the Director’s Charter as adopted by the Board of Directors. The Board of Directors consists of 10 Directors the majority of whom are independent and non-executive. Board members are elected by an Ordinary General Shareholders' Meeting for a period of three years. The Board of Directors bears the ultimate responsibility of the Bank’s operations and financial soundness. Its main mission is to ensure that the Bank operates in accordance with the regulations to which it is subject, in line with the established strategy and in the best interests of the shareholders whom it represents and defends. In certain areas, the preparatory work for the deliberations of the Board is carried out by specialized Committees composed of directors appointed by the Board; these Committees examine matters within their remit and submit their opinions and proposals to the Board for approval. Board of Directors and Committees

Board of Directors Executive/

Non-Executive (*)

/ Independent (**)

Committees Audit Risk Governance Remuneration AML/CFT

Antoun SEHNAOUI Chairman E Member Chairman

Nabil SEHNAOUI Member NE Member Member Member Member

Pierre Frédéric KAMEL Member NE Member Member

Kafinvest Holding Lebanon SAL - represented by Pierre Frédéric KAMEL

Member NE

NSKINV Ltd - Represented by Antoun SEHNAOUI

Member NE

Societe Generale France SA - Represented by Alexandre MAYMAT

Member NE Member

Jean-Louis MATTEI Member I Chairman

Ishac Mazen HANNA Member I Chairman Chairman

Eric WORMSER Member NE Member Member Member Member Member

Jean-Pierre DUCROQUET

Member I Chairman

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(*)A Director may be considered non-executive if he/she: • does not perform management duties within the Bank, does not carry out any executive tasks at this Bank and /or in any of its branches or subsidiaries in Lebanon and abroad, or does not have advisory capacity vis-à-vis senior management either at the moment or during the two years preceding his/ her appointment as a director; (**) A Director may be considered Independent if he/she: • is a Non-Executive Director; • is not one of the major shareholders who owns, directly or indirectly, more than 5% of the total amount of the shares of the Bank or of the voting rights relating thereto, whichever is higher; • is independent of any members of the Senior Management of the Bank and of its major shareholders, i.e. that there has been no employment ties with any of above mentioned parties whether at the moment or during the two years preceding his/ her appointment as a director; • is not a member of the immediate family, up to fourth degree of consanguinity, of any major shareholder; • is not one of the Bank’s debtors. These committees achieve their mission under the authority of the Board of Directors. The mission of the Risk Committee comprises i) periodically reviewing the organization and the performance of the Risk monitoring framework at SGBL, ii) supervising the effective application of the principles of risk management at the Bank and Group level, iii) examining the portfolio of credit and market risks borne by the Bank, iv) monitoring the portfolio breakdown and its evolution by category of limits/outstanding volumes and debtor clients, the regulatory ratios and key indicators (allocation of common equity per major risk, risk deterioration, concentration risks by sector, cost of risk, etc.), changes to the quality of loans etc. The Audit Committee assists the Board of Directors in its missions and its supervisory role. Overall, the committee i) examines, at regular intervals, the operating conditions and the activities of periodic and permanent internal control, ii) ensures the consistency and effectiveness of the security control measures, of the mechanisms established for the internal control of procedures, risks, regulatory accounting and ethical standards as well as anti-money laundering and anti-terrorist financing mechanisms, iii) ensures that the Bank complies with all the laws, rules and standards that govern the banking industry, namely with the directives, circulars and recommendations of the Central Bank of Lebanon, the Banking Control Commission and the Special Investigation Commission, iv) reports to the Board of Directors the delays detected and the potential discrepancies within the framework of critical or high-priority corrective actions, particularly deficiencies that might expose the Bank to significant risk. The Remuneration Committee is assigned the task of making recommendations concerning i) the process of renewal and replacement of directors and members of Senior Management, ii) the general policy on remuneration at SGBL or within the Group (in light of local developments), iii) the remunerations breakdown of executives and holders of key positions, iv) long term incentives v) fees paid to directors and executives. The mission of the Governance Committee is to i) oversee the effective functioning of the corporate governance structure, ii) evaluate and update this structure, iii) Carry out preparatory work for the examination by the Board of Directors of corporate governance issues, and iv) conduct an annual assessment of the Board of Directors’ performance. The mission of the AML/CFT Committee is to i) support the Board of Directors in its functions and supervisory role with respect to fighting money laundering and terrorist financing and understanding the related risks, and to assist it with making the appropriate decisions in this regard, and ii) To review, from a risk-based approach, the reports submitted by the Compliance Unit and the Internal Audit Unit on adopted procedures, unusual operations and high-risk accounts, regarding cash deposits and withdrawals, transfers, exemptions from filling Cash Transaction Slips (CTS) and the link between these operations and economic activities, and to also take the relevant decisions. The Management Committee is composed of members of executive committee, senior managers and managers representing the major functions and sectors of the Bank and whose responsibilities have a major impact on the activity of the Bank. This Committee is an instance for communication and exchanges on the strategy and the bank’s general interest issues. It promotes the exchange of information and thorough reflection as well as the emergence of positive initiatives for the development of the bank. Frequency of Meetings: The Board holds at least four meetings each year, and whenever required by the Bank’s interest. At least once a year, an item of the agenda is dedicated to the evaluation of the performance of Board of Directors. The frequency of the meetings of the Committees is set by the Board of Directors, taking into account local regulations. A minimum number of meetings is required as follows: • Four annual meetings of the Risk and Audit Committees at the rate of one committee per quarter of which at least two are to be held in Lebanon, • Two annual Remuneration and AML/CFT Committees at the rate of one per semester, • One annual Corporate Governance Committee. Internal Specialized committees In order to achieve an adequate level of protection against the risks faced by the Bank, Senior Management must hold on regular basis internal specialized committees that comprise officers in charge of handling the issues mentioned below. The following committees fall within the category of internal specialized committees: Credit Committees Credit Committees approve loans which exceed the approval limits set for the commercial division.

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Sensitive Risks Committees Sensitive Risk Committees review sensitive and doubtful loans managed by the commercial entities. Frequency of meetings: quarterly. Recovery Committees Recovery Committees are mandated to take decisions in respect of non-performing loans managed by the Recovery Department. Asset/Liability Management Committee (ALCO) This committee's mission is to prepare the decisions of the Management in terms of general tolerance to liquidity risks, validate the contingency funding plan to enable the bank to overcome the liquidity crisis, monitor the evolution of the liquidity situation, validate the adequacy of the monitoring system, management and supervision of structural risks, and review developments of structural Group risk through consolidated reports. Frequency of meetings: Quarterly. Treasury Committee Delegated by the ALCO Management Committee, this committee assesses the Bank’s short-term liquidity and takes steering decisions in accordance with the market’s situation. Frequency of meetings: Monthly. Correspondent Banking Committee This Committee’s mission is to approve the files of correspondent banks that have been authorized by the Board of Directors according to the limits set. Market Risk Monitoring Committee Its mission is: i) to identify, assess and track market risk generated by operations carried out on behalf of his activities of proprietary trading, corporate and institutional clients and the financial department in relation to the ALCO Committee, ii) to define and follow up the alert procedures, and iii) to ensure the real independence between the back and the front offices. Frequency of meetings: Quarterly. Investment Committee: Its mission is to approve equity participation of the Bank in a company in Lebanon and abroad. Operating Real estate Investment Committee Its mission is to approve i) any purchase or sale of real estate within the scope of article 153 of CMC and ii) any participation in a real estate company which activities are strictly limited to the acquisition of said real estate properties. Anti-Money Laundering and Anti-Terrorist Financing Committee Its mission is to monitor and manage human resources, tools, instruments, and regulatory provisions that are necessary to combat money laundering and terrorist financing. Frequency of meetings: quarterly. Operational Risks and Compliance Committee This committee ensures the proper implementation of policies and procedures pertaining to the management of operational risks as set by the Board of Directors and Senior Management. Frequency of meetings: quarterly. Physical and IT Security Committee Its mission is to i) validate the IT and physical security policies following the recommendation of the Head of IT,ii) supervise the proper implementation of this policy, iii) decide on appropriate corrective actions and iv) recommend measures to be taken in case of breaches of any security rules Frequency of meetings: twice a year. Subsidiaries Monitoring Committee This committee’s mission is to monitor the situation of subsidiaries both at the level of their performance and at the level of ongoing risk assessment and compliance with local regulations and with the directives of SGBL group. Frequency of meetings: Quarterly. Projects Portfolio Monitoring Committee This Committee is in charge of i) implementing the Bank transversal projects, ii) monitoring their progress, and iii) decides on projects, priorities and deadlines Frequency of meetings: Every two months New Product Committee This committee approves the concept and the proposal for any new product based on a feasibility study. . It also gives the green light for launching a product based on a complete report detailing targets, marketing channels and the subsequent action plan. Legal Affairs Committee Twice a year, this committee makes an assessment of legal risks coverage at the Recovery and Legal Affairs departments. .

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Quality Monitoring Committee This committee validates the quality policy to be validated by the Board and submits to the General Management periodic reports, at least quarterly, about customers’ claims, the nature, handling, and outcome of these claims, and the measures proposed to improve the policy relating to “The Principles of Banking and Financial Operations with Customers” Frequency of meeting: quarterly Procurement Committee The committee’s mission is to authorize purchases, orders or agreements pertaining to services or maintenance.

5.Internal Audit

Internal audit is an independent body, with a mission to assess the effectiveness of internal control as part of an objective, rigorous and impartial approach. Internal audit is hierarchically related to the Audit Board Committee, to which it reports on its activities.

It covers all activities and entities and is interested in all aspects of their operation, without any restriction. The main roles and scope of the Internal Audit Function include the following: − Identifying, developing and updating the audit plan, addressing key areas of risk and any changes in the risk management framework; − Assessing the design and operation of procedures, processes and controls employed by SGBL; − Drafting audit reports containing a detailed description of audit findings and communicating the findings along with identified failures and

deficiencies to the Board of Directors and Senior Management; and following-up on the status of identified deficiencies.

6.Anti-Money Laundering Policies and Procedures

6.1 Introduction: combating money laundering and terrorism financing Money laundering transactions deriving from criminal activities are well known to constitute, today, a large scale phenomenon (money laundering transactions involve several hundred billion dollars every year). Banks are particularly exposed to this risk and have a major role to play in combating this scourge. Since 1988, several international institutions have adopted special provisions aimed at preventing the use of the international financial system for money laundering transactions, the Financial Action Task Force (FATF) being the main player in this field. Initially aimed at combating drug trafficking, combating money laundering now extends to include all of the organized crimes, especially terrorist acts. Generally speaking, anti-money laundering (AML) regulatory frameworks are inspired from the FATF’s recommendations, with focus on two main topics: • Customer identification procedures • High vigilance when it comes to unusual and complex operations apparently lacking economic justification.

The Lebanese Regulatory Framework

Lebanon undertook to actively cooperate in combating money laundering. Since 2001, specific provisions were taken and preventive measures were adopted, mainly based on the customer's identification, the duty of vigilance and obligation of reporting in case of suspicious transactions. The main law pertaining to combating money laundering and terrorism financing in Lebanon is Law No.44 dated November 11, 2015, which identified new illicit funds and implemented new AML/CFT procedures.

6.2 AML at SGBL SGBL is determined to contribute to combating money laundering and terrorism financing and to assist the competent authorities to the extent possible, based on the laws in force. SGBL Group is constantly adapting its management techniques and organizational structure in the field of risk management – operational and counterparty risks. In this framework, a Compliance Unit was set up as early as 2004 in order to fight money laundering and improve operational risk management. In accordance with the regulations set by the Central Bank, as well as with Societe Generale Group instructions, SGBL has set the following organization for preventing and combating money laundering operations.

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Policies and procedures The bank’s anti-money laundering policies – approved by the Board and procedures are designed to foster compliance with the increasingly strict standards imposed under applicable laws and regulations relating to anti-money laundering, both in Lebanon and in the other jurisdictions where the Bank operates and has correspondent banks. The Bank’s anti-money laundering policies set a standard of compliance that is the minimum applicable across branches and offices. These standards reflect applicable Lebanese laws, Central Bank regulations and international standards and also require the Bank’s foreign operations to meet any higher standards imposed by local legislation. Accordingly, all branches are required to:

§ Identify and know their customers § Ensure that adequate records are kept and preserved § Provide training for relevant employees to enable them to understand and fulfill their obligations under applicable laws and

regulations § Ensure suspicious transactions are reported to the Compliance Officer (AMLO) at the Bank’s head office, who will, in turn, determine

whether a report is to be made to the Bank’s Management, as well as to the Special Investigation Commission, an independent commission at the Central Bank formed to investigate money laundering operations and ensure compliance with applicable laws and regulations.

§ Provide the Compliance Officer with all reasonable access to information that may be of assistance to him/her in carrying out his/her duties.

§ Ensure that all necessary controls and communications are in place and are operating effectively to prevent money laundering and implement all details of the anti-money laundering and know-your-customer (“KYC”) policies and procedures.

§ Implement all details of the anti-money laundering KYC policies and procedures. § Update AML/CFT and sanction tools when deemed necessary. Additional procedures define rules for monitoring customers’ transactions and reporting suspicious activities. In this regard, the Compliance Unit at the Bank’s Head Office produces daily and quarterly reports. Any transaction that does not fit within a customer’s transaction profile should be reviewed by the Anti-Money Laundering Compliance Correspondent at the relevant branch and by the branch manager to determine whether the circumstances give rise to any suspicion of money laundering. An employee should judge a transaction to be suspicious if, in their personal judgment, they know or suspect that the transaction might be connected to any criminal offense or activity. In accordance with the applicable Lebanese law, information relating to customers is required to be updated regularly and money laundering information and documents are stored securely for at least five years. Furthermore, specific tools to prevent money laundering are developed and adopted by Societe Generale and applied by SGBL in order to counter the above mentioned threats:

§ A filtering tool (FIRCOSOFT) to scrutinize international money transfers and detect any persons suspected of involvement in money laundering

§ FIRCOSOFT ON LINE - WORLD CHECK : an online filtering tool of blacklists § Behavioral analysis tools (SIRON) to detect suspicious transactions in retail and private banking activities.

A special board committee for anti-money laundering and combatting financing terrorism AML/CFT board Committee was created in 2017; its mission is to support the Board of Directors in its functions and supervisory role with respect to fighting money laundering and terrorist financing and understanding the related risks, and to assist it with making the appropriate decisions in this regard, and to review, from a risk-based approach, the reports submitted by the Compliance Unit and the Internal Audit Unit on adopted procedures, unusual operations and high-risk accounts, regarding cash deposits and withdrawals, transfers, exemptions from filling Cash Transaction Slips (CTS) and the link between these operations and economic activities, and to also take the relevant decisions. A special committee for combating money laundering A special committee was created at the General Management level in accordance with the regulations in force (AML Committee). It is composed of the following members: the COO, the Head of risk, the Head of execution and control of credits & operations, the Head of the commercial division, the Head of compliance, the Head of legal department and the Head of strategy finance and general secretariat. In broad terms, the committee is responsible for ensuring proper implementation of these anti-money laundering policies and procedures. The committee’s mission can be summarized as follows: • Set up and steer the human means, tools, instruments, and equipment involved in the appropriate implementation of the Bank’s AML

policy • Verify that AML training to the staff is continuously updated • Follow-up on the revision and upgrading of AML measures • Monitor the implementation of the regulations in force, of internal policies and decisions • Examine suspicious transactions before reporting them to the regulatory authorities. • Produce reports regarding operations that are likely to be suspicious operations Implementation of FATCA In 2010, the USA have introduced the Foreign Account Tax Compliant Act (FATCA) in the aim of combating fiscal evasion. FATCA obliges financial institutions to identify the persons and the companies submitted to this regulation, to report them, and to proceed with a withholding of the tax for non-cooperative clients. A whole system for data collection, reporting and tax withholding is being set up at the international level.

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In the framework of FATCA, and in line with Societe Generale, SGBL Group is FATCA Compliant and has implemented all the identification procedures as well as the reporting procedure to meet all the requirements. The anti-money laundering Officer – AMLO The various entities of SGBL Group will act in this field in perfect coordination and harmony with the AMLO, who must compulsorily be consulted on anything concerning fighting against money laundering. The AMLO heads the AML/CFT sanctions and the Compliance and Operational Monitoring unit, the Bank’s entity that is in charge of verifying the implementation of the rules on fighting against money laundering and the financing of terrorism. As per the Main Circular no 83 of the Central Bank, AML/CFT officers have been appointed in each branch of the bank in order to assure the first line of defense for controlling and applying AML/CFT procedures. Under the AMLO’s supervision, the Bank’s Compliance unit is responsible for the following main tasks:

• Disseminate and maintain the anti-money laundering culture within SGBL Group • See to the implementation of the rules, legal, regulatory and deontological standards in the field of fighting against money laundering • Elaborate, organize and implement on a day-to-day basis the anti-money laundering policy within SGBL Group • Act as the liaison for this category of activities between the company affiliated to Societe Generale, and Societe Generale itself, and

eventually the SGBL AML/CFT, Audit and Risk Committees, with the local authorities in charge of fighting against money laundering, particularly for the reporting of suspicious transactions

• See to the implementation of the local provisions related to archiving and set the relevant recommendations • Keep a record of suspicious transactions and other related transactions:

a) Any suspicious transaction detected during the verifications related to customer identification (KYC: know your customer) and/or any transaction reported to the authorities; the information shall include the date, the details regarding the suspicions and indicate the persons notified; b) Any suspicious transaction investigated by the AMLO, as well as the reasons in brief for which it has not been reported. This information should be kept for ten years.

7. Human Resources SGBL Group emphasizes on the professional development of its staff, and constantly works on tailoring its career management, mobility and training policies to suit the needs of the individual as well as the requirements of its business entities. The Human Resource Management of the Bank gives high priority to the training and career development of its employees. The training division is dedicated to developing in-house training programs as well as providing external training sessions to the staff, based on regular needs assessments. The Bank and its consolidated subsidiaries had 2150 employees as at December 31,2017 The proficiency of the Bank’s teams, their know-how and their competencies are recognized across the banking sector and are a pillar of the Group’s development strategy.

8. Insurance The Bank has ongoing insurance policies with several local insurance companies, with respect to its real estate properties, office fixtures and fittings, civil Third Part liability, motor vehicles and electronic equipment, as well as medical insurance, Life & Disability Insurance (with SGBL Insurance) and Workmen compensation & liability policy, in respect of staff. The Bank also has Banker’s Blanket Bond policy to cover such risks as theft, employee’s infidelity, forgery and counterfeit currency, Assistance and Life Insurances for Credit Card owners, Professional Indemnity Insurance, D&O (Directors & Officers) Insurance, and Political Violence Insurance.

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13. THE BANKING SECTOR AND BANKING REGULATIONS IN LEBANON

1. Central Bank and Banking Control Commission The Central Bank of Lebanon (Banque du Liban) is a separate, independent, non-governmental legal entity created by the Law implemented by Decree No. 13513 dated August 1st, 1963, and whose prime responsibility is to safeguard the stability of the local currency and promote monetary stability. In order to implement this task, the Central Bank intervenes in the market through the use of a wide variety of financial instruments, ranging from compulsory reserve requirements on Lebanese Pound and foreign currency deposits to repurchase agreements with the banking sector. The Central Bank has its headquarters in Beirut and has 9 branches spread over the Lebanese territory. The Central Bank is managed by the Governor assisted by four Vice-Governors, and the Central Council. The Governor is the legal representative of the Central Bank, and has extensive authority on the management of the Central Bank. He is entrusted with the enforcement of the Code of Money and Credit, and the implementation of the Central Council's resolutions. The vice-governors assist the Governor in managing the Bank. The Central Council sets the monetary and credit policies of the Central Bank, including money supply, and discount and lending rates. It also decides on various issues concerning the banking and financial sectors. The Banking Control Commission (BCC) defines, along with the Central Bank, the regulations that govern banking activities in Lebanon. The BCC is also in charge of monitoring the compliance of Lebanese banks with these laws and regulations and assesses the financial stability of these institutions based on periodic reporting requirements.

2. The Lebanese Banking Sector The banking sector in Lebanon is a pillar and a major driver of the Lebanese economy. It has always been recognized as stable and financially sound. In fact, the banking sector’s aggregate assets represent over 4.2 times Lebanon’s GDP. As at December 31, 2017, total banking assets in Lebanon reached USD219.9 billion. Banks’ assets have grown at a CAGR (compounded annual growth rate) of 7.7% between 2013 and 2017, mainly as a result of resilient credit activity and substantial financial inflows from abroad. Still, growth was more moderate than in the 2009-2013 period, which saw bank assets grow at a CAGR of 11.8%, as spillovers from the Syrian conflict weighed on economic activity in Lebanon. Banks were still able to generate robust growth in their profits over the past five years driven by a series of Central Bank initiatives and improvements in operational efficiency. As at September 30, 2017, Lebanon had 65 banks (including commercial, investment and Islamic banks) and 51 financial institutions. Most commercial banks in Lebanon operate according to the universal banking business model (i.e. supplying corporate, investment, private and retail banking services). However, in recent years, as bancarization reached high levels and room to grow retail business decreased, the larger banks turned to new markets abroad, as well as to new sources of income, with fee-based activities, advisory, and investment banking making their way into the market despite a difficult economic environment.

3. Banking Regulations Banking activities in Lebanon are governed by the Code of Money and Credit, the Lebanese Code of Commerce, and by the Circulars and Regulations set by the Central Bank and the Banking Control Commission (BCC), the latter having been established in 1967. The BCC has the responsibility of supervising banking activities and of ensuring compliance with the legal and regulatory framework. The BCC undertakes both off-site reviews and on-site examinations to assess compliance with banking laws and regulations, reliability of bank reporting and levels of liquidity, capital adequacy and loan-to-deposit ratios. Banks regularly submit reports to the Central Bank, including monthly statements on their daily foreign exchange positions, monthly financial information on customers and inter-bank deposits and audited financial statements. Banks also submit monthly reports to the Banking Control Commission regarding their loan portfolio, as well as monthly financial statements. Furthermore, like all commercial companies registered in Lebanon, banks must have their by-laws and minutes of certain General Meetings of shareholders as well as Board of Directors’ meetings whose objects relate to, or otherwise affect third parties, registered with the Registrar of Commerce and submitted to the Central Bank and to the Banking Control Commission. The Bank is in compliance with the following Central Bank decisions:

3.1.Related Party Transactions According to Central Bank decision No 11717 Dated March 8th , 2014, a transaction with a related party must be formally authorized by the general assembly of the bank’s shareholders and approved by the bank’s board of directors. The decision also provides that advances and credit facilities to directors, managers and companies having common directors with a bank should not exceed 2% of shareholders’ equity.

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The Central Bank Decision No 7156 Dated November 10th, 1998 provides that inter-bank deposits and placements among banks and foreign affiliated companies (whether or not financial institutions) may not exceed 25% of Tier I Capital. Pursuant to Article 152 of the Code of Money and Credit, the Board of Directors of the Bank must authorize all credit facilities granted directly or indirectly to major shareholders, Board members and Management, as well as to their respective family members and related companies. The authorization of the Board of Directors must specify the amount and terms of the facilities granted, which should thereafter be submitted to the General Assembly for approval as required.

3.2.Reserve Requirements The Central Bank decision Nº 7835, dated June 2nd, 2001 provides that with the exception of investment banks, commercial banks supplying medium and long term loans, must maintain a compulsory reserve in cash with the Central Bank equal to the sum of (a) 25 per cent of the weekly average of Lebanese Pound-denominated demand deposits and (b) 15 per cent of the weekly average of Lebanese Pound-denominated term deposits. Amendments are made to this decision, at the level of exemptions from reserve requirements kto incentivize banks to extend different types of Lebanese Pound-denominated loans, such as, housing, Kafalat, education and consumer loans for the financing of environment-friendly projects. According to the Decision No 7935 dated September 27th, 2001, banks must maintain in cash with the Central Bank an interest-bearing deposit to the extent of 15% of foreign currency-denominated deposits, notes, certificates of deposit and other debt instruments and loans from the financial sector with a remaining maturity of one year or less, against payment of interest at the rate applied by the Central Bank on foreign currency-denominated deposits. According to the Central Bank Decision No 7694 dated October 18th, 2000, Banks and financial institutions must also maintain a minimum of 40%, of their Tier I capital denominated in Lebanese Pounds, after provisions and distributions of profits, in liquid assets, consisting of (a) cash deposited with the Central Bank, (b) cash in the bank’s vaults, (c) cash deposited with other banks for term equal to or less than one year and (d) Lebanese Treasury bills with maturities of one year or less.

3.3. Liquidity Requirements According to Central Bank Decision Nº 7693 dated October 18th, 2000, banks must maintain a minimum of 10% of foreign currency denominated deposits, debt securities, certificates of deposits and other debt instruments with maturities equal or less than one year in liquid assets consisting of (a) cash deposited with the Central Bank, (b) cash in a bank’s vaults, and (c) cash deposited with other banks and for terms equal to or less than one year. The Central Bank Decision No 12768 dated March 8th, 2018 provides that Banks operating in Lebanon must keep a Liquidity Coverage Ratio which reflects their internal assessment of liquidity risk and is consistent with their liquidity profile, provided this ratio exceeds 100% for each significant currency. In addition to Lebanese pound for banks operating in Lebanon, a currency is considered significant if it represents 5% or more of total liabilities.

3.4.Capital Adequacy Requirements As of March 1995, commercial banks were required to meet a minimum capital adequacy ratio of 8% in line with the Basel I Accord. Pursuant to Central Bank Decision Nº 6939 dated March 25, 1998, all banks operating in Lebanon were required to gradually increase their capital adequacy ratio from 8% to 12%, by December 31, 2001. Following the establishment of the Basel II Framework by the Bank of International Settlements, the Central Bank of Lebanon issued circular no. 9302 dated April 1st, 2006, in which it requires commercial banks operating in Lebanon to meet Basel II capital adequacy requirements by January 1st, 2008. As at this date, the Bank was in full compliance with Basel II requirements. Basel II provides measures and minimum standards for capital adequacy and seeks to align regulatory capital requirements more closely to risks that commercial banks face, while encouraging these banks to identify and manage risks. As the international financial regulations evolved in the framework of Basel III requirements, the Lebanese authorities set the following deadlines for banks to comply progressively with these regulations by the end of 2018. Regulatory requirements 31-Dec-15 31-Dec 16 31-Dec 17 31-Dec 18

Common Equity Tier 1 ratio 8.00% 8.50% 9.00% 10.00%

Tier 1 ratio 10.00% 11.00% 12.00% 13.00%

Total capital ratio 12.00% 14.00% 14.50% 15.00%

At the date of this offering, the Bank is fully compliant with Lebanese regulations, in line with Basel III requirements.

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3.5. Corporate Governance According to Central Bank decision Nº 7737 dated December 15th, 2000, banks must establish an internal control and internal audit framework, depending on the size of the relevant bank and the nature of risks it is or might be exposed to and taking into consideration several basic components The Decision Nº 7776 of the Central Bank dated February 21st, 2001 provides that all decisions concerning credit granting, liquid asset investments, real estate investments, shareholding, participations, and operations performed on their own account on structured or derived financial instruments to be taken by banks operating in Lebanon must be submitted to the prior approval of one or more committees, as needed and as per a pre-defined structure and framework, specialized in the setting of efficient strategies for the management, follow-up and development of the bank’s activities, whether at the level of the bank or the banking group, as applicable. The Central Bank Decision No 9382 dated July 26th, 2006 provides that in implementation of the Basel II International Convention regarding the banks’ corporate governance, this decision has outlined the general guidelines for the banks’ corporate governance, regarding, inter alia: (i) the directors’ competence to hold their positions; (ii) the board of directors’ role in specifying the strategic goals and corporate values of the bank and to ensure implementation thereof; (iii) the board of directors’ duty to clearly provide for responsibilities and accountability and to ensure that such responsibility and accountability are thoroughly applied; and (iv) the transparent management of the bank. Pursuant to the Decision No. 9956 dated July 21st, 2008 of the Central Bank, the Board of directors of each Lebanese bank is required to establish :(i) an audit committee composed of at least three non-executive directors, one of whom shall have experience in accounting, financial management or auditing, (ii) a risk committee comprised of at least three directors and chaired by an independent member who has modern and practical banking or financial experience in risk assessment and management. The Decision No.10224 dated August 13th, 2009 provides that Lebanese banks must appoint as of the 2010 financial year two separate external auditors to jointly audit the banks’ accounts. The Bank is in compliance with the requirements provided under said decision. According to the Central Bank Decision No.11821 dated August 6th, 2014, the Board of Directors of Lebanese banks shall before the end of 2014 (i) approve a written “remuneration” policy in line with the bank’s strategy and development; (ii) establish a Remuneration Committee chosen among the Board non- executive members. The Remuneration Committee shall draft the remuneration policy and the remuneration system, supervise the proper implementation thereof and review and assess them periodically. Pursuant to the Decision No. 11323 of the Central Bank dated January 12th, 2013, Lebanese banks must establish a Compliance Department which is divided into (i) a Legal Compliance Unit, and (ii) an AML/CFT Compliance Unit. The Compliance Department should be independent from all other activities of the bank and its members should not be executive members of the banks. Intermediary circular N° 421 Dated May 4th, 2016 of the Central Bank set that Lebanese banks must create an Anti-Money Laundering/Counter Financing Terrorism Board Committee whose responsibilities shall include mainly: (i) supporting the Board of Directors in its function and supervisory role with respect to fighting money laundering and terrorism financing and understanding the related risks, and assisting it with making the appropriate decision in this regard; and (ii) reviewing from a risk-based approach the reports submitted by the compliance and internal audit departments on adopted procedures, unusual operations and high-risks accounts, regarding cash deposits and withdrawals, transfers, exceptions from filling cash transaction slips and the link between these operations and economic activities, and also taking the relevant decision. The Central Bank Decision No. 10227 dated August 21st, 2009 requires the Lebanese banks to adopt a business continuity plan for purposes of ensuring the continuity of the banks’ operations in the event of the occurrence of any disaster or other event that may affect the continuity of any bank’s operation. This decision grants banks a one-year phase-in compliance period. The business continuity plan shall include: (i) preventive and precautionary measures; (ii) detection procedure; (iii) rescue measures or operating pattern during and after the disaster; and (iv) procedures for resuming the ordinary course of business. The Central Bank Decision No. 12670 dated September 18th, 2017 instructed the Lebanese banks to prepare a recovery plan to be approved by their Board of Directors in order to restore stability to their financial situation and to cope with any future difficulties in time crisis. This plan must be written and adapted to the bank’s size, to its level of expansion abroad, and to the degree of complexity of its activities and operations.

3.6.Tier I and Tier II Capital Tier I capital comprises paid up share capital (excluding goodwill and intangible fixed assets), non-cumulative perpetual preferred shares, reserves, retained earnings, reserves for unspecified banking risks and shareholders’ cash contributions to capital (effectively foreign currency non-redeemable perpetual debt), less any unfavorable change in fair value of available-for-sale securities. Shareholders’ cash contributions to capital do not qualify for dividends but, subject to approval from the Banking Control Commission, may bear interest, provided that such interest is paid from net earnings. Tier II Capital comprises preferred shares (other than preferred shares that are both perpetual and non-cumulative), subordinated loans and any favorable change in fair value of available-for-sale securities, the revaluation surplus of the bank’s properties, subject to the Central Bank’s approval, and general provisions for unspecified risks.

3.7.Foreign Exchange Trading According to the Central Bank Decision No 6568 dated April 24th, 1997, proprietary foreign exchange trading position against Lebanese Pounds is restricted by the Central Bank to 1% of a bank’s Tier I capital. The decision maintained the global foreign exchange position under a ceiling of 40% of the net Tier I capital. Banks are however authorized to hold a structural foreign exchange position up to 60 per cent of adjusted Tier I Capital denominated in Lebanese Pounds.

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3.8.Credit Limits The Central Bank Decision Nº 7055 dated August 13th, 1998 sets the maximum allowable weighted credit limit for loans to a single borrower or group of related borrowers at (a) 20.0% of the Bank’s Tier 1 capital with respect to loans extended to a single borrower (or a group of related borrowers) the proceeds of which are to be used in Lebanon or outside Lebanon, or (b) 10.0% of the Bank’s Tier 1 capital with respect to loans extended to a single borrower (or a group of related borrowers) the proceeds of which are to be used in countries with sovereign ratings, subject to the following: • the aggregate exposure of a bank to borrowers in all countries other than Lebanon, regardless of the sovereign ratings of such countries,

may not exceed 400.0% of the Bank’s Tier 1 capital; • for countries with a rating BBB and above, the aggregate exposure of a bank to borrowers in any one such country may not exceed 50.0%

of the Bank’s Tier 1 capital; • for countries with a rating below BBB and unrated, (x) the aggregate exposure of a bank to borrowers in all such countries may not exceed

100.0% of the Bank’s Tier 1 capital and (y) the aggregate exposure of a bank to borrowers in any one such country may not exceed 25.0% of the Bank’s Tier 1 capital; and

• the relevant country limit imposed on a bank’s foreign banking operations may be increased by an additional 25% of the Bank’s Tier 1 capital with respect to loans granted and to be used in the country in which the relevant foreign banking operation conducts its principal business; provided such loans are financed by local deposits.

• Total facilities (exceeding 10% of consolidated Tier 1 capital of the bank) may not exceed 4 times consolidated Tier 1 capital. In any event, exposure to any one borrower or group of borrowers may not exceed 20.0% of the bank’s consolidated Tier 1 capital.

3.9.Loan Classification The Central Bank Decision No. 7159, dated November 10, 1998, as amended among others, by No. 12256 dated May 4th, 2016 introduces specific rules relating to loan classification and provisioning in accordance with the Basel Committee regulations. Specifically, it differentiates between the Retail Loans - which include the consumer loans, the revolving credits, and the housing loans - and the commercial loans such as the corporate or SME loans. It also divides loan facilities into six categories: regular loans, follow up loans, watch list loans, substandard loans, doubtful loans, and Bad Debt Loans. Lebanese banks are required to adopt in addition to the supervisory classification, their own loan grading system in order to manage their credit risk. In this context, Lebanese banks are required to classify the loan into ten categories: Excellent, Strong, Good, Satisfactory, Adequate, Marginal, Vulnerable, Doubtful, Substandard and Loss.

3.10. Credit Losses and Provisions for Doubtful Loans The BCC requires specific provisions to be established for identified credit losses. Full or partial provisions must be made for non-performing loans in accordance with applicable Central Bank regulations. Furthermore, non-performing loans must be put on a non-accrual basis and any interest subsequently received booked on a cash basis, as and when received. Non-performing loans are those which the Bank’s Credit Committee has deemed the borrower as unable to meet his repayment obligations, or whose performance is otherwise unsatisfactory.

3.11. Reserves for General Banking Risks The Central Bank Decision Nº 7129 Dated October 15th, 1998 instructed Lebanese banks to allocate on a yearly basis a general reserve (to be included in Tier I Capital) for unspecified banking risks out of net profits in an amount equal to a minimum of 0.2% and a maximum of 0.3% of risk-weighted assets based on Basel II simulations. The accumulated reserve for unspecified banking risks must be equivalent to 1.25% of risk weighted assets as at December 31, 2008, and 2% of risk weighted assets as at Dec. 31, 2018.

3.12. Accounting Standards Since 1997, all Lebanese banks are required to prepare their financial statements in accordance with International Financing Reporting Standards (IFRS). The Banking Control Commission issued instructions which correspond to International Financial Reporting Standards: the recognition of interest on classified loans only on a cash basis, guidelines for the effects of hyper-inflation, the recording of exchange gains and losses arising from revaluation of foreign exchange positions and a statement of non-monetary assets acquired in settlement of debts at current price. There are also certain restrictions on lending to shareholders and directors and on investments in subsidiaries and affiliates. Central Bank’s Decision Nº 6576 dated April 24, 1997 requires Lebanese banks to prepare consolidated financial statements effective July 1, 1997. Consolidated financial statements should include all companies (financial and non-financial) of which a bank has exclusive control (evidenced by an ownership of 50% and/or exclusive control over management). Companies in which a bank is an associate or has joint control (evidenced by direct or indirect ownership ranging from 20% up to 50%) should be presented using the “equity method”. In addition, the Bank adopted IFRS 7 in its financial reporting for accounting periods as of the 1st of January 2007. IFRS 7 applies to all risks arising from all financial instruments. It introduces the requirements for enhanced balanced sheet and income statement disclosure “by category”, information about any provisions against impaired assets, additional disclosure relating to the fair value of collateral and other credit enhancements used to manage credit risk as well as market risk sensitivity analyses.

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Besides, as of the 1st of January 2011, the Bank has adopted IFRS 9 to replace IAS 39 regarding the classification of financial instruments. As of January 2018, the banks have implemented IFRS9 and provisions required are reflected in their books. The Bank has furthermore elaborated a written policy to substantiate its strategy pertaining to its portfolio of financial instruments. Furthermore based on Central Bank’s Decision No 12713 dated 7 November 2017, banks are required to apply the IFRS 9 (concerning financial instruments), and the ensuing amendments of IFRS 7 (concerning financial instruments disclosures), on both separate and consolidated financial statements. Banks must also prepare and document one or more business models that are consistent with IFRS 9 requirements and that reflect the strategy set to manage financial assets and ensure cash flows.

3.13. AML/CFT Laws and regulations According to Law No. 318 dated April 20, 2001, banks must control their operations with customers in order to prevent any involvement in operations related to money laundering or terrorism financing. This law also established a Special Investigation Commission, which acts as a Financial Investigation Unit, to supervise, control and investigate AML and CFT operations in accordance with the law. Law No. 44 dated November 13, 2015, amended Law No. 318, through, among other changes, the introduction of new predicate offenses, including tax evasion, piracy, insider trading, fraud and corruption, bribery, illicit enrichment, abuse of power and misuse of authority. On May 18 , 2001, the Central Bank issued Decision No. 7818, as amended, to implement Law No. 318, which detailed the requirements with which all banks and other concerned institutions should comply. This Decision covered, among other things, relations with foreign correspondent banks, relations with customers and due diligence measures, controls on certain operations and customers, the establishment of committees and administrative units in charge of the control of operations for fighting money laundering and terrorism financing, and the tasks to be assigned to such units. Central Bank Basic Decision No. 7818 dated 18 May 2001, relating to the Control of Financial and Banking Operations for Fighting Money Laundering and Terrorism Financing (AML/CFT) as recently amended by Central Bank Intermediary Decision No. 12255 dated May 4, 2016, provides that, by no later than May 4, 2017, banks operating in Lebanon must establish an AML/CFT board committee composed of at least three board members, including one independent board member that will act as chair of the committee. The Bank is in the process of establishing the AML/CFT at board level. Pursuant to Central Bank Decision No. 12253 dated May 3, 2016, relating to the U.S. Hizballah International Financing Prevention Act of 2015 and its implementing regulations, regarding the prevention of access by Hizballah to international financial and other institutions, Lebanese banks are required to conduct their operations in compliance with this Act.

3.14. Implementation of FATF Recommendation 6 concerning UN Security Council Resolutions 1267 (1999), 1988 (2011), 1989 (2011), and any related successor resolutions Pursuant to Central Bank Decision No. 12147 dated December 22, 2015, banks, financial institutions and all other institutions licensed or supervised by the Central Bank, and all their branches, sister institutions and subsidiaries abroad are required to (i) review on a continuous basis any updates to the UN Security Council Website concerning the names designated in the lists issued pursuant to UN Security Council Resolutions 1267 (1999), 1988 (2011), 1989 (2011) and any related successor resolutions, and/or issued by the Special Sanctions Committees; and to automatically and immediately freeze, without delay and without any prior notice, the funds, accounts, operations, or other assets in whatever form (i.e., direct, indirect or joint) related to such names, as soon as such names are listed; and to inform the Special Investigation Commission of this action and provide it with any information in this respect within 48 hours; and (ii) notify the Special Investigation Commission in case of similarities between the name of a customer and any specific name and details included in the lists issued pursuant to the UN Security Council Resolutions referred to in (i) above and/or issued by the Special Sanction Committee.

3.15. Adoption of the Common Reporting Standards In line with Lebanon’s commitment to abide by international standards and best practices, several laws have been issued in order to ensure compliance with the common reporting standards issued by the OECD.

• Law No. 55 of 27 October 2016 provides for the exchange of information for tax purposes. • Law No. 60 of 27 October 2016 amended certain provisions of Law No. 44 of 11 November 2008, by introducing a definition of

residency and granting the Lebanese tax authorities with extensive powers of control and inspection in order to comply with exchange of information requirements.

• Law No. 74 of 27 October 2016 imposed tax reporting obligations on persons acting as trustees of foreign trusts. • Law No. 75 of 27 October 2016 prohibits the issuance of bearer shares and shares per order. • Law No. 77 of 27 October 2016 amended article 316 of the Penal Code relating to the financing of terrorism.

3.16. Relationship between Banks and Financial Institutions and their correspondents Pursuant to Banque du Liban Decision N° 10965, dated April 5, 2012, banks and financial institutions in Lebanon must (i) strictly implement the Regulations for the Control of Financial and Banking Operations for Fighting Money Laundering and Terrorist Financing, particularly with respect to customers who require cross-border operations through correspondent banks and financial institutions, (ii) be fully informed of the laws and regulations governing their correspondents abroad, and deal with the latter in conformity with the laws, regulations, procedures, sanctions and restrictions adopted by international legal organizations or by the sovereign authorities in the correspondents’ countries. Any dealings between banks and financial institutions operating in Lebanon, and their branches, subsidiaries or sister companies abroad should also be subject to these conditions.

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3.17. Real Time Gross Settlement System “BDL-RTGS” Pursuant to Banque du Liban Decision N° 11081, dated June 27, 2012, Real Time Gross Settlement System “BDLRTGS” is a national payment system to be used in banks and certain financial institutions which have applied to be a participant. BDL-RTGS has been established at Banque du Liban in accordance with the Code of Money and Credit Decree N° 13513. BDL-RTGS is a domestic funds transfer system whereby participants can send or receive a single Funds Settlement Instruction “FSI” to and from each other. FSIs are settled on a gross basis and in a real time manner provided that participants have sufficient funds or credit facilities. The BDL-RTGS offers the participants secure, reliable and real time method of payment that adheres to International Standards.

3.18. Bank Share Issuing and Trading, Investments and Participations (Prohibitions related to Bearer Shares) Central Bank Basic Circular No. 7814 and Basic Circular No. 7776 have been amended to prohibit banks and financial institutions from carrying on any kind of banking, non-banking, financial or non-financial operations, directly or indirectly, with any company or mutual investment fund, whose shares (or units) are wholly or partially in bearer form or whose shares (or units) are owned, directly or indirectly, by companies or mutual investment funds whose shares or units are in bearer form. In addition, whenever the shares of any Lebanese bank or financial institution are subject to a change in ownership to become the property of companies or mutual investment funds, the concerned bank or financial 97 institution is required, in its sole responsibility, to ensure that the shares of such companies or mutual investment funds (as well as those of any parent companies) are in registered form.

3.19. Prohibition of Exploitation of Inside Non-Public Information Law No. 160 prohibits insider trading, which is defined as the selling or purchasing of securities on the basis of material non-public information. Law No. 160 also prohibits the disclosure of material non-public information and the provision of investment advice on the basis of such information.

4. Capital Markets Authority’s (CMA) Regulations

4.1. Brokerage Activities CMA Decision No. 10, dated January 9, 2014, as amended, which replaces Central Bank Decision No. 6213, dated 28 June 1996, regulates brokerage activities undertaken by authorized institutions and promulgates rules relating to restrictions, transparency and disclosure obligations, among other matters. CMA’s Business Conduct Regulation, Series 3000 dated November 10, 2016, establishes the rules and code of conduct that an approved institution must comply with in carrying out securities business, dealing with clients and handling their assets. This regulation sets forth the internal controls and the procedures that need to be followed by institutions in their dealings with clients and their assets. It, among others, requires investor profiles to be created and maintained to evaluate proposed investment suitability, prohibits the making or acceptance of any phone call with an existing or a potential client regarding the operations of financial instruments unless the call is recorded. All clients are required to be informed that the calls are being recorded and such recordings shall be kept for a period of ten years or, if subject to a dispute, until the resolution of such dispute. In addition, on November 8, 2016, the Central Bank issued Intermediate Decision No. 437, amending Basic Decision No. 7493. The Intermediate Circular provides that banks that are not subject to Legislative Decree No. 50 dated July 15, 1983, and financial institutions are prohibited from undertaking, for the account of their clients, operations on financial instruments and products except through specialized banks that are subject to the provisions of the abovementioned legislative decree or through financial intermediaries. Banks and financial institutions that are non-compliant with these provisions are granted until June, 2018 to reconcile their situation, and this. Furthermore, CMA Series 2000, dated January 10, 2017, sets out requirements related to the licensing and registration of institutions and persons with the CMA in order to conduct securities business activities, identifying categories of licenses specific to dealing, advising, arranging, managing, and custody activities. The CMA ensures that the applicant meets certain principles to be approved for a license.

4.2. Financial Instruments and Products CMA Series 6000, dated 27 July 2017, , sets out the rules for issuing and promoting financial instruments and products including with respect to certain exempted practices. Series 6000 prohibits the issuance and the promotion of financial instruments and products to the public without the CMA’s prior approval. It also imposes transparency and disclosure obligations in respect of such activities.

4.3. Other CMA decisions The CMA has also issued other decisions in respect of, among other things, crowd funding and reporting requirements. CMA Decision No. 20, dated 22 February 2016 enables clients to lodge claims against Lebanese investment services providers before the CMA’s Sanctions Committee, provided clients have addressed the claim to the relevant department of the concerned investment services provider. Pursuant to CMA Decision No. 18, dated 31 August 2015, institutions conducting operations in financial instruments are required to ask their external auditors to include certain specified information relating to operations in financial instruments in the audited financial statements. The Decision also requires external auditors to co-operate with the 98 Control Unit of the CMA on any enquiry in this regard and to provide the CMA with any document or analysis that it may require. CMA Decision No. 17, dated 9 March 2015, the CMA has imposed know-your-client requirements, which require banks to investigate a client’s profile, including its investment objectives, financial situation, risk appetite, among other thing.

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14. TAXATION This section is for general information and contains comments of a general nature only based on applicable Lebanese tax legislation. It does not purport to be a comprehensive description of all relevant Lebanese taxes but describes the principal tax consequences for holders of Series 2018/A Preferred Shares and therefore should not be viewed as a tax advice. Potential investors in Series 2018/A Preferred Shares are recommended to seek advice from their tax consultant prior to making any investment decision.

1. Types of taxes The Lebanese Taxation system provides for the following direct and indirect taxes: Direct taxes:

a. Income tax: - Corporate income tax: Flat tax at a rate of 17% - Tax on moveable assets: Withholding tax at a rate of 10%.

b. Built-up Property Tax

c. Taxes on interest from financial income (introduced in 2003 and amended in October 2017): Withholding tax at a rate of 7%. Indirect taxes

a. Value Added Tax (VAT): the VAT was introduced in the Lebanese Republic in 2002 and is equal to a 11% flat rate as of 01/01/2018 (previous rate 10%). While banks are VAT exempt, all non-banking transactions carried out by a bank are subject to VAT.

b. Stamp Duty: there are two types of stamp duty proportionate and fixed. - A proportionate stamp duty set at 4 per mil (0.4%) (0.3% prior to 27/10/2017), and is usually applied to documents with

specified amounts, such as contracts. - A fixed stamp duty that varies with the type of document and is usually applied to licenses, certificates, receipts, and

invoices.

The fiscal stamp duty should be settled within a maximum period of 5 working days starting from the date of signature of a contract, failing which penalties shall apply. Loan and Advance Granted by Banks - Loans and advances granted by banks (including any financing transactions), are not subject to the proportionate stamp duty, but rather a fixed stamp duty set at LBP 10,000 payable annually (Ministry of Finance Memo. No. 1307 dated August 25th, 2001). Shares - Any declaration for subscription to shares or bonds is subject to the payment of a fixed stamp duty of LBP 5,000 (Stamp Duty Law – Schedule II). All contracts of sale or transfer of shares, bonds or treasury bills, are exempt from the stamp duty imposed by Decree Law No.67 dated 5/8/1967 pursuant to the Law I implemented by Decree No.5439 dated 20/09/1982.

2. Distribution Tax Distributions of dividends and/or payment of premiums are subject to a withholding tax at the rate of 10% that should be declared and paid to the Ministry of Finance within one month following the meeting of the General Assembly of shareholders that resolved said distribution or premium. In principal, this tax is due notwithstanding the nationality or domicile of the beneficiary of the dividends and/or premiums; however, tax treaties aiming to avoid double taxation between Lebanon and other countries, where applicable, may reduce or cancel this tax.

3. Capital Gain Tax (Decision 1/632 dated 01 July 2009)

- Capital gains resulting from the transfer of shares (including preferred shares), by individuals (resident or non-resident in Lebanon) are exempt from tax on moveable assets.

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- Capital gains resulting from a transfer of shares by a company whose object is to buy and sell shares, is subject to corporate tax at the rate of 17% as the gains realized are deemed a part of the company’s income.

- Capital gains resulting from the transfer of shares by a company which is not involved in the purchase and sale of shares are currently taxed at the rate of 10%.

- Capital gains resulting from the transfer of shares by a Lebanese Holding company are exempt from taxes if the shares were held by the Holding company for a period exceeding two years; otherwise they would be subject to a capital gain tax at the rate of 10%.

- Capital gains resulting from the transfer of shares by a non-Lebanese company are in principle exempt from taxes.

15. GENERAL INFORMATION 1. The creation and issue of the Series 2018/A Preferred Shares were authorized by a resolution of the Bank’s Extraordinary General Assembly held on 2 July, 2018. The Central Council of the Central Bank granted its final approval to issue the Preferred Shares on 31 July, 2018 (tentative). All consents, approvals, registrations, authorizations, notifications and other orders of regulatory authorities required to be obtained prior to the Issue Date under the laws and regulations of Lebanon in connection with the issue, offer and sale of the Preferred Shares Series 2018/A have been or, prior to the Issue Date, will be obtained. 2. There are no litigation or arbitration proceedings against or affecting the Bank or its assets, nor is the Bank aware of any pending or threatened proceedings, which have a materially adverse effect on it or its operations or which are or might be material in the context of the issue of the Preferred Shares Series 2018/A. 3.- As at the date of the present Offering Circular, there are no:

- material changes planned by the Bank to the nature of its business. - any other information that would be material to investors

4. The Annual Ordinary General Assembly of the Bank appointed Messrs. Semaan, Gholam & Co and Ernst & Young as the Bank’s auditors for a three-year period ending upon meeting of the Annual Ordinary General Assembly that shall approve the accounts of the Bank for the fiscal year ended 31/12/2016. Ernst & Young PCC and Semaan, Gholam & Co have given their written consent to the distribution of this Offering Circular with the inclusion herein of their reports and references to their names.

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16. EXHIBIT A - subscription application

SUBSCRIPTION APPLICATION FORM ∗

Issuance by Société Générale de Banque au Liban S.A.L.

of Series 2018/A Non-Cumulative Perpetual Convertible Preferred Shares

(the “Preferred Shares”)

∗إستمارة طلب اإلكتتاب .ل.م.إصدار من قبل بنك سوسيته جنرال في لبنان ش

/ أ غير تراكمية 2018ألسهم تفضيلية فئة وقابلة للتحويل ر محددة المدةغي

("األسهم التفضيلية")

The undersigned, hereby confirms having comprehensively reviewed and taken note of the provisions of the offering summary attached hereto (“Offering Summary”) and the offering circular (“Offering Circular”) which set forth the principal terms and conditions of the issuance by Société Générale de Banque au Liban S.A.L. (the “Bank”) of 12,500 (twelve thousand five hundred) Non-Cumulative Perpetual Series 2018/A Preferred Shares (the “Issuance”), and therefore agrees to subscribe to ________________________ Preferred Shares issued by the Bank at a value of USD 10,000 (United States Dollars ten thousand) per Preferred Share, being an aggregate subscription amount of USD _________________________ (the “Subscription Amount”), in accordance with the following terms and conditions:

أحكام كل من على شاملةيؤكد الموقع أدناه أنه اطلع بصورة ") وكتيب اإلصدار موجز اإلصدارموجز اإلصدار المرفق ربطا ("

والشروط األساسية األحكام والذين يحددان ")كتيب اإلصدار(" 0ل0م0من قبل بنك سوسيته جنرال في لبنان شلعملية اإلصدار

/ (إثني عشر ألف وخمسماية) أسهم 12,500") لـ /البنك("غير تراكمية وغير محددة المدة / أ 2018تفضيلية فئة

_____________")، ويوافق بالتالي على اإلكتتاب بـ اإلصدار(""أسهم تفضيلية" مصدرة من قبل البنك على أساس قيمة

/ (دوالر أميركي عشرة آالف) لكل سهم تفضيلي 10,000أ/0د، أي مبلغ اكتتاب إجمالي قدره / أ 2018 فئة

")، وفقا مبلغ اإلكتتاب/ ("__________________أ/0د لألحكام وللشروط التالية:

1) The undersigned admits and acknowledges that the minimum acceptable subscription amount is set at USD 50,000 (United States Dollars fifty thousand) and that the additional amounts that may be subscribed to are multiples of USD 10,000 (United States Dollars Ten Thousand).

ـــــــأن الحـــــــد )1 ـــــــاه وأخـــــــذ علمـــــــا ب ـــــــع أدن أقـــــــر الموقـــــــــــــــغ ـــــــــــــــاب يبل ـــــــــــــــول لإلكتت ـــــــــــــــى المقب األدن

(دوالر أميركــــــــــــــــــي خمســــــــــــــــــون /0/50,000أ0دألـــــــف) وأن أي اكتتـــــــاب إضـــــــافي يمكـــــــن أن يـــــــتم

ــــــــغ د ــــــــى أســــــــاس أضــــــــعاف مبل / 0/10,000أ0عل (دوالر أميركي عشرة آالف).

2) Capitalized terms used herein and not otherwise defined have the respective meanings ascribed thereto in the Offering Summary and in the Offering Circular.

ــــــــين مــــــــزدوجين إن )2 ــــــــارات المعــــــــرف عنهــــــــا ب العبــــم يعطــــى لهــــا فــــي المســــتند الحاضــــر، والتــــي ل

ـــــك ـــــى عـــــن تل ـــــف آخـــــر، لهـــــا نفـــــس المعن أي تعريوفـــــــــي المحـــــــــددة فـــــــــي "مـــــــــوجز اإلصـــــــــدار"

."كتيب اإلصدار"

3) The undersigned acknowledges that the Bank is also acting as placement agent (the “Placement Agent”) in connection with the issuance, offer and sale of the Preferred Shares.

ـــــأن " )3 ـــــاه علمـــــا ب ـــــع أدن ـــــذ الموق ـــــك"أخ يقـــــوم البنــــــــــوزع اإلصــــــــــدار (" ــــــــــوزع أيضــــــــــا بمهــــــــــام م م

") فيمـــــا يتعلـــــق بإصـــــدار وعـــــرض وبيـــــع اإلصـــــدار "األسهم التفضيلية".

∗ Banque du Liban and/or the Capital Markets Authority in Lebanon shall bear no responsibility for the information contained in this Subscription Application and in the Offering Summary or for the merits of any offering of Series 2018/A Preferred Shares

"استمارة طلب اإلكتتاب" متن ھیئة األسواق المالیة أي مسؤولیة بالنسبة للمعلومات الواردة في/أو الیتحمل مصرف لبنان و∗ ./أ 2018للنتائج المترتبة عن مزایا أي عروض متعلقة باألسھم التفضیلیة فئة أو بالنسبة وفي "موجز اإلصدار" الحاضرة

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4) The undersigned acknowledges that the present subscription application form (the “Subscription Application Form”) is subject to the Bank’s approval. Thus, the Bank may, in its sole discretion, accept or decline this offer to subscribe in whole or in part, without being under any obligation neither to justify nor to motivate such decision. Moreover, the basis for allotting the shares among the subscribers will be determined by the Bank which shall have the right to reduce the number of Preferred Shares requested by the undersigned at its sole and entire discretion, as it deems appropriate. Furthermore, the present Subscription Application Form may be declined even after its acceptance by the Bank, in case the banking regulatory or supervisory authorities express any reservations or objections on the undersigned. In such case, the undersigned undertakes to transfer the preferred shares allotted to him to another Eligible Investor (as defined in the Offering Circular) upon the Bank’s first demand.

ـــــب )4 ـــــأن إســـــتمارة طل ـــــا ب ـــــاه علم ـــــع أدن ـــــذ الموق أخإســــــــــــتمارة طلــــــــــــب اإلكتتــــــــــــاب الحاضــــــــــــرة ("

") تخضـــــــــــع لموافقـــــــــــة "البنـــــــــــك". اإلكتتـــــــــــاببالتـــــــالي، يتمتـــــــع "البنـــــــك"، وفقـــــــا الستنســـــــابه ـــــاب ـــــرض اإلكتت ـــــض ع ـــــول أو رف ـــــق قب ـــــرد، بح المنفـــــــب ـــــــك دون أن يترت ـــــــا، وذل ـــــــا أو كلي الحاضـــــــر جزئي

ـــــر لقـــــراره هـــــذا. ـــــه إعطـــــاء أي تبري فضـــــلا عـــــن عليذلـــــــك، يعـــــــود "للبنـــــــك" تحديـــــــد أســـــــس توزيـــــــع األســـــهم علـــــى المكتتبـــــين، علمـــــا بأنـــــه يحـــــق لـــــه تخفــــــــــــيض عــــــــــــدد "األســــــــــــهم التفضــــــــــــيلية" ـــــــع المطلـــــــوب اإلكتتـــــــاب بهـــــــا مـــــــن قبـــــــل الموقأدنـــــــــاه، وذلـــــــــك وفقـــــــــا الستنســـــــــابه المنفـــــــــرد

إضـــــــافة إلـــــــى والمطلـــــــق ولمـــــــا يـــــــراه مناســـــــبا.ـــــ ـــــب اإلكتت ـــــوز رفـــــض "إســـــتمارة طل ـــــك، يج اب" ذل

ـــــــــى بعـــــــــد قبولهـــــــــا مـــــــــن قبـــــــــل الحاضـــــــــرة حت"البنــــــك"، وذلــــــك فــــــي حــــــال حصــــــول أي تحفــــــظ أو إعتــــــــراض مــــــــن قبــــــــل الســــــــلطات المصــــــــرفية

، بحيــــــث يتعهــــــد الموقــــــع النظاميــــــة أو الرقابيــــــةـــــــأن يتفـــــــرغ عـــــــن ـــــــة، ب ـــــــاه فـــــــي هـــــــذه الحال أدناألســـــــهم التفضـــــــيلية المخصصـــــــة لـــــــه لصـــــــالح أي "مســــــتثمر مؤهــــــل" (كمــــــا هــــــو معــــــرف عنــــــه

ــــــــي " ــــــــاء ألول ف ــــــــك بن ــــــــب اإلصــــــــدرا")، وذل متي طلب يصدر عن "البنك".

5) The undersigned acknowledges and accepts that this Subscription Application Form shall also be subject to the Priority Subscription Rights granted to holders of Series 2012, Series 2013 and Series 2015 Preferred Shares to subscribe to the issued Series 2018/A Preferred Shares pro rata to their holdings.

ـــــــى أن )5 ـــــــاه علمـــــــا ووافـــــــق عل ـــــــع أدن أخـــــــذ الموق"إســـــــتمارة طلـــــــب اإلكتتـــــــاب" الحاضـــــــرة تخضـــــــع ــــــاب باألفضــــــلية باألســــــهم ــــــوق اإلكتت أيضــــــا لحق

والمصــــــــــدرة مــــــــــن /أ 2018التفضــــــــــيلية فئــــــــــة ـــــــــــالكي األســـــــــــهم "ا ـــــــــــة لم ـــــــــــك" الممنوح لبن

وفئـــــــــة 2013وفئـــــــــة 2012التفضـــــــــيلية فئـــــــــة بنسبة مساهمته.كل 2015

6) Upon acceptance by the Bank of the undersigned’s demand, the present Subscription Application Form shall become a binding and effective agreement between the Bank and the undersigned subject to the provisions of paragraph 4 above and paragraphs 7 and 8 below. Accordingly, the undersigned will not be entitled to cancel or otherwise terminate this Subscription Application Form for any reason whatsoever.

ع أدنـــــــاه مـــــــن قبـــــــل فـــــــور قبـــــــول طلـــــــب الموقـــــــ )6"البنـــــــك"، تصـــــــبح "إســـــــتمارة طلـــــــب اإلكتتـــــــاب" الحاضـــــــــــرة بمثابـــــــــــة عقـــــــــــد ملـــــــــــزم وســـــــــــاري ــــــع أدنــــــاه، مــــــع المفعــــــول بــــــين "البنــــــك" والموق

7أعـــــــاله والفقـــــــرتين 4مراعـــــــاة أحكـــــــام الفقـــــــرة ـــــــاه. 8و ـــــــع أدن ـــــــه ال يحـــــــق للموق بالتـــــــالي، فإن

ــــــــاه إلغــــــــاء أو فســــــــخ االســــــــتمارة الحاضــــــــرة أدن ألي سبب كان.

7) The undersigned acknowledges that the Issuance is subject to corporate and regulatory authorizations and that it shall be discontinued and immediately and automatically terminated in the event that:

أخــــــــذ الموقــــــــع أدنــــــــاه علمــــــــا بــــــــأن "اإلصــــــــدار" )7ظاميــــــة وبــــــأن هــــــذا يخضــــــع لتــــــراخيص خاصــــــة ون

"اإلصــــــــدار" ســــــــوف يتوقــــــــف وينتهــــــــي فــــــــورا وحكما في حال:

(a) The Central Bank of Lebanon (the “CBL”) does not approve the Bank’s capital increase through the issuance of Preferred Shares for any reason whatsoever.

عـــــدم موافقـــــة مصـــــرف لبنـــــان علـــــى زيـــــادة )أــــــــق إصــــــــدار رأســــــــ ــــــــك" عــــــــن طري مال "البن

"األســـــــــــــهم التفضـــــــــــــيلية"، وذلـــــــــــــك ألي سبب كان.

(b) The Bank’s Extraordinary General Assembly (“EGA”) does not approve the increase of capital and the issuance of Preferred Shares for any reason whatsoever.

عــــــدم موافقــــــة الجمعيــــــة العموميــــــة غيــــــر )بالعاديــــــة "للبنــــــك" علــــــى زيــــــادة رأســــــماله وعلـــــــى إصـــــــدار "األســـــــهم التفضـــــــيلية"،

وذلك ألي سبب كان.

108

8) The undersigned shall not be entitled to withdraw his offer to subscribe to the Preferred Shares unless in the event of major and substantial discrepancies between the final terms of the Issuance as described in the Offering Circular (and the relevant documentation) and any amended terms thereof as may be resolved by the Bank’s EGA before the Issue Date which may adversely affect the undersigned’s subscription.

The Bank shall notify the undersigned in writing of the existence of such major and substantial discrepancies. If the Bank does not receive from the undersigned a written request to withdraw his offer to subscribe to the 2018/A Preferred Shares due to such discrepancies within a maximum period of seven (7) calendar days as of the date of service of the aforesaid notice, the present Subscription Application shall be deemed binding and irrevocable and, accordingly, the Subscription Amount will not be refunded to the undersigned.

ــــــــع أدنــــــــاه أن يســــــــحب عرضــــــــه )8 ال يمكــــــــن للموقباإلكتتــــــــاب "باألســــــــهم التفضــــــــيلية" الحاضــــــــر، ــــــــوارق أساســــــــية ــــــــود ف ــــــــال وج ــــــــي ح ــــــــا ف إلوجوهريــــــــــــــة بــــــــــــــين األحكــــــــــــــام النهائيــــــــــــــة "لإلصـــــــدار" كمـــــــا هـــــــي مبينـــــــة فـــــــي "كتيـــــــب

(وفـــــــي المســـــــتندات التابعـــــــة لـــــــه) اإلصـــــــدار" وتلــــــك التــــــي قــــــد يــــــتم تعــــــديلها قبــــــل تــــــاريخ

عيــــــــة العموميــــــــة "اإلصــــــــدار" مــــــــن قبــــــــل الجمؤثر ســـــلبا قـــــد تـــــغيـــــر العاديـــــة "للبنـــــك"، والتـــــي

ــــــــــــــــــــــــى ــــــــــــــــــــــــاب المســــــــــــــــــــــــتثمر.عل اكتت

سوف يعلم "البنك" الموقع أدناه بوجود الفوارق . في بصورة خطية المذكورة أعالهاألساسية والجوهرية بسحب الموقع أدناه طلبا خطيا من حال لم يتبلغ "البنك"

بسبب / أ 2018فئة لية عرضه باإلكتتاب باألسهم التفضي) أيام من تاريخ 7(سبعة خالل مهلة أقصاها تلك الفوارق

إبالغه كتاب "البنك" اآلنف الذكر، سوف تعتبر "استمارة ملزمة وغير قابلة للرجوع عنها، طلب اإلكتتاب" الحاضرة

لموقع امن قبل دون إمكانية استرجاع "مبلغ اإلكتتاب" .تبعا لذلك أدناه

9) Should the undersigned refrain from exercising his right to withdraw his subscription within the above-mentioned time limit, the Subscription Amount shall be allocated to the purchase of the Preferred Shares according to the terms of the Offering Summary and the Offering Circular.

ـــــاه حقـــــه )9 ـــــع أدن ـــــم يســـــتعمل الموق فـــــي حـــــال لاكتتابــــــه ضــــــمن المهلــــــة المبينــــــة بــــــالرجوع عــــــن

ــــــــــغ ــــــــــتم تخصــــــــــيص "مبل ــــــــــاله، ســــــــــوف ي أعاإلكتتـــــــــاب" لشـــــــــراء "األســـــــــهم التفضـــــــــيلية" وفقــــــــا ألحكــــــــام "مــــــــوجز اإلصــــــــدار" و"كتيــــــــب

اإلصدار".

10) The undersigned undertakes and covenants to pay the Subscription Amount contemplated above upon signing this Subscription Application Form, by wire transfer in United States Dollars to a subscription dedicated account opened with the Bank (the “Subscription Dedicated Account”), the details of which are as follows:

ـــــــع أ )10 ـــــــد الموق ـــــــتعه ـــــــزم ب ـــــــاه والت ـــــــدن دفع أن يـــــع ـــــور توقي ـــــاله ف ـــــدد أع ـــــاب" المح ـــــغ االكتت "مبل

ـــــك "إســـــتمارة ـــــاب" الحاضـــــرة وذل ـــــب اإلكتت طلبموجـــــــــــــب تحويـــــــــــــل مصـــــــــــــرفي بالـــــــــــــدوالر ـــــــاب ـــــــى حســـــــاب مخصـــــــص لالكتت األميركـــــــي إل

ــــــك" (" ــــــدى "البن ــــــوح ل ــــــاب مفت حســــــاب االكتتـــــــــى المخصـــــــــص ـــــــــددة تفاصـــــــــيله عل ")، والمح

الشكل التالي:

Subscription Dedicated Account "حساب اإلكتتاب المخصص"

Bank : Société Générale de

Banque au Liban S.A.L.

Swift Code : SGLILBBX

Account No. :

Reference : SGBL-Series 2018/A

Preferred Shares

ل0م0البنك: بنك سوسيته جنرال في لبنان ش

SGLILBBXسويفت:

حساب رقم:

SGBL-Series 2018/Aالمرجع:

Preferred Shares

Dividends or other distributions including refunds together with interests thereon as specified here below, if any, paid inter alia as a result of (i) the refusal by the Bank of this Subscription Application Form in whole or in part, (ii) the termination of the offering, (iii) the exercise by the Subscriber of its rescission right, or (iv) the redemption of the Series 2018/A Preferred Shares allotted to the undersigned, are to be paid

يجري تسديد أنصبة األرباح أو أية توزيعات أخرى بما فيها المبالغ المستردة والفوائد المتعلقة بها وفقا لما هو مبين

على سبيل –أدناه، في حال توجبها، والمدفوعة نتيجة ) رفض "إستمارة طلب اإلكتتاب" i( –التعداد ال الحصر

) إنهاء العرض، iiمن قبل "البنك"، أو ( الحاضرة كليا أو جزئيا) iv) استعمال المكتتب حقه بإلغاء اإلكتتاب، أو (iiiأو (

المخصصة / أ 2018فئة األسهم التفضيلية استرداد ، وذلك لدى الحساب المصرفي المحددة للموقع أدناه

تفاصيله على الشكل التالي:

109

at the following bank account, the details of which are as follows:

Subscriber’s Account حساب المكتتب

Name of Subscriber’s bank:

Branch :

Account No. :

إسم مصرف المكتتب:

الفرع:

رقم الحساب:

The undersigned acknowledges that he will be entitled to receive interests on the Subscription Amount paid by him hereunder, calculated from the date on which the funds are deposited in the Subscription Dedicated Account until the date of their transfer to the account that will be opened by the Bank at the CBL towards depositing the funds needed for the Bank’s capital increase and the issuance of the Preferred Shares (or any earlier date on which all or any portion of such amount is refunded to the subscriber in accordance with the provisions set out herein), at a rate of 6% (six per cent.) per annum as due and payable by the Bank.

أخذ الموقع أدناه علما بأنه سوف يحق له استيفاء فوائد متأتية عن "مبلغ اإلكتتاب" المدفوع من قبله وفقا ألحكام هذا الطلب، تحتسب من تاريخ إيداع األموال في "حساب اإلكتتاب المخصص" وحتى تاريخ تحويل هذه األموال إلى الحساب الذي سوف يتم

لبنان بهدف إيداع األموال فتحه من قبل "البنك" لدى مصرفالبنك" وإصدار "األسهم التفضيلية" (أو "الالزمة لزيادة رأسمال

حتى أي تاريخ سابق آخر يتم فيه إعادة كل أو جزء من هذا المبلغ لى المكتتب وفقا لألحكام المنصوص عليها في الطلب الحاضر)، إ

نك".(ستة بالمئة) سنويا تستحق وتدفع من قبل "الب %6بنسبة

11) The undersigned acknowledges that the Preferred Shares will be deposited, upon their issuance, in the Bank’s account with Midclear, Account No.19/20, and instructs the Bank to hold the Preferred Shares purchased by him hereunder in custody for his benefit, in compliance with its standard custody arrangements.

أخــــــذ الموقــــــع أدنــــــاه علمــــــا بأنــــــه ســــــوف يــــــتم )11إيـــــــداع "األســـــــهم التفضـــــــيلية" فـــــــور إصـــــــدارها، ــــــدكلير ــــــدى شــــــركة مي ــــــك" ل ــــــي حســــــاب "البن ف

، ويعطـــــــــــــي 19/20ش.م.ل.، حســـــــــــــاب رقـــــــــــــم منــــــذ اآلن تعليماتــــــه "للبنــــــك" مــــــن أجــــــل حفــــــظ

ــــــــــــي ســــــــــــوف "األســــــــــــهم التفضــــــــــــيلية" ا لتيتملكهــــــا لديــــــه وذلــــــك، علــــــى ســــــبيل الحراســــــة ــــــل وفقــــــا ألســــــس الحراســــــة المعتمــــــدة مــــــن قب

"البنك".

12) The undersigned acknowledges that the Bank shall convene after the Closing Date the first Special General Assembly (“SGA”) of the body of holders of Series 2018/A Preferred Shares in accordance with the provisions of Law No. 308 dated April 3, 2001 which set out the automatic establishment of a body of holders upon the issuance of preferred shares whose task and purpose is to protect the interests of such holders. The agenda of such SGA shall be dedicated to the appointment of one or more representative(s) of the holders of Series 2018/A Preferred Shares’ Association.

ـــــأن "البنـــــك" ســـــوف )12 ـــــاه علمـــــا ب ـــــع أدن أخـــــذ الموق Closingيــــــدعو بعــــــد تــــــاريخ تنفيــــــذ اإلكتتــــــاب (

Date أول جمعيــــــــة عموميــــــــة خاصــــــــة لهيئــــــــة ،(، /أ 2018حــــــــاملي األســــــــهم التفضــــــــيلية فئــــــــة

ـــــــــاريخ 308وفقـــــــــا ألحكـــــــــام القـــــــــانون رقـــــــــم ت، والتــــــــــي تــــــــــنص علــــــــــى التشــــــــــكيل 3/4/2001

التلقــــــــــــــائي لهيئــــــــــــــة حــــــــــــــاملي األســــــــــــــهم ـــــون هـــــذه التفضـــــيلية ـــــور إصـــــدارها. تك ـــــك ف وذل

الهيئـــــــــة مكلفـــــــــة بصـــــــــيانة مصـــــــــالح حـــــــــاملي "األســـــــــــــــهم التفضـــــــــــــــيلية" المـــــــــــــــذكورة. إن جـــــــدول أعمـــــــال الجمعيـــــــة العموميـــــــة الخاصـــــــة ــــــة ــــــر لهيئ ــــــل أو أكث ــــــين ممث ــــــاول تعي ســــــوف يتن

/أ. 2018حاملي األسهم التفضيلية فئة

13) The undersigned hereby agrees, represents and warrants to the Bank on the date hereof, that:

ــــــع أدنــــــاهإن )13 لتــــــزم تجــــــاه او، وافــــــق وصــــــرح الموق ، بما يلي:ذه اإلستمارةه "البنك" بتاريخ

(i) He is an Eligible Investor where “Eligible Investor” means any individual or legal entity other than the Chairman, or any member of the Board of Directors or General Managers of the Bank, or the spouse or any minor children of any such

)i( أنــــــه "مســــــتثمر مؤهــــــل" هــــــذا علمــــــا بــــــأن"المســـــــــتثمر المؤهـــــــــل" لإلكتتـــــــــاب هـــــــــو أي شــــــــــخص طبيعــــــــــي أو معنــــــــــوي غيــــــــــر رئـــــــــــــيس مجلـــــــــــــس اإلدارة، أو أي عضـــــــــــــو

لمــــــــــديرين العــــــــــامين لمجلــــــــــس اإلدارة أو اأو زوجـــــــــــة أو األوالد القاصـــــــــــرين لهـــــــــــؤالء األشـــــــــــخاص، أو أي شـــــــــــخص يمـــــــــــثلهم، أو أي شــــــــخص أميركــــــــي أو بريطــــــــاني يكــــــــون

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person, or any person acting on their behalf, or any US or UK person expressly prohibited from purchasing the Series 2018/A Preferred Shares pursuant to the United States Securities Act of 1933 (Regulation S) and/or the United Kingdom Financial Services & Markets Act 2000, as amended.

(ii) He acknowledges that the representations made by him hereunder will be relied upon by the Bank, and as such, he confirms that and agrees (a) to be liable towards the Bank therefor, (b) to promptly inform the Bank in the event of occurrence of any changes in the representations and warranties made by him, (c) that the information provided for in Appendices (A), (B), and (C) attached hereto are true, accurate and complete.

(iii) All information provided or that will be provided by the undersigned to the “Bank” either in the account opening documentation, or in the KYC Form, or in the Economic Right Declaration, or in the FATCA Forms, or in the Common Reporting Standard Self Certification or such other documentation, are true, accurate and complete.

محظــــــر عليــــــه شــــــراء باألســــــهم التفضــــــيلية / أ وفقـــــــــا ألحكـــــــــام القـــــــــانون 2018فئـــــــــة

ــــــــــــ ـــــــــــروف ب ـــــــــــي المع UnitedاألميركStates Securities Act of 1933

(Regulation S) ـــــــــــــــــــه وتعد و/أو يالتالقــــــــــــانون اإلنكليــــــــــــزي المعــــــــــــروف بـــــــــــــ United Kingdom Financial Services & Markets Act 2000 ،

.هتوتعديال

)ii( ـــــــك" ســـــــوف ـــــــأن "البن ـــــــه أخـــــــذ علمـــــــا ب أنــــــي قــــــام بهــــــا ــــــى التصــــــاريح الت يســــــتند الــــــــع أدنــــــــاه بموجــــــــب هــــــــذا الطلــــــــب، الموقـــــــى (أ) ـــــــق عل ـــــــد ويواف ـــــــه يؤك ـــــــه، فإن وعلي

لبنـــــــــــك" اعتبـــــــــــاره مســـــــــــؤولا تجـــــــــــاه "اـــــــق بهـــــــذه بالنســـــــبة فـــــــي كـــــــل مـــــــا يتعلالتصـــــــــاريح، و(ب) إعـــــــــالم "البنـــــــــك" فـــــــــور حصـــــــول أي تغييـــــــر فـــــــي واقـــــــع التصـــــــاريح ــــــى أن ــــــك"، و(ج) عل ــــــام بهــــــا "للبن ــــــي ق الت

) Aالمعلومــــــــات الــــــــواردة فــــــــي المالحــــــــق (المرفقـــــــة ربطـــــــا، هـــــــي صـــــــحيحة C)) و(Bو(

ودقيقة وكاملة.

)iii( أن جميــــــــــع المعلومــــــــــات التــــــــــي زودهــــــــــاــــــع أ ــــــاه "للبنــــــك" أو التــــــي ســــــوف الموق دن

ــــــواردة ــــــك ال ــــــده بهــــــا، ســــــواء تل ــــــتم تزوي يفـــــــي مســـــــتندات فـــــــتح الحســـــــاب، أو فـــــــي نمـــــــــــوذج "إعـــــــــــرف عميلـــــــــــك"، أو فـــــــــــي تصـــــــــريح صـــــــــاحب الحـــــــــق االقتصـــــــــادي، أو

ـــــــــــاذج ـــــــــــي نم ــــــــــــ ف ـــــــــــي FATCAال ، أو فاســـــــــتمارة الشـــــــــهادة الذاتيـــــــــة لإلقامـــــــــة

هــــــــــي الضــــــــــريبية ، أو أي مســــــــــتند آخــــــــــر، صحيحة ودقيقة وكاملة.

(iv) He acknowledges receipt of a copy of the Offering Circular which includes inter alia Offering Summary, and confirms that, prior to the purchase of any Preferred Shares, he has been given the opportunity to make all needed inquiries with the Bank’s management pertaining to the terms and conditions of the Issuance and such other matters set forth in the Offering Circular and the relevant documentation.

)iv( ـــــب اإلصـــــدار" أنـــــه اســـــتلم نســـــخة عـــــن "كتيــــــا ــــــة م ــــــن جمل ــــــذي يتضــــــمن م يتضــــــمنهال

ـــــــــه ،"مـــــــــوجز اإلصـــــــــدار" ـــــــــد أن كمـــــــــا يؤكــــــــــل شــــــــــراء ــــــــــه الفرصــــــــــة قب ــــــــــت ل أعطي

إلستفســــــــــــار التفضــــــــــــيلية" ل "األســــــــــــهملــــــدى إدارة "البنــــــك" عــــــن أحكــــــام وشــــــروط ــــــــــرى ــــــــــن أي مســــــــــألة آخ "اإلصــــــــــدار" وعــــــب اإلصــــــدار" منصــــــوص عليهــــــا فــــــي "كتي

التابعة له. وفي المستندات

(v) He declares that he has reviewed the Offering Circular attached hereto and acknowledges that the information contained therein may not be deemed as a tax, legal or accounting advice provided by the Bank to the undersigned.

)v( " ـــــــــأنـــــــــه اطلـــــــــع علـــــــــى اإلصـــــــــدار" ب كتيالمرفـــــــــــق ربطـــــــــــا وأخـــــــــــذ علمـــــــــــا بـــــــــــأن ــــــى ــــــي إل ــــــه ال ترم ــــــواردة في ــــــات ال المعلومــــــــــة استشــــــــــارات ضــــــــــرائبية أو ــــــــــأمين أي ت

مــــــن قبــــــل "البنــــــك" قانونيــــــة أو محاســــــبية .لصالح الموقع أدناه

(vi) He acknowledges that the Preferred Shares shall not be listed on the Beirut

)vi( أقــــــــر بــــــــأن "األســــــــهم التفضــــــــيلية" لــــــــنــــــة ــــــدرج فــــــي بورصــــــة بيــــــروت وال فــــــي أي ت

111

Stock Exchange or on any other foreign stock exchange.

بورصة أجنبية.

(vii) He understands and asserts that, if he is acting on behalf of a corporation or any other legal entity, he has the legal capacity and authority to execute the Subscription Application Form and is vested with all needed powers to this effect from such entity’s competent bodies.

)vii( ـــــه فـــــي حـــــال ـــــاه وأكـــــد أن ـــــع أدن أقـــــر الموقكـــــــــان يمثـــــــــل أيـــــــــة شـــــــــركة أو أي كيـــــــــان قــــــــانوني آخــــــــر، بأنــــــــه يتمتــــــــع باألهليــــــــة ذ القانونيـــــــــــــــــة والصـــــــــــــــــالحية لتنفيـــــــــــــــــ

ــــــــاب" الحاضــــــــرة، ــــــــب اإلكتت "اســــــــتمارة طلوبأنـــــــه استحصـــــــل مـــــــن أجـــــــل ذلـــــــك علـــــــى جميــــــــع الموافقــــــــات الالزمــــــــة مــــــــن قبــــــــل المراجــــــع المختصــــــة لــــــدى الشــــــركة التــــــي

يمثلها.

(viii) He acknowledges and agrees that the dividends distributions payable in respect of the Series 2018/A Preferred Shares for any year, are subject to the availability of sufficient distributable net income for the relevant year, as described in the Offering Circular and the Offering summary included thereto.

)viii( ــــــــاه ووافــــــــق ــــــــع أدن ــــــــى أن أقــــــــر الموق علــــــتســــــديد أنصــــــبة األر ــــــة احب ــــــن المتوجب ع

ـــــــة األســـــــهم ا ـــــــن / أ 2018لتفضـــــــيلية فئ ع اتـــــوفر أرباحـــــســـــنة معينـــــة، يبقـــــى خاضـــــعا ل

تلـــــــك صـــــــافية قابلـــــــة للتوزيـــــــع وعائـــــــدة ل، وفقــــــــا لمــــــــا هــــــــو محــــــــدد فــــــــي لســــــــنةا

ـــــــــب اإلصـــــــــدار" و"مـــــــــوجز اإلصـــــــــدار" "كتي المشمول به.

(ix) He acknowledges and agrees that Series 2018/A Preferred Shares are non-cumulative, and accordingly, the holders of such shares cannot benefit from the accumulation of dividends that are in arrears. Therefore, should distributions of dividends not be declared for any year or paid, for any reason whatsoever, holders of Series 2018/A Preferred Shares will not be entitled to receive distributions even if funds are or become subsequently available

)ix( ــــــــاه ووافــــــــق ــــــــع أدن ــــــــى أن أقــــــــر الموق علــــــــــــة / أ 2018األســــــــــــهم التفضــــــــــــيلية فئ

ـــــالي فـــــال يمكـــــن ـــــة، وبالت ـــــر تراكمي هـــــي غيأن يســــــتفيد مــــــالكي هــــــذه االســــــهم مــــــن تــــــــــــراكم أنصــــــــــــبة األربــــــــــــاح المتعلقــــــــــــة

ــــــالي، فــــــي حــــــال بالســــــنوات الســــــابقة. بالتــــاح لســــنة ــــع أنصــــبة أرب ــــرار وتوزي ــــتم إق ــــم ي ل

يحــــــق ماليــــــة معينــــــة ألي ســــــبب كــــــان، لــــــن لمــــــــــالكي األســــــــــهم التفضــــــــــيلية فئــــــــــة

/ أ قـــــــبض أيـــــــة أنصـــــــبة أربـــــــاح عـــــــن 2018تلـــــــك الســـــــنة الماليـــــــة حتـــــــى فـــــــي حـــــــال

.كانت متوفرة أو أضحت متوفرة الحقا

(x) He acknowledges and agrees that the Series 2018/A Preferred Shares shall be of perpetual existence and have no fixed final redemption date and that the holders of Series 2018/A Preferred Shares shall not benefit from any put option to redeem and cancel their Series 2018/A Preferred Shares either in whole or in part.

)x( ــــــــاه ووافــــــــق ــــــــع أدن ــــــــى أن أقــــــــر الموق علــــــــــــة ا / أ 2018ألســــــــــــهم التفضــــــــــــيلية فئ

ـــــــدة ـــــــددة الم ـــــــر مح ـــــــي غي ـــــــث ه ـــــــن حي مـــــــيس لهـــــــا طبيعتهـــــــا ـــــــاريخ اســـــــترداد ول ت

مـــــــــــــــــالكي األســـــــــــــــــهم محـــــــــــــــــدد، وأنــــــــــة ــــــــــون / أ 2018التفضــــــــــيلية فئ ال يتمتع

باســــــترداد بعــــــض "البنــــــك"بحــــــق مطالبــــــة ـــــــة ـــــــل األســـــــهم التفضـــــــيلية فئ 2018أو ك

./ أ التي يملكونها

(xi) He acknowledges and agrees that the Series 2018/A Preferred Shares are subject to redemption and cancellation, in whole or in part, at the sole discretion and option of the Bank.

(xii) He acknowledges and agrees that the Series 2018/A Preferred Shares are not, and will not be, registered under the United States Securities Act of 1933, as amended (the “Securities Act”), the United Kingdom Financial Services & Markets Act 2000, as amended, or under the securities laws

)xi( ـــــــع أدنـــــــاه ووافـــــــق علـــــــى أنأقـــــــر الموقــــــــــــة ا / أ 2018ألســــــــــــهم التفضــــــــــــيلية فئ

ـــــاء، ســـــواء هـــــي ـــــة لإلســـــترداد واإللغ قابل وفقـــــــــــا الستنســـــــــــابكليـــــــــــا أو جزئيـــــــــــا،

المطلقين. "البنك" ئةيولمش

)xii( ـــــــع أدنـــــــاه ووافـــــــق علـــــــى أنأقـــــــر الموقــــــــــــة ا / أ 2018ألســــــــــــهم التفضــــــــــــيلية فئ

غيــــــر مدرجــــــة ولــــــن تــــــدرج وفقــــــا هــــــيام القــــــــانون األميركــــــــي المعــــــــروف ألحكــــــــ

United States Securities Actبــــــــ of 1933 و/أو القـــــــــــــانون ه تـــــــــــــوتعديال

112

of any other jurisdiction. Any offer, sale, resale or delivery of the Series 2018/A Preferred Shares within the United States and/or the United Kingdom, or to, or for the account or benefit of, any US or UK person prohibited from purchasing preferred shares pursuant to the Regulation S of the Securities Act as amended and/or the United Kingdom Financial Services & Markets Act 2000, as amended, would constitute a violation of the US laws and/or the UK laws (as the case may be) unless made pursuant to an exemption therefrom.

ــــــــــــ ـــــــــــروف ب ـــــــــــزي المع UnitedاإلنكليKingdom Financial Services &

Markets Act 2000هتـــــــــــــ، وتعديال ،األوراق الماليــــــــة كمــــــــا وألحكــــــــام قــــــــوانين

ـــــــــي أي ـــــــــرى. ف ـــــــــة أخ ـــــــــرض، دول وإن أي عتفــــــرغ أو تســــــليم لألســــــهم تفــــــرغ، إعــــــادة

/ أ داخـــــــــــــــل 2018التفضـــــــــــــــيلية فئـــــــــــــــة أو و/الواليـــــــــــــات األميركيـــــــــــــة المتحـــــــــــــدة

ـــــــا، أو لصـــــــالح ـــــــدة لبريطاني ـــــــة المتح المملكيركـــــــــــــــي أو مأو باســـــــــــــــم أي مـــــــــــــــواطن أ

ـــــــك أســـــــهما ـــــــه تمل ـــــــر علي بريطـــــــاني محظ نظـــــــــام الــــــــــ ألحكـــــــــامتفضـــــــــيلية ســـــــــندا Regulation S لقــــــــــــــــــانون مــــــــــــــــــن ا

ــــــــــــ ـــــــــــروف ب ـــــــــــي المع UnitedاألميركStates Securities Act of 1933

ه و/أو القــــــــــــانون اإلنكليــــــــــــزي تــــــــــــوتعديال United Kingdomالمعــــــــــروف بـــــــــــ

Financial Services & Markets Act 2000 ســــــــوف يشــــــــكل هتــــــــوتعديال ،

خرقــــــــــــــــا للقــــــــــــــــوانين األميركيــــــــــــــــة و/أو ـــــــي ـــــــا ف ـــــــاالت)، إل ـــــــة (حســـــــب الح البريطاني

حال إعفائهم من هذا الحظر.

(xiii) He acknowledges and agrees that most of the Bank’s operations are conducted in Lebanon and that, accordingly, the financial condition and results of operations of the Bank are greatly affected by the political, economic and monetary circumstances and conditions of Lebanon.

(xiv) He acknowledges and agrees that the Bank may at any time, even in case of a Mandatory Conversion, cancel any distribution of dividends for any relevant year in its absolute discretion taking into account its financial situation and its solvency. In such event, the right of the holders of Series 2018/A Preferred Shares to receive the Fixed Annual Dividend set out in the Offering Circular for the relevant financial year, shall become void de jure and will not be carried forward to the next financial year. Furthermore, the cancelation of any dividends distribution shall not be considered as an event of default and may not give rise to the preferred shareholders’ right to petition for the insolvency or the winding-up of the Bank

)xiii( ــــــــاه ووافــــــــق ــــــــع أدن ــــــــى أن أقــــــــر الموق علـــــــذة فـــــــي أغلبيـــــــة عمليـــــــات "البنـــــــك" منف

إن الوضـــــــع المـــــــالي فـــــــلبنـــــــان، وبالتـــــــالي ونتـــــــائج عمليـــــــات "البنـــــــك" تتـــــــأثر بشـــــــكل ــــــــراء الظــــــــروف والشــــــــروط ــــــــن ج ــــــــر م كبيــــــــــــة السياســــــــــــية واإلقتصــــــــــــادية والنقدي

في لبنان.

)xiv( علـــــــى أنـــــــه أقـــــــر الموقـــــــع أدنـــــــاه ووافـــــــقيحـــــــــق "للبنـــــــــك" فـــــــــي أي وقـــــــــت كـــــــــان وحتـــــــــــــى فـــــــــــــي حـــــــــــــاالت "التحويـــــــــــــل ــــــة ــــــع أي ــــــة توزي ــــــي"، أن يلغــــــي عملي اإللزامأربـــــاح عـــــن ســـــنة معينـــــة وفقـــــا الستنســـــابه المطلـــــــــق، وذلـــــــــك بعـــــــــد األخـــــــــذ بعـــــــــين ــــــي ــــــه. وف ــــــة ومالءت ــــــه المالي ــــــار حالت اإلعتبهـــــــــذه الحالـــــــــة، يســـــــــقط حـــــــــق مـــــــــالكي

ــــــــــــة / أ 2018األســــــــــــهم التفضــــــــــــيلية فئــــــــــاح الســــــــــنوية بإســــــــــتيفاء األ الثابتــــــــــةرب

عــــــــن فــــــــي "كتيــــــــب اإلصــــــــدار"المحــــــــددة حكمــــــا، وال يضــــــم الســــــنة الماليــــــة المعنيــــــة

إن إلغــــــاء وإلــــــى الســــــنة الماليــــــة الالحقــــــة. عمليـــــــة توزيـــــــع أيـــــــة أربـــــــاح ال يشـــــــكل أي إخــــــــــالل وال يخــــــــــول مــــــــــالكي األســــــــــهم ـــــــــب إفـــــــــالس أو تصـــــــــفية التفضـــــــــيلية طل

.المصرف

(xv) He acknowledges and agrees that in case of occurrence of a “Trigger Event” (as defined in the Offering Circular), all the Series 2018/A Preferred Shares then outstanding shall be, upon provision of a “Conversion Notice” (as defined below), mandatorily and finally

)xv( ــــاه ووافــــق ــــع أدن ــــر الموق ــــه أق ــــى أن فــــي عل Triggerحــــــال حصــــــول "حــــــدث موجــــــب"

Event ـــــــدد ـــــــا هـــــــو مح ـــــــب (كم ـــــــي "كتي ف)، تحـــــــــــول جميـــــــــــع األســـــــــــهم اإلصـــــــــــدار"

ـــــــة ـــــــي 2018التفضـــــــيلية فئ ـــــــة ف / أ القائمــــــــة، فــــــــور ــــــــة ونهائي حينــــــــه بصــــــــورة إلزاميــــــل إلزامــــــي" (كمــــــا إرســــــال " إشــــــعار بتحوي

) إلـــــى ر"فـــــي "كتيـــــب اإلصـــــداهـــــو محـــــدد ـــــة ـــــا حاج ـــــك"، دونم ــــــ "البن ـــــة ل أســـــهم عادي

113

converted into common shares of the Bank without the need for the consent of the holders of the Series 2018/A Preferred Shares, at a rate of one (1) common share per two (2) Preferred Shares Series 2018/A subject to (i) any Adjustment Event (as defined in the Offering Circular), and (ii) obtaining the necessary approvals from the Central Bank of Lebanon (“Mandatory Conversion”). It being noted that, following a Mandatory Conversion, the Bank will be fully discharged and irrevocably released from any and all obligations vis-à-vis the holders of the Preferred Shares Series 2018/A in respect of such series of preferred shares, immediately upon the registration of the relevant common shares with Midclear SAL.

(xvi) He acknowledges and agrees that the purchase of Series 2018/A Preferred Shares is only adapted for Eligible Investors having the financial ability and willingness to accept the risks of investing for an undetermined period and the lack of liquidity which are characteristics of the investment described in the Offering Circular.

لإلستحصـــــــــال علـــــــــى موافقـــــــــة مـــــــــالكي / أ، 2018األســــــــــــهم التفضــــــــــــيلية فئــــــــــــة

ـــــل ـــــد لك ـــــادي واح ـــــدل ســـــهم ع ـــــك بمع وذل/ أ ، 2018فئــــــــــــة تفضــــــــــــيليين ســــــــــــهمين

وذلــــــــــــك (أ) مــــــــــــع مراعــــــــــــاة أي "حــــــــــــدث فـــــــــي (كمـــــــــا هـــــــــو محـــــــــدد تصـــــــــحيحي"

ــــــــب اإلصــــــــدار" ، و(ب) شــــــــرط أن يــــــــتم )"كتيمصـــــــــرف موافقـــــــــات ال علـــــــــى اإلستحصـــــــــ

ــــــل ــــــة ("التحوي ــــــة لهــــــذه الغاي ــــــان الالزم لبنـــــه هـــــذا اإللزامـــــي"). تبعـــــا لحصـــــول علمـــــا أن

ــــــة ــــــرأ أي حال ــــــل إلزامــــــي"، ســــــوف تب "تحويـــــــة "البنـــــــك" تجـــــــاه مـــــــالكي األســـــــهم ذم

/ أ بصــــــــــــــورة 2018التفضــــــــــــــيلية فئــــــــــــــة نهائيـــــة وغيـــــر قابلـــــة للرجـــــوع عنهـــــا مـــــن أي

هـــــــــذه الفئـــــــــة مـــــــــن يتعلـــــــــق بموجـــــــــب م التفضـــــــــــيلية، وذلـــــــــــك فـــــــــــور األســـــــــــه

المعنيــــــــــة تســــــــــجيل األســــــــــهم العاديــــــــــة لــــــــــــــــدى شــــــــــــــــركة ميــــــــــــــــدكلير ش.م.ل.

)xvi( ــــــــاه ووافــــــــق ــــــــع أدن ــــــــى أن أقــــــــر الموق عل/ أ 2018أســــــــهما تفضــــــــيلية فئــــــــة شــــــــراء

مالئمـــــــــــــــــا فقـــــــــــــــــط "للمســـــــــــــــــتثمرين ــــــــؤهلين" ــــــــذالم ــــــــدرة ال ــــــــون بالق ين يتمتع

ـــــــــــاطر ـــــــــــل مخ ـــــــــــراغبين تحم ـــــــــــة وال الماليددة المـــــــدة اإلســـــــتثمار لفتـــــــرة غيـــــــر محـــــــ

ــــــن ــــــي تشــــــكل قوال ــــــي الســــــيولة والت ص فل فــــــــــي خصــــــــــائص اإلســــــــــتثمار المفصــــــــــ

"كتيب اإلصدار".

14) This Subscription Application Form shall be enforceable by and against the successors of the undersigned and shall inure to the benefit of and be enforceable by the undersigned and his respective successors. This Subscription Application Form may not be transferred or assigned by the undersigned to a third party under any circumstances.

ــــــاب" الحاضــــــرة هــــــي )14 ــــــب اإلكتت إن "اســــــتمارة طلــــــــاء ــــــــه خلف ــــــــل وبوج ــــــــن قب ــــــــذ م ــــــــة للتنفي قابل

عليـــــــــه، تكـــــــــون "اســـــــــتمارة الموقـــــــــع أدنـــــــــاه. وطلـــــــب اإلكتتـــــــاب" ســـــــارية المفعـــــــول ونافـــــــذة لصـــــــالح كـــــــل مـــــــن الموقـــــــع أدنـــــــاه وخلفائـــــــه. ال يحــــــق إطالقــــــا للموقــــــع أدنــــــاه التفــــــرغ أو تحويــــــل ــــــــاب" الحاضــــــــر ــــــــب اإلكتت هــــــــذه "اســــــــتمارة طل

لمصلحة أي شخص ثالث كان.

15) The undersigned hereby irrevocably empowers each of Messrs. Philippe Dubois, Tarek Chehab and Georges Saghbini, acting jointly or severally, to complete, execute and deliver, on behalf of the undersigned, any and all applications, subscription forms and such other documents needed or appropriate for the acceptance and registration by the CBL of the undersigned as a shareholder of the Bank, without accepting any liability whatsoever on the part of each of the aforementioned persons.

ــــــــع أدنــــــــاه بصــــــــورة غيــــــــر قابلــــــــة )15 فــــــــوض الموقـــــوا للرجـــــوع عنهـــــا، كـــــل مـــــن الســـــادة ـــــب دوب فيلي

ـــــــ ـــــــاد وطـــــــارق شـــــــهاب وج ورج صـــــــغبيني، باإلتحواإلنفــــــراد، مــــــن أجــــــل إتمــــــام وتنفيــــــذ وتســــــليم، بإســــــم الموقــــــع أدنــــــاه، أيــــــة طلبــــــات واســــــتمارات

قــــــــــد يقتضــــــــــي آخــــــــــر اكتتــــــــــاب وأي مســــــــــتند توقيعــــــه أو تنفيــــــذه مــــــن أجــــــل قبــــــول وتســــــجيل ــــــك" مــــــن ــــــاه كمســــــاهم فــــــي "البن ــــــع أدن الموقــــــل أي ــــــك دون أن يتحم ــــــان، وذل ــــــل مصــــــرف لبن قب

يــــــة مســــــؤولية مــــــن أي مــــــن هــــــؤالء االشــــــخاص أ نوع كان.

16) The undersigned hereby authorizes the Bank to take any and all steps needed towards redeeming and canceling the Preferred Shares and converting the same

ـــــك" )16 ـــــاه "للبن ـــــع أدن ـــــص الموق ـــــب هـــــذا ب رخ موجالقيـــــام بجميـــــع اإلجـــــراءات الالزمـــــة مـــــن الطلـــــب،

أجــــــــــــل اســــــــــــترداد "األســــــــــــهم التفضــــــــــــيلية" وإلغائهـــــــــا وتحويلهـــــــــا إلـــــــــى أســـــــــهم عاديـــــــــة

114

into common shares in accordance with the mechanism set out in the Offering Summary which is included in the Offering Circular (where applicable), including inter alia the power to instruct and authorize Midclear S.A.L. to proceed with such redemption, cancellation and conversion (as the case may be).

ــــــة المنصــــــوص عليهــــــا فــــــي "مــــــوجز وفقــــــا لآلليـــــــب اإلصـــــــدار" اإلصـــــــدار" المشـــــــمول فـــــــي "كتي

ـــــــد اإلقتضـــــــاء) بمـــــــا فيـــــــه صـــــــالحية إصـــــــدار ،(عنتعليمــــــــــــات والتــــــــــــرخيص لشــــــــــــركة ميــــــــــــدكلير

اإلســـــــــــــــترداد عمليـــــــــــــــات النفـــــــــــــــاذ 0ل0م0شواإللغـــــــــاء والتحويـــــــــل المومـــــــــأ إليهـــــــــا أعـــــــــاله

.الحالة)(حسب

17) The undersigned acknowledges that the Bank shall bear all liabilities in connection with the issuance of the Series 2018/A Preferred Shares howsoever the same arise from its own and direct actions. Furthermore, and subject to the Lebanese laws governing the board members’ liability arising from their management of the Bank, the undersigned will not be entitled to claim any right or compensation whatsoever either from Société Générale (France) S.A. (“SG France”) or from its representatives, officers, directors, advisors and agents in the Bank who are not concerned or engaged or bound by the present Issuance and assume and accept no obligation or liability whatsoever in connection thereto. Therefore, the undersigned hereby releases, discharges and holds SG France, its representatives, managers, officers, directors, advisors and agents whether acting as (i) members of the Bank’s Board of Directors or (ii) the Bank’s managers, harmless from and against any responsibility, liability, claim, right, lawsuit, damage, or compensation whatsoever arising out of or in connection with, either directly or indirectly, the terms of the Offering Summary and/or the Offering Circular, or for the merits of any offering related to the purchase of the Preferred Shares.

ـــــأن )17 ـــــاه علمـــــا ب ـــــع أدن "البنـــــك" ســـــوف أخـــــذ الموقيتحمـــــــل كامـــــــل المســـــــؤولية المتعلقـــــــة بإصـــــــدار

الناتجـــــــــة /أ 2018األســـــــــهم التفضـــــــــيلية فئـــــــــة ـــــك ـــــن ذل ـــــه المباشـــــرة. فضـــــلا ع ـــــن أفعال ـــــع ، ع وم

ـــــــــوانين ـــــــــاة الق ـــــــــة مراع ـــــــــي تاللبناني ـــــــــى الت رعــــــــــــس اإلدارة عــــــــــــن مســــــــــــؤولية أعضــــــــــــاء مجل

ــــــك"، ــــــاه إدارتهــــــم "للبن ــــــع أدن ــــــق للموق ــــــن يح لالمطالبـــــــة بـــــــأي حـــــــق أو تعـــــــويض مـــــــن أي نـــــــوع ــــــرال (فرنســــــا) ــــــاه سوســــــيته جن ــــــان، ســــــواء تج ك

) أو ممثيلهــــــــــــــــــــا، أو ”SG France“( .ش.مأعضـــــــــاء مجلـــــــــس إدراتهـــــــــا، أو مستشـــــــــاريها أو وكالئهــــــا فــــــي "البنــــــك" كــــــونهم غيــــــر معنيــــــين

ين بهــــــــذا "اإلصــــــــدار" وال يتحملــــــــون أي أو ملــــــــزمموجـــــــب أو أيـــــــة مســـــــؤولية مـــــــن أي نـــــــوع كـــــــان ـــــرئ ـــــي هـــــذا الســـــياق، يب ـــــي هـــــذا اإلطـــــار. وف ف

ـــــــع أدنـــــــاه ذمـــــــة وممثليهـــــــا SG Franceالموقوموظفيهـــــــــــا وأعضـــــــــــاء مجلـــــــــــس ومـــــــــــدرائها

إدارتهــــــــــا ومستشــــــــــاريها ووكالئهــــــــــا ســــــــــواء ـــــــك" iكـــــــانوا ( ـــــــس إدارة "البن ) أعضـــــــاء فـــــــي مجل

ــــــــة ) مــــــــدراء فــــــــiiأو ( ــــــــك"، مــــــــن أي ي إدارة "البنمســـــــــؤولية، أو مطلـــــــــب، أو حـــــــــق، أو دعـــــــــوى، أو ـــــاتج عـــــن أو ـــــوع كـــــان، ن ضـــــرر أو تعـــــويض مـــــن أي نمتعلـــــــــق بصـــــــــورة مباشـــــــــرة أو غيـــــــــر مباشـــــــــرة بأحكـــــــام "مـــــــوجز اإلصـــــــدار" وبأحكـــــــام "كتيـــــــب ـــــــق بشـــــــراء اإلصـــــــدار"، أو لجهـــــــة أي عـــــــرض يتعل

"األسهم التفضيلية".

18) The undersigned acknowledges that SG France and its representatives, officers, directors, advisors and agents have not reviewed and accept no responsibility for any information contained in the Offering Summary and in the Offering Circular.

ـــــــع أدنـــــــاه علمـــــــا بـــــــأن )18 SG Franceأخـــــــذ الموقـــــــــــس وممثل يهـــــــــــا، ومـــــــــــدرائها وأعضـــــــــــاء مجل

إدارتهــــــــــــا ومستشــــــــــــاريها ووكالئهــــــــــــا، لــــــــــــم ـــــــــواردة فـــــــــي ـــــــــى المعلومـــــــــات ال يطلعـــــــــوا عل"مــــــــوجز اإلصــــــــدار" وفــــــــي "كتيــــــــب اإلصــــــــدار"، ــــــة مســــــؤولية لهــــــذه ــــــالي أي ــــــوا بالت ــــــن يتحمل ول

الجهة.

19) This Subscription Application Form shall be governed by and construed in accordance with the Lebanese Laws in force and shall be subject to the exclusive jurisdiction of the courts of Beirut.

20) The undersigned hereby acknowledges that (i) he is fluent in English, (ii) he comprehensively reviewed this Subscription Application Form as well as all the terms and provisions of the Offering Circular, notably those written in English, and (iii) he

تمارة طلـــــــب اإلكتتـــــــاب" الحاضـــــــرة تخضـــــــع "إســـــــ )19ــــــــة ــــــــوانين اللبناني ــــــــام الق ــــــــا ألحك وتفســــــــر وفقالمرعيــــــــــــة اإلجــــــــــــراء وللصــــــــــــالحية الحصــــــــــــرية

لمحاكم بيروت.

ـــــع أدنـــــاهيقـــــر )20 اللغـــــة ويجيـــــد يـــــتقن(أ) أنـــــه ب الموقوافيــــــــة بصــــــــورة أنــــــــه إطلــــــــع (ب) و ،نجليزيــــــــةإلا

اإلكتتـــــــاب" الحاضـــــــرة طلـــــــب"اســـــــتمارة علـــــــى ـــــــــــب وعلـــــــــــى جميـــــــــــع بنـــــــــــود وأحكـــــــــــام "كتي

ــــــــك ،اإلصــــــــدار" ــــــــة ال ســــــــيما تل باللغــــــــة المكتوبكليـــــــا. مضـــــــمونهاأنـــــــه فهـــــــم (ج) ، ونجليزيـــــــةإلا

115

understood them entirely. The undersigned further acknowledges that (i) he has been given the opportunity to ask the necessary questions regarding the issuance of the Series 2018/A Preferred Shares and received the relevant responses from the Bank, and (ii) he obtained additional information needed to understand and assess the benefits and risks associated with the purchase of such preferred shares.

تــــــــم إعطــــــــاءه (أ) ويقــــــــر الموقــــــــع أدنــــــــاه بأنــــــــه إصــــــدار حــــــول الالزمــــــة ســــــئلة األالفرصــــــة لطــــــرح

وتلقــــــــى / أ 2018 م التفضــــــــيلية فئــــــــةهاألســــــــأنــــــه (ب) و، "البنــــــك"جابــــــات عنهــــــا مــــــن قبــــــل اإل

ـــــــات ـــــــى معلوم إضـــــــافية ضـــــــرورية استحصـــــــل عللفهــــــــــم وتقيــــــــــيم مزايــــــــــا ومخــــــــــاطر شــــــــــراء

.سهم التفضيليةتلك األك الوامت

IN WITNESS WHEREOF, the undersigned has signed this Subscription Application Form in two original copies each containing the same and equal tenor which shall constitute one and the same instrument, binding on all parties hereto.

، وقع الموقع أدناه "إستمارة طلب اإلكتتاب" الحاضرة بناء عليهعلى نسختين أصليتين متطابقتين واللتين تشكلين مستند واحد

ملزم للفريقين.

By: _______________________

Name: _____________________

Title: ______________________

Date and Place: ______________

_________________________التوقيع:

__________________________اإلسم:

_________________________الصفة:

____________________التاريخ والمكان:

[If signing on behalf of a corporation, kindly insert title of person signing and affix company seal or stamp].

(في حال التوقيع بإسم شركة، الرجاء ذكر صفة الموقع ووضع ختم الشركة أو مصادقتها).

For Authentification∗ of Signature: على التوقيع: ∗للمصادقة

By: ______________________________ Name: ___________________________ Title: ____________________________ Date and Branch: _________________

________________________التوقيع:

_________________________اإلسم:

_________________________الصفة:

____________________التاريخ والفرع:

This Authentification shall not be deemed as an acceptance or

approval by the Bank of the subscription to the Preferred Shares. إن هذا التوقيع لن يعتبر بمثابة قبول أو موافقة "البنك" على اإلكتتاب باألسهم ∗

التفضيلية.

116

10

SOCIETE GENERALE DEBANQUE AU LIBAN S.A.L.

Accepts the subscription

Number of Allotted Preferred Shares:

_______________

Aggregate Subscription Amount:

_____________________________USD

Declines the subscription

By: _______________________

Name: _____________________

Title: ______________________

Date and Place: ______________

By: _______________________

Name: _____________________

Title: ______________________

Date and Place: ______________

إن بنك سوسيته جنرالفي لبنان ش.م.ل

يوافق على اإلكتتاب

عدد األسهم التفضيلية الموافق على اإلكتتاب بها :

_______________

مجموع مبلغ اإلكتتاب:

_____________________________ د.أ

يرفض اإلكتتاب

التوقيع: ________________________

اإلسم: _________________________

الصفة: ________________________

التاريخ والمكان: ___________________

التوقيع: ________________________

اإلسم: _________________________

الصفة: _________________________

التاريخ والمكان: ____________________

117

11

APPENDIX A

DECLARATION OF OWNERSHIP OF SERIES 2012PREFERRED SHARES

The undersigned hereby declares and confirms, at his entire responsibility that:

(Notch the suitable box)

He is the holder of ------------------Series 2012 Preferred Shares He does not hold any Series 2012 Preferred Shares

Name :

Date :

Signature :

A ملحق

تصريح عن ملكية ألسهم تفضيلية فئة 2012

بأنــه: مســؤوليته، كامــل علــى ويؤكــد يصــرح أدنــاه، الموقــع إن

(إختر المربع المالئم)

يملك ------------- سهما تفضيليا فئة 2012

ال يملك أي سهم تفضيلي فئة 2012

االسم:

التاريخ:

التوقيع:

APPENDIX B

DECLARATION OF OWNERSHIP OF SERIES 2013 PREFERRED SHARES

The undersigned hereby declares and confirms, at his entire responsibility that:

(Notch the suitable box)

He is the holder of ------------------Series 2013 Preferred Shares He does not hold any Series 2013 Preferred Shares

Name :

Date :

Signature :

B ملحق

تصريح عن ملكية ألسهم تفضيلية فئة 2013

إن الموقع أدناه، يصرح ويؤكد على كامل مسؤوليته، بأنه

(إختر المربع المالئم)

يملك ------------- سهما تفضيليا فئة 2013

ال يملك أي سهم تفضيلي فئة 2013

االسم:

التاريخ:

التوقيع:

APPENDIX C

DECLARATION OF OWNERSHIP OF SERIES 2015 PREFERRED SHARES

The undersigned hereby declares and confirms, at his entire responsibility that:

(Notch the suitable box)

He is the holder of ------------------Series 2015 Preferred Shares He does not hold any Series 2015 Preferred Shares

Name :

Date :

Signature :

C ملحق

تصريح عن ملكية ألسهم تفضيلية فئة 2015

إن الموقع أدناه، يصرح ويؤكد على كامل مسؤوليته، بأنه

(إختر المربع المالئم)

يملك ------------- سهما تفضيليا فئة 2015

ال يملك أي سهم تفضيلي فئة 2015

االسم:

التاريخ:

التوقيع:

118

17.Consolidated Financial Statements

1- Audited annual consolidated financial statements for the year ended December 31, 2017

2- Audited annual consolidated financial statements for the year ended December 31, 2016

3- Audited annual consolidated financial statements for the year ended December 31, 2015

119

INDEXTOTHEFINANCIALSTATEMENTS

AuditedConsolidatedFinancialStatementsoftheBankasatandfortheyearendedDecember31,2017

F-1

- IndependentAuditors’ReporttotheShareholdersoftheBankdated26April2018issuedbyErnst&Youngp.c.candSemaan,Gholam&CoasatfortheyearendedDecember31,2017 F-2

- ConsolidatedincomestatementforeachoftheyearsendedDecember31,2017and2016 F-6- ConsolidatedstatementofcomprehensiveincomeforeachoftheyearendedDecember31,2017 F-7- ConsolidatedstatementoffinancialpositionfortheyearsendedDecember31,2017and2016 F-8- ConsolidatedstatementofchangesinequityfortheyearendedDecember31,2017 F-9- ConsolidatedstatementofcashflowsfortheyearsendedDecember31,2017and2016 F-10- NotetotheConsolidatedFinancialStatements F-11

AuditedConsolidatedFinancialStatementsoftheBankasatandfortheyearendedDecember31,2016

F-89

- IndependentAuditors’ReporttotheShareholdersoftheBankdated25April2017issuedbyErnst&Youngp.c.candSemaan,Gholam&CoasatfortheyearendedDecember31,2016

F-90

- ConsolidatedincomestatementforeachoftheyearsendedDecember31,2016and2015 F-95- ConsolidatedstatementofcomprehensiveincomeforeachoftheyearendedDecember31,2016 F-96- ConsolidatedstatementoffinancialpositionfortheyearsendedDecember31,2016and2015 F-97- ConsolidatedstatementofchangesinequityfortheyearendedDecember31,2016 F-98- ConsolidatedstatementofcashflowsfortheyearsendedDecember31,2016and2015 F-99- NotestotheConsolidatedFinancialStatements F-100

AuditedConsolidatedFinancialStatementsoftheBankasatandfortheyearendedDecember31,2015

F-179

- IndependentAuditors’ReporttotheShareholdersoftheBankdated30May2016issuedbyErnst&Youngp.c.candSemaan,Gholam&CoasatfortheyearendedDecember31,2015

F-180

- ConsolidatedincomestatementforeachoftheyearsendedDecember31,2015and2014 F-181- ConsolidatedstatementofcomprehensiveincomeforeachoftheyearendedDecember31,2015 F-182

- ConsolidatedstatementoffinancialpositionfortheyearsendedDecember31,2015and2014 F-183

- ConsolidatedstatementofchangesinequityfortheyearendedDecember31,2015 F-184- ConsolidatedstatementofcashflowsfortheyearsendedDecember31,2015and2014 F-185- NotestotheConsolidatedFinancialStatements F-186

SOCIETE GENERALE DE BANQUE AU LIBAN SAL CONSOLIDATED FINANCIAL STATEMENTS 31 DECEMBER 2017

Société Générale de Banque au Liban S.A.L. F.1

Société Générale de Banque au Liban S.A.L. F.2

Société Générale de Banque au Liban S.A.L. F.3

Société Générale de Banque au Liban S.A.L. F.4

Société Générale de Banque au Liban S.A.L. F.5

Société Générale de Banque au Liban SAL

CONSOLIDATED INCOME STATEMENT For the year ended 31 December 2017 2017 2016 Notes LL million LL million Interest and similar income 5 1,648,668 1,350,541 Interest and similar expense 6 (1,210,167) (954,170) ____________ ____________ NET INTEREST INCOME 438,501 396,371 ____________ ____________ Fee and commission income 7 98,024 102,433 Fee and commission expense (39,781) (33,163) ____________ ____________ NET FEE AND COMMISSION INCOME 58,243 69,270 ____________ ____________ Net gain from financial assets at fair value through profit or loss 8 12,476 18,668 Revenue from financial assets at fair value through other comprehensive income

9

1,715 638 Net gain from sale of financial assets at amortized cost 24 182,556 579,708 Other operating income 10 34,114 31,653 ____________ ____________ TOTAL OPERATING INCOME 727,605 1,096,308 Net credit losses 11 (12,285) (19,511) ____________ ____________ NET OPERATING INCOME 715,320 1,076,797 ____________ ____________ Personnel expenses 12 (142,058) (133,379) Other operating expenses 13 (157,326) (167,003) Depreciation of property and equipment 24 (11,955) (11,269) Amortization of intangible assets 25 (3,336) (3,210) Impairment of goodwill 29 - (163,158) Provision for impairment on non-currrent assets held for sale 27 (3,010) (951) ___________ ___________ TOTAL OPERATING EXPENSES (317,685) (478,970) ___________ ___________ OPERATING PROFIT 397,635 597,827 Provisions for risks and charges 37 - (165,825) Net gain from sale and write-off of other assets - 19 ___________ ___________ PROFIT BEFORE TAX 397,635 432,021 Income tax expense 14 (64,573) (128,999) ___________ ___________ PROFIT FOR THE YEAR 333,062 303,022 ____________ ____________ Attributable to: Equity holders of the parent 330,768 286,259 Non-controlling interest 2,294 16,763 ___________ ___________ 333,062 303,022 ____________ ____________

Société Générale de Banque au Liban S.A.L. F.6

Société Générale de Banque au Liban SAL

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME For the year ended 31 December 2017 2017 2016 LL million LL million PROFIT FOR THE YEAR 333,062 303,022 Other comprehensive income (loss) Other comprehensive income (loss) to be reclassified to profit or loss in subsequent periods (net of tax):

Exchange differences on translation of foreign operations 14,269 (2,089) __________ __________ Other comprehensive (loss) income not to be reclassified to profit or loss in subsequent periods (net

of tax):

Net (loss) gain from financial assets at fair value through other comprehensive income (11,918) 245 __________ __________ Other comprehensive income (loss) for the year, net of tax 2,351 (1,844) __________ __________ TOTAL COMPREHENSIVE INCOME FOR THE YEAR, NET OF TAX 335,413 301,178 __________ __________ Attributable to: Equity holders of the parent 333,136 284,425 Non-controlling interest 2,277 16,753 __________ __________ 335,413 301,178 __________ __________

Société Générale de Banque au Liban S.A.L. F.7

Société Générale de Banque au Liban S.A.L. F.8

Société Générale de Banque au Liban SAL

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY For the year ended 31 December 2017

Attributable to equity holders of the parent LL million

Non-controlling

interest LL million

Total

equity LL million

Share capital – common

shares

Share capital –

preferred shares

Share premium –

common shares

Share premium –

preferred shares

Cash contribution

by shareholders

Non distributable

reserves Distributable

reserves

Revaluation reserve of

property

Cumulative change in fair

value of financial

assets at fair value through

other comprehensive

income

Foreign currency

translation reserve

Profit for the year

Retained earnings Total

Notes LL million LL million LL million LL million LL million LL million LL million LL million LL million LL million LL million LL million LL million Balance at 31 December 2015 14,586 9,675 149,349 559,161 106,746 391,134 19,442 3,934 (477) (16,769) 250,844 351,552 1,839,177 52,502 1,891,679 Profit for the year - - - - - - - - - - 286,259 - 286,259 16,763 303,022 Other comprehensive loss - - - - - - - - 259 (2,093) - - (1,834) (10) (1,844) _________ __________ __________ ___________ ___________ __________ __________ _________ _________ _________ _________ _________ ________ _________ ________ Total comprehensive income - - - - - - - - 259 (2,093) 286,259 - 284,425 16,753 301,178 _________ __________ __________ ___________ ___________ __________ __________ _________ _________ _________ _________ _________ ________ _________ ________ Transfer to retained earnings - - - - - - - - - - (250,844) 250,844 - - - Income on financial transactions 36 - - - - - 404,801 - - - - - - 404,801 - 404,801 Transfer to non distributable reserves 39 - - - - - 68,765 - - - - (68,765) - - - Transfer to distributable reserves - - - - - - 1,090 - - - - (1,090) - - - Transfer to share premium 38 - - - 2,010 - - - - - - - (2,010) - - - Dividends paid to equity holders of the parent – preferred shares 43 - - - - - - - - - - - (34,281) (34,281) - (34,281) Dividends paid to non-controlling interest - - - - - - - - - - - - - (3,566) (3,566) Adjustments - - - - - (52) - - - - - - (52) - (52) _________ __________ __________ ___________ ___________ __________ __________ _________ _________ _________ _________ _________ ________ _________ ________ Balance at 31 December 2016 14,586 9,675 149,349 561,171 106,746 864,648 20,532 3,934 (218) (18,862) 286,259 496,250 2,494,070 65,689 2,559,759 Profit for the year - - - - - - - - - - 330,768 - 330,768 2,294 333,062 Other comprehensive income - - - - - - - - (11,876) 14,244 - - 2,368 (17) 2,351 _________ __________ __________ ___________ ___________ __________ __________ _________ _________ _________ _________ _________ ________ _________ ________ Total comprehensive income - - - - - - - - (11,876) 14,244 330,768 - 333,136 2,277 335,413 _________ __________ __________ ___________ ___________ __________ __________ _________ _________ _________ _________ _________ ________ _________ ________ Transfer to retained earnings - - - - - - - - 416 - (286,259) 285,843 - - - Transfer to non distributable reserves 39 - - - - - 97,536 - - - - - (97,536) - - - Transfer to distributable reserves 40 - - - - - - 8,928 - - - - (8,928) - - - Transfer to share premium 38 - - - 2,029 - - - - - - - (2,029) - - - Dividends paid to equity holders of the parent – preferred shares 43 - - - - - - - - - - - (39,763) (39,763) - (39,763) Dividends paid to equity holders of the parent – common shares 43 - - - - - - - - - - - (60,588) (60,588) - (60,588) Acquisition of non controlling interest in SGBL insurance 3 - - - - - - - - - - - 351 351 (13,166) (12,815) Dividends paid to non-controlling interest - - - - - - - - - - - - - (1,834) (1,834) Adjustments - - - - - (499) - - - - - - (499) - (499) _________ __________ __________ ___________ ___________ __________ __________ _________ _________ _________ _________ _________ ________ _________ ________ Balance at 31 December 2017 14,586 9,675 149,349 563,200 106,746 961,685 29,460 3,934 (11,678) (4,618) 330,768 573,600 2,726,707 52,966 2,779,673 _________ __________ __________ ___________ ___________ __________ __________ _________ _________ _________ _________ _________ ________ _________ ________

Société Générale de Banque au Liban S.A.L. F.9

Société Générale de Banque au Liban SAL

CONSOLIDATED STATEMENT OF CASH FLOWS For the year ended 31 December 2017 2017 2016 Notes LL million LL million OPERATING ACTIVITIES Profit before income tax 397,635 432,021 Adjustments for:

Depreciation and amortization 24 & 25 15,291 14,479 Share of profit from an associate 28 (172) (90) Amortization of additional deferred costs resulting from the acquisition of the Lebanese Canadian Bank SAL

28 - 3,526

Amortization of deferred employee termination benefits 28 8,232 8,103 Provision for impaired loans – customers 20 26,555 37,337 Provision for impaired loans – related parties 21 1,309 1,500 Loans written off 11 993 668 Impairment loss of goodwill 29 - 163,158 Net provisions for impairment of non-current assets held-for-sale 2,288 268 Net provisions on balances with banks and financial institutions 16 420 154 Write-back for other impaired debit balances 28 (10) (219) Recoveries of credit losses – customers 20 (16,982) (11,720) Provision for employees’ end of service benefits 12 2,132 6,293 Gain from sale of property and equipment - (19) Write-back of provision for financial assets at amortized cost 22 - (8,442) Gain from sale of non-current assets held-for-sale 10 (406) (3,080) Write-off of property and equipment 3 31 Write-off of intangible assets 25 7,753 - Net provision for risks and charges 3,758 191,767 Unrealized (gain) loss on derivative financial instruments (16,068) 5,554

_________ _________ 432,731 841,289 Working capital changes:

Cash and balances with the Central Banks (4,559,290) (2,917,943) Due from banks and financial institutions 34,112 105,372 Amounts due from affiliated banks and financial institutions (6,882) (2,794) Reverse repurchase agreements - 219,567 Due to the Central Banks 1,123,056 (403,800) Loans and repurchase agreements (380,933) (53,847) Due to banks and financial institutions 86,471 (196,017) Loans and advances to customers at amortized cost (742,399) (729,801) Loans and advances to related parties at amortized cost (11,637) 51,309 Financial assets at fair value through profit or loss (21,417) 59,536 Financial assets at fair value through other comprehensive income (148,224) 1,597 Financial assets at amortized cost 1,665,021 (149,395) Other assets (32,334) (23,844) Customers’ deposits at amortized cost 2,902,174 3,108,457 Related parties’ deposits at amortized cost (15,925) 48,436 Other liabilities (49,652) 43,437

_________ _________ Cash from operations 274,872 1,559 Employees’ end of service benefits paid 37 (2,951) (1,088) Taxation paid (237,309) (54,422) Provision for risks and charges paid (16,625) (5,965) _________ _________ Net cash flows from (used in) operating activities 17,987 (59,916) _________ _________ INVESTING ACTIVITIES Purchase of property and equipment 24 (63,313) (78,771) Purchase of intangible assets 25 (9,768) (11,580) Proceeds from sale of property and equipment 117 65 Proceeds from sale of non-current assets held for sale 1,779 17,317 Acquisition of a non-controlling interest in a subsidiary 3 (12,815) (151,380) _________ _________ Net cash flows used in investing activities (84,000) (224,349) _________ _________ FINANCING ACTIVITIES Dividends paid to equity holders of the parent 43 (100,351) (34,281) Dividends paid to non-controlling interest (1,834) (3,566) _________ _________ Net cash flows used in financing activities (102,185) (37,847) _________ _________ Effect of exchange rate changes and other adjustments 13,661 (1,498) _________ _________ DECREASE IN CASH AND CASH EQUIVALENTS (154,537) (323,610) Cash and cash equivalents at 1 January 1,870,308 2,193,918 _________ _________ CASH AND CASH EQUIVALENTS AT 31 DECEMBER 44 1,715,771 1,870,308 _________ _________ Operational cash flows from interest and dividend Interest paid 1,172,282 934,440 Interest received 1,532,821 1,310,925 Dividend received 3,437 2,905

Société Générale de Banque au Liban S.A.L. F.10

Société Générale de Banque au Liban SAL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2017 1 CORPORATE INFORMATION Société Générale de Banque au Liban SAL (the “Bank”) is a shareholding company registered in Beirut, Lebanon. It was registered in 1953 under no. 3696 at the Commercial Registry of Beirut and no. 19 on the list of banks published by the Central Bank of Lebanon. The headquarters of the Bank are located at Saloumeh Square, Sin El Fil, Lebanon. The Bank, together with its subsidiaries (collectively the “Group”), are mainly involved in banking, insurance and financial services activities (commercial, investment and private). 2 ACCOUNTING POLICIES 2.1 Basis of preparation The consolidated financial statements are prepared under the historical cost basis except for the restatement of certain tangible real estate properties in Lebanon according to the provisions of law No 282 dated 30 December 1993, and for the measurement at fair value of investment properties, derivative financial instruments, financial assets at fair value through profit or loss and financial assets at fair value through other comprehensive income. The consolidated financial statements are presented in Lebanese Lira (LL), and all values are rounded to the nearest million Lebanese Lira, except when otherwise indicated. Statement of compliance The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB), and the regulations of the Central Bank of Lebanon and the Banking Control Commission. Presentation of financial statements The Group presents its consolidated statement of financial position broadly in order of liquidity. An analysis regarding recovery or settlement within 12 months after the consolidated statement of financial position date (current) and more than 12 months after the consolidated statement of financial position date (non-current) is presented in the notes. Financial assets and financial liabilities are generally reported gross in the consolidated statement of financial position. They are only offset and reported net when, in addition to having an unconditional legally enforceable right to offset the recognized amounts without being contingent on a future event, the parties also intend to settle on a net basis in all of the following circumstances: • The normal course of business • The event of default • The event of insolvency or bankruptcy of the Group and/or its counterparties Basis of consolidation The consolidated financial statements comprise the financial statements of the Bank and its subsidiaries as at 31 December. The Bank consolidates a subsidiary when it controls it. Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Specifically, the Group controls an investee if and only if the Group has:

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

- Exposure, or rights, to variable returns from its involvement with the investee - The ability to use its power over the investee to affect its returns

Société Générale de Banque au Liban S.A.L. F.11

Société Générale de Banque au Liban SAL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2017 2 ACCOUNTING POLICIES (continued) 2.1 Basis of preparation (continued) Basis of consolidation (continued) Generally, there is a presumption that a majority of voting rights results in control. However, under individual circumstances, the Group may still exercise control with less than 50% shareholding or may not be able to exercise control even with ownership over 50% of an entity’s shares. When assessing whether it has power over an investee and therefore controls the variability of its returns, the Group considers all relevant facts and circumstances, including:

- The purpose and design of the investee - The relevant activities and how decisions about those activities are made and whether the Group can

direct those activities - Contractual arrangements such as call rights, put rights and liquidation rights - Whether the Group is exposed, or has rights, to variable returns from its involvement with the investee,

and has the power to affect the variability of such returns Profit or loss and each component of other comprehensive income (OCI) are attributed to the equity holders of the parent of the Group and to the non-controlling interests, even if this results in the non-controlling interests having a deficit balance. When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with the Group’s accounting policies. All intra-group assets and liabilities, equity, income, expenses and cash flows relating to transactions between members of the Group are eliminated in full on consolidation. A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as an equity transaction. If the Group loses control over a subsidiary, it derecognizes the related assets (including goodwill), liabilities, non-controlling interest and other components of equity while any resultant gain or loss is recognized in profit or loss. Any investment retained is recognized at fair value. The consolidated financial statements represent the financial statements of the Bank and the following subsidiaries:

Percentage of ownership Name

Country of incorporation

Activities

2017

2016

Société Générale Bank - Cyprus Ltd Cyprus Banking 100.00% 100.00% Société Générale de Banque – Jordanie Jordan Banking 87.67% 87.67% Fidus SAL* Lebanon Financial services 49.00% 49.00% Sogelease Liban SAL Lebanon Leasing 99.75% 99.75% SGBL Insurance SAL (previously Sogecap Liban SAL)

Lebanon

Insurance

100.00%

75.00%

Société Générale Jordanie Brokerage Ltd Jordan Brokerage 100.00% 100.00% Société Générale Libanaise Foncière SARL

Lebanon

Real estate

98.66%

98.66%

Société Générale de Services d'Investissement SARL

Lebanon

Services and studies

98.50%

98.50%

LCB Finance SAL Lebanon Financial services 100.00% 100.00% LCB Investments Holding SAL Lebanon Investments & management 100.00% 100.00% LCB Insurance Brokerage House SAL (owned by LCB Investments Holding SAL)

Lebanon

Brokerage

99.14%

99.14%

LCB Estates SAL (owned by LCB Investments Holding SAL)

Lebanon

Real Estate

99.14%

99.14%

SGBL Courtage Assurance SARL Lebanon Brokerage 100.00% 100.00% 799 Bassatine Tripoli SAL Lebanon Investments and management 60.00% 60.00% Foncière 415 Saifi SAL Lebanon Real estate 100.00% 100.00% Société d’Investissements et de Services «SIS» SAL

Lebanon

Investments and management

99.00%

99.00%

Liberty International Bank Limited ** Abu Dhabi Banking 100.00% - * The Group has a defacto control over Fidus SAL, consequently, the financial statements of Fidus SAL have

been consolidated with those of the Bank. ** The Bank incorporated Liberty International Bank Limited on 29 March 2017 in Abu Dhabi, UAE.

Société Générale de Banque au Liban S.A.L. F.12

Société Générale de Banque au Liban SAL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2017

2 ACCOUNTING POLICIES (continued) 2.2 Significant accounting judgments, estimates and assumptions The preparation of the Group’s financial statements requires management to make judgments, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the accompanying disclosures, and the disclosure of contingent liabilities. Uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of assets or liabilities affected in future periods. Judgments In the process of applying the Group’s accounting policies, management has made the following judgments, apart from those involving estimations, which have the most significant effect in the amounts recognized in the consolidated financial statements: Going concern The Group’s management has made an assessment of the Group’s ability to continue as a going concern and is satisfied that the Group has the resources to continue in business for the foreseeable future. Furthermore, management is not aware of any material uncertainties that may cast significant doubt upon the Group’s ability to continue as a going concern. Therefore, the consolidated financial statements continue to be prepared on the going concern basis. Impairment of goodwill Management judgment is required in estimating the future cash flows of the CGUs. These values are sensitive to cash flows projected for the periods for which detailed forecasts are available, and to assumptions regarding the term sustainable pattern of cash flows thereafter. While the acceptable range within which underlying assumptions can be applied is governed by the requirement for resulting forecasts to be compared with actual performance and verifiable economic data in future years, the cash flow forecasts necessarily and appropriately reflect management view of future business prospects. Business model In making an assessment whether a business model’s objective is to hold assets in order to collect contractual cash flows, the Group considers at which level of its business activities such assessment should be made. Generally, a business model is a matter of fact which can be evidenced by the way business is managed and the information provided to management. However, in some circumstances it may not be clear whether a particular activity involves one business model with some infrequent asset sales or whether the anticipated sales indicate that there are two different business models. In determining whether its business model for managing financial assets is to hold assets in order to collect contractual cash flows, the Group considers:

- management’s stated policies and objectives for the portfolio and the operation of those policies in practice;

- how management evaluates the performance of the portfolio; - whether management’s strategy focuses on earning contractual interest revenues; - the degree of frequency of any expected asset sales; - the reason for any asset sales; and - whether assets that are sold are held for an extended period of time relative to their contractual maturity.

Société Générale de Banque au Liban S.A.L. F.13

Société Générale de Banque au Liban SAL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2017 2 ACCOUNTING POLICIES (continued) 2.2 Significant accounting judgments, estimates and assumptions (continued) Estimates and assumptions The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are described below. The Group based its assumptions and estimates on parameters available when the financial statements were prepared. Existing circumstances and assumptions about future developments, however, may change due to market changes or circumstances arising beyond the control of the Group. Such changes are reflected in the assumptions when they occur. Fair value of financial instruments Where the fair values of financial assets and financial liabilities recorded on the consolidated statement of financial position cannot be derived from active markets, they are determined using a variety of valuation techniques that include the use of mathematical models. The inputs to these models are derived from observable market data where possible, but where observable market data is not available, judgment is required to establish fair values. The judgments include considerations of liquidity and model inputs such as volatility for longer dated derivatives and discount rates, prepayment rates and default rate assumptions for asset-backed securities. Impairment losses on loans and advances The Group reviews its individually significant loans and advances at each consolidated statement of financial position date to assess whether an impairment loss should be recorded in the consolidated income statement. In particular, judgment by management is required in the estimation of the amount and timing of future cash flows when determining the impairment loss. In estimating these cash flows, the Group makes judgments about the borrower’s financial situation and the net realizable value of collateral. These estimates are based on assumptions about a number of factors and actual results may differ, resulting in future changes to the allowance. Loans and advances that have been assessed individually and found not to be impaired and all individually insignificant loans and advances are then assessed collectively, in groups of assets with similar risk characteristics, to determine whether provision should be made due to incurred loss events for which there is objective evidence but whose effects are not yet evident. The collective assessment takes account of data from the loan portfolio (such as credit quality, levels of arrears, credit utilization, loan to collateral ratios etc.), and judgments to the effect of concentrations of risks and economic data (including levels of unemployment, real estate prices indices, country risk and the performance of different individual groups). Deferred tax assets Deferred tax assets are recognized in respect of tax losses to the extent that it is probable that taxable profit will be available against which the losses can be utilized. Judgment is required to determine the amount of deferred tax assets that can be recognized, based upon the likely timing and level of future taxable profits, together with future tax planning strategies. Revaluation of investment properties The Group carries its investment properties at fair value, with changes in fair value being recognized in the consolidated income statement. The Group engaged an independent valuation specialist to assess fair value as at 31 December. Investment properties were valued by reference to market-based evidence, using comparable prices adjusted for specific market factors such as nature, location and condition of the property.

Société Générale de Banque au Liban S.A.L. F.14

Société Générale de Banque au Liban SAL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2017 2 ACCOUNTING POLICIES (continued) 2.2 Significant accounting judgments, estimates and assumptions (continued) Estimates and assumptions (continued) Provisions and other contingent liabilities The Group operates in a regulatory and legal environment that, by nature, has a heightened element of litigation risk inherent to its operations. As a result, it is involved in various litigation and proceedings arising in the ordinary course of the Group’s businesses. When the Group can reliably measure the outflow of economic benefits in relation to a specific case and considers such outflows to be probable, the Group records a provision against the case. Where the probability of outflow is considered to be remote, or probable, but a reliable estimate cannot be made, a contingent liability is disclosed. However, when the Group is of the opinion that disclosing these estimates on a case-by-case basis would prejudice their outcome, then the Group does not include detailed, case-specific disclosers in its financial statements. Given the subjectivity and uncertainty of determining the probability and amount of losses, the Group takes into account a number of factors including legal advice, the stage of the matter and historical evidence from similar incidents. Significant judgement is required to conclude on these estimates. 2.3 Changes in accounting policy and disclosures New and amended standards and interpretations effective after 1 January 2017 The Group applied for the first time certain amendments to the standards, which are effective for annual periods beginning on or after 1 January 2017. The Group has not early adopted any standards, interpretations or amendments that have been issued but are not yet effective. The nature and the impact of each amendment is described below: Amendments to IAS 7 Statement of Cash Flows: Disclosure Initiative The amendments require entities to provide disclosure of changes in their liabilities arising from financing activities, including both changes arising from cash flows and non-cash changes (such as foreign exchange gains or losses). The adoption of this amendment had no significant impact on the amounts reported in these consolidated financial statements. Amendments to IAS 12 Income Taxes: Recognition of Deferred Tax Assets for Unrealized Losses The amendments clarify that an entity needs to consider whether tax law restricts the sources of taxable profits against which it may make deductions on the reversal of deductible temporary difference related to unrealized losses. Furthermore, the amendments provide guidance on how an entity should determine future taxable profits and explain the circumstances in which taxable profit may include the recovery of some assets for more than their carrying amount. The Group applied amendments retrospectively. However, their application has no effect on the Group’s financial position and performance. Annual Improvements Cycle - 2014-2016 Amendments to IFRS 12 Disclosure of Interests in Other Entities: Clarification of the scope of disclosure requirements in IFRS 12 The amendments clarify that the disclosure requirements in IFRS 12, other than those in paragraphs B10–B16, apply to an entity’s interest in a subsidiary, a joint venture or an associate (or a portion of its interest in a joint venture or an associate) that is classified (or included in a disposal group that is classified) as held for sale. These amendments did not affect the Group’s consolidated financial statements.

Société Générale de Banque au Liban S.A.L. F.15

Société Générale de Banque au Liban SAL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2017 2 ACCOUNTING POLICIES (continued) 2.4 Standards issued but not yet effective Certain new standards, amendments to standards and interpretations are not yet effective for the year ended 31 December 2017, with the Group not opting for early adoption. These have, therefore, not been applied in preparing these financial statements. IFRS 15 Revenue from contracts with Customers. IFRS 15 was issued in May 2014, and amended in April 2016, and establishes a five-step model to account for revenue arising from contracts with customers. Under IFRS 15, revenue is recognized at an amount that reflects the consideration to which an entity expects to be entitled in exchange for transferring goods or services to a customer. The new revenue standard will supersede all current revenue recognition requirements under IFRS. Either a full retrospective application or a modified retrospective application is required for annual periods beginning on or after 1 January 2018. The Group plans to adopt the new standard on the required effective date and does not expect a significant impact on its consolidated financial statements from the application of this standard. IFRS 16 Leases: IFRS 16 was issued in January 2016 and it replaces IAS 17 Leases, IFRIC 4 Determining whether an Arrangement contains a Lease, SIC-15 Operating Leases-Incentives and SIC-27 Evaluating the Substance of transactions involving the Legal Form of a Lease. IFRS 16 sets out the principles for the recognition, measurement, presentation and disclosure of leases and requires lessees to account for all leases under a single on-balance sheet model similar to the accounting for finance leases under IAS 17. IFRS 16 is effective for annual periods beginning on or after 1 January 2019. Early application is permitted, but not before an entity applies IFRS 15. The Group is currently assessing the impact of IFRS 16 and plans to adopt the new standard on the required effective date. IFRS 9 Financial Instruments In July 2014, the IASB issued the final version of IFRS 9 Financial Instruments that replaces IAS 39 Financial Instruments and all previous versions of IFRS 9 (2009, 2010 and 2013). The standard introduces new requirements for classification and measurement, impairment, and hedge accounting. The new version, IFRS 9 (2014) is effective for annual periods beginning on or after 1 January 2018. The Group plans to adopt the new standard on the required effective date along with the provisions of the Central Bank of Lebanon (‘BDL’) basic circular number 143 and the Banking Control Commission (‘BCC’) circular number 293. In accordance with the transition provisions of IFRS 9 (2014), the Group will apply this standard retrospectively. The changes in measures arising on initial application will be incorporated through an adjustment to opening retained earnings or reserves (as applicable) as at 1 January 2018. Estimated impact of the adoption of IFRS 9 on the opening equity at 1 January 2018:

• Based on assessments undertaken to date, the expected increase in impairment allowances when measured in accordance with IFRS 9 expected credit losses model (see II below) compared to IAS 39 incurred loss model is estimated at approximately LL 69,251 million, which is already covered by the Group’s excess provisions disclosed in notes 36 and 37. Accordingly, there will be no impact on the Group’s equity from the adoption of the IFRS 9 impairment requirements.

Société Générale de Banque au Liban S.A.L. F.16

Société Générale de Banque au Liban SAL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2017 2 ACCOUNTING POLICIES (continued) 2.4 Standards issued but not yet effective (continued) IFRS 9 Financial Instruments (continued) The above assessment is preliminary because not all transition work has been finalized. The actual impact of adopting IFRS 9 on 1 January 2018 may change because:

- IFRS 9 will require the Group to revise its accounting processes and internal controls and these changes are not yet complete;

- Although parallel runs were carried out in the second half of 2017, the new systems and associated controls in place have not been operational for a more extended period;

- The Group has not finalized the testing and assessment of control over its new IT systems and changes to its governance framework;

- The Group is refining and finalizing its models for ECL calculations; and - The new accounting policies, assumptions, judgements and estimation techniques employed are subject

to change until the Group finalizes its first financial statements that include the date of initial application. I. Classification and measurement The Group has early adopted classification and measurement requirements as issued in IFRS 9 (2009) and IFRS 9 (2010). In the July 2014 publication of IFRS 9, the new measurement category FVOCI was introduced for financial assets that satisfy the contractual cash flow characteristics (SPPI test). This category is aimed at portfolio of debt instruments for which amortized cost information, as well as fair value information is relevant and useful. This will be the case if these assets are held within a business model whose objective is achieved by both collecting contractual cash flows and selling the financial assets. At the date of application of IFRS 9 (2014), the Group reassessed the classification and measurement category for all financial assets debt instruments that satisfy the contractual cash flow characteristics (SPPI test) and classified them within the category that is consistent with the business model for managing these financial assets on the basis of facts and circumstances that existed at that date. The classification and measurement requirements for financial assets that are equity instruments or debt instruments that do not meet the contractual cash flow characteristics (SPPI test) and financial liabilities remain unchanged from previous versions of IFRS 9. The Group does not expect a material impact on the classification of the Group’s financial assets nor their carrying values. II. Impairment The standard introduces a new single model for the measurement of impairment losses on all financial assets including loans and debt securities measured at amortized cost or at fair value through OCI. The IFRS 9 expected credit loss (ECL) model replaces the current model of IAS 39. The ECL model contains a three-stage approach, which is based on the change in credit quality of financial assets since initial recognition. The ECL model is forward looking and requires the use of reasonable and supportable forecasts of future economic conditions in the determination of significant increases in credit risk and measurement of ECL. Stage 1 12-month ECL applies to all financial assets that have not experienced a significant increase in credit risk (SICR) since origination and are not credit impaired. The ECL will be computed using a factor that represents the Probability of Default (PD) occurring over the next 12 months. Stage 2 Under Stage 2, where there has been a significant increase in credit risk since initial recognition but the financial instruments are not considered credit impaired, an amount equal to the default probability weighted lifetime ECL will be recorded. Provisions are expected to be higher in this stage because of an increase in risk and the impact of a longer time horizon being considered compared to 12 months in Stage 1.

Société Générale de Banque au Liban S.A.L. F.17

Société Générale de Banque au Liban SAL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2017 2 ACCOUNTING POLICIES (continued) 2.4 Standards issued but not yet effective (continued) IFRS 9 Financial Instruments (continued) II. Impairment (continued) Stage 3 Under the Stage 3, where there is objective evidence of impairment at the reporting date these financial instruments will be classified as credit impaired and an amount equal to the lifetime ECL will be recorded for the financial assets. Key Considerations Some of the key concepts in IFRS 9 that have the most significant impact and require a high level of judgment, as considered by the Group while determining the impact assessment, are: Assessment of Significant Increase in Credit Risk The assessment of a significant increase in credit risk is done on a relative basis. To assess whether the credit risk on a financial asset has increased significantly since origination, the Group compares the risk of default occurring over the expected life of the financial asset at the reporting date to the corresponding risk of default at origination, using key risk indicators that are used in the Group existing risk management processes. Our assessment of significant increases in credit risk will be performed at least quarterly for each individual exposure based on three factors. If any of the following factors indicates that a significant increase in credit risk has occurred, the instrument will be moved from Stage 1 to Stage 2: (1) We have established thresholds for significant increases in credit risk based on movement in PDs relative to

initial recognition. (2) Additional qualitative reviews will be performed to assess the staging results and make adjustments, as

necessary, to better reflect the positions which have significantly increased in risk. (3) IFRS 9 contains a rebuttable presumption that instruments which are 30 days past due have experienced a

significant increase in credit risk. Movements between Stage 2 and Stage 3 are based on whether financial assets are credit-impaired as at the reporting date. The determination of credit-impairment under IFRS 9 will be similar to the individual assessment of financial assets for objective evidence of impairment under IAS 39.

Macroeconomic Factors, Forward Looking Information (FLI) and Multiple Scenarios The measurement of expected credit losses for each stage and the assessment of significant increases in credit risk must consider information about past events and current conditions as well as reasonable and supportable forecasts of future events and economic conditions. The estimation and application of forward-looking information will require significant judgment. Macroeconomic Factors, Forward Looking Information (FLI) and Multiple Scenarios (continued) PD, Loss Given Default (LGD) and Exposure At Default (EAD) inputs used to estimate Stage 1 and Stage 2 credit loss allowances are modelled based on the macroeconomic variables (or changes in macroeconomic variables) that are most closely correlated with credit losses in the relevant portfolio. Each macroeconomic scenario used in our expected credit loss calculation will have forecasts of the relevant macroeconomic variables. Our estimation of expected credit losses in Stage 1 and Stage 2 will be a discounted probability-weighted estimate that considers a minimum of three future macroeconomic scenarios. Our base case scenario will be based on macroeconomic forecasts published by our internal economics Bank. Upside and downside scenarios will be set relative to our base case scenario based on reasonably possible alternative macroeconomic conditions. Scenario design, including the identification of additional downside scenarios will occur on at least an annual basis and more frequently if conditions warrant. Scenarios will be probability-weighted according to our best estimate of their relative likelihood based on historical frequency and current trends and conditions. Probability weights will be updated on a quarterly basis. All scenarios considered will be applied to all portfolios subject to expected credit losses with the same probabilities.

Société Générale de Banque au Liban S.A.L. F.18

Société Générale de Banque au Liban SAL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2017 2 ACCOUNTING POLICIES (continued) 2.4 Standards issued but not yet effective (continued) IFRS 9 Financial Instruments (continued) II. Impairment (continued) Definition of default The definition of default used in the measurement of expected credit losses and the assessment to determine movement between stages will be consistent with the definition of default used for internal credit risk management purposes. IFRS 9 does not define default, but contains a rebuttable presumption that default has occurred when an exposure is greater than 90 days past due. Expected Life When measuring ECL, the Group must consider the maximum contractual period over which the Group is exposed to credit risk. All contractual terms should be considered when determining the expected life, including prepayment options and extension and rollover options. For certain revolving credit facilities that do not have a fixed maturity, the expected life is estimated based on the period over which the Group is exposed to credit risk and where the credit losses would not be mitigated by management actions. Governance In addition to the existing risk management framework, we have established an internal Committee to provide oversight to the IFRS 9 implementation. The Committee is comprised of senior representatives from Finance and Risk Management and will be responsible for reviewing and approving staging of financial assets and other key inputs and assumptions used in our expected credit loss estimates. It also assesses the appropriateness of the overall allowance to be provided for Expected Credit Losses. The expected impact on the Group’s consolidated statement of financial position and equity is discussed above. III. Hedge accounting The Group has early adopted hedge accounting requirements as issued in IFRS 9 (2013). These requirements were first published in November 2013 and remain unchanged in the July 2014 publication of IFRS 9, except to reflect the addition of the FVOCI measurement category to IFRS 9. The Group does not expect an impact on its financial statements as the Group does not have hedged items measured at FVOCI. IV. Financial instruments: disclosures (IFRS 7) The Group will be amending the disclosures for 2018 to include more extensive qualitative and quantitative disclosure relating to IFRS 9 such as new classification categories, three stage impairment model, new hedge accounting requirements and transition provisions. 2.5 Summary of significant accounting policies (1) Foreign currency translation The consolidated financial statements are presented in Lebanese Lira. For each entity in the Group, the Bank determines the functional currency and items included in the financial statements of each entity are measured using that functional currency. The Group uses the direct method of consolidation. (i) Transactions and balances Transactions in foreign currencies are initially recorded at the spot rate of exchange ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the spot rate of exchange at the reporting date. All differences arising on non–trading activities are taken to other operating income in the income statement, with the exception of differences on foreign currency borrowings that provide an effective hedge against a net investment in a foreign entity. These differences are taken directly to equity until the disposal of the net investment, at which time, they are recognized in the income statement. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the spot exchange rates as at the date of recognition. Non-monetary items measured at fair value in a foreign currency are translated using the spot exchange rates at the date when the fair value was determined.

Société Générale de Banque au Liban S.A.L. F.19

Société Générale de Banque au Liban SAL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2017 2 ACCOUNTING POLICIES (continued) 2.5 Summary of significant accounting policies (continued) (1) Foreign currency translation (continued) (ii) Group companies On consolidation, the assets and liabilities of foreign operations are translated into Lebanese Lira at the rate of exchange prevailing at the reporting date and their income statements are translated at the weighted average exchange rates for the year. The exchange differences arising on translation for consolidation are recognized in other comprehensive income. On disposal of a foreign entity, the deferred cumulative amount recognized in equity relating to that particular foreign operation is recognized in the income statement in other operating expenses or other operating income. Any goodwill arising on the acquisition of a foreign operation and any fair value adjustments to the carrying amounts of assets and liabilities arising on the acquisition are treated as assets and liabilities of the foreign operations and translated at closing rate. (2) Financial instruments – classification and measurement (i) Date of recognition All financial assets and liabilities are initially recognized on the trade date, i.e. the date that the Group becomes a party to the contractual provisions of the instrument. This includes purchases or sales of financial assets that require delivery of assets within the time frame generally established by regulation or convention in the market place. (ii) Classification and measurement of financial investments a. Financial assets The classification of financial assets depends on the basis of the entity's business model for managing the financial assets and the contractual cash flow characteristics of the financial asset. Assets are initially measured at fair value plus, in the case of a financial asset not at fair value through profit or loss, particular transaction costs. Assets are subsequently measured at amortized cost or at fair value. An entity may, at initial recognition, irrevocably designate a financial asset as measured at fair value through profit or loss if doing so eliminates or significantly reduces a measurement or recognition inconsistency (sometimes referred to as an 'accounting mismatch') that would otherwise arise from measuring assets or liabilities or recognizing the gains and losses on them on different bases. An entity is required to disclose such financial assets separately from those mandatorily measured at fair value. Financial assets at amortized cost Debt instruments are subsequently measured at amortized cost less any impairment loss (except for debt instruments that are designated at fair value through profit or loss upon initial recognition) if they meet the following two conditions:

• The asset is held within a business model whose objective is to hold assets in order to collect contractual cash flows; and

• The contractual terms of the instrument give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

These financial assets are initially recognized at cost, being the fair value of the consideration paid for the acquisition of the investment. All transaction costs directly attributed to the acquisition are also included in the cost of investment. After initial measurement, these financial assets are measured at amortized cost using the effective interest rate method, less allowance for impairment. Amortized cost is calculated by taking into account any discount of premium on acquisition and fees and costs that are an integral part of the effective interest rate. The amortization is included in “Interest and similar income” in the consolidated income statement. The losses arising from impairment are recognized in the consolidated income statement in “Net credit losses”.

Société Générale de Banque au Liban S.A.L. F.20

Société Générale de Banque au Liban SAL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2017 2 ACCOUNTING POLICIES (continued) 2.5 Summary of significant accounting policies (continued) (2) Financial instruments – classification and measurement (continued) (ii) Classification and measurement of financial investments (continued) a. Financial assets (continued) Financial assets at amortized cost (continued) Although the objective of an entity's business model may be to hold financial assets in order to collect contractual cash flows, the entity need not hold all of those instruments until maturity. Thus an entity's business model can be to hold financial assets to collect contractual cash flows even when sales of financial assets occur. However, if more than an infrequent number of sales are made out of a portfolio, the entity needs to assess whether and how such sales are consistent with an objective of collecting contractual cash flows. If the objective of the entity's business model for managing those financial assets changes, the entity is required to reclassify financial assets. Gains and losses arising from the derecognition of financial assets measured at amortized cost are reflected under “net (loss) gain from sale of debt instruments at amortized cost” in the consolidated income statement. Financial assets at fair value through profit or loss Included in this category are those debt instruments that do not meet the conditions in “at amortized cost” above, debt instruments designated at fair value through profit or loss upon initial recognition and equity instruments at fair value through profit or loss.

i. Debt instruments at fair value through profit or loss These financial assets are recorded in the consolidated statement of financial position at fair value. Changes in fair value and interest income are recorded under “Net gain (loss) from financial assets at fair value through profit or loss” in the consolidated income statement showing separately, those related to financial assets designated at fair value upon initial recognition from those mandatorily measured at fair value. Gains and losses arising from the derecognition of debt instruments at fair value through profit or loss are also reflected under “Net gain (loss) from financial assets at fair value through profit or loss” in the consolidated income statement showing separately, those related to financial assets designated at fair value upon initial recognition from those mandatorily measured at fair value.

ii. Equity instruments at fair value through profit or loss Investments in equity instruments are classified at fair value through profit or loss, unless the Group designates at initial recognition an investment that is not held for trading as at fair value through other comprehensive income.

These financial assets are recorded in the consolidated statement of financial position at fair value. Changes in fair value and dividend income are recorded under “Net gain (loss) from financial assets at fair value through profit or loss” in the consolidated income statement. Gains and losses arising from the derecognition of equity instruments at fair value through profit or loss are also reflected under “Net gain (loss) from financial assets at fair value through profit or loss” in the consolidated income statement. Financial assets at fair value through other comprehensive income Investments in equity instruments designated at initial recognition as not held for trading are classified at fair value through other comprehensive income. These financial assets are initially measured at fair value plus transaction costs. Subsequently, they are measured at fair value, with gains and losses arising from changes in fair value recognized in other comprehensive income and accumulated under equity. The cumulative gain or loss will not be reclassified to the consolidated income statement on disposal of the investments.

Société Générale de Banque au Liban S.A.L. F.21

Société Générale de Banque au Liban SAL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2017 2 ACCOUNTING POLICIES (continued) 2.5 Summary of significant accounting policies (continued) (2) Financial instruments – classification and measurement (continued) (ii) Classification and measurement of financial investments (continued) a. Financial assets (continued) Financial assets at fair value through other comprehensive income (continued) Dividends on these investments are recognized under “Revenue from financial assets at fair value through other comprehensive income” in the consolidated income statement when the entity’s right to receive payment of dividend is established in accordance with IAS 18: “Revenue”, unless the dividends clearly represent a recovery of part of the cost of the investment. Balances with the Central Banks, due from banks and financial institutions, loans to banks and financial institutions, reverse repurchase agreements, amounts due from affiliated banks and financial institutions and loans and advances to customers and related parties – at amortized cost After initial measurement, “Balances with the Central Banks”, “Due from banks and financial institutions”, “Loans to banks and financial institutions”, “Reverse repurchase agreements”, “Amounts due from affiliated banks and financial institutions” and “Loans and advances to customers and to related parties” are subsequently measured at amortized cost using the effective interest rate method (EIR), less allowance for impairment. Amortized cost is calculated by taking into account any discount or premium on acquisition and fees and costs that are an integral part of the EIR. The amortization is included in “Interest and similar income” in the consolidated income statement. The losses arising from impairment are recognized in the consolidated income statement in “Net credit losses”. b. Financial liabilities Liabilities are initially measured at fair value, plus particular transaction costs in the case of a financial liability not classified at fair value through profit or loss. Liabilities are subsequently measured at amortized cost or fair value. The Group classifies all financial liabilities as subsequently measured at amortized cost using the effective interest rate method, except for: - financial liabilities at fair value through profit or loss (including derivatives); - financial liabilities that arise when a transfer of a financial asset does not qualify for derecognition or when the

continuing involvement approach applies; - financial guarantee contracts and commitments to provide a loan at a below-market interest rate which after

initial recognition are subsequently measured at the higher of the amount determined in accordance with IAS 37 Provisions, Contingent Liabilities and Contingent Assets and the amount initially recognized less, when appropriate, cumulative amortization recognized in accordance with IAS 18 Revenue.

Fair value option An entity may, at initial recognition, irrevocably designate a financial liability as measured at fair value through profit or loss when: - doing so results in more relevant information, because it either eliminates or significantly reduces a

measurement or recognition inconsistency (sometimes referred to as “an accounting mismatch”) that would otherwise arise from measuring assets or liabilities or recognizing the gains and losses on them on different bases; or

- a group of financial liabilities or financial assets and financial liabilities is managed and its performance is evaluated on a fair value basis, in accordance with a documented risk management or investment strategy, and information about the group is provided internally on that basis to the entity's key management personnel.

The amount of changes in fair value of a financial liability designated at fair value through profit or loss at initial recognition that is attributable to changes in credit risk of that liability is recognized in other comprehensive income, unless such recognition would create an accounting mismatch in the consolidated income statement. Changes in fair value attributable to changes in credit risk are not reclassified to consolidated income statement.

Société Générale de Banque au Liban S.A.L. F.22

Société Générale de Banque au Liban SAL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2017 2 ACCOUNTING POLICIES (continued) 2.5 Summary of significant accounting policies (continued) (2) Financial instruments – classification and measurement (continued) (ii) Classification and measurement of financial investments (continued) b. Financial liabilities (continued) Due to the Central Banks, loans and repurchase agreements, due to banks and financial institutions, amounts due to affiliated banks and financial institutions and customers’ deposits and related parties’ deposits After initial measurement, “due to the Central Banks”, “loans and repurchase agreements”, “due to banks and financial institutions”, “amounts due to affiliated banks and financial institutions” and “customers’ and related parties’ deposits” are measured at amortized cost less amounts repaid using the effective interest rate method. Amortized cost is calculated by taking into account any discount or premium on the issue and costs that are an integral part of the effective interest rate method. c. Derivatives recorded at fair value through profit or loss The Group uses derivatives such as forward foreign exchange contracts and interest rate swaps. Derivatives are recorded at fair value and carried as assets when their fair value is positive and as liabilities when their fair value is negative. Changes in the fair value of derivatives are included in “net gain (loss) from financial assets at fair value through profit or loss” in the consolidated income statement. An embedded derivative is separated from the host and accounted for as a derivative if, and only if:

(a) the hybrid contract contains a host that is not an asset within the scope of IFRS 9; (b) the economic characteristics and risks of the embedded derivative are not closely related to the

economic characteristics and risks of the host; (c) a separate instrument with the same terms as the embedded derivative would meet the definition of a

derivative; and (d) the hybrid contract is not measured at fair value with changes in fair value recognized in profit or loss.

(iii) ‘Day 1’ profit or loss When the transaction price differs from the fair value of other observable current market transactions in the same instrument or based on a valuation technique whose variables include only data from observable markets, the Group immediately recognizes the difference between the transaction price and fair value (a ‘Day 1’ profit or loss) in the consolidated income statement. In cases where fair value is determined using data which is not observable, the difference between the transaction price and model value is only recognized in the consolidated income statement when the inputs become observable, or when the instrument is derecognized. (iv) Reclassification of financial assets The Group reclassifies financial assets if the objective of the business model for managing those financial assets changes. Such changes are expected to be very infrequent. Such changes are determined by the Group’s senior management as a result of external or internal changes when significant to the Group’s operations and demonstrable to external parties. If financial assets are reclassified, the reclassification is applied prospectively from the reclassification date, which is the first day of the first reporting period following the change in business model that results in the reclassification of financial assets. Any previously recognized gains, losses or interest are not restated. If a financial asset is reclassified so that it is measured at fair value, its fair value is determined at the reclassification date. Any gain or loss arising from a difference between the previous carrying amount and fair value is recognized in profit or loss. If a financial asset is reclassified so that it is measured at amortized cost, its fair value at the reclassification date becomes its new carrying amount.

Société Générale de Banque au Liban S.A.L. F.23

Société Générale de Banque au Liban SAL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2017 2 ACCOUNTING POLICIES (continued) 2.5 Summary of significant accounting policies (continued) (3) Derecognition of financial assets and financial liabilities (i) Financial assets A financial asset (or, where applicable a part of a financial asset or part of a group of similar financial assets) is derecognized when: • the rights to receive cash flows from the asset have expired; • the Group has transferred its rights to receive cash flows from the asset or has assumed an obligation to

pay the received cash flows in full without material delay to a third party under a ‘pass-through’ arrangement; and either: (a) the Group has transferred substantially all the risks and rewards of the asset, or (b) the Group has neither transferred nor retained substantially all the risks and rewards of the asset, but

has transferred control of the asset. When the Group has transferred its rights to receive cash flows from an asset or has entered into a pass-through arrangement, and has neither transferred nor retained substantially all the risks and rewards of the asset nor transferred control of the asset, the asset is recognized to the extent of the Group’s continuing involvement in the asset. In that case, the Group also recognizes an associated liability. The transferred asset and the associated liability are measured on a basis that reflects rights and obligations that the Group has retained. Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the Group could be required to repay. (ii) Financial liabilities A financial liability is derecognized when the obligation under the liability is discharged or cancelled or expires. Where an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability. The difference between the carrying value of the original financial liability and the consideration paid is recognized in the consolidated income statement. (4) Repurchase and reverse repurchase agreements Securities sold under agreements to repurchase at a specified future date are not derecognized from the consolidated statement of financial position as the Group retains substantially all the risks and rewards of ownership. The corresponding cash received is recognized in the consolidated statement of financial position as an asset with a corresponding obligation to return it, including accrued interest as a liability within “loans and repurchase agreements”, reflecting the transaction’s economic substance as a loan to the Group. The difference between the sale and repurchase prices is treated as interest expense and is accrued over the life of agreement using the effective interest rate. When the counterparty has the right to sell or repledge the securities, the Group reclassifies those securities in its consolidated statement of financial position to “Financial assets pledged as collateral”. Conversely, securities purchased under agreements to resell at a specified future date are not recognized in the consolidated statement of financial position. The consideration paid, including accrued interest, is recorded in the consolidated statement of financial position within “Reverse repurchase agreements”, reflecting the transaction’s economic substance as a loan by the Group. The difference between the purchase and resale prices is recorded in “Net interest income” and is accrued over the life of the agreement using the effective interest rate. If securities purchased under agreement to resell are subsequently sold to third parties, the obligation to return the securities is recorded as a short sale within “Financial liabilities at fair value through profit or loss” and measured at fair value with any gains or losses included in “net gain from financial assets at fair value through profit or loss” in the consolidated income statement.

Société Générale de Banque au Liban S.A.L. F.24

Société Générale de Banque au Liban SAL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2017 2 ACCOUNTING POLICIES (continued) 2.5 Summary of significant accounting policies (continued) (5) Securities lending and borrowing Securities lending and borrowing transactions are usually collateralized by securities or cash. The transfer of the securities to counterparties is only reflected on the consolidated statement of financial position if the risks and rewards of ownership are also transferred. Cash advanced or received as collateral is recorded as an asset or liability. Securities borrowed are not recognized on the consolidated statement of financial position, unless they are then sold to third parties, in which case the obligation to return the securities is recorded as a trading liability and measured at fair value with any gains or losses included in “Net trading income”. (6) Determination of fair value The Group measures financial instruments such as derivatives, and non-financial assets such as investment properties, at fair value at each statement of financial position date. Also, fair values of financial instruments measured at amortized cost are disclosed in the notes. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:

• In the principal market for the asset or liability, or • In the absence of a principal market, in the most advantageous market for the asset or liability

The principal or the most advantageous market must be accessible by the Group. The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest. A fair value measurement of a non-financial asset takes into account a market participant's ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use. The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs. All assets and liabilities for which fair value is measured or disclosed in the consolidated financial statements are categorized within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:

- Level 1 — Quoted (unadjusted) market prices in active markets for identical assets or liabilities - Level 2 — Valuation techniques for which the lowest level input that is significant to the fair value

measurement is directly or indirectly observable - Level 3 — Valuation techniques for which the lowest level input that is significant to the fair value

measurement is unobservable For assets and liabilities that are recognized in the consolidated financial statements on a recurring basis, the Group determines whether transfers have occurred between Levels in the hierarchy by re-assessing categorization (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.

Société Générale de Banque au Liban S.A.L. F.25

Société Générale de Banque au Liban SAL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2017 2 ACCOUNTING POLICIES (continued) 2.5 Summary of significant accounting policies (continued) (6) Determination of fair value (continued) The Group’s management determines the policies and procedures for both recurring fair value measurement and for non-recurring measurement. At each reporting date, the management analyses the movements in the values of assets and liabilities which are required to be re-measured or re-assessed as per the Group’s accounting policies. For this analysis, the management verifies the major inputs applied in the latest valuation by agreeing the information in the valuation computation to contracts and other relevant documents. For the purpose of fair value disclosures, the Group has determined classes of assets and liabilities on the basis of the nature, characteristics and risks of the asset or liability and the level of the fair value hierarchy as explained above. (7) Impairment of financial assets The Group assesses at each consolidated statement of financial position date whether there is any objective evidence that a financial asset or a group of financial assets is impaired. A financial asset or a group of financial assets is deemed to be impaired if, and only if, there is objective evidence of impairment as a result of one or more events that have occurred after the initial recognition of the asset (an incurred ‘loss event’) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or the group of financial assets that can be reliably estimated. Evidence of impairment may include indications that the borrower or a group of borrowers is experiencing significant financial difficulty, the probability that they will enter bankruptcy or other financial reorganization, default or delinquency in interest or principal payments and where observable data indicates that there is a measurable decrease in the estimated future cash flows, such as changes in arrears or economic conditions that correlate with defaults. (i) Financial assets carried at amortized cost For financial assets carried at amortized cost, the Group first assesses individually whether objective evidence of impairment exists for financial assets that are individually significant, or collectively for financial assets that are not individually significant. If the Group determines that no objective evidence of impairment exists for an individually assessed financial asset, it includes the asset in a group of financial assets with similar credit risk characteristics and collectively assesses them for impairment. Assets that are individually assessed for impairment and for which an impairment loss is, or continues to be, recognized are not included in a collective assessment of impairment. If there is objective evidence that an impairment loss has been incurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future expected credit losses that have not yet been incurred). The carrying amount of the asset is reduced through the use of an allowance account and the amount of the loss is recognized in the consolidated income statement. Loans together with the associated allowance are written off when there is no realistic prospect of future recovery and all collateral has been realized or has been transferred to the Group. If, in a subsequent year, the amount of the estimated impairment loss increases or decreases because of an event occurring after the impairment was recognized, the previously recognized impairment loss is increased or reduced by adjusting the allowance account. If a future write-off is later recovered, the recovery is credited to the “Net credit losses” in the consolidated income statement. The present value of the estimated future cash flows is discounted at the financial asset’s original effective interest rate. If a loan has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate. The calculation of the present value of the estimated future cash flows of a collateralized financial asset reflects the cash flows that may result from foreclosure less costs of obtaining and selling the collateral, whether or not the foreclosure is probable.

Société Générale de Banque au Liban S.A.L. F.26

Société Générale de Banque au Liban SAL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2017 2 ACCOUNTING POLICIES (continued) 2.5 Summary of significant accounting policies (continued) (7) Impairment of financial assets (continued) (i) Financial assets carried at amortized cost (continued) For the purpose of a collective evaluation of impairment, financial assets are grouped on the basis of the Group’s internal credit grading system, that considers credit risk characteristics such as asset type, industry, geographical location, collateral type, past-due status and other relevant factors. Future cash flows on a group of financial assets that are collectively evaluated for impairment are estimated on the basis of historical loss experience for assets with credit risk characteristics similar to those in the group. Historical loss experience is adjusted on the basis of current observable data to reflect the effects of current conditions on which the historical loss experience is based and to remove the effects of conditions in the historical period that do not exist currently. Estimates of changes in future cash flows reflect, and are directionally consistent with, changes in related observable data from year to year (such as changes in unemployment rates, property prices, commodity prices, payment status, or other factors that are indicative of incurred losses in the group and their magnitude). The methodology and assumptions used for estimating future cash flows are reviewed regularly to reduce any differences between loss estimates and actual loss experienced. (ii) Renegotiated loans Where possible, the Group seeks to restructure loans rather than to take possession of collateral. This may involve extending the payment arrangements and the agreement of new loan conditions. Once the terms have been renegotiated any impairment is measured using the original effective interest rate as calculated before the modification of terms and the loan is no longer considered past due. Management continuously reviews renegotiated loans to ensure that all criteria are met and that future payments are likely to occur. The loans continue to be subject to an individual or collective impairment assessment, calculated using the loan’s original effective interest rate. (iii) Collateral repossessed The Group’s policy is to determine whether a repossessed asset is best used for its internal operations or should be sold. Assets determined to be useful for the internal operations are transferred to their relevant asset category at the lower of their repossessed value or the carrying value of the original secured asset. Assets that are determined better to be sold, are immediately transferred to assets held for sale at their fair value at the repossessed date in line with the Group’s policy. (8) Hedge accounting The Group makes use of derivative instruments to manage exposures to interest rate, foreign currency and credit risks, including exposures arising from highly probable forecast transactions and firm commitments. In order to manage particular risks, the Group applies hedge accounting for transactions which meet the specified criteria. At inception of the hedge relationship, the Group formally documents the relationship between the hedged item and the hedging instrument, including the nature of the risk, the objective and strategy for undertaking the hedge and the method that will be used to assess the effectiveness of the hedging relationship. At each hedge effectiveness assessment date, a hedge relationship must be expected to be highly effective on a prospective basis and demonstrate that it was effective (retrospective effectiveness) for the designated period in order to qualify for hedge accounting. A formal assessment is undertaken to ensure the hedging instrument is expected to be highly effective in offsetting the designated risk in the hedged item both at inception and at each quarter end on an ongoing basis. A hedge is expected to be highly effective if the changes in fair value or cash flows attributable to the hedged risk during the period for which the hedge is designated are expected to offset in a range of 80% to 125% and are expected to achieve such offset in future periods. Hedge ineffectiveness is recognized in the consolidated income statement in “Net gain (loss) from financial assets at fair value through profit or loss”. For situations where that hedged item is a forecast transaction, the Group assesses whether the transaction is highly probable and presents an exposure to variations in cash flows that could ultimately affect the consolidated income statement.

Société Générale de Banque au Liban S.A.L. F.27

Société Générale de Banque au Liban SAL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2017 2 ACCOUNTING POLICIES (continued) 2.5 Summary of significant accounting policies (continued) (8) Hedge accounting (continued) (i) Fair value hedges For designated and qualifying fair value hedges, the cumulative change in the fair value of a hedging derivative is recognized in the consolidated income statement in “Net gain (loss) from financial instruments at fair value through profit or loss”. Meanwhile, the cumulative change in the fair value of the hedged item attributable to the risk hedged is recorded as part of the carrying value of the hedged item in the consolidated statement of financial position and is also recognized in “Net gain from financial assets at fair value through profit or loss” in the consolidated income statement. If the hedging instrument expires or is sold, terminated or exercised, or where the hedge no longer meets the criteria for hedge accounting, the hedge relationship is discontinued prospectively. For hedged items recorded at amortized cost, the difference between the carrying value of the hedged item on termination and the face value is amortized over the remaining term of the original hedge using the recalculated effective interest rate (EIR). If the hedged item is derecognized, the unamortized fair value adjustment is recognized immediately in the consolidated income statement. (ii) Cash flow hedges For designated and qualifying cash flow hedges, the effective portion of the gain or loss on the hedging instrument is initially recognized directly in equity in the “Cash flow hedge reserve”. The ineffective portion of the gain or loss on the hedging instrument is recognized immediately in the consolidated income statement. When the hedged cash flow affects the consolidated income statement, the gain or loss on the hedging instrument is recorded in the corresponding income or expense line of the consolidated income statement. When the forecast transaction subsequently results in the recognition of a non-financial asset or a non-financial liability, the gains and losses previously recognized in the other comprehensive income are removed from the reserve and included in the initial cost of the asset or liability. When a hedging instrument expires, or is sold, terminated, exercised, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss existing in other comprehensive income at that time remains in other comprehensive income and is recognized when the hedged forecast transaction is ultimately recognized in the consolidated income statement. When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was reported in other comprehensive income is immediately transferred to the consolidated income statement. (iii) Hedge of a net investment Hedges of net investments in a foreign operation, including a hedge of a monetary item that is accounted for as part of the net investment, are accounted for in a way similar to cash flow hedges. Gains or losses on the hedging instrument relating to the effective portion of the hedge are recognized directly in other comprehensive income while any gains or losses relating to the ineffective portion are recognized in the consolidated income statement. On disposal of the foreign operation, the cumulative value of any such gains or losses recognized directly in other comprehensive income is transferred to the consolidated income statement. (9) Offsetting financial instruments Financial assets and financial liabilities are offset and the net amount reported in the consolidated statement of financial position if, and only if, there is a currently enforceable legal right to offset the recognized amounts and there is an intention to settle on a net basis, or to realize the asset and settle the liability simultaneously. This is not generally the case with master netting agreements. Therefore, the related assets and liabilities are presented gross in the consolidated statement of financial position.

Société Générale de Banque au Liban S.A.L. F.28

Société Générale de Banque au Liban SAL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2017 2 ACCOUNTING POLICIES (continued) 2.5 Summary of significant accounting policies (continued) (10) Leasing The determination of whether an arrangement is a lease, or it contains a lease, is based on the substance of the arrangement and requires an assessment of whether the fulfillment of the arrangement is dependent on the use of a specific asset or assets and the arrangement conveys a right to use the asset. Group as a lessee Leases which do not transfer to the Group substantially all the risks and benefits incidental to ownership of the leased items are operating leases. Operating lease payments are recognized as an expense in the consolidated income statement on a straight line basis over the lease term. Contingent rents payable are recognized as an expense in the period in which they are incurred. Group as a lessor Leases where the Group does not transfer substantially all the risk and benefits of ownership of the asset are classified as operating leases. Initial direct costs incurred in negotiating operating leases are added to the carrying amount of the leased asset and recognized over the lease term on the same basis as rental income. Contingent rents are recognized as revenue in the period in which they are earned. (11) Recognition of income and expense Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured. The following specific recognition criteria must also be met before revenue is recognized. (i) Interest and similar income and expenses For all financial instruments measured at amortized cost, interest income or expense is recorded using the effective interest rate, which is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial instrument or a shorter period, where appropriate, to the net carrying amount of the financial asset or financial liability. The calculation takes into account all contractual terms of the financial instrument and includes any fees or incremental costs that are directly attributable to the instrument and are an integral part of the effective interest rate, but not future credit losses. The carrying amount of the financial asset or financial liability is adjusted if the Group revises its estimates of payments or receipts. The adjusted carrying amount is calculated based on the original effective interest rate and the change in the carrying amount is recorded as “Interest and similar income” for financial assets and “Interest and similar expenses” for financial liabilities. Once the recorded value of a financial asset or a group of similar financial assets has been reduced due to an impairment loss, interest income continues to be recognized using the rate of interest used to discount the future cash flows for the purpose of measuring the impairment loss. (ii) Fee and commission income The Group earns fee and commission income from a diverse range of services it provides to its customers. Fee income can be divided into the following two categories: Fee income earned from services that are provided over a certain period of time Fees earned for the provision of services over a period of time are accrued over that period. These fees include commission income and asset management, custody and other management and advisory fees. Loan commitment fees for loans that are likely to be drawn down and other credit related fees are deferred (together with any incremental costs) and recognized as an adjustment to the effective interest rate on the loan. When it is unlikely that a loan be drawn down, the loan commitment fees are recognized as revenues on expiry. Fee income from providing transaction services Fees arising from negotiating or participating in the negotiation of a transaction for a third party, such as the arrangement of the acquisition of shares or other securities or the purchase or sale of businesses, are recognized on completion of the underlying transaction. Fees or components of fees that are linked to a certain performance are recognized after fulfilling the corresponding criteria.

Société Générale de Banque au Liban S.A.L. F.29

Société Générale de Banque au Liban SAL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2017 2 ACCOUNTING POLICIES (continued) 2.5 Summary of significant accounting policies (continued) (11) Recognition of income and expense (continued) (ii) Fee and commission income (continued) Fee and commission income from providing insurance services Insurance and investment contract policyholders are charged for policy administration services, investment management services, surrenders and other contract fees. These fees are recognized as revenue over the period in which the related services are performed. If the fees are for services provided in future periods, then they are deferred and recognized over those future periods. (iii) Dividend income Dividend income is recognized when the Group’s right to receive the payment is established. (iv) Net gain (loss) on financial instruments at fair value through profit or loss Results arising from financial instruments at fair value through profit or loss, include all gains and losses from changes in fair value and related income or expense and dividends for financial assets at fair value through profit or loss. This includes any ineffectiveness recorded in hedging transactions. (12) Cash and cash equivalents Cash and cash equivalents as referred to in the consolidated statement of cash flows comprise balances with original maturities of a period of three months or less including cash and balances with the Central Banks, deposits with banks and financial institutions, reverse repurchase agreements, amounts due from affiliated banks and financial institutions, due to the Central Banks, loans and repurchase agreements, due to banks and financial institutions and amounts due to affiliated banks and financial institutions. (13) Investments in an associate An associate is an entity over which the Group has significant influence. Significant influence is the power to participate in the financial and operating policy decisions of the investee, but is not control or joint control over those policies. The considerations made in determining significant influence are similar to those necessary to determine control over subsidiaries. The Group’s investments in its associate is accounted for using the equity method. Under the equity method, the investment in an associate is initially recognized at cost. The carrying amount of the investment is adjusted to recognize changes in the Group’s share of net assets of the associate since the acquisition date. Goodwill relating to the associate is included in the carrying amount of the investment and is not tested for impairment individually. The statement of profit or loss reflects the Group’s share of the results of operations of the associate. Any change in OCI of this investee is presented as part of the Group’s OCI. In addition, when there has been a change recognized directly in the equity of the associate, the Group recognizes its share of any changes, when applicable, in the statement of changes in equity. Unrealized gains and losses resulting from transactions between the Group and the associate are eliminated to the extent of the interest in the associate. The financial statements of the associate are prepared for the same reporting period as the Group. When necessary, adjustments are made to bring the accounting policies in line with those of the Group. After application of the equity method, the Group determines whether it is necessary to recognize an impairment loss on its investment in its associate. At each reporting date, the Group determines whether there is objective evidence that the investment in the associate is impaired. If there is such evidence, the Group calculates the amount of impairment as the difference between the recoverable amount of the associate and its carrying value, and then recognizes the loss in the statement of profit or loss.

Société Générale de Banque au Liban S.A.L. F.30

Société Générale de Banque au Liban SAL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2017 2 ACCOUNTING POLICIES (continued) 2.5 Summary of significant accounting policies (continued) (14) Property and equipment Property and equipment are initially recorded at cost less accumulated depreciation and any impairment in value. Buildings acquired prior to 1 January 1994 were restated for the changes in the general purchasing power of Lebanese Lira after the approval of the Central Bank of Lebanon. Net surplus arising on restatement is credited to “Revaluation reserve of property”. Changes in the expected useful life are accounted for by changing the depreciation period or method, as appropriate, and treated as changes in accounting estimates. Depreciation is calculated using the straight line method to write-down the cost of property and equipment to their residual values over their estimated useful lives. Land is not depreciated. The estimated useful lives are as follows: • Buildings 50 years • Furniture and fixtures 5 to 12.5 years • Installations 16.67 years • Vehicles 10 years Property and equipment is derecognized on disposal or when no future economic benefits are expected from its use. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is recognized in “Net profit from sale and write-off of other assets” in the consolidated income statement in the year the asset is derecognized. The assets’ residual lives and methods of depreciation are reviewed at each financial year end and adjusted prospectively if applicable. (15) Business combinations and goodwill Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the aggregate of the consideration transferred, measured at acquisition date fair value and the amount of any non-controlling interest in the acquiree. For each business combination, the Group elects whether to measure the non controlling interest in the acquiree at fair value or at the proportionate share of the acquiree’s identifiable net assets. Acquisition costs incurred are expensed and included in administrative expenses. When the Group acquires a business, it assesses the financial assets and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic circumstances and pertinent conditions as at the acquisition date. This includes the separation of embedded derivatives in host contracts by the acquiree. If the business combination is achieved in stages, the previously held equity interest in the acquiree is remeasured at fair value at the acquisition date through the consolidated income statement. Any contingent consideration to be transferred by the acquirer will be recognized at fair value at the acquisition date. Subsequent changes to the fair value of the contingent consideration which is deemed to be an asset or liability will be recognized either in profit or loss or as a change to other comprehensive income. If the contingent consideration is classified as equity, it should not be remeasured until it is finally settled within equity. Goodwill is initially measured at cost being the excess of the aggregate of the consideration transferred and the amount recognized for non-controlling interests, and any previous interest held, over the net identifiable assets acquired and liabilities assumed. If the fair value of the net assets acquired is in excess of the aggregate consideration transferred, the Group re-assesses whether it has correctly identified all of the assets acquired and all of the liabilities assumed and reviews the procedures used to measure the amounts to be recognized at the acquisition date. If the re-assessment still results in an excess of the fair value of net assets acquired over the aggregate consideration transferred, then the gain is recognized in profit or loss.

Société Générale de Banque au Liban S.A.L. F.31

Société Générale de Banque au Liban SAL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2017 2 ACCOUNTING POLICIES (continued) 2.5 Summary of significant accounting policies (continued) (15) Business combinations and goodwill (continued) Following initial recognition, goodwill is measured at cost less any accumulated impairment losses. Goodwill is reviewed for impairment annually, or more frequently, if events or changes in circumstances indicate that the carrying value may be impaired. For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Bank’s cash– generating units (CGUs) or group of CGUs, which are expected to benefit from the synergies of the combination, irrespective of whether other assets or liabilities of the acquiree are assigned to those units. Each unit to which the goodwill is allocated represents the lowest level within the Bank at which the goodwill is monitored for internal management purposes, and is not larger than an operating segment in accordance with IFRS 8 Operating Segments. Where goodwill forms part of a cash-generating unit and part of the operation within that unit is disposed of, the goodwill associated with the operation disposed of is included in the carrying amount of the operation when determining the gain or loss on disposal of the operation. Goodwill disposed of in this circumstance is measured based on the relative values of the operation disposed of and the portion of the cash-generating unit retained. (16) Intangible assets An intangible asset is recognized only when its cost can be measured reliably and it is probable that the expected future economic benefits that are attributable to it will flow to the Group. Intangible assets acquired separately are measured on initial recognition at cost. The cost of intangible assets acquired in a business combination is their fair value as at the date of acquisition. Following initial recognition, intangible assets are carried at cost less any accumulated amortization and any accumulated impairment losses. The useful lives of intangible assets are assessed to be either finite or indefinite. Intangible assets with finite lives are amortized over the useful economic life. The amortization period and the amortization method for an intangible asset with a finite useful life are reviewed at least at each financial year-end. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset are accounted for by changing the amortization period or method, as appropriate, and treated as changes in accounting estimates. The amortization expense on intangible assets with finite lives is recognized in the consolidated income statement in the expense category consistent with the function of the intangible asset. Amortization is calculated using the straight line method to write down the cost of intangible assets to their residual values. The estimated useful lives are as follows: Software 5 years Key money 5 years Customer relationship – core deposits 12.5 years Customer relationship – loans and advances 12.5 years Intangible assets with indefinite useful lives are not amortized, but are tested for impairment annually, either individually or at the cash-generating unit level. The assessment of indefinite life is reviewed annually to determine whether the indefinite life continues to be supportable. If not, the change in useful life from indefinite to finite is made on a prospective basis. Gains or losses arising from de-recognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognized in the consolidated income statement when the asset is derecognized. The Group does not have intangible assets with indefinite economic life.

Société Générale de Banque au Liban S.A.L. F.32

Société Générale de Banque au Liban SAL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2017 2 ACCOUNTING POLICIES (continued) 2.5 Summary of significant accounting policies (continued) (17) Investment properties Investment properties are measured initially at cost, including transaction costs. Subsequent to initial recognition, investment properties are stated at fair value, which reflects market conditions at the reporting date. Gains or losses arising from changes in the fair values of investment properties are included in profit or loss in the period in which they arise, including the corresponding tax effect. Fair values are determined based on the evaluation performed by independent qualified valuers on the basis of current market values and if any, by reference to sale agreements entered into by the Group for the disposal of the property subsequent to year end. Investment properties are derecognized either when they have been disposed of or when they are permanently withdrawn from use and no future economic benefit is expected from their disposal. The difference between the net disposal proceeds and the carrying amount of the asset is recognized in the consolidated income statement in the period of derecognition. Transfers are made to (or from) investment property only when there is a change in use. For a transfer from investment property to owner-occupied property, the deemed cost for subsequent accounting is the fair value at the date of change in use. If owner-occupied property becomes an investment property, the Group accounts for such property in accordance with the policy stated under property and equipment up to the date of change in use. (18) Non-current assets held for sale Non-current assets classified as held for sale are measured at the lower of their carrying amount and fair value less costs to sell. Non-current assets are classified as held for sale if their carrying amounts will be recovered principally through a sale transaction rather than through continuing use. This condition is regarded as met only when the sale is highly probable and the asset is available for immediate sale in its present condition, management has committed to the sale, and the sale is expected to have been completed within one year from the date of classification. A discontinued operation is a component of an entity that either has been disposed of, or is classified as held for sale, and:

- Represents a separate major line of business or geographical area of operations - Is part of a single coordinated plan to dispose of a separate major line of business or geographical area

of operations Or

- Is a subsidiary acquired exclusively with a view to resale In the consolidated statement of comprehensive income of the reporting period, and of the comparable period of the previous year, income and expenses from discontinued operations are reported separately from income and expenses from continuing operations, down to the level of profit after taxes, even when the Group retains a non-controlling interest in the subsidiary after the sale. (19) Impairment of non-financial assets The Group assesses at each reporting date whether there is an indication that an asset may be impaired. If any indication exists, or when annual impairment testing for an asset is required, the Group estimates the asset’s recoverable amount. An asset’s recoverable amount is the higher of an asset’s or cash-generating unit’s (CGU) fair value less costs to sell and its value in use. Where the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs to sell, an appropriate valuation model is used. These calculations are corroborated by valuation multiples, quoted share prices for publicly traded subsidiaries or other available fair value indicators.

Société Générale de Banque au Liban S.A.L. F.33

Société Générale de Banque au Liban SAL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2017 2 ACCOUNTING POLICIES (continued) 2.5 Summary of significant accounting policies (continued) (19) Impairment of non-financial assets (continued) For assets excluding goodwill, an assessment is made at each reporting date as to whether there is any indication that previously recognized impairment losses may no longer exist or may have decreased. If such indication exists, the Group estimates the asset’s or CGU’s recoverable amount. A previously recognized impairment loss is reversed only if there has been a change in the assumptions used to determine the asset’s recoverable amount since the last impairment loss was recognized. The reversal is limited so that the carrying amount of the asset does not exceed its recoverable amount, nor exceeds the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognized for the asset in prior years. Such reversal is recognized in the consolidated income statement. Impairment losses relating to goodwill cannot be reversed in future periods. (20) Financial guarantees In the ordinary course of business, the Group gives financial guarantees, consisting of letters of credit, guarantees and acceptances. Financial guarantees are initially recognized in the consolidated financial statements (within “Other liabilities”) at fair value, being the premium received. Subsequent to initial recognition, the Group’s liability under each guarantee is measured at the higher of the amount initially recognized less, when appropriate, cumulative amortization recognized in the consolidated income statement, and the best estimate of expenditure required to settle any financial obligation arising as a result of the guarantee. Any increase in the liability relating to financial guarantees is recorded in the consolidated income statement in “Net credit losses”. The premium received is recognized in the consolidated income statement in “Net fees and commission income” on a straight line basis over the life of the guarantee. (21) Tax Taxes are provided for in accordance with regulations and laws that are effective in the countries where the Group operates. (i) Current tax Current tax assets and liabilities for the current and prior years are measured at the amount expected to be recovered from or paid to the taxation authorities. The taxation rates and tax law used to compute the amount are those that are enacted or substantively enacted by the statement of financial position date. (ii) Deferred tax Deferred tax is provided on temporary differences at the statement of financial position date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. Deferred tax liabilities are recognized for all taxable temporary differences, except: • Where the deferred tax liability arises from the initial recognition of goodwill or of an asset or liability in a

transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss;

• In respect of taxable temporary differences associated with investments in subsidiaries, where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.

Deferred tax assets are recognized for all deductible temporary differences, carry forward of unused tax credits and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry forward of unused tax credits and unused tax losses can be utilized except: • Where the deferred tax asset relating to the deductible temporary difference arises from the initial recognition

of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss;

• In respect of deductible temporary differences associated with investments in subsidiaries, deferred tax assets are recognized only to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilized.

Société Générale de Banque au Liban S.A.L. F.34

Société Générale de Banque au Liban SAL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2017 2 ACCOUNTING POLICIES (continued) 2.5 Summary of significant accounting policies (continued) (21) Tax (continued) (ii) Deferred tax (continued) The carrying amount of deferred tax assets is reviewed at each statement of financial position date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilized. Unrecognized deferred tax assets are reassessed at each statement of financial position date and are recognized to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered. Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realized or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the statement of financial position date. Current tax and deferred tax relating to items recognized directly in other comprehensive income are also recognized in other comprehensive income and not in the consolidated income statement. Deferred tax assets and deferred tax liabilities are offset if a legally enforceable right exists to net off current tax assets against current tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority. (22) Provision Provision are recognized when the Group has a present obligation (legal or constructive) as a result of a past event, and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. (23) Employees’ end of service benefits The Bank’s contributions for end of service benefits paid and due to the National Social Security Fund (NSSF) are calculated on the basis of 8.5% of staff salaries. The final end of service benefits due to employees by the NSSF (a defined contribution plan) after completing 20 years of service, at the retirement age, or if the employee permanently leaves employment, are calculated based on the last month salary multiplied by the number of years of service as stipulated in the National Social Security Law. The Group is liable to pay to the NSSF the difference between the contributions paid and the final end of service benefits due to employees by the NSSF. End-of-service benefits for employees at foreign subsidiaries are accrued for in accordance with the laws and regulations of the respective countries in which the subsidiaries are located. Contributions are recorded as an expense under “personnel expenses”. (24) Assets held in custody and under administration The Group provides custody and administration services that result in the holding or investing of assets on behalf of its clients. Assets under custody or under administration are not treated as assets of the Group and accordingly are recorded as off statement of financial position items. (25) Dividends on common and preferred shares Dividends on common and preferred shares are recognized as a liability and deducted from equity when they are approved by the Group’s shareholders. Interim dividends are deducted from equity when they are declared and no longer at the discretion of the Group. Dividends for the year that are approved after the statement of financial position date are disclosed as an event after the consolidated statement of financial position date. (26) Customer’s acceptances Customer’s acceptances represent term documentary credits which the Group has committed to settle on behalf of its clients against commitments by those clients (acceptances). The commitments resulting from these acceptances are stated as a liability in the consolidated statement of financial position for the same amount.

Société Générale de Banque au Liban S.A.L. F.35

Société Générale de Banque au Liban SAL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2017 2 ACCOUNTING POLICIES (continued) 2.5 Summary of significant accounting policies (continued) (27) Equity reserves The reserves recorded in equity (other comprehensive income) on the Group’s consolidated statement of financial position include: “Cumulative change in fair value of financial instruments at fair value through other comprehensive income” reserve which comprises changes in fair value of equity instruments at fair value through other comprehensive income. “Distributable and non-distributable reserve” which include transfers from retained earnings in accordance with regulatory requirements. “Revaluation reserve of property” which comprises the revaluation surplus relating to property. 3 ACQUISITION OF ADDITIONAL INTEREST IN SGBL INSURANCE SAL On 8 March 2017, the Group acquired an additional 25% interest in the voting shares of SGBL Insurance SAL (previously Sogecap Liban SAL), increasing its ownership interest to 100%. Cash consideration of EUR 7,930,000 (CV in LL 12,815 million) was paid to the non-controlling shareholders. The carrying value of the net assets of SGBL Insurance SAL (excluding goodwill on the original acquisition) was LL 13,166 million. Following is a schedule of additional interest acquired in SGBL Insurance SAL:

LL million Cash consideration paid to non-controlling shareholders 12,815 Carrying value of the additional interest in SGBL Insurance SAL (13,166) _________ Difference recognized in retained earnings (351) _________

4 MATERIAL PARTLY-OWNED SUBSIDIARIES Financial information of subsidiaries that have material non-controlling interests are provided below: Proportion of equity interests held by non-controlling interests: 2017 2016 Name Country of

incorporation % %

SGBL Insurance SAL (previously Sogecap Liban SAL) Lebanon - 25.00 Fidus SAL Lebanon 51.00 51.00 Société Générale de Banque – Jordanie (SGBJ) Jordan 12.33 12.33

Société Générale de Banque au Liban S.A.L. F.36

Société Générale de Banque au Liban SAL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2017 4 MATERIAL PARTLY-OWNED SUBSIDIARIES (continued) The summarized financial information of these subsidiaries are provided below. This information is based on amounts before inter-company eliminations: Summarized statements of profit and loss for 2017:

Fidus SAL

Société Générale de

Banque - Jordanie

LL million LL million Net interest income 5,781 40,254 Net fee and commission income 7,907 5,975 Net (loss) gain from financial assets at fair value through profit or loss (64) 1,994 Net gain from sale of debt instruments at amortized cost - 2,851 Revenue from financial assets at fair value through other comprehensive income

-

28

Other operating income 66 2,222 Net credit losses (1,329) (946) Operating expenses (11,699) (26,800) Income tax expense (175) (8,978) _________ _________ Profit for the year 487 16,600 _________ _________ Attributable to non-controlling interests 248 2,047 _________ _________ Dividends paid to non-controlling interest - 1,834 _________ _________ Summarized statements of profit and loss for 2016:

SGBL Insurance

SAL Fidus SAL

Société Générale de

Banque - Jordanie

LL million LL million LL million Net interest income 9,234 3,655 43,328 Net fee and commission income (expense) (3,383) 31,293 8,370 Net gain (loss) from financial assets at fair value through profit or loss

1,127 (13) 1,837

Revenue from financial assets at fair value through other comprehensive income - - 40 Net gain from sale of debt instruments at amortized cost - - 6,653 Income from insurance activities 24,223 - - Other operating income 93 1,354 1,370 Net credit losses - (283) (954) Operating expenses (16,524) (12,206) (25,442) Income tax expense (450) (3,554) (12,014) ________ _________ _________ Profit for the year 14,320 20,246 23,188 ________ _________ _________ Attributable to non-controlling interests 3,580 10,325 2,859 ________ _________ _________ Dividends paid to non-controlling interest 2,261 - 1,305 ________ _________ _________

Société Générale de Banque au Liban S.A.L. F.37

Société Générale de Banque au Liban SAL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2017 4 MATERIAL PARTLY-OWNED SUBSIDIARIES (continued) Summarized statements of financial position as at 31 December 2017:

Fidus SAL

Société Générale de Banque –

Jordanie LL million LL million Cash and balances with the Central Banks 233 170,859 Due from banks and financial institutions 45,962 79,799 Amounts due from affiliated banks and financial institutions 38,097 127,111 Financial assets at fair value through profit or loss 241 - Loans and advances at amortized cost 109,926 1,387,102 Financial assets at amortized cost - 1,045,438 Financial assets at fair value through other comprehensive income 373 1,109 Property and equipment 4,425 47,825 Intangible assets - 2,721 Non-current assets held for sale - 6,140 Other assets 345 6,670 Due to the Central Banks - (22,528) Due to banks and financial institutions (86,132) (41,051) Amounts due to affiliated banks and financial institutions (1,145) (518) Deposits at amortized cost (71,289) (2,504,258) Other liabilities (6,146) (21,309) _________ _________ Total equity 34,890 285,110 _________ _________ Attributable to non-controlling interests 17,794 35,154 _________ _________ Summarized statements of financial position as at 31 December 2016:

SGBL Insurance

SAL Fidus SAL

Société Générale de

Banque – Jordanie

LL million LL million LL million Cash and balances with the Central Banks 4 909 306,021 Due from banks and financial institutions - 91,327 89,397 Amounts due from affiliated banks and financial institutions 190,142 66,048 149,457 Financial assets at fair value through profit or loss 20,379 300 - Loans and advances at amortized cost - 130,248 1,210,961 Financial assets at amortized cost 1,475 - 948,735 Financial assets at fair value through other comprehensive income

- 330 1,017

Property and equipment 1,369 4,805 47,481 Intangible assets - - 2,880 Non-current assets held for sale - - 6,243 Other assets 2,048 651 6,716 Due to the Central Banks - - (25,737) Due to banks and financial institutions - (109,650) (105,228) Amounts due to affiliated banks and financial institutions - (8,788) (511) Deposits at amortized cost (132,541) (117,879) (2,325,789) Other liabilities (30,205) (23,898) (28,116) _________ _________ _________ Total equity 52,671 34,403 283,527 _________ _________ _________ Attributable to non-controlling interests 13,168 17,546 34,948 _________ _________ _________

Société Générale de Banque au Liban S.A.L. F.38

Société Générale de Banque au Liban SAL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2017 4 MATERIAL PARTLY-OWNED SUBSIDIARIES (continued) Summarized cash flow information for the year ended 31 December 2017:

Fidus SAL

Société Générale de Banque –

Jordanie LL million LL million Operating (42,784) (36,897) Investing (47) (42,039) Financing - (19,329) _________ _________ Net decrease in cash and cash equivalents (42,831) (98,265) _________ _________ Summarized cash flow information for the year ended 31 December 2016:

SGBL Insurance SAL Fidus SAL

Société Générale de Banque –

Jordanie LL million LL million LL million Operating 20,421 79,736 (120,090) Investing 58,803 (537) (185,446) Financing (9,045) (10,753) (18,163) _________ _________ _________ Net increase (decrease) in cash and cash equivalents 70,179 68,446 (323,699) _________ _________ _________ 5 INTEREST AND SIMILAR INCOME 2017 2016 LL million LL million Balances with the Central Banks 601,578 306,195 Financial assets at amortized cost 590,563 628,891 Loans and advances to customers at amortized cost 440,477 392,846 Due from banks and financial institutions 7,423 4,975 Loans and advances to related parties at amortized cost 5,696 5,045 Amounts due from affiliated banks and financial institutions 2,810 665 Reverse repurchase agreements 121 11,924 _________ _________ 1,648,668 1,350,541 _________ _________ 6 INTEREST AND SIMILAR EXPENSE 2017 2016 LL million LL million Customers’ deposits at amortized cost 1,079,985 825,378 Due to banks and financial institutions 83,111 74,557 Due to the Central Banks 38,048 50,185 Related parties’ deposits at amortized cost 7,021 3,939 Amounts due to affiliated banks and financial institutions 2,002 111 __________ __________ 1,210,167 954,170 __________ __________

Société Générale de Banque au Liban S.A.L. F.39

Société Générale de Banque au Liban SAL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2017

7 FEE AND COMMISSION INCOME 2017 2016 LL million LL million

Credit-related fees and commissions 37,196 36,313 Maintenance of accounts 22,414 21,557 Brokerage and custody income 12,153 18,060 Commercial banking income 9,188 10,126 Trade finance income 9,132 9,241 Other commissions 5,896 5,325 Insurance brokerage income 2,045 1,811

__________ __________ 98,024 102,433 __________ __________

8 NET GAIN FROM FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS

2017 2016 LL million LL million Net gain on foreign exchange 11,109 12,844 Interest income on debt instruments at fair value through profit or loss 8,939 3,733 Dividend income from equity instruments at fair value through profit or loss 1,722 2,267 Realized and unrealized loss from financial assets at fair value through profit or loss (9,294) (176) _________ _________ 12,476 18,668 _________ _________ Net gain on foreign exchange includes gains and losses from spot and forward contracts and the revaluation of the daily open trading position. 9 REVENUE FROM FINANCIAL ASSETS AT FAIR VALUE THROUGH OTHER

COMPREHENSIVE INCOME 2017 2016 LL million LL million Dividend income from financial assets at fair value through other comprehensive income 1,715 638 __________ __________ 10 OTHER OPERATING INCOME 2017 2016 LL million LL million Income from services rendered 134 134 Write-back of impairment losses on non-current assets held-for-sale (note 27) 722 683 Gain from sale of non-current assets held-for-sale (note 27) 406 3,080 Income from insurance activities 27,580 24,223 Other operating income 5,272 3,533 __________ __________ 34,114 31,653 __________ __________

Société Générale de Banque au Liban S.A.L. F.40

Société Générale de Banque au Liban SAL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2017 11 NET CREDIT LOSSES

2017 2016 LL million LL million Provision for loans and advances to customers (note 20) (26,555) (37,337) Provision for loans and advances to related parties (note 21) (1,309) (1,500) Write-back of provision for loans and advances to customers (note 20) 9,909 7,748 Write-back of unrealized interest on loans and advances to customers (note 20) 7,073 3,972 Loans written off (993) (668) __________ __________ (11,875) (27,785) Provision on balances with banks and financial institutions (note 16) (420) (154) Impairment loss on financial assets at amortized cost (note 22) - (233) Write-back of impairment on financial assets at amortized cost (note 22) - 8,442 Write-back of provision for other assets (note 28) 10 219 __________ __________ (12,285) (19,511) __________ __________ 12 PERSONNEL EXPENSES 2017 2016 LL million LL million Salaries and wages 97,196 87,819 Social Security contributions 14,261 12,807 Provisions for employees’ end of service benefits (note 37) 2,132 6,293 Other allowances 28,469 26,460 __________ __________ 142,058 133,379 __________ __________ 13 OTHER OPERATING EXPENSES 2017 2016 LL million LL million Net provision for risks and charges 8,246 18,454 Professional services 20,404 30,246 Publicity and advertising 19,723 16,734 Rent 17,272 16,271 Travelling and entertainment expenses 15,575 12,072 Maintenance and repairs 11,093 10,591 Telecommunication and postage 10,047 10,253 Taxes and fees 7,294 7,992 Premiums for guarantee of deposits 9,377 7,799 Electricity, water and fuel 4,855 4,782 Printings and stationery 2,714 2,766 Legal expenses 2,805 2,381 Other operating charges 27,921 26,662 __________ __________ 157,326 167,003 __________ __________

Société Générale de Banque au Liban S.A.L. F.41

Société Générale de Banque au Liban SAL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2017

14 INCOME TAX The components of income tax expense for the years ended 31 December 2017 and 2016 are: 2017 2016 LL million LL million Current tax Current income tax 63,527 239,148 Other adjustments 1,282 12 Deferred tax Relating to origination and reversal of temporary differences (236) 581 Relating to transactions with the Central Bank of Lebanon - (110,742) ___________ ___________ 64,573 128,999 ___________ ___________ Reconciliation of the total tax charge The reconciliation between the tax expense and the accounting profit for the years ended 31 December 2017 and 31 December 2016 is as follows: 2017 2016 LL million LL million Accounting profit before tax 397,635 432,021 Less: Revenues previously subject to tax (87,893) (32,091) Add: Non-deductible expenses 72,543 415,462 Add: Gain recognized directly in non-distributable reserves - 476,698 Add: Deferred income - 257,555 ___________ ___________ Taxable profit 382,285 1,549,645 ___________ ___________ Effective income tax rate 16.62% 15.43% ___________ ___________ Income tax expense 63,527 239,148 ___________ ___________ Current tax liabilities (note 36) 2017 2016 LL million LL million Income tax due 63,527 239,148 Tax withheld on interest previously paid (20,562) (21,387) Others 2,595 832 ___________ ___________ 45,560 218,593 ___________ ___________ Deferred tax The following table shows deferred tax recorded on the consolidated statement of financial position and changes recorded in the income tax expense: 2017 2016 Deferred tax

assets Deferred tax

liabilities Income

statement Deferred tax

assets Deferred tax

liabilities Income

statement LL million LL million LL million LL million LL million LL million Depreciation of property and equipment - 861 (278) 21 562 (202) Impairment allowance for loans and advances 4,625 - (2) 4,623 - - Unrealized losses on financial instruments at fair value through profit or loss 214 - - 214 - - Tax losses expected to be utilized in future periods 1,241 - (465) 776 - 846 Others 1,063 - 509 1,572 - (63) _________ _________ _________ _________ _________ _________ 7,143 861 (236) 7,206 562 581 _________ _________ _________ _________ _________ _________

Société Générale de Banque au Liban S.A.L. F.42

Société Générale de Banque au Liban SAL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2017

15 CASH AND BALANCES WITH THE CENTRAL BANKS 2017 2016 LL million LL million Cash 121,535 106,330 Current accounts with the Central Banks 419,844 729,735 Time deposits with the Central Banks 12,718,025 7,707,949 ___________ ___________ 13,259,404 8,544,014 ___________ ___________ Cash and balances with the Central Bank include non-interest bearing balances held at the Central Bank of Lebanon in coverage of the compulsory reserve requirements for all banks operating in Lebanon. This compulsory reserve is calculated on the basis of 25% of sight commitments and 15% of term commitments after taking into account certain waivers relating to subsidized loans denominated in Lebanese Lira. Accordingly, the compulsory reserve amounted to LL 222,555 million at 31 December 2017 (2016: LL 252,773 million). In addition a 15% of total deposits in foreign currencies regardless of nature is required. These placements amounted to US$ 1,224 million (equivalent to LL 1,844,754 million) as at 31 December 2017 (2016: US$ 1,096 million equivalent to LL 1,651,677 million). Société Générale de Banque – Jordanie and Société Générale Bank – Cyprus Ltd are also subject to compulsory reserve requirements with varying percentages, according to the banking rules and regulations of the Kingdom of Jordan and the Republic of Cyprus. Time deposits include placements of LL 1,096,176 million pledged to the favor of the Central Bank of Lebanon against loans granted by the latter as at 31 December 2017 (2016: LL 540,944 million) (notes 30 & 31). 16 DUE FROM BANKS AND FINANCIAL INSTITUTIONS 2017 2016 LL million LL million Current accounts 238,437 338,253 Time deposits 431,870 271,965 Checks for collection 75,178 65,620 Discounted bills 103 - Pledged accounts (i) 108,768 120,058 Debtor accounts against creditor accounts, net 581 3,008 __________ __________ 854,937 798,904 Less: Provision for impairment (711) (275) __________ __________ 854,226 798,629 __________ __________ (i) Included under pledged accounts an amount of LL 92,782 million placed as collateral against repurchase

agreements as at 31 December 2017 (2016: LL 89,668 million) (note 31). The movement of the provision for impairment of deposits with banks and financial institutions as recognized in the consolidated statement of financial position is as follows: 2017 2016 LL million LL million Provision at 1 January 275 145 Provision during the year (note 11) 420 154 Difference of exchange 16 (24) __________ __________ Provision at 31 December 711 275 __________ __________

Société Générale de Banque au Liban S.A.L. F.43

Société Générale de Banque au Liban SAL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2017 17 AMOUNTS DUE FROM AFFILIATED BANKS AND FINANCIAL INSTITUTIONS 2017 2016 LL million LL million Sight deposits 465,143 483,304 Time deposits 125,242 435,304 ____________ ____________ 590,385 918,608 ____________ ____________ Time deposits include an amount of LL 54,198 million (equivalent to Euro 30 million) as of 31 December 2017 (2016: Euro 30 million, equivalent to LL 47,889 million) pledged in favour of Société Générale SA Paris in guarantee of documentary letters of credit and guarantees issued in favor of the Bank’s clients. 18 DERIVATIVE FINANCIAL INSTRUMENTS The table below shows the fair values of derivative financial instruments, recorded as assets or liabilities, together with their notional amounts. The notional amount, recorded gross, is the amount of a derivative’s underlying asset, reference rate or index and is the basis upon which changes in the value of derivatives are measured. The notional amounts indicate the volume of transactions outstanding at year-end and are indicative of neither the market risk nor the credit risk. 2017 2016

Assets Liabilities

Total notional amount Assets Liabilities

Total notional amount

LL million

LL million LL million

LL million LL million LL million

Derivatives held-for-trading Forward foreign exchange contracts

9,197 (164) 566,312 2,472 (9,507) 674,487

________ _________ ________ _________ _________ ________ Derivatives often involve at their inception only a mutual exchange of promises with little or no transfer of consideration. However, these instruments frequently involve a high degree of leverage and are very volatile. A relatively small movement in the value of the asset, rate or index underlying a derivative contract may have a significant impact on the profit or loss of the Group. Over-the-counter derivatives may expose the Group to the risks associated with the absence of an exchange market on which to close out an open position. The Group’s exposure under derivative contracts is closely monitored as part of the overall management of the Group’s market risk. Derivative financial instruments held or issued for trading purposes Most of the Group’s derivative trading activities relate to deals with customers that are normally offset by transactions with other counterparties. Also included under this heading are any derivatives entered into for hedging purposes that do not meet the hedge accounting criteria. Fair value hedges Fair value hedges are used by the Group to protect it against changes in the fair value of financial assets and financial liabilities due to movements in exchange rates and interest rates. The financial instruments hedged for interest rate risk include loans and advances. The Group uses interest rate swaps to hedge interest rate risk.

Société Générale de Banque au Liban S.A.L. F.44

Société Générale de Banque au Liban SAL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2017 19 FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS 2017 2016 LL million LL million Quoted Shares 77,294 94,196 Funds 23,720 20,376 Lebanese treasury bills – Eurobonds 11,418 3,688 _________ _________ 112,432 118,260 _________ _________ Unquoted Shares 50,477 23,228 Lebanese treasury bills – denominated in LL 1,090 1,094 Debt securities issued by banks 37,688 37,688 ____________ ____________ 89,255 62,010 ____________ ____________ 201,687 180,270 ____________ ____________

20 LOANS AND ADVANCES TO CUSTOMERS AT AMORTIZED COST 2017 2016 LL million LL million Corporate lending 4,800,919 4,254,325 Retail lending 3,123,666 2,985,287 ____________ ____________ 7,924,585 7,239,612 Less: Unrealized interest (i) (351,633) (380,513) Less: Allowance for impairment losses (ii) (228,336) (231,450)

____________ ____________ 7,344,616 6,627,649

____________ ____________ (i) The movement of unrealized interest on substandard, doubtful, and bad loans is as follows:

2017 Corporate Retail Total LL million LL million LL million Balance at 1 January 297,801 82,712 380,513 Unrealized interest for the year 44,447 27,337 71,784 Less: Write-back during the year (note 11) (3,246) (3,827) (7,073) Less: Unrealized interest written off (89,873) (18,369) (108,242) Transfers from off-statement of financial position 62,209 10,927 73,136 Transfers to off-statement of financial position (65,660) (1,952) (67,612) Transfer from retail to corporate 2,859 (2,859) - Difference of exchange 3,745 5,382 9,127 ___________ ___________ ___________ Balance at 31 December 252,282 99,351 351,633 ___________ ___________ ___________

Société Générale de Banque au Liban S.A.L. F.45

Société Générale de Banque au Liban SAL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2017 20 LOANS AND ADVANCES TO CUSTOMERS AT AMORTIZED COST (continued)

2016 Corporate Retail Total LL million LL million LL million Balance at 1 January 308,372 63,262 371,634 Unrealized interest for the year 44,341 24,147 68,488 Less: Write-back during the year (note 11) (1,885) (2,087) (3,972) Less: Unrealized interest written off (63,465) (4,681) (68,146) Transfers from off-statement of financial position 11,197 3,275 14,472 Difference of exchange (759) (1,204) (1,963) __________

_ __________

_ __________

_ Balance at 31 December 297,801 82,712 380,513 __________

_ __________

_ __________

_ (ii) The movement of the impairment allowances during the year was as follows:

2017 Corporate Retail Total LL million LL million LL million Balance at 1 January 110,197 121,253 231,450 Charge for the year (note 11) 5,429 21,126 26,555 Less: Write-back of provision (note 11) (4,242) (5,667) (9,909) Less: Provisions written off (11,292) (10,004) (21,296) Transfers from off-statement of financial position 8,870 5,625 14,495 Transfers to off-statement of financial position (18,795) (2,589) (21,384) Transfer from retail to corporate 789 (789) - Difference of exchange 3,476 4,949 8,425 ___________ ___________ ___________ Balance at 31 December 94,432 133,904 228,336 ___________ ___________ ___________ Specific provisions 85,486 111,865 197,351 Collective provisions 8,946 22,039 30,985 ___________ ___________ ___________ 94,432 133,904 228,336 ___________ ___________ ___________ Gross amount of loans individually determined to be impaired, before deducting the individually assessed impairment allowance 453,260 309,415 762,675 ___________ ___________ ___________

2016 Corporate Retail Total LL million LL million LL million Balance at 1 January 111,597 98,151 209,748 Charge for the year (note 11) 8,134 29,203 37,337 Less: Write-back of provision (note 11) (3,619) (4,129) (7,748) Less: Provisions written off (14,687) (2,019) (16,706) Transfers from off-statement of financial position 9,467 1,392 10,859 Difference of exchange (695) (1,345) (2,040) ___________ ___________ ___________ Balance at 31 December 110,197 121,253 231,450 ___________ ___________ ___________ Specific provisions 101,327 98,948 200,275 Collective provisions 8,870 22,305 31,175 ___________ ___________ ___________ 110,197 121,253 231,450 ___________ ___________ ___________

Gross amount of loans individually determined to be impaired, before deducting the individually assessed impairment allowance

468,513 295,340 763,853 ___________ ___________ ___________

Société Générale de Banque au Liban S.A.L. F.46

Société Générale de Banque au Liban SAL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2017 21 LOANS AND ADVANCES TO RELATED PARTIES AT AMORTIZED COST 2017 2016 LL million LL million Corporate lending 83,568 83,013 Retail lending 47,176 38,772 __________ __________ 130,744 121,785 Less: Unrealized interest (i) (404) (339) Less: Allowance for impairment losses (ii) (19,275) (20,709) __________ __________ 111,065 100,737 __________ __________ (i) The movement of unrealized interest on substandard, doubtful, and bad loans is as follows:

2017 Corporate Retail Total LL million LL million LL million Balance at 1 January 339 - 339 Unrealized interest for the year 55 - 55 Difference of exchange 10 - 10 ____________ __________ ___________ Balance at 31 December 404 0 404 ____________ __________ ___________ 2016 Corporate Retail Total LL million LL million LL million Balance at 1 January 281 - 281 Unrealized interest for the year 51 - 51 Difference of exchange 7 - 7 ____________ __________ ___________ Balance at 31 December 339 - 339 ____________ __________ ___________ (ii) The movement of the impairment allowances during the year was as follows: 2017 Corporate Retail Total LL million LL million LL million Balance at 1 January 20,709 - 20,709 Charge for the year (note 11) 1,309 - 1,309 Less: provisions written off (2,771) - (2,771) Difference of exchange 28 - 28 __________ ________ _________ Balance at 31 December 19,275 - 19,275 __________ ________ _________ Gross amount of loans individually determined to be impaired, before deducting the individually assessed impairment allowance 23,776 - 23,776 __________ _________ _________

Société Générale de Banque au Liban S.A.L. F.47

Société Générale de Banque au Liban SAL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2017

21 LOANS AND ADVANCES TO RELATED PARTIES AT AMORTIZED COST (continued) 2016 Corporate Retail Total LL million LL million LL million Balance at 1 January 19,193 - 19,193 Charge for the year (note 11) 1,500 - 1,500 Difference of exchange 16 - 16 __________ ________ _________ Balance at 31 December 20,709 - 20,709 __________ ________ _________ Gross amount of loans individually determined to be impaired, before deducting the individually assessed impairment allowance 24,818 - 24,818 __________ _________ _________ 22 FINANCIAL ASSETS AT AMORTIZED COST 2017 2016 LL million LL million Quoted Lebanese treasury bills – Eurobonds 62,642 40,284 Lebanese treasury bills – Eurobonds pledged as collateral against repurchase agreements 2,176,089 2,582,749 Foreign governmental debt securities - 33,222 Foreign governmental debt securities pledged as collateral against repurchase agreements 25,290 25,194 Debt securities issued by banks 9,204 9,028 Corporate bonds pledged as collateral against repurchase agreements 42,261 42,980 ___________ ___________ Gross quoted investments at amortized cost 2,315,486 2,733,457 Provision for impairment (iv) - - ___________ ___________ 2,315,486 2,733,457 ___________ ___________ Unquoted Lebanese treasury bills – denominated in LL 996,572 2,877,681 Lebanese treasury bills – denominated in LL mortgaged in favour of

the Central Bank of Lebanon (i) 617,216 181,885 Certificates of deposit – denominated in LL 333,754 513,170 Certificates of deposit – EuroCDs 2,289,792 2,443,352 Certificates of deposits issued by foreign Central Banks 52,126 -

Certificates of deposit – EuroCDs pledged as collateral against repurchase agreements 45,390 45,390 Certificates of deposit – denominated in LL mortgaged in favour of

the Central Bank of Lebanon (ii) 19,554 - Certificates of deposit – EuroCDs mortgaged in favour of the Central

Bank of Lebanon (ii) 309,388 309,388 Certificates of deposit – EuroCDs mortgaged in favour of a customer

(iii) 669,674 412,723 Corporate bonds 21,723 22,013 Governmental bonds mortgaged against deposits from Social Security of Jordan 400,424 270,574

Governmental bonds mortgaged in favor of the Central Bank of Jordan 2,318 857

Foreign governmental debt securities 569,930 656,675 Certificates of deposit issued by banks - 10,566 ___________ ___________ Gross unquoted investments at amortized cost 6,327,861 7,744,274 Provision for impairment (iv) (1,083) (1,384) ___________ ___________ 6,326,778 7,742,890 ___________ ___________ 8,642,264 10,476,347 ___________ ___________

Société Générale de Banque au Liban S.A.L. F.48

Société Générale de Banque au Liban SAL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2017 22 FINANCIAL ASSETS AT AMORTIZED COST (continued) (i) These Lebanese treasury bills are pledged against soft loans granted by the Central Bank of Lebanon

(note 30).

(ii) During 2016, the Bank obtained the approval of the Central Bank of Lebanon to release an amount of US$ 200 million (equivalent LL 301,500 million) from obligatory reserves provided that this amount is invested in governmental bonds pledged in the favor of the Central Bank of Lebanon. The Bank pledged Eurobonds with a nominal amount of US$ 200 million (equivalent to LL 301,500 million) from 13 January 2016 until 18 August 2016, and subsequently two certificates of deposits with a total nominal amount of US$ 200 million (equivalent to LL 301,500 million). During 2017, in addition to previous amounts pledged to the Central Bank of Lebanon, the Bank pledged certificates of deposits with a nominal amount of LL 15,000 million against soft loans granted by the latter (note 30).

(iii) The Bank mortgaged and registered certificates of deposit in favor of a customer as a guarantee for the deposit placed at the Bank by the latter (note 34).

(iv) Movements in the provision for impairment of financial assets at amortized cost are as follows: 2017 2016 LL million LL million Provision at 1 January 1,384 9,595 Provided during the year (note 11) - 233 Written-back during the year (note 11) - (8,442) Write off during the year (301) - Difference of exchange - (2) ___________ ___________ Balance at 31 December 1,083 1,384 ___________ ___________ The Group derecognized some debt instruments classified at amortized cost due to the following reasons: - Deterioration of the credit rating below the ceiling allowed in the Group’s investment policy; - Liquidity gap and yield management; - Exchange of certificates of deposit by the Central Bank of Lebanon; - Currency risk management as a result of change in the currency base of deposits; or - Liquidity for capital expenditures. The schedule below details the net gain from sale of financial assets at amortized cost: 2017 2016 Gains Losses Net Gains Losses Net LL million LL million LL million LL million LL million LL million Lebanese sovereign and Central Bank of Lebanon

Certificates of deposit 20,737 - 20,737 393,732 (13,102) 380,630 Treasury bills 140,288 (98) 140,190 214,497 - 214,497 Eurobonds 15,633 (962) 14,671 662 (23,110) (22,448) __________ __________ __________ __________ __________ __________ 176,658 (1,060) 175,598 608,891 (36,212) 572,679 __________ __________ __________ __________ __________ __________ Other sovereign Other governmental securities 6,958 - 6,958 7,262 - 7,262 __________ __________ __________ __________ __________ __________ Private sector and other securities Corporate and other debt instruments - - - 1,675 (1,908) (233) __________ __________ __________ __________ __________ __________ 183,616 (1,060) 182,556 617,828 (38,120) 579,708 __________ __________ __________ __________ __________ __________

During 2017, the Group entered into certain financial transactions with the Central Bank of Lebanon relating to treasury bills denominated in Lebanese Lira, whereby the Central Bank purchased treasury bills denominated in LL with a nominal of LL 1,950,000 million. As a result of this sale, the Group realized a gain of LL 131,248 million in the consolidated income statement and deposited US$ 1,300 million with the Central Bank of Lebanon.

Société Générale de Banque au Liban S.A.L. F.49

Société Générale de Banque au Liban SAL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2017 22 FINANCIAL ASSETS AT AMORTIZED COST (continued) During 2016, the Group entered into certain financial transactions with the Central Bank of Lebanon. These transactions were available to banks provided that they are able to reinvest an amount equivalent to the nominal value of the sold instruments in Eurobonds issued by the Lebanese Republic or Certificates of Deposit issued by the Central Bank of Lebanon denominated in US Dollars and purchased at their fair values. The net gains from such trades in excess of the fair value of the financial instruments sold amounted to LL 1,272,142 million, of which LL 734,253 million was not realized in the consolidated income statement (note 36). 23 FINANCIAL ASSETS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME 2017 2016 LL million LL million Quoted Shares 148,418 12,593 ___________ ___________ Unquoted Shares 13,096 12,615 ___________ ___________ 161,514 25,208 ___________ ___________ Dividend income recognized in the consolidated income statement from financial assets at fair value through other comprehensive income is disclosed in note 9. 24 PROPERTY AND EQUIPMENT Advances

on purchase

of property and

equipment

Land and buildings

Furniture and

fixtures

Installations

Vehicles

Total LL million LL million LL million LL million LL million LL

million Cost: At 1 January 2017 86,204 282,999 124,567 73,843 2,282 569,895 Additions 57,253 76 3,408 2,443 133 63,313 Disposals - - (100) - (155) (255) Transfers (20,257) 10,573 3,357 5,973 354 0 Write-off - - (102) - - (102) Exchange differences 43 20 796 328 25 1,212 _________ ________ _________ __________ _________ _______ At 31 December 2017 123,243 293,668 131,926 82,587 2,639 634,063 _________ ________ _________ __________ _________ _______ Depreciation: At 1 January 2017 - 23,601 69,079 40,681 1,392 134,753 Provided during the year - 2,623 5,751 3,298 283 11,955 Relating to disposals - - (99) - (39) (138) Relating to write-off - - (99) - - (99) Exchange differences - 1 729 157 18 905 _________ ________ _________ __________ _________ _______ At 31 December 2017 - 26,225 75,361 44,136 1,654 147,376 _________ ________ _________ __________ _________ _______ Impairment: At 1 January 2017 and 31 December 2017

- 1,357 - - - 1,357

_________ ________ _________ __________ _________ _______ Net carrying amount: At 31 December 2017 123,243 266,086 56,565 38,451 985 485,330 _________ ________ _________ __________ _________ _______

Société Générale de Banque au Liban S.A.L. F.50

Société Générale de Banque au Liban SAL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2017 24 PROPERTY AND EQUIPMENT (continued)

Advances on

purchase of property

and equipment

Land and buildings

Furniture and

fixtures

Installations

Vehicles

Total LL million LL million LL million LL million LL million LL

million Cost: At 1 January 2016 64,415 127,355 83,403 63,297 2,122 340,592 Additions 37,597 - 39,013 1,856 305 78,771 Acquisition of a subsidiary (note 3) - 151,492 - - - 151,492 Disposals - - (406) (13) (218) (637) Transfers (16,332) 4,148 2,747 9,356 81 - Transfer from non-current assets held for sale (note 27) 534 -

- - - 534

Write-off - - (9) (610) - (619) Exchange differences (10) 4 (181) (43) (8) (238) _________ ________ _________ __________ _________ _______ At 31 December 2016 86,204 282,999 124,567 73,843 2,282 569,895 _________ ________ _________ __________ _________ _______ Depreciation: At 1 January 2016 - 21,206 63,708 38,575 1,401 124,890 Provided during the year - 2,395 5,934 2,743 197 11,269 Relating to disposals - - (380) (13) (198) (591) Relating to write-off - - (9) (579) - (588) Exchange differences - - (174) (45) (8) (227) _________ ________ _________ __________ _________ _______ At 31 December 2016 - 23,601 69,079 40,681 1,392 134,753 _________ ________ _________ __________ _________ _______ Impairment: At 1 January 2016 and 31 December 2016

- 1,357 - - - 1,357

_________ ________ _________ __________ _________ _______ Net carrying amount: At 31 December 2016 86,204 258,041 55,488 33,162 890 433,785 _________ ________ _________ __________ _________ _______ 25 INTANGIBLE ASSETS

Advances on intangible

assets

Customer relationships

Key money

Licenses and

software

Total

LL million LL million LL million LL million LL million Cost: At 1 January 2017 24,084 20,600 9,861 20,257 74,802 Additions 8,504 - - 1,264 9,768 Write off - - (7,753) - (7,753) Transfers (88) - 88 - - Exchange differences - - - 307 307 __________ ___________ ___________ ___________ ___________ At 31 December 2017 32,500 20,600 2,196 21,828 77,124 __________ ___________ ___________ ___________ ___________ Amortization: At 1 January 2017 - 8,584 1,934 14,967 25,485 Provided during the year - 1,717 - 1,619 3,336 Exchange differences - - - 284 284 __________ ___________ ____________ ___________ ___________ At 31 December 2017 - 10,301 1,934 16,870 29,105 __________ ___________ ____________ ___________ ___________ Net carrying amount: At 31 December 2017 32,500 10,299 262 4,958 48,019 __________ ___________ ____________ ___________ ___________

Société Générale de Banque au Liban S.A.L. F.51

Société Générale de Banque au Liban SAL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2017 25 INTANGIBLE ASSETS (continued)

Advances on

intangible assets

Customer relationships

Key money

Licenses and

software

Total

LL million LL million LL million LL million LL million Cost: At 1 January 2016 15,621 20,600 9,861 17,202 63,284 Additions 10,513 - - 1,067 11,580 Transfers (2,050) - - 2,050 - Exchange differences - - - (62) (62) __________ ___________ ___________ ___________ ___________ At 31 December 2016 24,084 20,600 9,861 20,257 74,802 __________ ___________ ___________ ___________ ___________ Amortization: At 1 January 2016 - 6,867 1,934 13,538 22,339 Provided during the year - 1,717 - 1,493 3,210 Exchange differences - - - (64) (64) __________ ___________ ____________ ___________ ___________ At 31 December 2016 - 8,584 1,934 14,967 25,485 __________ ___________ ____________ ___________ ___________ Net carrying amount: At 31 December 2016 24,084 12,016 7,927 5,290 49,317 __________ ___________ ____________ ___________ ___________ Customer relationships represents the intangibles resulting from the acquisition of assets and liabilities of the Lebanese Canadian Bank SAL (under liquidation) in prior years. 26 INVESTMENT PROPERTIES 2017 2016 LL million LL million Investment properties 1,478 1,483 __________ __________ The movement of investment properties recognized in the consolidated statement of financial position is as follows: 2017 2016 LL million LL million At 1 January 1,483 1,480 Exchange difference (5) 3 _________ _________ At 31 December 1,478 1,483 _________ _________ The Group’s investment properties consist of properties in Lebanon held by the Group for capital appreciation. As at 31 December 2017 and 2016, the fair values of the properties are based on valuations performed by accredited independent valuers specialized in valuing these types of properties. The Group did not generate any rental income nor incurred any expenses relating to investment properties during the years ended 31 December 2017 and 31 December 2016. The Group has no restrictions on the realizability of its investment properties and no contractual obligations to either purchase, construct or develop investment properties or for repairs, maintenance and enhancements.

Société Générale de Banque au Liban S.A.L. F.52

Société Générale de Banque au Liban SAL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2017 27 NON-CURRENT ASSETS HELD FOR SALE 2017 2016 LL million LL million Assets obtained in settlement of debts (i) 186,504 175,919 _________ _________ (i) The movement of the assets obtained in settlement of debts held for sale recognized in the consolidated

statement of financial position is as follows:

2017 2016 LL million LL million Cost: At 1 January 193,679 202,810 Additions 14,866 5,825 Disposals (1,373) (14,237) Transfers to property and equipment (note 24) - (534)

Exchange differences (627) (185) ___________ ___________ At 31 December 206,545 193,679 ____________ ____________ Impairment: At 1 January 17,760 17,492 Additions 3,010 951 Write-back during the year (722) (683) Exchange differences (7) - ____________ ____________ At 31 December 20,041 17,760 ____________ ____________ Net carrying amount: At 31 December 186,504 175,919 ____________ ____________

Assets obtained in settlement of debt held-for-sale represent primarily land and buildings acquired by the Group in settlement of certain loans and advances. During the year, the Group disposed of assets obtained in settlement of debts held for sale with a cost of LL 1,373 million (2016: LL 14,237 million) and recognized a gain of LL 406 million (2016: LL 3,080 million) and a write-back of impairment losses amounting to LL 722 million (2016: LL 683 million) (refer to note 10), in addition to the release of reserve for non-current assets held for sale amounting to LL 371 million to reserve for capital increase (2016: LL 8,462 million). This amount relates to appropriations previously booked on reserve for non-current assets held for sale (refer to note 39). 28 OTHER ASSETS 2017 2016 LL million LL million Deferred employee termination benefits (i) 12,528 20,760 Due from the National Social Security Fund 17,841 17,426 Prepaid expenses 23,267 9,773 Deferred tax assets (note 14) 7,143 7,206 Investment in an associate (ii) 1,945 1,773 Receivable from sale of non-current assets held for sale 4,731 15,975 Other debtors 73,173 44,023 Provision (iii) (6,544) (7,136) ________ ________ 134,084 109,800 _________ _________

Société Générale de Banque au Liban S.A.L. F.53

Société Générale de Banque au Liban SAL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2017

28 OTHER ASSETS (continued) (i) Deferred employee termination benefits Deferred employee termination benefits amounting to LL 12,528 million as at 31 December 2017 (2016: LL 20,760 million), represent compensations paid to employees whose contracts were terminated as a result of the acquisition of the assets and liabilities of the Lebanese Canadian Bank SAL and their related taxes. These compensations were calculated on the basis provided for in the staff compensation arbitrary decision dated 29 August 2011. These benefits were deferred up to an amount of LL 60,300 million (equivalent to US$ 40 million). As a compensation for the employee termination benefits, the Central Bank of Lebanon exempted the Bank from part of the compulsory reserves denominated in Lebanese Lira. Part of these reserves were invested in Lebanese treasury bills whose nominal value amounted to LL 80,000 million and maturing on 1 December 2016. During June 2012, the Central Bank of Lebanon granted the Bank a soft loan amounting to LL 170,000 million (note 30) in substitute of the exemption from part of the compulsory reserves granted during 2011. The proceeds from the soft loan were invested in Lebanese treasury bills. These treasury bills were pledged as collateral against the settlement of the soft loan. The interest income generated from these treasury bills will be offset against these deferred compensations over the period of the future economic benefits of these treasury bills. During the year ended 31 December 2017, deferred employee termination benefits of LL 8,232 million (2016: LL 8,103 million) were amortized to the consolidated income statement against a net spread between the interest income from the Lebanese treasury bills and interest expense on the soft loan. (ii) Investment in an associate As of 31 December 2017 and 2016 the Group had 50% equity interest in Centre de Traitement Monetique SAL. The Group’s share of profit from the associate amounted to LL 172 million for the year ended 31 December 2017 (2016: LL 90 million). (iii) Provision The movement of the provision recognized in the consolidated statement of financial position is as follows: 2017 2016 LL million LL million Provision at 1 January 7,136 3,622 Write-off of provision (582) - Written-back during the year (note 11) (10) (219) Transfer from provision for risk and charges - 3,733 __________ __________ Provision at 31 December 6,544 7,136 __________ __________ 29 GOODWILL 2017 2016 LL million LL million Cost: At 1 January 169,128 169,685 Difference of exchange - (557) __________ __________ At 31 December 169,128 169,128 __________ __________ Impairment: At 1 January 165,723 2,645 Impairment allowance during the year - 163,158 Difference of exchange - (80) __________ __________ At 31 December 165,723 165,723 __________ __________ Net book value: At 31 December 3,405 3,405 __________

Société Générale de Banque au Liban S.A.L. F.54

Société Générale de Banque au Liban SAL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2017 29 GOODWILL (continued) Impairment testing of goodwill Goodwill acquired through business combinations has been allocated to six individual cash generating units (CGUs) for impairment testing as follows: 2017 2016 LL million LL million Société Générale de Banque – Jordanie 2,393 2,393 Fidus SAL 199 199 Sogecap Liban SAL 813 813 Société Générale Bank – Cyprus Ltd (i) - - Retail banking (ii) - - Corporate banking (iii) - - __________ __________ 3,405 3,405 __________ __________

(i) As at 31 December 2016, the recoverable amount of Société Générale Bank - Cyprus Ltd CGU amounted to LL 93,350 million compared to a book value of LL 108,446 million. Accordingly, the Bank booked an impairment loss on goodwill of LL 15,090 million.

(ii) As at 31 December 2016, the recoverable amount of the retail CGU amounted to LL 91,653 million

compared to a book value of LL 167,036 million. Accordingly, the Bank booked an impairment loss on goodwill of LL 75,713 million.

(iii) As at 31 December 2016, the recoverable amount of the corporate CGU amounted to LL 283,797 million

compared to a book value of LL 356,308. Accordingly, the Bank booked an impairment loss on goodwill of LL 72,355 million.

Key assumptions used in value in use calculations The recoverable amount of the Corporate Banking, Retail Banking and Société Générale Bank – Cyprus Ltd have been determined based on value in use calculations, using cash flow projections based on financial budgets approved by senior management covering a five-year period. The following rates are used by the Group:

2016 Discount Projected

rate growth rate % % Cash Generating Units Corporate Banking 13.80% 3.00% Retail Banking 13.80% 3.00% Société Générale Bank – Cyprus Ltd 12.70% 2.00% Projected growth rates used are in line with, and do not exceed, the projected growth rates in GDP and inflation rate forecasts for Lebanon and Cyprus (where the operations reside). The calculation of value in use for the CGUs is most sensitive to interest margin, discount rates and the projected growth rates used to extrapolate cash flows beyond the budget period. Key assumptions Interest margins Interest margins are based on current fixed interest yields. Cost of equity The cost of equity is the return required for an investment to meet capital return requirements; it is often used as a capital budgeting threshold for required rate of return. Growth rate Growth rate is the percentage change of the compounded annualized rate of growth of revenues, earnings, dividends and even including macro concepts such as GDP and the economy as a whole.

Société Générale de Banque au Liban S.A.L. F.55

Société Générale de Banque au Liban SAL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2017

30 DUE TO THE CENTRAL BANKS 2017 2016 LL million LL million Current account 14 33 Term soft loans 1,617,526 428,855 Accrued interest 4,667 2,877 ___________ ___________ 1,622,207 431,765 ___________ ___________

Term soft loans include: - Term loan amounting to LL 483 million as at 31 December 2017 (2016: LL 10,228 million) were granted by the

Central Bank of Lebanon to cover 60% of the replacement costs of the Bank’s damaged buildings and installations and to cover 60% of the Bank’s credit losses relating to debtors directly affected by July 2006’s war. The effective interest rate for 2017 was 2.28% (2016: 3.04%). The loan is secured by the pledge on lebanese treasury bills with a nominal of LL 483 million (2016: LL 10,228 million) included under financial assets at amortized cost (note 22).

- Term loan amounting to LL 170,000 million granted during June 2012 from the Central Bank of Lebanon after

the acquisition of the assets and liabilities of the Lebanese Canadian Bank SAL for a ten years period. The effective interest rate is 2% for the first 5 years and 1.85% for the remaining 5 years. The loan is secured by the pledge on lebanese treasury bills with a nominal of LL 170,000 million (2016: LL 170,000 million) included under financial assets at amortized cost (note 22).

- Term loan amounting to LL 150,000 million granted during October 2013 from the Central Bank of Lebanon

for a three years period to cover the additional losses resulting from the acquisition of the assets and liabilities of the Lebanese Canadian Bank SAL. The effective interest rate is 1.97% for the first two years and will be revised for the third year by the Central Bank of Lebanon. The loan matured during 2016.

- Term loans totaling to LL 292,990 million as at 31 December 2017 (2016: LL 222,997 million) were granted by

the Central Bank of Lebanon to subsidize the loans granted to customers under cicular 313 of the Central Bank of Lebanon. The term loans are subject to a 1% interest rate payable on a monthly basis. Part of these term loans are secured by the pledge on Lebanese treasury bills with a nominal of LL 2,050 million (2016: LL 430 million) and certificates of deposits denominated in LL with a nominal of LL 15,000 million as at 31 December 2017 (2016: nil). These instruments are included under financial assets at amortized cost (note 22).

- Term loans totaling to LL 1,108,583 million as at 31 December 2017 (2016: nil) were granted by the Central

Bank of Lebanon. The term loans are subject to a 2% interest rate payable on a monthly basis. These term loans are secured by the pledge on Lebanese treasury bills with a nominal of LL 436,783 million included under financial assets at amortized cost (note 22) and the pledge of long-term placements held with the Central Bank of Lebanon amounting to LL 674,437 million (note 15).

31 LOANS AND REPURCHASE AGREEMENTS 2017 2016 LL million LL million Central Bank of Lebanon 431,476 582,452 Banks and financial institutions 1,249,908 1,479,865 __________ __________ 1,681,384 2,062,317 __________ __________ The Group has a program to sell securities under agreements to repurchase (‘repos’). The securities sold under agreements to repurchase are transferred to third parties and the Group receives cash in exchange. If the securities decrease in value, the Group may be required to pay additional cash collateral. The Group has determined that it retains substantially all the risks and rewards of these securities, which include credit risk and market risk, and therefore has not derecognized them. In addition, it recognizes a financial liability for cash received as collateral. The carrying amount and fair value of securities sold under agreements to repurchase at 31 December 2017 was LL 2,289,030 million and LL 2,246,197 million respectively (2016: LL 2,696,313 million and LL 2,648,811 million respectively). Those securities are presented in the statement of financial position under “Financial assets at amortized cost” (note 22).

Société Générale de Banque au Liban S.A.L. F.56

Société Générale de Banque au Liban SAL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2017 31 LOANS AND REPURCHASE AGREEMENTS (continued) The following tables provide a summary of financial instruments that have been transferred in such a way that part or all of the transferred financial assets do not qualify for derecognition or were pledged against facilities granted, together with the associated liabilities:

2017

Transferred financial asset

Foreign

governmental debt

securities

Certificates of deposit –

EuroCDs & bank

placements Corporate

bonds

Lebanese treasury

bills – Eurobonds Total

LL million LL million LL million LL million LL million

Carrying amount of assets

Securities lending and repos 25,290 467,129 42,261 2,176,089 2,710,769

___________ ___________ ___________ ___________ ___________ Carrying amount of associated Liabilities

Securities lending and repos 22,344 431,478 39,905 1,187,657 1,681,384

___________ ___________ ___________ ___________ ___________

2016

Transferred financial asset

Foreign

governmental debt

securities

Certificates of deposit –

EuroCDs & bank placements

Corporate bonds

Lebanese treasury bills – Eurobonds Total

LL million LL million LL million LL million LL million

Carrying amount of assets Securities lending and repos 25,194 586,334 42,980 2,582,749 3,237,257

___________ ___________ ___________ ___________ ___________ Carrying amount of associated Liabilities

Securities lending and repos 22,344 582,452 39,905 1,417,615 2,062,316

___________ ___________ ___________ ___________ ___________ In addition to the above an amount of LL 92,782 million is pledged as additional collateral against repurchase agreements as at 31 December 2017 (2016: LL 89,668 million). These placements are included under “Due from banks and financial institutions” (note 16). 32 DUE TO BANKS AND FINANCIAL INSTITUTIONS 2017 2016 LL million LL million Sight deposits 110,698 162,888 Time deposits 368,519 406,060 ___________ ___________ 479,217 568,948 ___________ ___________ 33 AMOUNTS DUE TO AFFILIATED BANKS AND FINANCIAL INSTITUTIONS 2017 2016 LL million LL million Sight deposits 6,844 1,429 ___________ ___________

Société Générale de Banque au Liban S.A.L. F.57

Société Générale de Banque au Liban SAL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2017 34 CUSTOMERS’ DEPOSITS AT AMORTIZED COST

2017 Corporate Retail Total LL million LL million LL million Sight deposits 765,575 1,307,593 2,073,168 Net creditor accounts against debtor accounts 763 1,147 1,910 Blocked margins 326,064 161,216 487,280 ____________ ____________ ____________ 1,092,402 1,469,956 2,562,358 Time deposits 5,084,658 10,276,492 15,361,150 Savings accounts 352,704 6,414,296 6,767,000 ____________ ____________ ____________ 6,529,764 18,160,744 24,690,508 ____________ ____________ ____________ 2016 Corporate Retail Total LL million LL million LL million Sight deposits 934,722 1,337,031 2,271,753 Net creditor accounts against debtor accounts - 988 988 Blocked margins 307,891 186,640 494,531 ____________ ____________ ____________ 1,242,613 1,524,659 2,767,272 Time deposits 3,676,276 9,057,654 12,733,930 Savings accounts 357,438 5,929,694 6,287,132 ____________ ____________ ____________ 5,276,327 16,512,007 21,788,334 ____________ ____________ ____________

Included in customers’ deposits as at 31 December 2017 are coded accounts amounting to LL 55,521 million (2016: LL 37,489 million). These accounts are opened in accordance with article 3 of the Banking Secrecy Law dated 3 September 1956. Included under customers’ deposits an amount of LL 583,073 million maturing during 2018, 2019 and 2020 guaranteed by certificates of deposit with a carrying amount of LL 669,674 (2016: deposits amounting to LL 376,884 million maturing during 2018 and 2019 guaranteed by certificates of deposit with a carrying amount of LL 412,723) (note 22). 35 RELATED PARTIES’ DEPOSITS AT AMORTIZED COST 2017 Corporate Retail Total LL million LL million LL million Sight deposits 2,102 10,543 12,645 Time deposits 10,283 142,354 152,637 ___________ ___________ ___________ 12,385 152,897 165,282 ___________ ___________ ___________ 2016 Corporate Retail Total LL million LL million LL million Sight deposits 618 3,835 4,453 Time deposits 3,973 172,781 176,754 ___________ ___________ ___________ 4,591 176,616 181,207 ___________ ___________ ___________

Société Générale de Banque au Liban S.A.L. F.58

Société Générale de Banque au Liban SAL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2017 36 OTHER LIABILITIES 2017 2016 LL million LL million Deferred income (i) 184,856 218,710 Current tax liabilities (note 14) 45,560 218,593 Redeemed preferred shares payable to third parties (ii) 21,859 21,859 Accrued expenses 26,649 41,424 Payable to the shareholders of the Lebanese Canadian Bank SAL (iv) 12,060 12,060 Customers’ transactions between Head Office and branches 18,989 15,193 Other taxes payable 15,626 17,951 Interest and commissions received in advance 10,631 10,121 Due to the National Social Security Fund 1,931 1,949 Deferred tax liabilities (note 14) 861 562 Other creditors (iii) 28,354 31,342 ___________ ___________ 367,376 589,764 ___________ ___________ (i) During 2016, the Central Bank of Lebanon issued Intermediate Circular number 446 dated 30 December

2016 relating to the gain realized by banks from certain financial transactions with the Central Bank of Lebanon, consisting of the sale of financial instruments denominated in Lebanese Lira and the purchase of financial instruments denominated in US Dollars. In accordance with the provisions of this circular, banks should recognize in the income statement, only part of the gain net of tax, caped to the extent of the losses recorded to comply with recent regulatory provisioning requirements (refer to note 37), the impairment losses on goodwill recorded in accordance with IAS 36 and the shortage needed to comply with the capital adequacy requirements. Lebanese banks may further recognize up to 70% of the remaining balance of the gain realized net of tax in the income statement as non-distributable profits to be appropriated to reserves for capital increase, qualifying for inclusion within regulatory Common Equity Tier One.

As a result of these operations with the Central Bank of Lebanon, the Group received a surplus of LL 1,272,142 million net of transaction costs consisting of interest, fees and other costs. The Group recognized current tax liabilities amounting to LL 188,436 million on the remaining balance of LL 1,272,142 million. The Group then recognized an amount of LL 537,889 million and their related taxes of LL 77,694 million in the statement of income and elected to recognize LL 404,801 million net of taxes, directly in non-distributable reserves within equity (note 39). The remaining surplus, equivalent to LL 218,710 million, was booked as deferred income as at 31 December 2016.

During 2017, the Group transferred an amount of LL 31,657 million (net of associated costs) from the deferred income to net gain from sale of financial assets at amortized cost in the consolidated income statement.

(ii) Redeemed preferred shares payable to third parties represent liabilities acquired with the acquisition of

the Lebanese Canadian Bank SAL and relating to preferred shares redeemed by the Lebanese Canadian Bank SAL and not yet claimed by the holders of those shares.

(iii) Included under other creditors an amount of LL 8,003 million as at 31 December 2016, representing the

partial settlement made by a debtor in settlement of its debts amounting to LL 8,356 million.

The Group reimbursed this payment during 2017 since it has received the full payment of LL 8,356 million from the shareholders of the Lebanese Canadian Bank SAL during prior years.

(iv) This represents the balance of the cash collateral deposited by the shareholders of the Lebanese

Canadian Bank SAL and amounting to US$ 8 million (equivalent to LL 12,060 million) as a guarantee against default of the loans of an acquired subsidiary. This amount is refundable to the shareholders of the Lebanese Canadian Bank SAL, since the initial consideration paid for the acquisition was reduced by the same amount.

Société Générale de Banque au Liban S.A.L. F.59

Société Générale de Banque au Liban SAL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2017 37 PROVISION FOR RISKS AND CHARGES 2017 2016 LL million LL million

Technical reserve for insurance contracts 22,812 24,918 Employees’ end of service benefits (i) 30,245 31,064 Provision for contingencies and charges 3,276 3,532 Excess provisions to comply with the Central Bank of Lebanon Intermediate Circular number 439 dated 8 November 2016 (ii)

165,825

165,825

Other provisions 26,762 37,671 __________ __________ 248,920 263,010 __________ __________

(i) Movements in the provision for end of service benefits recognized in the consolidated statement of

financial position are as follows:

2017 2016 LL million LL million

Balance at 1 January 31,064 25,859 Provided during the year (note 12) 2,132 6,293 Paid during the year (2,951) (1,088) ___________ ___________ Balance at 31 December 30,245 31,064 ___________ ___________

(ii) On 8 November 2016, the Central Bank of Lebanon issued Intermediate Circular number 439 which

required banks operating in Lebanon to constitute additional collective provisions. As such, provisions for risks and charges as at 31 December 2017 and 31 December 2016 include an amount of LL 165,825 million in excess of the provisioning requirements of IAS 39 (note 36).

38 SHARE CAPITAL a Common shares The authorized, issued and fully paid share capital as of 31 December 2017 comprised 56,535 shares of nominal value LL 258,000 each (2016: 56,535 shares of nominal value of LL 258,000 each). b Preferred shares - On 28 March 2013, the Bank issued 12,500 preferred shares (Series 2012) for a nominal amount of LL

212,400 each (a total of LL 2,655 million) plus a share premium denominated in US Dollars of US$ 9,859 per share. Accordingly, the total share premium resulting from the issuance amounted to US$ 123,238,806 (or LL 185,782 million) less issuance costs of LL 395 million.

- On 13 September 2013, the Bank issued 15,000 preferred shares (Series 2013) for a nominal amount of LL

212,400 each (a total of LL 3,186 million) plus a share premium denominated in US Dollars of US$ 9,859 per share. Accordingly, the total share premium resulting from the issuance amounted to US$ 147,886,567 (or LL 222,939 million) less issuance costs of LL 385 million.

- On 2 July 2015, the Bank issued 10,000 preferred shares (Series 2015) for a nominal amount of LL

233,000 each (a total of LL 2,330 million) plus a share premium denominated in US Dollars of US$ 9,845 per share. Accordingly, the total share premium resulting from the issuance amounted to US$ 98,454,395 (or LL 148,420 million) less issuance costs of LL 194 million.

Société Générale de Banque au Liban S.A.L. F.60

Société Générale de Banque au Liban SAL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2017 38 SHARE CAPITAL (continued) b Preferred shares (continued) The payment of dividends for preferred shareholders is dependent on: (1) The availability of non-consolidated net income for a specific year after appropriation of legal and other

regulatory reserves; (2) The continuous compliance with regulations issued by the Central Bank of Lebanon and the Banking Control

Commission; and (3) The approval of the ordinary general assembly of shareholders to distribute those dividends. During 2017, the Bank transferred LL 2,029 million (2016: LL 2,010 million) from “retained earnings” to the “share premium – preferred shares”. These represent the appropriation of transaction costs incurred on preferred shares and additional premiums of 1.25% relating to preferred shares – Series 2012, 2% relating to preferred shares – Series 2013 and 1.5% relating to preferred shares – Series 2015. The extraordinary general assembly of shareholders held on 2 July 2015 resolved to increase the nominal value of each share to LL 258,000. Accordingly, an amount of LL 937 million was transferred from “distributable reserves” to “share capital – preferred shares” in prior years. c Cash contribution by shareholders Cash contribution to capital amounted to US$ 9,855,900 and EUR 46,229,259 as at 31 December 2017 totaling to LL 106,746 million (2016: US$ 9,855,900 and EUR 46,229,259 totaling LL 106,746 million). These contributions were granted by the shareholders of the Bank in order to support and develop the activities of the Bank, in accordance with the following conditions:

− Every shareholder is committed to retain the contributions during the lifetime of the Bank; − The shareholders commit to cover any loss using their contributions according to the provisions of article

3-8 of circular N° 44 of the of the Central Bank of Lebanon and article 134 of the Money and Credit Act; and

− The shareholders have the right to use or not to use these contributions in case of a capital increase.

Both the Central Council of the Central Bank of Lebanon and the ordinary general assembly of the Bank approved these contributions. 39 NON DISTRIBUTABLE RESERVES

Legal reserve

Reserve for general

banking risks

Reserve against

doubtful and impaired loans

Reserve for capital increase

Reserve for non-current assets held

for sale

Reserve for retail

and corporate

loans Total LL million LL million LL million LL million LL million LL million LL million At 31 December 2015 128,956 131,925 635 74,925 46,002 8,691 391,134 Appropriation during the year 25,724 22,931 - 484 10,156 9,470 68,765 Transfers - - - 8,462 (8,462) - - Income on financial transactions (note 36)

- - - 404,801 - - 404,801

Adjsutments - - (52) - - - (52) __________ __________ __________ __________ _________ _________ __________ At 31 December 2016 154,680 154,856 583 488,672 47,696 18,161 864,648 Appropriation during the year 28,836 26,945 - 3,005 22,466 16,284 97,536 Transfers - - - 371 (371) - - Adjsutments - - (499) - - - (499) __________ __________ __________ __________ _________ _________ __________ At 31 December 2017 183,516 181,801 84 492,048 69,791 34,445 961,685 __________ __________ __________ __________ _________ _________ __________

Société Générale de Banque au Liban S.A.L. F.61

Société Générale de Banque au Liban SAL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2017 39 NON DISTRIBUTABLE RESERVES (continued) a) Legal reserve As required by local regulations where the Group operates, a percentage of the net profit for the year should be transferred to legal reserve. This reserve is not available for dividend distribution. b) Reserve for general banking risks In compliance with the Central Bank of Lebanon regulations, the Bank should appropriate from its net profit for the year, a minimum amount of 2 per thousand and a maximum of 3 per thousand from the total risk weighted assets and off-statement of financial position items based on the rates specified by the Central Bank of Lebanon as a reserve for general banking risks. The consolidated ratio should not be less than 2% of these risks at the end of 2027. In addition, Société Générale de Banque – Jordanie and Société Générale Bank – Cyprus Ltd are also required to appropriate reserves for general banking risks in accordance with local requirements. c) Reserve against doubtful and impaired loans In compliance with pronouncement 20/2008 of the Banking Control Commission issued on 13 September 2008, the Bank should appropriate to a special reserve an amount equal to its portfolio of doubtful and impaired loans which were not settled in accordance with the Central Bank basic circular no. 73 and its subsequent amendments. The Bank releases this reserve to retained earnings when:

• The loan is settled and fully paid; or • Partial settlement of the loan leading to a reserve in excess of the loan net carrying amount; or • A provision is made in the income statement.

d) Reserve for capital increase In compliance with the circular No. 167 issued by the Banking Control Commission, the Bank is required to appropriate the net write-back of provisions for doubtful debts in a particular year to the reserve for capital increase when the net results are positive. In compliance with the circular No. 173 issued by the Banking Control Commission, the Bank is required to appropriate the gain realized from the sales of non-current assets held for sale to the reserve for capital increase when the net results are positive. In compliances with the Central Bank of Lebanon intermediate circular no. 446 dated 30 December 2016, the Bank should appropriate the gain realized from the sale of treasury bills and certificates of deposits denominated in LL and the simultaneous purchase of Eurobonds and certificates of deposit denominated in US$ to the reserve for capital increase. e) Reserve for non-current assets held for sale In compliance with pronouncements of the Banking Control Commission, when properties acquired in settlement of debts are not sold within the timeframe required by local regulators, the Bank should appropriate an amount equal to 5% or 20% of the carrying value of such properties. The annual appropriation, which is from the net profit of the respective year after appropriations to legal reserve and reserve for general banking risks, is reported under “reserve for non-current assets held for sale”. The Bank shall make a transfer from this reserve into the “Reserve for capital increase” when: - The reserve appropriated in prior years related to a property disposed of; or - The reserve appropriated in prior years, equal or up to an impairment loss recognized in the income

statement against the acquired property.

Société Générale de Banque au Liban S.A.L. F.62

Société Générale de Banque au Liban SAL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2017 39 NON DISTRIBUTABLE RESERVES (continued) f) Reserve for retail and corporate loans In compliance with the circular No. 280 issued by the Banking Control Commission, the Bank is required to transfer from net profits for the year the equivalent of:

- 0.5% of retail loans that are less than 30 days past due (subject to deductions of some guarantees received) to general reserve for the year 2014. This ratio will increase yearly by 0.5% over a six year period starting 2015.

- 0.25% of corporate loans that are less than 30 days past due (subject to deductions of some guarantees

received) to general reserve for the year 2014. This ratio will increase to 0.5% for the year 2015, 1% for the year 2016 and 1.5% for the year 2017.

As per Central Bank circular No. 143 issued on 7 November 2017, Lebanese banks are to stop allocating from the net profits an amount for the reserve for retail and corporate loans. 40 DISTRIBUTABLE RESERVES General reserves 2017 2016 LL million LL million Balance at 1 January 20,532 19,442 Appropriation during the year 8,928 1,090 ___________ ___________ Balance at 31 December 29,460 20,532 ___________ ___________ 41 REVALUATION RESERVE OF PROPERTY 2017 2016 LL million LL million Revaluation amount 5,499 5,499 Book value (945) (945) Sale of real estate (620) (620) __________ _________ Revaluation variance 3,934 3,934 _________ _________ The Central Bank of Lebanon and the tax authorities approved on 29 March 1995 and on 18 April 1995 respectively, the revaluation of some of the buildings owned by the Bank and used for operating purposes in accordance with the law no. 282 dated 30 December 1993. 42 CUMULATIVE CHANGE IN FAIR VALUE OF FINANCIAL ASSETS AT FAIR VALUE

THROUGH OTHER COMPREHENSIVE INCOME 2017 2016 LL million LL million Balance at 1 January (218) (477) Transfer to retained earnings 416 - Net unrealized (loss) gain on financial assets at fair value through other comprehensive income, net of tax (11,876) 259 __________ __________ Balance at 31 December (11,678) (218) __________ __________

Société Générale de Banque au Liban S.A.L. F.63

Société Générale de Banque au Liban SAL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2017 43 DIVIDENDS PAID TO EQUITY HOLDERS OF THE PARENT According to the resolution of the ordinary general assembly of shareholders held on 25 April 2017 the following dividends were declared and paid: 2017 Number of shares Dividend per share Total in LL LL million Dividends for preferred shares – 2012 issue 12,500 1,060,325 13,255 Dividends for preferred shares – 2013 issue 15,000 1,060,325 15,905 Dividends for preferred shares – 2015 issue 10,000 1,060,325 10,603 Dividends for common shares 56,535 1,071,700 60,588 __________ 100,351 __________ According to the resolution of the ordinary general assembly of shareholders held on 25 April 2016 the following dividends were declared and paid: 2016 Number of shares Dividend per share Total in LL LL million Dividends for preferred shares – 2012 issue 12,500 1,055,250 13,191 Dividends for preferred shares – 2013 issue 15,000 1,055,250 15,829 Dividends for preferred shares – 2015 issue 10,000 526,185 5,261 __________ 34,281 __________ 44 CASH AND CASH EQUIVALENTS

2017 2016 LL million LL million Cash and balances with the Central Banks 13,259,404 8,544,014 Financial instruments – Treasury bills 3,865,027 5,687,379 Financial instruments – Certificates of deposit 3,667,552 3,734,590 Financial instruments – Certificates of deposits issued by foreign Central Banks 52,126 - Due from banks and financial institutions 854,226 798,629 Amounts due from affiliated banks and financial institutions 590,385 918,608 Due to the Central Banks (1,622,207) (431,765) Loans and repurchase agreements (1,681,384) (2,062,317) Due to banks and financial institutions (479,217) (568,948) Amounts due to affiliated banks and financial institutions (6,844) (1,429) _____________ _____________ 18,499,068 16,618,761 _____________ _____________ Less: balances with maturities exceeding 3 months Cash and balances with the Central Banks 12,337,843 7,778,553 Financial instruments – Treasury bills 3,865,027 5,681,269 Financial instruments – Certificates of deposit 3,667,552 3,519,512 Due from banks and financial institutions 46,381 80,913 Amounts due from affiliated banks and financial institutions 66,618 59,736 Due to the Central Banks (1,328,664) (205,608) Loans and repurchase agreements (1,681,384) (2,062,317) Due to banks and financial institutions (190,076) (103,605) _____________ _____________ 16,783,297 14,748,453 _____________ _____________ Cash and cash equivalents at 31 December 1,715,771 1,870,308 _____________ _____________

Société Générale de Banque au Liban S.A.L. F.64

Société Générale de Banque au Liban SAL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2017

45 RELATED PARTY TRANSACTIONS Parties are considered to be related if one party has the ability to control the other party or exercise significant influence over the other party in making financial or operation decisions, or one other party controls both. The definition includes subsidiaries, key management personnel and their close family members, as well as entities controlled or jointly controlled by them. A list of the Group’s principal subsidiaries is shown in note 2. Transactions between the Bank and its subsidiaries meet the definition of related party transactions. However, where these are eliminated on consolidation, they are not disclosed in the Group’s consolidated financial statements. Key Management Personnel are defined as those persons having authority and responsibility for planning, directing and controlling the activities of the Group, directly or indirectly, including the Directors of the Bank and the Officers of the Group. Entities under common directorships are defined as those entities for which members of the Bank’s board also serve as directors. Terms and conditions of transactions with related parties The Group enters into transactions with major related parties in the ordinary course of business at normal commercial interest and commission rates. As at 31 December 2017, the Group has made provisions and suspended interest for doubtful debts relating to amounts owed by related parties totaling to LL 19,679 million ( 2016: LL 21,048 million) (note 21). The following table provides the total amount of transactions and the amount of outstanding balances (including commitments) with related parties for the relevant financial year. 2017 2016 Outstandin

g balance Income

(expense) Outstanding

balance Income

(expense) LL million LL million LL million LL million Key management personnel Net loans and advances 105,116 4,792 95,260 4,220 Deposits 109,126 (5,238) 126,267 (2,114) Guarantees given 1,524 - 1,144 - Commitments 14 - 360 - Entities under common directorship Net loans and advances 5,870 904 5,386 824 Deposits 54,990 (1,788) 53,501 (1,828) Guarantees given 137 - 617 - Shareholder – Bank Net loans and advances 588,834 1,211 915,847 665 Deposits 492 (9) 476 - Guarantees given 19,616 - 34,466 - Guarantees received 443 - 35 - Commitments - - 438 (51) Associate Deposits 679 (18) 1,220 (22) Technical assistance fees paid to Société Générale – Paris, shareholder, amounted to LL 755 million for the year ended 31 December 2017 (2016: LL 754 million). The Bank rented offices from board members for LL 511 million for the year ended 31 December 2017 (2016: LL 510 million).

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2017 45 RELATED PARTY TRANSACTIONS (continued) Compensation of the key management personnel is as follows: 2017 2016 LL million LL million Short-term benefits (i) 19,914 12,122 Termination benefits 653 137 __________ __________ 20,567 12,259 __________ __________ (i) Short-term benefits comprise of salaries, bonuses, attendance fees and other short-term benefits to Key

Management Personnel. 46 FIDUCIARY ACCOUNTS

2017 2016 LL million LL million Deposits with banks 12,960 9,303 Loans and advances 10,703 6,030 Bonds 128,138 128,138 ____________ ____________ 151,801 143,471 ____________ ____________

47 ASSETS HELD IN CUSTODY AND UNDER ADMINISTRATION

2017 2016 LL million LL million Lebanese treasury bills and Eurobonds 86,067 50,264 Bonds and other debt instruments 75,093 109,949 Equity instruments 298,567 317,457 Funds 27,217 23,241 ____________ ____________ 486,944 500,911 ____________ ____________

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2017 48 CONTINGENT LIABILITIES, COMMITMENTS AND LEASING ARRANGEMENTS Credit-related commitments and contingent liabilities To meet the financial needs of customers, the Group enters into various commitments, guarantees and other contingent liabilities, which are mainly credit-related instruments including both financial and other guarantees and commitments to extend credit. Even though these obligations may not be recognized on the consolidated statement of financial position, they do contain credit risk and are therefore part of the overall risk of the Group. The table below discloses the nominal principal amounts of credit-related commitments and contingent liabilities. Nominal principal amounts represent the amount at risk should the contracts be fully drawn upon and clients default. As a significant portion of guarantees and commitments is expected to expire without being withdrawn, the total of the nominal principal amount is not indicative of future liquidity requirements. 2017 Banks Customers Total LL million LL million LL million Guarantee and contingent liabilities Financial guarantees 56,067 109,238 165,305 Other guarantees 10,172 307,811 317,983 _________ _________ _________ 66,239 417,049 483,288 _________ _________ _________ Commitments Documentary credits 270,934 11,358 282,292 Undrawn credit lines - 1,248,497 1,248,497 _________ _________ _________ 270,934 1,259,855 1,530,789 _________ _________ _________ 2016 Banks Customers Total LL million LL million LL million Guarantee and contingent liabilities Financial guarantees 64,796 94,174 158,970 Other guarantees 14,607 252,752 267,359 _________ _________ _________ 79,403 346,926 426,329 _________ _________ _________ Commitments Documentary credits 246,693 11,150 257,843 Undrawn credit lines - 1,120,491 1,120,491 _________ _________ _________ 246,693 1,131,641 1,378,334 _________ _________ _________ Guarantees Guarantees are given as security to support the performance of a customer to third parties. The main types of guarantees provided are:

• Financial guarantees given to banks and financial institutions on behalf of customers to secure loans, overdrafts, and other banking facilities; and

• Other guarantees provided include mainly performance guarantees, advance payment guarantees, tender guarantees, customs guarantees and retention guarantees.

Documentary credits Documentary credits commit the Bank to make payments to third parties, on production of documents, which are usually reimbursed immediately by customers.

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Société Générale de Banque au Liban SAL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2017 48 CONTINGENT LIABILITIES, COMMITMENTS AND LEASING ARRANGEMENTS (continued) Credit-related commitments and contingent liabilities (continued) Undrawn credit lines Undrawn credit lines are agreements to lend a customer in the future, subject to certain conditions. Such commitments are either made for a fixed period, or have no specific maturity but are cancellable by the lender subject to notice requirements. Legal claims Litigation is a common occurrence in the industries where the Group operates due to the nature of the businesses undertaken. The Group has formal controls and policies for managing legal claims. Once professional advice has been obtained and the amount of loss is reasonably estimated, the Group makes adjustments to account for any adverse effects which the claims may have on its financial standing. At year end, the Group had several unresolved legal claims. Based on advice from the legal counsel, management believes that legal claims not provided for will not result in any financial loss to the Group. Capital commitments At 31 December 2017, the Group had capital commitments in respect of premises and equipment purchases amounting to LL 75,122 million (2016: LL 102,581 million). Operating lease commitments – Group as lessee The Group enters into commercial leases on premises. There are no restrictions placed upon the lessee by entering into these leases. Future minimum lease payments under non-cancelable operating leases as at 31 December are as follow: 2017 2016 LL million LL million Within one year 9,948 8,529 After one year but not more than five years 27,222 26,117 More than five years 1,841 1,627 ___________ ___________ 39,011 36,273 ___________ ___________ Other commitments The Group has commitments relating to future donations to not for profit organizations amounting to LL 6,030 million as at 31 December 2017 (2016: LL 7,538 million). Other contingencies a) Certain areas of the Lebanese tax legislation are subject to different interpretations in respect of the taxability

of certain types of financial transactions and activities. Fiscal years 2015, 2016 and 2017 are not yet reviewed by the Department of Income Tax as well as the Value Added Tax since inception. Management believes that the effect of any such reviews will not have a material effect on the financial statements.

b) The Bank’s contributions to the National Social Security Fund (NSSF) have not been reviewed since May 2004. Management believe that the effect of any such review will not have a material effect on the financial statements.

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Société Générale de Banque au Liban SAL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2017 49 FAIR VALUE MEASUREMENT The fair values in this note are stated at a specific date and may be different from the amounts which will actually be paid on the maturity or settlement dates of the instrument. In many cases, it would not be possible to realize immediately the estimated fair values given the size of the portfolios measured. Accordingly, these fair values do not represent the value of these instruments to the Group as a going concern. The fair value of assets and liabilities is included at the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. Assets and liabilities are classified according to a hierarchy that reflects the significance of observable market inputs. The three levels of the fair value hierarchy are defined below. Quoted market prices – Level 1 Assets and liabilities are classified as Level 1 if their value is observable in an active market. Such instruments are valued by reference to unadjusted quoted prices for identical assets or liabilities in active markets where the quoted price is readily available, and the price represents actual and regularly occurring market transactions on an arm’s length basis. An active market is one in which transactions occur with sufficient volume and frequency to provide pricing information on an ongoing basis. Valuation technique using observable inputs – Level 2 Assets and liabilities classified as Level 2 have been valued using models whose most significant inputs are observable in an active market. Such valuation techniques and models incorporate assumptions about factors observable in an active market, that other market participants would use in their valuations, including interest rate yield curve, exchange rates, volatilities, and prepayment and defaults rates. Valuation technique using significant unobservable inputs – Level 3 Assets and liabilities are classified as Level 3 if their valuation incorporates significant inputs that are not based on observable market data (unobservable inputs). A valuation input is considered observable if it can be directly observed from transactions in an active market, or if there is compelling external evidence demonstrating an executable exit price. An input is deemed significant if it is shown to contribute more than 10% to the valuation of the asset or liability. Unobservable input levels are generally determined based on observable inputs of a similar nature, historical observations or other analytical techniques. Fair value measurement hierarchy of the Group’s assets and liabilities carried at fair value: 2017 Valuation techniques Quoted market

price Level 1

Observable inputs

Level 2

Unobservable inputs

Level 3

Total LL million LL million LL million LL million Assets measured at fair vlaue: Derivative financial instruments: Forward foreign exchange contracts - 9,197 - 9,197 Financial assets at fair value through profit or loss:

Lebanese treasury bills (LL) - 1,090 - 1,090 Lebanese treasury bills (Eurobonds) 11,418 - - 11,418 Debt securities issued by banks - 37,688 - 37,688 Funds 23,720 - - 23,720 Shares 77,294 10,253 40,224 127,771

Financial assets at fair value through other comprehensive income: Shares 148,418 12,223 873 161,514

Investment properties - - 1,478 1,478 Liabilities measured at fair value: Derivative financial instruments: Forward foreign exchange contracts - 164 - 164

Société Générale de Banque au Liban S.A.L. F.69

Société Générale de Banque au Liban SAL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2017

49 FAIR VALUE MEASUREMENT (continued) Fair value measurement hierarchy of the Group’s assets and liabilities carried at fair value (continued): 2016 Valuation techniques Quoted

market price Level 1

Observable inputs

Level 2

Unobservable inputs

Level 3

Total LL million LL million LL million LL

million Assets measured at fair vlaue: Derivative financial instruments: Forward foreign exchange contracts - 2,472 - 2,472 Financial assets at fair value through profit or loss:

Lebanese treasury bills (LL) - 1,094 - 1,094 Lebanese treasury bills (Eurobonds) 3,688 - - 3,688 Debt securities issued by banks - 37,688 - 37,688 Funds 20,376 - - 20,376 Shares 94,196 11,761 11,467 117,424

Financial assets at fair value through other comprehensive income:

Shares 12,593 11,741 874 25,208 Investment properties - - 1,483 1,483 Liabilities measured at fair value: Derivative financial instruments: Forward foreign exchange contracts - 9,507 - 9,507 There were no transfers between levels during 2017 (2016: the same). Assets and liabilities measured at fair value using a valuation technique with significant observable inputs (Level 2) Derivatives Derivative products are valued using a valuation technique with market observable inputs. The most frequently applied valuation techniques include forward pricing and swap models, using present value calculations. The models incorporate various inputs including the credit quality of counterparties, foreign exchange spot and forward rates and interest rate curves. Government bonds, certificates of deposit and other debt securities The Group values these unquoted debt securities using discounted cash flow valuation models where the lowest level input that is significant to the entire measurement is observable in an active market. These inputs include assumptions regarding current rates of interest, implied volatilities, credit spreads and broker statements. Assets and liabilities measured at fair value using a valuation technique with significant unobservable inputs (Level 3) Equity shares of non-listed entities These are investments in private companies, for which there is no or only limited sufficient recent information to determine fair value. The Group determined that cost adjusted to reflect the investee’s financial position and results since initial recognition represents the best estimate of fair value. Investment properties Investment properties valued using unobservable inputs are generally determined based on observable inputs of a similar nature, historical observations or other techniques. Investment properties are mainly valued by independent qualified valuers on the basis of current market prices of similar properties sold in the same area.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2017 49 FAIR VALUE MEASUREMENT (continued) Comparison of carrying amounts and fair values for financial assets and liabilities not held at fair value The fair values included in the table below were calculated for disclosure purposes only. The fair valuation techniques and assumptions described below relate only to the fair value of the Group’s financial instruments not measured at fair value. Other institutions may use different methods and assumptions for their fair value estimations, and therefore such fair value disclosures cannot necessarily be compared from one institution to another. 2017 2016

Carrying value Fair value

Carrying value Fair value

LL million LL million LL million LL million Financial assets Cash and balances with the Central Banks 13,259,404 13,259,404 8,544,014 8,544,014 Due from banks and financial institutions 854,226 854,226 798,629 798,629 Amounts due from affiliated banks and financial institutions 590,385 590,385 918,608 918,608 Loans to banks and financial institutions 8,397 8,397 8,397 8,397 Loans and advances to customers at amortized cost 7,344,616 7,344,616 6,627,649 6,627,649 Loans and advances to related parties at amortized cost

111,065 111,065 100,737 100,737

Financial assets at amortized cost 8,642,264 8,377,089 10,476,347 10,327,414 ___________ ___________ ___________ ___________ 30,810,357 30,545,182 27,474,381 27,325,448 ___________ ___________ ___________ __________ Financial liabilities

Due to the Central Banks 1,622,207 1,597,408 431,765 429,842 Loans and repurchase agreements 1,681,384 1,681,384 2,062,317 2,062,317 Due to banks and financial institutions 479,217 479,217 568,948 568,948 Amounts due to affiliated banks and financial institutions 6,844 6,844 1,429 1,429 Customers’ deposits at amortized cost 24,690,508 24,690,508 21,788,334 21,788,334 Related parties’ deposits at amortized cost 165,282 165,282 181,207 181,207 ___________ ___________ ___________ __________ 28,645,442 28,620,643 25,034,000 25,032,077 ___________ ___________ ___________ __________

Fair values measurement hierarchy of the Group’s financial assets and liabilities for which fair values are disclosed: 2017

Valuation techniques

Quoted market price

Level 1

Observable inputs

Level 2

Unobservable inputs

Level 3

Total LL million LL million LL million LL million Assets for which fair values are disclosed: Cash and balances with the Central Banks 121,535 13,137,869 - 13,259,404 Due from banks and financial institutions - 854,226 - 854,226 Amounts due from affiliated banks and financial institutions - 590,385 - 590,385 Loans to banks and financial institutions - 8,397 - 8,397 Loans and advances to customers at amortized cost - - 7,344,616 7,344,616 Loans and advances to related parties at amortized cost - - 111,065 111,065 Financial assets at amortized cost: Lebanese treasury bills (LL) - 1,581,040 - 1,581,040 Lebanese treasury bills (Eurobonds) 2,198,117 - - 2,198,117 Foreign governmental debt securities 26,249 964,863 - 991,112 Corporate bonds 42,895 20,775 - 63,670 Certificates of deposit issued by the Central Bank of Lebanon - 3,481,970 - 3,481,970 Certificates of deposit issued by foreign banks - 52,126 - 52,126 Debt securities issued by banks 9,054 - - 9,054 Liabilities for which fair values are disclosed: Due to the Central Banks - (1,597,408) - (1,597,408) Loans and repurchase agreements - (1,681,384) - (1,681,384) Due to banks and financial institutions - (479,217) - (479,217) Amounts due to affiliated banks and financial institutions - (6,844) - (6,844) Customers’ deposits at amortized cost - (24,690,508) - (24,690,508) Related parties’ deposits at amortized cost - (165,282) - (165,282)

Société Générale de Banque au Liban S.A.L. F.71

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2017 49 FAIR VALUE MEASUREMENT (continued) Fair values measurement hierarchy of the Group’s financial assets and liabilities for which fair values are disclosed (continued): 2016

Valuation techniques

Quoted market price

Level 1

Observable inputs

Level 2

Unobservable inputs

Level 3

Total LL million LL million LL million LL million Assets for which fair values are disclosed: Cash and balances with the Central Banks 106,330 8,437,684 - 8,544,014 Due from banks and financial institutions - 798,629 - 798,629 Amounts due from affiliated banks and financial institutions - 918,608 - 918,608 Loans to banks and financial institutions - 8,397 - 8,397 Loans and advances to customers at amortized cost - - 6,627,649 6,627,649 Loans and advances to related parties at amortized cost - - 100,737 100,737 Financial assets at amortized cost: Lebanese treasury bills (LL) - 3,083,568 - 3,083,568 Lebanese treasury bills (Eurobonds) 2,577,876 - - 2,577,876 Foreign governmental debt securities 58,751 948,416 - 1,007,167 Corporate bonds 44,040 20,246 - 64,286 Certificates of deposit issued by the Central Bank of Lebanon - 3,574,729 - 3,574,729 Certificates of deposit issued by banks - 10,578 - 10,578 Debt securities issued by banks 9,210 - - 9,210 Liabilities for which fair values are disclosed: Due to the Central Banks - (429,842) - (429,842) Loans and repurchase agreements - (2,062,317) - (2,062,317) Due to banks and financial institutions - (568,948) - (568,948) Amounts due to affiliated banks and financial institutions - (1,429) - (1,429) Customers’ deposits at amortized cost - (21,788,334) - (21,788,334) Related parties’ deposits at amortized cost - (181,207) - (181,207)

Assets and liabilities for which fair value is disclosed using a valuation technique with significant observable inputs (Level 2) and / or significant unobservable inputs (Level 3) Deposits with banks and loans and advances to banks For the purpose of this disclosure there is minimal difference between fair value and carrying amount of these financial assets as they are short-term in nature or have interest rates that re-price frequently. The fair value of deposits with longer maturities are estimated using discounted cash flows applying market rates for counterparties with similar credit quality. Government bonds, certificates of deposits and other debt securities The Bank values these unquoted debt securities using discounted cash flow valuation models where the lowest level input that is significant to the entire measurement is observable in an active market. These inputs include assumptions regarding current rates of interest, implied volatilities, credit spreads and broker statements. Loans and advances to banks and customers For the purpose of this disclosure, fair value of loans and advances is estimated using discounted cash flows by applying current rates for new loans granted during the year with similar remaining maturities and to counterparties with similar credit quality. Deposits from banks and customers In many cases, the fair value disclosed approximates carrying value because these financial liabilities are short-term in nature or have interest rates that re-price frequently. The fair value for deposits with long-term maturities, such as time deposits, are estimated using discounted cash flows, applying either market rates or current rates for deposits of similar remaining maturities.

Société Générale de Banque au Liban S.A.L. F.72

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2017 50 MATURITY ANALYSIS OF ASSETS AND LIABILITIES The table below shows an analysis of assets and liabilities analyzed according to when they are expected to be recovered or settled. At 31 December 2017

Less than one year

More than one year Total

LL million LL million LL million ASSETS Cash and balances with the Central Banks 1,463,770 11,795,634 13,259,404 Due from banks and financial institutions 828,784 25,442 854,226 Amounts due from affiliated banks and financial institutions 590,385 - 590,385 Loans to banks and financial institutions - 8,397 8,397 Derivative financial instruments 9,197 - 9,197 Financial assets at fair value through profit or loss 177,965 23,722 201,687 Loans and advances to customers at amortized cost 4,173,844 3,170,772 7,344,616 Loans and advances to related parties at amortized cost 94,171 16,894 111,065 Debtors by acceptances 348,376 96,999 445,375 Financial assets at amortized cost 318,390 8,323,874 8,642,264 Financial assets at fair value through other comprehensive income

1,109 160,405 161,514

Property and equipment 11,955 473,375 485,330 Intangible assets 3,434 44,585 48,019 Investment properties - 1,478 1,478 Non-current assets held for sale 177,521 8,983 186,504 Other assets 129,388 4,696 134,084 Goodwill - 3,405 3,405 __________ __________ __________ TOTAL ASSETS 8,328,289 24,158,661 32,486,950 __________ __________ __________ LIABILITIES Due to the Central Banks 31,604 1,590,603 1,622,207 Loans and repurchase agreements 450,974 1,230,410 1,681,384 Due to banks and financial institutions 434,985 44,232 479,217 Amounts due to affiliated banks and financial institutions 6,844 - 6,844 Derivative financial instruments 164 - 164 Customers’ deposits at amortized cost 23,029,860 1,660,648 24,690,508 Related parties’ deposits at amortized cost 165,282 - 165,282 Engagements by acceptances 348,376 96,999 445,375 Other liabilities 182,520 184,856 367,376 Provision for risks and charges 25,931 222,989 248,920 __________ __________ __________ TOTAL LIABILITIES 24,676,540 5,030,737 29,707,277 __________ __________ __________ NET (16,348,251) 19,127,924 2,779,673 __________ __________ __________

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Société Générale de Banque au Liban SAL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2017 50 MATURITY ANALYSIS OF ASSETS AND LIABILITIES (continued) At 31 December 2016

Less than one year

More than one year Total

LL million LL million LL million ASSETS Cash and balances with the Central Banks 1,234,877 7,309,137 8,544,014 Due from banks and financial institutions 768,627 30,002 798,629 Amounts due from affiliated banks and financial institutions 918,608 - 918,608 Loans to banks and financial institutions - 8,397 8,397 Derivative financial instruments 2,472 - 2,472 Financial assets at fair value through profit or loss 180,270 - 180,270 Loans and advances to customers at amortized cost 3,807,450 2,820,199 6,627,649 Loans and advances to related parties at amortized cost 89,337 11,400 100,737 Debtors by acceptances 211,715 - 211,715 Financial assets at amortized cost 1,100,068 9,376,279 10,476,347 Financial assets at fair value through other comprehensive income

1,017 24,191 25,208

Property and equipment 11,270 422,515 433,785 Intangible assets 5,407 43,910 49,317 Investment properties - 1,483 1,483 Non-current assets held for sale 168,304 7,615 175,919 Other assets 105,138 4,662 109,800 Goodwill - 3,405 3,405 __________ __________ __________ TOTAL ASSETS 8,604,560 20,063,195 28,667,755 __________ __________ __________ LIABILITIES Due to the Central Banks 208,034 223,731 431,765 Loans and repurchase agreements 1,046,725 1,015,592 2,062,317 Due to banks and financial institutions 546,700 22,248 568,948 Amounts due to affiliated banks and financial institutions 1,429 - 1,429 Derivative financial instruments 9,507 - 9,507 Customers’ deposits at amortized cost 20,681,680 1,106,654 21,788,334 Related parties’ deposits at amortized cost 181,207 - 181,207 Engagements by acceptances 211,715 - 211,715 Other liabilities 371,054 218,710 589,764 Provision for risks and charges 27,366 235,644 263,010 __________ __________ __________ TOTAL LIABILITIES 23,285,417 2,822,579 26,107,996 __________ __________ __________ NET (14,680,857) 17,240,616 2,559,759 __________ __________ __________ 51 RISK MANAGEMENT The Group devotes significant resources to the ongoing adaptation of its risk management framework, in order to keep pace with the increasing diversification of its activities. Risk management is implemented in compliance with the two following fundamental principles:

• risk assessment departments are completely independent from the operating divisions • a consistent approach to risk assessment and monitoring is applied at the Group level

a) Risk management structure The Board of Directors is ultimately responsible for identifying and controlling risks; however, there are separate independent bodies responsible for managing and monitoring risks. Board of Directors The Board of Directors is responsible for the overall risk management approach and for approving risk strategies and principles.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2017 51 RISK MANAGEMENT (continued) a) Risk management structure (continued) Risk Management The Risk Management Unit is responsible for implementing and maintaining risk related procedures to ensure an independent control process. Group Treasury Group Treasury is responsible for managing the Group’s assets and liabilities and the overall financial structure. It is also primarily responsible for the funding and liquidity risks of the Group. Internal Audit Risk management processes throughout the Group are audited annually by the internal audit function, that examines both the adequacy of the procedures and the Group’s compliance with the procedures. Internal Audit discusses the results of all assessments with management, and reports its findings and recommendations to the Board of Directors. b) Risk measurement and reporting systems The Group is using a RAROC (Risk-Adjusted Return on Capital) approach to quantify its credit risk. One of the main objectives is to establish, using quantitative methods, the level of loss expected on credit transactions over the course of the business cycle. Monitoring and controlling risks is primarily performed based on limits established by the Group. These limits reflect the business strategy and market environment of the Group as well as the level of risk that the Group is willing to accept, with additional emphasis on selected industries. In addition, the Group monitors and measures the overall risk-bearing capacity in relation to the aggregate risk exposure across all risk types and activities. c) Risk mitigation As part of its overall risk management, the Group uses derivatives and other instruments to manage exposures resulting from changes in interest rates, foreign currencies, credit risks, and exposures arising from forecast transactions. The Group actively uses collateral to reduce its credit risks. d) Excessive concentration The Group also attempts to control credit risk by regular monitoring of its credit exposures and continuous assessment of the creditworthiness of counterparties by the credit risk committee. 51.1 CREDIT RISK Credit risk is the risk that the Group will incur a loss because its customers or counterparties fail to discharge their contractual obligations. The Group manages and controls credit risk by setting limits on the amount of risk it is willing to accept for individual counterparties and for geographical and industry concentrations, and by monitoring exposures in relation to such limits. The Group has established a credit quality review process to provide early identification of possible changes in the creditworthiness of counterparties, including regular collateral revisions. Counterparty limits are established by the use of a credit risk classification system, which assigns each counterparty a risk rating. Risk ratings are subject to regular revision. The credit quality review process aims to allow the Group to assess the potential loss as a result of the risks to which it is exposed and take corrective actions. The risk rating system, which is managed by an independent unit, provides a rating based on client and transaction level. The classification system includes ten grades, of which five grades relate to credit facilities which are neither past due nor impaired (risk rating “1”, “2”, “3”, “4”, and “5”) and credit facilities which are past due but not impaired (risk rating “6a” and “6c”), substandard individually impaired loans (risk rating “6b”) and doubtful individually impaired loans (risk rating “7” and “8”). The Group uses the above internal rating system for the classifications of all of its financial assets portfolio.

Société Générale de Banque au Liban S.A.L. F.75

Société Générale de Banque au Liban SAL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2017 51 RISK MANAGEMENT (continued) 51.1 CREDIT RISK (continued) Derivative financial instruments Credit risk arising from derivative financial instruments is, at any time, limited to those with positive fair values, as recorded on the consolidated statement of financial position. In the case of credit derivatives, the Group is also exposed to or protected from the risk of default of the underlying entity referenced by the derivative. With gross-settled derivatives, the Group is also exposed to a settlement risk, being the risk that the Group honors its obligation but the counterparty fails to deliver the counter-value. Credit-related commitments risk The Group makes available to its customers guarantees which may require that the Group makes payments on their behalf and enters into commitments to extend credit lines to secure their liquidity needs. Letters of credit and guarantees (including standby letters of credit) commit the Group to make payments on behalf of customers in the event of a specific act, generally related to the import or export of goods. Such commitments expose the Group to similar risks as loans and are mitigated by the same control processes and policies. Analysis of maximum exposure to credit risk and collateral and other credit enhancements The following table shows the maximum exposure to credit risk by class of financial asset. It further shows the total fair value of collateral, capped to the maximum exposure to which it relates and the net exposure to credit risk. Collateral

31 December 2017:

Maximum exposure

Cash

Securities

Real estate

Letters of credit /

guarantees

Net credit exposure

LL million LL million LL million LL million LL million LL million Balances with the Central Banks 13,137,869 - - - - 13,137,869 Due from banks and financial Institutions 854,226 - - -

- 854,226

Amounts due from affiliated banks and

financial institutions 590,385 - - -

-

590,385 Loans to banks and financial institutions 8,397 - - (8,397)

- -

Derivative financial instruments 9,197 - - - - 9,197 Financial assets at fair value

through profit or loss 201,687 - - -

-

201,687 Loans and advances to customers

at amortized cost:

Retail loans 2,890,411 (366,194) (383) (1,694,907) - 828,927 Corporate loans 4,454,205 (445,335) (8,938) (1,631,843) - 2,368,089 Loans and advances to related

parties at amortized cost

Retail loans 47,176 - - (2,523) - 44,653 Corporate loans 63,889 (2,316) (76) (12,362) - 49,135 Debtors by acceptances 445,375 (121,529) - (5,738) - 318,108 Financial assets at amortized cost 8,642,264 - - - - 8,642,264 Financial assets at fair value through other comprehensive income 161,514 - - -

-

161,514 ____________ ___________ ___________ ___________ ___________ ___________ 31,506,595 (935,374) (9,397) (3,355,770) - 27,206,054 ____________ ___________ ___________ ____________ ___________ ____________ Financial guarantees 165,305 (59,753) (2) (21,613) - 83,937 Documentary credits 282,292 (53,665) - (24,722) - 203,905 Undrawn credit lines 1,248,497 (129,859) (2,873) (56,024) - 1,059,741 ____________ ___________ ___________ ___________ ___________ ___________ 1,696,094 (243,277) (2,875) (102,359) - 1,347,583 ____________ ___________ ___________ ___________ ___________ ___________ 33,202,689 (1,178,651) (12,272) (3,458,129) - 28,553,637 ____________ ___________ ___________ ___________ ___________ ___________

Société Générale de Banque au Liban S.A.L. F.76

Société Générale de Banque au Liban SAL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2017 51 RISK MANAGEMENT (continued) 51.1 CREDIT RISK (continued) Analysis of maximum exposure to credit risk and collateral and other credit enhancements (continued) Collateral

31 December 2016:

Maximum exposure

Cash

Securities

Real estate

Letters of credit /

guarantees

Net credit exposure

LL million LL million LL million LL million LL million LL million Balances with the Central Banks 8,437,684 - - - - 8,437,684 Due from banks and financial institutions 798,629 - - -

- 798,629

Amounts due from affiliated banks and

financial institutions 918,608 - - -

-

918,608 Loans to banks and financial institutions 8,397 - - (8,397)

- -

Derivative financial instruments 2,472 - - - - 2,472 Financial assets at fair value

through profit or loss 180,270 - - -

-

180,270 Loans and advances to customers

at amortized cost:

Retail loans 2,781,322 (332,586) (260) (1,546,396) (105,890) 796,190 Corporate loans 3,846,327 (340,012) (3) (1,355,538) (15,901) 2,134,873 Loans and advances to related

parties at amortized cost

Retail loans 38,772 (36) - (106) - 38,630 Corporate loans 61,965 (2,314) (91) (12,362) - 47,198 Debtors by acceptances 211,715 (14,223) - (3,816) - 193,676 Financial assets at amortized cost 10,476,347 - - - - 10,476,347 Financial assets at fair value through other comprehensive income 25,208 - - -

-

25,208 ____________ ___________ ___________ ___________ ___________ ___________ 27,787,716 (689,171) (354) (2,926,615) (121,791) 24,049,785 ____________ ___________ ___________ ____________ ___________ ____________ Financial guarantees 158,970 (37,795) (2) (14,827) - 106,346 Documentary credits 257,843 (20,018) - (18,568) - 219,257 Undrawn credit lines 1,120,491 (94,622) (3,623) (46,729) - 975,517 ____________ ___________ ___________ ___________ ___________ ___________ 1,537,304 (152,435) (3,625) (80,124) - 1,301,120 ____________ ___________ ___________ ___________ ___________ ___________ 29,325,020 (841,606) (3,979) (3,006,739) (121,791) 25,350,905 ____________ ___________ ___________ ___________ ___________ ___________ Collateral and other credit enhancements The amount and type of collateral required depends on an assessment of the credit risk of the counterparty. Guidelines are implemented regarding the acceptability of types of collateral and valuation parameters. Management monitors the market value of collateral, requests additional collateral in accordance with the underlying agreement, and monitors the market value of collateral obtained during its review of the adequacy of the allowance for impairment losses. The main types of collateral obtained are as follows: Securities The balances shown above represent the fair value of the securities. Letters of credit / guarantees The Group holds in some cases guarantees, letters of credit and similar instruments from banks and financial institutions which enable it to claim settlement in the event of default on the part of the counterparty. The balances shown represent the notional amount of these types of guarantees held by the Group.

Société Générale de Banque au Liban S.A.L. F.77

Société Générale de Banque au Liban SAL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2017 51 RISK MANAGEMENT (continued) 51.1 CREDIT RISK (continued) Collateral and other credit enhancement (continued) Real estate (commercial and residential) The Group holds in some cases a first degree mortgage over residential property (for housing loans) and commercial property (for commercial loans). The value shown above reflects the fair value of the property limited to the related mortgaged amount. Other In addition to the above, the Group also obtains guarantees from parent companies for loans to their subsidiaries, personal guarantees for loans to companies owned by individuals and assignments of insurance proceeds and revenues, which are not reflected in the above table. Risk concentrations: maximum exposure to credit risk without taking account of any collateral and other credit enhancements The Group’s concentrations of risk are managed by client/counterparty and by geographical region. The maximum credit exposure to any client as at 31 December 2017 was LL 375,597 million (2016: LL 368,148 million) before taking account of collateral or other credit enhancements and LL 134,363 million (2016: LL 147,711 million) net of such protection. The following table shows the maximum exposure to credit risk for the components of the consolidated statement of financial position, including derivatives, by geography of counterparty before the effect of mitigation through the use of master netting and collateral agreements. Where financial instruments are recorded at fair value, the amounts shown represent the current credit risk exposure but not the maximum risk exposure that could arise in the future as a result of changes in values. Geographic analysis 2017 2016

Lebanon Outside

Lebanon Total Lebanon Outside

Lebanon Total LL million LL million LL million LL million LL million LL million Financial assets Cash and balances with the Central Banks 12,752,437 506,967 13,259,404 8,225,975 318,039 8,544,014 Due from banks and financial institutions 96,054 758,172 854,226 123,285 675,344 798,629 Amounts due from affiliated banks and financial institutions 11 590,374 590,385 - 918,608 918,608 Loans to banks and financial institutions - 8,397 8,397 - 8,397 8,397 Derivative financial instruments - 9,197 9,197 1,336 1,136 2,472 Financial assets at fair value through profit or loss - Shares 103,082 24,689 127,771 96,229 21,195 117,424 - Funds - 23,720 23,720 - 20,376 20,376 - Lebanese treasury bills 12,508 - 12,508 4,782 - 4,782 - Debt securities issued by banks 37,688 - 37,688 37,688 - 37,688 Loans and advances to customers at amortized cost 5,126,100 2,218,516 7,344,616 4,696,755 1,930,894 6,627,649 Loans and advances to related parties at amortized cost 79,957 31,108 111,065 72,136 28,601 100,737 Financial assets at amortized cost - Lebanese treasury bills 3,852,519 - 3,852,519 5,682,599 - 5,682,599 - Other governmental debt securities - 997,962 997,962 - 986,522 986,522 - Certificates of deposit 3,667,552 52,126 3,719,678 3,734,589 - 3,734,589 - Other debt securities - 72,105 72,105 - 72,637 72,637 Financial assets at fair value through other comprehensive income - Shares 147,232 14,282 161,514 8,569 16,639 25,208 __________

_ _________

_ __________ _________

_ _________

_ _________

25,875,140 5,307,615 31,182,755 22,683,943 4,998,388 27,682,331

Société Générale de Banque au Liban S.A.L. F.78

Société Générale de Banque au Liban SAL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2017

51 RISK MANAGEMENT (continued) 51.1 CREDIT RISK (continued) Credit quality per class of financial assets The credit quality of financial assets is managed by the Group using internal credit ratings. The tables below show the credit quality by class of asset based on the Group’s internal credit rating system. The amounts presented are gross of impairment allowances. Neither past

due nor impaired

Past due but not impaired

Individually impaired Substandard Doubtful Total LL million LL million LL million LL million LL million 2017 Cash and balances with the Central Banks 13,259,404 - - - 13,259,404 Due from banks and financial institutions 854,226 - - 711 854,937 Loans to banks and financial institutions - - - 27,758 27,758 Amounts due from affiliated banks and financial institutions 590,385 - - - 590,385 Derivative financial instruments 9,197 - - - 9,197 Financial assets at fair value through profit or loss - Shares 127,771 - - - 127,771 - Funds 23,720 - - - 23,720 - Lebanese treasury bills 12,508 - - - 12,508 - Debt securities issued by banks 37,688 - - - 37,688 Loans and advances to customers at amortized cost - Corporate 4,249,366 98,293 74,197 379,063 4,800,919 - Retail 2,760,080 54,171 29,282 280,133 3,123,666 Loans and advances to related parties at amortized cost - Corporate 59,792 - - 23,776 83,568 - Retail 47,176 - - - 47,176 Financial assets at amortized cost - Lebanese treasury bills 3,852,519 - - - 3,852,519 - Other governmental debt securities 997,962 - - - 997,962 - Certificates of deposit 3,719,678 - - - 3,719,678 - Other debt securities 72,105 - - 1,083 73,188 Financial assets at fair value through other comprehensive income

- Shares 161,514 - - 15 161,529 ____________ ____________ ____________ __________ __________ 30,835,091 152,464 103,479 712,539 31,803,573 ____________ ____________ ____________ __________ __________ Moody’s equivalent Aaa – B3* Not rated Not rated Not rated Not rated Neither past

due nor impaired

Past due but not impaired

Individually impaired Substandard Doubtful Total LL million LL million LL million LL million LL million 2016 Cash and balances with the Central Banks 8,544,014 - - - 8,544,014 Due from banks and financial institutions 798,087 - - 817 798,904 Loans to banks and financial institutions - - - 24,668 24,668 Amounts due from affiliated banks and financial institutions 918,608 - - - 918,608 Derivative financial instruments 2,472 - - - 2,472 Financial assets at fair value through profit or loss - Shares 117,424 - - - 117,424 - Funds 20,376 - - - 20,376 - Lebanese treasury bills 4,782 - - - 4,782 - Debt securities issued by banks 37,688 - - - 37,688 Loans and advances to customers at amortized cost - Corporate 3,749,068 36,744 61,500 407,013 4,254,325 - Retail 2,661,384 28,563 24,942 270,398 2,985,287 Loans and advances to related parties at amortized cost - Corporate 58,195 - - 24,818 83,013 - Retail 38,772 - - - 38,772 Financial assets at amortized cost - Lebanese treasury bills 5,682,599 - - - 5,682,599 - Other governmental debt securities 986,522 - - - 986,522 - Certificates of deposit 3,734,589 - - - 3,734,589 - Other debt securities 72,637 - - 1,384 74,021 Financial assets at fair value through other comprehensive income

- Shares 25,208 - - 15 25,223 ____________ ____________ ____________ __________ __________ 27,452,425 65,307 86,442 729,113 28,333,287 ____________ ____________ ____________ __________ __________ Moody’s equivalent Aaa – B3* Not rated Not rated Not rated Not rated

(*) Amounts due from affiliated banks and financial institutions, derivative financial instruments, loans and

advances to customers, loans and advances to related parties are not rated by Moody’s.

Société Générale de Banque au Liban S.A.L. F.79

Société Générale de Banque au Liban SAL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2017 51 RISK MANAGEMENT (continued) 51.1 CREDIT RISK (continued) It is the Group’s policy to maintain accurate and consistent risk rating across the credit portfolio. This facilitates focused management of the applicable risks and the comparison of credit exposures across all lines of business, geographic regions and products. The rating system is supported by a variety of financial analytics, combined with processed market information to provide the main inputs for the measurement of counterparty risk. All internal risk ratings are tailored to the various categories and are derived in accordance with the Group’s rating policy. The attributable risks are assessed and updated regularly. The classification of loans and advances to customers and related parties at amortized cost as in accordance with the ratings of Central Bank of Lebanon circular 58 are as follows: 2017 Gross

balance Unrealized

interest Impairment allowances

Net balance

LL million LL million LL million LL million Regular 6,427,102 - - 6,427,102 Follow up 513,069 - - 513,069 Follow-up and regularization 328,707 - - 328,707 Substandard 103,479 (35,905) - 67,574 Doubtful 493,980 (195,756) (151,467) 146,757 Bad 188,992 (120,376) (65,159) 3,457 _____________ _____________ _____________ _____________ 8,055,329 (352,037) (216,626) 7,486,666 Collective impairment - - (30,985) (30,985) _____________ _____________ _____________ _____________ 8,055,329 (352,037) (247,611) 7,455,681 _____________ _____________ _____________ _____________

2016 Gross

balance Unrealized

interest Impairment allowances

Net balance

LL million LL million LL million LL million Regular 5,800,273 - - 5,800,273 Follow up 484,561 - - 484,561 Follow-up and regularization 287,892 - - 287,892 Substandard 86,442 (37,564) - 48,878 Doubtful 512,120 (221,980) (154,808) 135,332 Bad 190,109 (121,308) (66,176) 2,625 _____________ _____________ _____________ _____________ 7,361,397 (380,852) (220,984) 6,759,561 Collective impairment - - (31,175) (31,175) _____________ _____________ _____________ _____________ 7,361,397 (380,852) (252,159) 6,728,386 _____________ _____________ _____________ _____________

Renegotiated loans Restructuring activity aims to manage customer relationships, maximize collection opportunities and, if possible, avoid foreclosure or repossession. Such activities include extended payment arrangements, deferring foreclosure, modification, loan rewrites and/or deferral of payments pending a change in circumstances. Restructuring policies and practices are based on indicators or criteria which, in the judgment of local management, indicate that repayment will probably continue. The application of these policies varies according to the nature of the market and the type of the facility. 2017 2016 LL million LL million Corporate loans 151,374 141,567 Retail loans 29,350 16,154 ____________ ____________ 180,724 157,721 ____________ ____________

Société Générale de Banque au Liban S.A.L. F.80

Société Générale de Banque au Liban SAL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2017 51 RISK MANAGEMENT (continued) 51.1 CREDIT RISK (continued) Impairment assessment For accounting purposes, the Group uses an incurred loss model for the recognition of losses on impaired financial assets. This means that losses can only be recognized when objective evidence of a specific loss event has been observed. Triggering events include the following:

- Significant financial difficulty of the customer; - A breach of contracts such as default of payment; - Where the Group grants the customer a concession due to the customer experiencing financial difficulty; - It becomes probable that the customer will enter bankruptcy or other financial reorganization; - Observable data that suggests that there is a decrease in the estimated future cash flows of the loan.

Individually assessed allowances The Group determines the allowance appropriate for each individually significant loan or advance on an individual basis, taking into account any overdue payments of interests, credit rating downgrades, or infringement of the original terms of the contract. Items considered when determining allowance amounts include the sustainability of the counterparty’s business plan, its ability to improve performance once a financial difficulty has risen, projected receipts and the expected payout should bankruptcy ensue, the availability of other financial support, the realizable value of collateral and the timing of the expected cash flows. Impairment allowances are evaluated at each reporting date, unless unforeseen circumstances require more careful attention. Collectively assessed allowances Allowances are assessed collectively for losses on loans and advances and debt securities at amortized cost that are not individually significant (including credit cards, residential mortgages and unsecured consumer lending) and for individually significant loans that have been assessed individually and found not to be impaired. Allowances are evaluated separately at each reporting date with each portfolio. The Group generally bases its analysis on historical experience. However, when there are significant market developments, regional and / or global, the Group would include macroeconomic factors within its assessments. These factors include, depending on the characteristics of the individual or collective assessment: unemployment rates, current levels of bad debts, changes in laws, changes in regulations, bankruptcy trends, and other consumer data. The Group may use the aforementioned factors as appropriate to adjust the impairment allowances. The collective assessment is made for groups of assets with similar risk characteristics, in order to determine whether provision should be made due to incurred loss events for which there is objective evidence but whose effects are not yet evident in the individual loans assessments. The collective assessment takes account of data from the loan portfolio (such as historical losses on the portfolio, levels of arrears, credit utilization, loan to collateral ratios and expected receipts and recoveries once impaired) or economic data (such as current economic conditions, unemployment levels and local or industry-specific problems). This approximate delay between the time a loss is likely to have been incurred and the time it will be identified as requiring an individually assessed impairment allowance is also taken into consideration. Local management is responsible for deciding the length of this period which can extend for as long as one year. The impairment allowance is then reviewed by credit management to ensure alignment with the Group’s overall policy. Credit related commitments and financial guarantees are assessed and provisions are made in a similar manner as for loans. 51.2 MARKET RISK Market risk is the risk that the fair value or future cash flows of financial instruments will fluctuate due to changes in market variables such as interest rates, foreign exchange rates and equity prices. The Board has set limits on the value of risk that may be accepted. This is monitored on a weekly basis by the Asset and Liability Committee.

Société Générale de Banque au Liban S.A.L. F.81

Société Générale de Banque au Liban SAL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2017 51 RISK MANAGEMENT (continued) 51.2 MARKET RISK (continued) 51.2.1 INTEREST RATE RISK Interest rate risk arises from the possibility that changes in interest rates will affect future cash flows or the fair values of financial instruments. The Group is exposed to interest rate risk as a result of mismatches of interest rate repricing of assets, liabilities and off-statement of financial position items which will mature or reprice in a particular period. The Group manages this risk by matching the repricing of assets and liabilities through risk management strategies. Interest rate sensitivity The following table demonstrates the sensitivity to a reasonable possible change in interest rates, with all other variables held constant, of the Group’s consolidated income statement. The sensitivity of the consolidated income statement is the effect of the assumed changes in interest rates on the profit or loss for the year, based on the floating rate financial assets and financial liabilities held at 31 December, including the effect of hedging instruments. 2017 2016 Currency

Increase/decrease Sensitivity of profit or loss

Increase/ decrease

Sensitivity of profit or loss

in basis points LL million in basis points LL million Lebanese Lira + 50 8,791 + 50 6,955 US Dollars + 50 10,493 + 50 9,034 Euro + 50 (246) + 50 (241) Lebanese Lira - 50 (8,791) - 50 (6,955) US Dollars - 50 (10,493) - 50 (9,034) Euro - 50 246 - 50 241 Interest sensitivity gap The table below analyses the Group’s interest risk exposure on financial assets and liabilities. The Group’s assets and liabilities are included at carrying amount and categorized by the earlier of contractual repricing or maturity dates. 2017 (LL million) Non Up to 1 1 to 3 3 months 1 to 2 2 to 5 Over 5 interest month months to 1 year years years years bearing Total ASSETS Cash and balances with the Central Banks 1,359,190 801,990 54,198 37,688 987,564 9,255,743 763,031 13,259,404 Due from banks and financial institutions 547,284 31,667 34,409 - - 6,301 234,565 854,226 Amounts due from affiliated banks and financial institutions 57,919 37,920 54,418 - - - 440,128 590,385 Loans to banks and financial institutions 8,397 - - - - - - 8,397 Derivative financial instruments - - - - - - 9,197 9,197 Financial assets at fair value through profit or loss - - - 483 38,754 10,868 151,582 201,687 Loans and advances to customers at amortized cost 2,019,588 1,211,471 3,170,881 335,725 137,530 458,884 10,537 7,344,616 Loans and advances to related parties at amortized cost 61,362 1,893 47,810 - - - - 111,065 Financial assets at amortized cost 52,126 3,629 146,140 1,210,859 2,735,073 4,377,940 116,497 8,642,264 Financial assets at fair value through other comprehensive income - - - - - - 161,514 161,514 ___________ __________ __________ __________ __________ _________ ________ _________ TOTAL ASSETS 4,105,866 2,088,570 3,507,856 1,584,755 3,898,921 14,109,736 1,887,051 31,182,755 ___________ __________ __________ __________ __________ _________ ________ _________ LIABILITIES Due to the Central Banks 128 30 2,042 3,872 247,674 1,340,837 27,624 1,622,207 Loans and repurchase agreements - 445,768 244,441 874,892 84,081 22,172 10,030 1,681,384 Due to banks and financial institutions 252,812 43,001 108,871 - 9,267 34,965 30,301 479,217 Amounts due to affiliated banks and financial institutions 6,326 - - - - - 518 6,844 Customers’ deposits at amortized cost 12,634,299 3,365,899 4,977,246 1,072,430 405,955 299,509 1,935,170 24,690,508 Related parties’ deposits at amortized cost 144,643 288 3,987 - - 1,135 15,229 165,282 Derivative financial instruments - - - - - - 164 164 ___________ __________ __________ __________ __________ _________ ________ _________ TOTAL LIABILITIES 13,038,208 3,854,986 5,336,587 1,951,194 746,977 1,698,618 2,019,036 28,645,606 ___________ __________ __________ __________ __________ _________ ________ _________ Total interest sensitivity gap (8,932,342) (1,766,416) (1,828,731) (366,439) 3,151,944 12,411,118 (131,985) 2,537,149 ___________ __________ __________ __________ __________ _________ ________ _________

Société Générale de Banque au Liban S.A.L. F.82

Société Générale de Banque au Liban SAL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2017 51 RISK MANAGEMENT (continued) 51.2 MARKET RISK (continued) 51.2.1 INTEREST RATE RISK (continued) Interest sensitivity gap (continued) 2016 (LL million) Non Up to 1 1 to 3 3 months 1 to 2 2 to 5 Over 5 interest month months to 1 year years years years bearing Total ASSETS Cash and balances with the Central Banks 993,461 815,306 47,889 - 1,252,750 4,623,881 810,727 8,544,014 Due from banks and financial institutions 326,844 164,378 24,578 - - 6,301 276,528 798,629 Amounts due from affiliated banks and financial institutions 545,403 12,340 47,889 - - - 312,976 918,608 Loans to banks and financial institutions 8,397 - - - - - - 8,397 Derivative financial instruments - - - - - - 2,472 2,472 Financial assets at fair value through profit or loss - 541 - 478 1,076 40,314 137,861 180,270 Loans and advances to customers at amortized cost 862,730 2,001,541 2,972,104 297,901 103,523 376,900 12,950 6,627,649 Loans and advances to related parties at amortized cost 47,362 377 52,970 - - - 28 100,737 Financial assets at amortized cost 40,646 337,679 580,609 1,204,004 2,712,749 5,448,747 151,913 10,476,347 Financial assets at fair value through other comprehensive income

- - - - - - 25,208 25,208 ___________ __________ __________ __________ __________ _________ ________ ________ TOTAL ASSETS 2,824,843 3,332,162 3,726,039 1,502,383 4,070,098 10,496,143 1,730,663 27,682,331 ___________ __________ __________ __________ __________ _________ ________ _________ LIABILITIES Due to the Central Banks - 10,410 176,017 1,458 6,500 234,472 2,908 431,765 Loans and repurchase agreements 152,165 649,280 267,054 - 958,973 22,172 12,673 2,062,317 Due to banks and financial institutions 398,504 77,080 29,536 1,131 12,004 9,112 41,581 568,948 Amounts due to affiliated banks and financial institutions 965 - - - - - 464 1,429 Customers’ deposits at amortized cost 10,984,269 3,416,185 3,774,424 801,615 187,617 322,388 2,301,836 21,788,334 Related parties’ deposits at amortized cost 170,770 26 2,664 - - 1,137 6,610 181,207 Derivative financial instruments - - - - - - 9,507 9,507

___________ __________ __________ __________ __________ _________ ________ ________ TOTAL LIABILITIES 11,706,673 4,152,981 4,249,695 804,204 1,165,094 589,281 2,375,579 25,043,507 ___________ __________ __________ __________ __________ _________ ________ ________ Total interest sensitivity gap (8,881,830) (820,819) (523,656) 698,179 2,905,004 9,906,862 (644,916) 2,638,824 ___________ __________ __________ __________ __________ _________ ________ ________

51.2.2 CURRENCY RISK

Currency risk is the risk that the value of a financial instrument will fluctuate due to changes in foreign exchange rates. The Group has set limits on positions by currency. In accordance with the Group’s policy, positions are monitored on a daily basis and hedging strategies are used to ensure positions are maintained within established limits. Sensitivity to currency exchange rates The table below indicates the currencies to which the Group had significant exposure at 31 December on its non-trading monetary assets and liabilities and its forecast cash flows. The analysis calculates the effect of a reasonably possible movement of the currency rate against the Lebanese Lira, with all other variables held constant, on the consolidated income statement (due to fair value of currency sensitive non-trading monetary assets and liabilities). A negative amount in the table reflects a potential net reduction in consolidated income statement or equity, while a positive amount reflects a net potential increase. An equivalent decrease in each of the below currencies against the Lebanese Lira would have resulted in an equivalent but opposite impact. 2017 2016 Currency Change in

currency rate Effect on

profit before tax Change in

currency rate Effect on

profit before tax in % LL million in % LL million US Dollars + 2.5 1,506 + 2.5 (199) Euro + 2.5 (70) + 2.5 9

Société Générale de Banque au Liban S.A.L. F.83

Société Générale de Banque au Liban SAL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2017 51 RISK MANAGEMENT (continued) 51.2 MARKET RISK (continued) 51.2.2 CURRENCY RISK (continued) The following consolidated statements of financial position as at 31 December 2017 and 2016 are detailed in Lebanese Lira (LL million) and foreign currencies, primarily US$, translated into LL million: 31 December 2017 31 December 2016 Foreign

currencies in

Total Foreign

currencies in

Total LL million LL million LL million LL million LL million LL million ASSETS Cash and balances with the Central Banks 6,174,830 7,084,574 13,259,404 3,898,288 4,645,726 8,544,014 Due from banks and financial institutions 38,573 815,653 854,226 36,106 762,523 798,629 Amounts due from affiliated banks and financial institutions 11 590,374 590,385 - 918,608 918,608 Loans to banks and financial institutions - 8,397 8,397 - 8,397 8,397 Derivative financial instruments - 9,197 9,197 - 2,472 2,472 Financial assets at fair value through profit or loss 6,094 195,593 201,687 9,987 170,283 180,270 Loans and advances to customers at amortized cost 2,162,990 5,181,626 7,344,616 1,739,795 4,887,854 6,627,649 Loans and advances to related parties at amortized cost 1,702 109,363 111,065 161 100,576 100,737 Debtors by acceptances - 445,375 445,375 - 211,715 211,715 Financial assets at amortized cost 1,967,097 6,675,167 8,642,264 3,572,736 6,903,611 10,476,347 Financial assets at fair value through other comprehensive income 521 160,993 161,514 521 24,687 25,208 Property and equipment 233,319 252,011 485,330 198,342 235,443 433,785 Intangible assets 45,031 2,988 48,019 46,139 3,178 49,317 Investment properties - 1,478 1,478 - 1,483 1,483 Non-current assets held for sale 5,958 180,546 186,504 5,315 170,604 175,919 Other assets 75,988 58,096 134,084 58,149 51,651 109,800 Goodwill (33,427) 36,832 3,405 (147,056) 150,461 3,405 ____________ ____________ ___________ ____________ __________ ____________ TOTAL ASSETS 10,678,687 21,808,263 32,486,950 9,418,483 19,249,272 28,667,755 ____________ ____________ ___________ ____________ __________ ____________ LIABILITIES Due to the Central Banks 1,576,640 45,567 1,622,207 405,995 25,770 431,765 Loans and repurchase agreements - 1,681,384 1,681,384 - 2,062,317 2,062,317 Due to banks and financial institutions 1,465 477,752 479,217 188 568,760 568,948 Amounts due to affiliated banks and financial institutions 19 6,825 6,844 9 1,420 1,429 Derivative financial instruments - 164 164 - 9,507 9,507 Customers’ deposits at amortized cost 7,119,998 17,570,510 24,690,508 6,774,394 15,013,940 21,788,334 Related parties’ deposits at amortized cost 5,720 159,562 165,282 90,286 90,921 181,207 Engagements by acceptances - 445,375 445,375 - 211,715 211,715 Other liabilities 267,096 100,280 367,376 484,053 105,711 589,764 Provision for risks and charges 122,314 126,606 248,920 220,882 42,128 263,010 ____________ ____________ ___________ ____________ __________ ____________ TOTAL LIABILITIES 9,093,252 20,614,025 29,707,277 7,975,807 18,132,189 26,107,996 ____________ ____________ ___________ ____________ __________ ____________ NET EXPOSURE 1,585,435 1,194,238 2,779,673 1,442,676 1,117,083 2,559,759 ____________ ____________ ___________ ____________ __________ ____________

51.2.3 EQUITY PRICE RISK Equity price risk is the risk that the fair value of equities decreases as the result of changes in the level of equity indices and individual stocks. Equity price risk exposure arises from equity securities classified at fair value through profit or loss and at fair value through other comprehensive income. A 10 percent increase in the value of the Group’s equities at 31 December 2017 would have increased net income by LL 12,777 million and other comprehensive income by LL 16,151 million (2016: LL 11,742 million and LL 2,520 million respectively). An equivalent decrease would have resulted in an equivalent but opposite impact. 51.2.4 PREPAYMENT RISK Prepayment risk is the risk that the Group will incur a financial loss because its customers and counterparties repay or request repayment earlier than expected, such as fixed rate mortgages when interest rate fall. Market conditions causing prepayment is not significant in the markets in which the Group operates. Therefore the Group considers the effect of prepayment risk on net profit as not material after taking into account the effect of any prepayment penalties.

Société Générale de Banque au Liban S.A.L. F.84

Société Générale de Banque au Liban SAL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2017 51 RISK MANAGEMENT (continued) 51.3 LIQUIDITY RISK AND FUNDING MANAGEMENT Liquidity risk is defined as the risk that the Group will encounter difficulty in meeting obligations associated with financial liabilities that are settled by delivering cash or another financial asset. Liquidity risk arises because of the possibility that the Group might be unable to meet its payment obligations when they fall due under normal and stress circumstances. Liquidity risk can be caused by market disruptions or credit downgrades which may cause certain sources of funding to dry up immediately. To limit this risk, management has arranged diversified funding sources in addition to its core deposit base, and adopted a policy of managing assets with liquidity in mind and of monitoring future cash flows and liquidity on a daily basis. The Group has developed internal control processes and contingency plans for managing liquidity risk. This incorporates an assessment of expected cash flows and the availability of high grade collateral which would be used to secure additional funding if required. The Group maintains a portfolio of highly marketable and diverse assets that are assumed to be easily liquidated in the event of an unforeseen interruption of cash flow. The Group also has committed lines of credit that it can access to meet liquidity needs. In addition, the Group maintains a statutory deposit with the Central Banks on customer deposits. In accordance with the Group’s policy, the liquidity position is assessed and managed under a variety of scenarios, giving due consideration to stress factors relating to both the market in general and specifically to the Group. The Group maintains a solid ratio of highly liquid net assets in foreign currencies to deposits and commitments in foreign currencies taking market conditions into consideration. Regulatory ratios and limits In accordance with the Central Bank of Lebanon circulars, the ratio of net liquid assets to deposits in foreign currencies should not be less than 10%. The net liquid assets consist of cash and all balances with the Central Bank of Lebanon (excluding reserve requirements), certificates of deposit issued by the Central Bank of Lebanon irrespective of their maturities and deposits due from other banks that mature within one year, less deposits due to the Central Bank of Lebanon and deposits due to banks that mature within one year. Deposits are composed of total customer deposits (excluding blocked accounts) and due from financial institutions irrespective of their maturities and all certificates of deposit and acceptances and other debt instruments issued by the Group and loans from the public sector that mature within one year. Besides the regulatory requirements, the liquidity position is also monitored through internal limits, such as the loans-to-deposits ratio. Loans to deposits 2017 2016 Year-end 29.63% 30.53% Maximum 30.79% 34.21% Minimum 29.55% 30.53% Average 30.02% 32.74%

Société Générale de Banque au Liban S.A.L. F.85

Société Générale de Banque au Liban SAL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2017 51 RISK MANAGEMENT (continued) 51.3 LIQUIDITY RISK AND FUNDING MANAGEMENT (continued) The table below summarizes the maturity profile of the undiscounted cash flows of the Group’s financial assets and liabilities as at 31 December. Trading derivatives are shown at fair value in a separate column. All derivatives used for hedging purposes are shown by maturity, based on their contractual undiscounted repayment obligations. Repayments which are subject to notice are treated as if notice were being given immediately. However, the Group expects that many customers will not request repayment on the earliest date the Group could be required to pay and the table does not reflect the expected cash flows indicated by the Group’s deposit retention history.

31 December 2017: Trading Up to 1 1 to 3 3 months 1 to 5 Over 5 derivative month months to 1 year years years Total LL million LL million LL million LL million LL million LL million LL million Financial assets Cash and balances with the Central Banks - 1,250,044 170,427 45,216 2,956,215 25,947,642 30,369,544 Due from banks and financial institutions - 781,882 20,167 26,844 21,347 7,312 857,552 Loans to banks and financial institutions - - - - - 8,397 8,397 Amount due from affiliated banks and financial institutions

- 523,835 12,628 55,185 - - 591,648

Derivative financial instruments 9,197 - - - - - 9,197 Financial assets at fair value through profit or loss - 23,722 670 2,048 52,973 140,486 219,899 Loans and advances to customers at amortized cost - 2,275,582 163,474 1,926,311 2,290,521 1,486,553 8,142,441 Loans and advances to related parties at amortized cost

- 62,231 222 32,504 6,832 16,419 118,208

Financial assets at amortized cost - 73,640 99,454 500,110 5,366,963 5,755,789 11,795,956 Financial assets at fair value through other comprehensive income - - - - - 161,514 161,514 _________ _________ _________ ________ ________ _________ _________ Total undiscounted financial assets 9,197 4,990,936 467,042 2,588,218 10,694,851 33,524,112 52,274,356 _________ _________ _________ ________ ________ _________ _________ Financial liabilities Due to the Central Banks - 9,532 10,033 40,194 445,190 1,357,678 1,862,627 Loans and repurchase agreements - 16,969 226,940 273,069 624,261 928,353 2,069,592 Due to banks and financial institutions - 278,998 47,295 109,825 10,234 45,443 491,795 Amounts due to affiliated banks and financial institutions - 6,849 - - - - 6,849 Derivative financial instruments 164 - - - - - 164 Customers’ deposits at amortized cost - 13,084,090 4,385,047 6,425,354 1,758,174 67 25,652,732 Related parties’ deposits at amortized cost - 171,436 288 4,108 - - 175,832 _________ _________ _________ ________ ________ _________ _________ Total undiscounted financial liabilities 164 13,567,874 4,669,603 6,852,550 2,837,859 2,331,541 30,259,591 _________ _________ _________ ________ ________ _________ _________ Total net financial assets (liabilities) 9,033 (8,576,938) (4,202,561) (4,264,332) 7,856,992 31,192,571 22,014,765 _________ _________ _________ ________ ________ _________ _________

31 December 2016: Trading Up to 1 1 to 3 3 months 1 to 5 Over 5 derivative month months to 1 year years years Total LL million LL million LL million LL million LL million LL million LL million Financial assets Cash and balances with the Central Banks - 1,105,630 14,315 116,867 3,018,569 11,761,828 16,017,209 Due from banks and financial institutions - 727,328 26,561 14,878 13,526 21,032 803,325 Loans to banks and financial institutions - - - - - 8,397 8,397 Amount due from affiliated banks and financial institutions

- 858,396 12,341 47,889 - - 918,626

Derivative financial instruments 2,472 - - - - - 2,472 Financial assets at fair value through profit or loss - 20,379 1,216 2,081 12,335 160,699 196,710 Loans and advances to customers at amortized cost - 2,177,736 96,516 1,704,057 1,945,957 1,447,685 7,371,951 Loans and advances to related parties at amortized cost

- 60,213 127 29,525 4,387 11,742 105,994

Financial assets at amortized cost - 60,493 431,556 1,072,760 5,653,654 7,394,896 14,613,359 Financial assets at fair value through other comprehensive income - - - - - 25,208 25,208 _________ _________ _________ ________ ________ _________ _________ Total undiscounted financial assets 2,472 5,010,175 582,632 2,988,057 10,648,428 20,831,487 40,063,251 _________ _________ _________ ________ ________ _________ _________ Financial liabilities Due to the Central Banks - 5,051 15,711 190,890 79,475 162,431 453,558 Loans and repurchase agreements - 20,514 67,649 1,039,874 1,086,665 22,893 2,237,595 Due to banks and financial institutions - 440,165 77,294 29,601 14,830 11,582 573,472 Amounts due to affiliated banks and financial institutions - 1,429 - - - - 1,429 Derivative financial instruments 9,507 - - - - - 9,507 Customers’ deposits at amortized cost - 12,092,769 4,494,108 4,822,138 1,170,850 67 22,579,932 Related parties’ deposits at amortized cost - 188,653 26 2,777 - - 191,456 _________ _________ _________ ________ ________ _________ _________ Total undiscounted financial liabilities 9,507 12,748,581 4,654,788 6,085,280 2,351,820 196,973 26,046,949 _________ _________ _________ ________ ________ _________ _________ Total net financial assets (liabilities) (7,035) (7,738,406) (4,072,156) (3,097,223) 8,296,608 20,634,514 14,016,302 _________ _________ _________ ________ ________ _________ _________

Société Générale de Banque au Liban S.A.L. F.86

Société Générale de Banque au Liban SAL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2017

51 RISK MANAGEMENT (continued) 51.3 LIQUIDITY RISK AND FUNDING MANAGEMENT (continued) The table below shows the contractual expiry by maturity of the Group’s contingent liabilities and commitments. Each undrown commitment is included in the time band containing the earliest date it can be drawn down.

2017

On

demand Less than 3 months

3 to 12 months

1 to 5 years

Over 5 years

Total

LL million LL million LL million LL million LL million LL million Financial guarantees 22,809 17,566 67,348 8,479 49,103 165,305 Documentary credit 65,337 131,898 73,902 11,155 - 282,292 _________ _________ _________ _________ _________ _________ Total 88,146 149,464 141,250 19,634 49,103 447,597 ________ _________ _________ _________ _________ _________

2016

On

demand Less than 3 months

3 to 12 months

1 to 5 years

Over 5 years

Total

LL million LL million LL million LL million LL million LL million Financial guarantees 27,199 30,410 52,729 5,076 43,556 158,970 Documentary credit 58,889 82,220 103,964 12,770 - 257,843 _________ _________ _________ _________ _________ _________ Total 86,088 112,630 156,693 17,846 43,556 416,813 ________ _________ _________ _________ _________ _________

The Group expects that not all of the contingent liabilities or commitments will be drawn before expiry of the commitments. 51.4 OPERATIONAL RISK Operational risk is the risk of loss arising from systems failure, human error, fraud or external events. When controls fail to perform, operational risks can cause damage to reputation, have legal or regulatory implications, or lead to financial loss. The Group cannot expect to eliminate all operational risks, but through a control framework and by monitoring and responding to potential risks, the Group is able to manage the risks. Controls include effective segregation of duties, access, authorization and reconciliation procedures, staff training and assessment processes, including the use of internal audit. 52 CAPITAL By maintaining an actively managed capital base, the Group’s objectives are to cover risks inherent in the business, to retain sufficient financial strength and flexibility to support new business growth, and to meet national and international regulatory capital requirements at all times. The adequacy of the Group’s capital is monitored using, among other measures, the rules and ratios established by the Central Bank of Lebanon according to the provisions of Basic Circular No 44. These ratios measure capital adequacy by comparing the Group’s eligible capital with its consolidated statement of financial position assets and off-balance sheet commitments at a weighted amount to reflect their relative risk. To satisfy Basel III capital requirements, the Central Bank of Lebanon requires maintaining the following ratios of total regulatory capital to risk-weighted assets for the year ended 31 December 2017 and thereafter: Common Tier 1

capital ratio

Tier 1 capital ratio

Total capital ratio Year ended 31 December 2017 9.00 % 12.00% 14.50 % Risk weighted assets As of 31 December 2017 and 2016, risk weighted assets are as follows:

2017

2016 LL million LL million Risk weighted assets 15,697,204 14,041,529 __________ __________

Société Générale de Banque au Liban S.A.L. F.87

Société Générale de Banque au Liban SAL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2017 52 CAPITAL (continued) Regulatory capital At 31 December 2017 and 2016, regulatory capital consists of the following:

Excluding profit for the year Including profit for the year less

proposed dividends 2017 2016 2017 2016 LL million LL million LL million LL million Common Tier 1 capital 1,712,340 1,550,591 2,003,237 1,796,819 Additional Tier 1 capital 577,777 574,769 577,777 574,769 Tier 2 capital 191,776 225,496 191,776 225,496 __________ __________ __________ __________ Total capital 2,481,893 2,350,856 2,772,790 2,597,084 __________ __________ __________ __________ Capital adequacy ratio As of 31 December 2017 and 2016, capital adequacy ratio is as follows:

Excluding profit for the year Including profit for the year less

proposed dividends 2017 2016 2017 2016 Common Tier 1 capital 10.91% 11.04% 12.76% 12.80% __________ __________ __________ __________ Total Tier 1 capital ratio 14.59% 15.14% 16.44% 16.89% __________ __________ __________ __________ Total capital ratio 15.81% 16.74% 17.66% 18.50% __________ __________ __________ __________ The Group manages its capital structure and makes adjustments to it in the light of changes in economic conditions and the risk characteristics of its activities. In order to maintain or adjust the capital structure, the Group may adjust the amount of dividend payment to shareholders, return capital to shareholders or issue capital securities. No changes were made in the objectives, policies and processes from the previous years; however, they are under constant scrutiny of the Board. 53 COMPARATIVE INFORMATION Where necessary, comparative figures have been reclassified to conform with changes in presentation in the current period. An amount of LL 951 million have been reclassified from “Other operating expenses” to “Provision for impairment on non-currrent assets held for sale” in consolidated income statement. This change did not affect the previously reported results and have been made to improve the quality of information presented.

Société Générale de Banque au Liban S.A.L. F.88

SOCIETE GENERALE DE BANQUE AU LIBAN SAL

CONSOLIDATED FINANCIAL STATEMENTS

31 DECEMBER 2016

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CONSOLIDATED STATEMENT OF CHANGES IN EQUITY For the year ended 31 December 2016

Attributable to equity holders of the parent LL million

Non-controlling

interest LL million

Total

equity LL million

Share capital – common

shares

Share capital –

preferred shares

Share premium –

common shares

Share premium –

preferred shares

Cash contribution

by shareholders

Non distributable

reserves Distributable

reserves

Revaluation reserve of

property

Cumulative change in fair

value of financial

assets at fair value through

other comprehensive

income

Foreign currency

translation reserve

Profit for the year

Retained earnings Total

Notes LL million LL million LL million LL million LL million LL million LL million LL million LL million LL million LL million LL million LL million Balance at 31 December 2014 13,173 8,738 149,349 560,065 106,746 316,878 20,669 3,934 113 (8,105) 226,977 242,597 1,641,134 48,167 1,689,301 Profit for the year - - - - - - - - - - 250,844 - 250,844 7,468 258,312 Other comprehensive loss - - - - - - - - (590) (8,664) - - (9,254) (11) (9,265) _________ __________ __________ ___________ ___________ __________ __________ _________ _________ _________ _________ _________ ________ _________ ________ Total comprehensive income - - - - - - - - (590) (8,664) 250,844 - 241,590 7,457 249,047 _________ __________ __________ ___________ ___________ __________ __________ _________ _________ _________ _________ _________ ________ _________ ________ Increase in share capital 40 1,413 937 - - - - (2,350) - - - - - - - - Issuance of preferred shares 40 - 2,330 - 148,226 - - - - - - - - 150,556 - 150,556 Redemption of preferred shares 40 - (2,330) - (151,264) - - 206 - - - - - (153,388) - (153,388) Transfer to retained earnings - - - - - - - - - - (226,977) 226,977 - - - Transfer to non distributable reserves 41 - - - - - 74,269 - - - - - (74,269) - - - Transfer to distributable reserves 42 - - - - - - 917 - - - - (917) - - - Transfer to share premium 40 - - - 2,134 - - - - - - - (2,134) - - - Dividends paid to equity holders of the parent – preferred shares 45 - - - - - - - - - - - (40,702) (40,702) - (40,702) Dividends paid to non-controlling interest - - - - - - - - - - - - - (3,122) (3,122) Adjustments - - - - - (13) - - - - - - (13) - (13) _________ __________ __________ ___________ ___________ __________ __________ _________ _________ _________ _________ _________ ________ _________ ________ Balance at 31 December 2015 14,586 9,675 149,349 559,161 106,746 391,134 19,442 3,934 (477) (16,769) 250,844 351,552 1,839,177 52,502 1,891,679 Profit for the year - - - - - - - - - - 286,259 - 286,259 16,763 303,022 Other comprehensive loss - - - - - - - - 259 (2,093) - - (1,834) (10) (1,844) _________ __________ __________ ___________ ___________ __________ __________ _________ _________ _________ _________ _________ ________ _________ ________ Total comprehensive income - - - - - - - - 259 (2,093) 286,259 - 284,425 16,753 301,178 _________ __________ __________ ___________ ___________ __________ __________ _________ _________ _________ _________ _________ ________ _________ ________ Transfer to retained earnings - - - - - - - - - - (250,844) 250,844 - - - Income on financial transactions 38 - - - - - 404,801 - - - - - - 404,801 - 404,801 Transfer to non distributable reserves 41 - - - - - 68,765 - - - - (68,765) - - - Transfer to distributable reserves 42 - - - - - - 1,090 - - - - (1,090) - - - Transfer to share premium 40 - - - 2,010 - - - - - - - (2,010) - - - Dividends paid to equity holders of the parent – preferred shares 45 - - - - - - - - - - - (34,281) (34,281) - (34,281) Dividends paid to non-controlling interest - - - - - - - - - - - - - (3,566) (3,566) Adjustments - - - - - (52) - - - - - - (52) - (52) _________ __________ __________ ___________ ___________ __________ __________ _________ _________ _________ _________ _________ ________ _________ ________ Balance at 31 December 2016 14,586 9,675 149,349 561,171 106,746 864,648 20,532 3,934 (218) (18,862) 286,259 496,250 2,494,070 65,689 2,559,759 _________ __________ __________ ___________ ___________ __________ __________ _________ _________ _________ _________ _________ ________ _________ ________

Société Générale de Banque au Liban S.A.L. F.98

CONSOLIDATED STATEMENT OF CASH FLOWS For the year ended 31 December 2016 2016 2015 Notes LL million LL million OPERATING ACTIVITIES Profit before income tax 432,021 315,310 Adjustments for:

Depreciation and amortization 26 & 27 14,479 13,972 Share of (profit) loss from an associate 30 (90) 12 Amortization of additional deferred costs resulting from the acquisition of the Lebanese Canadian Bank SAL

30 3,526 6,815

Amortization of deferred employee termination benefits 30 8,103 8,080 Provision for impaired loans – customers 22 37,337 34,775 Provision for impaired loans – related parties 23 1,500 1,453 Loans written off 11 668 866 Impairment loss of goodwill 31 163,158 - Net provisions for impairment of non-current assets held-for-sale 268 517 Write-back of provision for other impaired debit balances 30 (219) (20) Recoveries of credit losses – customers 22 (11,720) (17,941) Provision for employees’ end of service benefits 12 6,293 4,317 Gain from sale of property and equipment (19) (283) Provision for other assets 30 - 249 (Write-back of provision) provision for financial assets at amortized cost 24 (8,442) 8,442 Gain from sale of non-current assets held-for-sale 10 (3,080) (544) Write-off of property and equipment 31 - Write-off of intangible assets - 19 Net provision for risks and charges 191,767 14,468 Unrealized loss on derivative financial instruments 5,554 1,632

_________ _________ 841,135 392,139 Working capital changes:

Cash and balances with the Central Banks (2,917,943) (57,604) Due from banks and financial institutions 105,502 (114,919) Amounts due from affiliated banks and financial institutions (2,794) (39,466) Reverse repurchase agreements 219,567 (219,567) Due to the Central Banks (403,800) 16,749 Loans and repurchase agreements (53,847) (2,584) Due to banks and financial institutions (196,017) 166,648 Loans and advances to customers at amortized cost (729,801) (667,568) Loans and advances to related parties at amortized cost 51,309 (12,038) Financial assets at fair value through profit or loss 59,536 (96,922) Financial assets at fair value through other comprehensive income 1,597 (259) Financial assets at amortized cost 449,914 (540,101) Financial assets at amortized cost pledged as collateral (599,309) (228,192) Loans to banks and financial institutions - (2,036) Other assets (23,844) (172) Customers’ deposits at amortized cost 3,108,457 1,767,525 Related parties’ deposits at amortized cost 48,436 2,588 Other liabilities 43,437 (3,368)

_________ _________ Cash from operations 1,535 360,853 Employees’ end of service benefits paid 39 (1,088) (1,698) Taxation paid (54,422) (49,080) Provision for risks and charges paid (5,965) (4,357) _________ _________ Net cash flows (used in) from operating activities (59,940) 305,718 _________ _________ INVESTING ACTIVITIES Purchase of property and equipment 26 (78,771) (21,761) Purchase of intangible assets 27 (11,580) (9,366) Proceeds from sale of property and equipment 65 360 Proceeds from sale of non-current assets held for sale 17,317 2,507 Acquisition of a subsidiary, net of cash acquired 3 (151,380) - _________ _________ Net cash flows used in investing activities (224,349) (28,260) _________ _________ FINANCING ACTIVITIES Issuance of preferred shares 40 - 150,556 Redemption of preferred shares 40 - (153,388) Dividends paid to equity holders of the parent 45 (34,281) (40,702) Dividends paid to non-controlling interest (3,566) (3,122) _________ _________ Net cash flows used in financing activities (37,847) (46,656) _________ _________ Effect of exchange rate changes and other adjustments (1,474) (6,723) _________ _________ (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (323,610) 224,079 Cash and cash equivalents at 1 January 2,193,918 1,969,839 _________ _________ CASH AND CASH EQUIVALENTS AT 31 DECEMBER 46 1,870,308 2,193,918 _________ _________ Operational cash flows from interest and dividend Interest paid 934,440 802,777 Interest received 1,310,925 1,200,647 Dividend received 2,905 2,661

Société Générale de Banque au Liban S.A.L. F.99

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2016 1 CORPORATE INFORMATION Société Générale de Banque au Liban SAL (the “Bank”) is a shareholding company registered in Beirut, Lebanon. It was registered in 1953 under no. 3696 at the Commercial Registry of Beirut and no. 19 on the list of banks published by the Central Bank of Lebanon. The headquarters of the Bank are located at Saloumeh Square, Sin El Fil, Lebanon. The Bank, together with its subsidiaries (collectively the “Group”), are mainly involved in banking, insurance and financial services activities (commercial, investment and private). 2 ACCOUNTING POLICIES 2.1 Basis of preparation The consolidated financial statements are prepared under the historical cost basis except for the restatement of certain tangible real estate properties in Lebanon according to the provisions of law No 282 dated 30 December 1993, and for the measurement at fair value of investment properties, derivative financial instruments, financial assets at fair value through profit or loss and financial assets at fair value through other comprehensive income. The consolidated financial statements are presented in Lebanese Lira (LL), and all values are rounded to the nearest million Lebanese Lira, except when otherwise indicated. Statement of compliance The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB), and the regulations of the Central Bank of Lebanon and the Banking Control Commission. Presentation of financial statements The Group presents its consolidated statement of financial position broadly in order of liquidity. An analysis regarding recovery or settlement within 12 months after the consolidated statement of financial position date (current) and more than 12 months after the consolidated statement of financial position date (non-current) is presented in the notes. Financial assets and financial liabilities are generally reported gross in the consolidated statement of financial position. They are only offset and reported net when, in addition to having an unconditional legally enforceable right to offset the recognized amounts without being contingent on a future event, the parties also intend to settle on a net basis in all of the following circumstances: • The normal course of business • The event of default • The event of insolvency or bankruptcy of the Group and/or its counterparties Basis of consolidation The consolidated financial statements comprise the financial statements of the Bank and its subsidiaries as at 31 December. The Bank consolidates a subsidiary when it controls it. Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Specifically, the Group controls an investee if and only if the Group has:

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

- Exposure, or rights, to variable returns from its involvement with the investee - The ability to use its power over the investee to affect its returns

Société Générale de Banque au Liban S.A.L. F.100

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2016 2 ACCOUNTING POLICIES (continued) 2.1 Basis of preparation (continued) Basis of consolidation (continued) Generally, there is a presumption that a majority of voting rights results in control. However, under individual circumstances, the Group may still exercise control with less than 50% shareholding or may not be able to exercise control even with ownership over 50% of an entity’s shares. When assessing whether it has power over an investee and therefore controls the variability of its returns, the Group considers all relevant facts and circumstances, including:

- The purpose and design of the investee - The relevant activities and how decisions about those activities are made and whether the Group can

direct those activities - Contractual arrangements such as call rights, put rights and liquidation rights - Whether the Group is exposed, or has rights, to variable returns from its involvement with the investee,

and has the power to affect the variability of such returns The Group re-assesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control. Consolidation of a subsidiary begins when the Group obtains control over the subsidiary and ceases when the Group loses control of the subsidiary. Assets, liabilities, income and expenses of a subsidiary acquired or disposed of during the year are included in the statement of comprehensive income from the date the Group gains control until the date the Group ceases to control the subsidiary. A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as an equity transaction. If the Group loses control over a subsidiary, it derecognizes the related assets (including goodwill), liabilities, non-controlling interest and other components of equity, while any resultant gain or loss is recognized in profit or loss. Any investment retained is recognized at fair value at the date of loss of control. Profit or loss and each component of other comprehensive income (OCI) are attributed to the equity holders of the parent of the Group and to the non-controlling interests, even if this results in the non-controlling interests having a deficit balance. When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with the Group’s accounting policies. All intra-group assets and liabilities, equity, income, expenses and cash flows relating to transactions between members of the Group are eliminated in full on consolidation. A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as an equity transaction. If the Group loses control over a subsidiary, it derecognizes the related assets (including goodwill), liabilities, non-controlling interest and other components of equity while any resultant gain or loss is recognized in profit or loss. Any investment retained is recognized at fair value.

Société Générale de Banque au Liban S.A.L. F.101

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2016

2 ACCOUNTING POLICIES (continued) 2.1 Basis of preparation (continued) Basis of consolidation (continued) The consolidated financial statements represent the financial statements of the Bank and the following subsidiaries:

Percentage of ownership Name

Country of incorporation

Activities

2016

2015

Société Générale Bank - Cyprus Ltd Cyprus Banking 100.00% 100.00% Société Générale de Banque - Jordanie Jordan Banking 87.67% 87.67% Fidus SAL* Lebanon Financial services 49.00% 49.00% Sogelease Liban SAL Lebanon Leasing 99.75% 99.75% Sogecap Liban SAL Lebanon Insurance 75.00% 75.00% Société Générale Jordanie Brokerage Ltd Jordan Brokerage 100.00% 100.00% Société Générale Libanaise Foncière SARL

Lebanon

Real estate

98.66%

98.66%

Société Générale de Services d'Investissement SARL

Lebanon

Services and studies

98.50%

98.50%

LCB Finance SAL Lebanon Financial services 100.00% 100.00% LCB Investments Holding SAL Lebanon Investments & management 100.00% 100.00% LCB Insurance Brokerage House SAL (owned by LCB Investments Holding SAL)

Lebanon

Brokerage

99.14%

99.14%

LCB Estates SAL (owned by LCB Investments Holding SAL)

Lebanon

Real Estate

99.14%

99.14%

SGBL Courtage Assurance SARL Lebanon Brokerage 100.00% 100.00% 799 Bassatine Tripoli SAL Lebanon Investments and management 60.00% 60.00% Foncière 415 Saifi SAL Lebanon Real estate 100.00% - Société d’Investissements et de Services «SIS» SAL

Lebanon

Investments and management

99.00%

99.00%

* The Group controls Fidus SAL despite having an interest of only 49% in this entity. Consequently, the financial statements of Fidus SAL have been consolidated with those of the Bank.

2.2 Significant accounting judgments, estimates and assumptions The preparation of the Group’s financial statements requires management to make judgments, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the accompanying disclosures, and the disclosure of contingent liabilities. Uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of assets or liabilities affected in future periods. Judgments In the process of applying the Group’s accounting policies, management has made the following judgments, apart from those involving estimations, which have the most significant effect in the amounts recognized in the consolidated financial statements: Going concern The Group’s management has made an assessment of the Group’s ability to continue as a going concern and is satisfied that the Group has the resources to continue in business for the foreseeable future. Furthermore, management is not aware of any material uncertainties that may cast significant doubt upon the Group’s ability to continue as a going concern. Therefore, the consolidated financial statements continue to be prepared on the going concern basis. Impairment of goodwill Management judgment is required in estimating the future cash flows of the CGUs. These values are sensitive to cash flows projected for the periods for which detailed forecasts are available, and to assumptions regarding the term sustainable pattern of cash flows thereafter. While the acceptable range within which underlying assumptions can be applied is governed by the requirement for resulting forecasts to be compared with actual performance and verifiable economic data in future years, the cash flow forecasts necessarily and appropriately reflect management view of future business prospects. Business model In making an assessment whether a business model’s objective is to hold assets in order to collect contractual cash flows, the Group considers at which level of its business activities such assessment should be made. Generally, a business model is a matter of fact which can be evidenced by the way business is managed and the information provided to management. However, in some circumstances it may not be clear whether a particular activity involves one business model with some infrequent asset sales or whether the anticipated sales indicate that there are two different business models.

Société Générale de Banque au Liban S.A.L. F.102

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2016

2 ACCOUNTING POLICIES (continued) 2.2 Significant accounting judgments, estimates and assumptions (continued) Judgments (continued) Business model (continued) In determining whether its business model for managing financial assets is to hold assets in order to collect contractual cash flows, the Group considers:

- management’s stated policies and objectives for the portfolio and the operation of those policies in practice;

- how management evaluates the performance of the portfolio; - whether management’s strategy focuses on earning contractual interest revenues; - the degree of frequency of any expected asset sales; - the reason for any asset sales; and - whether assets that are sold are held for an extended period of time relative to their contractual maturity.

Contractual cash flows of financial assets The Group exercises judgment in determining whether the contractual terms of financial assets it originates or acquires give rise on specific dates to cash flows that are solely payments of principal and interest on the principal outstanding and so may qualify for amortized cost measurement. In making the assessment, the Group considers all contractual terms, including any prepayment terms or provisions to extend the maturity of the assets, terms that change the amount and timing of cash flows and whether the contractual terms contain leverage. Estimates and assumptions The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are described below. The Group based its assumptions and estimates on parameters available when the financial statements were prepared. Existing circumstances and assumptions about future developments, however, may change due to market changes or circumstances arising beyond the control of the Group. Such changes are reflected in the assumptions when they occur. Fair value of financial instruments Where the fair values of financial assets and financial liabilities recorded on the consolidated statement of financial position cannot be derived from active markets, they are determined using a variety of valuation techniques that include the use of mathematical models. The inputs to these models are derived from observable market data where possible, but where observable market data is not available, judgment is required to establish fair values. The judgments include considerations of liquidity and model inputs such as volatility for longer dated derivatives and discount rates, prepayment rates and default rate assumptions for asset-backed securities. The valuation of financial instruments is described in more detail in note 51. Impairment losses on loans and advances The Group reviews its individually significant loans and advances at each consolidated statement of financial position date to assess whether an impairment loss should be recorded in the consolidated income statement. In particular, judgment by management is required in the estimation of the amount and timing of future cash flows when determining the impairment loss. In estimating these cash flows, the Group makes judgments about the borrower’s financial situation and the net realizable value of collateral. These estimates are based on assumptions about a number of factors and actual results may differ, resulting in future changes to the allowance. Loans and advances that have been assessed individually and found not to be impaired and all individually insignificant loans and advances are then assessed collectively, in groups of assets with similar risk characteristics, to determine whether provision should be made due to incurred loss events for which there is objective evidence but whose effects are not yet evident. The collective assessment takes account of data from the loan portfolio (such as credit quality, levels of arrears, credit utilization, loan to collateral ratios etc.), and judgments to the effect of concentrations of risks and economic data (including levels of unemployment, real estate prices indices, country risk and the performance of different individual groups). Deferred tax assets Deferred tax assets are recognized in respect of tax losses to the extent that it is probable that taxable profit will be available against which the losses can be utilized. Judgment is required to determine the amount of deferred tax assets that can be recognized, based upon the likely timing and level of future taxable profits, together with future tax planning strategies.

Société Générale de Banque au Liban S.A.L. F.103

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2016 2 ACCOUNTING POLICIES (continued) 2.2 Significant accounting judgments, estimates and assumptions (continued) Estimates and assumptions (continued) Revaluation of investment properties The Group carries its investment properties at fair value, with changes in fair value being recognized in the consolidated income statement. The Group engaged an independent valuation specialist to assess fair value as at 31 December. Investment properties were valued by reference to market-based evidence, using comparable prices adjusted for specific market factors such as nature, location and condition of the property. Provisions and other contingent liabilities The Group operates in a regulatory and legal environment that, by nature, has a heightened element of litigation risk inherent to its operations. As a result, it is involved in various litigation and proceedings arising in the ordinary course of the Group’s businesses. When the Group can reliably measure the outflow of economic benefits in relation to a specific case and considers such outflows to be probable, the Group records a provision against the case. Where the probability of outflow is considered to be remote, or probable, but a reliable estimate cannot be made, a contingent liability is disclosed. However, when the Group is of the opinion that disclosing these estimates on a case-by-case basis would prejudice their outcome, then the Group does not include detailed, case-specific disclosers in its financial statements. Given the subjectivity and uncertainty of determining the probability and amount of losses, the Group takes into account a number of factors including legal advice, the stage of the matter and historical evidence from similar incidents. Significant judgement is required to conclude on these estimates. 2.3 Changes in accounting policy and disclosures New standards and interpretations effective after 1 January 2016 The following new and revised IFRSs have been applied in the current period in these consolidated financial statements. Their adoption had no significant impact on the amounts reported in these consolidated financial statements but may affect the accounting for future transactions or arrangements. Standard Description Effective date Amendments to IAS 1 – Disclosure Initiative

The amendments provide clarifications and narrow-focus improvements on materiality, presentation of primary statements, structure of notes, disclosure of accounting policies, and presentation of OCI arising from equity accounted investments. The amendments are designed to further encourage companies to apply professional judgement in determining what information to disclose and how to structure notes in their financial statements.

1 January 2016

Amendments to IFRS 11 – Accounting for acquisition of interests in Joint Operations

The amendments clarify that when acquiring an interest in a joint operation where the activity of the joint operation constitutes a business, all of the principles on business combinations accounting in IFRS 3, and other IFRSs, that do not conflict with the guidance in IFRS 11, are to be applied. The requirements apply to the acquisition of both the initial interest and additional interests in a joint operation but any previously held interest in the joint operation would not be remeasured.

1 January 2016

Société Générale de Banque au Liban S.A.L. F.104

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2016 2 ACCOUNTING POLICIES (continued) 2.3 Changes in accounting policy and disclosures (continued) New standards and interpretations effective after 1 January 2016 (continued) Standard Description Effective date Amendments to IFRS 10, IFRS 12 and IAS 28 Investment entities – Applying the consolidation exception

The amendments define an investment entity and require a reporting entity that meets the definition of an investment entity not to consolidate its subsidiaries but instead to measure its subsidiaries at fair value through profit or loss in its consolidated and separate financial statements.

1 January 2016

Amendments to IAS 16 and IAS 38 – Clarification of acceptable methods of depreciation and amortization

The amendment clarifies that the use of revenue-based methods to calculate the depreciation of an asset is not appropriate. The IASB has also clarified that revenue is generally presumed to be an inappropriate basis for measuring the consumption of the economic benefits embodied in an intangible asset.

1 January 2016

IFRS 10 Consolidated Financial Statements and IAS 28 - Investments in Associates & Joint Ventures

The amendment clarifies the treatment of the sale or contribution of assets from an investor to its associate or joint venture, as follows: (a) require full recognition in the investor's financial statements of gains and losses arising on the sale or contribution of assets that constitute a business (as defined in IFRS 3 Business Combinations). (b) require the partial recognition of gains and losses where the assets do not constitute a business, i.e. a gain or loss is recognized only to the extent of the unrelated investors’ interests in that associate or joint venture.

1 January 2016

2.4 Standards issued but not yet effective Certain new standards, amendments to standards and interpretations are not yet effective for the year ended 31 December 2016, with the Group not opting for early adoption. These have, therefore, not been applied in preparing these consolidated financial statements. Standard Description Effective date IFRS 15, ‘Revenue from contracts with Customers’.

This is the converged standard on revenue recognition. It replaces IAS 11, ‘Construction contracts’, IAS 18,’Revenue’ and related interpretations. Revenue is recognized when a customer obtains control of a good or service. A customer obtains control when it has the ability to direct the use of and obtain the benefits from the good or service. The core principle of IFRS 15 is that an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. IFRS 15 also includes a cohesive set of disclosure requirements that will result in an entity providing users of financial statements with comprehensive information about the nature, amount, timing and uncertainty of revenue and cash flows arising from the entity’s contracts with customers.

1 January 2018

Société Générale de Banque au Liban S.A.L. F.105

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2016

2 ACCOUNTING POLICIES (continued) 2.4 Standards issued but not yet effective (continued) Standard Description Effective date IAS 12, “Income taxes”

The amendments clarify the following (a) Recognition of a deferred tax asset if the loss is unrealized is allowed, if certain conditions are met; and (b) The bottom line of the tax return is not the ‘future taxable profit’ for the recognition test. The IASB amendments clarify the accounting for deferred tax assets for unrealized losses on debt instruments measured at fair value. The current approach of using the expected bottom line on the tax return – i.e. future taxable income less tax-deductible expenses, will no longer be appropriate instead the taxable income before the deduction will be used, to avoid double counting.

1 January 2017

IAS 7, “Statement of cash flows”

The amendments issued are as follows: (a) introduce additional disclosure requirements intended to address investors’ concerns as currently they are not able to understand the management of an entity’s financing activities; (b) require disclosure of information enabling users to evaluate changes in liabilities arising from financing activities, including both changes arising from cash flows and non-cash changes; (c) do not prescribe a specific format for disclosures but indicates that we can fulfil the requirement by providing a reconciliation between opening and closing balances for liabilities arising from financing activities; and (d) are also applicable to financial assets that hedge liabilities arising from financing activities

1 January 2017

IFRS 9, ‘Financial instruments’

In prior years the Group has early adopted IFRS 9 (2010) which includes the requirements for the classification and measurement. In July 2014, the IASB issued the final version of IFRS 9 Financial Instruments (IFRS 9 (2014)) which reflects all phases of the financial instruments project and replaces IAS 39 Financial Instruments: Recognition and Measurement and all previous versions of IFRS 9. The standard introduces new requirements for classification and measurement, impairment, and hedge accounting. Classification and measurement Debt instruments held within a business model in which assets are managed both in order to collect contractual cash flows and for sale should be measured at fair value through OCI but only if they pass the contractual characteristics assessment. Impairment There is now a new expected credit losses model that replaces the incurred loss impairment model used in IAS 39. IFRS 9 requires the Group to record expected credit losses on all of its debt securities, loans and receivables, either on a 12-month or lifetime basis. Hedging IFRS 9 relaxes the requirements for hedge effectiveness by replacing the bright line hedge effectiveness tests. It requires an economic relationship between the hedged item and hedging instrument and for the ‘hedged ratio’ to be the same as the one management actually use for risk management purposes. Contemporaneous documentation is still required but is different to that currently prepared under IAS 39.

1 January 2018

Société Générale de Banque au Liban S.A.L. F.106

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2016 2 ACCOUNTING POLICIES (continued) 2.4 Standards issued but not yet effective (continued) IFRS 16, ‘Leases’ The IASB issued the new standard for accounting for leases in

January 2016. (a) The new standard does not significantly change the accounting for leases for lessors. However, it does require lessees to recognize most leases on their balance sheets as lease liabilities, with the corresponding right-of-use assets. (b) Lessees must apply a single model for all recognized leases, but will have the option not to recognize ‘short-term’ leases and leases of ‘low-value’ assets. (c) Generally, the profit or loss recognition pattern for recognized leases will be similar to today’s finance lease accounting, with interest and depreciation expense recognized separately in the statement of profit or loss. Early application is permitted provided the new revenue standard, IFRS 15, is applied on the same date. Lessees must adopt IFRS 16 using either a full retrospective or a modified retrospective approach.

1 January 2019

The Group is currently assessing the impact of adopting the above changes as it plans to adopt the new standards on the required effective dates. 2.5 Summary of significant accounting policies (1) Foreign currency translation The consolidated financial statements are presented in Lebanese Lira. For each entity in the Group, the Bank determines the functional currency and items included in the financial statements of each entity are measured using that functional currency. The Group uses the direct method of consolidation. (i) Transactions and balances Transactions in foreign currencies are initially recorded at the spot rate of exchange ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the spot rate of exchange at the reporting date. All differences arising on non–trading activities are taken to other operating income in the income statement, with the exception of differences on foreign currency borrowings that provide an effective hedge against a net investment in a foreign entity. These differences are taken directly to equity until the disposal of the net investment, at which time, they are recognized in the income statement. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the spot exchange rates as at the date of recognition. Non-monetary items measured at fair value in a foreign currency are translated using the spot exchange rates at the date when the fair value was determined. (ii) Group companies On consolidation, the assets and liabilities of foreign operations are translated into Lebanese Lira at the rate of exchange prevailing at the reporting date and their income statements are translated at the weighted average exchange rates for the year. The exchange differences arising on translation for consolidation are recognized in other comprehensive income. On disposal of a foreign entity, the deferred cumulative amount recognized in equity relating to that particular foreign operation is recognized in the income statement in other operating expenses or other operating income. Any goodwill arising on the acquisition of a foreign operation and any fair value adjustments to the carrying amounts of assets and liabilities arising on the acquisition are treated as assets and liabilities of the foreign operations and translated at closing rate.

Société Générale de Banque au Liban S.A.L. F.107

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2016

2 ACCOUNTING POLICIES (continued) 2.5 Summary of significant accounting policies (continued) (2) Financial instruments – classification and measurement (i) Date of recognition All financial assets and liabilities are initially recognized on the trade date, i.e. the date that the Group becomes a party to the contractual provisions of the instrument. This includes purchases or sales of financial assets that require delivery of assets within the time frame generally established by regulation or convention in the market place. (ii) Classification and measurement of financial investments a. Financial assets The classification of financial assets depends on the basis of the entity's business model for managing the financial assets and the contractual cash flow characteristics of the financial asset. Assets are initially measured at fair value plus, in the case of a financial asset not at fair value through profit or loss, particular transaction costs. Assets are subsequently measured at amortized cost or at fair value. An entity may, at initial recognition, irrevocably designate a financial asset as measured at fair value through profit or loss if doing so eliminates or significantly reduces a measurement or recognition inconsistency (sometimes referred to as an 'accounting mismatch') that would otherwise arise from measuring assets or liabilities or recognizing the gains and losses on them on different bases. An entity is required to disclose such financial assets separately from those mandatorily measured at fair value. Financial assets at amortized cost Debt instruments are subsequently measured at amortized cost less any impairment loss (except for debt instruments that are designated at fair value through profit or loss upon initial recognition) if they meet the following two conditions:

• The asset is held within a business model whose objective is to hold assets in order to collect contractual cash flows; and

• The contractual terms of the instrument give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

These financial assets are initially recognized at cost, being the fair value of the consideration paid for the acquisition of the investment. All transaction costs directly attributed to the acquisition are also included in the cost of investment. After initial measurement, these financial assets are measured at amortized cost using the effective interest rate method, less allowance for impairment. Amortized cost is calculated by taking into account any discount of premium on acquisition and fees and costs that are an integral part of the effective interest rate. The amortization is included in “Interest and similar income” in the consolidated income statement. The losses arising from impairment are recognized in the consolidated income statement in “Net credit losses”. Although the objective of an entity's business model may be to hold financial assets in order to collect contractual cash flows, the entity need not hold all of those instruments until maturity. Thus an entity's business model can be to hold financial assets to collect contractual cash flows even when sales of financial assets occur. However, if more than an infrequent number of sales are made out of a portfolio, the entity needs to assess whether and how such sales are consistent with an objective of collecting contractual cash flows. If the objective of the entity's business model for managing those financial assets changes, the entity is required to reclassify financial assets. Gains and losses arising from the derecognition of financial assets measured at amortized cost are reflected under “net (loss) gain from sale of debt instruments at amortized cost” in the consolidated income statement. Financial assets at fair value through profit or loss Included in this category are those debt instruments that do not meet the conditions in “at amortized cost” above, debt instruments designated at fair value through profit or loss upon initial recognition and equity instruments at fair value through profit or loss.

Société Générale de Banque au Liban S.A.L. F.108

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2016 2 ACCOUNTING POLICIES (continued) 2.5 Summary of significant accounting policies (continued) (2) Financial instruments – classification and measurement (continued) (ii) Classification and measurement of financial investments (continued) a. Financial assets (continued) Financial assets at fair value through profit or loss (continued)

i. Debt instruments at fair value through profit or loss These financial assets are recorded in the consolidated statement of financial position at fair value. Changes in fair value and interest income are recorded under “Net gain (loss) from financial assets at fair value through profit or loss” in the consolidated income statement showing separately, those related to financial assets designated at fair value upon initial recognition from those mandatorily measured at fair value. Gains and losses arising from the derecognition of debt instruments at fair value through profit or loss are also reflected under “Net gain (loss) from financial assets at fair value through profit or loss” in the consolidated income statement showing separately, those related to financial assets designated at fair value upon initial recognition from those mandatorily measured at fair value.

ii. Equity instruments at fair value through profit or loss Investments in equity instruments are classified at fair value through profit or loss, unless the Group designates at initial recognition an investment that is not held for trading as at fair value through other comprehensive income.

These financial assets are recorded in the consolidated statement of financial position at fair value. Changes in fair value and dividend income are recorded under “Net gain (loss) from financial assets at fair value through profit or loss” in the consolidated income statement. Gains and losses arising from the derecognition of equity instruments at fair value through profit or loss are also reflected under “Net gain (loss) from financial assets at fair value through profit or loss” in the consolidated income statement. Financial assets at fair value through other comprehensive income Investments in equity instruments designated at initial recognition as not held for trading are classified at fair value through other comprehensive income. These financial assets are initially measured at fair value plus transaction costs. Subsequently, they are measured at fair value, with gains and losses arising from changes in fair value recognized in other comprehensive income and accumulated under equity. The cumulative gain or loss will not be reclassified to the consolidated income statement on disposal of the investments. Dividends on these investments are recognized under “Revenue from financial assets at fair value through other comprehensive income” in the consolidated income statement when the entity’s right to receive payment of dividend is established in accordance with IAS 18: “Revenue”, unless the dividends clearly represent a recovery of part of the cost of the investment. Balances with the Central Banks, due from banks and financial institutions, loans to banks and financial institutions, reverse repurchase agreements, amounts due from affiliated banks and financial institutions and loans and advances to customers and related parties – at amortized cost After initial measurement, “Balances with the Central Banks”, “Due from banks and financial institutions”, “Loans to banks and financial institutions”, “Reverse repurchase agreements”, “Amounts due from affiliated banks and financial institutions” and “Loans and advances to customers and to related parties” are subsequently measured at amortized cost using the effective interest rate method (EIR), less allowance for impairment. Amortized cost is calculated by taking into account any discount or premium on acquisition and fees and costs that are an integral part of the EIR. The amortization is included in “Interest and similar income” in the consolidated income statement. The losses arising from impairment are recognized in the consolidated income statement in “Net credit losses”.

Société Générale de Banque au Liban S.A.L. F.109

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2016 2 ACCOUNTING POLICIES (continued) 2.5 Summary of significant accounting policies (continued) (2) Financial instruments – classification and measurement (continued) (ii) Classification and measurement of financial investments (continued) b. Financial liabilities Liabilities are initially measured at fair value, plus particular transaction costs in the case of a financial liability not classified at fair value through profit or loss. Liabilities are subsequently measured at amortized cost or fair value. The Group classifies all financial liabilities as subsequently measured at amortized cost using the effective interest rate method, except for: - financial liabilities at fair value through profit or loss (including derivatives); - financial liabilities that arise when a transfer of a financial asset does not qualify for derecognition or when the

continuing involvement approach applies; - financial guarantee contracts and commitments to provide a loan at a below-market interest rate which after

initial recognition are subsequently measured at the higher of the amount determined in accordance with IAS 37 Provisions, Contingent Liabilities and Contingent Assets and the amount initially recognized less, when appropriate, cumulative amortization recognized in accordance with IAS 18 Revenue.

Fair value option An entity may, at initial recognition, irrevocably designate a financial liability as measured at fair value through profit or loss when: - doing so results in more relevant information, because it either eliminates or significantly reduces a

measurement or recognition inconsistency (sometimes referred to as “an accounting mismatch”) that would otherwise arise from measuring assets or liabilities or recognizing the gains and losses on them on different bases; or

- a group of financial liabilities or financial assets and financial liabilities is managed and its performance is evaluated on a fair value basis, in accordance with a documented risk management or investment strategy, and information about the group is provided internally on that basis to the entity's key management personnel.

The amount of changes in fair value of a financial liability designated at fair value through profit or loss at initial recognition that is attributable to changes in credit risk of that liability is recognized in other comprehensive income, unless such recognition would create an accounting mismatch in the consolidated income statement. Changes in fair value attributable to changes in credit risk are not reclassified to consolidated income statement. Due to the Central Banks, loans and repurchase agreements, due to banks and financial institutions, amounts due to affiliated banks and financial institutions and customers’ deposits and related parties’ deposits After initial measurement, “due to the Central Banks”, “loans and repurchase agreements”, “due to banks and financial institutions”, “amounts due to affiliated banks and financial institutions” and “customers’ and related parties’ deposits” are measured at amortized cost less amounts repaid using the effective interest rate method. Amortized cost is calculated by taking into account any discount or premium on the issue and costs that are an integral part of the effective interest rate method. c. Derivatives recorded at fair value through profit or loss The Group uses derivatives such as forward foreign exchange contracts and interest rate swaps. Derivatives are recorded at fair value and carried as assets when their fair value is positive and as liabilities when their fair value is negative. Changes in the fair value of derivatives are included in “net gain (loss) from financial assets at fair value through profit or loss” in the consolidated income statement.

Société Générale de Banque au Liban S.A.L. F.110

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2016 2 ACCOUNTING POLICIES (continued) 2.5 Summary of significant accounting policies (continued) (2) Financial instruments – classification and measurement (continued) (ii) Classification and measurement of financial investments (continued) c. Derivatives recorded at fair value through profit or loss (continued) An embedded derivative is separated from the host and accounted for as a derivative if, and only if:

(a) the hybrid contract contains a host that is not an asset within the scope of IFRS 9; (b) the economic characteristics and risks of the embedded derivative are not closely related to the

economic characteristics and risks of the host; (c) a separate instrument with the same terms as the embedded derivative would meet the definition of a

derivative; and (d) the hybrid contract is not measured at fair value with changes in fair value recognized in profit or loss.

(iii) ‘Day 1’ profit or loss When the transaction price differs from the fair value of other observable current market transactions in the same instrument or based on a valuation technique whose variables include only data from observable markets, the Group immediately recognizes the difference between the transaction price and fair value (a ‘Day 1’ profit or loss) in the consolidated income statement. In cases where fair value is determined using data which is not observable, the difference between the transaction price and model value is only recognized in the consolidated income statement when the inputs become observable, or when the instrument is derecognized. (iv) Reclassification of financial assets The Group reclassifies financial assets if the objective of the business model for managing those financial assets changes. Such changes are expected to be very infrequent. Such changes are determined by the Group’s senior management as a result of external or internal changes when significant to the Group’s operations and demonstrable to external parties. If financial assets are reclassified, the reclassification is applied prospectively from the reclassification date, which is the first day of the first reporting period following the change in business model that results in the reclassification of financial assets. Any previously recognized gains, losses or interest are not restated. If a financial asset is reclassified so that it is measured at fair value, its fair value is determined at the reclassification date. Any gain or loss arising from a difference between the previous carrying amount and fair value is recognized in profit or loss. If a financial asset is reclassified so that it is measured at amortized cost, its fair value at the reclassification date becomes its new carrying amount. (3) Derecognition of financial assets and financial liabilities (i) Financial assets A financial asset (or, where applicable a part of a financial asset or part of a group of similar financial assets) is derecognized when: • the rights to receive cash flows from the asset have expired; • the Group has transferred its rights to receive cash flows from the asset or has assumed an obligation to

pay the received cash flows in full without material delay to a third party under a ‘pass-through’ arrangement; and either: (a) the Group has transferred substantially all the risks and rewards of the asset, or (b) the Group has neither transferred nor retained substantially all the risks and rewards of the asset, but

has transferred control of the asset. When the Group has transferred its rights to receive cash flows from an asset or has entered into a pass-through arrangement, and has neither transferred nor retained substantially all the risks and rewards of the asset nor transferred control of the asset, the asset is recognized to the extent of the Group’s continuing involvement in the asset. In that case, the Group also recognizes an associated liability. The transferred asset and the associated liability are measured on a basis that reflects rights and obligations that the Group has retained.

Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the Group could be required to repay.

Société Générale de Banque au Liban S.A.L. F.111

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2016 2 ACCOUNTING POLICIES (continued) 2.5 Summary of significant accounting policies (continued) (3) Derecognition of financial assets and financial liabilities (continued) (ii) Financial liabilities A financial liability is derecognized when the obligation under the liability is discharged or cancelled or expires. Where an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability. The difference between the carrying value of the original financial liability and the consideration paid is recognized in the consolidated income statement. (4) Repurchase and reverse repurchase agreements Securities sold under agreements to repurchase at a specified future date are not derecognized from the consolidated statement of financial position as the Group retains substantially all the risks and rewards of ownership. The corresponding cash received is recognized in the consolidated statement of financial position as an asset with a corresponding obligation to return it, including accrued interest as a liability within “loans and repurchase agreements”, reflecting the transaction’s economic substance as a loan to the Group. The difference between the sale and repurchase prices is treated as interest expense and is accrued over the life of agreement using the effective interest rate. When the counterparty has the right to sell or repledge the securities, the Group reclassifies those securities in its consolidated statement of financial position to “Financial assets pledged as collateral”. Conversely, securities purchased under agreements to resell at a specified future date are not recognized in the consolidated statement of financial position. The consideration paid, including accrued interest, is recorded in the consolidated statement of financial position within “Reverse repurchase agreements”, reflecting the transaction’s economic substance as a loan by the Group. The difference between the purchase and resale prices is recorded in “Net interest income” and is accrued over the life of the agreement using the effective interest rate. If securities purchased under agreement to resell are subsequently sold to third parties, the obligation to return the securities is recorded as a short sale within “Financial liabilities at fair value through profit or loss” and measured at fair value with any gains or losses included in “net gain from financial assets at fair value through profit or loss” in the consolidated income statement. (5) Securities lending and borrowing Securities lending and borrowing transactions are usually collateralized by securities or cash. The transfer of the securities to counterparties is only reflected on the consolidated statement of financial position if the risks and rewards of ownership are also transferred. Cash advanced or received as collateral is recorded as an asset or liability. Securities borrowed are not recognized on the consolidated statement of financial position, unless they are then sold to third parties, in which case the obligation to return the securities is recorded as a trading liability and measured at fair value with any gains or losses included in “Net trading income”. (6) Determination of fair value The Group measures financial instruments such as derivatives, and non-financial assets such as investment properties, at fair value at each statement of financial position date. Also, fair values of financial instruments measured at amortized cost are disclosed in the notes. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:

• In the principal market for the asset or liability, or • In the absence of a principal market, in the most advantageous market for the asset or liability

Société Générale de Banque au Liban S.A.L. F.112

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2016 2 ACCOUNTING POLICIES (continued) 2.5 Summary of significant accounting policies (continued) (6) Determination of fair value (continued) The principal or the most advantageous market must be accessible by the Group. The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest. A fair value measurement of a non-financial asset takes into account a market participant's ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use. The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs. All assets and liabilities for which fair value is measured or disclosed in the consolidated financial statements are categorized within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:

- Level 1 — Quoted (unadjusted) market prices in active markets for identical assets or liabilities - Level 2 — Valuation techniques for which the lowest level input that is significant to the fair value

measurement is directly or indirectly observable - Level 3 — Valuation techniques for which the lowest level input that is significant to the fair value

measurement is unobservable For assets and liabilities that are recognized in the consolidated financial statements on a recurring basis, the Group determines whether transfers have occurred between Levels in the hierarchy by re-assessing categorization (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period. The Group’s management determines the policies and procedures for both recurring fair value measurement and for non-recurring measurement. At each reporting date, the management analyses the movements in the values of assets and liabilities which are required to be re-measured or re-assessed as per the Group’s accounting policies. For this analysis, the management verifies the major inputs applied in the latest valuation by agreeing the information in the valuation computation to contracts and other relevant documents. For the purpose of fair value disclosures, the Group has determined classes of assets and liabilities on the basis of the nature, characteristics and risks of the asset or liability and the level of the fair value hierarchy as explained above. (7) Impairment of financial assets The Group assesses at each consolidated statement of financial position date whether there is any objective evidence that a financial asset or a group of financial assets is impaired. A financial asset or a group of financial assets is deemed to be impaired if, and only if, there is objective evidence of impairment as a result of one or more events that have occurred after the initial recognition of the asset (an incurred ‘loss event’) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or the group of financial assets that can be reliably estimated. Evidence of impairment may include indications that the borrower or a group of borrowers is experiencing significant financial difficulty, the probability that they will enter bankruptcy or other financial reorganization, default or delinquency in interest or principal payments and where observable data indicates that there is a measurable decrease in the estimated future cash flows, such as changes in arrears or economic conditions that correlate with defaults.

Société Générale de Banque au Liban S.A.L. F.113

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2016 2 ACCOUNTING POLICIES (continued) 2.5 Summary of significant accounting policies (continued) (7) Impairment of financial assets (continued) (i) Financial assets carried at amortized cost For financial assets carried at amortized cost, the Group first assesses individually whether objective evidence of impairment exists for financial assets that are individually significant, or collectively for financial assets that are not individually significant. If the Group determines that no objective evidence of impairment exists for an individually assessed financial asset, it includes the asset in a group of financial assets with similar credit risk characteristics and collectively assesses them for impairment. Assets that are individually assessed for impairment and for which an impairment loss is, or continues to be, recognized are not included in a collective assessment of impairment. If there is objective evidence that an impairment loss has been incurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future expected credit losses that have not yet been incurred). The carrying amount of the asset is reduced through the use of an allowance account and the amount of the loss is recognized in the consolidated income statement. Loans together with the associated allowance are written off when there is no realistic prospect of future recovery and all collateral has been realized or has been transferred to the Group. If, in a subsequent year, the amount of the estimated impairment loss increases or decreases because of an event occurring after the impairment was recognized, the previously recognized impairment loss is increased or reduced by adjusting the allowance account. If a future write-off is later recovered, the recovery is credited to the “Net credit losses” in the consolidated income statement. The present value of the estimated future cash flows is discounted at the financial asset’s original effective interest rate. If a loan has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate. The calculation of the present value of the estimated future cash flows of a collateralized financial asset reflects the cash flows that may result from foreclosure less costs of obtaining and selling the collateral, whether or not the foreclosure is probable. For the purpose of a collective evaluation of impairment, financial assets are grouped on the basis of the Group’s internal credit grading system, that considers credit risk characteristics such as asset type, industry, geographical location, collateral type, past-due status and other relevant factors. Future cash flows on a group of financial assets that are collectively evaluated for impairment are estimated on the basis of historical loss experience for assets with credit risk characteristics similar to those in the group. Historical loss experience is adjusted on the basis of current observable data to reflect the effects of current conditions on which the historical loss experience is based and to remove the effects of conditions in the historical period that do not exist currently. Estimates of changes in future cash flows reflect, and are directionally consistent with, changes in related observable data from year to year (such as changes in unemployment rates, property prices, commodity prices, payment status, or other factors that are indicative of incurred losses in the group and their magnitude). The methodology and assumptions used for estimating future cash flows are reviewed regularly to reduce any differences between loss estimates and actual loss experienced. (ii) Renegotiated loans Where possible, the Group seeks to restructure loans rather than to take possession of collateral. This may involve extending the payment arrangements and the agreement of new loan conditions. Once the terms have been renegotiated any impairment is measured using the original effective interest rate as calculated before the modification of terms and the loan is no longer considered past due. Management continuously reviews renegotiated loans to ensure that all criteria are met and that future payments are likely to occur. The loans continue to be subject to an individual or collective impairment assessment, calculated using the loan’s original effective interest rate.

Société Générale de Banque au Liban S.A.L. F.114

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2016 2 ACCOUNTING POLICIES (continued) 2.5 Summary of significant accounting policies (continued) (7) Impairment of financial assets (continued) (iii) Collateral repossessed The Group’s policy is to determine whether a repossessed asset is best used for its internal operations or should be sold. Assets determined to be useful for the internal operations are transferred to their relevant asset category at the lower of their repossessed value or the carrying value of the original secured asset. Assets that are determined better to be sold, are immediately transferred to assets held for sale at their fair value at the repossessed date in line with the Group’s policy. (8) Hedge accounting The Group makes use of derivative instruments to manage exposures to interest rate, foreign currency and credit risks, including exposures arising from highly probable forecast transactions and firm commitments. In order to manage particular risks, the Group applies hedge accounting for transactions which meet the specified criteria. At inception of the hedge relationship, the Group formally documents the relationship between the hedged item and the hedging instrument, including the nature of the risk, the objective and strategy for undertaking the hedge and the method that will be used to assess the effectiveness of the hedging relationship. At each hedge effectiveness assessment date, a hedge relationship must be expected to be highly effective on a prospective basis and demonstrate that it was effective (retrospective effectiveness) for the designated period in order to qualify for hedge accounting. A formal assessment is undertaken to ensure the hedging instrument is expected to be highly effective in offsetting the designated risk in the hedged item both at inception and at each quarter end on an ongoing basis. A hedge is expected to be highly effective if the changes in fair value or cash flows attributable to the hedged risk during the period for which the hedge is designated are expected to offset in a range of 80% to 125% and are expected to achieve such offset in future periods. Hedge ineffectiveness is recognized in the consolidated income statement in “Net gain (loss) from financial assets at fair value through profit or loss”. For situations where that hedged item is a forecast transaction, the Group assesses whether the transaction is highly probable and presents an exposure to variations in cash flows that could ultimately affect the consolidated income statement. (i) Fair value hedges For designated and qualifying fair value hedges, the cumulative change in the fair value of a hedging derivative is recognized in the consolidated income statement in “Net gain (loss) from financial instruments at fair value through profit or loss”. Meanwhile, the cumulative change in the fair value of the hedged item attributable to the risk hedged is recorded as part of the carrying value of the hedged item in the consolidated statement of financial position and is also recognized in “Net gain from financial assets at fair value through profit or loss” in the consolidated income statement. If the hedging instrument expires or is sold, terminated or exercised, or where the hedge no longer meets the criteria for hedge accounting, the hedge relationship is discontinued prospectively. For hedged items recorded at amortized cost, the difference between the carrying value of the hedged item on termination and the face value is amortized over the remaining term of the original hedge using the recalculated effective interest rate (EIR). If the hedged item is derecognized, the unamortized fair value adjustment is recognized immediately in the consolidated income statement. (ii) Cash flow hedges For designated and qualifying cash flow hedges, the effective portion of the gain or loss on the hedging instrument is initially recognized directly in equity in the “Cash flow hedge reserve”. The ineffective portion of the gain or loss on the hedging instrument is recognized immediately in the consolidated income statement. When the hedged cash flow affects the consolidated income statement, the gain or loss on the hedging instrument is recorded in the corresponding income or expense line of the consolidated income statement. When the forecast transaction subsequently results in the recognition of a non-financial asset or a non-financial liability, the gains and losses previously recognized in the other comprehensive income are removed from the reserve and included in the initial cost of the asset or liability.

Société Générale de Banque au Liban S.A.L. F.115

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2016 2 ACCOUNTING POLICIES (continued) 2.5 Summary of significant accounting policies (continued) (8) Hedge accounting (continued) (ii) Cash flow hedges (continued) When a hedging instrument expires, or is sold, terminated, exercised, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss existing in other comprehensive income at that time remains in other comprehensive income and is recognized when the hedged forecast transaction is ultimately recognized in the consolidated income statement. When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was reported in other comprehensive income is immediately transferred to the consolidated income statement. (iii) Hedge of a net investment Hedges of net investments in a foreign operation, including a hedge of a monetary item that is accounted for as part of the net investment, are accounted for in a way similar to cash flow hedges. Gains or losses on the hedging instrument relating to the effective portion of the hedge are recognized directly in other comprehensive income while any gains or losses relating to the ineffective portion are recognized in the consolidated income statement. On disposal of the foreign operation, the cumulative value of any such gains or losses recognized directly in other comprehensive income is transferred to the consolidated income statement. (9) Offsetting financial instruments Financial assets and financial liabilities are offset and the net amount reported in the consolidated statement of financial position if, and only if, there is a currently enforceable legal right to offset the recognized amounts and there is an intention to settle on a net basis, or to realize the asset and settle the liability simultaneously. This is not generally the case with master netting agreements. Therefore, the related assets and liabilities are presented gross in the consolidated statement of financial position. (10) Leasing The determination of whether an arrangement is a lease, or it contains a lease, is based on the substance of the arrangement and requires an assessment of whether the fulfillment of the arrangement is dependent on the use of a specific asset or assets and the arrangement conveys a right to use the asset. Group as a lessee Leases which do not transfer to the Group substantially all the risks and benefits incidental to ownership of the leased items are operating leases. Operating lease payments are recognized as an expense in the consolidated income statement on a straight line basis over the lease term. Contingent rents payable are recognized as an expense in the period in which they are incurred. Group as a lessor Leases where the Group does not transfer substantially all the risk and benefits of ownership of the asset are classified as operating leases. Initial direct costs incurred in negotiating operating leases are added to the carrying amount of the leased asset and recognized over the lease term on the same basis as rental income. Contingent rents are recognized as revenue in the period in which they are earned. (11) Recognition of income and expense Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured. The following specific recognition criteria must also be met before revenue is recognized. (i) Interest and similar income and expenses For all financial instruments measured at amortized cost, interest income or expense is recorded using the effective interest rate, which is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial instrument or a shorter period, where appropriate, to the net carrying amount of the financial asset or financial liability. The calculation takes into account all contractual terms of the financial instrument and includes any fees or incremental costs that are directly attributable to the instrument and are an integral part of the effective interest rate, but not future credit losses.

Société Générale de Banque au Liban S.A.L. F.116

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2016 2 ACCOUNTING POLICIES (continued) 2.5 Summary of significant accounting policies (continued) (11) Recognition of income and expense (continued) (i) Interest and similar income and expenses (continued) The carrying amount of the financial asset or financial liability is adjusted if the Group revises its estimates of payments or receipts. The adjusted carrying amount is calculated based on the original effective interest rate and the change in the carrying amount is recorded as “Interest and similar income” for financial assets and “Interest and similar expenses” for financial liabilities. Once the recorded value of a financial asset or a group of similar financial assets has been reduced due to an impairment loss, interest income continues to be recognized using the rate of interest used to discount the future cash flows for the purpose of measuring the impairment loss. (ii) Fee and commission income The Group earns fee and commission income from a diverse range of services it provides to its customers. Fee income can be divided into the following two categories: Fee income earned from services that are provided over a certain period of time Fees earned for the provision of services over a period of time are accrued over that period. These fees include commission income and asset management, custody and other management and advisory fees. Loan commitment fees for loans that are likely to be drawn down and other credit related fees are deferred (together with any incremental costs) and recognized as an adjustment to the effective interest rate on the loan. When it is unlikely that a loan be drawn down, the loan commitment fees are recognized as revenues on expiry. Fee income from providing transaction services Fees arising from negotiating or participating in the negotiation of a transaction for a third party, such as the arrangement of the acquisition of shares or other securities or the purchase or sale of businesses, are recognized on completion of the underlying transaction. Fees or components of fees that are linked to a certain performance are recognized after fulfilling the corresponding criteria. Fee and commission income from providing insurance services Insurance and investment contract policyholders are charged for policy administration services, investment management services, surrenders and other contract fees. These fees are recognized as revenue over the period in which the related services are performed. If the fees are for services provided in future periods, then they are deferred and recognized over those future periods. (iii) Dividend income Dividend income is recognized when the Group’s right to receive the payment is established. (iv) Net gain (loss) on financial instruments at fair value through profit or loss Results arising from financial instruments at fair value through profit or loss, include all gains and losses from changes in fair value and related income or expense and dividends for financial assets at fair value through profit or loss. This includes any ineffectiveness recorded in hedging transactions. (12) Cash and cash equivalents Cash and cash equivalents as referred to in the consolidated statement of cash flows comprise balances with original maturities of a period of three months or less including cash and balances with the Central Banks, deposits with banks and financial institutions, reverse repurchase agreements, amounts due from affiliated banks and financial institutions, due to the Central Banks, loans and repurchase agreements, due to banks and financial institutions and amounts due to affiliated banks and financial institutions.

Société Générale de Banque au Liban S.A.L. F.117

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2016 2 ACCOUNTING POLICIES (continued) 2.5 Summary of significant accounting policies (continued) (13) Investments in an associate An associate is an entity over which the Group has significant influence. Significant influence is the power to participate in the financial and operating policy decisions of the investee, but is not control or joint control over those policies. The considerations made in determining significant influence are similar to those necessary to determine control over subsidiaries. The Group’s investments in its associate is accounted for using the equity method. Under the equity method, the investment in an associate is initially recognized at cost. The carrying amount of the investment is adjusted to recognize changes in the Group’s share of net assets of the associate since the acquisition date. Goodwill relating to the associate is included in the carrying amount of the investment and is not tested for impairment individually. The statement of profit or loss reflects the Group’s share of the results of operations of the associate. Any change in OCI of this investee is presented as part of the Group’s OCI. In addition, when there has been a change recognized directly in the equity of the associate, the Group recognizes its share of any changes, when applicable, in the statement of changes in equity. Unrealized gains and losses resulting from transactions between the Group and the associate are eliminated to the extent of the interest in the associate. The financial statements of the associate are prepared for the same reporting period as the Group. When necessary, adjustments are made to bring the accounting policies in line with those of the Group. After application of the equity method, the Group determines whether it is necessary to recognize an impairment loss on its investment in its associate. At each reporting date, the Group determines whether there is objective evidence that the investment in the associate is impaired. If there is such evidence, the Group calculates the amount of impairment as the difference between the recoverable amount of the associate and its carrying value, and then recognizes the loss in the statement of profit or loss. (14) Property and equipment Property and equipment are initially recorded at cost less accumulated depreciation and any impairment in value. Buildings acquired prior to 1 January 1994 were restated for the changes in the general purchasing power of Lebanese Lira after the approval of the Central Bank of Lebanon. Net surplus arising on restatement is credited to “Revaluation reserve of property”. Changes in the expected useful life are accounted for by changing the depreciation period or method, as appropriate, and treated as changes in accounting estimates. Depreciation is calculated using the straight line method to write-down the cost of property and equipment to their residual values over their estimated useful lives. Land is not depreciated. The estimated useful lives are as follows: • Buildings 50 years • Furniture and fixtures 5 to 12.5 years • Installations 16.67 years • Vehicles 10 years Property and equipment is derecognized on disposal or when no future economic benefits are expected from its use. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is recognized in “Net profit from sale and write-off of other assets” in the consolidated income statement in the year the asset is derecognized. The assets’ residual lives and methods of depreciation are reviewed at each financial year end and adjusted prospectively if applicable.

Société Générale de Banque au Liban S.A.L. F.118

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2016

2 ACCOUNTING POLICIES (continued) 2.5 Summary of significant accounting policies (continued) (15) Business combinations and goodwill Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the aggregate of the consideration transferred, measured at acquisition date fair value and the amount of any non-controlling interest in the acquiree. For each business combination, the Group elects whether to measure the non controlling interest in the acquiree at fair value or at the proportionate share of the acquiree’s identifiable net assets. Acquisition costs incurred are expensed and included in administrative expenses. When the Group acquires a business, it assesses the financial assets and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic circumstances and pertinent conditions as at the acquisition date. This includes the separation of embedded derivatives in host contracts by the acquiree. If the business combination is achieved in stages, the previously held equity interest in the acquiree is remeasured at fair value at the acquisition date through the consolidated income statement. Any contingent consideration to be transferred by the acquirer will be recognized at fair value at the acquisition date. Subsequent changes to the fair value of the contingent consideration which is deemed to be an asset or liability will be recognized either in profit or loss or as a change to other comprehensive income. If the contingent consideration is classified as equity, it should not be remeasured until it is finally settled within equity. Goodwill is initially measured at cost being the excess of the aggregate of the consideration transferred and the amount recognized for non-controlling interests, and any previous interest held, over the net identifiable assets acquired and liabilities assumed. If the fair value of the net assets acquired is in excess of the aggregate consideration transferred, the Group re-assesses whether it has correctly identified all of the assets acquired and all of the liabilities assumed and reviews the procedures used to measure the amounts to be recognized at the acquisition date. If the re-assessment still results in an excess of the fair value of net assets acquired over the aggregate consideration transferred, then the gain is recognized in profit or loss. Following initial recognition, goodwill is measured at cost less any accumulated impairment losses. Goodwill is reviewed for impairment annually, or more frequently, if events or changes in circumstances indicate that the carrying value may be impaired. For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Bank’s cash– generating units (CGUs) or group of CGUs, which are expected to benefit from the synergies of the combination, irrespective of whether other assets or liabilities of the acquiree are assigned to those units. Each unit to which the goodwill is allocated represents the lowest level within the Bank at which the goodwill is monitored for internal management purposes, and is not larger than an operating segment in accordance with IFRS 8 Operating Segments. Where goodwill forms part of a cash-generating unit and part of the operation within that unit is disposed of, the goodwill associated with the operation disposed of is included in the carrying amount of the operation when determining the gain or loss on disposal of the operation. Goodwill disposed of in this circumstance is measured based on the relative values of the operation disposed of and the portion of the cash-generating unit retained. (16) Intangible assets An intangible asset is recognized only when its cost can be measured reliably and it is probable that the expected future economic benefits that are attributable to it will flow to the Group. Intangible assets acquired separately are measured on initial recognition at cost. The cost of intangible assets acquired in a business combination is their fair value as at the date of acquisition. Following initial recognition, intangible assets are carried at cost less any accumulated amortization and any accumulated impairment losses. The useful lives of intangible assets are assessed to be either finite or indefinite. Intangible assets with finite lives are amortized over the useful economic life. The amortization period and the amortization method for an intangible asset with a finite useful life are reviewed at least at each financial year-end. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset are accounted for by changing the amortization period or method, as appropriate, and treated as changes in accounting estimates. The amortization expense on intangible assets with finite lives is recognized in the consolidated income statement in the expense category consistent with the function of the intangible asset.

Société Générale de Banque au Liban S.A.L. F.119

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2016

2 ACCOUNTING POLICIES (continued) 2.5 Summary of significant accounting policies (continued) (16) Intangible assets (continued) Amortization is calculated using the straight line method to write down the cost of intangible assets to their residual values. The estimated useful lives are as follows: Software 5 years Key money 5 years Customer relationship – core deposits 12.5 years Customer relationship – loans and advances 12.5 years Intangible assets with indefinite useful lives are not amortized, but are tested for impairment annually, either individually or at the cash-generating unit level. The assessment of indefinite life is reviewed annually to determine whether the indefinite life continues to be supportable. If not, the change in useful life from indefinite to finite is made on a prospective basis. Gains or losses arising from de-recognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognized in the consolidated income statement when the asset is derecognized. The Group does not have intangible assets with indefinite economic life. (17) Investment properties Investment properties are measured initially at cost, including transaction costs. Subsequent to initial recognition, investment properties are stated at fair value, which reflects market conditions at the reporting date. Gains or losses arising from changes in the fair values of investment properties are included in profit or loss in the period in which they arise, including the corresponding tax effect. Fair values are determined based on the evaluation performed by independent qualified valuers on the basis of current market values and if any, by reference to sale agreements entered into by the Group for the disposal of the property subsequent to year end. Investment properties are derecognized either when they have been disposed of or when they are permanently withdrawn from use and no future economic benefit is expected from their disposal. The difference between the net disposal proceeds and the carrying amount of the asset is recognized in the consolidated income statement in the period of derecognition. Transfers are made to (or from) investment property only when there is a change in use. For a transfer from investment property to owner-occupied property, the deemed cost for subsequent accounting is the fair value at the date of change in use. If owner-occupied property becomes an investment property, the Group accounts for such property in accordance with the policy stated under property and equipment up to the date of change in use. (18) Non-current assets held for sale Non-current assets classified as held for sale are measured at the lower of their carrying amount and fair value less costs to sell. Non-current assets are classified as held for sale if their carrying amounts will be recovered principally through a sale transaction rather than through continuing use. This condition is regarded as met only when the sale is highly probable and the asset is available for immediate sale in its present condition, management has committed to the sale, and the sale is expected to have been completed within one year from the date of classification. A discontinued operation is a component of an entity that either has been disposed of, or is classified as held for sale, and:

- Represents a separate major line of business or geographical area of operations - Is part of a single coordinated plan to dispose of a separate major line of business or geographical area

of operations Or

- Is a subsidiary acquired exclusively with a view to resale In the consolidated statement of comprehensive income of the reporting period, and of the comparable period of the previous year, income and expenses from discontinued operations are reported separately from income and expenses from continuing operations, down to the level of profit after taxes, even when the Group retains a non-controlling interest in the subsidiary after the sale.

Société Générale de Banque au Liban S.A.L. F.120

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2016 2 ACCOUNTING POLICIES (continued) 2.5 Summary of significant accounting policies (continued) (19) Impairment of non-financial assets The Group assesses at each reporting date whether there is an indication that an asset may be impaired. If any indication exists, or when annual impairment testing for an asset is required, the Group estimates the asset’s recoverable amount. An asset’s recoverable amount is the higher of an asset’s or cash-generating unit’s (CGU) fair value less costs to sell and its value in use. Where the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs to sell, an appropriate valuation model is used. These calculations are corroborated by valuation multiples, quoted share prices for publicly traded subsidiaries or other available fair value indicators. For assets excluding goodwill, an assessment is made at each reporting date as to whether there is any indication that previously recognized impairment losses may no longer exist or may have decreased. If such indication exists, the Group estimates the asset’s or CGU’s recoverable amount. A previously recognized impairment loss is reversed only if there has been a change in the assumptions used to determine the asset’s recoverable amount since the last impairment loss was recognized. The reversal is limited so that the carrying amount of the asset does not exceed its recoverable amount, nor exceeds the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognized for the asset in prior years. Such reversal is recognized in the consolidated income statement. Impairment losses relating to goodwill cannot be reversed in future periods. (20) Financial guarantees In the ordinary course of business, the Group gives financial guarantees, consisting of letters of credit, guarantees and acceptances. Financial guarantees are initially recognized in the consolidated financial statements (within “Other liabilities”) at fair value, being the premium received. Subsequent to initial recognition, the Group’s liability under each guarantee is measured at the higher of the amount initially recognized less, when appropriate, cumulative amortization recognized in the consolidated income statement, and the best estimate of expenditure required to settle any financial obligation arising as a result of the guarantee. Any increase in the liability relating to financial guarantees is recorded in the consolidated income statement in “Net credit losses”. The premium received is recognized in the consolidated income statement in “Net fees and commission income” on a straight line basis over the life of the guarantee. (21) Tax Taxes are provided for in accordance with regulations and laws that are effective in the countries where the Group operates. (i) Current tax Current tax assets and liabilities for the current and prior years are measured at the amount expected to be recovered from or paid to the taxation authorities. The taxation rates and tax law used to compute the amount are those that are enacted or substantively enacted by the statement of financial position date. The Bank’s profits from operation in Lebanon are subject to a tax rate of 15% after deducting the 5% tax on interest received according to Law no. 497/2003 dated 30 January 2003.

Société Générale de Banque au Liban S.A.L. F.121

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2016 2 ACCOUNTING POLICIES (continued) 2.5 Summary of significant accounting policies (continued) (21) Tax (continued) (ii) Deferred tax Deferred tax is provided on temporary differences at the statement of financial position date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. Deferred tax liabilities are recognized for all taxable temporary differences, except: • Where the deferred tax liability arises from the initial recognition of goodwill or of an asset or liability in a

transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss;

• In respect of taxable temporary differences associated with investments in subsidiaries, where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.

Deferred tax assets are recognized for all deductible temporary differences, carry forward of unused tax credits and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry forward of unused tax credits and unused tax losses can be utilized except: • Where the deferred tax asset relating to the deductible temporary difference arises from the initial recognition

of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss;

• In respect of deductible temporary differences associated with investments in subsidiaries, deferred tax assets are recognized only to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilized.

The carrying amount of deferred tax assets is reviewed at each statement of financial position date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilized. Unrecognized deferred tax assets are reassessed at each statement of financial position date and are recognized to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered. Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realized or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the statement of financial position date. Current tax and deferred tax relating to items recognized directly in other comprehensive income are also recognized in other comprehensive income and not in the consolidated income statement. Deferred tax assets and deferred tax liabilities are offset if a legally enforceable right exists to net off current tax assets against current tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority. (22) Provision Provision are recognized when the Group has a present obligation (legal or constructive) as a result of a past event, and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.

Société Générale de Banque au Liban S.A.L. F.122

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2016 2 ACCOUNTING POLICIES (continued) 2.5 Summary of significant accounting policies (continued) (23) Employees’ end of service benefits The Bank’s contributions for end of service benefits paid and due to the National Social Security Fund (NSSF) are calculated on the basis of 8.5% of staff salaries. The final end of service benefits due to employees by the NSSF (a defined contribution plan) after completing 20 years of service, at the retirement age, or if the employee permanently leaves employment, are calculated based on the last month salary multiplied by the number of years of service as stipulated in the National Social Security Law. The Group is liable to pay to the NSSF the difference between the contributions paid and the final end of service benefits due to employees by the NSSF. End-of-service benefits for employees at foreign subsidiaries are accrued for in accordance with the laws and regulations of the respective countries in which the subsidiaries are located. Contributions are recorded as an expense under “personnel expenses”. (24) Assets held in custody and under administration The Group provides custody and administration services that result in the holding or investing of assets on behalf of its clients. Assets under custody or under administration are not treated as assets of the Group and accordingly are recorded as off statement of financial position items. (25) Dividends on common and preferred shares Dividends on common and preferred shares are recognized as a liability and deducted from equity when they are approved by the Group’s shareholders. Interim dividends are deducted from equity when they are declared and no longer at the discretion of the Group. Dividends for the year that are approved after the statement of financial position date are disclosed as an event after the consolidated statement of financial position date. (26) Customer’s acceptances Customer’s acceptances represent term documentary credits which the Group has committed to settle on behalf of its clients against commitments by those clients (acceptances). The commitments resulting from these acceptances are stated as a liability in the consolidated statement of financial position for the same amount. (27) Equity reserves The reserves recorded in equity (other comprehensive income) on the Group’s consolidated statement of financial position include: “Cumulative change in fair value of financial instruments at fair value through other comprehensive income” reserve which comprises changes in fair value of equity instruments at fair value through other comprehensive income. “Distributable and non-distributable reserve” which include transfers from retained earnings in accordance with regulatory requirements. “Revaluation reserve of property” which comprises the revaluation surplus relating to property.

Société Générale de Banque au Liban S.A.L. F.123

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2016 3 BUSINESS COMBINATIONS During 2016, the Bank acquired the total shares and the amounts due from the former shareholders of Fonciere 415 Saifi SAL for LL 151,400 million after obtaining the approval of the Central Bank of Lebanon on 30 November 2016. This company owns a plot of land where the Bank’s new headquarters will be constructed. Assets acquired and liabilities assumed The fair values of the identifiable assets and liabilities of Fonciere 415 Saifi SAL as at the date of acquisition were: Fair value

recognized on acquisition

LL million Assets Cash and bank balances 20 Property and equipment (note 26) 151,492 Other assets 138 ___________ 151,650 ___________ Liabilities Other liabilities 250 ___________ Total identifiable net assets at fair value 151,400 ___________ Purchase consideration transferred 151,400 ___________ LL million Cash flow on acquisition Net cash acquired from the acquisition 20 Cash paid (151,400) _______________ Net cash flow on acquisition (151,380) _______________ 4 MATERIAL PARTLY-OWNED SUBSIDIARIES Financial information of subsidiaries that have material non-controlling interests are provided below: Proportion of equity interests held by non-controlling interests: 2016 2015 Name Country of

incorporation % %

Sogecap Liban SAL Lebanon 25.00 25.00 Fidus SAL Lebanon 51.00 51.00 Société Générale de Banque – Jordanie (SGBJ) Jordan 12.33 12.33

Société Générale de Banque au Liban S.A.L. F.124

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2016 4 MATERIAL PARTLY-OWNED SUBSIDIARIES (continued) The summarized financial information of these subsidiaries are provided below. This information is based on amounts before inter-company eliminations: Summarized statements of profit and loss for 2016:

Sogecap Liban

SAL Fidus SAL

Société Générale de

Banque - Jordanie

LL million

LL million LL million

Net interest income 9,234 3,655 43,328 Net fee and commission income (expense) (3,383) 31,293 8,370 Net gain (loss) from financial assets at fair value through profit or loss

1,127 (13) 1,837

Revenue from financial assets at fair value through other comprehensive income - - 40 Net gain from sale of debt instruments at amortized cost - - 6,653 Income from insurance activities 24,223 - - Other operating income 93 1,354 1,370 Net credit losses - (283) (954) Operating expenses (16,524) (12,206) (25,442) Income tax expense (450) (3,554) (12,014) ________ _________ _________ Profit for the year 14,320 20,246 23,188 ________ _________ _________ Attributable to non-controlling interests 3,580 10,325 2,859 ________ _________ _________ Dividends paid to non-controlling interest 2,261 - 1,305 ________ _________ _________ Summarized statements of profit and loss for 2015:

Sogecap Liban

SAL Fidus SAL

Société Générale de

Banque - Jordanie

LL million LL million LL million Net interest income 8,276 2,903 37,479 Net fee and commission income (expense) (2,798) 12,190 6,456 Net gain (loss) from financial assets at fair value through profit or loss

(665) (9) 6,603

Revenue from financial assets at fair value through other comprehensive income - - 36 Net gain from sale of debt instruments at amortized cost - - 7,043 Income from insurance activities 21,524 - - Other operating income 9 92 469 Net credit losses - (200) (1,942) Operating expenses (11,569) (12,060) (23,398) Income tax expense (421) (443) (11,462) ________ _________ _________ Profit for the year 14,356 2,473 21,284 ________ _________ _________ Attributable to non-controlling interests 3,589 1,261 2,624 ________ _________ _________ Dividends paid to non-controlling interest 2,073 - 1,049 ________ _________ _________

Société Générale de Banque au Liban S.A.L. F.125

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2016 4 MATERIAL PARTLY-OWNED SUBSIDIARIES (continued) Summarized statements of financial position as at 31 December 2016:

Sogecap

Liban SAL Fidus SAL

Société Générale de Banque –

Jordanie LL million LL million LL million Cash and balances with the Central Banks 4 909 306,021 Due from banks and financial institutions - 91,327 89,397 Amounts due from affiliated banks and financial institutions 190,142 66,048 149,457 Financial assets at fair value through profit or loss 20,379 300 - Loans and advances at amortized cost - 130,248 1,210,961 Financial assets at amortized cost 1,475 - 677,304 Financial assets at amortized cost pledged as collateral - - 271,431 Financial assets at fair value through other comprehensive income - 330 1,017 Property and equipment 1,369 4,805 47,481 Intangible assets - - 2,880 Non-current assets held for sale - - 6,243 Other assets 2,048 651 6,716 Due to the Central Banks - - (25,737) Due to banks and financial institutions - (109,650) (105,228) Amounts due to affiliated banks and financial institutions - (8,788) (511) Deposits at amortized cost (132,541) (117,879) (2,325,789) Other liabilities (30,205) (23,898) (28,116) _________ _________ _________ Total equity 52,671 34,403 283,527 _________ _________ _________ Attributable to non-controlling interests 13,168 17,546 34,948 _________ _________ _________ Summarized statements of financial position as at 31 December 2015:

Sogecap Liban SAL Fidus SAL

Société Générale de Banque –

Jordanie LL million LL million LL million Cash and balances with the Central Banks 6 52 573,015 Due from banks and financial institutions - 117,741 67,954 Amounts due from affiliated banks and financial institutions 117,649 14,923 46,407 Financial assets at fair value through profit or loss 18,545 315 68,551 Loans and advances at amortized cost - 254,418 918,076 Financial assets at amortized cost 54,209 - 591,598 Financial assets at amortized cost pledged as collateral - - 240,069 Financial assets at fair value through other comprehensive income - 338 532 Property and equipment 1,427 4,657 48,744 Intangible assets - - 1,988 Non-current assets held for sale - - 6,828 Other assets 2,058 1,173 7,111 Due to the Central Banks - (543) (30,860) Due to banks and financial institutions - (98,146) (62,913) Amounts due to affiliated banks and financial institutions - (73,382) (12,524) Deposits at amortized cost (122,189) (200,661) (2,171,131) Other liabilities (24,309) (6,729) (22,394) _________ _________ _________ Total equity 47,396 14,156 271,051 _________ _________ _________ Attributable to non-controlling interests 11,849 7,220 33,421 _________ _________ _________

Société Générale de Banque au Liban S.A.L. F.126

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2016 4 MATERIAL PARTLY-OWNED SUBSIDIARIES (continued) Summarized cash flow information for the year ended 31 December 2016:

Sogecap Liban SAL Fidus SAL

Société Générale de

Banque – Jordanie

LL million LL million LL million Operating 20,421 79,736 (120,090) Investing 58,803 (537) (185,446) Financing (9,045) (10,753) (18,163) _________ _________ _________ Net increase (decrease) in cash and cash equivalents 70,179 68,446 (323,699) _________ _________ _________ Summarized cash flow information for the year ended 31 December 2015:

Sogecap Liban SAL Fidus SAL

Société Générale de

Banque – Jordanie

LL million LL million LL million Operating 18,257 (10,569) 473,836 Investing (5,760) (274) (228,864) Financing (8,291) (608) (4,476) _________ _________ _________ Net increase (decrease) in cash and cash equivalents 4,206 (11,451) 240,496 _________ _________ _________ 5 INTEREST AND SIMILAR INCOME 2016 2015 LL million LL million Financial assets at amortized cost 586,604 577,244 Loans and advances to customers at amortized cost 392,846 356,075 Balances with the Central Banks 306,195 241,145 Financial assets at amortized cost pledged as collateral 42,287 9,663 Reverse repurchase agreements (note 18) 11,924 7,435 Loans and advances to related parties at amortized cost 5,045 8,159 Due from banks and financial institutions 4,975 4,683 Amounts due from affiliated banks and financial institutions 665 433 _________ _________ 1,350,541 1,204,837 _________ _________ 6 INTEREST AND SIMILAR EXPENSE 2016 2015 LL million LL million Customers’ deposits at amortized cost 825,378 725,130 Due to banks and financial institutions 74,557 45,575 Due to the Central Banks 50,185 35,301 Related parties’ deposits at amortized cost 3,939 4,955 Amounts due to affiliated banks and financial institutions 111 26 __________ __________ 954,170 810,987 __________ __________

Société Générale de Banque au Liban S.A.L. F.127

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2016 7 FEE AND COMMISSION INCOME

2016 2015 LL million LL million

Loans and advances 23,049 23,518 Maintenance of accounts 21,557 21,853 Credit cards 13,264 10,799 Customers’ market transactions 18,060 18,979 Transfers 6,003 6,140 Letters of guarantee 5,441 4,754 Letters of credit and acceptance 3,800 3,394 Checks 2,231 2,469 Cash transactions 1,892 2,106 Commission on insurance related activities 1,811 1,762 Other commissions 5,325 6,437

__________ __________ 102,433 102,211 __________ __________

8 NET GAIN ON FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS

2016 2015 LL million LL million Net gain on foreign exchange 12,844 15,074 Interest income on debt instruments at fair value through profit or loss 3,733 4,030 Dividend income from equity instruments at fair value through profit or loss 2,267 1,648 Realized and unrealized (loss) gain from financial assets at fair value through profit or loss (176) 2,770 _________ _________ 18,668 23,522 _________ _________ Net gain on foreign exchange includes gains and losses from spot and forward contracts and the revaluation of the daily open trading position. 9 REVENUE FROM FINANCIAL ASSETS AT FAIR VALUE THROUGH OTHER

COMPREHENSIVE INCOME 2016 2015 LL million LL million Dividend income from financial assets at fair value through other comprehensive Income 638 1,012 __________ __________ 10 OTHER OPERATING INCOME 2016 2015 LL million LL million Income from services rendered 134 134 Write-back of impairment losses on non-current assets held-for-sale (note 29) 684 103 Gain from sale of non-current assets held-for-sale (note 29) 3,080 544 Income from insurance activities 24,223 21,524 Other operating income 3,532 3,033 __________ __________ 31,653 25,338 __________ __________

Société Générale de Banque au Liban S.A.L. F.128

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2016 11 NET CREDIT LOSSES

2016 2015 LL million LL million Provision for loans and advances to customers (note 22) (37,337) (34,775) Provision for loans and advances to related parties (note 23) (1,500) (1,453) Write-back of provision for loans and advances to customers (note 22) 7,748 11,151 Write-back of unrealized interest on loans and advances to customers (note 22) 3,972 6,790 Loans written off (668) (866) __________ __________ (27,785) (19,153) Provision for other assets (note 30) - (249) Provision on balances with banks and financial institutions (note 16) (154) - Impairment loss on financial assets at amortized cost (note 24) (233) (8,442) Write-back of impairment on financial assets at amortized cost (note 24) 8,442 - Write-back of provision for other assets (note 30) 219 20 __________ __________ (19,511) (27,824) __________ __________ 12 PERSONNEL EXPENSES 2016 2015 LL million LL million Salaries and wages 87,819 82,374 Social Security contributions 12,807 12,233 Provisions for employees’ end of service benefits (note 39) 6,293 4,317 Other allowances 26,460 24,354 __________ __________ 133,379 123,278 __________ __________ 13 OTHER OPERATING EXPENSES 2016 2015 LL million LL million Net provision for risks and charges 18,454 10,855 Professional services 30,246 22,937 Publicity and advertising 16,734 13,763 Rent 16,271 19,546 Travelling and entertainment expenses 12,072 9,627 Maintenance and repairs 10,591 9,764 Telecommunication and postage 10,253 10,374 Taxes and fees 7,992 7,832 Premiums for guarantee of deposits 7,799 7,386 Electricity, water and fuel 4,782 4,613 Printings and stationery 2,766 2,856 Legal expenses 2,381 2,501 Other operating charges 27,613 18,519 __________ __________ 167,954 140,573 __________ __________

Société Générale de Banque au Liban S.A.L. F.129

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2016

14 INCOME TAX The components of income tax expense for the years ended 31 December 2016 and 2015 are: 2016 2015 LL million LL million Current tax Current income tax 239,148 56,426 Other adjustments 12 739 Deferred tax Relating to origination and reversal of temporary differences 581 (167) Relating to transactions with the Central Bank of Lebanon (110,742) - ___________ ___________ 128,999 56,998 ___________ ___________

Reconciliation of the total tax charge The reconciliation between the tax expense and the accounting profit for the years ended 31 December 2016 and 31 December 2015 is as follows: 2016 2015 LL million LL million Accounting profit before tax 432,021 315,310 Less: Revenues previously subject to tax (32,091) (24,692) Add: Non-deductible expenses 415,462 47,410 Add: Gain recognized directly in non-distributable reserves 476,698 - Add: Deferred income 257,555 - ___________ ___________ Taxable profit 1,549,645 338,028 ___________ ___________ Effective income tax rate 15.43% 16.69% ___________ ___________ Income tax expense reported in the consolidated income statement

239,148 56,426

___________ ___________ Current tax liabilities (note 38) 2016 2015 LL million LL million Income tax due 239,148 56,426 Tax withheld on interest previously paid (21,387) (21,479) Others 832 (1,467) ___________ ___________ 218,593 33,480 ___________ ___________ Deferred tax The following table shows deferred tax recorded on the consolidated statement of financial position and changes recorded in the income tax expense: 2016 2015

Deferred tax assets

Deferred tax liabilities

Income statement

Deferred tax assets

Deferred tax liabilities

Income statement

LL million LL million LL million LL million LL million LL million Non-current assets held for sale - - - - - 1 Depreciation of property and equipment 21 562 (202) 25 356 (339) Impairment allowance for loans and advances 4,623 - - 4,623 - (455) Unrealized losses on financial instruments at fair value through profit or loss 214 - - 214 - (214) Tax losses expected to be utilized in future periods 776 - 846 1,622 - 1,290 Others 1,572 - (63) 1,509 - (450) _________ _________ _________ _________ _________ _________ 7,206 562 581 7,993 356 (167) _________ _________ _________ _________ _________ _________

Société Générale de Banque au Liban S.A.L. F.130

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2016 15 CASH AND BALANCES WITH THE CENTRAL BANKS 2016 2015 LL million LL million Cash 106,330 97,882 Current accounts with the Central Banks 729,735 886,015 Time deposits with the Central Banks 7,707,949 4,833,829 ___________ ___________ 8,544,014 5,817,726 ___________ ___________ Cash and balances with the Central Banks include non-interest bearing balances held by the Group at the Central Bank of Lebanon in coverage of the compulsory reserve requirements for all banks operating in Lebanon. This compulsory reserve is calculated on the basis of 25% of sight commitments and 15% of term commitments after taking into account certain waivers related to subsidized loans denominated in Lebanese Lira. Accordingly, the compulsory reserve amounted to LL 252,773 million as at 31 December 2016 (2015: LL 321,870 million). In addition a 15% of total deposits in foreign currencies regardless of nature is required. These placements amounted to US$ 1,095,640,000 (equivalent to LL 1,651,677 million) as at 31 December 2016 (2015: US$ 1,065,308,850 equivalent to LL 1,605,953 million). Société Générale de Banque – Jordanie and Société Générale Bank – Cyprus Ltd are also subject to compulsory reserve requirements with varying percentages, according to the banking rules and regulations of the Kingdom of Jordan and the Republic of Cyprus. Time deposits include placements of LL 540,944 million pledged to the favor of the Central Bank of Lebanon against loans granted by the latter as at 31 December 2016 (2015: LL 548,496 million) (note 33). Time deposits with the Central Bank of Lebanon include the following long term placements:

2016 2015

Amount in original currency LL million LL million Interest rate

Interest payment date

Maturity date

LL 720,000 million 720,000 - 8.40% every 6 months 13-Sep-46 LL 500,000 million 500,000 - 8.00% every 6 months 2-Oct-36 LL 500,000 million 500,000 - 8.40% every 6 months 20-Sep-46 LL 500,000 million 500,000 - 8.40% every 6 months 20-Sep-46 LL 300,000 million 300,000 - 8.40% every 6 months 20-Sep-46 LL 439,000 million 439,000 - 5.00% every 6 months 9-Dec-21 EUR 150 million 239,444 246,996 6.75% every 6 months 5-Apr-22 US$ 200 million 301,500 301,500 6.75% every 6 months 5-Apr-22 US$ 200 million 301,500 301,500 7.25% every 6 months 29-Nov-24 LL 200,000 million 200,000 200,000 8.60% every 6 months 10-Feb-22 US$ 250 million 376,875 376,875 8.00% every 6 months 7-Aug-28 US$ 250 million 376,875 376,875 6.30% every 6 months 7-Oct-19 US$ 150 million 226,125 226,125 6.30% every 6 months 2-Dec-19

________ ________ 4,981,319 2,029,871 ________ ________

Société Générale de Banque au Liban S.A.L. F.131

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2016 16 DUE FROM BANKS AND FINANCIAL INSTITUTIONS 2016 2015 LL million LL million Current accounts 338,253 176,375 Time deposits 271,965 328,298 Checks for collection 65,620 78,774 Discounted bills - 828 Pledged accounts (i) 120,058 99,234 Debtor accounts against creditor accounts, net 3,008 14,900 __________ __________ 798,904 698,409 Less: Provision for impairment (275) (145) __________ __________ 798,629 698,264 __________ __________ (i) Included under pledged accounts an amount of LL 89,668 million placed as collateral against repurchase

agreements as at 31 December 2016 (2015: LL 64,133 million) (note 33). The movement of the provision for impairment of deposits with banks and financial institutions as recognized in the consolidated statement of financial position is as follows: 2016 2015 LL million LL million Provision at 1 January 145 152 Provision during the year (note 11) 154 - Difference of exchange (24) (7) __________ __________ Provision at 31 December 275 145 __________ __________ 17 AMOUNTS DUE FROM AFFILIATED BANKS AND FINANCIAL INSTITUTIONS 2016 2015 LL million LL million Sight deposits 483,304 351,015 Time deposits 435,304 426,420 ____________ ____________ 918,608 777,435 ____________ ____________ Time deposits include an amount of LL 47,889 million (equivalent to Euro 30 million) as of 31 December 2016 (2015: Euro 30 million, equivalent to LL 53,848 million) pledged in favor of Société Générale SA Paris in guarantee of documentary letters of credit and guarantees issued in favor of the Bank’s clients.

Société Générale de Banque au Liban S.A.L. F.132

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2016 18 REVERSE REPURCHASE AGREEMENTS 2016 2015 LL million LL million Financial institution - 416,910 _________ _________ The Group has a programme to purchase securities under agreements to resell (reverse repos). The Group has an obligation to return the securities and the counterparty retains substantially all the risks and rewards of ownership. Consequently, the securities are not recognized by the Group, which instead record a separate asset under reverse repurchase agreements reflecting the transaction’s economic substance as a loan by the Group. During 2016 and 2015, the Group bought Certificates of Deposit issued by the Central Bank of Lebanon from a financial institution under the agreement to resell them. Net interest income on the reverse repurchase agreements amounted to LL 11,924 million for the year ended 31 December 2016 (2015: LL 7,435 million) (note 5). 19 DERIVATIVE FINANCIAL INSTRUMENTS The table below shows the fair values of derivative financial instruments, recorded as assets or liabilities, together with their notional amounts. The notional amount, recorded gross, is the amount of a derivative’s underlying asset, reference rate or index and is the basis upon which changes in the value of derivatives are measured. The notional amounts indicate the volume of transactions outstanding at year-end and are indicative of neither the market risk nor the credit risk. 2016 2015

Assets Liabilities

Total notional amount Assets Liabilities

Total notional amount

LL million

LL million LL million

LL million LL million LL million

Derivatives held-for-trading Forward foreign exchange contracts

2,472 (9,507) 674,487 2,969 (4,450) 551,131

________ _________ ________ _________ _________ ________ Derivatives often involve at their inception only a mutual exchange of promises with little or no transfer of consideration. However, these instruments frequently involve a high degree of leverage and are very volatile. A relatively small movement in the value of the asset, rate or index underlying a derivative contract may have a significant impact on the profit or loss of the Group. Over-the-counter derivatives may expose the Group to the risks associated with the absence of an exchange market on which to close out an open position. The Group’s exposure under derivative contracts is closely monitored as part of the overall management of the Group’s market risk. Derivative financial instruments held or issued for trading purposes Most of the Group’s derivative trading activities relate to deals with customers that are normally offset by transactions with other counterparties. Also included under this heading are any derivatives entered into for hedging purposes that do not meet the hedge accounting criteria. Fair value hedges Fair value hedges are used by the Group to protect it against changes in the fair value of financial assets and financial liabilities due to movements in exchange rates and interest rates. The financial instruments hedged for interest rate risk include loans and advances. The Group uses interest rate swaps to hedge interest rate risk.

Société Générale de Banque au Liban S.A.L. F.133

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2016 20 FINANCIAL ASSETS AT AMORTIZED COST PLEDGED AS COLLATERAL 2016 2015 LL million LL million Governmental bonds mortgaged against deposits from Social Security of Jordan 267,717 235,813 Governmental bonds mortgaged in favor of the Central Bank of Jordan 857 1,797 Treasury bills mortgaged in favor of the Central Bank of Lebanon (i) 180,658 330,228 Certificates of deposits mortgaged in favor of the Central Bank of Lebanon (ii) 301,500 - Certificates of deposits mortgaged in favor of a customer (iii) 410,040 - Accrued interest receivable 14,655 8,280 _________ _________ 1,175,427 576,118 _________ _________ (i) The Lebanese treasury bills are pledged against soft loans granted by the Central Bank of Lebanon (note

32). These consist of the following: Nominal amount

2016 2015 Financial assets LL million LL million Coupon rate Maturity date Lebanese treasury bills 170,000 170,000 6.74% 1 June 2017 Lebanese treasury bills - 150,000 6.50% 7 July 2016 Lebanese treasury bills - 483 6.18% 30 June 2016 Lebanese treasury bills 483 - 6.50% 21 June 2018 Lebanese treasury bills 9,745 9,745 6.74% 6 February 2020 Lebanese treasury bills 430 - 8.24% 8 September 2022 _________ _________ 180,658 330,228 _________ _________ (ii) During 2016, the Bank obtained the approval of the Central Bank of Lebanon to release an amount of US$

200 million (equivalent LL 301,500 million) from obligatory reserves provided that this amount is invested in governmental bonds pledged in the favor of the Central Bank of Lebanon. The Bank pledged Eurobonds with a nominal amount of US$ 200 million (equivalent to LL 301,500 million) from 13 January 2016 until 18 August 2016, and subsequently two certificates of deposits with a total nominal amount of US$ 200 million (equivalent to LL 301,500 million).

(iii) The Bank mortgaged and registered certificates of deposit in favor of a customer as a guarantee for the

deposit placed at the Bank by the latter (note 36). 21 FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS 2016 2015 LL million LL million Quoted Shares 94,196 74,866 Funds 20,376 18,542 Lebanese treasury bills – Eurobonds 3,688 17,540 ____________ ____________ 118,260 110,948 ____________ ____________

Société Générale de Banque au Liban S.A.L. F.134

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2016 21 FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS (continued) 2016 2015 LL million LL million Unquoted Shares 23,228 21,526 Lebanese treasury bills – denominated in LL 1,094 1,093 Debt securities issued by banks 37,688 37,688 Foreign governmental debt securities - 68,551 ____________ ____________ 62,010 128,858 ____________ ____________ 180,270 239,806 ____________ ____________

22 LOANS AND ADVANCES TO CUSTOMERS AT AMORTIZED COST 2016 2015 LL million LL million Corporate lending 4,254,325 3,834,747 Retail lending 2,985,287 2,676,593 ____________ ____________ 7,239,612 6,511,340 Less: Unrealized interest (i) (380,513) (371,634) Less: Allowance for impairment losses (ii) (231,450) (209,748)

____________ ____________ 6,627,649 5,929,958

____________ ____________ (i) The movement of unrealized interest on substandard, doubtful, and bad loans is as follows:

2016 Corporate Retail Total LL million LL million LL million Balance at 1 January 308,372 63,262 371,634 Unrealized interest for the year 44,341 24,147 68,488 Less: Write-back during the year (note 11) (1,885) (2,087) (3,972) Less: Unrealized interest written off (63,465) (4,681) (68,146) Transfers from off-statement of financial position 11,197 3,275 14,472 Difference of exchange (759) (1,204) (1,963) __________ __________ __________ Balance at 31 December 297,801 82,712 380,513 __________ __________ __________

2015

Corporate Retail Total LL million LL million LL million Balance at 1 January 343,467 61,121 404,588 Unrealized interest for the year 55,239 17,687 72,926 Less: Write-back during the year (note 11) (4,391) (2,399) (6,790) Less: Unrealized interest written off (86,123) (14,305) (100,428) Transfers from off-statement of financial position 12,131 5,712 17,843 Transfers to off-statement of financial position (11,003) (1,958) (12,961) Difference of exchange (948) (2,596) (3,544) __________ __________ ________

Balance at 31 December 308,372 63,262 371,634 __________ __________ __________

Société Générale de Banque au Liban S.A.L. F.135

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2016 22 LOANS AND ADVANCES TO CUSTOMERS AT AMORTIZED COST (continued) (ii) The movement of the impairment allowances during the year was as follows:

2016 Corporate Retail Total LL million LL million LL million Balance at 1 January 111,597 98,151 209,748 Charge for the year (note 11) 8,134 29,203 37,337 Less: Write-back of provision (note 11) (3,619) (4,129) (7,748) Less: Provisions written off (14,687) (2,019) (16,706) Transfers from off-statement of financial position 9,467 1,392 10,859 Difference of exchange (695) (1,345) (2,040) __________ __________ __________ Balance at 31 December 110,197 121,253 231,450 __________ __________ __________ Specific provisions 101,327 98,948 200,275 Collective provisions 8,870 22,305 31,175 __________ __________ __________ 110,197 121,253 231,450 __________ __________ __________ Gross amount of loans individually determined to be impaired, before deducting the individually assessed impairment allowance 468,513 295,340 763,853 __________ __________ __________

2015

Corporate Retail Total LL million LL million LL million Balance at 1 January 148,171 100,057 248,228 Charge for the year (note 11) 17,484 17,291 34,775 Transfer from retail loans to corporate loans 170 (170) - Transfer from deposits 6,990 1,122 8,112 Less: Write-back of provision (note 11) (6,966) (4,185) (11,151) Less: Provisions written off (42,345) (11,567) (53,912) Transfers from off-statement of financial position 3,524 2,960 6,484 Transfers to off-statement of financial position (13,423) (3,530) (16,953) Difference of exchange (2,008) (3,827) (5,835) __________ __________ __________ Balance at 31 December 111,597 98,151 209,748 __________ __________ __________ Specific provisions 101,890 83,777 185,667 Collective provisions 9,707 14,374 24,081 __________ __________ __________ 111,597 98,151 209,748 __________ __________ __________ Gross amount of loans individually determined to be impaired, before deducting the individually assessed impairment allowance 468,517 238,944 707,461 __________ __________ __________

Société Générale de Banque au Liban S.A.L. F.136

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2016

23 LOANS AND ADVANCES TO RELATED PARTIES AT AMORTIZED COST 2016 2015 LL million LL million Corporate lending 83,013 132,239 Retail lending 38,772 40,781 __________ __________ 121,785 173,020 Less: Unrealized interest (i) (339) (281) Less: Allowance for impairment losses (ii) (20,709) (19,193) __________ __________ 100,737 153,546 __________ __________ (i) The movement of unrealized interest on substandard, doubtful, and bad loans is as follows:

2016 Corporate Retail Total LL million LL million LL million Balance at 1 January 281 - 281 Unrealized interest for the year 51 - 51 Difference of exchange 7 - 7 ____________ __________ ___________ Balance at 31 December 339 - 339 ____________ __________ ___________ 2015

Corporate Retail Total LL million LL million LL million Balance at 1 January 234 - 234 Unrealized interest for the year 47 - 47 ____________ __________ ___________ Balance at 31 December 281 - 281 ____________ __________ ___________ (ii) The movement of the impairment allowances during the year was as follows: 2016 Corporate Retail Total LL million LL million LL million Balance at 1 January 19,193 - 19,193 Charge for the year (note 11) 1,500 - 1,500 Difference of exchange 16 - 16 __________ ________ _________ Balance at 31 December 20,709 - 20,709 __________ ________ _________ Gross amount of loans individually determined to be impaired, before deducting the individually assessed impairment allowance 24,818 - 24,818 __________ _________ _________

Société Générale de Banque au Liban S.A.L. F.137

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2016

23 LOANS AND ADVANCES TO RELATED PARTIES AT AMORTIZED COST (continued) 2015

Corporate Retail Total LL million LL million LL million Balance at 1 January 17,748 - 17,748 Charge for the year (note 11) 1,453 - 1,453 Difference of exchange (8) - (8) __________ ________ _________ Balance at 31 December 19,193 - 19,193 __________ ________ _________ Gross amount of loans individually determined to be impaired, before deducting the individually assessed impairment allowance 22,890 - 22,890 __________ ________ _________ 24 FINANCIAL ASSETS AT AMORTIZED COST 2016 2015 LL million LL million Quoted Lebanese treasury bills – Eurobonds 40,284 871,752 Lebanese treasury bills – Eurobonds pledged as collateral against repurchase agreements 2,582,749 1,664,449 Foreign governmental debt securities 33,222 1,710 Foreign governmental debt securities pledged as collateral against repurchase agreements 25,194 81,930 Debt securities issued by banks 9,028 11,280 Debt securities issued by banks pledged as collateral against repurchase agreements - 73,487 Corporate bonds pledged as collateral against repurchase agreements 42,980 125,402 ___________ ___________ Gross quoted investments at amortized cost 2,733,457 2,830,010 Provision for impairment (i) - (8,442) ___________ ___________ 2,733,457 2,821,568 ___________ ___________ Unquoted Lebanese treasury bills – denominated in LL 2,877,681 2,773,197 Lebanese treasury bills – denominated in LL pledged as collateral against repurchase agreements - 403,023 Certificates of deposit – denominated in LL 513,170 1,932,221 Certificates of deposit – EuroCDs 2,443,352 349,993 Certificates of deposit – EuroCDs pledged as collateral against repurchase agreements 45,390 46,311 Certificates of deposits issued by foreign central banks - 141,515 Corporate bonds 22,013 22,025 Foreign governmental debt securities 656,675 429,212 Certificates of deposit issued by banks 10,566 10,554 ___________ ___________ Gross unquoted investments at amortized cost 6,568,847 6,108,051 Provision for impairment (i) (1,384) (1,153) ___________ ___________ 6,567,463 6,106,898 ___________ ___________ 9,300,920 8,928,466 ___________ ___________

Société Générale de Banque au Liban S.A.L. F.138

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2016

24 FINANCIAL ASSETS AT AMORTIZED COST (continued) (i) Movements in the provision for impairment of financial assets at amortized cost are as follows: 2016 2015 LL million LL million Provision at 1 January 9,595 1,153 Provided during the year (note 11) 233 8,442 Written-back during the year (note 11) (8,442) - Difference of exchange (2) - ___________ ___________ Balance at 31 December 1,384 9,595 ___________ ___________ The Group derecognized some debt instruments classified at amortized cost due to the following reasons: - Deterioration of the credit rating below the ceiling allowed in the Bank’s investment policy; - Liquidity gap and yield management; - Exchange of certificates of deposit by the Central Bank of Lebanon; - Currency risk management as a result of change in the currency base of deposits; or - Liquidity for capital expenditures. The schedule below details the net gain from sale of financial assets at amortized cost: 2016 2015

Gains Losses Net Gains Losses Net LL million LL million LL million LL million LL million LL million Lebanese sovereign and Central Bank of Lebanon

Certificates of deposit 393,732 (13,102) 380,630 73,130 - 73,130 Treasury bills 214,497 - 214,497 25,053 - 25,053 Eurobonds 662 (23,110) (22,448) 737 - 737 __________ __________ __________ __________ __________ __________ 608,891 (36,212) 572,679 98,920 - 98,920 __________ __________ __________ __________ __________ __________ Other sovereign Other governmental securities 7,262 - 7,262 7,043 - 7,043 __________ __________ __________ __________ __________ __________ Private sector and other securities Corporate and other debt instruments 1,675 (1,908) (233) - - - __________ __________ __________ __________ __________ __________ 617,828 (38,120) 579,708 105,963 - 105,963 __________ __________ __________ __________ __________ __________ During 2016, the Group entered into certain financial transactions with the Central Bank of Lebanon relating to treasury bills and certificates of deposit denominated in Lebanese Pounds. These transactions were available to banks provided that they are able to reinvest an amount equivalent to the nominal value of the sold instruments in Eurobonds issued by the Lebanese Republic or Certificates of Deposit issued by the Central Bank of Lebanon denominated in US Dollars and purchased at their fair values. The net gains from such trades in excess of the fair value of the financial instruments sold amounted to LL 1,272,142 million, of which LL 734,253 million was not realized in the consolidated income statement (note 38). 25 FINANCIAL ASSETS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME 2016 2015 LL million LL million Quoted Shares 12,593 13,935 ___________ ___________ Unquoted Shares 12,615 12,625 ___________ ___________ 25,208 26,560 ___________ ___________ Dividend income recognized in the consolidated income statement from financial assets at fair value through other comprehensive income is as follows: 2016 2015 LL million LL million Dividend income from equity instruments 638 1,012 ___________ ___________

Société Générale de Banque au Liban S.A.L. F.139

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2016

26 PROPERTY AND EQUIPMENT Advances

on purchase

of property and

equipment

Land and buildings

Furniture and

fixtures

Installations

Vehicles

Total LL million LL million LL million LL million LL million LL

million Cost: At 1 January 2016 64,415 127,355 83,403 63,297 2,122 340,592 Additions 37,597 - 39,013 1,856 305 78,771 Acquisition of a subsidiary (note 3) - 151,492 - - - 151,492 Disposals - - (406) (13) (218) (637) Transfers (16,332) 4,148 2,747 9,356 81 - Transfer from non-current assets held for sale (note 29) 534 -

- - - 534

Write-off - - (9) (610) - (619) Exchange differences (10) 4 (181) (43) (8) (238) _________ ________ _________ __________ _________ _______ At 31 December 2016 86,204 282,999 124,567 73,843 2,282 569,895 _________ ________ _________ __________ _________ _______ Depreciation: At 1 January 2016 - 21,206 63,708 38,575 1,401 124,890 Provided during the year - 2,395 5,934 2,743 197 11,269 Relating to disposals - - (380) (13) (198) (591) Relating to write-off - - (9) (579) - (588) Exchange differences - - (174) (45) (8) (227) _________ ________ _________ __________ _________ _______ At 31 December 2016 - 23,601 69,079 40,681 1,392 134,753 _________ ________ _________ __________ _________ _______ Impairment: At 1 January 2016 and 31 December 2016

- 1,357 - - - 1,357

_________ ________ _________ __________ _________ _______ Net carrying amount: At 31 December 2016 86,204 258,041 55,488 33,162 890 433,785 _________ ________ _________ __________ _________ _______

Advances on

purchase of property

and equipment

Land and buildings

Furniture and

fixtures

Installations

Vehicles

Total LL million LL million LL million LL million LL million LL

million Cost: At 1 January 2015 51,000 125,664 80,695 60,652 1,995 320,006 Additions 18,011 - 2,447 1,079 224 21,761 Disposals - (53) (80) (3) (81) (217) Transfers (4,547) 1,767 1,031 1,749 - - Write-off - - (11) - - (11) Exchange differences (49) (23) (679) (180) (16) (947) _________ ________ _________ __________ _________ _______ At 31 December 2015 64,415 127,355 83,403 63,297 2,122 340,592 _________ ________ _________ __________ _________ _______ Depreciation: At 1 January 2015 - 18,977 58,419 36,167 1,283 114,846 Provided during the year - 2,259 5,921 2,586 166 10,932 Relating to disposals - (29) (71) (3) (37) (140) Relating to write-off - - (11) - - (11) Exchange differences - (1) (550) (175) (11) (737) _________ ________ _________ __________ _________ _______ At 31 December 2015 - 21,206 63,708 38,575 1,401 124,890 _________ ________ _________ __________ _________ _______ Impairment: At 1 January 2015 and 31 December 2015

- 1,357 - - - 1,357

_________ ________ _________ __________ _________ _______ Net carrying amount: At 31 December 2015 64,415 104,792 19,695 24,722 721 214,345 _________ ________ _________ __________ _________ _______

Société Générale de Banque au Liban S.A.L. F.140

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2016 27 INTANGIBLE ASSETS

Advances on intangible

assets

Customer relationships

Key money

Licenses and

software

Total

LL million LL million LL million LL million LL million Cost: At 1 January 2016 15,621 20,600 9,861 17,202 63,284 Additions 10,513 - - 1,067 11,580 Transfers (2,050) - - 2,050 - Exchange differences - - - (62) (62) __________ ___________ ___________ ___________ ___________ At 31 December 2016 24,084 20,600 9,861 20,257 74,802 __________ ___________ ___________ ___________ ___________ Amortization: At 1 January 2016 - 6,867 1,934 13,538 22,339 Provided during the year - 1,717 - 1,493 3,210 Exchange differences - - - (64) (64) __________ ___________ ____________ ___________ ___________ At 31 December 2016 - 8,584 1,934 14,967 25,485 __________ ___________ ____________ ___________ ___________ Net carrying amount: At 31 December 2016 24,084 12,016 7,927 5,290 49,317 __________ ___________ ____________ ___________ ___________

Advances on intangible

assets

Customer relationships

Key money

Licenses and

software

Total

LL million LL million LL million LL million LL million Cost: At 1 January 2015 6,914 20,600 9,861 16,791 54,166 Additions 8,707 - - 659 9,366 Write-off - - - (19) (19) Exchange differences - - - (229) (229) __________ ___________ ___________ ___________ ___________ At 31 December 2015 15,621 20,600 9,861 17,202 63,284 __________ ___________ ___________ ___________ ___________ Amortization: At 1 January 2015 - 5,151 1,934 12,407 19,492 Provided during the year - 1,716 - 1,324 3,040 Exchange differences - - - (193) (193) __________ ___________ ____________ ___________ ___________ At 31 December 2015 - 6,867 1,934 13,538 22,339 __________ ___________ ____________ ___________ ___________ Net carrying amount: At 31 December 2015 15,621 13,733 7,927 3,664 40,945 __________ ___________ ____________ ___________ ___________ Customer relationships represents the intangibles resulting from the acquisition of assets and liabilities of the Lebanese Canadian Bank SAL (under liquidation) in prior years. 28 INVESTMENT PROPERTIES 2016 2015 LL million LL million Investment properties 1,483 1,480 __________ __________ The movement of investment properties recognized in the consolidated statement of financial position is as follows: 2016 2015 LL million LL million At 1 January 1,480 1,445 Exchange difference 3 35 _________ _________ At 31 December 1,483 1,480 _________ _________

Société Générale de Banque au Liban S.A.L. F.141

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2016 28 INVESTMENT PROPERTIES (continued) The Group’s investment properties consist of properties in Lebanon held by the Group for capital appreciation. As at 31 December 2016 and 2015, the fair values of the properties are based on valuations performed by accredited independent valuers specialized in valuing these types of properties. The Group did not generate any rental income nor incurred any expenses relating to investment properties during the years ended 31 December 2016 and 31 December 2015. The Group has no restrictions on the realizability of its investment properties and no contractual obligations to either purchase, construct or develop investment properties or for repairs, maintenance and enhancements. 29 NON-CURRENT ASSETS HELD FOR SALE 2016 2015 LL million LL million Assets obtained in settlement of debts (i) 175,919 185,318 _________ _________ (i) The movement of the assets obtained in settlement of debts held for sale recognized in the consolidated

statement of financial position is as follows: 2016 2015 LL million LL million Cost: At 1 January 202,810 171,289 Additions 5,825 33,489 Disposals (14,237) (1,963) Transfers to property and equipment (note 26) (534) -

Other adjustments (185) (5) ____________ ____________ At 31 December 193,679 202,810 ____________ ____________ Impairment: At 1 January 17,492 16,975 Additions 952 620 Write-back during the year (684) (103) ____________ ____________ At 31 December 17,760 17,492 ____________ ____________ Net carrying amount: At 31 December 175,919 185,318 ____________ ____________

Assets obtained in settlement of debt held-for-sale represent primarily land and buildings acquired by the Group in settlement of certain loans and advances. During the year, the Group disposed of assets obtained in settlement of debt held for sale with a cost of LL 14,237 million (2015: LL 1,963 million) and recognized a gain of LL 3,080 million (2015: LL 544 million) and a write-back of impairment losses amounting to LL 684 million (2015: LL 103 million) (refer to note 10), in addition to the release of reserve for non-current assets held for sale amounting to LL 8,462 million (2015: LL 151 million) to reserve for capital increase. This amount relates to appropriations previously booked on property acquired in settlement of debts held for sale (refer to note 41).

Société Générale de Banque au Liban S.A.L. F.142

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2016 30 OTHER ASSETS 2016 2015 LL million LL million Deferred employee termination benefits (i) 20,760 28,863 Additional deferred costs resulting from the acquisition of the Lebanese Canadian Bank SAL (ii)

-

3,526

Due from the National Social Security Fund 17,426 16,663 Prepaid expenses 9,773 11,139 Deferred tax assets (note 14) 7,206 7,993 Investment in an associate (iii) 1,773 1,683 Receivable from sale of non-current assets held for sale 15,975 980 Other debtors 44,023 33,646 Provision (iv) (7,136) (3,622) ________ ________ 109,800 100,871 _________ _________ (i) Deferred employee termination benefits Deferred employee termination benefits amounting to LL 20,760 million as at 31 December 2016 (2015: LL 28,863 million), represent compensations paid to employees whose contracts were terminated as a result of the acquisition of the assets and liabilities of the Lebanese Canadian Bank SAL and their related taxes. These compensations were calculated on the basis provided for in the staff compensation arbitrary decision dated 29 August 2011. These benefits were deferred up to an amount of LL 60,300 million (equivalent to US$ 40 million). As a compensation for the employee termination benefits, the Central Bank of Lebanon exempted the Bank from part of the compulsory reserves denominated in Lebanese Lira. Part of these reserves were invested in Lebanese treasury bills whose nominal value amounted to LL 80,000 million and maturing on 1 December 2016. During June 2012, the Central Bank of Lebanon granted the Bank a soft loan amounting to LL 170,000 million (note 32) in substitute of the exemption from part of the compulsory reserves granted during 2011. The proceeds from the soft loan were invested in Lebanese treasury bills maturing on 1 June 2017. These treasury bills were pledged as collateral against the settlement of the soft loan. The interest income generated from these treasury bills will be offset against these deferred compensations over the period of the future economic benefits of these treasury bills. During the year ended 31 December 2016, deferred employee termination benefits of LL 8,103 million (2015: LL 8,080 million) were amortized to the consolidated income statement against a net spread between the interest income from the Lebanese treasury bills and interest expense on the soft loan. (ii) Additional deferred costs resulting from the acquisition of the Lebanese Canadian Bank SAL On 3 June 2013, the Central Council of the Central Bank of Lebanon granted the Bank a soft loan amounting to LL 150,000 million (note 32) to cover additional costs incurred subsequently in relation to the acquisition of the assets and liabilities of the Lebanese Canadian Bank SAL. The proceeds from the soft loan were invested in Lebanese treasury bills maturing on 7 July 2016. These treasury bills were pledged as collateral against the settlement of the soft loan. The interest income generated from these treasury bills will be offset against these deferred compensations over the period of the future economic benefits of these treasury bills. During the year ended 31 December 2016, deferred costs of LL 3,526 million (2015: LL 6,815 million) were amortized to the consolidated income statement against a net spread between the interest income from the Lebanese treasury bills and interest expense on the soft loan.

Société Générale de Banque au Liban S.A.L. F.143

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2016 30 OTHER ASSETS (continued) (iii) Investment in an associate As of 31 December 2016 and 2015 the Group had 50% equity interest in Centre de Traitement Monetique SAL. The Group’s share of profit from the associate amounted to LL 90 million for the year ended 31 December 2016 (2015: Share of loss from the associate amounted to LL 12 million). (iv) Provision The movement of the provision recognized in the consolidated statement of financial position is as follows: 2016 2015 LL million LL million Provision at 1 January 3,622 3,393 Provided during the year (note 11) - 249 Written-back during the year (note 11) (219) (20) Transfer from provision for risk and charges 3,733 - __________ __________ Provision at 31 December 7,136 3,622 __________ __________ 31 GOODWILL 2016 2015 LL million LL million Cost: At 1 January 169,685 171,756 Difference of exchange (557) (2,071) __________ __________ At 31 December 169,128 169,685 __________ __________ Impairment: At 1 January 2,645 2,946 Impairment allowance during the year 163,158 - Difference of exchange (80) (301) __________ __________ At 31 December 165,723 2,645 __________ __________ Net book value: At 31 December 3,405 167,040 __________ __________ Impairment testing of goodwill Goodwill acquired through business combinations has been allocated to five individual cash generating units (CGUs) for impairment testing as follows: 2016 2015 LL million LL million Société Générale de Banque – Jordanie 2,393 2,393 Fidus SAL 199 199 Sogecap Liban SAL 813 813 Société Générale Bank – Cyprus Ltd (i) - 15,567 Corporate banking (ii) - 72,355 Retail banking (iii) - 75,713 __________ __________ 3,405 167,040

Société Générale de Banque au Liban S.A.L. F.144

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2016 31 GOODWILL (continued) Impairment testing of goodwill (continued)

(i) The recoverable amount of Société Générale Bank - Cyprus Ltd CGU amounted to LL 93,350 million compared to a book value of LL 108,446 million. Accordingly, the Bank booked an impairment loss on goodwill of LL 15,090 million.

(ii) The recoverable amount of the retail CGU amounted to LL 91,653 million compared to a book value of LL

167,036 million. Accordingly, the Bank booked an impairment loss on goodwill of LL 75,713 million.

(iii) The recoverable amount of the corporate CGU amounted to LL 283,797 million compared to a book value of LL 356,308. Accordingly, the Bank booked an impairment loss on goodwill of LL 72,355 million.

Key assumptions used in value in use calculations The recoverable amount of the Corporate Banking, Retail Banking and Société Générale Bank – Cyprus Ltd have been determined based on value in use calculations, using cash flow projections based on financial budgets approved by senior management covering a five-year period. The following rates are used by the Group:

2016 2015

Discount Projected Discount Projected rate growth rate rate growth rate % % % % Cash Generating Units Corporate Banking 13.80% 3.00% 12.67% 3.00% Retail Banking 13.80% 3.00% 12.67% 3.00% Société Générale Bank – Cyprus Ltd 12.70% 2.00% 13.65% 3.67% Projected growth rates used are in line with, and do not exceed, the projected growth rates in GDP and inflation rate forecasts for Lebanon and Cyprus (where the operations reside). The calculation of value in use for the CGUs is most sensitive to interest margin, discount rates and the projected growth rates used to extrapolate cash flows beyond the budget period. Key assumptions Interest margins Interest margins are based on current fixed interest yields. Cost of equity The cost of equity is the return required for an investment to meet capital return requirements; it is often used as a capital budgeting threshold for required rate of return. Growth rate Growth rate is the percentage change of the compounded annualized rate of growth of revenues, earnings, dividends and even including macro concepts such as GDP and the economy as a whole. 32 DUE TO THE CENTRAL BANKS

2016 2015 LL million LL million Current account 33 554 Term soft loans 428,855 604,991 Accrued interest 2,877 4,416 ___________ ___________ 431,765 609,961

Société Générale de Banque au Liban S.A.L. F.145

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2016 32 DUE TO THE CENTRAL BANKS (continued) Term soft loans include: - Term loans amounting to LL 10,228 million as at 31 December 2016 (2015: LL 10,228 million) were

granted by the Central Bank of Lebanon to cover 60% of the replacement costs of the Bank’s damaged buildings and installations and to cover 60% of the Bank’s credit losses relating to debtors directly affected by July 2006’s war. The effective interest rate for 2016 was 3.04% (2015: 3.04%).

- Term loan amounting to LL 170,000 million granted during June 2012 from the Central Bank of

Lebanon after the acquisition of the assets and liabilities of the Lebanese Canadian Bank SAL for a ten years period. The effective interest rate is 2% for the first 5 years and will be revised on a later stage by the Central Bank of Lebanon for the remaining 5 years (note 30).

- Term loan amounting to LL 150,000 million granted during October 2013 from the Central Bank of

Lebanon for a three years period to cover the additional losses resulting from the acquisition of the assets and liabilities of the Lebanese Canadian Bank SAL. The effective interest rate is 1.97% for the first two years and will be revised for the third year by the Central Bank of Lebanon (note 30). The loan matured during 2016.

- Term loans totaling to LL 222,997 million as at 31 December 2016 (2015: LL 243,962 million) were

granted by the Central Bank of Lebanon to subsidize the loans granted to customers under cicular 313 of the Central Bank of Lebanon. The term loans are subject to a 1% interest rate payable on a monthly basis.

Loans amounting to LL 180,228 million (2015: LL 330,228 million) are secured by the pledge on Lebanese treasury bills for a nominal amount of LL 180,658 million (2015: LL 330,228 million) included under financial assets pledged as collateral as at 31 December 2016 (note 20). 33 LOANS AND REPURCHASE AGREEMENTS 2016 2015 LL million LL million Central Bank of Lebanon 582,452 982,973 Banks and financial institutions 1,479,865 1,133,191 __________ __________ 2,062,317 2,116,164 __________ __________ The Group has a program to sell securities under agreements to repurchase (‘repos’). The securities sold under agreements to repurchase are transferred to third parties and the Group receives cash in exchange. If the securities decrease in value, the Group may be required to pay additional cash collateral. The Group has determined that it retains substantially all the risks and rewards of these securities, which include credit risk and market risk, and therefore has not derecognized them. In addition, it recognizes a financial liability for cash received as collateral. The carrying amount and fair value of securities sold under agreements to repurchase at 31 December 2016 was LL 2,696,313 million and LL 2,648,811 million respectively (2015: LL 2,386,160 million and LL 2,364,682 million respectively). Those securities are presented in the consolidated statement of financial position under “Financial assets at amortized cost” (note 24).

Société Générale de Banque au Liban S.A.L. F.146

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2016 33 LOANS AND REPURCHASE AGREEMENTS (continued) The following tables provide a summary of financial instruments that have been transferred in such a way that part or all of the transferred financial assets do not qualify for derecognition or were pledged against facilities granted, together with the associated liabilities:

2016

Transferred financial asset

Foreign governmental

debt securities

Debt securities issued by

banks

Certificates of deposit –EuroCDs &

bank placements

Lebanese treasury

bills – denominated

in LL Corporate

bonds

Lebanese treasury bills –

Eurobonds Total LL million LL million LL million LL million LL million LL million LL million

Carrying amount of assets

Securities lending and repos 25,194 - 586,334 - 42,980 2,582,749 3,237,257

___________ ___________ ___________ ___________ ___________ ___________ ___________ Carrying amount of associated liabilities

Securities lending and repos 22,344 - 582,452 - 39,905 1,417,616 2,062,317

___________ ___________ ___________ ___________ ___________ ___________ ___________

2015

Transferred financial asset

Foreign governmental

debt securities

Debt securities issued by

banks

Certificates of deposit –

EuroCDs & bank

placements

Lebanese treasury bills

– denominated

in LL Corporate

bonds

Lebanese treasury bills –

Eurobonds Total

LL million LL million LL million LL million LL million LL million LL million

Carrying amount of assets

Securities lending and repos 80,597 69,883 594,807 403,023 121,897 1,664,449 2,934,656

___________ ___________ ___________ ___________ ___________ ___________ ___________ Carrying amount of associated liabilities

Securities lending and repos 77,402 60,810 580,994 401,979 110,098 884,881 2,116,164

___________ ___________ ___________ ___________ ___________ ___________ ___________

In addition to the above an amount of LL 89,668 million is pledged as additional collateral against repurchase agreements as at 31 December 2016 (2015: LL 64,133 million). These placements are included under “Due from banks and financial institutions” (note 16). 34 DUE TO BANKS AND FINANCIAL INSTITUTIONS 2016 2015 LL million LL million Sight deposits 162,888 107,081 Time deposits 406,060 505,201 ___________ ___________ 568,948 612,282 ___________ ___________ 35 AMOUNTS DUE TO AFFILIATED BANKS AND FINANCIAL INSTITUTIONS 2016 2015 LL million LL million Sight deposits 1,429 3,671 Time deposits - 17,514 ___________ ___________ 1,429 21,185 ___________ ___________

Société Générale de Banque au Liban S.A.L. F.147

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2016 36 CUSTOMERS’ DEPOSITS AT AMORTIZED COST 2016 Corporate Retail Total LL million LL million LL million Sight deposits 934,722 1,337,031 2,271,753 Net creditor accounts against debtor accounts - 988 988 Blocked margins 307,891 186,640 494,531 ____________ ____________ ____________ 1,242,613 1,524,659 2,767,272 Time deposits 3,676,276 9,057,654 12,733,930 Savings accounts 357,438 5,929,694 6,287,132 ____________ ____________ ____________ 5,276,327 16,512,007 21,788,334 ____________ ____________ ____________ 2015

Corporate Retail Total LL million LL million LL million Sight deposits 790,406 1,203,261 1,993,667 Net creditor accounts against debtor accounts - 1,476 1,476 Blocked margins 307,419 265,355 572,774 ____________ ____________ ____________ 1,097,825 1,470,092 2,567,917 Time deposits 3,079,761 7,077,464 10,157,225 Savings accounts 211,020 5,743,715 5,954,735 ____________ ____________ ____________ 4,388,606 14,291,271 18,679,877 ____________ ____________ ____________ Included in customers’ deposits as at 31 December 2016 are coded accounts amounting to LL 37,489 million (2015: LL 135,920 million). These accounts are opened in accordance with article 3 of the Banking Secrecy Law dated 3 September 1956. Included under customers’ deposits an amount of LL 376,884 million maturing during 2018 and 2019 guaranteed by certificates of deposit with a nominal amount of LL 410,040 (note 20). 37 RELATED PARTIES’ DEPOSITS AT AMORTIZED COST 2016

Corporate Retail Total LL million LL million LL million Sight deposits 618 3,835 4,453 Time deposits 3,973 172,781 176,754 ___________ ___________ ___________ 4,591 176,616 181,207 ___________ ___________ ___________ 2015

Corporate Retail Total LL million LL million LL million Sight deposits 8,713 632 9,345 Time deposits 79,291 44,135 123,426 ___________ ___________ ___________ 88,004 44,767 132,771 ___________ ___________ ___________

Société Générale de Banque au Liban S.A.L. F.148

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2016 38 OTHER LIABILITIES 2016 2015 LL million LL million Deferred income (i) 218,710 - Current tax liabilities (note 14) 218,593 33,480 Redeemed preferred shares payable to third parties (ii) 21,859 21,859 Accrued expenses 41,424 21,447 Payable to the shareholders of the Lebanese Canadian Bank SAL (iv) 12,060 12,060 Customers’ transactions between Head Office and branches 15,193 7,104 Other taxes payable 17,951 9,142 Interest and commissions received in advance 10,121 10,521 Due to the National Social Security Fund 1,949 1,667 Deferred tax liabilities (note 14) 562 356 Other creditors (iii) 31,342 24,412 ___________ ___________ 589,764 142,048 ___________ ___________ (i) During 2016, the Central Bank of Lebanon issued Intermediate Circular number 446 dated 30 December

2016 relating to the gain realized by banks from certain financial transactions with the Central Bank of Lebanon, consisting of the sale of financial instruments denominated in Lebanese Pounds and the purchase of financial instruments denominated in US Dollars. In accordance with the provisions of this circular, banks should recognize in the income statement, only part of the gain net of tax, caped to the extent of the losses recorded to comply with recent regulatory provisioning requirements (refer to note 39), the impairment losses on goodwill recorded in accordance with IAS 36 and the shortage needed to comply with the capital adequacy requirements. Lebanese banks may further recognize up to 70% of the remaining balance of the gain realized net of tax in the income statement as non-distributable profits to be appropriated to reserves for capital increase, qualifying for inclusion within regulatory Common Equity Tier One. As a result of these operations with the Central Bank of Lebanon, the Group received a surplus of LL 1,272,142 million net of transaction costs consisting of interest, fees and other costs. The Group recognized current tax liabilities amounting to LL 188,436 million on the remaining balance of LL 1,272,142 million. The Group then recognized an amount of LL 537,889 million and their related taxes of LL 77,694 million in the consolidated statement of income and elected to recognize LL 404,801 million net of taxes, directly in non-distributable reserves within equity (note 41). The remaining surplus, equivalent to LL 218,710 million, was booked as deferred income.

(ii) Redeemed preferred shares payable to third parties represent liabilities acquired with the acquisition of the

assets and liabilities of the Lebanese Canadian Bank SAL and relating to preferred shares redeemed by the Lebanese Canadian Bank SAL and not yet claimed by the holders of those shares.

(iii) Included under other creditors an amount of LL 8,003 million as at 31 December 2016 (2015: the same),

representing the partial settlement made by a debtor in settlement of his debts amounting to LL 8,356 million.

The Group will reimburse this payment since it has received the full payment of LL 8,356 million from the shareholders of the Lebanese Canadian Bank SAL during the year 2012.

(iv) This represents the balance of the cash collateral deposited by the shareholders of the Lebanese Canadian Bank SAL and amounting to US$ 8 million (equivalent to LL 12,060 million) as a guarantee against default of the loans of an acquired subsidiary.

This amount is refundable to the shareholders of the Lebanese Canadian Bank SAL, since the initial consideration paid for the acquisition was reduced by the same amount.

Société Générale de Banque au Liban S.A.L. F.149

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2016 39 PROVISION FOR RISKS AND CHARGES 2016 2015 LL million LL million

Technical reserve for insurance contracts 24,918 19,585 Employees’ end of service benefits (i) 31,064 25,859 Provision for contingencies and charges 3,532 5,296 Excess provisions to comply with the Central Bank of Lebanon Intermediate Circular number 439 dated 8 November 2016 (ii)

165,825

-

Other provisions 37,671 24,997 __________ __________ 263,010 75,737 __________ __________

(i) Movements in the provision for end of service benefits recognized in the consolidated statement of

financial position are as follows: 2016 2015 LL million LL million

Balance at 1 January 25,859 23,240 Provided during the year (note 12) 6,293 4,317 Paid during the year (1,088) (1,698) ___________ ___________ Balance at 31 December 31,064 25,859 ___________ ___________

(ii) On 8 November 2016, the Central Bank of Lebanon issued Intermediate Circular number 439 which

required banks operating in Lebanon to constitute additional collective provisions. As such, provisions for risks and charges as at 31 December 2016 include an amount of LL 165,825 million in excess of the provisioning requirements of IAS 39 (note 38).

40 SHARE CAPITAL a Common shares The authorized, issued and fully paid share capital as of 31 December 2016 comprised 56,535 shares of nominal value LL 258,000 each (2015: 56,535 shares of nominal value of LL 258,000 each). The extraordinary general assembly of shareholders held on 2 July 2015 resolved to increase the nominal value of each share from LL 233,000 to LL 258,000. Accordingly, an amount of LL 1,413 million was transferred from “distributable reserves” to “share capital – common shares” (note 42). b Preferred shares - On 15 March 2010, the Bank issued 10,000 preferred shares (Series 2010) for a nominal amount of

LL 212,400 each (a total of LL 2,124 million) plus a share premium denominated in US Dollars of US$ 9,859. Accordingly, share premium of LL 148,284 million represents a premium of US$ 98,590,000 (or LL 148,624 million) less issuance costs of LL 340 million. The extraordinary general assembly of shareholders held on 2 July 2015 resolved to redeem all the 10,000 preferred shares (Series 2010).

- On 28 March 2013, the Bank issued 12,500 preferred shares (Series 2012) for a nominal amount of

LL 212,400 each (a total of LL 2,655 million) plus a share premium denominated in US Dollars of US$ 9,859 per share. Accordingly, the total share premium resulting from the issuance amounted to US$ 123,238,806 (or LL 185,782 million) less issuance costs of LL 395 million.

- On 13 September 2013, the Bank issued 15,000 preferred shares (Series 2013) for a nominal amount of

LL 212,400 each (a total of LL 3,186 million) plus a share premium denominated in US Dollars of US$ 9,859 per share. Accordingly, the total share premium resulting from the issuance amounted to US$ 147,886,567 (or LL 222,939 million) less issuance costs of LL 385 million.

Société Générale de Banque au Liban S.A.L. F.150

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2016 40 SHARE CAPITAL (continued) b Preferred shares (continued) - On 2 July 2015, the Bank issued 10,000 preferred shares (Series 2015) for a nominal amount of LL 233,000

each (a total of LL 2,330 million) plus a share premium denominated in US Dollars of US$ 9,845 per share. Accordingly, the total share premium resulting from the issuance amounted to US$ 98,454,395 (or LL 148,420 million) less issuance costs of LL 194 million.

The payment of dividends for preferred shareholders is dependent on: (1) The availability of non-consolidated net income for a specific year after appropriation of legal and other

regulatory reserves; (2) The continuous compliance with regulations issued by the Central Bank of Lebanon and the Banking Control

Commission; and (3) The approval of the ordinary general assembly of shareholders to distribute those dividends. During 2016, the Bank transferred LL 2,010 million (2015: LL 2,134 million) from “retained earnings” to the “share premium – preferred shares”. These represent the appropriation of transaction costs incurred on preferred shares and additional premiums of 1.25% relating to preferred shares – Series 2012, 2% relating to preferred shares – Series 2013 and 1.5% relating to preferred shares – Series 2015. The extraordinary general assembly of shareholders held on 2 July 2015 resolved to increase the nominal value of shares from LL 233,000 to LL 258,000. Accordingly an amount of LL 937 million was transferred from “distributable reserves” to “share capital – preferred shares” (note 42). c Cash contribution by shareholders Cash contribution to capital amounted to US$ 9,855,900 and EUR 46,229,259 as at 31 December 2016 totaling to LL 106,746 million (2015: US$ 9,855,900 and EUR 46,229,259 totaling LL 106,746 million). These contributions were granted by the shareholders of the Bank in order to support and develop the activities of the Bank, in accordance with the following conditions:

− Every shareholder is committed to retain the contributions during the lifetime of the Bank; − The shareholders commit to cover any loss using their contributions according to the provisions of article

3-8 of circular N° 44 of the of the Central Bank of Lebanon and article 134 of the Money and Credit Act; and

− The shareholders have the right to use or not to use these contributions in case of a capital increase.

Both the Central Council of the Central Bank of Lebanon and the ordinary general assembly of the Bank approved these contributions. 41 NON DISTRIBUTABLE RESERVES

Legal reserve

Reserve for general

banking risks

Reserve against

doubtful and impaired loans

Reserve for capital increase

Reserve for non-current assets held

for sale

Reserve for retail

and corporate

loans Total LL million LL million LL million LL million LL million LL million LL million At 1 January 2015 104,583 111,082 648 66,128 34,437 - 316,878 Appropriation during the year 24,373 20,843 - 8,646 11,716 8,691 74,269 Transfers - - - 151 (151) - - Adjsutments - - (13) - - - (13) __________ __________ __________ __________ _________ _________ __________ At 31 December 2015 128,956 131,925 635 74,925 46,002 8,691 391,134 Appropriation during the year 25,724 22,931 - 484 10,156 9,470 68,765 Transfers - - - 8,462 (8,462) - - Income on financial transactions (note 38)

- - - 404,801 - - 404,801

Adjsutments - - (52) - - - (52) __________ __________ __________ __________ _________ _________ __________ At 31 December 2016 154,680 154,856 583 488,672 47,696 18,161 864,648 __________ __________ __________ __________ _________ _________ __________

Société Générale de Banque au Liban S.A.L. F.151

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2016

41 NON DISTRIBUTABLE RESERVES (continued) a) Legal reserve As required by local regulations where the Group operates, a percentage of the net profit for the year should be transferred to legal reserve. This reserve is not available for dividend distribution. b) Reserve for general banking risks In compliance with the Central Bank of Lebanon regulations, the Bank should appropriate from its net profit for the year, a minimum amount of 2 per thousand and a maximum of 3 per thousand from the total risk weighted assets and off-statement of financial position items based on the rates specified by the Central Bank of Lebanon as a reserve for general banking risks. The consolidated ratio should not be less than 2% of these risks at the end of 2027. In addition, Société Générale de Banque – Jordanie and Société Générale Bank – Cyprus Ltd are also required to appropriate reserves for general banking risks in accordance with local requirements. c) Reserve against doubtful and impaired loans In compliance with pronouncement 20/2008 of the Banking Control Commission issued on 13 September 2008, the Bank should appropriate to a special reserve an amount equal to its portfolio of doubtful and impaired loans which were not settled in accordance with the Central Bank basic circular no. 73 and its subsequent amendments. The Bank releases this reserve to retained earnings when:

• The loan is settled and fully paid; or • Partial settlement of the loan leading to a reserve in excess of the loan net carrying amount; or • A provision is made in the income statement.

d) Reserve for capital increase In compliance with the circular No. 167 issued by the Banking Control Commission, the Bank is required to appropriate the net write-back of provisions for doubtful debts in a particular year to the reserve for capital increase when the net results are positive. In compliance with the circular No. 173 issued by the Banking Control Commission, the Bank is required to appropriate the gain realized from the sales of non-current assets held for sale to the reserve for capital increase when the net results are positive. In compliances with the Central Bank of Lebanon intermediate circular no. 446 dated 30 December 2016, the Bank should appropriate the gain realized from the sale of treasury bills and certificates of deposits denominated in LL and the simultaneous purchase of Eurobonds and certificates of deposit denominated in US$ to the reserve for capital increase. e) Reserve for non-current assets held for sale In compliance with pronouncements of the Banking Control Commission, when properties acquired in settlement of debts are not sold within the timeframe required by local regulators, the Bank should appropriate an amount equal to 5% or 20% of the carrying value of such properties. The annual appropriation, which is from the net profit of the respective year after appropriations to legal reserve and reserve for general banking risks, is reported under “reserve for non-current assets held for sale”. The Bank shall make a transfer from this reserve into the “Reserve for capital increase” when: - The reserve appropriated in prior years related to a property disposed of; or - The reserve appropriated in prior years, equal or up to an impairment loss recognized in the income

statement against the acquired property.

Société Générale de Banque au Liban S.A.L. F.152

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2016 41 NON DISTRIBUTABLE RESERVES (continued) f) Reserve for retail and corporate loans In compliance with the circular No. 280 issued by the Banking Control Commission, the Bank is required to transfer from net profits for the year the equivalent of:

- 0.5% of retail loans that are less than 30 days past due (subject to deductions of some guarantees received) to general reserve for the year 2014. This ratio will increase yearly by 0.5% over a six year period starting 2015.

- 0.25% of corporate loans that are less than 30 days past due (subject to deductions of some guarantees

received) to general reserve for the year 2014. This ratio will increase to 0.5% for the year 2015, 1% for the year 2016 and 1.5% for the year 2017.

42 DISTRIBUTABLE RESERVES General reserves

2016 2015 LL million LL million Balance at 1 January 19,442 20,669 Appropriation during the year 1,090 917 Transfer to share capital – common shares (note 40) - (1,413) Transfer to share capital – preferred shares (note 40) - (937) Transfer upon redemption of preferred shares - 206 ___________ ___________ Balance at 31 December 20,532 19,442 ___________ ___________ 43 REVALUATION RESERVE OF PROPERTY 2016 2015 LL million LL million Revaluation amount 5,499 5,499 Book value (945) (945) Sale of real estate (620) (620) _________ _________ Revaluation variance 3,934 3,934 _________ _________ The Central Bank of Lebanon and the tax authorities approved on 29 March 1995 and on 18 April 1995 respectively, the revaluation of some of the buildings owned by the Bank and used for operating purposes in accordance with the law no. 282 dated 30 December 1993. 44 CUMULATIVE CHANGE IN FAIR VALUE OF FINANCIAL ASSETS AT FAIR VALUE

THROUGH OTHER COMPREHENSIVE INCOME 2016 2015 LL million LL million Balance at 1 January (477) 113 Net unrealized gain (loss) on financial assets at fair value through other comprehensive income, net of tax 259 (590) __________ __________ Balance at 31 December (218) (477) __________ __________

Société Générale de Banque au Liban S.A.L. F.153

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2016

45 DIVIDENDS PAID TO EQUITY HOLDERS OF THE PARENT According to the resolution of the ordinary general assembly of shareholders held on 25 April 2016 the following dividends were declared and paid: 2016 Number of shares Dividend per share Total in LL LL million Dividends for preferred shares – 2012 issue 12,500 1,055,250 13,191 Dividends for preferred shares – 2013 issue 15,000 1,055,250 15,829 Dividends for preferred shares – 2015 issue 10,000 526,185 5,261 __________ 34,281 __________ According to the resolution of the ordinary general assembly of shareholders held on 24 April 2015 the following dividends were declared and paid: 2015 Number of shares Dividend per share Total in LL LL million Dividends for preferred shares – 2010 issue 10,000 1,168,313 11,683 Dividends for preferred shares – 2012 issue 12,500 1,055,250 13,190 Dividends for preferred shares – 2013 issue 15,000 1,055,250 15,829 __________ 40,702 __________ 46 CASH AND CASH EQUIVALENTS

2016 2015 LL million LL million Cash and balances with the Central Banks 8,544,014 5,817,726 Financial instruments – Treasury bills 5,687,379 6,067,103 Financial instruments – Certificates of deposit 3,734,590 2,339,079 Financial instruments – Certificates of deposits issued by foreign Central Banks - 141,515 Due from banks and financial institutions 798,629 698,264 Amounts due from affiliated banks and financial institutions 918,608 777,435 Reverse repurchase agreements - 416,910 Due to the Central Banks (431,765) (609,961) Loans and repurchase agreements (2,062,317) (2,116,164) Due to banks and financial institutions (568,948) (612,282) Amounts due to affiliated banks and financial institutions (1,429) (21,185) _____________ _____________ 16,618,761 12,898,440 _____________ _____________ Less: balances with maturities exceeding 3 months Cash and balances with the Central Banks 7,778,553 4,860,610 Financial instruments – Treasury bills 5,681,269 6,067,103 Financial instruments – Certificates of deposit 3,519,512 2,339,079 Due from banks and financial institutions 80,913 186,415 Amounts due from affiliated banks and financial institutions 59,736 56,942 Reverse repurchase agreeements - 219,567 Due to the Central Banks (205,608) (609,408) Loans and repurchase agreements (2,062,317) (2,116,164) Due to banks and financial institutions (103,605) (299,622) _____________ _____________ 14,748,453 10,704,522 _____________ _____________ Cash and cash equivalents at 31 December 1,870,308 2,193,918 _____________ _____________

Société Générale de Banque au Liban S.A.L. F.154

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2016

47 RELATED PARTY TRANSACTIONS Parties are considered to be related if one party has the ability to control the other party or exercise significant influence over the other party in making financial or operation decisions, or one other party controls both. The definition includes subsidiaries, key management personnel and their close family members, as well as entities controlled or jointly controlled by them. A list of the Group’s principal subsidiaries is shown in note 2. Transactions between the Bank and its subsidiaries meet the definition of related party transactions. However, where these are eliminated on consolidation, they are not disclosed in the Group’s consolidated financial statements. Key Management Personnel are defined as those persons having authority and responsibility for planning, directing and controlling the activities of the Group, directly or indirectly, including the Directors of the Bank and the Officers of the Group. Entities under common directorships are defined as those entities for which members of the Bank’s board also serve as directors. Terms and conditions of transactions with related parties The Group enters into transactions with major related parties in the ordinary course of business at normal commercial interest and commission rates. As at 31 December 2016, the Group has made provisions and suspended interest for doubtful debts relating to amounts owed by related parties totaling to LL 21,048 million ( 2015: LL 19,474 million) (note 23). The following table provides the total amount of transactions and the amount of outstanding balances (including commitments) with related parties for the relevant financial year. 2016 2015

Outstanding balance

Income (expense)

Outstanding balance

Income (expense)

LL million LL million LL million LL million Key management personnel Net loans and advances 95,260 4,220 139,848 5,594 Deposits 126,267 (2,114) 44,372 (1,939) Guarantees given 1,144 - 433 - Commitments 360 - 754 - Entities under common directorship Net loans and advances 5,386 824 13,602 2,565 Deposits 53,501 (1,828) 87,203 (3,041) Guarantees given 617 - 189 - Commitments - - 20,405 21 Shareholder – Bank Net loans and advances 915,847 665 772,566 433 Deposits 476 - 17,973 - Guarantees given 34,466 - 145,654 - Guarantees received 35 - - - Commitments 438 (51) - - Associate Deposits 1,220 - 854 (22) Technical assistance fees paid to Société Générale – Paris, shareholder, amounted to LL 754 million for the year ended 31 December 2016 (2015: LL 754 million). The bank rented offices from board members for LL 510 million for the year ended 31 December 2016 (2015: LL 509 million).

Société Générale de Banque au Liban S.A.L. F.155

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2016 47 RELATED PARTY TRANSACTIONS (continued) Compensation of the key management personnel is as follows: 2016 2015 LL million LL million Short-term benefits (i) 12,122 8,936 Termination benefits 137 190 __________ __________ 12,259 9,126 __________ __________ (i) Short-term benefits comprise of salaries, bonuses, attendance fees and other short-term benefits to Key

Management Personnel. 48 FIDUCIARY ACCOUNTS A summary of the Group’s fiduciary accounts according to law no. 520 dated 6 June 1996 relating to the development of financial markets and fiduciary contracts is as follows:

2016 2015 LL million LL million Deposits with banks 9,303 3,351 Loans and advances 6,030 19,598 Bonds 128,138 113,062 ____________ ____________ 143,471 136,011 ____________ ____________

49 ASSETS HELD IN CUSTODY AND UNDER ADMINISTRATION

2016 2015 LL million LL million Lebanese treasury bills and Eurobonds 50,264 92,965 Bonds and other debt instruments 109,949 92,639 Equity instruments 317,457 334,579 Funds 23,241 19,284 ____________ ____________ 500,911 539,467 ____________ ____________

Société Générale de Banque au Liban S.A.L. F.156

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2016 50 CONTINGENT LIABILITIES, COMMITMENTS AND LEASING ARRANGEMENTS Credit-related commitments and contingent liabilities To meet the financial needs of customers, the Group enters into various commitments, guarantees and other contingent liabilities, which are mainly credit-related instruments including both financial and other guarantees and commitments to extend credit. Even though these obligations may not be recognized on the consolidated statement of financial position, they do contain credit risk and are therefore part of the overall risk of the Group. The table below discloses the nominal principal amounts of credit-related commitments and contingent liabilities. Nominal principal amounts represent the amount at risk should the contracts be fully drawn upon and clients default. As a significant portion of guarantees and commitments is expected to expire without being withdrawn, the total of the nominal principal amount is not indicative of future liquidity requirements. 2016 Banks Customers Total LL million LL million LL million Guarantee and contingent liabilities Financial guarantees 64,796 94,174 158,970 Other guarantees 14,607 252,752 267,359 _________ _________ _________ 79,403 346,926 426,329 _________ _________ _________ Commitments Documentary credits 246,693 11,150 257,843 Undrawn credit lines - 1,120,491 1,120,491 _________ _________ _________ 246,693 1,131,641 1,378,334 _________ _________ _________ 2015

Banks Customers Total LL million LL million LL million Guarantee and contingent liabilities Financial guarantees 170,015 76,004 246,019 Other guarantees 17,776 254,471 272,247 _________ _________ _________ 187,791 330,475 518,266 _________ _________ _________ Commitments Documentary credits 160,384 9,212 169,596 Undrawn credit lines - 976,146 976,146 _________ _________ _________ 160,384 985,358 1,145,742 _________ _________ _________ Guarantees Guarantees are given as security to support the performance of a customer to third parties. The main types of guarantees provided are:

• Financial guarantees given to banks and financial institutions on behalf of customers to secure loans, overdrafts, and other banking facilities; and

• Other guarantees provided include mainly performance guarantees, advance payment guarantees, tender guarantees, customs guarantees and retention guarantees.

Documentary credits Documentary credits commit the Bank to make payments to third parties, on production of documents, which are usually reimbursed immediately by customers.

Société Générale de Banque au Liban S.A.L. F.157

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2016 50 CONTINGENT LIABILITIES, COMMITMENTS AND LEASING ARRANGEMENTS (continued) Credit-related commitments and contingent liabilities (continued) Undrawn credit lines Undrawn credit lines are agreements to lend a customer in the future, subject to certain conditions. Such commitments are either made for a fixed period, or have no specific maturity but are cancellable by the lender subject to notice requirements. Legal claims Litigation is a common occurrence in the industries where the Group operates due to the nature of the businesses undertaken. The Group has formal controls and policies for managing legal claims. Once professional advice has been obtained and the amount of loss is reasonably estimated, the Group makes adjustments to account for any adverse effects which the claims may have on its financial standing. At year end, the Group had several unresolved legal claims. Based on advice from the legal counsel, management believes that legal claims not provided for will not result in any financial loss to the Group. Capital commitments At 31 December 2016, the Group had capital commitments in respect of premises and equipment purchases amounting to LL 102,581 million (2015: LL 59,900 million). Operating lease commitments – Group as lessee The Group enters into commercial leases on premises. There are no restrictions placed upon the lessee by entering into these leases. Future minimum lease payments under non-cancelable operating leases as at 31 December are as follow: 2016 2015 LL million LL million Within one year 8,529 6,834 After one year but not more than five years 26,117 16,116 More than five years 1,627 242 ___________ ___________ 36,273 23,192 ___________ ___________ Other commitments The Group has commitments relating to future donations to not for profit organizations amounting to LL 7,538 million as at 31 December 2016 (2015: LL 7,085 million). Other contingencies a) The Bank’s books and records are being reviewed by the Department of Income Tax for the years 2012 to

2014. The outcome of this review is still not predictable. Management believe that the effect of any such review will not have a material effect on the consolidated financial statements.

b) Certain areas of the Lebanese tax legislation are subject to different interpretations in respect of the taxability of certain types of financial transactions and activities. Fiscal years 2015 and 2016 are not yet reviewed by the Department of Income Tax as well as the Value Added Tax since inception. Management believe that the effect of any such review will not have a material effect on the consolidated financial statements.

c) The Bank’s contributions to the National Social Security Fund (NSSF) have not been reviewed since May 2004. Management believe that the effect of any such review will not have a material effect on the consolidated financial statements.

Société Générale de Banque au Liban S.A.L. F.158

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2016 51 FAIR VALUE MEASUREMENT The fair values in this note are stated at a specific date and may be different from the amounts which will actually be paid on the maturity or settlement dates of the instrument. In many cases, it would not be possible to realize immediately the estimated fair values given the size of the portfolios measured. Accordingly, these fair values do not represent the value of these instruments to the Group as a going concern. The fair value of assets and liabilities is included at the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. Assets and liabilities are classified according to a hierarchy that reflects the significance of observable market inputs. The three levels of the fair value hierarchy are defined below. Quoted market prices – Level 1 Assets and liabilities are classified as Level 1 if their value is observable in an active market. Such instruments are valued by reference to unadjusted quoted prices for identical assets or liabilities in active markets where the quoted price is readily available, and the price represents actual and regularly occurring market transactions on an arm’s length basis. An active market is one in which transactions occur with sufficient volume and frequency to provide pricing information on an ongoing basis. Valuation technique using observable inputs – Level 2 Assets and liabilities classified as Level 2 have been valued using models whose most significant inputs are observable in an active market. Such valuation techniques and models incorporate assumptions about factors observable in an active market, that other market participants would use in their valuations, including interest rate yield curve, exchange rates, volatilities, and prepayment and defaults rates. Valuation technique using significant unobservable inputs – Level 3 Assets and liabilities are classified as Level 3 if their valuation incorporates significant inputs that are not based on observable market data (unobservable inputs). A valuation input is considered observable if it can be directly observed from transactions in an active market, or if there is compelling external evidence demonstrating an executable exit price. An input is deemed significant if it is shown to contribute more than 10% to the valuation of the asset or liability. Unobservable input levels are generally determined based on observable inputs of a similar nature, historical observations or other analytical techniques. Fair value measurement hierarchy of the Group’s assets and liabilities carried at fair value: 2016 Valuation techniques Quoted market

price Level 1

Observable inputs

Level 2

Unobservable inputs

Level 3

Total LL million LL million LL million LL million Assets measured at fair vlaue: Derivative financial instruments: Forward foreign exchange contracts - 2,472 - 2,472 Financial assets at fair value through profit or loss:

Lebanese treasury bills (LL) - 1,094 - 1,094 Lebanese treasury bills (Eurobonds) 3,688 - - 3,688 Debt securities issued by banks - 37,688 - 37,688 Funds 20,376 - - 20,376 Shares 94,196 23,228 - 117,424

Financial assets at fair value through other comprehensive income: Shares 12,593 11,741 874 25,208

Investment properties - - 1,483 1,483 Liabilities measured at fair value: Derivative financial instruments: Forward foreign exchange contracts -

9,507 - 9,507

Société Générale de Banque au Liban S.A.L. F.159

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2016

51 FAIR VALUE MEASUREMENT (continued) Fair value measurement hierarchy of the Group’s assets and liabilities carried at fair value (continued):

2015

Valuation techniques

Quoted market price

Level 1

Observable inputs

Level 2

Unobservable inputs

Level 3

Total LL million LL million LL million LL million Assets measured at fair vlaue: Derivative financial instruments: Forward foreign exchange contracts - 2,969 - 2,969 Financial assets at fair value through profit or loss:

Lebanese treasury bills (LL) - 1,093 - 1,093 Lebanese treasury bills (Eurobonds) 17,540 - - 17,540 Debt securities issued by banks - 37,688 - 37,688 Foreign governmental debt securities - 68,551 - 68,551 Funds 18,542 - - 18,542 Shares 74,866 21,526 - 96,392

Financial assets at fair value through other comprehensive income: Shares 13,935 11,750 875 26,560

Investment properties - - 1,480 1,480 Liabilities measured at fair value: Derivative financial instruments: Forward foreign exchange contracts - (4,450) - (4,450) There were no transfers between levels during 2016 (2015: the same). Assets and liabilities measured at fair value using a valuation technique with significant observable inputs (Level 2) Derivatives Derivative products are valued using a valuation technique with market observable inputs. The most frequently applied valuation techniques include forward pricing and swap models, using present value calculations. The models incorporate various inputs including the credit quality of counterparties, foreign exchange spot and forward rates and interest rate curves. Government bonds, certificates of deposit and other debt securities The Group values these unquoted debt securities using discounted cash flow valuation models where the lowest level input that is significant to the entire measurement is observable in an active market. These inputs include assumptions regarding current rates of interest, implied volatilities, credit spreads and broker statements. Assets and liabilities measured at fair value using a valuation technique with significant unobservable inputs (Level 3) Equity shares of non-listed entities These are investments in private companies, for which there is no or only limited sufficient recent information to determine fair value. The Group determined that cost adjusted to reflect the investee’s financial position and results since initial recognition represents the best estimate of fair value. Investment properties Investment properties valued using unobservable inputs are generally determined based on observable inputs of a similar nature, historical observations or other techniques. Investment properties are mainly valued by independent qualified valuers on the basis of current market prices of similar properties sold in the same area.

Société Générale de Banque au Liban S.A.L. F.160

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2016 51 FAIR VALUE MEASUREMENT (continued) Comparison of carrying amounts and fair values for financial assets and liabilities not held at fair value The fair values included in the table below were calculated for disclosure purposes only. The fair valuation techniques and assumptions described below relate only to the fair value of the Group’s financial instruments not measured at fair value. Other institutions may use different methods and assumptions for their fair value estimations, and therefore such fair value disclosures cannot necessarily be compared from one institution to another. 2016 2015

Carrying value Fair value

Carrying value Fair value

LL million LL million LL million LL million Financial assets Cash and balances with the Central Banks 8,544,014 8,544,014 5,817,726 5,817,726 Due from banks and financial institutions 798,629 798,629 698,264 698,264 Amounts due from affiliated banks and financial institutions 918,608 918,608 777,435 777,435 Reverse repurchase agreements - - 416,910 416,910 Loans to banks and financial institutions 8,397 8,397 8,397 8,397 Financial assets pledged as collateral 1,175,427 1,163,669 576,118 579,990 Loans and advances to customers at amortized cost 6,627,649 6,627,649 5,929,958 5,929,958 Loans and advances to related parties at amortized cost

100,737 100,737 153,546 153,546

Financial assets at amortized cost 9,300,920 9,163,745 8,928,466 9,017,179 ___________ ___________ ___________ __________ 27,474,381 27,325,448 23,306,820 23,399,405 ___________ ___________ ___________ __________ Financial liabilities

Due to the Central Banks 431,765 429,842 609,961 607,980 Loans and repurchase agreements 2,062,317 2,062,317 2,116,164 2,116,164 Due to banks and financial institutions 568,948 568,948 612,282 612,282 Amounts due to affiliated banks and financial institutions 1,429 1,429 21,185 21,185 Customers’ deposits at amortized cost 21,788,334 21,788,334 18,679,877 18,679,877 Related parties’ deposits at amortized cost 181,207 181,207 132,771 132,771 ___________ ___________ ___________ __________ 25,034,000 25,032,077 22,172,240 22,170,259 ___________ ___________ ___________ __________

Fair values measurement hierarchy of the Group’s financial assets and liabilities for which fair values are disclosed: 2016

Valuation techniques

Quoted market price

Level 1

Observable inputs

Level 2

Unobservable inputs

Level 3

Total LL million LL million LL million LL million Assets for which fair values are disclosed: Cash and balances with the Central Banks 106,330 8,437,684 - 8,544,014 Due from banks and financial institutions - 798,629 - 798,629 Amounts due from affiliated banks and financial institutions - 918,608 - 918,608 Loans to banks and financial institutions - 8,397 - 8,397 Financial assets at amortized cost pledged as collateral: Lebanese treasury bills - 183,296 - 183,296 Foreign governmental bonds - 279,006 - 279,006 Certificates of deposit issued by the Central Bank of Lebanon - 701,367 - 701,367 Loans and advances to customers at amortized cost - - 6,627,649 6,627,649 Loans and advances to related parties at amortized cost - - 100,737 100,737 Financial assets at amortized cost: Lebanese treasury bills (LL) - 2,900,272 - 2,900,272 Lebanese treasury bills (Eurobonds) 2,577,876 - - 2,577,876 Foreign governmental debt securities 58,751 669,410 - 728,161 Corporate bonds 44,040 20,246 - 64,286 Certificates of deposit issued by the Central Bank of Lebanon - 2,873,362 - 2,873,362 Certificates of deposit issued by banks - 10,578 - 10,578 Debt securities issued by banks 9,210 - - 9,210 Liabilities for which fair values are disclosed: Due to the Central Banks - (429,842) - (429,842) Loans and repurchase agreements - (2,062,317) - (2,062,317) Due to banks and financial institutions - (568,948) - (568,948) Amounts due to affiliated banks and financial institutions - (1,429) - (1,429) Customers’ deposits at amortized cost - (21,788,334) - (21,788,334) Related parties’ deposits at amortized cost - (181,207) - (181,207)

Société Générale de Banque au Liban S.A.L. F.161

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2016 51 FAIR VALUE MEASUREMENT (continued) Fair values measurement hierarchy of the Group’s financial assets and liabilities for which fair values are disclosed (continued): 2015

Valuation techniques

Quoted market price

Level 1

Observable inputs

Level 2

Observable inputs

Level 3

Total LL million LL million LL million LL million Assets for which fair values are disclosed: Cash and balances with the Central Banks 97,822 5,719,904 - 5,817,726 Due from banks and financial institutions - 698,264 - 698,264 Amounts due from affiliated banks and financial institutions - 777,435 - 777,435 Reverse repurchase agreeements - 416,910 - 416,910 Loans to banks and financial institutions - 8,397 - 8,397 Financial assets at amortized cost pledged as collateral: Lebanese treasury bills - 339,921 - 339,921 Foreign governmental bonds - 240,069 - 240,069 Loans and advances to customers at amortized cost - - 5,929,958 5,929,958 Loans and advances to related parties at amortized cost - - 153,546 153,546 Financial assets at amortized cost: Lebanese treasury bills (LL) - 3,252,205 - 3,252,205 Lebanese treasury bills (Eurobonds) 2,524,484 - - 2,524,484 Foreign governmental debt securities 80,822 445,171 - 525,993 Corporate bonds 110,786 20,930 - 131,716 Certificates of deposits issued by foreign central banks - 141,515 - 141,515 Certificates of deposit issued by the Central Bank of Lebanon - 2,345,560 - 2,345,560 Certificates of deposit issued by banks - 10,578 - 10,578 Debt securities issued by banks 85,128 - - 85,128 Liabilities for which fair values are disclosed: Due to the Central Banks - (607,980) - (607,980) Loans and repurchase agreements - (2,116,164) - (2,116,164) Due to banks and financial institutions - (612,282) - (612,282) Amounts due to affiliated banks and financial institutions - (21,185) - (21,185) Customers’ deposits at amortized cost

- (18,679,877) - (18,679,877

) Related parties’ deposits at amortized cost - (132,771) - (132,771)

Assets and liabilities for which fair value is disclosed using a valuation technique with significant observable inputs (Level 2) and / or significant unobservable inputs (Level 3) Deposits with banks and loans and advances to banks For the purpose of this disclosure there is minimal difference between fair value and carrying amount of these financial assets as they are short-term in nature or have interest rates that re-price frequently. The fair value of deposits with longer maturities are estimated using discounted cash flows applying market rates for counterparties with similar credit quality. Government bonds, certificates of deposits and other debt securities The Bank values these unquoted debt securities using discounted cash flow valuation models where the lowest level input that is significant to the entire measurement is observable in an active market. These inputs include assumptions regarding current rates of interest, implied volatilities, credit spreads and broker statements. Loans and advances to banks and customers For the purpose of this disclosure, fair value of loans and advances is estimated using discounted cash flows by applying current rates for new loans granted during the year with similar remaining maturities and to counterparties with similar credit quality. Deposits from banks and customers In many cases, the fair value disclosed approximates carrying value because these financial liabilities are short-term in nature or have interest rates that re-price frequently. The fair value for deposits with long-term maturities, such as time deposits, are estimated using discounted cash flows, applying either market rates or current rates for deposits of similar remaining maturities.

Société Générale de Banque au Liban S.A.L. F.162

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2016

52 MATURITY ANALYSIS OF ASSETS AND LIABILITIES The table below shows an analysis of assets and liabilities analyzed according to when they are expected to be recovered or settled. At 31 December 2016

Less than one year

More than one year Total

LL million LL million LL million ASSETS Cash and balances with the Central Banks 1,234,877 7,309,137 8,544,014 Due from banks and financial institutions 768,627 30,002 798,629 Amounts due from affiliated banks and financial institutions 918,608 - 918,608 Loans to banks and financial institutions - 8,397 8,397 Derivative financial instruments 2,472 - 2,472 Financial assets at amortized cost pledged as collateral 182,535 992,892 1,175,427 Financial assets at fair value through profit or loss 180,270 - 180,270 Loans and advances to customers at amortized cost 3,807,450 2,820,199 6,627,649 Loans and advances to related parties at amortized cost 89,337 11,400 100,737 Debtors by acceptances 211,715 - 211,715 Financial assets at amortized cost 917,533 8,383,387 9,300,920 Financial assets at fair value through other comprehensive income

1,017 24,191 25,208

Property and equipment 11,270 422,515 433,785 Intangible assets 5,407 43,910 49,317 Investment properties - 1,483 1,483 Non-current assets held for sale 168,304 7,615 175,919 Other assets 105,138 4,662 109,800 Goodwill - 3,405 3,405 __________ __________ __________ TOTAL ASSETS 8,604,560 20,063,195 28,667,755 __________ __________ __________ LIABILITIES Due to the Central Banks 208,034 223,731 431,765 Loans and repurchase agreements 1,046,725 1,015,592 2,062,317 Due to banks and financial institutions 546,700 22,248 568,948 Amounts due to affiliated banks and financial institutions 1,429 - 1,429 Derivative financial instruments 9,507 - 9,507 Customers’ deposits at amortized cost 20,681,680 1,106,654 21,788,334 Related parties’ deposits at amortized cost 181,207 - 181,207 Engagements by acceptances 211,715 - 211,715 Other liabilities 371,054 218,710 589,764 Provision for risks and charges 27,366 235,644 263,010 __________ __________ __________ TOTAL LIABILITIES 23,285,417 2,822,579 26,107,996 __________ __________ __________ NET (14,680,857) 17,240,616 2,559,759 __________ __________ __________

Société Générale de Banque au Liban S.A.L. F.163

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2016 52 MATURITY ANALYSIS OF ASSETS AND LIABILITIES (continued) At 31 December 2015

Less than one year

More than one year Total

LL million LL million LL million ASSETS Cash and balances with the Central Banks 1,589,527 4,228,199 5,817,726 Due from banks and financial institutions 654,629 43,635 698,264 Amounts due from affiliated banks and financial institutions 777,435 - 777,435 Reverse repurchase agreements 416,910 - 416,910 Loans to banks and financial institutions - 8,397 8,397 Derivative financial instruments 2,969 - 2,969 Financial assets at amortized cost pledged as collateral 158,147 417,971 576,118 Financial assets at fair value through profit or loss 239,806 - 239,806 Loans and advances to customers at amortized cost 2,772,966 3,156,992 5,929,958 Loans and advances to related parties at amortized cost 118,432 35,114 153,546 Debtors by acceptances 167,061 2,430 169,491 Financial assets at amortized cost 516,970 8,411,496 8,928,466 Financial assets at fair value through other comprehensive income

532 26,028 26,560

Property and equipment 10,932 203,413 214,345 Intangible assets 4,470 36,475 40,945 Investment properties - 1,480 1,480 Non-current assets held for sale 185,318 - 185,318 Other assets 77,095 23,776 100,871 Goodwill - 167,040 167,040 __________ __________ __________ TOTAL ASSETS 7,693,199 16,762,446 24,455,645 __________ __________ __________ LIABILITIES Due to the Central Banks 181,508 428,453 609,961 Loans and repurchase agreements 990,425 1,125,739 2,116,164 Due to banks and financial institutions 584,487 27,795 612,282 Amounts due to affiliated banks and financial institutions 21,185 - 21,185 Derivative financial instruments 4,450 - 4,450 Customers’ deposits at amortized cost 18,599,222 80,655 18,679,877 Related parties’ deposits at amortized cost 131,861 910 132,771 Engagements by acceptances 167,061 2,430 169,491 Other liabilities 142,048 - 142,048 Provision for risks and charges 22,235 53,502 75,737 __________ __________ __________ TOTAL LIABILITIES 20,844,482 1,719,484 22,563,966 __________ __________ __________ NET (13,151,283) 15,042,962 1,891,679 __________ __________ __________ 53 RISK MANAGEMENT The Group devotes significant resources to the ongoing adaptation of its risk management framework, in order to keep pace with the increasing diversification of its activities. Risk management is implemented in compliance with the two following fundamental principles:

• risk assessment departments are completely independent from the operating divisions • a consistent approach to risk assessment and monitoring is applied at the Group level

a) Risk management structure The Board of Directors is ultimately responsible for identifying and controlling risks; however, there are separate independent bodies responsible for managing and monitoring risks. Board of Directors The Board of Directors is responsible for the overall risk management approach and for approving risk strategies and principles.

Société Générale de Banque au Liban S.A.L. F.164

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2016 53 RISK MANAGEMENT (continued) a) Risk management structure (continued) Risk Management The Risk Management Unit is responsible for implementing and maintaining risk related procedures to ensure an independent control process. Group Treasury Group Treasury is responsible for managing the Group’s assets and liabilities and the overall financial structure. It is also primarily responsible for the funding and liquidity risks of the Group. Internal Audit Risk management processes throughout the Group are audited annually by the internal audit function, that examines both the adequacy of the procedures and the Group’s compliance with the procedures. Internal Audit discusses the results of all assessments with management, and reports its findings and recommendations to the Board of Directors. b) Risk measurement and reporting systems The Group is using a RAROC (Risk-Adjusted Return on Capital) approach to quantify its credit risk. One of the main objectives is to establish, using quantitative methods, the level of loss expected on credit transactions over the course of the business cycle. Monitoring and controlling risks is primarily performed based on limits established by the Group. These limits reflect the business strategy and market environment of the Group as well as the level of risk that the Group is willing to accept, with additional emphasis on selected industries. In addition, the Group monitors and measures the overall risk-bearing capacity in relation to the aggregate risk exposure across all risk types and activities. c) Risk mitigation As part of its overall risk management, the Group uses derivatives and other instruments to manage exposures resulting from changes in interest rates, foreign currencies, credit risks, and exposures arising from forecast transactions. The Group actively uses collateral to reduce its credit risks. d) Excessive concentration The Group also attempts to control credit risk by regular monitoring of its credit exposures and continuous assessment of the creditworthiness of counterparties by the credit risk committee. 53.1 CREDIT RISK Credit risk is the risk that the Group will incur a loss because its customers or counterparties fail to discharge their contractual obligations. The Group manages and controls credit risk by setting limits on the amount of risk it is willing to accept for individual counterparties and for geographical and industry concentrations, and by monitoring exposures in relation to such limits. The Group has established a credit quality review process to provide early identification of possible changes in the creditworthiness of counterparties, including regular collateral revisions. Counterparty limits are established by the use of a credit risk classification system, which assigns each counterparty a risk rating. Risk ratings are subject to regular revision. The credit quality review process aims to allow the Group to assess the potential loss as a result of the risks to which it is exposed and take corrective actions. The risk rating system, which is managed by an independent unit, provides a rating based on client and transaction level. The classification system includes ten grades, of which five grades relate to credit facilities which are neither past due nor impaired (risk rating “1”, “2”, “3”, “4”, and “5”) and credit facilities which are past due but not impaired (risk rating “6a” and “6c”), substandard individually impaired loans (risk rating “6b”) and doubtful individually impaired loans (risk rating “7” and “8”). The Group uses the above internal rating system for the classifications of all of its financial assets portfolio.

Société Générale de Banque au Liban S.A.L. F.165

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2016 53 RISK MANAGEMENT (continued) 53.1 CREDIT RISK (continued) Derivative financial instruments Credit risk arising from derivative financial instruments is, at any time, limited to those with positive fair values, as recorded on the consolidated statement of financial position. In the case of credit derivatives, the Group is also exposed to or protected from the risk of default of the underlying entity referenced by the derivative. With gross-settled derivatives, the Group is also exposed to a settlement risk, being the risk that the Group honors its obligation but the counterparty fails to deliver the counter-value. Credit-related commitments risk The Group makes available to its customers guarantees which may require that the Group makes payments on their behalf and enters into commitments to extend credit lines to secure their liquidity needs. Letters of credit and guarantees (including standby letters of credit) commit the Group to make payments on behalf of customers in the event of a specific act, generally related to the import or export of goods. Such commitments expose the Group to similar risks as loans and are mitigated by the same control processes and policies. Analysis of maximum exposure to credit risk and collateral and other credit enhancements The following table shows the maximum exposure to credit risk by class of financial asset. It further shows the total fair value of collateral, capped to the maximum exposure to which it relates and the net exposure to credit risk. Collateral

31 December 2016:

Maximum exposure

Cash

Securities

Real estate

Letters of credit /

guarantees

Net credit exposure

LL million LL million LL million LL million LL million LL million Balances with the Central Banks 8,437,684 - - - - 8,437,684 Due from banks and financial institutions 798,629 - - -

- 798,629

Amounts due from affiliated banks and

financial institutions 918,608 - - -

-

918,608 Loans to banks and financial institutions 8,397 - - (8,397)

- -

Financial assets at amortized cost pledged as collateral 1,175,427 - - -

- 1,175,427

Derivative financial instruments 2,472 - - - - 2,472 Financial assets at fair value

through profit or loss 180,270 - - -

-

180,270 Loans and advances to customers

at amortized cost:

Retail loans 2,781,322 (332,586) (260) (1,546,396) (105,890) 796,190 Corporate loans 3,846,327 (340,012) (3) (1,355,538) (15,901) 2,134,873 Loans and advances to related

parties at amortized cost

Retail loans 38,772 (36) - (106) - 38,630 Corporate loans 61,965 (2,314) (91) (12,362) - 47,198 Debtors by acceptances 211,715 (14,223) - (3,816) - 193,676 Financial assets at amortized cost 9,300,920 - - - - 9,300,920 Financial assets at fair value through other comprehensive income 25,208 - - -

-

25,208 ____________ ___________ ___________ ___________ ___________ ___________ 27,787,716 (689,171) (354) (2,926,615) (121,791) 24,049,785 ____________ ___________ ___________ ____________ ___________ ____________ Financial guarantees 158,970 (37,795) (2) (14,827) - 106,346 Documentary credits 257,843 (20,018) - (18,568) - 219,257 Undrawn credit lines 1,120,491 (94,622) (3,623) (46,729) - 975,517 ____________ ___________ ___________ ___________ ___________ ___________ 1,537,304 (152,435) (3,625) (80,124) - 1,301,120 ____________ ___________ ___________ ___________ ___________ ___________ 29,325,020 (841,606) (3,979) (3,006,739) (121,791) 25,350,905 ____________ ___________ ___________ ___________ ___________ ___________

Société Générale de Banque au Liban S.A.L. F.166

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2016 53 RISK MANAGEMENT (continued) 53.1 CREDIT RISK (continued) Analysis of maximum exposure to credit risk and collateral and other credit enhancements (continued) Collateral

31 December 2015:

Maximum exposure

Cash

Securities

Real estate

Letters of credit /

guarantees

Net credit exposure

LL million LL million LL million LL million LL million LL million Balances with the Central Banks 5,719,844 - - - - 5,719,844 Due from banks and financial institutions 698,264 - - -

- 698,264

Amounts due from affiliated banks and

financial institutions 777,435 - - -

-

777,435 Reverse repurchase agreements 416,910 - (416,910) - - - Loans to banks and financial

institutions 8,397 - - (8,397) -

- Financial assets at amortized cost pledged as collateral 576,118 - - -

- 576,118

Derivative financial instruments 2,969 - - - - 2,969 Financial assets at fair value through profit or loss 239,806 - - -

- 239,806

Loans and advances to customers at amortized cost:

Retail loans 2,515,180 (272,006) (174,495) (1,392,535) (10,829) 665,315 Corporate loans 3,414,778 (421,627) (57,136) (1,257,409) - 1,678,606 Loans and advances to related

parties at amortized cost

Retail loans 40,781 - - (106) - 40,675 Corporate loans 112,765 (2,335) - (12,362) - 98,068 Debtors by acceptances 169,491 (1,935) - (3,639) - 163,917 Financial assets at amortized cost 8,928,466 - - - - 8,928,466 Financial assets at fair value through other comprehensive income 26,560 - - -

-

26,560 ____________ ___________ ___________ ___________ ___________ ___________ 23,647,764 (697,903) (648,541) (2,674,448) (10,829) 19,616,043 ____________ ___________ ___________ ____________ ___________ ____________ Financial guarantees 246,019 (16,306) (2) (16,399) - 213,312 Documentary credits 169,596 (5,537) - (16,133) - 147,926 Undrawn credit lines 976,146 (79,650) (3,572) (70,052) - 822,872 ____________ ___________ ___________ ___________ ___________ ___________ 1,391,761 (101,493) (3,574) (102,584) - 1,184,110 ____________ ___________ ___________ ___________ ___________ ___________ 25,039,525 (799,396) (652,115) (2,777,032) (10,829) 20,800,153 ____________ ___________ ___________ ___________ ___________ ___________ Collateral and other credit enhancements The amount and type of collateral required depends on an assessment of the credit risk of the counterparty. Guidelines are implemented regarding the acceptability of types of collateral and valuation parameters. Management monitors the market value of collateral, requests additional collateral in accordance with the underlying agreement, and monitors the market value of collateral obtained during its review of the adequacy of the allowance for impairment losses. The main types of collateral obtained are as follows: Securities The balances shown above represent the fair value of the securities. Letters of credit / guarantees The Group holds in some cases guarantees, letters of credit and similar instruments from banks and financial institutions which enable it to claim settlement in the event of default on the part of the counterparty. The balances shown represent the notional amount of these types of guarantees held by the Group.

Société Générale de Banque au Liban S.A.L. F.167

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2016 53 RISK MANAGEMENT (continued) 53.1 CREDIT RISK (continued) Collateral and other credit enhancement (continued) Real estate (commercial and residential) The Group holds in some cases a first degree mortgage over residential property (for housing loans) and commercial property (for commercial loans). The value shown above reflects the fair value of the property limited to the related mortgaged amount. Other In addition to the above, the Group also obtains guarantees from parent companies for loans to their subsidiaries, personal guarantees for loans to companies owned by individuals and assignments of insurance proceeds and revenues, which are not reflected in the above table. Risk concentrations: maximum exposure to credit risk without taking account of any collateral and other credit enhancements The Group’s concentrations of risk are managed by client/counterparty and by geographical region. The maximum credit exposure to any client as at 31 December 2016 was LL 368,148 million (2015: LL 309,334 million) before taking account of collateral or other credit enhancements and LL 147,711 million (2015: LL 52,732 million) net of such protection. The following table shows the maximum exposure to credit risk for the components of the consolidated statement of financial position, including derivatives, by geography of counterparty before the effect of mitigation through the use of master netting and collateral agreements. Where financial instruments are recorded at fair value, the amounts shown represent the current credit risk exposure but not the maximum risk exposure that could arise in the future as a result of changes in values. Geographic analysis 2016 2015

Lebanon

Outside Lebanon Total Lebanon

Outside Lebanon Total

LL million LL million LL million LL million LL million LL million Financial assets Cash and balances with the Central Banks 8,225,975 318,039 8,544,014 5,231,801 585,925 5,817,726 Due from banks and financial institutions 123,285 675,344 798,629 120,580 577,684 698,264 Amounts due from affiliated banks and financial institutions - 918,608 918,608 - 777,435 777,435 Reverse repurchase agreements - - - 416,910 - 416,910 Loans to banks and financial institutions - 8,397 8,397 - 8,397 8,397 Derivative financial instruments 1,336 1,136 2,472 326 2,643 2,969 Financial assets at amortized cost pledged as collateral - Lebanese treasury bills 181,885 - 181,885 336,049 - 336,049 - Certificates of deposit 722,111 - 722,111 - Other governmental debt securities - 271,431 271,431 - 240,069 240,069 Financial assets at fair value through profit or loss - Shares 96,229 21,195 117,424 74,714 21,678 96,392 - Funds - 20,376 20,376 - 18,542 18,542 - Other governmental debt securities - - - - 68,551 68,551 - Lebanese treasury bills 4,782 - 4,782 18,633 - 18,633 - Debt securities issued by banks 37,688 - 37,688 37,688 - 37,688 Loans and advances to customers at amortized cost 4,696,755 1,930,894 6,627,649 4,231,317 1,698,641 5,929,958 Loans and advances to related parties at amortized cost 72,136 28,601 100,737 79,419 74,127 153,546 Financial assets at amortized cost - Lebanese treasury bills 5,500,714 - 5,500,714 5,712,421 - 5,712,421 - Other governmental debt securities - 715,091 715,091 - 512,852 512,852 - Certificates of deposit 3,012,478 - 3,012,478 2,339,079 141,515 2,480,594 - Other debt securities - 72,637 72,637 - 222,599 222,599 Financial assets at fair value through other comprehensive income - Shares 8,569 16,639 25,208 10,395 16,165 26,560 ___________ __________ __________ __________ __________ _________ 22,683,943 4,998,388 27,682,331 18,609,332 4,966,823 23,576,155

Société Générale de Banque au Liban S.A.L. F.168

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2016

53 RISK MANAGEMENT (continued) 53.1 CREDIT RISK (continued) Credit quality per class of financial assets The credit quality of financial assets is managed by the Group using internal credit ratings. The tables below show the credit quality by class of asset based on the Group’s internal credit rating system. The amounts presented are gross of impairment allowances. Neither past

due nor impaired

Past due but not impaired

Individually impaired Substandard Doubtful Total LL million LL million LL million LL million LL million 2016 Cash and balances with the Central Banks 8,544,014 - - - 8,544,014 Due from banks and financial institutions 798,087 - - 817 798,904 Loans to banks and financial institutions - - - 24,668 24,668 Amounts due from affiliated banks and financial institutions 918,608 - - - 918,608 Derivative financial instruments 2,472 - - - 2,472 Financial assets at fair value through profit or loss - Shares 117,424 - - - 117,424 - Funds 20,376 - - - 20,376 - Lebanese treasury bills 4,782 - - - 4,782 - Debt securities issued by banks 37,688 - - - 37,688 Loans and advances to customers at amortized cost - Corporate 3,749,068 36,744 61,500 407,013 4,254,325 - Retail 2,661,384 28,563 24,942 270,398 2,985,287 Loans and advances to related parties at amortized cost - Corporate 58,195 - - 24,818 83,013 - Retail 38,772 - - - 38,772 Financial assets at amortized cost pledged as collateral - Lebanese treasury bills 181,885 - - - 181,885 - Certificates of deposit 722,111 - - - 722,111 - Other governmental bonds 271,431 - - - 271,431 Financial assets at amortized cost - Lebanese treasury bills 5,500,714 - - - 5,500,714 - Other governmental debt securities 715,091 - - - 715,091 - Certificates of deposit 3,012,478 - - - 3,012,478 - Other debt securities 72,637 - - 1,384 74,021 Financial assets at fair value through other comprehensive income

- Shares 25,208 - - 15 25,223 ____________ ____________ ____________ __________ __________ 27,452,425 65,307 86,442 729,113 28,333,287 ____________ ____________ ____________ __________ __________ Moody’s equivalent Aaa – B3* Not rated Not rated Not rated Not rated Neither past

due nor impaired

Past due but not impaired

Individually impaired

Substandard Doubtful Total

LL million LL million LL million LL million LL million 2015 Cash and balances with the Central Banks 5,817,726 - - - 5,817,726 Due from banks and financial institutions 697,416 - - 993 698,409 Reverse repurchase agreements 416,910 - - - 416,910 Loans to banks and financial institutions - - - 21,920 21,920 Amounts due from affiliated banks and financial institutions 777,435 - - - 777,435 Derivative financial instruments 2,969 - - - 2,969 Financial assets at fair value through profit or loss - Shares 96,392 - - - 96,392 - Funds 18,542 - - - 18,542 - Lebanese treasury bills 18,633 - - - 18,633 - Debt securities issued by banks 37,688 - - - 37,688 - Other governmental debt securities 68,551 - - - 68,551 Loans and advances to customers at amortized cost - Corporate 3,295,457 70,773 62,701 405,816 3,834,747 - Retail 2,402,494 35,155 20,702 218,242 2,676,593 Loans and advances to related parties at amortized cost - Corporate 109,349 - - 22,890 132,239 - Retail 40,781 - - - 40,781 Financial assets at amortized cost pledged as collateral - Lebanese treasury bills 336,049 - - - 336,049 - Other governmental bonds 240,069 - - - 240,069 Financial assets at amortized cost - Lebanese treasury bills 5,712,421 - - - 5,712,421 - Other governmental debt securities 512,852 - - - 512,852 - Certificates of deposit 2,480,594 - - - 2,480,594 - Other debt securities 188,902 - - 43,292 232,194 Financial assets at fair value through other comprehensive income

- Shares 26,560 - - 15 26,575 ____________ ____________ ____________ __________ __________ 23,297,790 105,928 83,403 713,168 24,200,289 ____________ ____________ ____________ __________ __________ Moody’s equivalent Aaa – B3* Not rated Not rated Not rated Not rated

(*) Amounts due from affiliated banks and financial institutions, derivative financial instruments, loans and

advances to customers, loans and advances to related parties are not rated by Moody’s.

Société Générale de Banque au Liban S.A.L. F.169

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2016 53 RISK MANAGEMENT (continued) 53.1 CREDIT RISK (continued) It is the Group’s policy to maintain accurate and consistent risk rating across the credit portfolio. This facilitates focused management of the applicable risks and the comparison of credit exposures across all lines of business, geographic regions and products. The rating system is supported by a variety of financial analytics, combined with processed market information to provide the main inputs for the measurement of counterparty risk. All internal risk ratings are tailored to the various categories and are derived in accordance with the Group’s rating policy. The attributable risks are assessed and updated regularly. The classification of loans and advances to customers and related parties at amortized cost as in accordance with the ratings of Central Bank of Lebanon circular 58 are as follows: 2016 Gross

balance Unrealized

interest Impairment allowances

Net balance

LL million LL million LL million LL million Regular 5,800,273 - - 5,800,273 Follow up 484,561 - - 484,561 Follow-up and regularization 287,892 - - 287,892 Substandard 86,442 (37,564) - 48,878 Doubtful 512,120 (221,980) (154,808) 135,332 Bad 190,109 (121,308) (66,176) 2,625 _____________ _____________ _____________ _____________ 7,361,397 (380,852) (220,984) 6,759,561 Collective impairment - - (31,175) (31,175) _____________ _____________ _____________ _____________ 7,361,397 (380,852) (252,159) 6,728,386 _____________ _____________ _____________ _____________

2015

Gross balance

Unrealized interest

Impairment allowances

Net balance

LL million LL million LL million LL million Regular 5,120,710 - - 5,120,710 Follow up 520,129 - - 520,129 Follow-up and regularization 313,170 - - 313,170 Substandard 83,403 (39,334) - 44,069 Doubtful 488,590 (231,217) (150,197) 107,176 Bad 158,358 (101,364) (54,663) 2,331 _____________ _____________ _____________ _____________ 6,684,360 (371,915) (204,860) 6,107,585 Collective impairment - - (24,081) (24,081) _____________ _____________ _____________ _____________ 6,684,360 (371,915) (228,941) 6,083,504 _____________ _____________ _____________ _____________

Renegotiated loans Restructuring activity aims to manage customer relationships, maximize collection opportunities and, if possible, avoid foreclosure or repossession. Such activities include extended payment arrangements, deferring foreclosure, modification, loan rewrites and/or deferral of payments pending a change in circumstances. Restructuring policies and practices are based on indicators or criteria which, in the judgment of local management, indicate that repayment will probably continue. The application of these policies varies according to the nature of the market and the type of the facility. 2016 2015 LL million LL million Corporate loans 141,567 249,108 Retail loans 16,154 27,473 ____________ ____________ 157,721 276,581 ____________ ____________

Société Générale de Banque au Liban S.A.L. F.170

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2016 53 RISK MANAGEMENT (continued) 53.1 CREDIT RISK (continued) Impairment assessment For accounting purposes, the Group uses an incurred loss model for the recognition of losses on impaired financial assets. This means that losses can only be recognized when objective evidence of a specific loss event has been observed. Triggering events include the following:

- Significant financial difficulty of the customer; - A breach of contracts such as default of payment; - Where the Group grants the customer a concession due to the customer experiencing financial difficulty; - It becomes probable that the customer will enter bankruptcy or other financial reorganization; - Observable data that suggests that there is a decrease in the estimated future cash flows of the loan.

Individually assessed allowances The Group determines the allowance appropriate for each individually significant loan or advance on an individual basis, taking into account any overdue payments of interests, credit rating downgrades, or infringement of the original terms of the contract. Items considered when determining allowance amounts include the sustainability of the counterparty’s business plan, its ability to improve performance once a financial difficulty has risen, projected receipts and the expected payout should bankruptcy ensue, the availability of other financial support, the realizable value of collateral and the timing of the expected cash flows. Impairment allowances are evaluated at each reporting date, unless unforeseen circumstances require more careful attention. Collectively assessed allowances Allowances are assessed collectively for losses on loans and advances and debt securities at amortized cost that are not individually significant (including credit cards, residential mortgages and unsecured consumer lending) and for individually significant loans that have been assessed individually and found not to be impaired. Allowances are evaluated separately at each reporting date with each portfolio. The Group generally bases its analysis on historical experience. However, when there are significant market developments, regional and / or global, the Group would include macroeconomic factors within its assessments. These factors include, depending on the characteristics of the individual or collective assessment: unemployment rates, current levels of bad debts, changes in laws, changes in regulations, bankruptcy trends, and other consumer data. The Group may use the aforementioned factors as appropriate to adjust the impairment allowances. The collective assessment is made for groups of assets with similar risk characteristics, in order to determine whether provision should be made due to incurred loss events for which there is objective evidence but whose effects are not yet evident in the individual loans assessments. The collective assessment takes account of data from the loan portfolio (such as historical losses on the portfolio, levels of arrears, credit utilization, loan to collateral ratios and expected receipts and recoveries once impaired) or economic data (such as current economic conditions, unemployment levels and local or industry-specific problems). This approximate delay between the time a loss is likely to have been incurred and the time it will be identified as requiring an individually assessed impairment allowance is also taken into consideration. Local management is responsible for deciding the length of this period which can extend for as long as one year. The impairment allowance is then reviewed by credit management to ensure alignment with the Group’s overall policy. Credit related commitments and financial guarantees are assessed and provisions are made in a similar manner as for loans. 53.2 MARKET RISK Market risk is the risk that the fair value or future cash flows of financial instruments will fluctuate due to changes in market variables such as interest rates, foreign exchange rates and equity prices. The Board has set limits on the value of risk that may be accepted. This is monitored on a weekly basis by the Asset and Liability Committee.

Société Générale de Banque au Liban S.A.L. F.171

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2016 53 RISK MANAGEMENT (continued) 53.2 MARKET RISK (continued) 53.2.1 INTEREST RATE RISK Interest rate risk arises from the possibility that changes in interest rates will affect future cash flows or the fair values of financial instruments. The Group is exposed to interest rate risk as a result of mismatches of interest rate repricing of assets, liabilities and off-statement of financial position items which will mature or reprice in a particular period. The Group manages this risk by matching the repricing of assets and liabilities through risk management strategies. Interest rate sensitivity The following table demonstrates the sensitivity to a reasonable possible change in interest rates, with all other variables held constant, of the Group’s consolidated income statement. The sensitivity of the consolidated income statement is the effect of the assumed changes in interest rates on the profit or loss for the year, based on the floating rate financial assets and financial liabilities held at 31 December, including the effect of hedging instruments. 2016 2015

Currency

Increase/decrease Sensitivity of profit or loss

Increase/ decrease

Sensitivity of profit or loss

in basis points LL million in basis points LL million Lebanese Lira + 50 6,955 + 50 5,638 US Dollars + 50 9,034 + 50 9,177 Euro + 50 (241) + 50 650 Lebanese Lira - 50 (6,955) - 50 (5,638) US Dollars - 50 (9,034) - 50 (9,177) Euro - 50 241 - 50 (650) Interest sensitivity gap The table below analyses the Group’s interest risk exposure on financial assets and liabilities. The Group’s assets and liabilities are included at carrying amount and categorized by the earlier of contractual repricing or maturity dates. 2016 (LL million) Non Up to 1 1 to 3 3 months 1 to 2 2 to 5 Over 5 interest month months to 1 year years years years bearing Total ASSETS Cash and balances with the Central Banks 993,461 815,306 47,889 - 1,252,750 4,623,881 810,727 8,544,014 Due from banks and financial institutions 326,844 164,378 24,578 - - 6,301 276,528 798,629 Amounts due from affiliated banks and financial institutions 545,403 12,340 47,889 - - - 312,976 918,608 Loans to banks and financial institutions 8,397 - - - - - - 8,397 Financial assets at amortized cost pledged as collateral - 746 170,000 483 451,767 537,791 14,640 1,175,427 Derivative financial instruments - - - - - - 2,472 2,472 Financial assets at fair value through profit or loss - 541 - 478 1,076 40,314 137,861 180,270 Loans and advances to customers at amortized cost 862,730 2,001,541 2,972,104 297,901 103,523 376,900 12,950 6,627,649 Loans and advances to related parties at amortized cost 47,362 377 52,970 - - - 28 100,737 Financial assets at amortized cost 40,646 336,933 410,609 1,203,521 2,260,982 4,910,956 137,273 9,300,920 Financial assets at fair value through other comprehensive income - - - - - - 25,208 25,208 ___________ __________ __________ __________ __________ _________ ________ _________ TOTAL ASSETS 2,824,843 3,332,162 3,726,039 1,502,383 4,070,098 10,496,143 1,730,663 27,682,331 ___________ __________ __________ __________ __________ _________ ________ _________ LIABILITIES Due to the Central Banks - 10,410 176,017 1,458 6,500 234,472 2,908 431,765 Loans and repurchase agreements 152,165 649,280 267,054 - 958,973 22,172 12,673 2,062,317 Due to banks and financial institutions 398,504 77,080 29,536 1,131 12,004 9,112 41,581 568,948 Amounts due to affiliated banks and financial institutions 965 - - - - - 464 1,429 Customers’ deposits at amortized cost 10,984,269 3,416,185 3,774,424 801,615 187,617 322,388 2,301,836 21,788,334 Related parties’ deposits at amortized cost 170,770 26 2,664 - - 1,137 6,610 181,207 Derivative financial instruments - - - - - - 9,507 9,507 ___________ __________ __________ __________ __________ _________ ________ _________ TOTAL LIABILITIES 11,706,673 4,152,981 4,249,695 804,204 1,165,094 589,281 2,375,579 25,043,507 ___________ __________ __________ __________ __________ _________ ________ _________ Total interest sensitivity gap (8,881,830) (820,819) (523,656) 698,179 2,905,004 9,906,862 (644,916) 2,638,824 ___________ __________ __________ __________ __________ _________ ________ _________

Société Générale de Banque au Liban S.A.L. F.172

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2016 53 RISK MANAGEMENT (continued) 53.2 MARKET RISK (continued) 53.2.1 INTEREST RATE RISK (continued) Interest sensitivity gap (continued) 2015 (LL million)

Non

Up to 1 1 to 3 3 months 1 to 2 2 to 5 Over 5 interest

month months to 1 year years years years bearing Total ASSETS Cash and balances with the Central Banks 1,379,846 909,210 - - 813,750 2,111,434 603,486 5,817,726 Due from banks and financial institutions 389,382 16,500 145,678 - 3,724 11,653 131,327 698,264 Amounts due from affiliated banks and financial institutions 383,867 4,449 56,930 - - - 332,189 777,435 Loans to banks and financial institutions 8,397 - - - - - - 8,397 Financial assets at amortized cost pledged as collateral - - 152,325 170,000 9,745 235,768 8,280 576,118 Derivative financial instruments - - - - - - 2,969 2,969 Financial assets at fair value through profit or loss - - 24,558 36,299 16,597 47,146 115,206 239,806 Loans and advances to customers at amortized cost 1,184,697 1,299,065 2,594,090 301,377 171,065 368,582 11,082 5,929,958 Loans and advances to related parties at amortized cost 59,145 507 82,445 488 1,602 9,311 48 153,546 Financial assets at amortized cost 151,326 43,073 199,668 656,894 2,698,626 5,056,163 122,716 8,928,466 Financial assets at fair value through other comprehensive income - - - - - - 26,560 26,560 Reverse repurchase agreements - 197,175 219,235 - - - 500 416,910 ___________ __________ __________ __________ __________ _________ ________ _________ TOTAL ASSETS 3,556,660 2,469,979 3,474,929 1,165,058 3,715,109 7,840,057 1,354,363 23,576,155 ___________ __________ __________ __________ __________ _________ ________ _________ LIABILITIES Due to the Central Banks 696 7,295 162,422 179,745 0 255,436 4,367 609,961 Loans and repurchase agreements 152,165 996,518 18,316 75,375 685,638 178,115 10,037 2,116,164 Due to banks and financial institutions 369,634 41,259 169,846 1,570 7,266 18,960 3,747 612,282 Amounts due to affiliated banks and financial institutions 19,774 - - - - - 1,411 21,185 Customers’ deposits at amortized cost 10,759,485 3,415,148 2,168,775 23,420 25,147 303,515 1,984,387 18,679,877 Related parties’ deposits at amortized cost 92,119 26,151 1,348 907 - 43 12,203 132,771 Derivative financial instruments - - - - - - 4,450 4,450 ___________ __________ __________ __________ __________ _________ ________ _________ TOTAL LIABILITIES 11,393,873 4,486,371 2,520,707 281,017 718,051 756,069 2,020,602 22,176,690 ___________ __________ __________ __________ __________ _________ ________ _________ Total interest sensitivity gap (7,837,213) (2,016,392) 954,222 884,041 2,997,058 7,083,988 (666,239) 1,399,465 ___________ __________ __________ __________ __________ _________ ________ _________

53.2.2 CURRENCY RISK Currency risk is the risk that the value of a financial instrument will fluctuate due to changes in foreign exchange rates. The Group has set limits on positions by currency. In accordance with the Group’s policy, positions are monitored on a daily basis and hedging strategies are used to ensure positions are maintained within established limits. Sensitivity to currency exchange rates The table below indicates the currencies to which the Group had significant exposure at 31 December on its non-trading monetary assets and liabilities and its forecast cash flows. The analysis calculates the effect of a reasonably possible movement of the currency rate against the Lebanese Lira, with all other variables held constant, on the consolidated income statement (due to fair value of currency sensitive non-trading monetary assets and liabilities). A negative amount in the table reflects a potential net reduction in consolidated income statement or equity, while a positive amount reflects a net potential increase. An equivalent decrease in each of the below currencies against the Lebanese Lira would have resulted in an equivalent but opposite impact. 2016 2015

Currency Change in currency rate

Effect on profit before tax

Change in currency rate

Effect on profit before tax

in % LL million in % LL million US Dollars + 2.5 (199) + 2.5 (148) Euro + 2.5 9 + 2.5 9

Société Générale de Banque au Liban S.A.L. F.173

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2016 53 RISK MANAGEMENT (continued) 53.2 MARKET RISK (continued) 53.2.2 CURRENCY RISK (continued) The following consolidated statements of financial position as at 31 December 2016 and 2015 are detailed in Lebanese Lira (LL million) and foreign currencies, primarily US$, translated into LL million: 31 December 2016 31 December 2015

Foreign currencies in

Total

Foreign currencies in

Total

LL million LL million LL million LL million LL million LL million

ASSETS Cash and balances with the Central Banks 3,898,288 4,645,726 8,544,014 1,121,440 4,696,286 5,817,726 Due from banks and financial institutions 36,106 762,523 798,629 55,876 642,388 698,264 Amounts due from affiliated banks and financial institutions - 918,608 918,608 - 777,435 777,435 Reverse repurchase agreements - - - - 416,910 416,910 Loans to banks and financial institutions - 8,397 8,397 - 8,397 8,397 Derivative financial instruments - 2,472 2,472 - 2,969 2,969 Financial assets at fair value through profit or loss 9,987 170,283 180,270 9,985 229,821 239,806 Loans and advances to customers at amortized cost 1,739,795 4,887,854 6,627,649 1,486,516 4,443,442 5,929,958 Loans and advances to related parties at amortized cost 161 100,576 100,737 36,296 117,250 153,546 Debtors by acceptances - 211,715 211,715 - 169,491 169,491 Financial assets at amortized cost 3,390,852 5,910,068 9,300,920 5,108,440 3,820,026 8,928,466 Financial assets at amortized cost pledged as collateral 181,884 993,543 1,175,427 336,049 240,069 576,118 Financial assets at fair value through other comprehensive income 521 24,687 25,208 521 26,039 26,560 Property and equipment 198,342 235,443 433,785 143,824 70,521 214,345 Intangible assets 46,139 3,178 49,317 38,746 2,199 40,945 Investment properties - 1,483 1,483 - 1,480 1,480 Non-current assets held for sale 5,315 170,604 175,919 7,991 177,327 185,318 Other assets 58,149 51,651 109,800 64,819 36,052 100,871 Goodwill (147,056) 150,461 3,405 1,012 166,028 167,040 ____________ ____________ ___________ ____________ __________ ____________ TOTAL ASSETS 9,418,483 19,249,272 28,667,755 8,411,515 16,044,130 24,455,645 ____________ ____________ ___________ ____________ __________ ____________ LIABILITIES Due to the Central Banks 405,995 25,770 431,765 578,548 31,413 609,961 Loans and repurchase agreements - 2,062,317 2,062,317 401,979 1,714,185 2,116,164 Due to banks and financial institutions 188 568,760 568,948 44,472 567,810 612,282 Amounts due to affiliated banks and financial institutions 9 1,420 1,429 81 21,104 21,185 Derivative financial instruments - 9,507 9,507 - 4,450 4,450 Customers’ deposits at amortized cost 6,774,394 15,013,940 21,788,334 6,361,552 12,318,325 18,679,877 Related parties’ deposits at amortized cost 90,286 90,921 181,207 8,687 124,084 132,771 Engagements by acceptances - 211,715 211,715 - 169,491 169,491 Other liabilities 484,053 105,711 589,764 52,196 89,852 142,048 Provision for risks and charges 220,882 42,128 263,010 43,256 32,481 75,737 ____________ ____________ ___________ ____________ __________ ____________ TOTAL LIABILITIES 7,975,807 18,132,189 26,107,996 7,490,771 15,073,195 22,563,966 ____________ ____________ ___________ ____________ __________ ____________ NET EXPOSURE 1,442,676 1,117,083 2,559,759 920,744 970,935 1,891,679 ____________ ____________ ___________ ____________ __________ ____________

53.2.3 EQUITY PRICE RISK Equity price risk is the risk that the fair value of equities decreases as the result of changes in the level of equity indices and individual stocks. Equity price risk exposure arises from equity securities classified at fair value through profit or loss and at fair value through other comprehensive income. A 10 percent increase in the value of the Group’s equities at 31 December 2016 would have increased net income by LL 11,742 million and other comprehensive income by LL 2,520 million (2015: LL 9,639 million and LL 2,514 million respectively). An equivalent decrease would have resulted in an equivalent but opposite impact. 53.2.4 PREPAYMENT RISK Prepayment risk is the risk that the Group will incur a financial loss because its customers and counterparties repay or request repayment earlier than expected, such as fixed rate mortgages when interest rate fall. Market conditions causing prepayment is not significant in the markets in which the Group operates. Therefore the Group considers the effect of prepayment risk on net profit as not material after taking into account the effect of any prepayment penalties.

Société Générale de Banque au Liban S.A.L. F.174

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2016 53 RISK MANAGEMENT (continued) 53.3 LIQUIDITY RISK AND FUNDING MANAGEMENT Liquidity risk is defined as the risk that the Group will encounter difficulty in meeting obligations associated with financial liabilities that are settled by delivering cash or another financial asset. Liquidity risk arises because of the possibility that the Group might be unable to meet its payment obligations when they fall due under normal and stress circumstances. Liquidity risk can be caused by market disruptions or credit downgrades which may cause certain sources of funding to dry up immediately. To limit this risk, management has arranged diversified funding sources in addition to its core deposit base, and adopted a policy of managing assets with liquidity in mind and of monitoring future cash flows and liquidity on a daily basis. The Group has developed internal control processes and contingency plans for managing liquidity risk. This incorporates an assessment of expected cash flows and the availability of high grade collateral which would be used to secure additional funding if required. The Group maintains a portfolio of highly marketable and diverse assets that are assumed to be easily liquidated in the event of an unforeseen interruption of cash flow. The Group also has committed lines of credit that it can access to meet liquidity needs. In addition, the Group maintains a statutory deposit with the Central Banks on customer deposits. In accordance with the Group’s policy, the liquidity position is assessed and managed under a variety of scenarios, giving due consideration to stress factors relating to both the market in general and specifically to the Group. The Group maintains a solid ratio of highly liquid net assets in foreign currencies to deposits and commitments in foreign currencies taking market conditions into consideration. Regulatory ratios and limits In accordance with the Central Bank of Lebanon circulars, the ratio of net liquid assets to deposits in foreign currencies should not be less than 10%. The net liquid assets consist of cash and all balances with the Central Bank of Lebanon (excluding reserve requirements), certificates of deposit issued by the Central Bank of Lebanon irrespective of their maturities and deposits due from other banks that mature within one year, less deposits due to the Central Bank of Lebanon and deposits due to banks that mature within one year. Deposits are composed of total customer deposits (excluding blocked accounts) and due from financial institutions irrespective of their maturities and all certificates of deposit and acceptances and other debt instruments issued by the Group and loans from the public sector that mature within one year. Besides the regulatory requirements, the liquidity position is also monitored through internal limits, such as the loans-to-deposits ratio. Loans to deposits 2016 2015 Year-end 30.53% 32.75% Maximum 34.21% 33.26% Minimum 30.53% 32.07% Average 32.74% 32.67%

Société Générale de Banque au Liban S.A.L. F.175

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2016 53 RISK MANAGEMENT (continued) 53.3 LIQUIDITY RISK AND FUNDING MANAGEMENT (continued) The table below summarizes the maturity profile of the undiscounted cash flows of the Group’s financial assets and liabilities as at 31 December. Trading derivatives are shown at fair value in a separate column. All derivatives used for hedging purposes are shown by maturity, based on their contractual undiscounted repayment obligations. Repayments which are subject to notice are treated as if notice were being given immediately. However, the Group expects that many customers will not request repayment on the earliest date the Group could be required to pay and the table does not reflect the expected cash flows indicated by the Group’s deposit retention history. 31 December 2016: Trading Up to 1 1 to 3 3 months 1 to 5 Over 5 derivative month months to 1 year years years Total LL million LL million LL million LL million LL million LL million LL million Financial assets Cash and balances with the Central Banks - 1,105,630 14,315 116,867 3,018,569 11,761,828 16,017,209 Due from banks and financial institutions - 727,328 26,561 14,878 13,526 21,032 803,325 Loans to banks and financial institutions - - - - - 8,397 8,397 Amount due from affiliated banks and financial institutions

- 858,396 12,341 47,889 - - 918,626

Derivative financial instruments 2,472 - - - - - 2,472 Financial assets at fair value through profit or loss - 20,379 1,216 2,081 12,335 160,699 196,710 Loans and advances to customers at amortized cost - 2,177,736 96,516 1,704,057 1,945,957 1,447,685 7,371,951 Loans and advances to related parties at amortized cost

- 60,213 127 29,525 4,387 11,742 105,994

Financial assets at amortized cost pledged as collateral

- - 12,826 208,450 585,391 705,447 1,512,114

Financial assets at amortized cost - 60,493 418,730 864,310 5,068,263 6,689,449 13,101,245 Financial assets at fair value through other comprehensive income - 1,018 - - - 24,190 25,208 _________ _________ _________ ________ ________ _________ _________ Total undiscounted financial assets 2,472 5,011,193 582,632 2,988,057 10,648,428 20,830,469 40,063,251 _________ _________ _________ ________ ________ _________ _________ Financial liabilities Due to the Central Banks - 5,051 15,711 190,890 79,475 162,431 453,558 Loans and repurchase agreements - 20,514 67,649 1,039,874 1,086,665 22,893 2,237,595 Due to banks and financial institutions - 440,165 77,294 29,601 14,830 11,582 573,472 Amounts due to affiliated banks and financial institutions - 1,429 - - - - 1,429 Derivative financial instruments 9,507 - - - - - 9,507 Customers’ deposits at amortized cost - 12,092,769 4,494,108 4,822,138 1,170,850 67 22,579,932 Related parties’ deposits at amortized cost - 188,653 26 2,777 - - 191,456 _________ _________ _________ ________ ________ _________ _________ Total undiscounted financial liabilities 9,507 12,748,581 4,654,788 6,085,280 2,351,820 196,973 26,046,949 _________ _________ _________ ________ ________ _________ _________ Total net financial assets (liabilities) (7,035) (7,737,388) (4,072,156) (3,097,223) 8,296,608 20,633,496 14,016,302 _________ _________ _________ ________ ________ _________ _________

31 December 2015: Trading Up to 1 1 to 3 3 months 1 to 5 Over 5 derivative month months to 1 year years years Total LL million LL million LL million LL million LL million LL million LL million Financial assets Cash and balances with the Central Banks - 1,338,167 38,671 213,998 2,368,169 3,579,074 7,538,079 Due from banks and financial institutions - 515,821 - 138,861 7,832 43,445 705,959 Loans to banks and financial institutions - - - - - 8,397 8,397 Amount due from affiliated banks and financial institutions

- 716,068 4,450 56,942 - - 777,460

Reserve repurchase agreements - - 199,035 220,546 - - 419,581 Derivative financial instruments 2,969 - - - - - 2,969 Financial assets at fair value through profit or loss - 18,545 874 26,699 66,759 152,026 264,903 Loans and advances to customers at amortized cost - 2,140,339 138,540 646,708 1,997,219 1,689,223 6,612,029 Loans and advances to related parties at amortized cost

- 110,991 140 7,918 7,869 32,433 159,351

Financial assets at amortized cost pledged as collateral

- 4,875 328 169,032 187,741 238,226 600,202

Financial assets at amortized cost - 167,759 141,620 693,988 5,331,307 7,272,980 13,607,654 Financial assets at fair value through other comprehensive income - - - - 338 26,222 26,560 _________ _________ _________ ________ ________ _________ _________ Total undiscounted financial assets 2,969 5,012,565 523,658 2,174,692 9,967,234 13,042,026 30,723,144 _________ _________ _________ ________ ________ _________ _________ Financial liabilities Due to the Central Banks - 7,122 10,915 171,085 230,416 223,972 643,510 Loans and repurchase agreements - 15,279 987,963 26,754 1,024,783 202,693 2,257,472 Due to banks and financial institutions - 373,609 41,358 170,939 9,714 23,777 619,397 Amounts due to affiliated banks and financial institutions - 21,185 - - - - 21,185 Derivative financial instruments 4,450 - - - - - 4,450 Customers’ deposits at amortized cost - 11,559,486 4,186,508 2,942,421 82,729 - 18,771,144 Related parties’ deposits at amortized cost - 105,860 26,152 181 942 - 133,135 _________ _________ _________ ________ ________ _________ _________ Total undiscounted financial liabilities 4,450 12,082,541 5,252,896 3,311,380 1,348,584 450,442 22,450,293 _________ _________ _________ ________ ________ _________ _________ Total net financial assets (liabilities) (1,481) (7,069,976) (4,729,238) (1,136,688) 8,618,650 12,591,584 8,272,851 _________ _________ _________ ________ ________ _________ _________

Société Générale de Banque au Liban S.A.L. F.176

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2016 53 RISK MANAGEMENT (continued) 53.3 LIQUIDITY RISK AND FUNDING MANAGEMENT (continued) The table below shows the contractual expiry by maturity of the Group’s contingent liabilities and commitments. Each undrown commitment is included in the time band containing the earliest date it can be drawn down.

2016

On

demand Less than 3 months

3 to 12 months

1 to 5 years

Over 5 years

Total

LL million LL million LL million LL million LL million LL million Financial guarantees 27,199 30,410 52,729 5,076 43,556 158,970 Documentary credit 58,889 82,220 103,964 12,770 - 257,843 _________ _________ _________ _________ _________ _________ Total 86,088 112,630 156,693 17,846 43,556 416,813 ________ _________ _________ _________ _________ _________

2015

On

demand Less than 3 months

3 to 12 months

1 to 5 years

Over 5 years

Total

LL million LL million LL million LL million LL million LL million Financial guarantees 119,853 21,294 44,532 14,753 45,587 246,019 Documentary credit 20,509 61,448 76,956 10,683 - 169,596 _________ _________ _________ _________ _________ _________ Total 140,362 82,742 121,488 25,436 45,587 415,615 ________ _________ _________ _________ _________ _________

The Group expects that not all of the contingent liabilities or commitments will be drawn before expiry of the commitments. 53.4 OPERATIONAL RISK Operational risk is the risk of loss arising from systems failure, human error, fraud or external events. When controls fail to perform, operational risks can cause damage to reputation, have legal or regulatory implications, or lead to financial loss. The Group cannot expect to eliminate all operational risks, but through a control framework and by monitoring and responding to potential risks, the Group is able to manage the risks. Controls include effective segregation of duties, access, authorization and reconciliation procedures, staff training and assessment processes, including the use of internal audit. 54 CAPITAL By maintaining an actively managed capital base, the Group’s objectives are to cover risks inherent in the business, to retain sufficient financial strength and flexibility to support new business growth, and to meet national and international regulatory capital requirements at all times. The adequacy of the Group’s capital is monitored using, among other measures, the rules and ratios established by the Central Bank of Lebanon according to the provisions of Basic Circular No 44. These ratios measure capital adequacy by comparing the Group’s eligible capital with its consolidated statement of financial position assets and off-balance sheet commitments at a weighted amount to reflect their relative risk. To satisfy Basel III capital requirements, the Central Bank of Lebanon requires maintaining the following ratios of total regulatory capital to risk-weighted assets for the year ended 31 December 2016 and thereafter: Common Tier 1

capital ratio

Tier 1 capital ratio

Total capital ratio Year ended 31 December 2016 8.5 % 11 % 14 % Risk weighted assets As of 31 December 2016 and 2015, risk weighted assets are as follows:

2016

2015

LL million LL million Risk weighted assets 14,041,529 11,957,663 __________ __________

Société Générale de Banque au Liban S.A.L. F.177

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2016 54 CAPITAL (continued) Regulatory capital At 31 December 2016 and 2015, regulatory capital consists of the following:

Excluding profit for the year

Including profit for the year less

proposed dividends

2016 2015 2016 2015

LL million LL million LL million LL million Common Tier 1 capital 1,550,591 776,404 1,796,819 991,949 Additional Tier 1 capital 574,769 571,067 574,769 571,067 Tier 2 capital 225,496 6,277 225,496 6,277 __________ __________ __________ __________ Total capital 2,350,856 1,353,748 2,597,084 1,569,293 __________ __________ __________ __________ Capital adequacy ratio As of 31 December 2016 and 2015, capital adequacy ratio is as follows:

Excluding profit for the year Including profit for the year less

proposed dividends

2016 2015 2016 2015 Common Tier 1 capital 11.04% 6.49% 12.80% 8.30% __________ __________ __________ __________ Total Tier 1 capital ratio 15.14% 11.27% 16.89% 13.07% __________ __________ __________ __________ Total capital ratio 16.74% 11.32% 18.50% 13.12% __________ __________ __________ __________ The Group manages its capital structure and makes adjustments to it in the light of changes in economic conditions and the risk characteristics of its activities. In order to maintain or adjust the capital structure, the Group may adjust the amount of dividend payment to shareholders, return capital to shareholders or issue capital securities. No changes were made in the objectives, policies and processes from the previous years; however, they are under constant scrutiny of the Board.

Société Générale de Banque au Liban S.A.L. F.178

SOCIETE GENERALE DE BANQUE AU LIBAN SAL

CONSOLIDATED FINANCIAL STATEMENTS

31 DECEMBER 2015

Société Générale de Banque au Liban S.A.L. F.179

Société Générale de Banque au Liban S.A.L. F.180

Société Générale de Banque au Liban S.A.L. F.181

Société Générale de Banque au Liban S.A.L. F.182

Société Générale de Banque au Liban S.A.L. F.183

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY For the year ended 31 December 2015

Attributable to equity holders of the parent LL million

Non-controlling

interests LL million

Total

equity LL million

Share capital – common

shares

Share capital –

preferred shares

Share premium –

common shares

Share premium –

preferred shares

Cash contribution

by shareholders

Non distributable

reserves Distributable

reserves

Revaluation reserve of

property

Cumulative change in fair

value of financial

assets at fair value through

other comprehensive

income

Foreign currency

translation reserve

Profit for the year

Retained earnings Total

Notes LL million LL million LL million LL million LL million LL million LL million LL million LL million LL million LL million LL million LL million

Balance at 31 December 2013 13,173 8,738 149,349 558,013 106,746 258,560 20,110 3,934 312 2,159 201,325 170,868 1,493,287 42,905 1,536,192

Profit for the year - - - - - - - - - - 226,977 - 226,977 6,889 233,866

Other comprehensive income - - - - - - - - (199) (10,264) - - (10,463) (49) (10,512)

_________ __________ __________ ___________ ___________ __________ __________ _________ _________ _________ _________ _________ ________ _________ ________

Total comprehensive income - - - - - - - - (199) (10,264) 226,977 - 216,514 6,840 223,354

_________ __________ __________ ___________ ___________ __________ __________ _________ _________ _________ _________ _________ ________ _________ ________

Transfer to retained earnings - - - - - - - - - - (201,325) 201,325 - - -

Transfer to non distributable reserves 41 - - - - - 58,318 - - - - - (58,318) - - -

Transfer to distributable reserves 42 - - - - - - 559 - - - - (559) - - -

Non-controlling interest resulting from capital increase in Fidus SAL - - - - - - - - - - - - - 382 382

Transfer to share premium 40 - - - 2,052 - - - - - - - (2,052) - - -

Dividends paid to equity holders of the parent – common shares 45 - - - - - - - - - - - (42,210) (42,210) - (42,210)

Dividends paid to equity holders of the parent – preferred shares 45 - - - - - - - - - - - (26,457) (26,457) - (26,457)

Dividends paid to non-controlling interests - - - - - - - - - - - - - (1,960) (1,960)

_________ __________ __________ ___________ ___________ __________ __________ _________ _________ _________ _________ _________ ________ _________ ________

Balance at 31 December 2014 13,173 8,738 149,349 560,065 106,746 316,878 20,669 3,934 113 (8,105) 226,977 242,597 1,641,134 48,167 1,689,301

Profit for the year - - - - - - - - - - 250,844 - 250,844 7,468 258,312

Other comprehensive income - - - - - - - - (590) (8,664) - - (9,254) (11) (9,265)

_________ __________ __________ ___________ ___________ __________ __________ _________ _________ _________ _________ _________ ________ _________ ________

Total comprehensive income - - - - - - - - (590) (8,664) 250,844 - 241,590 7,457 249,047

_________ __________ __________ ___________ ___________ __________ __________ _________ _________ _________ _________ _________ ________ _________ ________

Increase in share capital 40 1,413 937 - - - - (2,350) - - - - - - - -

Issuance of preferred shares 40 - 2,330 - 148,226 - - - - - - - - 150,556 - 150,556

Redemption of preferred shares 40 - (2,330) - (151,264) - - 206 - - - - - (153,388) - (153,388)

Transfer to retained earnings - - - - - - - - - - (226,977) 226,977 - - -

Transfer to non distributable reserves 41 - - - - - 74,269 - - - - - (74,269) - - -

Transfer to distributable reserves 42 - - - - - - 917 - - - - (917) - - -

Transfer to share premium 40 - - - 2,134 - - - - - - - (2,134) - - -

Dividends paid to equity holders of the parent – preferred shares 45 - - - - - - - - - - - (40,702) (40,702) - (40,702)

Dividends paid to non-controlling interest - - - - - - - - - - - - - (3,122) (3,122)

Adjustments - - - - - (13) - - - - - - (13) - (13)

_________ __________ __________ ___________ ___________ __________ __________ _________ _________ _________ _________ _________ ________ _________ ________

Balance at 31 December 2015 14,586 9,675 149,349 559,161 106,746 391,134 19,442 3,934 (477) (16,769) 250,844 351,552 1,839,177 52,502 1,891,679 _________ __________ __________ ___________ ___________ __________ __________ _________ _________ _________ _________ _________ ________ _________ ________

Société Générale de Banque au Liban S.A.L. F.184

CONSOLIDATED STATEMENT OF CASH FLOWS For the year ended 31 December 2015 2015 2014 Notes LL million LL million OPERATING ACTIVITIES Profit before income tax 315,310 279,651 Adjustments for:

Depreciation and amortization 26 & 27 13,972 13,631 Share of loss (profit) from an associate 30 12 (31) Amortization of additional deferred costs resulting from the acquisition of the Lebanese Canadian Bank SAL

30 6,815 6,815

Amortization of deferred employee termination benefits 30 8,080 8,080 Provision for impaired loans – customers 22 34,775 39,150 Provision for impaired loans – related parties 23 1,453 1,386 Loans written off 11 866 347 Net provisions / (Write-back of provisions) for impairment of non-current assets held-for-sale 29 517 (91) Write-back of provision for other impaired debit balances 30 (20) (17) Recoveries of credit losses – customers 22 (17,941) (17,960) Provision for employees’ end of service benefits 12 4,317 3,447 Gain from sale of property and equipment (283) (977) Provision for other assets 30 249 - Provision for financial assets at amortized cost 24 8,442 - Gain from sale of non-current assets held-for-sale 10 (544) (9,195) Loss on liquidation of a subsidiary held for sale - 1,235 Write-off of intangible assets 19 - Net provision for risks and charges 14,468 9,764 Unrealized loss (gain) on derivative financial instruments 1,632 (364)

_________ _________ 392,139 334,871 Working capital changes:

Cash and balances with the Central Banks (57,604) (1,106,008) Due from banks and financial institutions (114,919) 11,548 Amounts due from affiliated banks and financial institutions (39,466) (9,926) Reverse repurchase agreements (219,567) - Due to the Central Banks 16,749 134,081 Loans and repurchase agreements (2,584) 598,839 Due to banks and financial institutions 166,648 (8,343) Loans and advances to customers at amortized cost (667,568) (832,421) Loans and advances to related parties at amortized cost (12,038) (59,736) Financial assets at fair value through profit or loss (96,922) (19,848) Financial assets at fair value through other comprehensive income (259) 3,373 Financial assets at amortized cost (540,101) (609,903) Financial assets at amortized cost pledged as collateral (228,192) 111,486 Loans to banks and financial institutions (2,036) 3,930 Other assets (172) (13,893) Customers’ deposits at amortized cost 1,767,525 1,637,100 Related parties’ deposits at amortized cost 2,588 29,613 Other liabilities (3,368) (508)

_________ _________ Cash from operations 360,853 204,255 Employees’ end of service benefits paid 39 (1,698) (3,417) Taxation paid (49,080) (43,313) Provision for risks and charges paid (4,357) (1,686) _________ _________ Net cash flows from operating activities 305,718 155,839 _________ _________ INVESTING ACTIVITIES Purchase of property and equipment 26 (21,761) (24,384) Purchase of intangible assets 27 (9,366) (7,979) Proceeds from sale of property and equipment 360 9,695 Proceeds from sale of non-current assets held for sale 2,507 16,559 Proceeds from sale of investment properties - 10,553 _________ _________ Net cash flows used in (from) investing activities (28,260) 4,444 _________ _________ FINANCING ACTIVITIES Issuance of preferred shares 40 150,556 - Redemption of preferred shares 40 (153,388) - Dividends paid to equity holders of the parent 45 (40,702) (68,667) Dividends paid to non-controlling interest (3,122) (1,960) Non-controlling interest resulting from capital increase in Fidus SAL - 382 _________ _________ Net cash flows used in financing activities (46,656) (70,245) _________ _________ Effect of exchange rate changes and other adjustments (6,723) (7,621) _________ _________ INCREASE IN CASH AND CASH EQUIVALENTS 224,079 82,417 Cash and cash equivalents at 1 January 1,969,839 1,887,422 _________ _________ CASH AND CASH EQUIVALENTS AT 31 DECEMBER 46 2,193,918 1,969,839 _________ _________ Operational cash flows from interest and dividend Interest paid 802,777 727,416 Interest received 1,200,647 1,101,859 Dividend received

2,661 2,612

Société Générale de Banque au Liban S.A.L. F.185

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2015 1 CORPORATE INFORMATION Société Générale de Banque au Liban SAL (the Bank) is a shareholding company registered in Beirut, Lebanon. It was registered in 1953 under no. 3696 at the Commercial Registry of Beirut and no. 19 on the list of banks published by the Central Bank of Lebanon. The headquarters of the Bank are located at Saloumeh Square, Sin El Fil, Lebanon. The Bank, together with its subsidiaries (collectively the “Group”), are mainly involved in banking, insurance and financial services activities (commercial, investment and private). 2 ACCOUNTING POLICIES 2.1 Basis of preparation The consolidated financial statements are prepared under the historical cost basis except for the restatement of certain tangible real estate properties in Lebanon according to the provisions of law No 282 dated 30 December 1993, and for the measurement at fair value of investment properties, derivative financial instruments, financial assets at fair value through profit or loss and financial assets at fair value through other comprehensive income. The consolidated financial statements are presented in Lebanese Lira (LL), and all values are rounded to the nearest million Lebanese Lira, except when otherwise indicated. Statement of compliance The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB), and the regulations of the Central Bank of Lebanon and the Banking Control Commission. Presentation of financial statements The Group presents its consolidated statement of financial position broadly in order of liquidity. An analysis regarding recovery or settlement within 12 months after the consolidated statement of financial position date (current) and more than 12 months after the consolidated statement of financial position date (non-current) is presented in the notes. Financial assets and financial liabilities are offset and the net amount is reported in the consolidated statement of financial position only when there is a legally enforceable right to offset the recognized amounts and there is an intention to settle on a net basis, or to realize the assets and settle the liability simultaneously. This is not generally the case with master netting agreements. Therefore the related assets and liabilities are presented gross in the consolidated statement of financial position. Income and expense is not offset in the consolidated income statement unless required or permitted by any accounting standard or interpretation, as specifically disclosed in the accounting policies of the Group. Basis of consolidation The consolidated financial statements comprise the financial statements of the Bank and its subsidiaries as at 31 December. Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Specifically, the Group controls an investee if and only if the Group has:

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

- Exposure, or rights, to variable returns from its involvement with the investee - The ability to use its power over the investee to affect its returns

Société Générale de Banque au Liban S.A.L. F.186

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2015 2 ACCOUNTING POLICIES (continued) 2.1 Basis of preparation (continued) Basis of consolidation (continued) Generally, there is a presumption that a majority of voting rights result in control. To support this presumption and when the Group has less than a majority of the voting or similar rights of an investee, the Group considers all relevant facts and circumstances in assessing whether it has power over an investee, including:

- The contractual arrangement with the other vote holders of the 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 if facts and circumstances indicate that there are changes to one or more of the three elements of control. Consolidation of a subsidiary begins when the Group obtains control over the subsidiary and ceases when the Group loses control of the subsidiary. Assets, liabilities, income and expenses of a subsidiary acquired or disposed of during the year are included in the statement of comprehensive income from the date the Group gains control until the date the Group ceases to control the subsidiary. Profit or loss and each component of other comprehensive income (OCI) are attributed to the equity holders of the parent of the Group and to the non-controlling interests, even if this results in the non-controlling interests having a deficit balance. When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with the Group’s accounting policies. All intra-group assets and liabilities, equity, income, expenses and cash flows relating to transactions between members of the Group are eliminated in full on consolidation. A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as an equity transaction. If the Group loses control over a subsidiary, it derecognizes the related assets (including goodwill), liabilities, non-controlling interest and other components of equity while any resultant gain or loss is recognized in profit or loss. Any investment retained is recognized at fair value. The consolidated financial statements represent the financial statements of the Bank and the following subsidiaries:

Percentage of ownership Name

Country of incorporation

Activities

2015

2014

Société Générale Bank - Cyprus Ltd Cyprus Banking 100.00% 100.00% Société Générale de Banque - Jordanie Jordan Banking 87.67% 87.67% Fidus SAL* Lebanon Financial services 49.00% 49.00% Sogelease Liban SAL Lebanon Leasing 99.75% 99.75% Sogecap Liban SAL Lebanon Insurance 75.00% 75.00% Société Générale Jordanie Brokerage Ltd Jordan Brokerage 100.00% 100.00% Société Générale Libanaise Foncière SARL

Lebanon

Real estate

98.66%

98.66%

Société Générale de Services d'Investissement SARL

Lebanon

Services and studies

98.50%

98.50%

LCB Finance SAL Lebanon Financial services 100.00% 100.00% LCB Investments Holding SAL Lebanon Investments & management 100.00% 100.00% LCB Insurance Brokerage House SAL (owned by LCB Investments Holding SAL)

Lebanon

Brokerage

99.14%

99.14%

LCB Estates SAL (owned by LCB Investments Holding SAL)

Lebanon

Real Estate

99.14%

99.14%

SGBL Courtage Assurance SARL Lebanon Brokerage 100.00% 100.00% 799 Bassatine Tripoli SAL Lebanon Investments and

management 60.00% 60.00%

Société d’Investissements et de Services «SIS» SAL

Lebanon

Investments and management

99.00%

99.00%

* The Group controls Fidus SAL despite having an interest of only 49% in this entity. Consequently, the financial statements of Fidus SAL have been consolidated with those of the Bank.

Société Générale de Banque au Liban S.A.L. F.187

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2015 2 ACCOUNTING POLICIES (continued) 2.2 Significant accounting judgments, estimates and assumptions The preparation of the Group’s financial statements requires management to make judgments, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the accompanying disclosures, and the disclosure of contingent liabilities. Uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of assets or liabilities affected in future periods. Judgments In the process of applying the Group’s accounting policies, management has made the following judgments, apart from those involving estimations, which have the most significant effect in the amounts recognized in the consolidated financial statements: Going concern The Group’s management has made an assessment of the Group’s ability to continue as a going concern and is satisfied that the Group has the resources to continue in business for the foreseeable future. Furthermore, management is not aware of any material uncertainties that may cast significant doubt upon the Group’s ability to continue as a going concern. Therefore, the consolidated financial statements continue to be prepared on the going concern basis. Business model In making an assessment whether a business model’s objective is to hold assets in order to collect contractual cash flows, the Group considers at which level of its business activities such assessment should be made. Generally, a business model is a matter of fact which can be evidenced by the way business is managed and the information provided to management. However, in some circumstances it may not be clear whether a particular activity involves one business model with some infrequent asset sales or whether the anticipated sales indicate that there are two different business models. In determining whether its business model for managing financial assets is to hold assets in order to collect contractual cash flows, the Group considers:

- management’s stated policies and objectives for the portfolio and the operation of those policies in practice;

- how management evaluates the performance of the portfolio; - whether management’s strategy focuses on earning contractual interest revenues; - the degree of frequency of any expected asset sales; - the reason for any asset sales; and - whether assets that are sold are held for an extended period of time relative to their contractual maturity.

Contractual cash flows of financial assets The Group exercises judgment in determining whether the contractual terms of financial assets it originates or acquires give rise on specific dates to cash flows that are solely payments of principal and interest on the principal outstanding and so may qualify for amortized cost measurement. In making the assessment, the Group considers all contractual terms, including any prepayment terms or provisions to extend the maturity of the assets, terms that change the amount and timing of cash flows and whether the contractual terms contain leverage.

Société Générale de Banque au Liban S.A.L. F.188

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2015 2 ACCOUNTING POLICIES (continued) 2.2 Significant accounting judgments, estimates and assumptions (continued) Estimates and assumptions The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are described below. The Group based its assumptions and estimates on parameters available when the financial statements were prepared. Existing circumstances and assumptions about future developments, however, may change due to market changes or circumstances arising beyond the control of the Group. Such changes are reflected in the assumptions when they occur. Fair value of financial instruments Where the fair values of financial assets and financial liabilities recorded on the consolidated statement of financial position cannot be derived from active markets, they are determined using a variety of valuation techniques that include the use of mathematical models. The inputs to these models are derived from observable market data where possible, but where observable market data is not available, judgment is required to establish fair values. The judgments include considerations of liquidity and model inputs such as volatility for longer dated derivatives and discount rates, prepayment rates and default rate assumptions for asset-backed securities. The valuation of financial instruments is described in more detail in note 51. Impairment losses on loans and advances The Group reviews its individually significant loans and advances at each consolidated statement of financial position date to assess whether an impairment loss should be recorded in the consolidated income statement. In particular, judgment by management is required in the estimation of the amount and timing of future cash flows when determining the impairment loss. In estimating these cash flows, the Group makes judgments about the borrower’s financial situation and the net realizable value of collateral. These estimates are based on assumptions about a number of factors and actual results may differ, resulting in future changes to the allowance. Loans and advances that have been assessed individually and found not to be impaired and all individually insignificant loans and advances are then assessed collectively, in groups of assets with similar risk characteristics, to determine whether provision should be made due to incurred loss events for which there is objective evidence but whose effects are not yet evident. The collective assessment takes account of data from the loan portfolio (such as credit quality, levels of arrears, credit utilization, loan to collateral ratios etc.), and judgments to the effect of concentrations of risks and economic data (including levels of unemployment, real estate prices indices, country risk and the performance of different individual groups). Deferred tax assets Deferred tax assets are recognized in respect of tax losses to the extent that it is probable that taxable profit will be available against which the losses can be utilized. Judgment is required to determine the amount of deferred tax assets that can be recognized, based upon the likely timing and level of future taxable profits, together with future tax planning strategies. Revaluation of investment properties The Group carries its investment properties at fair value, with changes in fair value being recognized in the consolidated income statement. The Group engaged an independent valuation specialist to assess fair value as at 31 December. Investment properties were valued by reference to market-based evidence, using comparable prices adjusted for specific market factors such as nature, location and condition of the property.

Société Générale de Banque au Liban S.A.L. F.189

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2015 2 ACCOUNTING POLICIES (continued) 2.3 Changes in accounting policy and disclosures New and amended standards and interpretations The accounting policies adopted in the preparation of the consolidated financial statements are consistent with those followed in the preparation of the Group’s consolidated financial statements for the year ended 31 December 2014 except for the adoption of new standards and interpretations effective as of 1 January 2015. Although these new standards and amendments apply for the first time in 2015, they do not have a material impact on the consolidated financial statements of the Group. The nature and the impact of each new standard or amendment is described below: Amendments to IAS 19 Defined Benefit Plans: Employee Contributions IAS 19 requires an entity to consider contributions from employees or third parties when accounting for defined benefit plans. Where the contributions are linked to service, they should be attributed to periods of service as a negative benefit. These amendments clarify that, if the amount of the contributions is independent of the number of years of service, an entity is permitted to recognize such contributions as a reduction in the service cost in the period in which the service is rendered, instead of allocating the contributions to the periods of service. This amendment is effective for annual periods beginning on or after 1 July 2014. This amendment is not relevant to the Group, since it does not have defined benefit plans with contributions from employees or third parties. Annual Improvements 2010-2012 Cycle These improvements are effective from 1 July 2014. They include: IFRS 2 Share-based Payment This improvement is applied prospectively and clarifies various issues relating to the definitions of performance and service conditions which are vesting conditions, including:

• A performance condition must contain a service condition • A performance target must be met while the counterparty is rendering service • A performance target may relate to the operations or activities of an entity, or to those of another entity

in the same group • A performance condition may be a market or non-market condition • If the counterparty, regardless of the reason, ceases to provide service during the vesting period, the

service condition is not satisfied These amendments do not impact the Group’s accounting policies. IFRS 3 Business Combinations The amendment is applied prospectively and clarifies that all contingent consideration arrangements classified as liabilities (or assets) arising from a business combination should be subsequently measured at fair value through profit or loss whether or not they fall within the scope of IFRS 9. This is consistent with the Group’s current accounting policy, and thus this amendment does not impact the Group’s accounting policy. IFRS 8 Operating Segments The amendments are applied retrospectively and clarify that:

• An entity must disclose the judgments made by management in applying the aggregation criteria in paragraph 12 of IFRS 8, including a brief description of operating segments that have been aggregated and the economic characteristics (e.g., sales and gross margins) used to assess whether the segments are ‘similar’

• The reconciliation of segment assets to total assets is only required to be disclosed if the reconciliation is reported to the chief operating decision maker, similar to the required disclosure for segment liabilities.

The Group did not disclose any information about segments since it is not required to apply IFRS 8.

Société Générale de Banque au Liban S.A.L. F.190

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2015 2 ACCOUNTING POLICIES (continued) 2.3 Changes in accounting policy and disclosures (continued) New and amended standards and interpretations (continued) IAS 16 Property, Plant and Equipment and IAS 38 Intangible Assets The amendment is applied retrospectively and clarifies in IAS 16 and IAS 38 that the asset may be revalued by reference to observable data by either adjusting the gross carrying amount of the asset to market value or by determining the market value of the carrying value and adjusting the gross carrying amount proportionately so that the resulting carrying amount equals the market value. In addition, the accumulated depreciation or amortization is the difference between the gross and carrying amounts of the asset. The Group did not record any revaluation adjustments during the current period. IAS 24 Related Party Disclosures The amendment is applied retrospectively and clarifies that a management entity (an entity that provides key management personnel services) is a related party subject to the related party disclosures. In addition, an entity that uses a management entity is required to disclose the expenses incurred for management services. This amendment is not relevant for the Group as it does not receive any management services from other entities. Annual Improvements 2011-2013 Cycle These improvements are effective from 1 July 2014. They include: IFRS 3 Business Combinations The amendment is applied prospectively and clarifies for the scope exceptions within IFRS 3 that:

• Joint arrangements, not just joint ventures, are outside the scope of IFRS 3 • This scope exception applies only to the accounting in the financial statements of the joint arrangement

itself The Group is not a joint arrangement, and thus this amendment is not relevant to the Group. IFRS 13 Fair Value Measurement The amendment is applied prospectively and clarifies that the portfolio exception in IFRS 13 can be applied not only to financial assets and financial liabilities, but also to other contracts within the scope of IFRS 9. The Group does not apply the portfolio exception in IFRS 13. IAS 40 Investment Property The description of ancillary services in IAS 40 differentiates between investment property and owner-occupied property (i.e., property, plant and equipment). The amendment is applied prospectively and clarifies that IFRS 3, and not the description of ancillary services in IAS 40, is used to determine if the transaction is the purchase of an asset or a business combination. In previous periods, the Group has relied on IFRS 3, not IAS 40, in determining whether an acquisition is of an asset or is a business acquisition. Thus, this amendment does not impact the accounting policy of the Group. 2.4 Standards issued but not yet effective The standards and interpretations that are issued, but not yet effective, up to the date of issuance of the Group’s consolidated financial statements are disclosed below. The Group intends to adopt these standards, if applicable, when they become effective. IFRS 9 (2014) Financial Instruments In July 2014, the IASB issued the final version of IFRS 9 Financial Instruments (IFRS 9 (2014)) which reflects all phases of the financial instruments project and replaces IAS 39 Financial Instruments: Recognition and Measurement and all previous versions of IFRS 9. The standard introduces new requirements for classification and measurement, impairment, and hedge accounting. In prior years the Group has early adopted IFRS 9 (2011) which includes the requirements for the classification and measurement. IFRS 9 (2014) is effective for annual periods beginning on or after 1 January 2018, with early application permitted. Retrospective application is required, but comparative information is not compulsory. The adoption of IFRS 9 (2014) will have an effect on measuring impairment allowances and on the classification and measurement of the Group’s financial assets, but no impact on the classification and measurement of the Group’s financial liabilities. The Group is currently assessing the impact of IFRS 9 (2014) and plans to adopt the new standard on the required effective date.

Société Générale de Banque au Liban S.A.L. F.191

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2015 2 ACCOUNTING POLICIES (continued) 2.4 Standards issued but not yet effective (continued) IFRS 15 Revenue from Contracts with Customers IFRS 15 was issued in May 2014 and establishes a new five-step model that will apply to revenue arising from contracts with customers. Under IFRS 15 revenue is recognized at an amount that reflects the consideration to which an entity expects to be entitled in exchange for transferring goods or services to a customer. The principles in IFRS 15 provide a more structured approach to measuring and recognizing revenue. The new revenue standard is applicable to all entities and will supersede all current revenue recognition requirements under IFRS. Either a full or modified retrospective application is required for annual periods beginning on or after 1 January 2018 with early adoption permitted. The Group is currently assessing the impact of IFRS 15 and plans to adopt the new standard on the required effective date. Amendments to IFRS 11 Joint Arrangements: Accounting for Acquisitions of Interests The amendments to IFRS 11 require that a joint operator accounting for the acquisition of an interest in a joint operation, in which the activity of the joint operation constitutes a business, must apply the relevant IFRS 3 principles for business combinations accounting. The amendments also clarify that a previously held interest in a joint operation is not remeasured on the acquisition of an additional interest in the same joint operation while joint control is retained. In addition, a scope exclusion has been added to IFRS 11 to specify that the amendments do not apply when the parties sharing joint control, including the reporting entity, are under common control of the same ultimate controlling party. The amendments apply to both the acquisition of the initial interest in a joint operation and the acquisition of any additional interests in the same joint operation and are prospectively effective for annual periods beginning on or after 1 January 2016, with early adoption permitted. These amendments are not expected to have any impact on the Group. Amendments to IAS 16 and IAS 38: Clarification of Acceptable Methods of Depreciation and Amortization The amendments clarify the principle in IAS 16 and IAS 38 that revenue reflects a pattern of economic benefits that are generated from operating a business (of which the asset is part) rather than the economic benefits that are consumed through use of the asset. As a result, a revenue-based method cannot be used to depreciate property, plant and equipment and may only be used in very limited circumstances to amortize intangible assets. The amendments are effective prospectively for annual periods beginning on or after 1 January 2016, with early adoption permitted. These amendments are not expected to have any impact to the Group given that the Group has not used a revenue-based method to depreciate its non-current assets. Amendments to IAS 27: Equity Method in Separate Financial Statements The amendments will allow entities to use the equity method to account for investments in subsidiaries, joint ventures and associates in their separate financial statements. Entities already applying IFRS and electing to change to the equity method in its separate financial statements will have to apply that change retrospectively. The amendments are effective for annual periods beginning on or after 1 January 2016, with early adoption permitted. These amendments will not have any impact on the Group’s consolidated financial statements. Amendments to IFRS 10 and IAS 28: Sale or Contribution of Assets between an Investor and its Associate or Joint Venture The amendments address the conflict between IFRS 10 and IAS 28 in dealing with the loss of control of a subsidiary that is sold or contributed to an associate or joint venture. The amendments clarify that the gain or loss resulting from the sale or contribution of assets that constitute a business, as defined in IFRS 3, between an investor and its associate or joint venture, is recognized in full. Any gain or loss resulting from the sale or contribution of assets that do not constitute a business, however, is recognized only to the extent of unrelated investors’ interests in the associate or joint venture. These amendments must be applied prospectively and are effective for annual periods beginning on or after 1 January 2016, with early adoption permitted. These amendments are not expected to have any impact on the Group.

Société Générale de Banque au Liban S.A.L. F.192

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2015 2 ACCOUNTING POLICIES (continued) 2.4 Standards issued but not yet effective (continued) Annual Improvements 2012-2014 Cycle These improvements are effective for annual periods beginning on or after 1 January 2016. They include: IFRS 5 Non-current Assets Held for Sale and Discontinued Operations Assets (or disposal groups) are generally disposed of either through sale or distribution to owners. The amendment clarifies that changing from one of these disposal methods to the other would not be considered a new plan of disposal, rather it is a continuation of the original plan. There is, therefore, no interruption of the application of the requirements in IFRS 5. This amendment must be applied prospectively. These amendments are not expected to have any impact on the Group. IFRS 7 Financial Instruments: Disclosures (i) Servicing contracts The amendment clarifies that a servicing contract that includes a fee can constitute continuing involvement in a financial asset. An entity must assess the nature of the fee and the arrangement against the guidance for continuing involvement in IFRS 7 in order to assess whether the disclosures are required. The assessment of which servicing contracts constitute continuing involvement must be done retrospectively. However, the required disclosures would not need to be provided for any period beginning before the annual period in which the entity first applies the amendments. These amendments are not expected to have any impact on the Group. (ii) Applicability of the amendments to IFRS 7 to condensed interim financial statements The amendment clarifies that the offsetting disclosure requirements do not apply to condensed interim financial statements, unless such disclosures provide a significant update to the information reported in the most recent annual report. This amendment must be applied retrospectively. These amendments are not expected to have any impact on the Group. IAS 19 Employee Benefits The amendment clarifies that market depth of high quality corporate bonds is assessed based on the currency in which the obligation is denominated, rather than the country where the obligation is located. When there is no deep market for high quality corporate bonds in that currency, government bond rates must be used. This amendment must be applied prospectively. These amendments are not expected to have any impact on the Group. IAS 34 Interim Financial Reporting The amendment clarifies that the required interim disclosures must either be in the interim financial statements or incorporated by cross-reference between the interim financial statements and wherever they are included within the interim financial report (e.g., in the management commentary or risk report). The other information within the interim financial report must be available to users on the same terms as the interim financial statements and at the same time. This amendment must be applied retrospectively. These amendments are not expected to have any impact on the Group. Amendments to IAS 1 Disclosure Initiative The amendments to IAS 1 Presentation of Financial Statements clarify, rather than significantly change, existing IAS 1 requirements. The amendments clarify:

• The materiality requirements in IAS 1 • That specific line items in the statement(s) of profit or loss and OCI and the statement of financial

position may be disaggregated • That entities have flexibility as to the order in which they present the notes to financial statements • That the share of OCI of associates and joint ventures accounted for using the equity method must be

presented in aggregate as a single line item, and classified between those items that will or will not be subsequently reclassified to profit or loss

Société Générale de Banque au Liban S.A.L. F.193

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2015

2 ACCOUNTING POLICIES (continued) 2.4 Standards issued but not yet effective (continued)

Annual Improvements 2012-2014 Cycle (continued) Amendments to IAS 1 Disclosure Initiative(continued) Furthermore, the amendments clarify the requirements that apply when additional subtotals are presented in the statement of financial position and the statement(s) of profit or loss and OCI. These amendments are effective for annual periods beginning on or after 1 January 2016, with early adoption permitted. These amendments are not expected to have any impact on the Group. Amendments to IFRS 10, IFRS 12 and IAS 28 Investment Entities: Applying the Consolidation Exception The amendments address issues that have arisen in applying the investment entities exception under IFRS 10. The amendments to IFRS 10 clarify that the exemption from presenting consolidated financial statements applies to a parent entity that is a subsidiary of an investment entity, when the investment entity measures all of its subsidiaries at fair value. Furthermore, the amendments to IFRS 10 clarify that only a subsidiary of an investment entity that is not an investment entity itself and that provides support services to the investment entity is consolidated. All other subsidiaries of an investment entity are measured at fair value. The amendments to IAS 28 allow the investor, when applying the equity method, to retain the fair value measurement applied by the investment entity associate or joint venture to its interests in subsidiaries. These amendments must be applied retrospectively and are effective for annual periods beginning on or after 1 January 2016, with early adoption permitted. These amendments are not expected to have any impact on the Group. 2.5 Summary of significant accounting policies (1) Foreign currency translation The consolidated financial statements are presented in Lebanese Lira. For each entity in the Group, the Group determines the functional currency and items included in the financial statements of each entity are measured using that functional currency. The Group uses the direct method of consolidation and has elected to recycle the gain or loss that arises from using this method. (i) Transactions and balances Transactions in foreign currencies are initially recorded at the spot rate of exchange ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the spot rate of exchange at the reporting date. All differences arising on non–trading activities are taken to other operating income in the income statement, with the exception of differences on foreign currency borrowings that provide an effective hedge against a net investment in a foreign entity. These differences are taken directly to equity until the disposal of the net investment, at which time, they are recognized in the income statement. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the spot exchange rates as at the date of recognition. Non-monetary items measured at fair value in a foreign currency are translated using the spot exchange rates at the date when the fair value was determined. (ii) Group companies On consolidation, the assets and liabilities of foreign operations are translated into Lebanese Lira at the rate of exchange prevailing at the reporting date and their income statements are translated at the average exchange rates for the year. The exchange differences arising on translation for consolidation are recognized in other comprehensive income. On disposal of a foreign entity, the deferred cumulative amount recognized in equity relating to that particular foreign operation is recognized in the income statement in other operating expenses or other operating income. Any goodwill arising on the acquisition of a foreign operation and any fair value adjustments to the carrying amounts of assets and liabilities arising on the acquisition are treated as assets and liabilities of the foreign operations and translated at closing rate.

Société Générale de Banque au Liban S.A.L. F.194

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2015 2 ACCOUNTING POLICIES (continued) 2.5 Summary of significant accounting policies (continued) (2) Financial instruments – classification and measurement (i) Date of recognition All financial assets and liabilities are initially recognized on the trade date, i.e. the date that the Group becomes a party to the contractual provisions of the instrument. This includes purchases or sales of financial assets that require delivery of assets within the time frame generally established by regulation or convention in the market place. (ii) Classification and measurement of financial investments a. Financial assets The classification of financial assets depends on the basis of the entity's business model for managing the financial assets and the contractual cash flow characteristics of the financial asset. Assets are initially measured at fair value plus, in the case of a financial asset not at fair value through profit or loss, particular transaction costs. Assets are subsequently measured at amortized cost or at fair value. An entity may, at initial recognition, irrevocably designate a financial asset as measured at fair value through profit or loss if doing so eliminates or significantly reduces a measurement or recognition inconsistency (sometimes referred to as an 'accounting mismatch') that would otherwise arise from measuring assets or liabilities or recognizing the gains and losses on them on different bases. An entity is required to disclose such financial assets separately from those mandatorily measured at fair value. Financial assets at amortized cost Debt instruments are subsequently measured at amortized cost less any impairment loss (except for debt instruments that are designated at fair value through profit or loss upon initial recognition) if they meet the following two conditions:

• The asset is held within a business model whose objective is to hold assets in order to collect contractual cash flows; and

• The contractual terms of the instrument give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

These financial assets are initially recognized at cost, being the fair value of the consideration paid for the acquisition of the investment. All transaction costs directly attributed to the acquisition are also included in the cost of investment. After initial measurement, these financial assets are measured at amortized cost using the effective interest rate method, less allowance for impairment. Amortized cost is calculated by taking into account any discount of premium on acquisition and fees and costs that are an integral part of the effective interest rate. The amortization is included in “Interest and similar income” in the consolidated income statement. The losses arising from impairment are recognized in the consolidated income statement in “Net credit losses”. Although the objective of an entity's business model may be to hold financial assets in order to collect contractual cash flows, the entity need not hold all of those instruments until maturity. Thus an entity's business model can be to hold financial assets to collect contractual cash flows even when sales of financial assets occur. However, if more than an infrequent number of sales are made out of a portfolio, the entity needs to assess whether and how such sales are consistent with an objective of collecting contractual cash flows. If the objective of the entity's business model for managing those financial assets changes, the entity is required to reclassify financial assets. Gains and losses arising from the derecognition of financial assets measured at amortized cost are reflected under “net (loss) gain from sale of debt instruments at amortized cost” in the consolidated income statement.

Société Générale de Banque au Liban S.A.L. F.195

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2015 2 ACCOUNTING POLICIES (continued) 2.5 Summary of significant accounting policies (continued) (2) Financial instruments – classification and measurement (continued) (ii) Classification and measurement of financial investments (continued) a. Financial assets (continued) Financial assets at fair value through profit or loss Included in this category are those debt instruments that do not meet the conditions in “at amortized cost” above, debt instruments designated at fair value through profit or loss upon initial recognition and equity instruments at fair value through profit or loss.

i. Debt instruments at fair value through profit or loss These financial assets are recorded in the consolidated statement of financial position at fair value. Changes in fair value and interest income are recorded under “Net gain (loss) from financial assets at fair value through profit or loss” in the consolidated income statement showing separately, those related to financial assets designated at fair value upon initial recognition from those mandatorily measured at fair value. Gains and losses arising from the derecognition of debt instruments at fair value through profit or loss are also reflected under “Net gain (loss) from financial assets at fair value through profit or loss” in the consolidated income statement showing separately, those related to financial assets designated at fair value upon initial recognition from those mandatorily measured at fair value.

ii. Equity instruments at fair value through profit or loss Investments in equity instruments are classified at fair value through profit or loss, unless the Group designates at initial recognition an investment that is not held for trading as at fair value through other comprehensive income.

These financial assets are recorded in the consolidated statement of financial position at fair value. Changes in fair value and dividend income are recorded under “Net gain (loss) from financial assets at fair value through profit or loss” in the consolidated income statement. Gains and losses arising from the derecognition of equity instruments at fair value through profit or loss are also reflected under “Net gain (loss) from financial assets at fair value through profit or loss” in the consolidated income statement. Financial assets at fair value through other comprehensive income Investments in equity instruments designated at initial recognition as not held for trading are classified at fair value through other comprehensive income. These financial assets are initially measured at fair value plus transaction costs. Subsequently, they are measured at fair value, with gains and losses arising from changes in fair value recognized in other comprehensive income and accumulated under equity. The cumulative gain or loss will not be reclassified to the consolidated income statement on disposal of the investments. Dividends on these investments are recognized under “Revenue from financial assets at fair value through other comprehensive income” in the consolidated income statement when the entity’s right to receive payment of dividend is established in accordance with IAS 18: “Revenue”, unless the dividends clearly represent a recovery of part of the cost of the investment.

Société Générale de Banque au Liban S.A.L. F.196

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2015 2 ACCOUNTING POLICIES (continued) 2.5 Summary of significant accounting policies (continued) (2) Financial instruments – classification and measurement (continued) (ii) Classification and measurement of financial investments (continued) a. Financial assets (continued) Balances with the Central Banks, due from banks and financial institutions, loans to banks and financial institutions, reverse repurchase agreements, amounts due from affiliated banks and financial institutions and loans and advances to customers and related parties – at amortized cost After initial measurement, “Balances with the Central Banks”, “Due from banks and financial institutions”, “Loans to banks and financial institutions”, “Reverse repurchase agreements”, “Amounts due from affiliated banks and financial institutions” and “Loans and advances to customers and to related parties” are subsequently measured at amortized cost using the effective interest rate method (EIR), less allowance for impairment. Amortized cost is calculated by taking into account any discount or premium on acquisition and fees and costs that are an integral part of the EIR. The amortization is included in “Interest and similar income” in the consolidated income statement. The losses arising from impairment are recognized in the consolidated income statement in “Net credit losses”. b. Financial liabilities Liabilities are initially measured at fair value, plus particular transaction costs in the case of a financial liability not classified at fair value through profit or loss. Liabilities are subsequently measured at amortized cost or fair value. The Group classifies all financial liabilities as subsequently measured at amortized cost using the effective interest rate method, except for: - financial liabilities at fair value through profit or loss (including derivatives); - financial liabilities that arise when a transfer of a financial asset does not qualify for derecognition or when the

continuing involvement approach applies; - financial guarantee contracts and commitments to provide a loan at a below-market interest rate which after

initial recognition are subsequently measured at the higher of the amount determined in accordance with IAS 37 Provisions, Contingent Liabilities and Contingent Assets and the amount initially recognized less, when appropriate, cumulative amortization recognized in accordance with IAS 18 Revenue.

Fair value option An entity may, at initial recognition, irrevocably designate a financial liability as measured at fair value through profit or loss when: - doing so results in more relevant information, because it either eliminates or significantly reduces a

measurement or recognition inconsistency (sometimes referred to as “an accounting mismatch”) that would otherwise arise from measuring assets or liabilities or recognizing the gains and losses on them on different bases; or

- a group of financial liabilities or financial assets and financial liabilities is managed and its performance is evaluated on a fair value basis, in accordance with a documented risk management or investment strategy, and information about the group is provided internally on that basis to the entity's key management personnel.

The amount of changes in fair value of a financial liability designated at fair value through profit or loss at initial recognition that is attributable to changes in credit risk of that liability is recognized in other comprehensive income, unless such recognition would create an accounting mismatch in the consolidated income statement. Changes in fair value attributable to changes in credit risk are not reclassified to consolidated income statement.

Société Générale de Banque au Liban S.A.L. F.197

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2015 2 ACCOUNTING POLICIES (continued) 2.5 Summary of significant accounting policies (continued) (2) Financial instruments – classification and measurement (continued) (ii) Classification and measurement of financial investments (continued) b. Financial liabilities (continued) Due to the Central Banks, loans and repurchase agreements, due to banks and financial institutions, amounts due to affiliated banks and financial institutions and customers’ deposits and related parties’ deposits After initial measurement, “due to the Central Banks”, “loans and repurchase agreements”, “due to banks and financial institutions”, “amounts due to affiliated banks and financial institutions” and “customers’ and related parties’ deposits” are measured at amortized cost less amounts repaid using the effective interest rate method. Amortized cost is calculated by taking into account any discount or premium on the issue and costs that are an integral part of the effective interest rate method. c. Derivatives recorded at fair value through profit or loss The Group uses derivatives such as forward foreign exchange contracts and interest rate swaps. Derivatives are recorded at fair value and carried as assets when their fair value is positive and as liabilities when their fair value is negative. Changes in the fair value of derivatives are included in “net gain (loss) from financial assets at fair value through profit or loss” in the consolidated income statement. An embedded derivative is separated from the host and accounted for as a derivative if, and only if:

(a) the hybrid contract contains a host that is not an asset within the scope of IFRS 9; (b) the economic characteristics and risks of the embedded derivative are not closely related to the

economic characteristics and risks of the host; (c) a separate instrument with the same terms as the embedded derivative would meet the definition of a

derivative; and (d) the hybrid contract is not measured at fair value with changes in fair value recognized in profit or loss.

(iii) ‘Day 1’ profit or loss When the transaction price differs from the fair value of other observable current market transactions in the same instrument or based on a valuation technique whose variables include only data from observable markets, the Group immediately recognizes the difference between the transaction price and fair value (a ‘Day 1’ profit or loss) in the consolidated income statement. In cases where fair value is determined using data which is not observable, the difference between the transaction price and model value is only recognized in the consolidated income statement when the inputs become observable, or when the instrument is derecognized. (iv) Reclassification of financial assets The Group reclassifies financial assets if the objective of the business model for managing those financial assets changes. Such changes are expected to be very infrequent. Such changes are determined by the Group’s senior management as a result of external or internal changes when significant to the Group’s operations and demonstrable to external parties. If financial assets are reclassified, the reclassification is applied prospectively from the reclassification date, which is the first day of the first reporting period following the change in business model that results in the reclassification of financial assets. Any previously recognized gains, losses or interest are not restated. If a financial asset is reclassified so that it is measured at fair value, its fair value is determined at the reclassification date. Any gain or loss arising from a difference between the previous carrying amount and fair value is recognized in profit or loss. If a financial asset is reclassified so that it is measured at amortized cost, its fair value at the reclassification date becomes its new carrying amount.

Société Générale de Banque au Liban S.A.L. F.198

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2015 2 ACCOUNTING POLICIES (continued) 2.5 Summary of significant accounting policies (continued) (3) Derecognition of financial assets and financial liabilities (i) Financial assets A financial asset (or, where applicable a part of a financial asset or part of a group of similar financial assets) is derecognized when: • the rights to receive cash flows from the asset have expired; • the Group has transferred its rights to receive cash flows from the asset or has assumed an obligation to

pay the received cash flows in full without material delay to a third party under a ‘pass-through’ arrangement; and either: (a) the Group has transferred substantially all the risks and rewards of the asset, or (b) the Group has neither transferred nor retained substantially all the risks and rewards of the asset, but

has transferred control of the asset. When the Group has transferred its rights to receive cash flows from an asset or has entered into a pass-through arrangement, and has neither transferred nor retained substantially all the risks and rewards of the asset nor transferred control of the asset, the asset is recognized to the extent of the Group’s continuing involvement in the asset. In that case, the Group also recognizes an associated liability. The transferred asset and the associated liability are measured on a basis that reflects rights and obligations that the Group has retained. Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the Group could be required to repay. (ii) Financial liabilities A financial liability is derecognized when the obligation under the liability is discharged or cancelled or expires. Where an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability. The difference between the carrying value of the original financial liability and the consideration paid is recognized in the consolidated income statement. (4) Repurchase and reverse repurchase agreements Securities sold under agreements to repurchase at a specified future date are not derecognized from the consolidated statement of financial position as the Group retains substantially all the risks and rewards of ownership. The corresponding cash received is recognized in the consolidated statement of financial position as an asset with a corresponding obligation to return it, including accrued interest as a liability within “loans and repurchase agreements”, reflecting the transaction’s economic substance as a loan to the Group. The difference between the sale and repurchase prices is treated as interest expense and is accrued over the life of agreement using the effective interest rate. When the counterparty has the right to sell or repledge the securities, the Group reclassifies those securities in its consolidated statement of financial position to “Financial assets pledged as collateral”. Conversely, securities purchased under agreements to resell at a specified future date are not recognized in the consolidated statement of financial position. The consideration paid, including accrued interest, is recorded in the consolidated statement of financial position within “Reverse repurchase agreements”, reflecting the transaction’s economic substance as a loan by the Group. The difference between the purchase and resale prices is recorded in “Net interest income” and is accrued over the life of the agreement using the effective interest rate. If securities purchased under agreement to resell are subsequently sold to third parties, the obligation to return the securities is recorded as a short sale within “Financial liabilities at fair value through profit or loss” and measured at fair value with any gains or losses included in “net gain from financial assets at fair value through profit or loss” in the consolidated income statement.

Société Générale de Banque au Liban S.A.L. F.199

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2015 2 ACCOUNTING POLICIES (continued) 2.5 Summary of significant accounting policies (continued) (5) Securities lending and borrowing Securities lending and borrowing transactions are usually collateralized by securities or cash. The transfer of the securities to counterparties is only reflected on the consolidated statement of financial position if the risks and rewards of ownership are also transferred. Cash advanced or received as collateral is recorded as an asset or liability. Securities borrowed are not recognized on the consolidated statement of financial position, unless they are then sold to third parties, in which case the obligation to return the securities is recorded as a trading liability and measured at fair value with any gains or losses included in “Net trading income”. (6) Determination of fair value The Group measures financial instruments such as derivatives, and non-financial assets such as investment properties, at fair value at each statement of financial position date. Also, fair values of financial instruments measured at amortized cost are disclosed in the notes. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:

• In the principal market for the asset or liability, or • In the absence of a principal market, in the most advantageous market for the asset or liability

The principal or the most advantageous market must be accessible by the Group. The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest. A fair value measurement of a non-financial asset takes into account a market participant's ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use. The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs. All assets and liabilities for which fair value is measured or disclosed in the consolidated financial statements are categorized within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:

- Level 1 — Quoted (unadjusted) market prices in active markets for identical assets or liabilities - Level 2 — Valuation techniques for which the lowest level input that is significant to the fair value

measurement is directly or indirectly observable - Level 3 — Valuation techniques for which the lowest level input that is significant to the fair value

measurement is unobservable For assets and liabilities that are recognized in the consolidated financial statements on a recurring basis, the Group determines whether transfers have occurred between Levels in the hierarchy by re-assessing categorization (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period. The Group’s management determines the policies and procedures for both recurring fair value measurement and for non-recurring measurement. At each reporting date, the management analyses the movements in the values of assets and liabilities which are required to be re-measured or re-assessed as per the Group’s accounting policies. For this analysis, the management verifies the major inputs applied in the latest valuation by agreeing the information in the valuation computation to contracts and other relevant documents. For the purpose of fair value disclosures, the Group has determined classes of assets and liabilities on the basis of the nature, characteristics and risks of the asset or liability and the level of the fair value hierarchy as explained above.

Société Générale de Banque au Liban S.A.L. F.200

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2015 2 ACCOUNTING POLICIES (continued) 2.5 Summary of significant accounting policies (continued) (7) Impairment of financial assets The Group assesses at each consolidated statement of financial position date whether there is any objective evidence that a financial asset or a group of financial assets is impaired. A financial asset or a group of financial assets is deemed to be impaired if, and only if, there is objective evidence of impairment as a result of one or more events that have occurred after the initial recognition of the asset (an incurred ‘loss event’) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or the group of financial assets that can be reliably estimated. Evidence of impairment may include indications that the borrower or a group of borrowers is experiencing significant financial difficulty, the probability that they will enter bankruptcy or other financial reorganization, default or delinquency in interest or principal payments and where observable data indicates that there is a measurable decrease in the estimated future cash flows, such as changes in arrears or economic conditions that correlate with defaults. (i) Financial assets carried at amortized cost For financial assets carried at amortized cost, the Group first assesses individually whether objective evidence of impairment exists for financial assets that are individually significant, or collectively for financial assets that are not individually significant. If the Group determines that no objective evidence of impairment exists for an individually assessed financial asset, it includes the asset in a group of financial assets with similar credit risk characteristics and collectively assesses them for impairment. Assets that are individually assessed for impairment and for which an impairment loss is, or continues to be, recognized are not included in a collective assessment of impairment. If there is objective evidence that an impairment loss has been incurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future expected credit losses that have not yet been incurred). The carrying amount of the asset is reduced through the use of an allowance account and the amount of the loss is recognized in the consolidated income statement. Loans together with the associated allowance are written off when there is no realistic prospect of future recovery and all collateral has been realized or has been transferred to the Group. If, in a subsequent year, the amount of the estimated impairment loss increases or decreases because of an event occurring after the impairment was recognized, the previously recognized impairment loss is increased or reduced by adjusting the allowance account. If a future write-off is later recovered, the recovery is credited to the “Net credit losses” in the consolidated income statement. The present value of the estimated future cash flows is discounted at the financial asset’s original effective interest rate. If a loan has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate. The calculation of the present value of the estimated future cash flows of a collateralized financial asset reflects the cash flows that may result from foreclosure less costs of obtaining and selling the collateral, whether or not the foreclosure is probable. For the purpose of a collective evaluation of impairment, financial assets are grouped on the basis of the Group’s internal credit grading system, that considers credit risk characteristics such as asset type, industry, geographical location, collateral type, past-due status and other relevant factors. Future cash flows on a group of financial assets that are collectively evaluated for impairment are estimated on the basis of historical loss experience for assets with credit risk characteristics similar to those in the group. Historical loss experience is adjusted on the basis of current observable data to reflect the effects of current conditions on which the historical loss experience is based and to remove the effects of conditions in the historical period that do not exist currently.

Société Générale de Banque au Liban S.A.L. F.201

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2015 2 ACCOUNTING POLICIES (continued) 2.5 Summary of significant accounting policies (continued) (7) Impairment of financial assets (continued) (i) Financial assets carried at amortized cost (continued) Estimates of changes in future cash flows reflect, and are directionally consistent with, changes in related observable data from year to year (such as changes in unemployment rates, property prices, commodity prices, payment status, or other factors that are indicative of incurred losses in the group and their magnitude). The methodology and assumptions used for estimating future cash flows are reviewed regularly to reduce any differences between loss estimates and actual loss experienced. (ii) Renegotiated loans Where possible, the Group seeks to restructure loans rather than to take possession of collateral. This may involve extending the payment arrangements and the agreement of new loan conditions. Once the terms have been renegotiated any impairment is measured using the original effective interest rate as calculated before the modification of terms and the loan is no longer considered past due. Management continuously reviews renegotiated loans to ensure that all criteria are met and that future payments are likely to occur. The loans continue to be subject to an individual or collective impairment assessment, calculated using the loan’s original effective interest rate. (iii) Collateral repossessed The Group’s policy is to determine whether a repossessed asset is best used for its internal operations or should be sold. Assets determined to be useful for the internal operations are transferred to their relevant asset category at the lower of their repossessed value or the carrying value of the original secured asset. Assets that are determined better to be sold, are immediately transferred to assets held for sale at their fair value at the repossessed date in line with the Group’s policy. (8) Hedge accounting The Group makes use of derivative instruments to manage exposures to interest rate, foreign currency and credit risks, including exposures arising from highly probable forecast transactions and firm commitments. In order to manage particular risks, the Group applies hedge accounting for transactions which meet the specified criteria. At inception of the hedge relationship, the Group formally documents the relationship between the hedged item and the hedging instrument, including the nature of the risk, the objective and strategy for undertaking the hedge and the method that will be used to assess the effectiveness of the hedging relationship. At each hedge effectiveness assessment date, a hedge relationship must be expected to be highly effective on a prospective basis and demonstrate that it was effective (retrospective effectiveness) for the designated period in order to qualify for hedge accounting. A formal assessment is undertaken to ensure the hedging instrument is expected to be highly effective in offsetting the designated risk in the hedged item both at inception and at each quarter end on an ongoing basis. A hedge is expected to be highly effective if the changes in fair value or cash flows attributable to the hedged risk during the period for which the hedge is designated are expected to offset in a range of 80% to 125% and are expected to achieve such offset in future periods. Hedge ineffectiveness is recognized in the consolidated income statement in “Net gain (loss) from financial assets at fair value through profit or loss”. For situations where that hedged item is a forecast transaction, the Group assesses whether the transaction is highly probable and presents an exposure to variations in cash flows that could ultimately affect the consolidated income statement.

Société Générale de Banque au Liban S.A.L. F.202

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2015 2 ACCOUNTING POLICIES (continued) 2.5 Summary of significant accounting policies (continued) (8) Hedge accounting (continued) (i) Fair value hedges For designated and qualifying fair value hedges, the cumulative change in the fair value of a hedging derivative is recognized in the consolidated income statement in “Net gain (loss) from financial instruments at fair value through profit or loss”. Meanwhile, the cumulative change in the fair value of the hedged item attributable to the risk hedged is recorded as part of the carrying value of the hedged item in the consolidated statement of financial position and is also recognized in “Net gain from financial assets at fair value through profit or loss” in the consolidated income statement. If the hedging instrument expires or is sold, terminated or exercised, or where the hedge no longer meets the criteria for hedge accounting, the hedge relationship is discontinued prospectively. For hedged items recorded at amortized cost, the difference between the carrying value of the hedged item on termination and the face value is amortized over the remaining term of the original hedge using the recalculated effective interest rate (EIR). If the hedged item is derecognized, the unamortized fair value adjustment is recognized immediately in the consolidated income statement. (ii) Cash flow hedges For designated and qualifying cash flow hedges, the effective portion of the gain or loss on the hedging instrument is initially recognized directly in equity in the “Cash flow hedge reserve”. The ineffective portion of the gain or loss on the hedging instrument is recognized immediately in the consolidated income statement. When the hedged cash flow affects the consolidated income statement, the gain or loss on the hedging instrument is recorded in the corresponding income or expense line of the consolidated income statement. When the forecast transaction subsequently results in the recognition of a non-financial asset or a non-financial liability, the gains and losses previously recognized in the other comprehensive income are removed from the reserve and included in the initial cost of the asset or liability. When a hedging instrument expires, or is sold, terminated, exercised, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss existing in other comprehensive income at that time remains in other comprehensive income and is recognized when the hedged forecast transaction is ultimately recognized in the consolidated income statement. When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was reported in other comprehensive income is immediately transferred to the consolidated income statement. (iii) Hedge of a net investment Hedges of net investments in a foreign operation, including a hedge of a monetary item that is accounted for as part of the net investment, are accounted for in a way similar to cash flow hedges. Gains or losses on the hedging instrument relating to the effective portion of the hedge are recognized directly in other comprehensive income while any gains or losses relating to the ineffective portion are recognized in the consolidated income statement. On disposal of the foreign operation, the cumulative value of any such gains or losses recognized directly in other comprehensive income is transferred to the consolidated income statement. (9) Offsetting financial instruments Financial assets and financial liabilities are offset and the net amount reported in the consolidated statement of financial position if, and only if, there is a currently enforceable legal right to offset the recognized amounts and there is an intention to settle on a net basis, or to realize the asset and settle the liability simultaneously. This is not generally the case with master netting agreements. Therefore, the related assets and liabilities are presented gross in the consolidated statement of financial position.

Société Générale de Banque au Liban S.A.L. F.203

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2015 2 ACCOUNTING POLICIES (continued) 2.5 Summary of significant accounting policies (continued) (10) Leasing The determination of whether an arrangement is a lease, or it contains a lease, is based on the substance of the arrangement and requires an assessment of whether the fulfillment of the arrangement is dependent on the use of a specific asset or assets and the arrangement conveys a right to use the asset. Group as a lessee Leases which do not transfer to the Group substantially all the risks and benefits incidental to ownership of the leased items are operating leases. Operating lease payments are recognized as an expense in the consolidated income statement on a straight line basis over the lease term. Contingent rents payable are recognized as an expense in the period in which they are incurred. Group as a lessor Leases where the Group does not transfer substantially all the risk and benefits of ownership of the asset are classified as operating leases. Initial direct costs incurred in negotiating operating leases are added to the carrying amount of the leased asset and recognized over the lease term on the same basis as rental income. Contingent rents are recognized as revenue in the period in which they are earned. (11) Recognition of income and expense Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured. The following specific recognition criteria must also be met before revenue is recognized. (i) Interest and similar income and expenses For all financial instruments measured at amortized cost, interest income or expense is recorded using the effective interest rate, which is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial instrument or a shorter period, where appropriate, to the net carrying amount of the financial asset or financial liability. The calculation takes into account all contractual terms of the financial instrument and includes any fees or incremental costs that are directly attributable to the instrument and are an integral part of the effective interest rate, but not future credit losses. The carrying amount of the financial asset or financial liability is adjusted if the Group revises its estimates of payments or receipts. The adjusted carrying amount is calculated based on the original effective interest rate and the change in the carrying amount is recorded as “Interest and similar income” for financial assets and “Interest and similar expenses” for financial liabilities. Once the recorded value of a financial asset or a group of similar financial assets has been reduced due to an impairment loss, interest income continues to be recognized using the rate of interest used to discount the future cash flows for the purpose of measuring the impairment loss. (ii) Fee and commission income The Group earns fee and commission income from a diverse range of services it provides to its customers. Fee income can be divided into the following two categories: Fee income earned from services that are provided over a certain period of time Fees earned for the provision of services over a period of time are accrued over that period. These fees include commission income and asset management, custody and other management and advisory fees. Loan commitment fees for loans that are likely to be drawn down and other credit related fees are deferred (together with any incremental costs) and recognized as an adjustment to the effective interest rate on the loan. When it is unlikely that a loan be drawn down, the loan commitment fees are recognized over the commitment period on a straight line basis. Fee income from providing transaction services Fees arising from negotiating or participating in the negotiation of a transaction for a third party, such as the arrangement of the acquisition of shares or other securities or the purchase or sale of businesses, are recognized on completion of the underlying transaction. Fees or components of fees that are linked to a certain performance are recognized after fulfilling the corresponding criteria.

Société Générale de Banque au Liban S.A.L. F.204

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2015 2 ACCOUNTING POLICIES (continued) 2.5 Summary of significant accounting policies (continued) (11) Recognition of income and expense (continued) (ii) Fee and commission income (continued) Fee and commission income from providing insurance services Insurance and investment contract policyholders are charged for policy administration services, investment management services, surrenders and other contract fees. These fees are recognized as revenue over the period in which the related services are performed. If the fees are for services provided in future periods, then they are deferred and recognized over those future periods. (iii) Dividend income Dividend income is recognized when the Group’s right to receive the payment is established. (iv) Net gain (loss) on financial instruments at fair value through profit or loss Results arising from financial instruments at fair value through profit or loss, include all gains and losses from changes in fair value and related income or expense and dividends for financial assets at fair value through profit or loss. This includes any ineffectiveness recorded in hedging transactions. (12) Cash and cash equivalents Cash and cash equivalents as referred to in the consolidated statement of cash flows comprise balances with original maturities of a period of three months or less including cash and balances with the Central Banks, deposits with banks and financial institutions, reverse repurchase agreements, amounts due from affiliated banks and financial institutions, due to the Central Banks, loans and repurchase agreements, due to banks and financial institutions and amounts due to affiliated banks and financial institutions. (13) Investments in an associate An associate is an entity over which the Group has significant influence. Significant influence is the power to participate in the financial and operating policy decisions of the investee, but is not control or joint control over those policies. The considerations made in determining significant influence are similar to those necessary to determine control over subsidiaries. The Group’s investments in its associate is accounted for using the equity method. Under the equity method, the investment in an associate is initially recognized at cost. The carrying amount of the investment is adjusted to recognize changes in the Group’s share of net assets of the associate since the acquisition date. Goodwill relating to the associate is included in the carrying amount of the investment and is not tested for impairment individually. The statement of profit or loss reflects the Group’s share of the results of operations of the associate. Any change in OCI of this investee is presented as part of the Group’s OCI. In addition, when there has been a change recognized directly in the equity of the associate, the Group recognizes its share of any changes, when applicable, in the statement of changes in equity. Unrealized gains and losses resulting from transactions between the Group and the associate are eliminated to the extent of the interest in the associate. The financial statements of the associate are prepared for the same reporting period as the Group. When necessary, adjustments are made to bring the accounting policies in line with those of the Group. After application of the equity method, the Group determines whether it is necessary to recognize an impairment loss on its investment in its associate. At each reporting date, the Group determines whether there is objective evidence that the investment in the associate is impaired. If there is such evidence, the Group calculates the amount of impairment as the difference between the recoverable amount of the associate and its carrying value, and then recognizes the loss in the statement of profit or loss.

Société Générale de Banque au Liban S.A.L. F.205

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2015 2 ACCOUNTING POLICIES (continued) 2.5 Summary of significant accounting policies (continued) (14) Property and equipment Property and equipment are initially recorded at cost less accumulated depreciation and any impairment in value. Buildings acquired prior to 1 January 1994 were restated for the changes in the general purchasing power of Lebanese Lira after the approval of the Central Bank of Lebanon. Net surplus arising on restatement is credited to “Revaluation reserve of property”. Changes in the expected useful life are accounted for by changing the depreciation period or method, as appropriate, and treated as changes in accounting estimates. Depreciation is calculated using the straight line method to write-down the cost of property and equipment to their residual values over their estimated useful lives. Land is not depreciated. The estimated useful lives are as follows: • Buildings 50 years • Furniture and fixtures 5 to 12.5 years • Installations 16.67 years • Vehicles 10 years Property and equipment is derecognized on disposal or when no future economic benefits are expected from its use. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is recognized in “Net profit from sale and write-off of other assets” in the consolidated income statement in the year the asset is derecognized. The assets’ residual lives and methods of depreciation are reviewed at each financial year end and adjusted prospectively if applicable. (15) Business combinations and goodwill Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the aggregate of the consideration transferred, measured at acquisition date fair value and the amount of any non-controlling interest in the acquiree. For each business combination, the Group elects whether to measure the non controlling interest in the acquiree at fair value or at the proportionate share of the acquiree’s identifiable net assets. Acquisition costs incurred are expensed and included in administrative expenses. When the Group acquires a business, it assesses the financial assets and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic circumstances and pertinent conditions as at the acquisition date. This includes the separation of embedded derivatives in host contracts by the acquiree. If the business combination is achieved in stages, the previously held equity interest in the acquiree is remeasured at fair value at the acquisition date through the consolidated income statement. Any contingent consideration to be transferred by the acquirer will be recognized at fair value at the acquisition date. Subsequent changes to the fair value of the contingent consideration which is deemed to be an asset or liability will be recognized either in profit or loss or as a change to other comprehensive income. If the contingent consideration is classified as equity, it should not be remeasured until it is finally settled within equity. Goodwill is initially measured at cost being the excess of the aggregate of the consideration transferred and the amount recognized for non-controlling interests, and any previous interest held, over the net identifiable assets acquired and liabilities assumed. If the fair value of the net assets acquired is in excess of the aggregate consideration transferred, the Group re-assesses whether it has correctly identified all of the assets acquired and all of the liabilities assumed and reviews the procedures used to measure the amounts to be recognized at the acquisition date. If the re-assessment still results in an excess of the fair value of net assets acquired over the aggregate consideration transferred, then the gain is recognized in profit or loss.

Société Générale de Banque au Liban S.A.L. F.206

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2015

2 ACCOUNTING POLICIES (continued) 2.5 Summary of significant accounting policies (continued) (15) Business combinations and goodwill (continued) After initial recognition, goodwill is measured at cost less any accumulated impairment losses. For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Group’s cash-generating units that are expected to benefit from the combination, irrespective of whether other assets or liabilities of the acquiree are assigned to those units. Where goodwill forms part of a cash-generating unit and part of the operation within that unit is disposed of, the goodwill associated with the operation disposed of is included in the carrying amount of the operation when determining the gain or loss on disposal of the operation. Goodwill disposed of in this circumstance is measured based on the relative values of the operation disposed of and the portion of the cash-generating unit retained. (16) Intangible assets An intangible asset is recognized only when its cost can be measured reliably and it is probable that the expected future economic benefits that are attributable to it will flow to the Group. Intangible assets acquired separately are measured on initial recognition at cost. The cost of intangible assets acquired in a business combination is their fair value as at the date of acquisition. Following initial recognition, intangible assets are carried at cost less any accumulated amortization and any accumulated impairment losses. The useful lives of intangible assets are assessed to be either finite or indefinite. Intangible assets with finite lives are amortized over the useful economic life. The amortization period and the amortization method for an intangible asset with a finite useful life are reviewed at least at each financial year-end. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset are accounted for by changing the amortization period or method, as appropriate, and treated as changes in accounting estimates. The amortization expense on intangible assets with finite lives is recognized in the consolidated income statement in the expense category consistent with the function of the intangible asset. Amortization is calculated using the straight line method to write down the cost of intangible assets to their residual values. The estimated useful lives are as follows: Computer software 5 years Key money 5 years Customer relationship – core deposits 12.5 years Customer relationship – loans and advances 12.5 years Intangible assets with indefinite useful lives are not amortized, but are tested for impairment annually, either individually or at the cash-generating unit level. The assessment of indefinite life is reviewed annually to determine whether the indefinite life continues to be supportable. If not, the change in useful life from indefinite to finite is made on a prospective basis. Gains or losses arising from de-recognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognized in the consolidated income statement when the asset is derecognized. The Group does not have intangible assets with indefinite economic life. (17) Investment properties Investment properties are measured initially at cost, including transaction costs. Subsequent to initial recognition, investment properties are stated at fair value, which reflects market conditions at the reporting date. Gains or losses arising from changes in the fair values of investment properties are included in profit or loss in the period in which they arise, including the corresponding tax effect. Fair values are determined based on the evaluation performed by independent qualified valuers on the basis of current market values and if any, by reference to sale agreements entered into by the Group for the disposal of the property subsequent to year end. Investment properties are derecognized either when they have been disposed of or when they are permanently withdrawn from use and no future economic benefit is expected from their disposal. The difference between the net disposal proceeds and the carrying amount of the asset is recognized in the consolidated income statement in the period of derecognition.

Société Générale de Banque au Liban S.A.L. F.207

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2015 2 ACCOUNTING POLICIES (continued) 2.5 Summary of significant accounting policies (continued) (17) Investment properties (continued) Transfers are made to (or from) investment property only when there is a change in use. For a transfer from investment property to owner-occupied property, the deemed cost for subsequent accounting is the fair value at the date of change in use. If owner-occupied property becomes an investment property, the Group accounts for such property in accordance with the policy stated under property and equipment up to the date of change in use. (18) Non-current assets held for sale Non-current assets classified as held for sale are measured at the lower of their carrying amount and fair value less costs to sell. Non-current assets are classified as held for sale if their carrying amounts will be recovered principally through a sale transaction rather than through continuing use. This condition is regarded as met only when the sale is highly probable and the asset is available for immediate sale in its present condition, management has committed to the sale, and the sale is expected to have been completed within one year from the date of classification. (19) Impairment of non-financial assets The Group assesses at each reporting date whether there is an indication that an asset may be impaired. If any indication exists, or when annual impairment testing for an asset is required, the Group estimates the asset’s recoverable amount. An asset’s recoverable amount is the higher of an asset’s or cash-generating unit’s (CGU) fair value less costs to sell and its value in use. Where the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs to sell, an appropriate valuation model is used. These calculations are corroborated by valuation multiples, quoted share prices for publicly traded subsidiaries or other available fair value indicators. For assets excluding goodwill, an assessment is made at each reporting date as to whether there is any indication that previously recognized impairment losses may no longer exist or may have decreased. If such indication exists, the Group estimates the asset’s or CGU’s recoverable amount. A previously recognized impairment loss is reversed only if there has been a change in the assumptions used to determine the asset’s recoverable amount since the last impairment loss was recognized. The reversal is limited so that the carrying amount of the asset does not exceed its recoverable amount, nor exceeds the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognized for the asset in prior years. Such reversal is recognized in the consolidated income statement. Impairment losses relating to goodwill cannot be reversed in future periods. (20) Financial guarantees In the ordinary course of business, the Group gives financial guarantees, consisting of letters of credit, guarantees and acceptances. Financial guarantees are initially recognized in the consolidated financial statements (within “Other liabilities”) at fair value, being the premium received. Subsequent to initial recognition, the Group’s liability under each guarantee is measured at the higher of the amount initially recognized less, when appropriate, cumulative amortization recognized in the consolidated income statement, and the best estimate of expenditure required to settle any financial obligation arising as a result of the guarantee. Any increase in the liability relating to financial guarantees is recorded in the consolidated income statement in “Net credit losses”. The premium received is recognized in the consolidated income statement in “Net fees and commission income” on a straight line basis over the life of the guarantee.

Société Générale de Banque au Liban S.A.L. F.208

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2015 2 ACCOUNTING POLICIES (continued) 2.5 Summary of significant accounting policies (continued) (21) Tax Taxes are provided for in accordance with regulations and laws that are effective in the countries where the Group operates. (i) Current tax Current tax assets and liabilities for the current and prior years are measured at the amount expected to be recovered from or paid to the taxation authorities. The taxation rates and tax law used to compute the amount are those that are enacted or substantively enacted by the statement of financial position date. The Bank’s profits from operation in Lebanon are subject to a tax rate of 15% after deducting the 5% tax on interest received according to Law no. 497/2003 dated 30 January 2003. (ii) Deferred tax Deferred tax is provided on temporary differences at the statement of financial position date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. Deferred tax liabilities are recognized for all taxable temporary differences, except: • Where the deferred tax liability arises from the initial recognition of goodwill or of an asset or liability in a

transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss;

• In respect of taxable temporary differences associated with investments in subsidiaries, where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.

Deferred tax assets are recognized for all deductible temporary differences, carry forward of unused tax credits and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry forward of unused tax credits and unused tax losses can be utilized except: • Where the deferred tax asset relating to the deductible temporary difference arises from the initial recognition

of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss;

• In respect of deductible temporary differences associated with investments in subsidiaries, deferred tax assets are recognized only to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilized.

The carrying amount of deferred tax assets is reviewed at each statement of financial position date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilized. Unrecognized deferred tax assets are reassessed at each statement of financial position date and are recognized to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered. Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realized or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the statement of financial position date. Current tax and deferred tax relating to items recognized directly in equity are also recognized in equity and not in the consolidated income statement. Deferred tax assets and deferred tax liabilities are offset if a legally enforceable right exists to net off current tax assets against current tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority.

Société Générale de Banque au Liban S.A.L. F.209

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2015 2 ACCOUNTING POLICIES (continued) 2.5 Summary of significant accounting policies (continued) (22) Provision Provision are recognized when the Group has a present obligation (legal or constructive) as a result of a past event, and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. (23) Employees’ end of service benefits The Bank’s contributions for end of service benefits paid and due to the National Social Security Fund (NSSF) are calculated on the basis of 8.5% of staff salaries. The final end of service benefits due to employees by the NSSF (a defined contribution plan) after completing 20 years of service, at the retirement age, or if the employee permanently leaves employment, are calculated based on the last month salary multiplied by the number of years of service as stipulated in the National Social Security Law. The Group is liable to pay to the NSSF the difference between the contributions paid and the final end of service benefits due to employees by the NSSF. End-of-service benefits for employees at foreign subsidiaries are accrued for in accordance with the laws and regulations of the respective countries in which the subsidiaries are located. Contributions are recorded as an expense under “personnel expenses”. (24) Assets held in custody and under administration The Group provides custody and administration services that result in the holding or investing of assets on behalf of its clients. Assets under custody or under administration are not treated as assets of the Group and accordingly are recorded as off statement of financial position items. (25) Dividends on common and preferred shares Dividends on common and preferred shares are recognized as a liability and deducted from equity when they are approved by the Group’s shareholders. Interim dividends are deducted from equity when they are declared and no longer at the discretion of the Group. Dividends for the year that are approved after the statement of financial position date are disclosed as an event after the consolidated statement of financial position date. (26) Customer’s acceptances Customer’s acceptances represent term documentary credits which the Group has committed to settle on behalf of its clients against commitments by those clients (acceptances). The commitments resulting from these acceptances are stated as a liability in the consolidated statement of financial position for the same amount. (27) Equity reserves The reserves recorded in equity (other comprehensive income) on the Group’s consolidated statement of financial position include: “Cumulative change in fair value of financial instruments at fair value through other comprehensive income” reserve which comprises changes in fair value of equity instruments at fair value through other comprehensive income. “Distributable and non-distributable reserve” which include transfers from retained earnings in accordance with regulatory requirements. “Revaluation reserve of property” which comprises the revaluation surplus relating to property.

Société Générale de Banque au Liban S.A.L. F.210

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2015 3 BUSINESS COMBINATIONS During 2011, the Bank acquired the assets, liabilities, rights and commitments of the Lebanese Canadian Bank SAL (under liquidation) for a consideration of US$ 580 million equivalent to LL 874,350 million. The fair values of certain assets and liabilities were determined provisionally at the acquisition date and were subject to an assessment by independent professional firms. According to their results, the Lebanese Canadian Bank SAL (under liquidation) agreed to settle to the Bank a total amount of US$ 60 million (equivalent to LL 90,450 million) as follows: LL million Adjustment to the initial total consideration 24,920 Guarantee against non-performing loans 65,530 _________ 90,450 _________ Part of the non-performing debtors acquired from the Lebanese Canadian Bank SAL (under liquidation), settled their unpaid balances; accordingly, the Bank released part of the guarantee against non-performing loans amounting to LL 57,418 million and the remaining balance of LL 8,112 million was transferred to provisions for loans and advances ( note 22) as at 31 December 2015 (2014: release of LL 46,087 million). In addition, on 12 September 2013 a new Escrow agreement was signed between the Lebanese Canadian Bank SAL (under liquidation) and the Bank according to which the former agreed to deposit in an Escrow account at a local bank (Escrow Agent) an amount of US$ 49.1 million (equivalent to LL 74,018 million) as a provision against any additional adjustments to the initial consideration paid namely in relation to the following:

• The provision amount of US$ 30 million (equivalent to LL 45,225 million) against the adjustment of the deferred consideration by reference to the arbitrator’s mission;

• The taxes and social security obligations of US$ 9.1 million (equivalent to LL 13,717 million); • The financial limit amount of US$ 5 million (equivalent to LL 7,538 million); and • The comfort provision of US$ 5 million (equivalent to LL 7,538 million).

The tables below summarize the movement of the new Escrow account as at 31 December. 31 December 2015:

Initial deposited

amount

Amounts released to the

Lebanese Canadian Bank

Amounts released to third

parties

Amounts released to the

Bank

Ending

balance LL million LL million LL million LL million LL Million Provision against the adjustment

of the deferred consideration

45,225

(44,341)

-

(884)

- Tax and social security obligations

13,717 (11,038) (2,679) - -

Financial limit 7,538 (7,026) (276) (236) - Comfort provision 7,538 - (151) - 7,387 ________ ________ ________ ________ ________ Total 74,018 (62,405) (3,106) (1,120) 7,387 _______ ________ _______ _______ _______ 31 December 2014:

Initial deposited

amount

Amounts released to the

Lebanese Canadian Bank

Amounts released to third

parties

Amounts released to the

Bank

Ending

balance LL million LL million LL million LL million LL Million Provision against the adjustment

of the deferred consideration

45,225

(44,341)

-

(884)

- Tax and social security obligations

13,717 (11,038) (2,679) - -

Financial limit 7,538 - - - 7,538 Comfort provision 7,538 - - - 7,538 ________ ________ ________ ________ ________ Total 74,018 (55,379) (2,679) (884) 15,076 _______ ________ _______ _______ _______

Société Générale de Banque au Liban S.A.L. F.211

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2015 3 BUSINESS COMBINATIONS (continued) The movement on the total consideration paid by the Bank is as follows: 2015 2014 LL million LL million Initial consideration paid 874,350 874,350 Reimbursements received according to the addendum of 21 June 2013 (90,450) (90,450) Reimbursements received from the Escrow account (1,120) (884) Payments made due to the settlements from non-performing debtors acquired 57,418 46,087 __________ __________ Ending consideration paid 840,198 829,103 __________ __________ 4 MATERIAL PARTLY-OWNED SUBSIDIARIES Financial information of subsidiaries that have material non-controlling interests are provided below: Proportion of equity interests held by non-controlling interests: 2015 2014 Name Country of

incorporation % %

Sogecap Liban SAL Lebanon 25.00 25.00 Fidus SAL Lebanon 51.00 51.00 Société Générale de Banque – Jordanie (SGBJ) Jordan 12.33 12.33 The summarized financial information of these subsidiaries are provided below. This information is based on amounts before inter-company eliminations: Summarized statements of profit and loss for 2015:

Sogecap Liban

SAL Fidus SAL

Société Générale de

Banque - Jordanie

LL million

LL million LL million

Net interest income 8,276 2,903 37,479 Net fee and commission income (expense) (2,798) 12,190 6,456 Net gain (loss) from financial assets at fair value through profit or loss

(665) (9) 6,603

Revenue from financial assets at fair value through other comprehensive income - - 36 Net gain from sale of debt instruments at amortized cost - - 7,043 Income from insurance activities 21,524 - - Other operating income 9 92 469 Net credit losses - (200) (1,942) Operating expenses (11,569) (12,060) (23,398) Income tax expense (421) (443) (11,462) ________ _________ _________ Profit for the year 14,356 2,473 21,284 ________ _________ _________ Attributable to non-controlling interests 3,589 1,261 2,624 ________ _________ _________ Dividends paid to non-controlling interest 2,073 - 1,049 ________ _________ _________

Société Générale de Banque au Liban S.A.L. F.212

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2015 4 MATERIAL PARTLY-OWNED SUBSIDIARIES (continued) Summarized statements of profit and loss for 2014:

Sogecap Liban SAL Fidus SAL

Société Générale de Banque -

Jordanie LL million LL million LL million Net interest income 7,318 3,243 32,921 Net fee and commission income (expense) (2,378) 7,921 6,529 Net gain from financial assets at fair value through profit or loss

825 8 3,624

Revenue from financial assets at fair value through other comprehensive income

-

-

40

Net gain from sale of debt instruments at amortized cost 1,039 - 5,762 Income from insurance activities 19,191 - - Other operating income 37 325 1,117 Net (credit losses) recovery of credit losses - 1,472 (1,095) Operating expenses (11,922) (10,702) (21,487) Income tax expense (408) (188) (7,823) ________ _________ _________ Profit for the year 13,702 2,079 19,588 ________ _________ _________ Attributable to non-controlling interests 3,426 1,060 2,415 ________ _________ _________ Dividends paid to non-controlling interest 1,960 - - ________ _________ _________ Summarized statements of financial position as at 31 December 2015:

Sogecap Liban SAL Fidus SAL

Société Générale de

Banque – Jordanie

LL million LL million LL million Cash and balances with the Central Banks 6 52 573,015 Due from banks and financial institutions - 117,741 67,954 Amounts due from affiliated banks and financial institutions 117,649 14,923 46,407 Financial assets at fair value through profit or loss 18,545 315 68,551 Loans and advances at amortized cost - 254,418 918,076 Financial assets at amortized cost 54,209 - 591,598 Financial assets at amortized cost pledged as collateral - - 240,069 Financial assets at fair value through other comprehensive income

- 338 532

Property and equipment 1,427 4,657 48,744 Intangible assets - - 1,988 Non-current assets held for sale - - 6,828 Other assets 2,058 1,173 7,111 Due to the Central Banks - (543) (30,860) Due to banks and financial institutions - (98,146) (62,913) Amounts due to affiliated banks and financial institutions - (73,382) (12,524) Deposits at amortized cost (122,189) (200,661) (2,171,131) Other liabilities (24,309) (6,729) (22,394) _________ _________ _________ Total equity 47,396 14,156 271,051 _________ _________ _________ Attributable to non-controlling interests 11,849 7,220 33,421 _________ _________ _________

Société Générale de Banque au Liban S.A.L. F.213

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2015 4 MATERIAL PARTLY-OWNED SUBSIDIARIES (continued) Summarized statements of financial position as at 31 December 2014:

Sogecap Liban SAL Fidus SAL

Société Générale de

Banque – Jordanie

LL million LL million LL million Cash and balances with the Central Banks 4 890 477,149 Due from banks and financial institutions - 60,320 50,197 Amounts due from affiliated banks and financial institutions 113,303 10,110 49,556 Financial assets at fair value through profit or loss 18,015 318 - Loans and advances at amortized cost - 114,048 681,193 Financial assets at amortized cost 41,822 - 516,422 Financial assets at amortized cost pledged as collateral - - 3,133 Financial assets at fair value through other comprehensive income

- 376 405

Property and equipment 1,190 4,770 47,050 Intangible assets - - 2,183 Non-current assets held for sale - - 7,549 Other assets 2,240 1,736 7,940 Due to the Central Banks - - (21,377) Due to banks and financial institutions - (48,056) (44,009) Amounts due to affiliated banks and financial institutions - (51,776) (18,604) Deposits at amortized cost (113,421) (76,399) (1,481,403) Other liabilities (21,820) (4,653) (19,009) _________ _________ _________ Total equity 41,333 11,684 258,375 _________ _________ _________ Attributable to non-controlling interests 10,333 5,959 31,858 _________ _________ _________ Summarized cash flow information for the year ended 31 December 2015:

Sogecap Liban SAL Fidus SAL

Société Générale de

Banque – Jordanie

LL million LL million LL million Operating 18,257 (10,569) 473,836 Investing (5,760) (274) (228,864) Financing (8,291) (608) (4,476) _________ _________ _________ Net increase in cash and cash equivalents 4,206 (11,451) 240,496 _________ _________ _________ Summarized cash flow information for the year ended 31 December 2014:

Sogecap Liban SAL Fidus SAL

Société Générale de

Banque – Jordanie

LL million LL million LL million Operating 18,034 3,995 339,958 Investing 8,023 (206) 94,284 Financing (7,841) 772 (95,052) _________ _________ _________ Net increase in cash and cash equivalents 18,216 4,561 339,190 _________ _________ _________

Société Générale de Banque au Liban S.A.L. F.214

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2015 5 INTEREST AND SIMILAR INCOME 2015 2014 LL million LL million Financial assets at amortized cost 577,244 552,876 Loans and advances to customers at amortized cost 356,075 318,130 Balances with the Central Banks 241,145 210,622 Reverse repurchase agreements 7,435 8,970 Financial assets at amortized cost pledged as collateral 9,663 7,858 Loans and advances to related parties at amortized cost 8,159 6,137 Due from banks and financial institutions 4,683 4,157 Amounts due from affiliated banks and financial institutions 433 928 _________ _________ 1,204,837 1,109,678 _________ _________ 6 INTEREST AND SIMILAR EXPENSE 2015 2014 LL million LL million Customers’ deposits at amortized cost 725,130 674,156 Due to the Central Banks 35,301 33,112 Due to banks and financial institutions 45,575 25,523 Related parties’ deposits at amortized cost 4,955 5,367 Amounts due to affiliated banks and financial institutions 26 15 __________ __________ 810,987 738,173 __________ __________ 7 FEE AND COMMISSION INCOME

2015 2014 LL million LL million

Loans and advances 23,518 26,424 Maintenance of accounts 21,853 21,630 Credit Cards 10,799 13,675 Customers’ market transactions 18,979 11,689 Transfers 6,140 6,301 Letters of guarantee 4,754 4,609 Letters of credit and acceptance 3,394 3,701 Checks 2,469 2,719 Cash transactions 2,106 1,799 Commission on insurance related activities 1,762 774 Other commissions 6,437 7,178

__________ __________ 102,211 100,499 __________ __________

Société Générale de Banque au Liban S.A.L. F.215

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2015 8 NET GAIN ON FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS

2015 2014 LL million LL million Net gain on foreign exchange 15,074 12,788 Interest income on debt instruments at fair value through profit or loss 4,030 4,027 Dividend income from equity instruments at fair value through profit or loss 1,648 1,733 Realized and unrealized gain from financial assets at fair value through profit or loss 2,770 11,815 _________ _________ 23,522 30,363 _________ _________ Net gain on foreign exchange includes gains and losses from spot and forward contracts and the revaluation of the daily open trading position. 9 REVENUE FROM FINANCIAL ASSETS AT FAIR VALUE THROUGH OTHER

COMPREHENSIVE INCOME 2015 2014 LL million LL million Dividend income from financial assets at fair value through other comprehensive income 1,012 877 __________ __________ 10 OTHER OPERATING INCOME 2015 2014 LL million LL million Income from services rendered 134 134 Write-back of impairment losses on non-current assets held-for-sale (note 29) 103 91 Gain from sale of non-current assets held-for-sale (note 29) 544 9,195 Income from insurance activities 21,524 19,191 Other operating income 3,033 1,948 __________ __________ 25,338 30,559 __________ __________

Société Générale de Banque au Liban S.A.L. F.216

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2015 11 NET CREDIT LOSSES

2015 2014 LL million LL million Loans and advances to customers and related parties: Provision for corporate loans (note 22) (17,485) (11,508) Provision for retail loans (note 22) (17,290) (27,642) Provision for corporate loans - related parties (note 23) (1,453) (1,386) Write-back of provision for corporate loans (note 22) 11,088 11,504 Write-back of provision for retail loans (note 22) 6,853 6,456 Loans written off (866) (347) __________ __________ (19,153) (22,923) Provision for other assets (note 30) (249) - Impairment loss on financial assets at amortized cost (note 24) (8,442) - Write-back of provision for other debit balances – other assets (note 30) 20 17 __________ __________ (27,824) (22,906) __________ __________ 12 PERSONNEL EXPENSES 2015 2014 LL million LL million Salaries and wages 82,374 80,197 Social Security contributions 12,233 11,440 Provisions for employees’ end of service benefits (note 39) 4,317 3,447 Early retirement scheme - 3,421 Other allowances 24,354 22,679 __________ __________ 123,278 121,184 __________ __________ 13 OTHER OPERATING EXPENSES 2015 2014 LL million LL million Professional services 22,937 21,480 Rent 19,546 13,594 Publicity and advertising 13,763 10,656 Net provision for risks and charges 10,855 9,555 Telecommunication and postage 10,374 9,851 Maintenance and repairs 9,764 9,048 Travelling and entertainment expenses 9,627 10,066 Taxes and fees 7,832 8,044 Premiums for guarantee of deposits 7,386 7,088 Electricity, water and fuel 4,613 5,262 Printings and stationery 2,856 2,721 Legal expenses 2,501 2,350 Loss from liquidation of a subsidiary held for sale (note 29) - 1,235 Other operating charges 18,519 17,074 __________ __________ 140,573 128,024 __________ __________

Société Générale de Banque au Liban S.A.L. F.217

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2015

14 INCOME TAX The components of income tax expense for the years ended 31 December 2015 and 2014 are: 2015 2014 LL million LL million Current tax Current income tax 56,426 46,301 Other adjustments 739 17 Deferred tax Relating to origination and reversal of temporary differences (167) (533) ___________ ___________ 56,998 45,785 ___________ ___________ Reconciliation of the total tax charge The reconciliation between the tax expense and the accounting profit for the years ended 31 December 2015 and 31 December 2014 is as follows: 2015 2014 LL million LL million Accounting profit before tax 315,310 279,651 Less: Revenues previously subject to tax (24,692) (37,880) Add: Non-deductible expenses 47,410 37,853 ___________ ___________ Taxable profit 338,028 279,624 ___________ ___________ Effective income tax rate 16.69% 16.56% ___________ ___________ Income tax expense reported in the consolidated income statement 56,426 46,301 ___________ ___________ Current tax liabilities (note 38) 2015 2014 LL million LL million Income tax due 56,426 46,301 Tax withheld on interest previously paid (21,479) (20,323) Others (1,467) (416) ___________ ___________ 33,480 25,562 ___________ ___________ Deferred tax The following table shows deferred tax recorded on the consolidated statement of financial position and changes recorded in the income tax expense: 2015 2014 Deferred tax

assets Deferred tax

liabilities Income

statement Deferred tax

assets Deferred tax

liabilities Income

statement LL million LL million LL million LL million LL million LL million Non-current assets held for sale - - 1 1 - - Depreciation of property and equipment 25 356 (339) 42 - 5 Impairment allowance for loans and advances 4,623 - (455) 4,168 - (414) Unrealized losses on financial instruments at fair value through profit or loss 214 - (214) - - 232 Tax losses expected to be utilized in future periods 1,622 - 1,290 2,912 - 280 Others 1,509 - (450) 1,059 - (636) _________ _________ _________ _________ _________ _________ 7,993 356 (167) 8,182 - (533) _________ _________ _________ _________ _________ _________

Société Générale de Banque au Liban S.A.L. F.218

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2015 15 CASH AND BALANCES WITH THE CENTRAL BANKS 2015 2014 LL million LL million Cash 97,882 100,665 Current accounts with the Central Banks 886,015 810,863 Time deposits with the Central Banks 4,833,829 4,772,445 ___________ ___________ 5,817,726 5,683,973 ___________ ___________ Cash and balances with the Central Banks include non-interest bearing balances held by the Group at the Central Bank of Lebanon in coverage of the compulsory reserve requirements for all banks operating in Lebanon. This compulsory reserve is calculated on the basis of 25% of sight commitments and 15% of term commitments after taking into account certain waivers related to subsidized loans denominated in Lebanese Lira. Accordingly, the compulsory reserve amounted to LL 321,870 million as at 31 December 2015 (2014: LL 346,107 million). In addition a 15% of total deposits in foreign currencies regardless of nature is required. These placements amounted to US$ 1,065,308,850 (equivalent to LL 1,605,953 million) as at 31 December 2015 (2014: US$ 1,030,609,500 equivalent to LL 1,553,644 million). Société Générale de Banque – Jordanie and Société Générale Bank – Cyprus Ltd are also subject to compulsory reserve requirements with varying percentages, according to the banking rules and regulations of the Kingdom of Jordan and the Republic of Cyprus. Time deposits include placements of LL 548,496 million pledged to the favor of the Central Bank of Lebanon against loans granted by the latter as at 31 December 2015 (2014: LL 576,581 million) (note 32). Time deposits with the Central Bank of Lebanon include the following long term placements greater than LL 200,000 million: 2015 2014 Amount in original currency LL million LL million Interest rate Interest payment

date Maturity

date EUR 150 million 246,996 275,081 6.75% every 6 months 5-Apr-22 US$ 200 million 301,500 301,500 6.75% every 6 months 5-Apr-22 US$ 200 million 301,500 301,500 7.25% every 6 months 29-Nov-24 LL 200,000 million 200,000 200,000 8.60% every 6 months 10-Feb-22 US$ 250 million 376,875 376,875 8.00% every 6 months 7-Aug-28 US$ 250 million 376,875 376,875 6.30% every 6 months 7-Oct-19 US$ 150 million 226,125 226,125 6.30% every 6 months 2-Dec-19

Société Générale de Banque au Liban S.A.L. F.219

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2015 16 DUE FROM BANKS AND FINANCIAL INSTITUTIONS 2015 2014 LL million LL million Current accounts 176,375 110,029 Time deposits 328,298 137,098 Checks for collection 78,774 69,865 Discounted bills 828 700 Pledged accounts (i) 99,234 49,942 Debtor accounts against creditor accounts, net 14,900 16,288 __________ __________ 698,409 383,922 Less: Provision for impairment (145) (152) __________ __________ 698,264 383,770 __________ __________ (i) Included under pledged accounts an amount of LL 64,133 million placed as collateral against repurchase

agreements as at 31 December 2015 (2014: LL 21,149 million) (note 33). The movement of the provision for impairment of deposits with banks and financial institutions as recognized in the consolidated statement of financial position is as follows: 2015 2014 LL million LL million Provision at 1 January 152 161 Difference of exchange (7) (9) __________ __________ Provision at 31 December 145 152 __________ __________ 17 AMOUNTS DUE FROM AFFILIATED BANKS AND FINANCIAL INSTITUTIONS 2015 2014 LL million LL million Sight deposits 351,015 640,442 Time deposits 426,420 391,478 ____________ ____________ 777,435 1,031,920 ____________ ____________ Time deposits include an amount of LL 53,848 million (equivalent to Euro 30 million) as of 31 December 2015 (2014: Euro 30 million, equivalent to LL 55,016 million) pledged in favor of Société Générale SA Paris in guarantee of documentary letters of credit and guarantees issued in favor of the Bank’s clients.

Société Générale de Banque au Liban S.A.L. F.220

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2015 18 REVERSE REPURCHASE AGREEMENTS 2015 2014 LL million LL million Financial institution 416,910 - _________ _________ The Group has a programme to purchase securities under agreements to resell (reverse repos). The Group has an obligation to return the securities and the counterparty retains substantially all the risks and rewards of ownership. Consequently, the securities are not recognized by the Group, which instead record a separate asset under reverse repurchase agreements reflecting the transaction’s economic substance as a loan by the Group. During 2015 and 2014, the Group bought Certificates of Deposit issued by the Central Bank of Lebanon from a financial institution under the agreement to resell them. Net interest income on the reverse repurchase agreements amounted to LL 7,435 million for the year ended 31 December 2015 (2014: LL 8,970 million) (note 5). 19 DERIVATIVE FINANCIAL INSTRUMENTS The table below shows the fair values of derivative financial instruments, recorded as assets or liabilities, together with their notional amounts. The notional amount, recorded gross, is the amount of a derivative’s underlying asset, reference rate or index and is the basis upon which changes in the value of derivatives are measured. The notional amounts indicate the volume of transactions outstanding at year-end and are indicative of neither the market risk nor the credit risk. 2015 2014

Assets Liabilities

Total notional amount Assets Liabilities

Total notional amount

LL million

LL million LL million

LL million LL million LL million

Derivatives held-for-trading Forward foreign exchange contracts

2,969 (4,450) 551,131 309 (158) 21,352

________ _________ ________ _________ _________ ________ Derivatives often involve at their inception only a mutual exchange of promises with little or no transfer of consideration. However, these instruments frequently involve a high degree of leverage and are very volatile. A relatively small movement in the value of the asset, rate or index underlying a derivative contract may have a significant impact on the profit or loss of the Group. Over-the-counter derivatives may expose the Group to the risks associated with the absence of an exchange market on which to close out an open position. The Group’s exposure under derivative contracts is closely monitored as part of the overall management of the Group’s market risk. Derivative financial instruments held or issued for trading purposes Most of the Group’s derivative trading activities relate to deals with customers that are normally offset by transactions with other counterparties. Also included under this heading are any derivatives entered into for hedging purposes that do not meet the hedge accounting criteria. Fair value hedges Fair value hedges are used by the Group to protect it against changes in the fair value of financial assets and financial liabilities due to movements in exchange rates and interest rates. The financial instruments hedged for interest rate risk include loans and advances. The Group uses interest rate swaps to hedge interest rate risk.

Société Générale de Banque au Liban S.A.L. F.221

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2015 20 FINANCIAL ASSETS AT AMORTIZED COST PLEDGED AS COLLATERAL 2015 2014 LL million LL million Governmental bonds mortgaged against deposits from Social Security of Jordan 235,813 - Governmental bonds mortgaged in favor of the Central Bank of Jordan 1,797 3,097 Treasury bills mortgaged in favor of the Central Bank of Lebanon (i) 330,228 338,753 Accrued interest receivable 8,280 6,076 _________ _________ 576,118 347,926 _________ _________ (i) The Lebanese treasury bills are pledged against soft loans granted by the Central Bank of Lebanon (note

32). These consist of the following: Nominal amount 2015 2014 Financial assets LL million LL million Coupon rate Maturity date Lebanese treasury bills 170,000 170,000 6.74% 1 June 2017 Lebanese treasury bills 150,000 150,000 6.50% 7 July 2016 Lebanese treasury bills 483 483 6.18% 30 June 2016 Lebanese treasury bills - 18,270 7.38% 12 February 2015 Lebanese treasury bills 9,745 - 6.74% 6 February 2020 _________ _________ 330,228 338,753 _________ _________ 21 FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS 2015 2014 LL million LL million Quoted Shares 74,866 42,823 Funds 18,542 18,011 Lebanese treasury bills – Eurobonds 17,540 28,470 ____________ ____________ 110,948 89,304 ____________ ____________ Unquoted Shares 21,526 14,616 Lebanese treasury bills – denominated in LL 1,093 1,072 Certificates of deposit – EuroCDs - 204 Debt securities issued by banks 37,688 37,688 Foreign governmental debt securities 68,551 - ____________ ____________ 128,858 53,580 ____________ ____________ 239,806 142,884 ____________ ____________

Société Générale de Banque au Liban S.A.L. F.222

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2015

22 LOANS AND ADVANCES TO CUSTOMERS AT AMORTIZED COST 2015 2014 LL million LL million

Corporate lending 3,834,747 3,625,602 Retail lending 2,676,593 2,348,905 ____________ ____________ 6,511,340 5,974,507 Less: Allowance for impairment losses and unrealized interest (581,382) (652,816) ____________ ____________ 5,929,958 5,321,691 ____________ ____________

A reconciliation of the allowance for impairment for loans and advances to customers, by class, is as follows: 2015 Corporate Retail Total LL million LL million LL million

Balance at 1 January 491,639 161,177 652,816 Charge for the year (note 11) 17,485 17,290 34,775 Transfer to off-statement of financial position (24,425) (5,488) (29,913) Unrealized interest for the year 55,240 17,688 72,928 Transfers from retail loans to corporate loans 170 (170) - Transfer from guarantees against non-performing loans (note 3) 6,990 1,122 8,112 Write-back of provision (note 11) (11,088) (6,853) (17,941) Provisions written off (128,469) (25,873) (154,342) Transfers from off-statement of financial position 15,655 8,672 24,327 Difference of exchange (3,228) (6,152) (9,380) __________ __________ __________ Balance at 31 December 419,969 161,413 581,382 __________ __________ __________ Interest in suspense 308,372 63,262 371,634 Specific provisions 101,890 83,777 185,667 Collective provisions 9,707 14,374 24,081 __________ __________ __________ 419,969 161,413 581,382 __________ __________ __________ Gross amount of loans individually determined to be impaired, before deducting the individually assessed impairment allowance 468,517 238,944 707,461 __________ __________ __________

2014 Corporate Retail Total LL million LL million LL million

Balance at 1 January 538,305 144,100 682,405 Charge for the year (note 11) 11,508 27,642 39,150 Transfer to off-statement of financial position (74,610) (2,474) (77,084) Unrealized interest for the year 56,394 20,349 76,743 Transfers from corporate loans to retail loans (14) 14 - Transfer from loans and advances to related parties (note 23) - 245 245 Write-back of provision (note 11) (11,504) (6,456) (17,960) Provisions written off (25,398) (20,515) (45,913) Transfers from off-statement of financial position 5,340 1,976 7,316 Difference of exchange (8,382) (3,704) (12,086) __________ __________ __________ Balance at 31 December 491,639 161,177 652,816 __________ __________ __________ Interest in suspense 343,467 61,120 404,587 Specific provision 144,925 87,520 232,445 Collective provisions 3,247 12,537 15,784 __________ __________ __________ 491,639 161,177 652,816 __________ __________ __________ Gross amount of loans individually determined to be impaired, before deducting the individually assessed impairment allowance 611,103 255,824 866,927 __________ __________ __________

Société Générale de Banque au Liban S.A.L. F.223

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2015 23 LOANS AND ADVANCES TO RELATED PARTIES AT AMORTIZED COST 2015 2014 LL million LL million Corporate lending 132,239 129,673 Retail lending 40,781 31,262 __________ __________ 173,020 160,935 Less: Allowance for impairment losses and unrealized interest (19,474) (17,982) __________ __________ 153,546 142,953 __________ __________ A reconciliation of the allowance for impairment for loans and advances to related parties, by class, is as follows: 2015 Corporate Retail Total LL million LL million LL million Balance at 1 January 17,982 - 17,982 Charge for the year (note 11) 1,453 - 1,453 Unrealized interest for the year 47 - 47 Difference of exchange (8) - (8) ________ ________ _________ Balance at 31 December 19,474 - 19,474 ________ ________ _________ Interest in suspense 281 - 281 Specific provisions 19,193 - 19,193 Collective provisions - - - ________ ________ _________ 19,474 - 19,474 ________ ________ _________ Gross amount of loans individually determined to be impaired, before deducting the individually assessed impairment allowance

22,890

-

22,890

________ ________ _________ 2014 Corporate Retail Total LL million LL million LL million Balance at 1 January 16,916 - 16,916 Charge for the year (note 11) 1,386 - 1,386 Transfer to loans and advances to customers (note 22) (245) - (245) Unrealized interest for the year 44 - 44 Difference of exchange (119) - (119) ________ ________ _________ Balance at 31 December 17,982 - 17,982 ________ ________ _________ Interest in suspense 234 - 234 Specific provisions 17,748 - 17,748 Collective provisions - - - ________ ________ _________ 17,982 - 17,982 ________ ________ _________ Gross amount of loans individually determined to be impaired, before deducting the individually assessed impairment allowance

21,019

-

21,019

________ ________ _________

Société Générale de Banque au Liban S.A.L. F.224

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2015 24 FINANCIAL ASSETS AT AMORTIZED COST 2015 2014 LL million LL million Quoted Lebanese treasury bills – Eurobonds 871,752 402,785 Lebanese treasury bills – Eurobonds pledged as collateral against repurchase agreements 1,664,449 1,673,050 Foreign governmental debt securities 1,710 1,764 Foreign governmental debt securities pledged as collateral against repurchase agreements 81,930 82,880 Debt securities issued by banks 11,280 7,548 Debt securities issued by banks pledged as collateral against repurchase agreements 73,487 77,900 Corporate bonds pledged as collateral against repurchase agreements 125,402 126,217 ___________ ___________ Gross quoted investments at amortized cost 2,830,010 2,372,144 Provision for impairment (note 11) (8,442) - ___________ ___________ 2,821,568 2,372,144 ___________ ___________ Unquoted Lebanese treasury bills – denominated in LL 2,773,197 2,512,450 Lebanese treasury bills – denominated in LL pledged as collateral against repurchase agreements 403,023 403,357 Certificates of deposit – denominated in LL 1,932,221 1,730,888 Certificates of deposit – EuroCDs 349,993 656,384 Certificates of deposit – EuroCDs pledged as collateral against repurchase agreements 46,311 46,336 Certificates of deposits issued by foreign central banks 141,515 - Corporate bonds 22,025 8,178 Foreign governmental debt securities 429,212 516,166 Certificates of deposit issued by banks 10,554 10,542 ___________ ___________ Gross unquoted investments at amortized cost 6,108,051 5,884,301 Provision for impairment (1,153) (1,153) ___________ ___________ 6,106,898 5,883,148 ___________ ___________ 8,928,466 8,255,292 ___________ ___________ The Group derecognized some debt instruments classified at amortized cost during 2015 and 2014 due to the following reasons: - Deterioration of the credit rating below the ceiling allowed in the Group’s investment policy; - Liquidity gap and yield management; - Exchange of certificates of deposit by the Central Bank of Lebanon; - Currency risk management as a result of change in the currency base of deposits; or - Liquidity for capital expenditures. The total net gain from disposal amounted to LL 105,963 million for the year ended 31 December 2015 (2014: LL 56,894 million).

Société Générale de Banque au Liban S.A.L. F.225

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2015 24 FINANCIAL ASSETS AT AMORTIZED COST (continued)

The schedule below details the gains and losses arising from the derecognition of these financial assets: 2015 2014 Gains Losses Net Gains Losses Net LL million LL million LL million LL million LL million LL million Lebanese sovereign and Central Bank of Lebanon

Certificates of deposit 73,130 - 73,130 15,422 (326) 15,096 Treasury bills 25,053 - 25,053 7,780 - 7,780 Eurobonds 737 - 737 27,309 - 27,309 __________ __________ __________ __________ __________ __________ 98,920 - 98,920 50,511 (326) 50,185 __________ __________ __________ __________ __________ __________ Other sovereign

Other governmental securities 7,043 - 7,043 5,763 (203) 5,560 __________ __________ __________ __________ __________ __________ Private sector and other securities

Corporate and other debt instruments - - - 1,149 - 1,149 __________ __________ __________ __________ __________ __________ 105,963 - 105,963 57,423 (529) 56,894 __________ __________ __________ __________ __________ __________

25 FINANCIAL ASSETS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME 2015 2014 LL million LL million Quoted Shares 24,073 24,426 ___________ ___________ Unquoted Shares 2,487 2,449 ___________ ___________ 26,560 26,875 ___________ ___________ The table below shows the details of financial assets classified at “fair value through other comprehensive income as at 31 December: 2015 2014 LL million LL million Quoted Holcim Liban SAL 9,573 10,054 Al Salam Bank – Sudan 2,505 2,505 Al Salam Bank – Algeria 10,138 10,138 Al Salam Bank – Bahrain 1,588 1,588 Jordan Loan Guarantee Corporation 269 141 ___________ ___________ 24,073 24,426 ___________ ___________ Unquoted MasterCard 219 219 Visa 746 746 SWIFT SCRL 99 22 Metropolitan Club SAL 62 62 Jordan Mortgage Refinancing Company 212 212 Almaloumat Alltimanieh 52 52 Kafalat 380 380 Société Financière du Liban SAL 380 380 3 Angle Capital SA 337 376 ___________ __________ 2,487 2,449 ___________ ___________ 26,560 26,875

Société Générale de Banque au Liban S.A.L. F.226

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2015 25 FINANCIAL ASSETS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME (continued) Dividend income recognized in the consolidated income statement from financial assets at fair value through other comprehensive income is as follows: 2015 2014 LL million LL million Dividend income from financial assets derecognized or redeemed during the year - 172 Dividend income from equity instruments 1,012 705 _________ _________ 1,012 877 _________ _________ During 2014, preferred shares of LL 2,261 million were redeemed at their par value. The Group also sold unquoted shares at their book value of LL 1,060 million during 2014.

26 PROPERTY AND EQUIPMENT Advances on

purchase of property and

equipment

Land and buildings

Furniture and fixtures

Installations

Vehicles

Total LL million LL million LL million LL million LL million LL million Cost: At 1 January 2015 51,000 125,664 80,695 60,652 1,995 320,006 Additions 18,011 - 2,447 1,079 224 21,761 Disposals - (53) (80) (3) (81) (217) Transfers (4,547) 1,767 1,031 1,749 - - Write-off - - (11) - - (11) Exchange differences (49) (23) (679) (180) (16) (947) _________ ________ _________ __________ _________ _______ At 31 December 2015 64,415 127,355 83,403 63,297 2,122 340,592 _________ ________ _________ __________ _________ _______ Depreciation: At 1 January 2015 - 18,977 58,419 36,167 1,283 114,846 Provided during the year - 2,259 5,921 2,586 166 10,932 Relating to disposals - (29) (71) (3) (37) (140) Relating to write-off - - (11) - - (11) Exchange differences - (1) (550) (175) (11) (737) _________ ________ _________ __________ _________ _______ At 31 December 2015 - 21,206 63,708 38,575 1,401 124,890 _________ ________ _________ __________ _________ _______ Impairment: At 1 January 2015 and 31 December 2015 - 1,357 - - - 1,357 _________ ________ _________ __________ _________ _______ Net carrying amount: At 31 December 2015 64,415 104,792 19,695 24,722 721 214,345 _________ ________ _________ __________ _________ _______ Advances on

purchase of property and

equipment

Land and buildings

Furniture and fixtures

Installations

Vehicles

Total LL million LL million LL million LL million LL million LL million Cost: At 1 January 2014 51,604 125,439 76,812 51,468 2,120 307,443 Additions 21,161 - 2,564 505 154 24,384 Disposals - (8,868) (412) (306) (255) (9,841) Transfers (21,677) 9,132 2,979 9,566 - - Write-off - - (399) (308) - (707) Exchange differences (88) (39) (849) (273) (24) (1,273) _________ ________ _________ __________ _________ _______ At 31 December 2014 51,000 125,664 80,695 60,652 1,995 320,006 _________ ________ _________ __________ _________ _______ Depreciation: At 1 January 2014 - 16,824 54,031 34,929 1,296 107,080 Provided during the year - 2,357 5,850 2,119 232 10,558 Relating to disposals - (204) (394) (306) (226) (1,130) Relating to write-off - - (392) (308) - (700) Exchange differences - - (676) (267) (19) (962) _________ ________ _________ __________ _________ _______ At 31 December 2014 - 18,977 58,419 36,167 1,283 114,846 _________ ________ _________ __________ _________ _______ Impairment: At 1 January 2014 and 31 December 2014 - 1,357 - - - 1,357 _________ ________ _________ __________ _________ _______ Net carrying amount: At 31 December 2014 51,000 105,330 22,276 24,485 712 203,803 _________ ________ _________ __________ _________ _______

Société Générale de Banque au Liban S.A.L. F.227

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2015 27 INTANGIBLE ASSETS

Advances on intangible

assets

Customer relationships

Key money

Licenses and

software

Total

LL million LL million LL million LL million LL million Cost: At 1 January 2015 6,914 20,600 9,861 16,791 54,166 Additions 8,707 - - 659 9,366 Write-off - - - (19) (19) Exchange differences - - - (229) (229) __________ ___________ ___________ ___________ ___________ At 31 December 2015 15,621 20,600 9,861 17,202 63,284 __________ ___________ ___________ ___________ ___________ Amortization: At 1 January 2015 - 5,151 1,934 12,407 19,492 Provided during the year - 1,716 - 1,324 3,040 Exchange differences - - - (193) (193) __________ ___________ ____________ ___________ ___________ At 31 December 2015 - 6,867 1,934 13,538 22,339 __________ ___________ ____________ ___________ ___________ Net carrying amount: At 31 December 2015 15,621 13,733 7,927 3,664 40,945 __________ ___________ ____________ ___________ ___________

Advances on intangible

assets

Customer relationships

Key money

Licenses and

software

Total

LL million LL million LL million LL million LL million Cost: At 1 January 2014 354 20,600 9,861 15,580 46,395 Additions 6,806 - - 1,173 7,979 Transfers (246) - - 246 - Exchange differences - - - (208) (208) __________ ___________ ___________ ___________ ___________ At 31 December 2014 6,914 20,600 9,861 16,791 54,166 __________ ___________ ___________ ___________ ___________ Amortization: At 1 January 2014 - 3,434 1,934 11,280 16,648 Provided during the year - 1,717 - 1,356 3,073 Exchange differences - - - (229) (229) __________ ___________ ____________ ___________ ___________ At 31 December 2014 - 5,151 1,934 12,407 19,492 __________ ___________ ____________ ___________ ___________ Net carrying amount: At 31 December 2014 6,914 15,449 7,927 4,384 34,674 __________ ___________ ____________ ___________ ___________ Customer relationships represents the intangibles resulting from the acquisition of assets and liabilities of the Lebanese Canadian Bank SAL (under liquidation). 28 INVESTMENT PROPERTIES 2015 2014 LL million LL million Investment properties 1,480 1,445 __________ __________ The movement of investment properties recognized in the consolidated statement of financial position is as follows: 2015 2014 LL million LL million At 1 January 1,445 12,021 Disposals - (10,553) Exchange difference 35 (23) _________ _________ At 31 December 1,480 1,445 _________ _________

Société Générale de Banque au Liban S.A.L. F.228

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2015 28 INVESTMENT PROPERTIES (continued) The Group’s investment properties consist of properties in Lebanon held by the Group for capital appreciation. As at 31 December 2015 and 2014, the fair values of the properties are based on valuations performed by accredited independent valuers specialized in valuing these types of properties. The Group did not generate any rental income nor incurred any expenses relating to investment properties during the years ended 31 December 2015 and 31 December 2014. The Group has no restrictions on the realizability of its investment properties and no contractual obligations to either purchase, construct or develop investment properties or for repairs, maintenance and enhancements. 29 NON-CURRENT ASSETS HELD FOR SALE 2015 2014 LL million LL million Assets obtained in settlement of debts (i) 185,318 154,314 Subsidiary (ii) - - _________ _________ 185,318 154,314 _________ _________ (i) The movement of the assets obtained in settlement of debts held for sale recognized in the consolidated

statement of financial position is as follows: 2015 2014 LL million LL million Cost: At 1 January 171,289 156,338 Additions 33,489 20,324 Disposals (1,963) (5,363) Other adjustments (5) (10) ____________ ____________ At 31 December 202,810 171,289 ____________ ____________ Impairment: At 1 January 16,975 17,066 Additions 620 - Write-back during the year (103) (91) ____________ ____________ At 31 December 17,492 16,975 ____________ ____________ Net carrying amount: At 31 December 185,318 154,314 ____________ ____________

Assets obtained in settlement of debt held-for-sale represent primarily land and buildings acquired by the Group in settlement of certain loans and advances. During the year, the Group disposed of assets obtained in settlement of debt held for sale with carrying value of LL 1,860 million (2014: LL 5,272 million) and recognized a gain of LL 544 million (2014: LL 9,195 million) and a write-back of impairment losses amounting to LL 103 million (2014: LL 91 million) (refer to note 10), in addition to the release of reserve for non-current assets held for sale amounting to LL 151 million (2014: LL 1,821 million) to reserve for capital increase. This amount relates to appropriations previously booked on property acquired in settlement of debts held for sale (refer to note 41). (ii) Subsidiary held for sale: Prime Bank (Gambia) Ltd was acquired with the acquisition of the assets and liabilities of the Lebanese Canadian Bank SAL. This subsidiary was fully liquidated. The loss resulting from liquidation amounted to LL 1,235 million for the year ended 31 December 2014 (note 13).

Société Générale de Banque au Liban S.A.L. F.229

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2015 30 OTHER ASSETS 2015 2014 LL million LL million Deferred employee termination benefits (i) 28,863 36,829 Additional deferred costs resulting from the acquisition of the Lebanese Canadian Bank SAL (ii)

3,526

10,341

Due from the National Social Security Fund 16,663 15,008 Prepaid expenses 11,139 14,648 Deferred tax assets (note 14) 7,993 8,182 Investment in an associate (iii) 1,683 1,695 Receivable from sale of non-current assets held for sale 980 980 Other debtors 33,646 31,545 Provision for other debtors (iv) (3,622) (3,393) ________ ________ 100,871 115,835 _________ _________ (i) Deferred employee termination benefits Deferred employee termination benefits amounting to LL 28,863 million as at 31 December 2015 (2014: LL 36,829 million), represent compensations paid to employees whose contracts were terminated as a result of the acquisition of the assets and liabilities of the Lebanese Canadian Bank SAL and their related taxes which were accounted for and paid during 2014 amounting to LL 2,502 million (note 50). These compensations were calculated on the basis provided for in the staff compensation arbitrary decision dated 29 August 2011. These benefits were deferred up to an amount of LL 60,300 million (equivalent to US$ 40 million). As a compensation for the employee termination benefits, the Central Bank of Lebanon exempted the Bank from part of the compulsory reserves denominated in Lebanese Lira. Part of these reserves were invested in Lebanese treasury bills whose nominal value amounted to LL 80,000 million and maturing on 1 December 2016. During June 2012, the Central Bank of Lebanon granted the Bank a soft loan amounting to LL 170,000 million (note 32) in substitute of the exemption from part of the compulsory reserves granted during 2011. The proceeds from the soft loan were invested in Lebanese treasury bills maturing on 1 June 2017. These treasury bills were pledged as collateral against the settlement of the soft loan. The interest income generated from these treasury bills will be offset against these deferred compensations over the period of the future economic benefits of these treasury bills. During the year ended 31 December 2015, deferred employee termination benefits of LL 8,080 million (2014: LL 8,080 million) were amortized to the consolidated income statement against a net spread between the interest income from the Lebanese treasury bills and interest expense on the soft loan for the same amount.. (ii) Additional deferred costs resulting from the acquisition of the Lebanese Canadian Bank SAL On 3 June 2013, the Central Council of the Central Bank of Lebanon granted the Bank a soft loan amounting to LL 150,000 million (note 32) to cover additional costs incurred subsequently in relation to the acquisition of the assets and liabilities of the Lebanese Canadian Bank SAL. The proceeds from the soft loan were invested in Lebanese treasury bills maturing on 7 July 2016. These treasury bills were pledged as collateral against the settlement of the soft loan. The interest income generated from these treasury bills will be offset against these deferred compensations over the period of the future economic benefits of these treasury bills. During the year ended 31 December 2015, deferred costs of LL 6,815 million (2014: LL 6,815 million) were amortized to the consolidated income statement against a net spread between the interest income from the Lebanese treasury bills and interest expense on the soft loan for the same amount.

Société Générale de Banque au Liban S.A.L. F.230

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2015 30 OTHER ASSETS (continued) (iii) Investment in an associate As of 31 December 2015 and 2014 the Group had 50% equity interest in Centre de Traitement Monetique SAL. The Group’s share of loss from the associate amounted to LL 12 million for the year ended 31 December 2015 (2014: Share of profit from the associate amounted to LL 31 million). (iv) Provision for other debtors The movement of provision for other debtors recognized in the consolidated statement of financial position is as follows: 2015 2014 LL million LL million Provision at 1 January 3,393 3,851 Provided during the year (note 11) 249 - Written-back during the year (note 11) (20) (17) Written-off during the year - (441) __________ __________ Provision at 31 December 3,622 3,393 __________ __________ 31 GOODWILL 2015 2014 LL million LL million Cost: At 1 January 171,756 175,362 Difference of exchange (2,071) (3,606) __________ __________ At 31 December 169,685 171,756 __________ __________ Impairment: At 1 January 2,946 3,470 Difference of exchange (301) (524) __________ __________ At 31 December 2,645 2,946 __________ __________ Net book value: At 31 December 167,040 168,810 __________ __________ Impairment testing of goodwill Goodwill acquired through business combinations has been allocated to five individual cash generating units for impairment testing as follows: 2015 2014 LL million LL million Société Générale de Banque – Jordanie 2,393 2,393 Fidus SAL 199 199 Sogecap Liban SAL 813 813 Société Générale Bank – Cyprus Ltd 15,567 17,337 Assets and liabilities of the Lebanese Canadian Bank SAL 148,068 148,068 __________ __________ 167,040 168,810 __________ __________

Société Générale de Banque au Liban S.A.L. F.231

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2015 31 GOODWILL (continued) Key assumptions used in value in use calculations The recoverable amount of the assets and liabilities of the Lebanese Canadian Bank SAL, Société Générale Bank – Cyprus Ltd and Société Générale de Banque – Jordanie have been determined based on value in use calculations, using cash flow projections based on financial budgets approved by senior management covering a five-year period. The following rates are used by the Group: Assets and liabilities of

the Lebanese Canadian Bank SAL

Société Générale Bank –

Cyprus Ltd Société Générale Bank

– Jordanie 2015 2014 2015 2014 2015 2014 Growth rate 6.48% 2.1% 3.67% 7% 5% 5% Discount rate 12.67% 13.8% 13.65% 17.65% 10.30% 10.30% Projected terminal rate 2% 2 % 2% 2% 2.50% 2.50% The calculation of value in use is most sensitive to interest margin, discount rates, projected growth rates used to extrapolate cash flows beyond the budget period and projected terminal rates. Interest margins Interest margins are based on current fixed interest yields. Discount rates Discount rates reflect the current market assessment of the risk specific to each cash generating unit. The discount rate was estimated based on the average percentage of a weighted average cost of equity for the banking industry, determined on a pre-tax basis. This rate was further adjusted to reflect the market assessment of any risks specific to the cash generating unit for which future estimates of cash flows have not been adjusted. Market share assumptions These assumptions are important because, as well as using industry data for growth rates, management assesses how the unit’s relative position to its competitors might change over the budget period. Management expects the Group’s share to be stable over the budget period. Projected growth rates Growth rates are determined first by management by line of business based on the projected increase in interest and commissions. Management then reviews growth rates for reasonableness and adjusts them, by comparing the overall growth rate to the average growth rates published for the industry for the five years preceding the beginning of the budget period. Sensitivity to changes in assumptions The key assumptions described above may change as economic and market conditions change. The Group estimates that reasonably possible changes in these assumptions are not expected to cause the recoverable amount of either unit to decline below the carrying amount. 32 DUE TO THE CENTRAL BANKS

2015 2014 LL million LL million Current account 554 19,683 Term soft loans 604,991 588,992 Accrued interest 4,416 3,668 ___________ ___________ 609,961 612,343 ___________ ___________

Société Générale de Banque au Liban S.A.L. F.232

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2015 32 DUE TO THE CENTRAL BANKS (continued) Term soft loans include: - Term loans amounting to LL 10,228 million as at 31 December 2015 (2014: LL 18,753 million) were granted by

the Central Bank of Lebanon to cover 60% of the replacement costs of the Bank’s damaged buildings and installations and to cover 60% of the Bank’s credit losses relating to debtors directly affected by July 2006’s war. The effective interest rate for 2015 was 3.04% (2014: 3.37%).

- Term loan amounting to LL 170,000 million granted during June 2012 from the Central Bank of Lebanon after

the acquisition of the assets and liabilities of the Lebanese Canadian Bank SAL for a ten years period. The effective interest rate is 2% for the first 5 years and will be revised on a later stage by the Central Bank of Lebanon for the remaining 5 years (note 30).

- Term loan amounting to LL 150,000 million granted during October 2013 from the Central Bank of Lebanon

for a three years period to cover the additional losses resulting from the acquisition of the assets and liabilities of the Lebanese Canadian Bank SAL. The effective interest rate is 1.97% for the first two years and will be revised for the third year by the Central Bank of Lebanon (note 30).

- Term loans totaling to LL 243,962 million as at 31 December 2015 (2014: LL 228,896 million) were granted by

the Central Bank of Lebanon to subsidize the loans granted to customers under cicular 313 of the Central Bank of Lebanon. The term loans are subject to a 1% interest rate payable on a monthly basis.

Loans amounting to LL 330,228 million (2014: LL 338,753 million) are secured by the pledge on Lebanese treasury bills for a nominal amount of LL 330,228 million (2014: LL 338,753 million) included under financial assets pledged as collateral as at 31 December 2015 (note 20). 33 LOANS AND REPURCHASE AGREEMENTS 2015 2014 LL million LL million Central Bank of Lebanon 982,973 982,864 Banks and financial institutions 1,133,191 1,135,884 __________ __________ 2,116,164 2,118,748 __________ __________ The Group has a program to sell securities under agreements to repurchase (‘repos’). The securities sold under agreements to repurchase are transferred to third parties and the Group receives cash in exchange. If the securities decrease in value, the Group may be required to pay additional cash collateral. The Group has determined that it retains substantially all the risks and rewards of these securities, which include credit risk and market risk, and therefore has not derecognized them. In addition, it recognizes a financial liability for cash received as collateral. The carrying amount and fair value of securities sold under agreements to repurchase at 31 December 2015 was LL 2,386,160 million and LL 2,364,682 million respectively (2014: LL 2,409,740 million and LL 2,429,243 million respectively). Those securities are presented in the consolidated statement of financial position under “Financial assets at amortized cost” (note 24).

Société Générale de Banque au Liban S.A.L. F.233

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2015 33 LOANS AND REPURCHASE AGREEMENTS (continued) The following tables provide a summary of financial instruments that have been transferred in such a way that part or all of the transferred financial assets do not qualify for derecognition or were pledged against facilities granted, together with the associated liabilities:

2015

Transferred financial asset

Foreign governmental

debt securities

Debt securities issued by

banks

Certificates of deposit –EuroCDs &

bank placements

Lebanese treasury

bills – denominated

in LL Corporate

bonds

Lebanese treasury bills –

Eurobonds Total LL million LL million LL million LL million LL million LL million LL million

Carrying amount of assets

Securities lending and repos 80,597 69,883 594,807 403,023 121,897 1,664,449 2,934,656

___________ ___________ ___________ ___________ ___________ ___________ ___________ Carrying amount of associated liabilities

Securities lending and repos 77,402 60,810 580,994 401,979 110,098 884,881 2,116,164

___________ ___________ ___________ ___________ ___________ ___________ ___________

2014

Transferred financial asset

Foreign governmental

debt securities

Debt securities issued by

banks

Certificates of deposit –

EuroCDs & bank

placements

Lebanese treasury bills

– denominated

in LL Corporate

bonds

Lebanese treasury bills –

Eurobonds Total

LL million LL million LL million LL million LL million LL million LL million

Carrying amount of assets

Securities lending and repos

82,880 77,900 622,917 403,357 126,217 1,673,050 2,986,321

___________ ___________ ___________ ___________ ___________ ___________ ___________ Carrying amount of associated liabilities

Securities lending and repos 77,405 64,037 580,934 401,930 110,091 884,351 2,118,748

___________ ___________ ___________ ___________ ___________ ___________ ___________

In addition to the above an amount of LL 64,133 million is pledged as additional collateral against repurchase agreements as at 31 December 2015 (2014: LL 21,149 million). These placements are included under “Due from banks and financial institutions” (note 16). 34 DUE TO BANKS AND FINANCIAL INSTITUTIONS 2015 2014 LL million LL million Sight deposits 107,081 65,080 Time deposits 505,201 282,200 ___________ ___________ 612,282 347,280 ___________ ___________ 35 AMOUNTS DUE TO AFFILIATED BANKS AND FINANCIAL INSTITUTIONS 2015 2014 LL million LL million Sight deposits 3,671 3,856 Time deposits 17,514 - ___________ ___________ 21,185 3,856 ___________ ___________

Société Générale de Banque au Liban S.A.L. F.234

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2015 36 CUSTOMERS’ DEPOSITS AT AMORTIZED COST 2015 Corporate Retail Total LL million LL million LL million Sight deposits 790,406 1,203,261 1,993,667 Net creditor accounts against debtor accounts - 1,476 1,476 Blocked margins 307,419 265,355 572,774 ____________ ____________ ____________ 1,097,825 1,470,092 2,567,917 Time deposits 3,079,761 7,077,464 10,157,225 Savings accounts 211,020 5,743,715 5,954,735 ____________ ____________ ____________ 4,388,606 14,291,271 18,679,877 ____________ ____________ ____________ 2014 Corporate Retail Total LL million LL million LL million Sight deposits 673,589 1,096,072 1,769,661 Net creditor accounts against debtor accounts - 2,435 2,435 Blocked margins 211,043 153,238 364,281 ____________ ____________ ____________ 884,632 1,251,745 2,136,377 Time deposits 2,570,209 6,307,133 8,877,342 Savings accounts 224,328 5,682,417 5,906,745 ____________ ____________ ____________ 3,679,169 13,241,295 16,920,464 ____________ ____________ ____________ Included in customers’ deposits as at 31 December 2015 are coded accounts amounting to LL 135,920 million (2014: LL 151,266 million). These accounts are opened in accordance with article 3 of the Banking Secrecy Law dated 3 September 1956. 37 RELATED PARTIES’ DEPOSITS AT AMORTIZED COST 2015 Corporate Retail Total LL million LL million LL million Sight deposits 8,713 632 9,345 Time deposits 79,291 44,135 123,426 ___________ ___________ ___________ 88,004 44,767 132,771 ___________ ___________ ___________ 2014 Corporate Retail Total LL million LL million LL million Sight deposits 10,619 710 11,329 Time deposits 69,162 49,692 118,854 ___________ ___________ ___________ 79,781 50,402 130,183 ___________ ___________ ___________

Société Générale de Banque au Liban S.A.L. F.235

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2015 38 OTHER LIABILITIES 2015 2014 LL million LL million Current tax liabilities (note 14) 33,480 25,562 Redeemed preferred shares payable to third parties (i) 21,859 21,859 Accrued expenses 21,447 17,666 Payable to the shareholders of the Lebanese Canadian Bank SAL (iii) 12,060 12,060 Customers’ transactions between Head Office and branches 7,104 11,949 Other taxes payable 9,142 11,112 Interest and commissions received in advance 10,521 9,731 Due to the National Social Security Fund 1,667 1,666 Deferred tax liabilities (note 14) 356 - Other creditors (ii) 24,412 25,893 ___________ ___________ 142,048 137,498 ___________ ___________ (i) Redeemed preferred shares payable to third parties represent liabilities acquired with the acquisition of the

assets and liabilities of the Lebanese Canadian Bank SAL and relating to preferred shares redeemed by the Lebanese Canadian Bank SAL and not yet claimed by the holders of those shares.

(ii) Included under other creditors an amount of LL 8,003 million as at 31 December 2015 (2014: the same),

representing the partial settlement made by a debtor in settlement of his debts amounting to LL 8,356 million.

The Group will reimburse this payment since it has received the full payment of LL 8,356 million from the shareholders of the Lebanese Canadian Bank SAL during the year 2012.

(iii) This represents the balance of the cash collateral deposited by the shareholders of the Lebanese Canadian Bank SAL and amounting to US$ 8 million (equivalent to LL 12,060 million) as a guarantee against default of the loans of an acquired subsidiary.

This amount is refundable to the shareholders of the Lebanese Canadian Bank SAL, since the initial consideration paid for the acquisition was reduced by the same amount.

39 PROVISION FOR RISKS AND CHARGES 2015 2014 LL million LL million Technical reserve for insurance contracts 19,585 17,416 Employees’ end of service benefits (i) 25,859 23,240 Provision for contingencies and charges 5,296 4,996 Other provisions 24,997 17,352 __________ __________ 75,737 63,004 __________ __________ (i) Employees’ end of service benefits Movements in the provision for end of service benefits recognized in the consolidated statement of financial position are as follows:

2015 2014 LL million LL million Balance at 1 January 23,240 28,494 Provided during the year (note 12) 4,317 3,447 Paid during the year (1,698) (3,417) Transfer to customers’ deposits at amortized cost - (4,583) Difference of exchange - (701) ___________ ___________ Balance at 31 December 25,859 23,240 ___________ ___________

Société Générale de Banque au Liban S.A.L. F.236

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2015 40 SHARE CAPITAL a Common shares The authorized, issued and fully paid share capital as of 31 December 2015 comprised 56,535 shares of nominal value LL 258,000 each (2014: 56,535 shares of nominal value of LL 233,000 each). The extraordinary general assembly of shareholders held on 2 July 2015 resolved to increase the nominal value of each share from LL 233,000 to LL 258,000. Accordingly, an amount of LL 1,413 million was transferred from “distributable reserves” to “share capital – common shares”. b Preferred shares - On 15 March 2010, the Bank issued 10,000 preferred shares (Series 2010) for a nominal amount of

LL 212,400 each (a total of LL 2,124 million) plus a share premium denominated in US Dollars of US$ 9,859. Accordingly, share premium of LL 148,284 million represents a premium of US$ 98,590,000 (or LL 148,624 million) less issuance costs of LL 340 million. The extraordinary general assembly of shareholders held on 2 July 2015 resolved to redeem all the 10,000 preferred shares (Series 2010).

- On 28 March 2013, the Bank issued 12,500 preferred shares (Series 2012) for a nominal amount of

LL 212,400 each (a total of LL 2,655 million) plus a share premium denominated in US Dollars of US$ 9,859 per share. Accordingly, the total share premium resulting from the issuance amounted to US$ 123,238,806 (or LL 185,782 million) less issuance costs of LL 395 million.

- On 13 September 2013, the Bank issued 15,000 preferred shares (Series 2013) for a nominal amount of

LL 212,400 each (a total of LL 3,186 million) plus a share premium denominated in US Dollars of US$ 9,859 per share. Accordingly, the total share premium resulting from the issuance amounted to US$ 147,886,567 (or LL 222,939 million) less issuance costs of LL 385 million.

- On 2 July 2015, the Bank issued 10,000 preferred shares (Series 2015) for a nominal amount of LL

233,000 each (a total of LL 2,330 million) plus a share premium denominated in US Dollars of US$ 9,845 per share. Accordingly, the total share premium resulting from the issuance amounted to US$ 98,454,395 (or LL 148,420 million) less issuance costs of LL 194 million.

The payment of dividends for preferred shareholders is dependent on: (1) The availability of non-consolidated net income for a specific year after appropriation of legal and other

regulatory reserves; (2) The continuous compliance with regulations issued by the Central Bank of Lebanon and the Banking Control

Commission; and (3) The approval of the ordinary general assembly of shareholders to distribute those dividends. During 2015, the Bank transferred LL 2,134 million (2014: LL 2,052 million) from “retained earnings” to the “share premium – preferred shares”. These represent the appropriation of transaction costs incurred on preferred shares and additional premiums of 1.75% relating to preferred shares – Series 2010, 1.25% relating to preferred shares – Series 2012, 2% relating to preferred shares – Series 2013 and 1.5% relating to preferred shares – Series 2015. The extraordinary general assembly of shareholders held on 13 September 2013 resolved to increase the nominal value of shares from LL 212,400 to LL 233,000. Accordingly an amount of LL 772 million was transferred from “distributable reserves” to “share capital – preferred shares”.

Société Générale de Banque au Liban S.A.L. F.237

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2015 40 SHARE CAPITAL (continued) b Preferred shares (continued) The extraordinary general assembly of shareholders held on 2 July 2015 resolved to increase the nominal value of shares from LL 233,000 to LL 258,000. Accordingly an amount of LL 937 million was transferred from “distributable reserves” to “share capital – preferred shares”. c Cash contribution by shareholders Cash contribution to capital amounted to US$ 9,855,900 and EUR 46,229,259 as at 31 December 2015 totaling to LL 106,746 million (2014: US$ 9,855,900 and EUR 46,229,259 totaling LL 106,746 million). These contributions were granted by the shareholders of the Bank in order to support and develop the activities of the Bank, in accordance with the following conditions:

− Every shareholder is committed to retain the contributions during the lifetime of the Bank; − The shareholders commit to cover any loss using their contributions according to the provisions of article

3-8 of circular N° 44 of the of the Central Bank of Lebanon and article 134 of the Money and Credit Act; and

− The shareholders have the right to use or not to use these contributions in case of a capital increase.

Both the Central Council of the Central Bank of Lebanon and the ordinary general assembly of the Bank approved these contributions. 41 NON DISTRIBUTABLE RESERVES

Legal reserve

Reserve for general banking

risks

Reserve against

doubtful and impaired loans

Reserve for capital increase

Reserve for non-current assets held

for sale

Reserve for retail

and corporate

loans Total LL million LL million LL million LL million LL million LL million LL million At 1 January 2014 82,883 90,054 648 56,340 28,635 - 258,560 Appropriation during the year 21,700 21,028 - 7,967 7,623 - 58,318 Transfers - - - 1,821 (1,821) - - __________ __________ __________ __________ _________ _________ __________ At 31 December 2014 104,583 111,082 648 66,128 34,437 - 316,878 Appropriation during the year 24,373 20,843 - 8,646 11,716 8,691 74,269 Transfers - - - 151 (151) - - Adjsutments - - (13) - - - (13) __________ __________ __________ __________ _________ _________ __________ At 31 December 2015 128,956 131,925 635 74,925 46,002 8,691 391,134 __________ __________ __________ __________ _________ _________ __________ a) Legal reserve As required by local regulations where the Group operates, a percentage of the net profit for the year should be transferred to legal reserve. This reserve is not available for dividend distribution. b) Reserve for general banking risks In compliance with the Central Bank of Lebanon regulations, the Bank should appropriate from its net profit for the year, a minimum amount of 2 per thousand and a maximum of 3 per thousand from the total risk weighted assets and off-statement of financial position items based on the rates specified by the Central Bank of Lebanon as a reserve for general banking risks. The consolidated ratio should not be less than 2% of these risks at the end of 2027. In addition, Société Générale de Banque – Jordanie and Société Générale Bank – Cyprus Ltd are also required to appropriate reserves for general banking risks in accordance with local requirements.

Société Générale de Banque au Liban S.A.L. F.238

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2015

41 NON DISTRIBUTABLE RESERVES (continued) c) Reserve against doubtful and impaired loans In compliance with pronouncement 20/2008 of the Banking Control Commission issued on 13 September 2008, the Bank should appropriate to a special reserve an amount equal to its portfolio of doubtful and impaired loans which were not settled in accordance with the Central Bank basic circular no. 73 and its subsequent amendments. The Bank releases this reserve to retained earnings when:

• The loan is settled and fully paid; or • Partial settlement of the loan leading to a reserve in excess of the loan net carrying amount; or • A provision is made in the income statement.

d) Reserve for capital increase In compliance with the circular No. 167 issued by the Banking Control Commission, the Bank is required to appropriate the net write-back of provisions for doubtful debts in a particular year to the reserve for capital increase when the net results are positive. In compliance with the circular No. 173 issued by the Banking Control Commission, the Bank is required to appropriate the gain realized from the sales of non-current assets held for sale to the reserve for capital increase when the net results are positive. e) Reserve for non-current assets held for sale In compliance with pronouncements of the Banking Control Commission, when properties acquired in settlement of debts are not sold within the timeframe required by local regulators, the Bank should appropriate an amount equal to 5% or 20% of the carrying value of such properties. The annual appropriation, which is from the net profit of the respective year after appropriations to legal reserve and reserve for general banking risks, is reported under “reserve for non-current assets held for sale”. The Bank shall make a transfer from this reserve into the “Reserve for capital increase” when: - The reserve appropriated in prior years related to a property disposed of; or - The reserve appropriated in prior years, equal or up to an impairment loss recognized in the income

statement against the acquired property. f) Reserve for retail and corporate loans In compliance with the circular No. 280 issued by the Banking Control Commission, the Bank is required to transfer from net profits for the year the equivalent of:

- 0.5% of retail loans that are less than 30 days past due (subject to deductions of some guarantees received) to general reserve for the year 2014. This ratio will increase yearly by 0.5% over a six year period starting 2015.

- 0.25% of corporate loans that are less than 30 days past due (subject to deductions of some guarantees received) to general reserve for the year 2014. This ratio will increase to 0.5% for the year 2015, 1% for the year 2016 and 1.5% for the year 2017.

42 DISTRIBUTABLE RESERVES General reserves 2015 2014 LL million LL million Balance at 1 January 20,669 20,110 Appropriation during the year 917 559 Transfer to share capital – common shares (note 40) (1,413) - Transfer to share capital – preferred shares (note 40) (937) - Transfer upon redemption of preferred shares 206 - ___________ ___________ Balance at 31 December 19,442 20,669 ___________ ___________

Société Générale de Banque au Liban S.A.L. F.239

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2015 43 REVALUATION RESERVE OF PROPERTY 2015 2014 LL million LL million Revaluation amount 5,499 5,499 Book value (945) (945) Sale of real estate (620) (620) _________ _________ Revaluation variance 3,934 3,934 _________ _________ The Central Bank of Lebanon and the tax authorities approved on 29 March 1995 and on 18 April 1995 respectively, the revaluation of some of the buildings owned by the Bank and used for operating purposes in accordance with the law no. 282 dated 30 December 1993. 44 CUMULATIVE CHANGE IN FAIR VALUE OF FINANCIAL ASSETS AT FAIR VALUE

THROUGH OTHER COMPREHENSIVE INCOME 2015 2014 LL million LL million Balance at 1 January 113 312 Net unrealized loss on financial assets at fair value through other comprehensive income, net of tax (590) (199) __________ __________ Balance at 31 December (477) 113 __________ __________

45 DIVIDENDS PAID TO EQUITY HOLDERS OF THE PARENT According to the resolution of the ordinary general assembly of shareholders held on 24 April 2015 the following dividends were declared and paid: 2015 Number of shares Dividend per share Total in LL LL million Dividends for preferred shares – 2010 issue 10,000 1,168,313 11,683 Dividends for preferred shares – 2012 issue 12,500 1,055,250 13,190 Dividends for preferred shares – 2013 issue 15,000 1,055,250 15,829 __________ 40,702 __________ According to the resolution of the ordinary general assembly of shareholders held on 17 April 2014 the following dividends were declared and paid: 2014 Number of shares Dividend per share Total in LL LL million Dividends for preferred shares – 2010 issue 10,000 1,168,313 11,683 Dividends for preferred shares – 2012 issue 12,500 803,732 10,047 Dividends for preferred shares – 2013 issue 15,000 315,135 4,727 Dividends for ordinary shares 56,535 746,618 42,210 __________ 68,667 __________

Société Générale de Banque au Liban S.A.L. F.240

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2015 46 CASH AND CASH EQUIVALENTS

2015 2014 LL million LL million Cash and balances with the Central Banks 5,817,726 5,683,973 Financial instruments – Certificates of deposits issued by foreign Central Banks 141,515 - Due from banks and financial institutions 698,264 383,770 Amounts due from affiliated banks and financial institutions 777,435 1,031,920 Reverse repurchase agreements 416,910 - Due to the Central Banks (609,961) (612,343) Loans and repurchase agreements (2,116,164) (2,118,748) Due to banks and financial institutions (612,282) (347,280) Amounts due to affiliated banks and financial institutions (21,185) (3,856) _____________ _____________ 4,492,258 4,017,436 _____________ _____________ Less: balances with maturities exceeding 3 months Cash and balances with the Central Banks 4,860,610 4,803,006 Due from banks and financial institutions 186,415 71,496 Amounts due from affiliated banks and financial institutions 56,942 17,476 Reverse repurchase agreeements 219,567 - Due to the Central Banks (609,408) (592,659) Loans and repurchase agreements (2,116,164) (2,118,748) Due to banks and financial institutions (299,622) (132,974) _____________ _____________ 2,298,340 2,047,597 _____________ _____________ Cash and cash equivalents at 31 December 2,193,918 1,969,839 _____________ _____________

47 RELATED PARTY TRANSACTIONS Parties are considered to be related if one party has the ability to control the other party or exercise significant influence over the other party in making financial or operation decisions, or one other party controls both. The definition includes subsidiaries, key management personnel and their close family members, as well as entities controlled or jointly controlled by them. A list of the Group’s principal subsidiaries is shown in note 2. Transactions between the Bank and its subsidiaries meet the definition of related party transactions. However, where these are eliminated on consolidation, they are not disclosed in the Group’s consolidated financial statements. Key Management Personnel are defined as those persons having authority and responsibility for planning, directing and controlling the activities of the Group, directly or indirectly, including the Directors of the Bank and the Officers of the Group. Entities under common directorships are defined as those entities for which members of the Bank’s board also serve as directors.

Société Générale de Banque au Liban S.A.L. F.241

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2015

47 RELATED PARTY TRANSACTIONS (continued) Terms and conditions of transactions with related parties The Group enters into transactions with major related parties in the ordinary course of business at normal commercial interest and commission rates. As at 31 December 2015, the Group has made provisions for doubtful debts relating to amounts owed by related parties amounting to LL 19,474 million ( 2014: LL 17,982 million) (note 23). The following table provides the total amount of transactions and the amount of outstanding balances (including commitments) with related parties for the relevant financial year. 2015 2014 Outstandin

g balance Income

(expense) Outstanding

balance Income

(expense) LL million LL million LL million LL million Key management personnel Net loans and advances 139,848 5,594 131,796 4,816 Deposits 44,372 (1,939) 49,977 (2,666) Guarantees given 433 - 481 - Commitments 754 - 231 - Entities under common directorship Net loans and advances 13,602 2,565 11,087 1,384 Deposits 87,203 (3,041) 79,210 (2,741) Guarantees given 189 - 189 - Commitments 20,405 21 3,963 - Shareholder – Bank Net loans and advances 772,566 433 1,029,592 919 Deposits 17,973 - 457 - Guarantees given 145,654 - 33,381 - Associate Deposits 854 (22) 936 (22) Technical assistance fees paid to Société Générale – Paris amounted to LL 754 million for the year ended 31 December 2015 (2014: LL 754 million). The bank rented offices from board members for LL 509 million for the year ended 31 December 2015 (2014: LL 515 million). Compensation of the key management personnel is as follows: 2015 2014 LL million LL million Short-term benefits (i) 8,936 10,002 Termination benefits 190 302 __________ __________ 9,126 10,304 __________ __________ (i) Short-term benefits comprise of salaries, bonuses, attendance fees and other short-term benefits to Key

Management Personnel.

Société Générale de Banque au Liban S.A.L. F.242

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2015 48 FIDUCIARY ACCOUNTS A summary of the Group’s fiduciary accounts according to law no. 520 dated 6 June 1996 relating to the development of financial markets and fiduciary contracts is as follows:

2015 2014 LL million LL million Deposits with banks 3,351 50,258 Loans and advances 19,598 19,598 Equity instruments 113,062 113,063 Certificates of deposit - 17,273 ____________ ____________ 136,011 200,192 ____________ ____________

49 ASSETS HELD IN CUSTODY AND UNDER ADMINISTRATION

2015 2014 LL million LL million Lebanese treasury bills and Eurobonds 92,965 61,439 Bonds and other debt instruments 84,533 152,902 Equity instruments 445,570 430,540 Funds 46,355 56,305 ____________ ____________ 669,423 701,186 ____________ ____________

50 CONTINGENT LIABILITIES, COMMITMENTS AND LEASING ARRANGEMENTS Credit-related commitments and contingent liabilities To meet the financial needs of customers, the Group enters into various commitments, guarantees and other contingent liabilities, which are mainly credit-related instruments including both financial and other guarantees and commitments to extend credit. Even though these obligations may not be recognized on the consolidated statement of financial position, they do contain credit risk and are therefore part of the overall risk of the Group. The table below discloses the nominal principal amounts of credit-related commitments and contingent liabilities. Nominal principal amounts represent the amount at risk should the contracts be fully drawn upon and clients default. As a significant portion of guarantees and commitments is expected to expire without being withdrawn, the total of the nominal principal amount is not indicative of future liquidity requirements. 2015 Banks Customers Total LL million LL million LL million Guarantee and contingent liabilities Financial guarantees 170,015 76,004 246,019 Other guarantees 17,776 254,471 272,247 _________ _________ _________ 187,791 330,475 518,266 _________ _________ _________ Commitments Documentary credits 160,384 9,212 169,596 Loan commitments - 976,146 976,146 _________ _________ _________ 160,384 985,358 1,145,742 _________ _________ _________

Société Générale de Banque au Liban S.A.L. F.243

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2015 50 CONTINGENT LIABILITIES, COMMITMENTS AND LEASING ARRANGEMENTS (continued) Credit-related commitments and contingent liabilities (continued) 2014 Banks Customers Total LL million LL million LL million Guarantee and contingent liabilities Financial guarantees 51,229 85,379 136,608 Other guarantees 31,758 224,252 256,010 _________ _________ _________ 82,987 309,631 392,618 _________ _________ _________ Commitments Documentary credits 181,176 12,478 193,654 Loan commitments - 942,749 942,749 _________ _________ _________ 181,176 955,227 1,136,403 _________ _________ _________ Guarantees Guarantees are given as security to support the performance of a customer to third parties. The main types of guarantees provided are:

• Financial guarantees given to banks and financial institutions on behalf of customers to secure loans, overdrafts, and other banking facilities; and

• Other guarantees provided include mainly performance guarantees, advance payment guarantees, tender guarantees, customs guarantees and retention guarantees.

Documentary credits Documentary credits commit the Bank to make payments to third parties, on production of documents, which are usually reimbursed immediately by customers. Loan commitments Loan commitments are defined amounts (unutilized credit lines or undrawn portions of credit lines) against which clients can borrow money under defined terms and conditions. Legal claims Litigation is a common occurrence in the industries where the Group operates due to the nature of the businesses undertaken. The Group has formal controls and policies for managing legal claims. Once professional advice has been obtained and the amount of loss is reasonably estimated, the Group makes adjustments to account for any adverse effects which the claims may have on its financial standing. At year end, the Group had several unresolved legal claims. Based on advice from the legal counsel, management believes that legal claims not provided for will not result in any financial loss to the Group. Capital commitments At 31 December 2015, the Group had capital commitments in respect of premises and equipment purchases amounting to LL 59,900 million (2014: LL 60,288 million).

Société Générale de Banque au Liban S.A.L. F.244

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2015 50 CONTINGENT LIABILITIES, COMMITMENTS AND LEASING ARRANGEMENTS (continued) Operating lease commitments – Group as lessee The Group enters into commercial leases on premises. There are no restrictions placed upon the lessee by entering into these leases. Future minimum lease payments under non-cancelable operating leases as at 31 December are as follow: 2015 2014 LL million LL million Within one year 6,834 8,326 After one year but not more than five years 16,116 16,077 More than five years 242 - ___________ ___________ 23,192 24,403 ___________ ___________ Other commitments The Group has commitments relating to future donations to not for profit organizations amounting to LL 7,085 million as at 31 December 2015 (2014: LL 7,085 million). Other contingencies a) The Bank’s books and records were reviewed by the Department of Income Tax for the years 2008 to 2011.

Accordingly, the Department of Income Tax imposed additional taxes and penalties amounting to LL 4,193 million. The Bank settled the taxes during 2014 and filed an objection against this assessment. Part of this expense which relates to the termination benefits of the employees of the Lebanese Canadian Bank SAL (under liquidation) totaling to LL 2,502 million was deferred (refer to note 30).

b) Certain areas of the Lebanese tax legislation are subject to different interpretations in respect of the taxability of certain types of financial transactions and activities. Fiscal years from 2012 to 2015 are open to review by the Department of Income Tax as well as the Value Added Tax since inception. Management believe that the effect of any such review will not have a material effect on the consolidated financial statements.

c) The Bank’s contributions to the National Social Security Fund (NSSF) have not been reviewed since May 2004. Management believe that the effect of any such review will not have a material effect on the consolidated financial statements.

51 FAIR VALUE MEASUREMENT The fair values in this note are stated at a specific date and may be different from the amounts which will actually be paid on the maturity or settlement dates of the instrument. In many cases, it would not be possible to realize immediately the estimated fair values given the size of the portfolios measured. Accordingly, these fair values do not represent the value of these instruments to the Group as a going concern. The fair value of assets and liabilities is included at the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. Assets and liabilities are classified according to a hierarchy that reflects the significance of observable market inputs. The three levels of the fair value hierarchy are defined below. Quoted market prices – Level 1 Assets and liabilities are classified as Level 1 if their value is observable in an active market. Such instruments are valued by reference to unadjusted quoted prices for identical assets or liabilities in active markets where the quoted price is readily available, and the price represents actual and regularly occurring market transactions on an arm’s length basis. An active market is one in which transactions occur with sufficient volume and frequency to provide pricing information on an ongoing basis. Valuation technique using observable inputs – Level 2 Assets and liabilities classified as Level 2 have been valued using models whose most significant inputs are observable in an active market. Such valuation techniques and models incorporate assumptions about factors observable in an active market, that other market participants would use in their valuations, including interest rate yield curve, exchange rates, volatilities, and prepayment and defaults rates.

Société Générale de Banque au Liban S.A.L. F.245

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2015 51 FAIR VALUE MEASUREMENT (continued) Valuation technique using significant unobservable inputs – Level 3 Assets and liabilities are classified as Level 3 if their valuation incorporates significant inputs that are not based on observable market data (unobservable inputs). A valuation input is considered observable if it can be directly observed from transactions in an active market, or if there is compelling external evidence demonstrating an executable exit price. An input is deemed significant if it is shown to contribute more than 10% to the valuation of the asset or liability. Unobservable input levels are generally determined based on observable inputs of a similar nature, historical observations or other analytical techniques. Fair value measurement hierarchy of the Group’s assets and liabilities carried at fair value: 2015 Valuation techniques Quoted market

price Level 1

Observable inputs

Level 2

Unobservable inputs

Level 3

Total LL million LL million LL million LL million Assets measured at fair vlaue: Derivative financial instruments: Forward foreign exchange contracts - 2,969 - 2,969 Financial assets at fair value through profit or loss:

Lebanese treasury bills (LL) - 1,093 - 1,093 Lebanese treasury bills (Eurobonds) 17,540 - - 17,540 Debt securities issued by banks - 37,688 - 37,688 Foreign governmental debt securities - 68,551 - 68,551 Funds 18,542 - - 18,542 Shares 74,866 21,526 - 96,392

Financial assets at fair value through other comprehensive income: Shares 24,073 1,612 875 26,560

Investment properties - - 1,480 1,480 Liabilities measured at fair value: Derivative financial instruments: Forward foreign exchange contracts - (4,450) - (4,450) 2014 Valuation techniques Quoted market

price Level 1

Observable inputs

Level 2

Unobservable inputs

Level 3

Total LL million LL million LL million LL million Assets measured at fair vlaue: Derivative financial instruments: Forward foreign exchange contracts - 309 - 309 Financial assets at fair value through profit or loss:

Lebanese treasury bills (LL) - 1,072 - 1,072 Lebanese treasury bills (Eurobonds) 28,470 - - 28,470 Debt securities issued by banks - 37,688 - 37,688 Certificates of deposit (EuroCDs) - 204 - 204 Funds 18,011 - - 18,011 Shares 42,823 14,616 - 57,439

Financial assets at fair value through other comprehensive income: Shares 24,426 1,605 844 26,875

Investment properties - - 1,445 1,445 Liabilities measured at fair value: Derivative financial instruments: Forward foreign exchange contracts - (158) - (158) There were no transfers between levels during 2015 (2014: the same). Assets and liabilities measured at fair value using a valuation technique with significant observable inputs (Level 2) Derivatives Derivative products are valued using a valuation technique with market observable inputs. The most frequently applied valuation techniques include forward pricing and swap models, using present value calculations. The models incorporate various inputs including the credit quality of counterparties, foreign exchange spot and forward rates and interest rate curves. Government bonds, certificates of deposit and other debt securities The Group values these unquoted debt securities using discounted cash flow valuation models where the lowest level input that is significant to the entire measurement is observable in an active market. These inputs include assumptions regarding current rates of interest, implied volatilities, credit spreads and broker statements.

Société Générale de Banque au Liban S.A.L. F.246

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2015 51 FAIR VALUE MEASUREMENT (continued) Assets and liabilities measured at fair value using a valuation technique with significant unobservable inputs (Level 3) Equity shares of non-listed entities These are investments in private companies, for which there is no or only limited sufficient recent information to determine fair value. The Group determined that cost adjusted to reflect the investee’s financial position and results since initial recognition represents the best estimate of fair value. Investment properties Investment properties valued using unobservable inputs are generally determined based on observable inputs of a similar nature, historical observations or other techniques. Investment properties are mainly valued by independent qualified valuers on the basis of current market prices of similar properties sold in the same area. Comparison of carrying amounts and fair values for financial assets and liabilities not held at fair value The fair values included in the table below were calculated for disclosure purposes only. The fair valuation techniques and assumptions described below relate only to the fair value of the Group’s financial instruments not measured at fair value. Other institutions may use different methods and assumptions for their fair value estimations, and therefore such fair value disclosures cannot necessarily be compared from one institution to another. 2015 2014

Carrying value Fair value

Carrying value Fair value

LL million LL million LL million LL million Financial assets Cash and balances with the Central Banks 5,817,726 5,817,726 5,683,973 5,683,973 Due from banks and financial institutions 698,264 698,264 383,770 383,770 Amounts due from affiliated banks and financial institutions 777,435 777,435 1,031,920 1,031,920 Reverse repurchase agreements 416,910 416,910 - - Loans to banks and financial institutions 8,397 8,397 6,361 6,361 Financial assets pledged as collateral 576,118 579,990 347,926 352,261 Loans and advances to customers at amortized cost 5,929,958 5,929,958 5,321,691 5,321,691 Loans and advances to related parties at amortized cost

153,546 153,546 142,953 142,953

Financial assets at amortized cost 8,928,466 9,017,179 8,255,292 8,414,122 ___________ ___________ ___________ __________ 23,306,820 23,399,405 21,173,886 21,337,051 ___________ ___________ ___________ __________

Financial liabilities

Due to the Central Banks 609,961 607,980 612,343 610,326 Loans and repurchase agreements 2,116,164 2,116,164 2,118,748 2,118,748 Due to banks and financial institutions 612,282 612,282 347,280 347,280 Amounts due to affiliated banks and financial institutions 21,185 21,185 3,856 3,856 Customers’ deposits at amortized cost 18,679,877 18,679,877 16,920,464 16,920,464 Related parties’ deposits at amortized cost 132,771 132,771 130,183 130,183 ___________ ___________ ___________ __________ 22,172,240 22,170,259 20,132,874 20,130,857 ___________ ___________ ___________ __________

Société Générale de Banque au Liban S.A.L. F.247

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2015

51 FAIR VALUE MEASUREMENT (continued) Fair values measurement hierarchy of the Group’s financial assets and liabilities for which fair values are disclosed: 2015

Valuation techniques

Quoted market price

Level 1

Observable inputs

Level 2

Unobservable inputs

Level 3

Total LL million LL million LL million LL million Assets for which fair values are disclosed: Cash and balances with the Central Banks 97,822 5,719,904 - 5,817,726 Due from banks and financial institutions - 698,264 - 698,264 Amounts due from affiliated banks and financial institutions - 777,435 - 777,435 Reverse repurchase agreeements - 416,910 - 416,910 Loans to banks and financial institutions - 8,397 - 8,397 Financial assets at amortized cost pledged as collateral: Lebanese treasury bills - 339,921 - 339,921 Foreign governmental bonds - 240,069 - 240,069 Loans and advances to customers at amortized cost - - 5,929,958 5,929,958 Loans and advances to related parties at amortized cost - - 153,546 153,546 Financial assets at amortized cost: Lebanese treasury bills (LL) - 3,252,205 - 3,252,205 Lebanese treasury bills (Eurobonds) 2,524,484 - - 2,524,484 Foreign governmental debt securities 80,822 445,171 - 525,993 Corporate bonds 110,786 20,930 - 131,716 Certificates of deposits issued by foreign central banks - 141,515 - 141,515 Certificates of deposit issued by the Central Bank of Lebanon - 2,345,560 - 2,345,560 Certificates of deposit issued by banks - 10,578 - 10,578 Debt securities issued by banks 85,128 - - 85,128 Liabilities for which fair values are disclosed: Due to the Central Banks - (607,980) - (607,980) Loans and repurchase agreements - (2,116,164) - (2,116,164) Due to banks and financial institutions - (612,282) - (612,282) Amounts due to affiliated banks and financial institutions - (21,185) - (21,185) Customers’ deposits at amortized cost - (18,679,877) - (18,679,877) Related parties’ deposits at amortized cost - (132,771) - (132,771) 2014

Valuation techniques

Quoted market price

Level 1

Observable inputs

Level 2

Unobservable inputs

Level 3

Total LL million LL million LL million LL million Assets for which fair values are disclosed: Cash and balances with the Central Banks 100,665 5,583,308 - 5,683,973 Due from banks and financial institutions - 383,770 - 383,770 Amounts due from affiliated banks and financial institutions - 1,031,920 - 1,031,920 Loans to banks and financial institutions - 6,361 - 6,361 Financial assets at amortized cost pledged as collateral: Lebanese treasury bills - 349,129 - 349,129 Foreign governmental bonds - 3,132 - 3,132 Loans and advances to customers at amortized cost - - 5,321,691 5,321,691 Loans and advances to related parties at amortized cost - - 142,953 142,953 Financial assets at amortized cost: Lebanese treasury bills (LL) - 2,979,628 - 2,979,628 Lebanese treasury bills (Eurobonds) 2,130,098 - - 2,130,098 Foreign governmental debt securities 85,601 534,713 - 620,314 Corporate bonds 126,111 255 - 126,366 Certificates of deposit issued by the Central Bank of Lebanon - 2,468,959 - 2,468,959 Certificates of deposit issued by banks - 10,525 - 10,525 Debt securities issued by banks 78,232 - - 78,232 Liabilities for which fair values are disclosed: Due to the Central Banks - (610,326) - (610,326) Loans and repurchase agreements - (2,118,748) - (2,118,748) Due to banks and financial institutions - (347,280) - (347,280) Amounts due to affiliated banks and financial institutions - (3,856) - (3,856) Customers’ deposits at amortized cost - (16,920,464) - (16,920,464) Related parties’ deposits at amortized cost - (130,183) - (130,183)

Assets and liabilities for which fair value is disclosed using a valuation technique with significant observable inputs (Level 2) and / or significant unobservable inputs (Level 3) Deposits with banks and loans and advances to banks For the purpose of this disclosure there is minimal difference between fair value and carrying amount of these financial assets as they are short-term in nature or have interest rates that re-price frequently. The fair value of deposits with longer maturities are estimated using discounted cash flows applying market rates for counterparties with similar credit quality.

Société Générale de Banque au Liban S.A.L. F.248

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2015

51 FAIR VALUE MEASUREMENT (continued) Assets and liabilities for which fair value is disclosed using a valuation technique with significant observable inputs (Level 2) and / or significant unobservable inputs (Level 3) (continued) Government bonds, certificates of deposits and other debt securities The Bank values these unquoted debt securities using discounted cash flow valuation models where the lowest level input that is significant to the entire measurement is observable in an active market. These inputs include assumptions regarding current rates of interest, implied volatilities, credit spreads and broker statements. Loans and advances to banks and customers For the purpose of this disclosure, fair value of loans and advances is estimated using discounted cash flows by applying current rates for new loans granted during the year with similar remaining maturities and to counterparties with similar credit quality. Deposits from banks and customers In many cases, the fair value disclosed approximates carrying value because these financial liabilities are short-term in nature or have interest rates that re-price frequently. The fair value for deposits with long-term maturities, such as time deposits, are estimated using discounted cash flows, applying either market rates or current rates for deposits of similar remaining maturities.

52 MATURITY ANALYSIS OF ASSETS AND LIABILITIES The table below shows an analysis of assets and liabilities analyzed according to when they are expected to be recovered or settled. At 31 December 2015

Less than one year

More than one year Total

LL million LL million LL million ASSETS Cash and balances with the Central Banks 1,589,527 4,228,199 5,817,726 Due from banks and financial institutions 654,629 43,635 698,264 Amounts due from affiliated banks and financial institutions 777,435 - 777,435 Reverse repurchase agreements 416,910 - 416,910 Loans to banks and financial institutions - 8,397 8,397 Derivative financial instruments 2,969 - 2,969 Financial assets at amortized cost pledged as collateral 158,147 417,971 576,118 Financial assets at fair value through profit or loss 239,806 - 239,806 Loans and advances to customers at amortized cost 2,772,966 3,156,992 5,929,958 Loans and advances to related parties at amortized cost 118,432 35,114 153,546 Debtors by acceptances 167,061 2,430 169,491 Financial assets at amortized cost 516,970 8,411,496 8,928,466 Financial assets at fair value through other comprehensive income

532 26,028 26,560

Property and equipment 10,932 203,413 214,345 Intangible assets 4,470 36,475 40,945 Investment properties - 1,480 1,480 Non-current assets held for sale 185,318 - 185,318 Other assets 77,095 23,776 100,871 Goodwill - 167,040 167,040 __________ __________ __________ TOTAL ASSETS 7,693,199 16,762,446 24,455,645 __________ __________ __________ LIABILITIES Due to the Central Banks 181,508 428,453 609,961 Loans and repurchase agreements 990,425 1,125,739 2,116,164 Due to banks and financial institutions 584,487 27,795 612,282 Amounts due to affiliated banks and financial institutions 21,185 - 21,185 Derivative financial instruments 4,450 - 4,450 Customers’ deposits at amortized cost 18,599,222 80,655 18,679,877 Related parties’ deposits at amortized cost 131,861 910 132,771 Engagements by acceptances 167,061 2,430 169,491 Other liabilities 142,048 - 142,048 Provision for risks and charges 22,235 53,502 75,737 __________ __________ __________ TOTAL LIABILITIES 20,844,482 1,719,484 22,563,966 __________ __________ __________ NET (13,151,283) 15,042,962 1,891,679 __________ __________ __________

Société Générale de Banque au Liban S.A.L. F.249

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2015 52 MATURITY ANALYSIS OF ASSETS AND LIABILITIES (continued) At 31 December 2014

Less than one year

More than one year Total

LL million LL million LL million ASSETS Cash and balances with the Central Banks 1,287,675 4,396,298 5,683,973 Due from banks and financial institutions 335,173 48,597 383,770 Amounts due from affiliated banks and financial institutions 1,031,920 - 1,031,920 Loans to banks and financial institutions 6,361 - 6,361 Derivative financial instruments 309 - 309 Financial assets at amortized cost pledged as collateral 27,442 320,484 347,926 Financial assets at fair value through profit or loss 142,884 - 142,884 Loans and advances to customers at amortized cost 2,523,340 2,798,351 5,321,691 Loans and advances to related parties at amortized cost 111,611 31,342 142,953 Debtors by acceptances 56,636 - 56,636 Financial assets at amortized cost 918,027 7,337,265 8,255,292 Financial assets at fair value through other comprehensive income

- 26,875 26,875

Property and equipment 8,027 195,776 203,803 Intangible assets 2,467 32,207 34,674 Investment properties - 1,445 1,445 Non-current assets held for sale 154,314 - 154,314 Other assets 70,026 45,809 115,835 Goodwill - 168,810 168,810 __________ __________ __________ TOTAL ASSETS 6,676,212 15,403,259 22,079,471 __________ __________ __________ LIABILITIES Due to the Central Banks 62,582 549,761 612,343 Loans and repurchase agreements 989,872 1,128,876 2,118,748 Due to banks and financial institutions 315,295 31,985 347,280 Amounts due to affiliated banks and financial institutions 3,856 - 3,856 Derivative financial instruments 158 - 158 Customers’ deposits at amortized cost 16,856,934 63,530 16,920,464 Related parties’ deposits at amortized cost 130,183 - 130,183 Engagements by acceptances 56,636 - 56,636 Other liabilities 137,498 - 137,498 Provision for risks and charges - 63,004 63,004 __________ __________ __________ TOTAL LIABILITIES 18,553,014 1,837,156 20,390,170 __________ __________ __________ NET (11,876,802) 13,566,103 1,689,301 __________ __________ __________ 53 RISK MANAGEMENT The Group devotes significant resources to the ongoing adaptation of its risk management framework, in order to keep pace with the increasing diversification of its activities. Risk management is implemented in compliance with the two following fundamental principles:

• risk assessment departments are completely independent from the operating divisions • a consistent approach to risk assessment and monitoring is applied at the Group level

a) Risk management structure The Board of Directors is ultimately responsible for identifying and controlling risks; however, there are separate independent bodies responsible for managing and monitoring risks. Board of Directors The Board of Directors is responsible for the overall risk management approach and for approving risk strategies and principles.

Société Générale de Banque au Liban S.A.L. F.250

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2015 53 RISK MANAGEMENT (continued) a) Risk management structure (continued) Risk Management The Risk Management Unit is responsible for implementing and maintaining risk related procedures to ensure an independent control process. Group Treasury Group Treasury is responsible for managing the Group’s assets and liabilities and the overall financial structure. It is also primarily responsible for the funding and liquidity risks of the Group. Internal Audit Risk management processes throughout the Group are audited annually by the internal audit function, that examines both the adequacy of the procedures and the Group’s compliance with the procedures. Internal Audit discusses the results of all assessments with management, and reports its findings and recommendations to the Board of Directors. b) Risk measurement and reporting systems The Group is using a RAROC (Risk-Adjusted Return on Capital) approach to quantify its credit risk. One of the main objectives is to establish, using quantitative methods, the level of loss expected on credit transactions over the course of the business cycle. Monitoring and controlling risks is primarily performed based on limits established by the Group. These limits reflect the business strategy and market environment of the Group as well as the level of risk that the Group is willing to accept, with additional emphasis on selected industries. In addition, the Group monitors and measures the overall risk-bearing capacity in relation to the aggregate risk exposure across all risk types and activities. c) Risk mitigation As part of its overall risk management, the Group uses derivatives and other instruments to manage exposures resulting from changes in interest rates, foreign currencies, credit risks, and exposures arising from forecast transactions. The Group actively uses collateral to reduce its credit risks. d) Excessive concentration The Group also attempts to control credit risk by regular monitoring of its credit exposures and continuous assessment of the creditworthiness of counterparties by the credit risk committee. 53.1 CREDIT RISK Credit risk is the risk that the Group will incur a loss because its customers or counterparties fail to discharge their contractual obligations. The Group manages and controls credit risk by setting limits on the amount of risk it is willing to accept for individual counterparties and for geographical and industry concentrations, and by monitoring exposures in relation to such limits. The Group has established a credit quality review process to provide early identification of possible changes in the creditworthiness of counterparties, including regular collateral revisions. Counterparty limits are established by the use of a credit risk classification system, which assigns each counterparty a risk rating. Risk ratings are subject to regular revision. The credit quality review process aims to allow the Group to assess the potential loss as a result of the risks to which it is exposed and take corrective actions. The risk rating system, which is managed by an independent unit, provides a rating based on client and transaction level. The classification system includes ten grades, of which five grades relate to credit facilities which are neither past due nor impaired (risk rating “1”, “2”, “3”, “4”, and “5”) and credit facilities which are past due but not impaired (risk rating “6a” and “6c”), substandard individually impaired loans (risk rating “6b”) and doubtful individually impaired loans (risk rating “7” and “8”). The Group uses the above internal rating system for the classifications of all of its financial assets portfolio.

Société Générale de Banque au Liban S.A.L. F.251

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2015 53 RISK MANAGEMENT (continued) 53.1 CREDIT RISK (continued) Derivative financial instruments Credit risk arising from derivative financial instruments is, at any time, limited to those with positive fair values, as recorded on the consolidated statement of financial position. In the case of credit derivatives, the Group is also exposed to or protected from the risk of default of the underlying entity referenced by the derivative. With gross-settled derivatives, the Group is also exposed to a settlement risk, being the risk that the Group honors its obligation but the counterparty fails to deliver the counter-value. Credit-related commitments risk The Group makes available to its customers guarantees which may require that the Group makes payments on their behalf and enters into commitments to extend credit lines to secure their liquidity needs. Letters of credit and guarantees (including standby letters of credit) commit the Group to make payments on behalf of customers in the event of a specific act, generally related to the import or export of goods. Such commitments expose the Group to similar risks as loans and are mitigated by the same control processes and policies. Analysis of maximum exposure to credit risk and collateral and other credit enhancements The following table shows the maximum exposure to credit risk by class of financial asset. It further shows the total fair value of collateral, capped to the maximum exposure to which it relates and the net exposure to credit risk. Collateral

31 December 2015:

Maximum exposure

Cash

Securities

Real estate

Letters of credit /

guarantees

Net credit exposure

LL million LL million LL million LL million LL million LL million Balances with the Central Banks 5,719,844 - - - - 5,719,844 Due from banks and financial institutions 698,264 - - -

- 698,264

Amounts due from affiliated banks and

financial institutions 777,435 - - -

-

777,435 Reverse repurchase agreements 416,910 - (416,910) - - - Loans to banks and financial

institutions 8,397 - - (8,397) -

- Financial assets at amortized cost pledged as collateral 576,118 - - -

- 576,118

Derivative financial instruments 2,969 - - - - 2,969 Financial assets at fair value

through profit or loss 239,806 - - -

-

239,806 Loans and advances to customers

at amortized cost:

Retail loans 2,515,180 (272,006) (174,495) (1,392,535) (10,829) 665,315 Corporate loans 3,414,778 (421,627) (57,136) (1,257,409) - 1,678,606 Loans and advances to related

parties at amortized cost

Retail loans 40,781 - - (106) - 40,675 Corporate loans 112,765 (2,335) - (12,362) - 98,068 Debtors by acceptances 169,491 (1,935) - (3,639) - 163,917 Financial assets at amortized cost 8,928,466 - - - - 8,928,466 ____________ ___________ ___________ ___________ ___________ ___________ 23,621,204 (697,903) (648,541) (2,674,448) (10,829) 19,589,483 ____________ ___________ ___________ ____________ ___________ ____________ Financial guarantees 246,019 (16,306) (2) (16,399) - 213,312 Documentary credits 169,596 (5,537) - (16,133) - 147,926 Loan commitments 976,146 (79,650) (3,572) (70,052) - 822,872 ____________ ___________ ___________ ___________ ___________ ___________ 1,391,761 (101,493) (3,574) (102,584) - 1,184,110 ____________ ___________ ___________ ___________ ___________ ___________ 25,012,965 (799,396) (652,115) (2,777,032) (10,829) 20,773,593 ____________ ___________ ___________ ___________ ___________ ___________

Société Générale de Banque au Liban S.A.L. F.252

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2015 53 RISK MANAGEMENT (continued) 53.1 CREDIT RISK (continued) Analysis of maximum exposure to credit risk and collateral and other credit enhancements (continued) Collateral

31 December 2014:

Maximum exposure

Cash

Securities

Real estate

Net credit exposure

LL million LL million LL million LL million LL million Balances with the Central Banks 5,583,308 - - - 5,583,308 Due from banks and financial institutions 383,770 - - - 383,770 Amounts due from affiliated banks and

financial institutions 1,031,920 - - - 1,031,920 Loans to banks and financial institutions 6,361 - - - 6,361 Financial assets at amortized cost pledged as collateral 347,926 - - - 347,926 Derivative financial instruments 309 - - - 309 Financial assets at fair value through profit or loss 142,884 - - - 142,884 Loans and advances to customers at amortized cost: Retail loans 2,187,728 (238,858) (70,566) (1,249,241) 629,063 Corporate loans 3,133,963 (332,095) (63) (1,235,278) 1,566,527 Loans and advances to related parties at amortized cost Retail loans 31,262 - - (106) 31,156 Corporate loans 111,691 (2,247) - (12,362) 97,082 Debtors by acceptances 56,636 (1,599) - (4,414) 50,623 Financial assets at amortized cost 8,255,292 - - - 8,255,292 ____________ ___________ ___________ ___________ ___________ 21,273,050 (574,799) (70,629) (2,501,401) 18,126,221 ____________ ___________ ___________ ____________ ____________ Financial guarantees 136,608 (21,744) (68) (16,365) 98,431 Documentary credits 193,654 (6,091) - (13,875) 173,688 Loan commitments 942,749 (86,511) (3,593) (77,945) 774,700 ____________ ___________ ___________ ___________ ___________ 1,273,011 (114,346) (3,661) (108,185) 1,046,819 ____________ ___________ ___________ ___________ ___________ 22,546,061 (689,145) (74,290) (2,609,586) 19,173,040 ____________ ___________ ___________ ___________ ___________ Collateral and other credit enhancements The amount and type of collateral required depends on an assessment of the credit risk of the counterparty. Guidelines are implemented regarding the acceptability of types of collateral and valuation parameters. Management monitors the market value of collateral, requests additional collateral in accordance with the underlying agreement, and monitors the market value of collateral obtained during its review of the adequacy of the allowance for impairment losses. The main types of collateral obtained are as follows: Securities The balances shown above represent the fair value of the securities. Letters of credit / guarantees The Group holds in some cases guarantees, letters of credit and similar instruments from banks and financial institutions which enable it to claim settlement in the event of default on the part of the counterparty. The balances shown represent the notional amount of these types of guarantees held by the Group.

Société Générale de Banque au Liban S.A.L. F.253

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2015 53 RISK MANAGEMENT (continued) 53.1 CREDIT RISK (continued) Collateral and other credit enhancement (continued) Real estate (commercial and residential) The Group holds in some cases a first degree mortgage over residential property (for housing loans) and commercial property (for commercial loans). The value shown above reflects the fair value of the property limited to the related mortgaged amount. Other In addition to the above, the Group also obtains guarantees from parent companies for loans to their subsidiaries, personal guarantees for loans to companies owned by individuals and assignments of insurance proceeds and revenues, which are not reflected in the above table. Risk concentrations: maximum exposure to credit risk without taking account of any collateral and other credit enhancements The Group’s concentrations of risk are managed by client/counterparty and by geographical region. The maximum credit exposure to any client as at 31 December 2015 was LL 309,334 million (2014: LL 349,810 million) before taking account of collateral or other credit enhancements and LL 52,732 million (2014: LL 167,898 million) net of such protection. The following table shows the maximum exposure to credit risk for the components of the consolidated statement of financial position, including derivatives, by geography of counterparty before the effect of mitigation through the use of master netting and collateral agreements. Where financial instruments are recorded at fair value, the amounts shown represent the current credit risk exposure but not the maximum risk exposure that could arise in the future as a result of changes in values. Geographic analysis 2015 2014

Lebanon Outside

Lebanon Total Lebanon Outside

Lebanon Total LL million LL million LL million LL million LL million LL million Financial assets Cash and balances with the Central Banks 5,231,801 585,925 5,817,726 5,183,580 500,393 5,683,973 Due from banks and financial institutions 120,580 577,684 698,264 109,183 274,587 383,770 Amounts due from affiliated banks and financial institutions - 777,435 777,435 - 1,031,920 1,031,920 Reverse repurchase agreements 416,910 - 416,910 - - - Loans to banks and financial institutions - 8,397 8,397 - 6,361 6,361 Derivative financial instruments 326 2,643 2,969 226 83 309 Financial assets at amortized cost pledged as collateral - Lebanese treasury bills 336,049 - 336,049 344,793 - 344,793 - Other governmental debt securities - 240,069 240,069 - 3,133 3,133 Financial assets at fair value through profit or loss - Shares 74,714 21,678 96,392 38,708 18,731 57,439 - Funds - 18,542 18,542 - 18,011 18,011 - Other governmental debt securities - 68,551 68,551 - - - - Lebanese treasury bills 18,633 - 18,633 29,542 - 29,542 - Certificates of deposit - - - 204 - 204 - Debt securities issued by banks 37,688 - 37,688 37,688 - 37,688 Loans and advances to customers at amortized cost 4,231,317 1,698,641 5,929,958 3,857,261 1,464,430 5,321,691 Loans and advances to related parties at amortized cost 79,419 74,127 153,546 118,326 24,627 142,953 Financial assets at amortized cost - Lebanese treasury bills 5,712,421 - 5,712,421 4,991,642 - 4,991,642 - Other governmental debt securities - 512,852 512,852 - 600,810 600,810 - Certificates of deposit 2,339,079 141,515 2,480,594 2,444,150 - 2,444,150 - Other debt securities - 222,599 222,599 - 218,690 218,690 Financial assets at fair value through other comprehensive income - Shares 24,627 1,933 26,560 10,876 15,999 26,875 ________ _________ _________ _________ _________ _________ 18,623,564 4,952,591 23,576,155 17,166,179 4,177,775 21,343,954

Société Générale de Banque au Liban S.A.L. F.254

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2015 53 RISK MANAGEMENT (continued) 53.1 CREDIT RISK (continued) Credit quality per class of financial assets The credit quality of financial assets is managed by the Group using internal credit ratings. The tables below show the credit quality by class of asset based on the Group’s internal credit rating system. The amounts presented are gross of impairment allowances. Neither past

due nor impaired

Past due but not impaired

Individually impaired Substandard Doubtful Total LL million LL million LL million LL million LL million 2015 Cash and balances with the Central Banks 5,817,726 - - - 5,817,726 Due from banks and financial institutions 697,416 - - 993 698,409 Reverse repurchase agreements 416,910 - - - 416,910 Loans to banks and financial institutions - - - 21,920 21,920 Amounts due from affiliated banks and financial institutions 777,435 - - - 777,435 Derivative financial instruments 2,969 - - - 2,969 Financial assets at fair value through profit or loss - Shares 96,392 - - - 96,392 - Funds 18,542 - - - 18,542 - Lebanese treasury bills 18,633 - - - 18,633 - Debt securities issued by banks 37,688 - - - 37,688 - Other governmental debt securities 68,551 - - - 68,551 Loans and advances to customers at amortized cost - Corporate 3,295,457 70,773 62,701 405,816 3,834,747 - Retail 2,402,494 35,155 20,702 218,242 2,676,593 Loans and advances to related parties at amortized cost - Corporate 109,349 - - 22,890 132,239 - Retail 40,781 - - - 40,781 Financial assets at amortized cost pledged as collateral - Lebanese treasury bills 336,049 - - - 336,049 - Other governmental bonds 240,069 - - - 240,069 Financial assets at amortized cost - Lebanese treasury bills 5,712,421 - - - 5,712,421 - Other governmental debt securities 512,852 - - - 512,852 - Certificates of deposit 2,480,594 - - - 2,480,594 - Other debt securities 188,902 - - 43,292 232,194 Financial assets at fair value through other comprehensive income

- Shares 26,560 - - 15 26,575 ____________ ____________ ____________ __________ __________ 23,297,790 105,928 83,403 713,168 24,200,289 ____________ ____________ ____________ __________ __________ Moody’s equivalent Aaa – B3* Not rated Not rated Not rated Not rated Neither past

due nor impaired

Past due but not impaired

Individually impaired Substandard Doubtful Total LL million LL million LL million LL million LL million 2014 Cash and balances with the Central Banks 5,683,973 - - - 5,683,973 Due from banks and financial institutions 383,246 - - 676 383,922 Loans to banks and financial institutions - - - 19,489 19,489 Amounts due from affiliated banks and financial institutions 1,031,920 - - - 1,031,920 Derivative financial instruments 309 - - - 309 Financial assets at fair value through profit or loss - Shares 57,439 - - - 57,439 - Funds 18,011 - - - 18,011 - Lebanese treasury bills 29,542 - - - 29,542 - Debt securities issued by banks 37,688 - - - 37,688 - Certificates of deposit 204 - - - 204 Loans and advances to customers at amortized cost - Corporate 2,990,612 23,887 103,848 507,255 3,625,602 - Retail 2,033,755 59,326 31,398 224,426 2,348,905 Loans and advances to related parties at amortized cost - Corporate 108,654 - - 21,019 129,673 - Retail 31,262 - - - 31,262 Financial assets at amortized cost pledged as collateral - Lebanese treasury bills 344,793 - - - 344,793 - Other governmental bonds 3,133 - - - 3,133 Financial assets at amortized cost - Lebanese treasury bills 4,991,642 - - - 4,991,642 - Other governmental debt securities 600,810 - - - 600,810 - Certificates of deposit 2,444,150 - - - 2,444,150 - Other debt securities 218,690 - - 1,153 219,843 Financial assets at fair value through other comprehensive income

- Shares 26,875 - - 15 26,890 ____________ ____________ ____________ __________ __________ 21,036,708 83,213 135,246 774,033 22,029,200 ____________ ____________ ____________ __________ __________ Moody’s equivalent Aaa – B3* Not rated Not rated Not rated Not rated

(*) Amounts due from affiliated banks and financial institutions, derivative financial instruments, loans and

advances to customers, loans and advances to related parties are not rated by Moody’s.

Société Générale de Banque au Liban S.A.L. F.255

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2015 53 RISK MANAGEMENT (continued) 53.1 CREDIT RISK (continued) It is the Group’s policy to maintain accurate and consistent risk rating across the credit portfolio. This facilitates focused management of the applicable risks and the comparison of credit exposures across all lines of business, geographic regions and products. The rating system is supported by a variety of financial analytics, combined with processed market information to provide the main inputs for the measurement of counterparty risk. All internal risk ratings are tailored to the various categories and are derived in accordance with the Group’s rating policy. The attributable risks are assessed and updated regularly. The classification of loans and advances to customers and related parties at amortized cost as in accordance with the ratings of Central Bank of Lebanon circular 58 are as follows: 2015 Gross

balance Unrealized

interest Impairment allowances

Net balance

LL million LL million LL million LL million Regular 5,120,710 - - 5,120,710 Follow up 520,129 - - 520,129 Follow-up and regularization 313,170 - - 313,170 Substandard 83,403 (39,334) - 44,069 Doubtful 488,590 (231,217) (150,197) 107,176 Bad 158,358 (101,364) (54,663) 2,331 _____________ _____________ _____________ _____________ 6,684,360 (371,915) (204,860) 6,107,585 Collective impairment - - (24,081) (24,081) _____________ _____________ _____________ _____________ 6,684,360 (371,915) (228,941) 6,083,504 _____________ _____________ _____________ _____________ 2014 Gross

balance Unrealized

interest Impairment allowances

Net balance

LL million LL million LL million LL million Regular 4,633,044 - - 4,633,044 Follow up 373,429 - - 373,429 Follow-up and regularization 241,023 - - 241,023 Substandard 135,246 (33,600) - 101,646 Doubtful 628,493 (300,031) (198,344) 130,118 Bad 124,207 (71,190) (51,849) 1,168 _____________ _____________ _____________ _____________ 6,135,442 (404,821) (250,193) 5,480,428 Collective impairment - - (15,784) (15,784) _____________ _____________ _____________ _____________ 6,135,442 (404,821) (265,977) 5,464,644 _____________ _____________ _____________ _____________ Renegotiated loans Restructuring activity aims to manage customer relationships, maximize collection opportunities and, if possible, avoid foreclosure or repossession. Such activities include extended payment arrangements, deferring foreclosure, modification, loan rewrites and/or deferral of payments pending a change in circumstances. Restructuring policies and practices are based on indicators or criteria which, in the judgment of local management, indicate that repayment will probably continue. The application of these policies varies according to the nature of the market and the type of the facility. 2015 2014 LL million LL million Corporate loans 249,108 182,397 Retail loans 27,473 31,409 ____________ ____________ 276,581 213,806 ____________ ____________

Société Générale de Banque au Liban S.A.L. F.256

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2015 53 RISK MANAGEMENT (continued) 53.1 CREDIT RISK (continued) Impairment assessment For accounting purposes, the Group uses an incurred loss model for the recognition of losses on impaired financial assets. This means that losses can only be recognized when objective evidence of a specific loss event has been observed. Triggering events include the following:

- Significant financial difficulty of the customer; - A breach of contracts such as default of payment; - Where the Group grants the customer a concession due to the customer experiencing financial difficulty; - It becomes probable that the customer will enter bankruptcy or other financial reorganization; - Observable data that suggests that there is a decrease in the estimated future cash flows of the loan.

Individually assessed allowances The Group determines the allowance appropriate for each individually significant loan or advance on an individual basis, taking into account any overdue payments of interests, credit rating downgrades, or infringement of the original terms of the contract. Items considered when determining allowance amounts include the sustainability of the counterparty’s business plan, its ability to improve performance once a financial difficulty has risen, projected receipts and the expected payout should bankruptcy ensue, the availability of other financial support, the realizable value of collateral and the timing of the expected cash flows. Impairment allowances are evaluated at each reporting date, unless unforeseen circumstances require more careful attention. Collectively assessed allowances Allowances are assessed collectively for losses on loans and advances and debt securities at amortized cost that are not individually significant (including credit cards, residential mortgages and unsecured consumer lending) and for individually significant loans that have been assessed individually and found not to be impaired. Allowances are evaluated separately at each reporting date with each portfolio. The Group generally bases its analysis on historical experience. However, when there are significant market developments, regional and / or global, the Group would include macroeconomic factors within its assessments. These factors include, depending on the characteristics of the individual or collective assessment: unemployment rates, current levels of bad debts, changes in laws, changes in regulations, bankruptcy trends, and other consumer data. The Group may use the aforementioned factors as appropriate to adjust the impairment allowances. The collective assessment is made for groups of assets with similar risk characteristics, in order to determine whether provision should be made due to incurred loss events for which there is objective evidence but whose effects are not yet evident in the individual loans assessments. The collective assessment takes account of data from the loan portfolio (such as historical losses on the portfolio, levels of arrears, credit utilization, loan to collateral ratios and expected receipts and recoveries once impaired) or economic data (such as current economic conditions, unemployment levels and local or industry-specific problems). This approximate delay between the time a loss is likely to have been incurred and the time it will be identified as requiring an individually assessed impairment allowance is also taken into consideration. Local management is responsible for deciding the length of this period which can extend for as long as one year. The impairment allowance is then reviewed by credit management to ensure alignment with the Group’s overall policy. Credit related commitments and financial guarantees are assessed and provisions are made in a similar manner as for loans. 53.2 MARKET RISK Market risk is the risk that the fair value or future cash flows of financial instruments will fluctuate due to changes in market variables such as interest rates, foreign exchange rates and equity prices. The Board has set limits on the value of risk that may be accepted. This is monitored on a weekly basis by the Asset and Liability Committee.

Société Générale de Banque au Liban S.A.L. F.257

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2015 53 RISK MANAGEMENT (continued) 53.2 MARKET RISK (continued) 53.2.1 INTEREST RATE RISK Interest rate risk arises from the possibility that changes in interest rates will affect future cash flows or the fair values of financial instruments. The Group is exposed to interest rate risk as a result of mismatches of interest rate repricing of assets, liabilities and off-statement of financial position items which will mature or reprice in a particular period. The Group manages this risk by matching the repricing of assets and liabilities through risk management strategies. Interest rate sensitivity The following table demonstrates the sensitivity to a reasonable possible change in interest rates, with all other variables held constant, of the Group’s consolidated income statement. The sensitivity of the consolidated income statement is the effect of the assumed changes in interest rates on the profit or loss for the year, based on the floating rate financial assets and financial liabilities held at 31 December, including the effect of hedging instruments. 2015 2014 Currency

Increase/decrease Sensitivity of profit or loss

Increase/ decrease

Sensitivity of profit or loss

in basis points LL million in basis points LL million Lebanese Lira + 50 5,638 + 50 4,980 US Dollars + 50 9,177 + 50 8,416 Euro + 50 650 + 50 745 Lebanese Lira - 50 (5,638) - 50 (4,980) US Dollars - 50 (9,177) - 50 (8,416) Euro - 50 (650) - 50 (745) Interest sensitivity gap The table below analyses the Group’s interest risk exposure on financial assets and liabilities. The Group’s assets and liabilities are included at carrying amount and categorized by the earlier of contractual repricing or maturity dates. 2015 (LL million) Non Up to 1 1 to 3 3 months 1 to 2 2 to 5 Over 5 interest month months to 1 year years years years bearing Total ASSETS Cash and balances with the Central Banks 1,379,846 909,210 - - 813,750 2,111,434 603,486 5,817,726 Due from banks and financial institutions 389,382 16,500 145,678 - 3,724 11,653 131,327 698,264 Amounts due from affiliated banks and financial institutions 383,867 4,449 56,930 - - - 332,189 777,435 Loans to banks and financial institutions 8,397 - - - - - - 8,397 Financial assets at amortized cost pledged as collateral - - 152,325 170,000 9,745 235,768 8,280 576,118 Derivative financial instruments - - - - - - 2,969 2,969 Financial assets at fair value through profit or loss - - 24,558 36,299 16,597 47,146 115,206 239,806 Loans and advances to customers at amortized cost 1,184,697 1,299,065 2,594,090 301,377 171,065 368,582 11,082 5,929,958 Loans and advances to related parties at amortized cost 59,145 507 82,445 488 1,602 9,311 48 153,546 Financial assets at amortized cost 151,326 43,073 199,668 656,894 2,698,626 5,056,163 122,716 8,928,466 Financial assets at fair value through other comprehensive income - - - - - - 26,560 26,560 Reverse repurchase agreements - 197,175 219,235 - - - 500 416,910 ___________ __________ __________ __________ __________ _________ ________ ________

TOTAL ASSETS 3,556,660 2,469,979 3,474,929 1,165,058 3,715,109 7,840,057 1,354,363 23,576,155 ___________ __________ __________ __________ __________ _________ ________ ________ LIABILITIES Due to the Central Banks 696 7,295 162,422 179,745 0 255,436 4,367 609,961 Loans and repurchase agreements 152,165 996,518 18,316 75,375 685,638 178,115 10,037 2,116,164 Due to banks and financial institutions 369,634 41,259 169,846 1,570 7,266 18,960 3,747 612,282 Amounts due to affiliated banks and financial institutions 19,774 - - - - - 1,411 21,185 Customers’ deposits at amortized cost 10,759,485 3,415,148 2,168,775 23,420 25,147 303,515 1,984,387 18,679,877 Related parties’ deposits at amortized cost 92,119 26,151 1,348 907 - 43 12,203 132,771 Derivative financial instruments - - - - - - 4,450 4,450 ___________ __________ __________ __________ __________ _________ ________ ________

TOTAL LIABILITIES 11,393,873 4,486,371 2,520,707 281,017 718,051 756,069 2,020,602 22,176,690 ___________ __________ __________ __________ __________ _________ ________ ________

Total interest sensitivity gap (7,837,213) (2,016,392) 954,222 884,041 2,997,058 7,083,988 (666,239) 1,399,465 ___________ __________ __________ __________ __________ _________ ________ _________

Société Générale de Banque au Liban S.A.L. F.258

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2015 53 RISK MANAGEMENT (continued) 53.2 MARKET RISK (continued) 53.2.1 INTEREST RATE RISK (continued) Interest sensitivity gap (continued) 2014 (LL million) Non Up to 1 1 to 3 3 months 1 to 2 2 to 5 Over 5 interest month months to 1 year years years years bearing Total ASSETS Cash and balances with the Central Banks 1,300,910 852,320 - - 753,750 2,199,518 577,475 5,683,973 Due from banks and financial institutions 209,576 19,000 27,478 - 3,724 11,653 112,339 383,770 Amounts due from affiliated banks and financial institutions 395,106 3,301 14,421 - - - 619,092 1,031,920 Loans to banks and financial institutions 6,361 - - - - - - 6,361 Financial assets at amortized cost pledged as collateral - 18,270 3,097 150,483 170,000 - 6,076 347,926 Derivative financial instruments - - - - - - 309 309 Financial assets at fair value through profit or loss - - 3,063 8 19,064 44,989 75,760 142,884 Loans and advances to customers at amortized cost 1,037,316 1,191,377 1,778,085 274,289 324,259 701,811 14,554 5,321,691 Loans and advances to related parties at amortized cost 100,148 695 11,053 4,833 4,110 22,037 77 142,953 Financial assets at amortized cost 200,503 54,007 535,866 320,563 2,755,273 4,261,403 127,677 8,255,292 Financial assets at fair value through other comprehensive income - - - - - - 26,875 26,875 ___________ __________ __________ __________ __________ _________ _______ _________ TOTAL ASSETS 3,249,920 2,138,970 2,373,063 750,176 4,030,180 7,241,411 1,560,234 21,343,954 ___________ __________ __________ __________ __________ _________ _______ _________ LIABILITIES Due to the Central Banks 19,666 24,021 7,752 150,483 170,000 236,769 3,652 612,343 Loans and repurchase agreements 152,165 1,448,768 18,316 - 250,567 239,447 9,485 2,118,748 Due to banks and financial institutions 168,479 61,187 60,420 - 5,553 26,432 25,209 347,280 Amounts due to affiliated banks and financial institutions 3,751 - - - - - 105 3,856 Customers’ deposits at amortized cost 10,487,132 3,557,975 1,163,763 43,776 14,185 5,420 1,648,213 16,920,464 Related parties’ deposits at amortized cost 103,620 2,205 10,415 - - - 13,943 130,183 Derivative financial instruments - - - - - - 158 158 ___________ __________ __________ __________ __________ _________ _______ _________ TOTAL LIABILITIES 10,934,813 5,094,156 1,260,666 194,259 440,305 508,068 1,700,765 20,133,032 ___________ __________ __________ __________ __________ _________ _______ _________ Total interest sensitivity gap (7,684,893) (2,955,186) 1,112,397 555,917 3,589,875 6,733,343 (140,531) 1,210,922 ___________ __________ __________ __________ __________ _________ _______ _________

53.2.2 CURRENCY RISK Currency risk is the risk that the value of a financial instrument will fluctuate due to changes in foreign exchange rates. The Group has set limits on positions by currency. In accordance with the Group’s policy, positions are monitored on a daily basis and hedging strategies are used to ensure positions are maintained within established limits. Sensitivity to currency exchange rates The table below indicates the currencies to which the Group had significant exposure at 31 December on its non-trading monetary assets and liabilities and its forecast cash flows. The analysis calculates the effect of a reasonably possible movement of the currency rate against the Lebanese Lira, with all other variables held constant, on the consolidated income statement (due to fair value of currency sensitive non-trading monetary assets and liabilities). A negative amount in the table reflects a potential net reduction in consolidated income statement or equity, while a positive amount reflects a net potential increase. An equivalent decrease in each of the below currencies against the Lebanese Lira would have resulted in an equivalent but opposite impact. 2015 2014 Currency Change in currency

rate Effect on

profit before tax Change in currency

rate Effect on

profit before tax in % LL million in % LL million US Dollars + 2.5 (148) + 2.5 (117) Euro + 2.5 9

+ 2.5 17

Société Générale de Banque au Liban S.A.L. F.259

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2015 53 RISK MANAGEMENT (continued) 53.2 MARKET RISK (continued) 53.2.2 CURRENCY RISK (continued) The following consolidated statements of financial position as at 31 December 2015 and 2014 are detailed in Lebanese Lira (LL million) and foreign currencies, primarily US$, translated into LL million: 31 December 2015

31 December 2014

Foreign currencies in

Total

Foreign currencies in

Total

LL million LL million LL million LL million LL million LL million ASSETS Cash and balances with the Central Banks 1,121,440 4,696,286 5,817,726 1,066,637 4,617,336 5,683,973 Due from banks and financial institutions 55,876 642,388 698,264 51,955 331,815 383,770 Amounts due from affiliated banks and financial institutions - 777,435 777,435 - 1,031,920 1,031,920 Reverse repurchase agreements - 416,910 416,910 - - - Loans to banks and financial institutions - 8,397 8,397 - 6,361 6,361 Derivative financial instruments - 2,969 2,969 - 309 309 Financial assets at fair value through profit or loss 9,985 229,821 239,806 8,822 134,062 142,884 Loans and advances to customers at amortized cost 1,486,516 4,443,442 5,929,958 1,370,771 3,950,920 5,321,691 Loans and advances to related parties at amortized cost 36,296 117,250 153,546 33,232 109,721 142,953 Debtors by acceptances - 169,491 169,491 - 56,636 56,636 Financial assets at amortized cost 5,108,440 3,820,026 8,928,466 4,646,694 3,608,598 8,255,292 Financial assets at amortized cost pledged as collateral 336,049 240,069 576,118 344,793 3,133 347,926 Financial assets at fair value through other comprehensive income 521 26,039 26,560 520 26,355 26,875 Property and equipment 143,824 70,521 214,345 135,017 68,786 203,803 Intangible assets 38,746 2,199 40,945 32,117 2,557 34,674 Investment properties - 1,480 1,480 - 1,445 1,445 Non-current assets held for sale 7,991 177,327 185,318 7,621 146,693 154,314 Other assets 64,819 36,052 100,871 77,252 38,583 115,835 Goodwill 1,012 166,028 167,040 1,012 167,798 168,810 ____________ ____________ ___________ ____________ __________ ____________ TOTAL ASSETS 8,411,515 16,044,130 24,455,645 7,776,443 14,303,028 22,079,471 ____________ ____________ ___________ ____________ __________ ____________ LIABILITIES Due to the Central Banks 578,548 31,413 609,961 571,282 41,061 612,343 Loans and repurchase agreements 401,979 1,714,185 2,116,164 401,930 1,716,818 2,118,748 Due to banks and financial institutions 44,472 567,810 612,282 13,158 334,122 347,280 Amounts due to affiliated banks and financial institutions 81 21,104 21,185 84 3,772 3,856 Derivative financial instruments - 4,450 4,450 - 158 158 Customers’ deposits at amortized cost 6,361,552 12,318,325 18,679,877 5,938,716 10,981,748 16,920,464 Related parties’ deposits at amortized cost 8,687 124,084 132,771 13,135 117,048 130,183 Engagements by acceptances - 169,491 169,491 - 56,636 56,636 Other liabilities 52,196 89,852 142,048 46,342 91,156 137,498 Provision for risks and charges 43,256 32,481 75,737 34,838 28,166 63,004 ____________ ____________ ___________ ____________ __________ ____________ TOTAL LIABILITIES 7,490,771 15,073,195 22,563,966 7,019,485 13,370,685 20,390,170 ____________ ____________ ___________ ____________ __________ ____________ NET EXPOSURE 920,744 970,935 1,891,679 756,958 932,343 1,689,301 ____________ ____________ ___________ ____________ __________ ____________

53.2.3 EQUITY PRICE RISK Equity price risk is the risk that the fair value of equities decreases as the result of changes in the level of equity indices and individual stocks. Equity price risk exposure arises from equity securities classified at fair value through profit or loss and at fair value through other comprehensive income. A 10 percent increase in the value of the Group’s equities at 31 December 2015 would have increased net income by LL 9,639 million and other comprehensive income by LL 2,514 million (2014: LL 5,744 million and LL 2,541 million respectively). An equivalent decrease would have resulted in an equivalent but opposite impact. 53.2.4 PREPAYMENT RISK Prepayment risk is the risk that the Group will incur a financial loss because its customers and counterparties repay or request repayment earlier than expected, such as fixed rate mortgages when interest rate fall. Market conditions causing prepayment is not significant in the markets in which the Group operates. Therefore the Group considers the effect of prepayment risk on net profit as not material after taking into account the effect of any prepayment penalties.

Société Générale de Banque au Liban S.A.L. F.260

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2015 53 RISK MANAGEMENT (continued) 53.3 LIQUIDITY RISK AND FUNDING MANAGEMENT Liquidity risk is defined as the risk that the Group will encounter difficulty in meeting obligations associated with financial liabilities that are settled by delivering cash or another financial asset. Liquidity risk arises because of the possibility that the Group might be unable to meet its payment obligations when they fall due under normal and stress circumstances. Liquidity risk can be caused by market disruptions or credit downgrades which may cause certain sources of funding to dry up immediately. To limit this risk, management has arranged diversified funding sources in addition to its core deposit base, and adopted a policy of managing assets with liquidity in mind and of monitoring future cash flows and liquidity on a daily basis. The Group has developed internal control processes and contingency plans for managing liquidity risk. This incorporates an assessment of expected cash flows and the availability of high grade collateral which would be used to secure additional funding if required. The Group maintains a portfolio of highly marketable and diverse assets that are assumed to be easily liquidated in the event of an unforeseen interruption of cash flow. The Group also has committed lines of credit that it can access to meet liquidity needs. In addition, the Group maintains a statutory deposit with the Central Banks on customer deposits. In accordance with the Group’s policy, the liquidity position is assessed and managed under a variety of scenarios, giving due consideration to stress factors relating to both the market in general and specifically to the Group. The Group maintains a solid ratio of highly liquid net assets in foreign currencies to deposits and commitments in foreign currencies taking market conditions into consideration. Regulatory ratios and limits In accordance with the Central Bank of Lebanon circulars, the ratio of net liquid assets to deposits in foreign currencies should not be less than 10%. The net liquid assets consist of cash and all balances with the Central Bank of Lebanon (excluding reserve requirements), certificates of deposit issued by the Central Bank of Lebanon irrespective of their maturities and deposits due from other banks that mature within one year, less deposits due to the Central Bank of Lebanon and deposits due to banks that mature within one year. Deposits are composed of total customer deposits (excluding blocked accounts) and due from financial institutions irrespective of their maturities and all certificates of deposit and acceptances and other debt instruments issued by the Group and loans from the public sector that mature within one year. Besides the regulatory requirements, the liquidity position is also monitored through internal limits, such as the loans-to-deposits ratio. Loans to deposits 2015 2014 Year-end 32.75% 32.47% Maximum 33.26% 33.12% Minimum 32.07% 30.25% Average 32.67% 32.03%

Société Générale de Banque au Liban S.A.L. F.261

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2015 53 RISK MANAGEMENT (continued) 53.3 LIQUIDITY RISK AND FUNDING MANAGEMENT (continued) The table below summarizes the maturity profile of the undiscounted cash flows of the Group’s financial assets and liabilities as at 31 December. Trading derivatives are shown at fair value in a separate column. All derivatives used for hedging purposes are shown by maturity, based on their contractual undiscounted repayment obligations. Repayments which are subject to notice are treated as if notice were being given immediately. However, the Group expects that many customers will not request repayment on the earliest date the Group could be required to pay and the table does not reflect the expected cash flows indicated by the Group’s deposit retention history.

31 December 2015: Trading Up to 1 1 to 3 3 months 1 to 5 Over 5 derivative month months to 1 year years years Total LL million LL million LL million LL million LL million LL million LL million Financial assets Cash and balances with the Central Banks - 1,338,167 38,671 213,998 2,368,169 3,579,074 7,538,079 Due from banks and financial institutions - 515,821 - 138,861 7,832 43,445 705,959 Loans to banks and financial institutions - - - - - 8,397 8,397 Amount due from affiliated banks and financial institutions

- 716,068 4,450 56,942 - - 777,460

Reserve repurchase agreements - - 199,035 220,546 - - 419,581 Derivative financial instruments 2,969 - - - - - 2,969 Financial assets at fair value through profit or loss - 18,545 874 26,699 66,759 152,026 264,903 Loans and advances to customers at amortized cost - 2,140,339 138,540 646,708 1,997,219 1,689,223 6,612,029 Loans and advances to related parties at amortized cost

- 110,991 140 7,918 7,869 32,433 159,351

Financial assets at amortized cost pledged as collateral

- 4,875 328 169,032 187,741 238,226 600,202

Financial assets at amortized cost - 167,759 141,620 693,988 5,331,307 7,272,980 13,607,654 Financial assets at fair value through other comprehensive income - - - - 338 26,222 26,560 _________ _________ _________ ________ ________ _________ _________ Total undiscounted financial assets 2,969 5,012,565 523,658 2,174,692 9,967,234 13,042,026 30,723,144 _________ _________ _________ ________ ________ _________ _________ Financial liabilities Due to the Central Banks - 7,122 10,915 171,085 230,416 223,972 643,510 Loans and repurchase agreements - 15,279 987,963 26,754 1,024,783 202,693 2,257,472 Due to banks and financial institutions - 373,609 41,358 170,939 9,714 23,777 619,397 Amounts due to affiliated banks and financial institutions - 21,185 - - - - 21,185 Derivative financial instruments 4,450 - - - - - 4,450 Customers’ deposits at amortized cost - 11,559,486 4,186,508 2,942,421 82,729 - 18,771,144 Related parties’ deposits at amortized cost - 105,860 26,152 181 942 - 133,135 _________ _________ _________ ________ ________ _________ _________ Total undiscounted financial liabilities 4,450 12,082,541 5,252,896 3,311,380 1,348,584 450,442 22,450,293 _________ _________ _________ ________ ________ _________ _________ Total net financial assets (liabilities) (1,481) (7,069,976) (4,729,238) (1,136,688) 8,618,650 12,591,584 8,272,851 _________ _________ _________ ________ ________ _________ _________

31 December 2014: Trading Up to 1 1 to 3 3 months 1 to 5 Over 5 derivative month months to 1 year years years Total LL million LL million LL million LL million LL million LL million LL million Financial assets Cash and balances with the Central Banks - 1,229,750 56,479 922 2,485,475 3,866,098 7,638,724 Due from banks and financial institutions - 293,161 28,795 13,259 5,621 52,884 393,720 Loans to banks and financial institutions - - - - - 6,361 6,361 Amount due from affiliated banks and financial institutions

- 1,014,204 3,321 14,428 - - 1,031,953

Derivative financial instruments 309 - - - - - 309 Financial assets at fair value through profit or loss - 18,015 876 5,653 33,699 111,741 169,984 Loans and advances to customers at amortized cost - 1,963,120 122,690 579,838 1,749,508 1,553,817 5,968,973 Loans and advances to related parties at amortized cost

- 111,655 147 3,918 24,077 51,286 191,083

Financial assets at amortized cost pledged as collateral

- 4,890 18,944 19,485 347,445 - 390,764

Financial assets at amortized cost - 237,892 136,244 944,800 4,786,010 5,439,894 11,544,840 Financial assets at fair value through other comprehensive income - - - - 376 26,499 26,875 _________ _________ _________ ________ ________ ________ _________ Total undiscounted financial assets 309 4,872,687 367,496 1,582,303 9,432,211 11,108,580 27,363,586 _________ _________ _________ ________ ________ ________ _________ Financial liabilities Due to the Central Banks - 25,386 27,758 24,367 391,412 179,128 648,051 Loans and repurchase agreements - 14,138 8,855 1,021,663 957,106 287,006 2,288,768 Due to banks and financial institutions - 193,810 61,281 61,043 6,050 33,243 355,427 Amounts due to affiliated banks and financial institutions

- 3,856 - - - - 3,856

Derivative financial instruments 158 - - - - - 158 Customers’ deposits at amortized cost - 11,193,030 4,283,181 1,470,532 60,978 5,420 17,013,141 Related parties’ deposits at amortized cost - 117,903 2,206 10,420 - - 130,529 _________ _________ _________ ________ ________ ________ _________ Total undiscounted financial liabilities 158 11,548,123 4,383,281 2,588,025 1,415,546 504,797 20,439,930 _________ _________ _________ ________ ________ ________ _________ Total net financial assets (liabilities) 151 (6,675,436) (4,015,785) (1,005,722) 8,016,665 10,603,783 6,923,656 _________ _________ _________ ________ ________ ________ _________

Société Générale de Banque au Liban S.A.L. F.262

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2015

53 RISK MANAGEMENT (continued) 53.3 LIQUIDITY RISK AND FUNDING MANAGEMENT (continued) The table below shows the contractual expiry by maturity of the Group’s contingent liabilities and commitments. Each undrown commitment is included in the time band containing the earliest date it can be drawn down.

2015

On

demand Less than 3 months

3 to 12 months

1 to 5 years

Over 5 years

Total

LL million LL million LL million LL million LL million LL million Financial guarantees 119,853 21,294 44,532 14,753 45,587 246,019 Documentary credit 20,509 61,448 76,956 10,683 - 169,596 _________ _________ _________ _________ _________ _________ Total 140,362 82,742 121,488 25,436 45,587 415,615 ________ _________ _________ _________ _________ _________

2014

On

demand Less than 3 months

3 to 12 months

1 to 5 years

Over 5 years

Total

LL million LL million LL million LL million LL million LL million Financial guarantees 22,053 5,576 41,602 14,354 53,023 136,608 Documentary credit 45,832 73,295 58,577 15,950 - 193,654 _________ _________ _________ _________ _________ _________ Total 67,885 78,871 100,179 30,304 53,023 330,262 ________ _________ _________ _________ _________ _________

The Group expects that not all of the contingent liabilities or commitments will be drawn before expiry of the commitments. 53.4 OPERATIONAL RISK Operational risk is the risk of loss arising from systems failure, human error, fraud or external events. When controls fail to perform, operational risks can cause damage to reputation, have legal or regulatory implications, or lead to financial loss. The Group cannot expect to eliminate all operational risks, but through a control framework and by monitoring and responding to potential risks, the Group is able to manage the risks. Controls include effective segregation of duties, access, authorization and reconciliation procedures, staff training and assessment processes, including the use of internal audit.

Société Générale de Banque au Liban S.A.L. F.263

54 CAPITAL By maintaining an actively managed capital base, the Group’s objectives are to cover risks inherent in the business, to retain sufficient financial strength and flexibility to support new business growth, and to meet national and international regulatory capital requirements at all times. The adequacy of the Group’s capital is monitored using, among other measures, the rules and ratios established by the Central Bank of Lebanon according to the provisions of Basic Circular No 44. These ratios measure capital adequacy by comparing the Group’s eligible capital with its consolidated statement of financial position assets and off-balance sheet commitments at a weighted amount to reflect their relative risk. To satisfy Basel III capital requirements, the Central Bank of Lebanon requires maintaining the following ratios of total regulatory capital to risk-weighted assets for the year ended 31 December 2015 and thereafter: Common Tier 1

capital ratio

Tier 1 capital ratio

Total capital ratio Year ended 31 December 2015 8.0 % 10.0 % 12.0 % Risk weighted assets As of 31 December 2015 and 2014, risk weighted assets are as follows:

2015

2014 LL million LL million Risk weighted assets 11,957,663 11,641,663 __________ __________

Société Générale de Banque au Liban S.A.L. F.264

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2015 54 CAPITAL (continued) Regulatory capital At 31 December 2015 and 2014, regulatory capital consists of the following:

Excluding profit for the year Including profit for the year less

proposed dividends 2015 2014 2015 2014 LL million LL million LL million LL million Common Tier 1 capital 776,404 626,046 991,949 819,288 Additional Tier 1 capital 571,067 568,802 571,067 568,802 Tier 2 capital 6,277 4,044 6,277 4,044 __________ __________ __________ __________ Total capital 1,353,748 1,198,892 1,569,293 1,392,134 __________ __________ __________ __________ Capital adequacy ratio As of 31 December 2015 and 2014, capital adequacy ratio is as follows:

Excluding profit for the year Including profit for the year less

proposed dividends 2015 2014 2015 2014 Common Tier 1 capital 6.49% 5.38% 8.30% 7.04% __________ __________ __________ __________ Total Tier 1 capital ratio 11.27% 10.26% 13.07% 11.92% __________ __________ __________ __________ Total capital ratio 11.32% 10.30% 13.12% 11.96% __________ __________ __________ __________ The Group manages its capital structure and makes adjustments to it in the light of changes in economic conditions and the risk characteristics of its activities. In order to maintain or adjust the capital structure, the Group may adjust the amount of dividend payment to shareholders, return capital to shareholders or issue capital securities. No changes were made in the objectives, policies and processes from the previous years; however, they are under constant scrutiny of the Board.

Société Générale de Banque au Liban S.A.L. F.265

REGISTERED OFFICE OF THE BANK Société Générale de Banque au Liban S.A.L. Sehnaoui Building Riad El Solh Street P.O.Box 11-2955 Beirut - Lebanon Contact persons: Sarita CHAANINE, Jeanine KABENJI LEGAL ADVISORS Société Civile Professionnelle - SCP Sami el Solh Avenue – UCA Bldg, – 1st floor P.O. Box 116/2325 Palais de Justice E-mail : info@scplaw.info Phone number : 01-380800 Beirut – Lebanon

PRINCIPAL STATUTORY AUDITORS OF THE BANK BDO, Semaan, Gholam & Co. Gholam Building Sioufi Street P.O. Box 11-0558, Riad Solh Beirut – 1107 2050 Beirut - Lebanon Ernst & Young P.C.C. Starco Building, 9th Floor Mina El Hosn, Omar Daouk Street P.O. Box 11-1639, Riad El Solh Beirut – 1107 2090 Beirut - Lebanon