BANQUE MAROCAINE DU COMMERCE EXTE´ RIEUR (incorporated as a public joint stock company under the laws of Morocco) U.S.$300,000,000 6.25 per cent. Notes due 2018

The issue price of the U.S.$300,000,000 6.25 per cent. Notes due 2018 (the Notes) of Banque Marocaine du Commerce Exte´rieur (the Issuer or the )is98.947 per cent. of their principal amount. Unless previously redeemed or cancelled, the Notes will be redeemed at their principal amount on 27 November 2018. The Notes are subject to redemption in whole at their principal amount at the option of the Issuer at any time in the event of certain changes affecting taxation in Morocco. The Notes will bear interest from 27 November 2013 at the rate of 6.25 per cent. per annum payable semi-annually in arrear on 27 May and 27 November each year commencing on 27 May 2014. Payments on the Notes will be made in U.S. dollars without deduction for or on account of imposed or levied by Morocco to the extent described under Condition 8 (Taxation) of the Notes. This Prospectus has been approved by the Luxembourg Commission de Surveillance du Secteur Financier (the CSSF), which is the Luxembourg competent authority for the purpose of Directive 2003/71/EC, as amended (the Prospectus Directive), as a Prospectus. Application has been made for the Notes to be admitted to listing on the official list and trading on the Luxembourg Stock Exchange’s regulated market. The CSSF gives no undertaking as to the economic and financial soundness of the transaction and the quality or solvency of the Issuer in line with the provisions of article 7(7) of the Luxembourg Law on prospectuses for securities. An investment in the Notes involves certain risks. For a discussion of these risks, see ‘‘Risk factors’’. The Notes have not been, and will not be, registered under the United States Securities Act of 1933 (the Securities Act) and are subject to United States law requirements. The Notes are being offered outside the United States by the Managers (as defined in ‘‘Subscription and sale’’) in accordance with Regulation S under the Securities Act (Regulation S), and may not be offered, sold or delivered within the United States or to, or for the account or benefit of, U.S. persons except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act. The Notes will be in registered form in the denomination of U.S.$200,000 plus integral multiples of U.S.$1,000 in excess thereof. The Notes may be held and transferred, and will be offered and sold, in the principal amount of U.S.$200,000 and integral multiples of U.S.$1,000 in excess thereof. The Notes will be represented by a global registered note certificate (the Global Note Certificate) registered in the name of Citvic Nominees Limited as nominee for, and deposited with, a common depositary for Euroclear Bank S.A./N.V. (Euroclear) and Clearstream Banking, socie´te´ anonyme, Luxembourg (Clearstream Luxembourg). Individual note certificates (Individual Note Certificates) evidencing holdings of Notes will only be available in certain limited circumstances. See ‘‘Summary of provisions relating to the Notes in global form’’. The Notes are expected to be rated Ba1 by Moody’s Investor Service (Moody’s) which is established in the EEA and registered under Regulation (EU) No 1060/2009, as amended (the CRA Regulation). A security rating is not a recommendation to buy, sell or hold securities and may be subject to suspension, reduction or withdrawal at any time by the assigning rating agency.

Joint Lead Managers and Bookrunners

BARCLAYS BMCE CAPITAL

BNP PARIBAS CITIGROUP

26 November 2013 CONTENTS Page IMPORTANT NOTICES...... 3 PRESENTATION OF FINANCIAL AND OTHER INFORMATION ...... 5 EXCHANGE RATES ...... 7 CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS ..... 8 OVERVIEW...... 9 RISK FACTORS ...... 12 DOCUMENT INCORPORATED BY REFERENCE...... 30 TERMS AND CONDITIONS OF THE NOTES ...... 31 SUMMARY OF PROVISIONS RELATING TO THE NOTES IN GLOBAL FORM...... 41 USE OF PROCEEDS...... 43 SELECTED FINANCIAL INFORMATION ...... 44 FINANCIAL REVIEW...... 48 DESCRIPTION OF THE GROUP ...... 70 RISK MANAGEMENT...... 86 MANAGEMENT AND EMPLOYEES...... 96 THE KINGDOM OF MOROCCO...... 106 BANKING INDUSTRY AND REGULATION IN MOROCCO ...... 110 TAXATION ...... 115 SUBSCRIPTION AND SALE...... 118 GENERAL INFORMATION ...... 122 FINANCIAL STATEMENTS AND AUDITORS’ REPORTS ...... F-1

2 IMPORTANT NOTICES This Prospectus comprises a prospectus for the purposes of the Prospectus Directive (as defined above) and for the purpose of giving information with regard to the Issuer, the Issuer and its subsidiaries taken as a whole (the Group) and the Notes which, according to the particular nature of the Issuer and the Notes, is necessary to enable investors to make an informed assessment of the assets and liabilities, financial position, profit and losses and prospects of the Issuer. The Issuer accepts responsibility for the information contained in this Prospectus (including, for the avoidance of doubt, the English translation of the auditor’s report and audited consolidated annual financial statements for the year ended 31 December 2011 of the Issuer, which are incorporated by reference in this Prospectus) and declares that, having taken all reasonable care to ensure that such is the case, the information contained in this Prospectus to the best of its knowledge is in accordance with the facts and contains no omission likely to affect its import. The Issuer does not accept any responsibility for the accuracy of the third party information defined in the paragraph below, nor has the Issuer independently verified any such information. Information contained in this Prospectus under the headings ‘‘Risk factors’’, ‘‘Financial review’’, ‘‘Description of the Group’’, ‘‘The Kingdom of Morocco’’ and ‘‘Banking industry and regulation in Morocco’’ and identified as such was derived from the Haut Commissariat au Plan (the HCP), the International Monetary Fund (the IMF), Bank Al-Maghrib and Moody’s (in the case of ‘‘Risk factors’’), the HCP, the IMF and Groupement Professionnel des Banques du Maroc (the Moroccan ’ Association) (in the case of ‘‘Financial review’’), the IMF, Bank Al-Maghrib, The Moroccan Banks’ Association and the CIA World Factbook (in the case of ‘‘Description of the Group’’), the HCP, the Ministry of Economy and Finance, Fitch Ratings Limited (Fitch), Moody’s and Standard & Poor’s Ratings Services (S&P) (in the case of the ‘‘The Kingdom of Morocco’’) and Bank Al-Maghrib and the Moroccan Banks’ Association (in the case of ‘‘Banking industry and regulation in Morocco’’). The Issuer confirms that this information has been accurately reproduced and, so far as the Issuer is aware and is able to ascertain from information available from such sources, no facts have been omitted which would render the reproduced information inaccurate or misleading. The Issuer has not authorised the making or provision of any representation or information regarding the Issuer or the Notes other than as contained in this Prospectus or as approved for such purpose by the Issuer. Any such representation or information should not be relied upon as having been authorised by the Issuer or the Joint Lead Managers. Neither the Joint Lead Managers nor any of their respective affiliates have authorised the whole or any part of this Prospectus and none of them makes any representation or warranty or accepts any responsibility as to the accuracy or completeness of the information contained in this Prospectus. Neither the delivery of this Prospectus nor the offering, sale or delivery of any Note shall in any circumstances create any implication that there has been no adverse change, or any event reasonably likely to involve any adverse change, in the condition (financial or otherwise) of the Issuer since the date of this Prospectus. This Prospectus does not constitute an offer of, or an invitation to subscribe for or purchase, any Notes. The distribution of this Prospectus and the offering, sale and delivery of the Notes in certain jurisdictions may be restricted by law. Persons into whose possession this Prospectus comes are required by the Issuer and the Joint Lead Managers to inform themselves about and to observe any such restrictions. For a description of certain restrictions on offers, sales and deliveries of Notes and on distribution of this Prospectus and other offering material relating to the Notes, see ‘‘Subscription and sale’’. In particular, the Notes have not been and will not be registered under the Securities Act and are subject to United States requirements. Subject to certain exceptions, the Notes may not be offered, sold or delivered within the United States or to U.S. persons. In connection with the issue of the Notes, Citigroup Global Markets Limited (the Stabilising Manager) (or persons acting on behalf of the Stabilising Manager) may over allot Notes or effect transactions with a view to supporting the price of the Notes at a level higher than that which might otherwise prevail. However, there is no assurance that the Stabilising Manager (or persons acting on behalf of the Stabilising Manager) will undertake stabilisation action. Any stabilisation action may begin on or after the date on which adequate public disclosure of the terms of the offer of the Notes is made and, if begun, may be ended at any time, but it must end no later than the earlier of 30 days after the issue date of the Notes and 60 days after the date of the allotment of the Notes. Any stabilisation action or over-allotment

3 must be conducted by the Stabilising Manager (or by persons acting on behalf of the Stabilising Manager) in accordance with all applicable laws and rules.

NOTICE TO RESIDENTS OF THE KINGDOM OF BAHRAIN In relation to investors in the Kingdom of Bahrain, notes issued in connection with this Prospectus and related offering documents may only be offered in registered form to existing account holders and accredited investors as defined by the of Bahrain (‘‘CBB’’) in the Kingdom of Bahrain where such investors make a minimum investment of at least U.S.$100,000 or any equivalent amount in other currency or such other amount as the CBB may determine. This Prospectus does not constitute an offer of securities in the Kingdom of Bahrain in terms of Article (81) of the Central Bank and Financial Institutions Law 2006 (decree Law No. 64 of 2006). This Prospectus and related offering documents have not been and will not be registered as a prospectus with the CBB. Accordingly, no securities may be offered, sold or made the subject of an invitation for subscription or purchase nor will this Prospectus or any other related document or material be used in connection with any offer, sale or invitation to subscribe or purchase securities, whether directly or indirectly, to persons in the Kingdom of Bahrain, other than to accredited investors for an offer outside the Kingdom of Bahrain. The CBB has not reviewed, approved or registered this Prospectus or related offering documents and it has not in any way considered the merits of the securities to be offered for investment, whether in or outside the Kingdom of Bahrain. Therefore, the CBB assumes no responsibility for the accuracy and completeness of the statements and information contained in this document and expressly disclaims any liability whatsoever for any loss howsoever arising from reliance upon the whole or any part of the content of this document. No offer of securities will be made to the public in the Kingdom of Bahrain and this Prospectus must be read by the addressee only and must not be issued, passed to, or made available to the public generally.

NOTICE TO RESIDENTS OF THE STATE OF QATAR This Prospectus does not and is not intended to constitute an offer, sale or delivery of notes or other debt financing instruments under the laws of the State of Qatar and has not been and will not be reviewed or approved by or registered with the Qatar Financial Markets Authority or Qatar Central Bank. The Notes are not and will not be traded on the Qatar Exchange.

4 PRESENTATION OF FINANCIAL AND OTHER INFORMATION The Group prepared its unaudited reviewed consolidated financial statements as at and for the six months ended 30 June 2013 (the Interim Financial Statements) and its audited consolidated financial statements as at and for the year ended 31 December 2012 (the 2012 Financial Statements) and as at and for the year ended 31 December 2011 (the 2011 Financial Statements) in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (the IASB). In the Interim Financial Statements and in the 2012 Financial Statements, the Group has included enhanced disclosures in the notes to the accounts as compared with the 2011 Financial Statements. As a result, the Interim Financial Statements and the 2012 Financial Statements (including comparative figures for 2011) are included in this document whereas the 2011 Financial Statements are incorporated by reference for the purposes of the Prospectus Directive.

QUALIFICATION OF 2011 AUDITORS’ REPORT The audit report issued by Fidaroc Grant Thornton and Ernst & Young (the auditors) for the 2011 Financial Statements contained the following qualification: ‘‘BMCE Bank received in March 2011 a second notice of the tax administration following the control over the period 2006 to 2009 of (IS), (IR) and Value Added Tax (VAT). Disagreeing with the tax adjustments notified, the bank introduced an appeal to the local commission of taxation. In the current state of the proceedings, we are not able to estimate the potential impacts of this control over the results and equity of the Group on December 31, 2011’’. The appeal was resolved during 2012 and, as a result, the Group recorded a one-off cost of Dh 387 million in its income statement for 2012. This is noted (without qualification) in the auditors’ report to the 2012 Financial Statements. The auditors’ review report relating to the Interim Financial Statements is also unqualified.

AUDITING STANDARDS In conducting their audits of the 2012 Financial Statements and the 2011 Financial Statements, the auditors applied Moroccan auditing standards. Moroccan auditing standards are in line with International Federation of Accountants (IFAC) standards. The standards manual was revised and adopted by the relevant authorities. It has now been in force since 31 December 2010 and is in full compliance with the IFAC standards, incorporating some Moroccan legal specificities. The quality control standards have also been redesigned to comply with the IFAC standards and are in the course of being adopted. The same applies to the code of ethics that has been brought into conformity with the revised IFAC Code of Ethics and is in the course of being adopted. The auditors also applied Moroccan standards in conducting their limited review of the Interim Financial Statements.

RECLASSIFICATION IN 2012 During 2012, the Group reclassified the interest income earned on a held to maturity portfolio of fixed income securities held by its subsidiary, Bank of Africa, from Net gains on financial instruments at fair value through profit or loss to Interest income to reflect the presentation adopted by the rest of the Group. As a result: . Interest income in the comparative financial information for 2011 included in the 2012 Financial Statements was Dh 317 million higher than Interest income as stated in the 2011 Financial Statements; and . Net gains on financial instruments at fair value through profit or loss in the comparative financial information for 2011 included in the 2012 Financial Statements was Dh 317 million lower than Net gains on financial instruments at fair value through profit or loss as stated in the 2011 Financial Statements. As a result of this reclassification, all financial information as at and for the year ended 31 December 2011 included in this Prospectus has been derived from the 2012 Financial Statements.

5 DEFINITIONS In this Prospectus, unless otherwise specified or the context otherwise requires, references to: . Morocco are to the Kingdom of Morocco; . Dh and are to the lawful currency for the time being of Morocco; . U.S.$ and U.S. dollars are to the lawful currency for the time being of the United States of America; . C and euro are to the currency introduced at the start of the third stage of European economic and monetary union pursuant to the Treaty on the Functioning of the European Union, as amended; . 2011 are to the 12 months ended 31 December 2011; . 2012 are to the 12 months ended 31 December 2012; and . billion are to a thousand million. Certain figures and percentages included in this Prospectus have been subject to rounding adjustments. Accordingly, figures shown in the same category presented in different tables may vary slightly and figures shown as totals in certain tables may not be an arithmetic aggregation of the figures which precede them.

6 EXCHANGE RATES The Moroccan dirham currently is, and since April 2001 has been, pegged to a basket of currencies which, since 2001, has been 80 per cent. euro and 20 per cent. U.S. dollars, according to a prospectus published by the Kingdom of Morocco on 12 December 2012. As at 30 June 2013, the closing exchange rates, expressed as an average of the selling and buying rate as quoted by Bank Al-Maghrib, the Moroccan central bank, were U.S.$1.00 = Dh 8.494 and A1.00 = Dh 11.128. The tables below show the exchange rate history of the dirham against the U.S. dollar and the euro, respectively, for the periods and as at the dates indicated. These figures are not adjusted for inflation. The period end figures represent the average of the buying and selling rates quoted by Bank Al-Maghrib and the average figures are based on monthly averages published by Bank Al-Maghrib.

Dirham/U.S. dollar Average Period end (dirham per U.S. dollar) 2013 (up to 30 June 2013)...... 8.494 8.539 2012...... 8.628 8.434 2011...... 8.089 8.577 2010...... 8.434 8.357

Dirham/euro Average Period end (dirham per euro) 2013 (up to 30 June 2013)...... 11.128 11.117 2012...... 11.091 11.148 2011...... 11.249 11.106 2010...... 11.148 11.171

Source: Bank Al-Maghrib

7 CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS Some statements in this Prospectus may be deemed to be ‘‘forward-looking statements’’. Forward-looking statements include statements concerning the Issuer’s plans, objectives, goals, strategies and future operations and performance and the assumptions underlying these forward-looking statements. When used in this Prospectus, the words ‘‘anticipates’’, ‘‘estimates’’, ‘‘expects’’, ‘‘believes’’, ‘‘intends’’, ‘‘plans’’, ‘‘aims’’, ‘‘seeks’’, ‘‘may’’, ‘‘will’’, ‘‘should’’ and any similar expressions generally identify forward-looking statements. These forward-looking statements are contained in the sections entitled ‘‘Risk factors’’, ‘‘Financial review’’ and ‘‘Description of the Group’’ and other sections of this Prospectus. The Issuer has based these forward-looking statements on the current view of its management with respect to future events and financial performance. Although the Issuer believes that the expectations, estimates and projections reflected in its forward-looking statements are reasonable, if one or more of the risks or uncertainties materialise, including those identified below or which the Issuer has otherwise identified in this Prospectus, or if any of the Issuer’s underlying assumptions prove to be incomplete or inaccurate, the Issuer’s actual results of operations may vary from those expected, estimated or predicted. Investors are therefore strongly advised to read the sections ‘‘Risk factors’’, ‘‘Financial review’’, ‘‘Description of the Group’’ and ‘‘Banking industry and regulation in Morocco’’, which include a more detailed description of the factors that might have an impact on the Issuer’s business development and on the banking industry in which the Group operates. The risks and uncertainties referred to above include: . macro-economic and financial market conditions (and changes therein) and, in particular, the effect of the ongoing European sovereign debt crisis; . credit risks, including the impact of a higher level of credit defaults arising from adverse economic conditions, the impact of provisions and impairments and concentration on the Issuer’s portfolio of customer and advances; . the effects of, and changes in, laws, regulations and government policy affecting the Group’s business activities; . removal or adjustment of the currency basket to which the dirham is currently pegged; . liquidity risks, including the inability of the Issuer to meet its contractual and contingent cash flow obligations or its inability to fund its operations; and . changes in interest rates and other market conditions. Additional factors that could cause actual results, performance or achievements to differ materially include, but are not limited to, those discussed under ‘‘Risk factors’’. These forward-looking statements speak only as at the date of this Prospectus. Without prejudice to any requirements under applicable laws, the Issuer expressly disclaims any obligation or undertaking to disseminate after the date of this Prospectus any updates or revisions to any forward-looking statements contained herein to reflect any change in expectations thereof or any change in events, conditions or circumstances on which any forward-looking statement is based.

8 OVERVIEW This overview must be read as an introduction to this Prospectus and any decision to invest in the Notes should be based on a consideration of the Prospectus as a whole, including the documents incorporated by reference. Words and expressions defined in the ‘‘Terms and Conditions of the Notes’’ below or elsewhere in this Prospectus have the same meanings in this overview.

The Issuer: Banque Marocaine du Commerce Exte´rieur. The Group, through the Bank, offers a wide range of retail and corporate banking services to individuals, small and medium sized enterprises and large corporate customers in Morocco. Other Group companies based in Morocco offer a range of other banking services, including , brokerage, asset management, custody, leasing, factoring, consumer credit, debt recovery and credit insurance. In addition, through its majority-owned subsidiary, Bank of Africa, and direct holdings in two associated companies, the Group provides banking services in 17 other African countries, almost all of which are in sub-Saharan Africa. The Group also has a banking subsidiary in London (with a branch in Paris), a banking subsidiary in Madrid and representative offices in Germany, Italy, the and China. As at 30 June 2013, the Bank was the third largest Moroccan in terms of total assets and shareholders’ equity, with Dh 224,733 million in total consolidated assets and Dh 17,918 million in consolidated shareholders’ equity. As at 30 June 2013, the Bank was also the third largest Moroccan commercial bank in terms of total deposits, with Dh 147,359 million in total consolidated deposits. As at 30 June 2013, the Bank had the third largest branch network among commercial banks in Morocco, with 605 branches, 27 business centres and a corporate centre in Morocco. The Bank’s principal activities in Morocco consist of , including the acceptance of deposits, lending, the sale of bancassurance products, money transfers and electronic banking services and commercial lending, including the making of short-, medium- and long-term loans. The Bank’s branches are delegated primary responsibility for most of its customers and offer the full range of the Bank’s products and services. The Group’s international activities, principally in sub-Saharan Africa through Bank of Africa and minority investments in two associated African banks, encompass a range of standard banking services across 17 other African countries. In Europe, principally through subsidiary banks in London and Madrid, the Group focuses on international payments and finance, including granting - and import-related credits to, and issuing letters of credit and guarantees for the account of, companies engaged in Morocco’s foreign trade, as well as cross- border retail banking services which are primarily targeted at Moroccans resident abroad. The majority of the Group’s assets and net income is derived from its operations in Morocco. As at 30 June 2013, the Bank’s domestic banking activity accounted for 71 per cent. of the Group’s total assets, and the activities of the Group’s other Moroccan entities accounted for a further 4 per cent. of the Group’s total assets. In 2012, the Bank’s domestic banking activity accounted for 31 per cent. of the net profit attributable to shareholders of the Group and the activities of the Group’s other Moroccan entities accounted for a further 20 per cent. In the six months ended 30 June 2013, the Bank’s domestic banking activity accounted for 44 per cent.

9 of the net profit attributable to shareholders of the Group and the activities of the Group’s other Moroccan entities accounted for a further 18 per cent.

As at 30 September 2013, members of the FinanceCom Group, a major Moroccan business group, owned, directly and indirectly, 38.76 per cent. of the Bank. The Bank’s other significant shareholders include Banque Fe´de´rative du Cre´dit Mutuel, the holding company of the Cre´dit Mutuel Centre Est Europe – CIC group (the CM-CIC Group) and CDG Group, a significant institutional investor in Morocco, which held 26.21 per cent. and 8.46 per cent., respectively, of the Bank’s shares as at 30 September 2013. Joint Lead Managers: Citigroup Global Markets Limited Barclays Bank PLC BNP Paribas BMCE Capital

Fiscal Agent Citibank, N.A., London Branch

Paying Agent and Registrar Citigroup Global Markets Deutschland AG

The Notes: U.S.$300,000,000 6.25 per cent. Notes due 2018 Issue Price: 98.947 per cent. of the principal amount of the Notes. Issue Date: Expected to be on or about 27 November 2013. Use of Proceeds: General corporate purposes. See ‘‘Use of proceeds’’. Interest: The Notes will bear interest from 27 November 2013 at a rate of 6.25 per cent. per annum payable semi-annually in arrear on 27 May and 27 November in each year, commencing 27 May 2014. Ranking of the Notes: The Notes are senior, unsubordinated, unconditional and unsecured obligations of the Issuer and shall at all times rank pari passu and without any preference among themselves. Form and Denomination: The Notes will be issued in registered form in the denomination of U.S.$200,000 and integral multiples of U.S.$1,000 in excess thereof. The Notes will be represented by a global registered note certificate. Final Redemption: 27 November 2018 Optional Redemption: Not Applicable. Tax Redemption: The Notes will be redeemable at the option of the Issuer prior to maturity only for tax reasons. See Condition 6(b) (Redemption for tax reasons) of the Notes. Negative Pledge: The Conditions contain a negative pledge provision. See Condition 3 (Negative Pledge) of the Notes. Cross Default: The Conditions contain a cross-default provision. See Condition 9(c) (Cross-default of Issuer or Material Subsidiary) of the Notes. Rating: The Notes are expected to be rated Ba1 by Moody’s. Withholding Tax: Under current Moroccan laws and regulations, interest payments under the Notes to non-resident individuals or non-resident entities are subject to Moroccan withholding tax at a rate of 10 per cent. The Issuer will pay additional amounts in respect of this withholding so that holders receive the full amount they would have received had there been no withholding.

10 Governing Law: The Notes (apart from Condition 13 (Representation of Noteholders; Modification)), the Fiscal Agency Agreement, the Deed of Covenant and the Subscription Agreement will be governed by English law. Listing and Trading: Application has been made for the Notes to be admitted to listing on the official list and to trading on the Luxembourg Stock Exchange’s regulated market. Clearing Systems: Euroclear and Clearstream, Luxembourg. Selling Restrictions: See ‘‘Subscription and sale’’. Risk Factors: See ‘‘Risk factors’’. Financial Information: See ‘‘Selected Financial Information’’, ‘‘Financial Statements and Auditor’s Reports’’ and ‘‘Document Incorporated by Reference’’.

11 RISK FACTORS The Issuer believes that the following factors may affect its ability to fulfil its obligations under the Notes. Most of these factors are contingencies that may or may not occur and the Issuer is not in a position to express a view on the likelihood of any such contingency occurring. The order in which the risks are presented below does not necessarily reflect the likelihood of their occurrence or the magnitude of their potential impact on the Issuer. In addition, factors that the Issuer believes are material for the purpose of assessing the market risks associated with the Notes are described below. The Issuer believes that the factors described below represent the principal risks inherent in investing in the Notes, but the inability of the Issuer to pay interest, principal or other amounts on or in respect of the Notes may occur for other reasons which may not be considered significant risks by the Issuer based on information currently available to it or which it may not currently be able to anticipate. Prospective investors should also read the detailed information set out elsewhere in this Prospectus and reach their own views prior to making any investment decision. Prospective investors should also consult their own financial and legal advisers about the risks associated with an investment in the Notes and the suitability of investing in the Notes in light of their particular circumstances, without relying on the Issuer. Prospective investors are advised to make, and will be deemed by the Issuer to have made, their own investigations in relation to such factors before making any investment decision.

FACTORS THAT MAY AFFECT THE ISSUER’S ABILITY TO FULFIL ITS OBLIGATIONS UNDER THE NOTES

The Group’s business, financial condition, results of operations and prospects are and will continue to be affected by global and regional financial markets and economic conditions, particularly those in the European Union, and any deterioration in these conditions could adversely impact the Group There has been significant volatility and disruption in global capital and credit markets since the onset of the global financial crisis in late 2007. As a result, there has been a material reduction in the availability of financing, both for financial institutions and their customers, compelling many financial institutions to rely on central banks and governments to provide liquidity and, in some cases, additional capital. Governments around the world have taken actions intended to stabilise financial markets and prevent the failure of financial institutions. Despite such measures, international capital and credit markets have continued to experience volatility. In common with the rest of the Moroccan banking industry, the Group’s business and results of operations have been adversely affected by these conditions. For example, those sectors of the Moroccan economy which depend on external demand have been adversely affected by the continuing financial crisis and this has created a less favourable business environment. In this context, the Group has been impacted by a slight decrease in the demand for credit and tightening liquidity. In addition, fluctuations in the prices of equity securities have affected the fair value of financial instruments held by the Group and the deteriorating macroeconomic environment has resulted in higher credit losses and there remains a significant risk of future credit losses. The European Union (the EU) is Morocco’s largest trading partner and to the EU accounted for 55.5 per cent. of Morocco’s total exports in 2011. In addition, remittances from the Eurozone account for approximately 80 per cent. of Morocco’s total remittances on an annual basis, and remittances from Moroccans resident abroad are dependent on, among other factors, economic conditions in the relevant host countries. In 2011, these remittances represented 7.3 per cent. of Moroccan GDP. As a result, the Moroccan economy is significantly affected by events in the Eurozone and the wider EU. A decline in economic growth in Eurozone countries and any inability of such countries to issue securities in the sovereign debt market or to service existing debt, could reduce demand for Moroccan imports or lead to a reduced level of remittances received from the Eurozone. This could, in turn, have a material adverse impact on Morocco’s balance of trade and adversely affect its economic growth. If the levels of international market disruption and volatility experienced from time to time and, at times, for significant periods in the last four years continue or recur, the Group may experience reductions in business activity, increased funding costs and funding pressures, decreased asset values, credit losses and impairment charges, and lower profitability and cash flows. The Group’s business and financial performance may also be adversely affected by future recovery rates on assets, particularly as the

12 historical assumptions underlying asset recovery rates may prove to be inaccurate as a result of the significant periods of market volatility and disruption since 2007.

The Group’s business, financial condition, results of operations and prospects are and will continue to be affected by economic conditions in Morocco, its principal market, and any deterioration in these conditions could materially adversely impact the Group As at 30 June 2013, 74.8 per cent. of the Group’s assets and 55.5 per cent. of its gross operating income for 2012 was attributable to the activities of the Group in Morocco. In addition, 78.0 per cent. of its total customer loans at 30 June 2013 were advanced by its Moroccan businesses. As a result, the Group is in large part dependent upon the performance of the Moroccan economy and any significant deterioration in that performance could have a material adverse effect on the Group. Morocco’s economic performance has in the past been hampered by its large public sector, the vulnerability of agricultural production to drought and a reliance on exports of phosphates and phosphate derivatives. In recent years, the Moroccan economy has experienced uneven growth, with real GDP growth rates of 2.7 per cent. in 2007, 5.6 per cent. in 2008, 4.8 per cent. in 2009, 3.6 per cent. in 2010 and 5.0 per cent. in 2011. The preliminary estimate of the GDP growth rate for 2012 made by the HCP is 2.7 per cent. Morocco’s current account deficit was 5.4 per cent. of GDP in 2009, before declining to 4.5 per cent. of GDP in 2010 and increasing to 8.0 per cent. of GDP in 2011 and 9.9 per cent. in 2012. Since 2007, the current account deficit has been financed, at least in part, by increased borrowing. If the current account deficit is not reduced, further levels of borrowing will be needed to finance the deficit, which could negatively affect Morocco’s economy. The Moroccan economy remains vulnerable to external shocks, including events part of, or similar to, the Arab Spring, the global financial crisis and the Eurozone crisis, as well as to a range of other factors. See ‘‘—Risks relating to securities issued by an issuer located in Morocco—The future performance of the Moroccan economy is subject to a range of risks’’.

The Group is exposed to credit risk and recent rapid growth in the Group’s portfolio, including through gaining control of Bank of Africa, has resulted in an increase in its credit risk profile Risks arising from adverse changes in the credit quality and recoverability of loans and amounts due from counterparties are inherent in a wide range of the Group’s businesses, principally in its lending activities. In particular, the Group is exposed to the risk that borrowers may not repay their loans according to their contractual terms and that the collateral securing the payment of these loans may be insufficient. The Group continuously reviews and analyses its loan portfolio and credit risks, and the Group’s provision for losses on loans is based on, among other things, its analysis of current and historical delinquency rates and loan management and the valuation of the underlying assets, as well as numerous other management assumptions. However, these internal analyses and assumptions may give rise to inaccurate predictions of credit performance, particularly in a volatile economic climate. The Group’s customer loans and advances (its customer loan portfolio) increased by 14.7 per cent. in 2010, by 13.0 per cent. in 2011, by 14.4 per cent. in 2012 and by 1.2 per cent. in the first half of 2013, to Dh 141 billion at 30 June 2013. In 2010, the Group made Dh 1,093 million in impairment provisions in respect of its customer loan portfolio, equal to 1.0 per cent. of its gross loans and advances to customers as at 31 December 2010. In 2011, the Group made Dh 1,125 million in impairment provisions in respect of its customer loan portfolio, equal to 0.9 per cent. of its gross loans and advances to customers at 31 December 2011. In 2012, the Group made Dh 1,415 million in impairment provisions in respect of its customer loan portfolio, equal to 1.0 per cent. of its gross loans and advances to customers at 31 December 2012. In the first half of 2013, the Group made Dh 910 million in impairment provisions in respect of its customer loan portfolio, equal to 0.6 per cent. of its gross loans and advances to customers at 30 June 2013. Growth in the Group’s customer loan portfolio has increased its credit exposure and, as the Group continues to expand its customer loan portfolio, management will need to continually monitor the credit quality of the customer loan portfolio. See ‘‘Risk management—Credit risk—Loan monitoring and internal rating system’’. A material deterioration in the quality of the Group’s customer loan portfolio or any significant increase in loan losses in the future could have a material adverse effect on the Group’s business, financial condition, results of operations and prospects. In addition, continued growth in the Group’s customer loan portfolio will require the Group to manage that growth through the recruitment

13 and training of additional skilled personnel to monitor the portfolio and the associated capital risks and to manage the Group’s increased funding requirements as well as through investment in more sophisticated banking information technology and management information systems. Any failure by the Group to manage its growth appropriately could materially adversely affect the Group’s results of operations and financial condition as a result of an increase in non-performing loans as well as increased capital and liquidity risks. Credit losses could also arise from a deterioration in the credit quality of specific issuers and counterparties of the Group, or from a general deterioration in local or global economic conditions, or from systemic risks within these financial systems, which could affect the recoverability and value of the Group’s assets and require an increase in the Group’s provisions for the impairment of loans and other credit exposures. Unlike many other countries, Morocco did not experience recessionary conditions in the years following the global financial crisis. As a result, the Group’s credit risk management systems have not been tested to the same extent as in other countries and the Group may be vulnerable to a severe economic downturn in Morocco as a result. The Group is currently experiencing considerably higher levels of non-performing loans in its subsidiary, Bank of Africa, than those in the Bank. The Group first gained control of, and as a result consolidated, Bank of Africa in 2010. At 30 June 2013, 31 December 2012 and 31 December 2011, the Group’s non- performing customer loans as a percentage of its total gross customer loans were 4.8 per cent., 4.7 per cent. and 5.3 per cent., respectively, in Morocco and 12.7 per cent., 11.8 per cent. and 10.7 per cent., respectively, in Bank of Africa. The Group is seeking to address the higher levels of non- performing loans in Bank of Africa by implementing new credit risk management procedures (based on those currently used by the Bank), although this process is expected to take several years to complete. As a result, the Group may continue to experience high levels of non-performing loans in Bank of Africa for some time, which may be increased in the event of any material economic downturn in the countries in which Bank of Africa operates. Any failure by the Group to maintain the quality of its assets through effective risk management policies could lead to higher loan loss provisioning and result in higher levels of defaults and write-offs, which, in turn, could have a material adverse effect on the Group’s business, financial condition, results of operations and prospects.

The Group’s customer loan portfolio and deposit base are concentrated in Morocco and the Group has significant customer concentrations The Group’s customer loan portfolio is concentrated, geographically, in Morocco. The Group’s customer loan portfolio constituted 58.3 per cent. of its total assets, or Dh 121 billion, at 31 December 2011, 60.1 per cent. of its total assets, or Dh 139 billion, at 31 December 2012 and 62.5 per cent. of its total assets, or Dh 141 billion, at 30 June 2013. Dh 96 billion, or 79.1 per cent., of the Group’s customer loan portfolio represented credit granted by Group entities located in Morocco at 31 December 2011, Dh 109 billion, or 78.2 per cent., of its customer loan portfolio represented credit granted by Group entities located in Morocco at 31 December 2012 and Dh 110 billion, or 78.0 per cent., of its customer loan portfolio represented credit granted by Group entities located in Morocco at 30 June 2013. The Group’s customer deposits are also concentrated, geographically, in Morocco. The Group’s customer deposits constituted 66.8 per cent. of its total liabilities, or Dh 139 billion, as at 31 December 2011, 62.6 per cent., of its total liabilities, or Dh 145 billion, as at 31 December 2012 and 65.6 per cent. of its total liabilities, or Dh 147 billion, at 30 June 2013. Dh 101 billion, or 73.3 per cent., of its customer deposits at 31 December 2011 were accepted by Group entities located in Morocco, Dh 103 billion, or 71.4 per cent., of its customer deposits at 31 December 2012 were accepted by Group entities located in Morocco and Dh 104 billion, or 70.4 per cent., of its customer deposits at 30 June 2013 were accepted by Group entities located in Morocco. As a result, any deterioration in general economic conditions in Morocco or any failure by the Group to manage effectively its geographic risk concentrations could have a material adverse effect on the Group’s business, financial condition, results of operations and prospects. See ‘‘—The Group’s business, financial condition, results of operations and prospects are and will continue to be affected by global and regional financial markets and economic conditions and any deterioration in economic conditions in Morocco could materially adversely impact the Group’’. The Group’s 20 largest customer loans and advances outstanding at 30 June 2013 constituted 15 per cent. of its total loan portfolio at that date. In terms of liabilities, the Group’s 20 largest customer deposits at

14 31 December 2012 constituted 12 per cent. of its total customer deposits at that date. As a result, a material weakening in the credit quality of, or a default by, any one or more of the Group’s large loan customers could result in the Group making significant additional loan loss provisions and experiencing reduced interest income. Similarly, the withdrawal or non-renewal of its deposits by any one or more of the Group’s large depositors could require the Group to obtain replacement funding from other sources which may not be readily available or may be more expensive. Either of such eventualities would be likely to have a material adverse effect on the Group’s business, financial condition, results of operations and prospects.

The Group has significant credit-related contingent liabilities and commitments that may lead to potential losses As part of its normal banking business, the Group issues loan commitments and guarantees which are accounted for off the Group’s balance sheet until such time as they are actually funded or cancelled. Although these commitments are contingent, they nonetheless subject the Group to both credit and liquidity risks. Although the Group anticipates that only a portion of its obligations in respect of these commitments will be triggered and funds itself accordingly, the Group may need to make payments in respect of a greater portion of such commitments, particularly in cases where there has been a general deterioration in market conditions. This would result in the Group needing to obtain additional funding, potentially at relatively short notice, which could have an adverse affect on its financial condition and results of operations. As at 30 June 2013, the Group had Dh 35 billion in such contingent liabilities and other commitments outstanding, equal to 18.1 per cent. of its combined customer loans and advances, loans to credit institutions and contingent liabilities at that date.

The Group could be adversely affected by the soundness or the perceived soundness of other financial institutions and counterparties, which could result in significant systemic liquidity problems, losses or defaults Against the backdrop of constraints on liquidity and the high cost of funds in the interbank lending market, and given the high level of interdependence between financial institutions that became most evident following the bankruptcy of Lehman Brothers in 2008, the Group is subject to the risk of deterioration of the commercial and financial soundness, or perceived soundness, of other financial institutions. Within the financial services industry, the default of any one institution could lead to significant losses, and potentially defaults, by other institutions. As was experienced in 2008 and 2009, concerns about, or a default by, one institution could also lead to significant liquidity problems, losses or defaults by other institutions, because the commercial and financial soundness of many financial institutions is closely related as a result of their credit, trading, clearing or other relationships. Even the perceived lack of creditworthiness of, or questions about, a counterparty may lead to market-wide liquidity problems and losses or defaults by the Group or other institutions. This risk, often referred to as ‘‘systemic risk’’, may also adversely affect other financial intermediaries, such as securities firms and exchanges, with whom the Group interacts on a daily basis. Systemic risk, should it materialise, could have a material adverse effect on the Group’s ability to raise new funding and on its business, financial condition, results of operations and prospects.

The Group is subject to the risk that liquidity may not always be readily available or may only be available at costs which may adversely affect the Group’s business or results of operations Liquidity risk is the risk that the Group will be unable to meet its obligations, including funding commitments, as they become due. This risk is inherent in banking operations and can be heightened by a number of enterprise-specific factors, including over-reliance on a particular source of funding (including, for example, short-term and overnight funding), changes in credit ratings or market-wide phenomena such as market dislocation and major disasters. Credit markets worldwide experienced a severe reduction in liquidity in the final quarter of 2008 and the first half of 2009. Since then, market conditions have been volatile, with financial institutions continuing to experience periods of reduced liquidity. The perception of counterparty risk between banks has also increased significantly since the final quarter of 2008, which has led to reductions in certain traditional sources of liquidity, such as the debt markets, asset sales and redemption of investments. The Group’s access to these traditional sources of liquidity may be restricted or available only at a higher cost. In addition, uncertainty or volatility in the capital and credit markets may limit the Group’s ability to refinance maturing liabilities with long-term funding or increase the cost of such funding. The Group’s access to any additional financing it may need will depend on a variety of factors, including market

15 conditions, the availability of credit generally and to borrowers in the financial services industry specifically, and the Group’s financial condition, credit ratings and credit capacity. The Group has historically relied on customer deposits and, to a significantly lesser extent, interbank borrowing and domestic debt securities issuance to meet most of its funding needs. The availability of deposits is subject to fluctuation due to factors outside the Group’s control, including possible loss of confidence by customers and competitive pressures, and this could result in a significant outflow of deposits within a short period of time. As at 31 December 2012, approximately 62 per cent. of the Group’s funding (which comprises amounts due to banks and financial institutions, customer deposits, issued debt securities and subordinated debt) comprised deposits payable on demand and approximately 92 per cent. had remaining maturities of one year or less or was payable on demand. In addition, the Group has a number of individually significant depositors. See ‘‘—The Group’s customer loan portfolio and deposit base are concentrated in Morocco and the Group has significant individual customer concentrations’’. If a substantial portion of the Group’s depositors withdraw their demand deposits or do not roll over their term deposits at maturity, the Group may need to seek other sources of funding or may have to sell assets to meet its funding requirements. There can be no assurance that the Group will be able to obtain additional funding as and when required or at prices that will not affect the Group’s ability to compete effectively and, if the Group is forced to sell assets to meet its funding requirements, it may suffer material losses as a result. In extreme cases, if the Group is unable to refinance or replace such deposits with alternative sources of funding to meet its liquidity needs, through deposits, the interbank markets, the international or domestic capital markets or through asset sales, this would have a material adverse effect on the Group’s business, financial condition, results of operations and prospects and could, potentially, result in its insolvency.

Market fluctuations and volatility may adversely affect the value of the Group’s securities portfolio and make it more difficult to assess the fair value of certain of its assets The Group has significant holdings of equity and other variable income securities, principally comprising shares in financial institutions, and fixed income securities, principally comprising Moroccan government treasury bills and other securities eligible for central bank refinancing. As at 31 December 2011, the Group’s equity securities portfolio amounted to Dh 26,393 million or 12.7 per cent. of the Group’s total assets and its fixed income securities amounted to Dh 17,518 million or 8.4 per cent. of the Group’s total assets. As at 31 December 2012, the Group’s equity securities portfolio amounted to Dh 24,106 million or 10.4 per cent. of the Group’s total assets and its fixed income securities amounted to Dh 23,773 million or 10.3 per cent. of the Group’s total assets. As at 30 June 2013, the Group’s equity securities portfolio amounted to Dh 23,416 million or 10.4 per cent. of the Group’s total assets and its fixed income securities amounted to Dh 19,687 million or 8.8 per cent. of the Group’s total assets. The Group earns interest income on the debt securities comprised in the portfolio (which is included in its income statement as Interest income) as well as realised gains and losses on the sale of securities and unrealised gains and losses resulting from the fair valuation of the securities held at fair value through profit and loss at each balance sheet date (which is included in its income statement under Banking revenue) and the level of this income depends on numerous factors beyond the Group’s control, such as general market volatility and overall market trading activity, and, in relation to equity securities, fluctuations in their prices caused by a range of factors specific to the companies concerned. In addition, the prices of the Group’s fixed income securities will vary with changes in interest rate levels and fluctuations in currency exchange rates as well as perceived changes in the credit quality of the issuers of the securities. Valuations of the securities in the Group’s securities portfolio in future periods, reflecting then-prevailing market conditions, may result in significant changes in their fair values and, where these changes are negative, could adversely affect the Group’s results of operations. In addition, the value ultimately realised by the Group in respect of any securities may be materially different from their current or estimated fair value. Any of these factors could require the Group to recognise fair valuation losses or realise impairment charges, which would adversely affect its results of operations.

The Group has a significant investment in Bank of Africa, which exposes the Group to a range of risks In 2008, the Group acquired a 42.5 per cent. shareholding in Bank of Africa which it has since increased to 68.58 per cent. at 30 June 2013. Bank of Africa is a fully-consolidated holding company which owns controlling stakes in banks and other financial service, companies operating in 15 different countries,

16 almost all of which are in sub-Saharan Africa. As at 30 June 2013, the Group’s International activities reporting segment (which principally comprises the operations of Bank of Africa but also includes minority investments in two other African banks as well as bank subsidiaries in the United Kingdom and Spain) accounted for 22.0 per cent. of the Group’s customer loan portfolio and 29.6 per cent. of its customer deposits and, in 2012, the International activities reporting segment accounted for 44.5 per cent. of the Group’s net banking income and 49.0 per cent. of the Group’s share of profit for the year. In the first half of 2013, the International activities reporting segment accounted for 46.7 per cent. of the Group’s net banking income and 38.1 per cent. of the Group’s share of profit for the period. Although the Group’s African business is diversified across 19 countries (comprising 17 Bank of Africa countries, Morocco and the Republic of Congo through the Group’s 25 per cent. investment in its associated company, La Congolaise de Banque), it faces a wide range of political, social and economic risks in operating in those countries. For example, the Group has operations in the Democratic Republic of Congo, the Ivory Coast and Mali, each of which have recently experienced major civil conflict, as well as in a number of other countries which have experienced civil clashes or armed conflict within the past five years. According to the IMF1, real GDP in sub-Saharan Africa grew by 5.6 per cent. in 2010, 5.5 per cent. in 2011 and 4.9 per cent. in 2012 and is expected to show similar growth in 2013. Most countries participated in this expansion, although drought slowed growth in many countries and certain countries experienced GDP declines in some years. An IMF report2 identified two principal risks which could adversely impact future economic growth in sub-Saharan Africa: . global economic uncertainty, including resumed financial stresses in the euro area which could spill over into a broader global slowdown, with associated weakening of commodity prices, global trade flows, and foreign investment, which could significantly impact those sub-Saharan countries whose economies and financial systems are more directly linked to Europe; and . a surge in oil prices, linked to geopolitical tensions, which could adversely impact sub-Saharan Africa’s oil importers. Other Africa-specific risks to future economic growth noted in the report include intensified political turmoil in some countries and further climatic shocks, such as droughts and flooding, which could materially adversely affect agricultural output. In terms of the banking sectors in sub-Saharan Africa, the same IMF report observed that the banking systems in most counties had been relatively unaffected by the global financial crisis. However, the report also noted that: . for the 16 sub-Saharan African jurisdictions for which Basel core principles have been assessed, observance of these principles compares well to that in other regions, although there are still significant shortcomings in prudential regulation and supervision; . credit to the private sector in several sub-Saharan African countries has continued to grow at high rates throughout the global financial crisis, which may also reflect a deterioration in the quality of banks’ loan portfolios; . rapid expansion of pan-African banking groups (such as Bank of Africa) may, in some cases, have outpaced supervisory capacity. Under adverse economic conditions across the region, these banking groups could become a channel for cross-border contagion; and . banks in sub-Saharan Africa have asset-side exposures to segments of the European financial system that have come under stress, posing a risk to banks’ foreign assets. Should any one or more of Bank of Africa’s subsidiaries be adversely affected by political, social and/or economic factors, this could have an adverse effect on its financial condition and results of operations and could also adversely impact the Group’s consolidated results and financial condition.

The Group’s risk management and management information systems are not completely integrated and the Group receives less management information in relation to its international activities than it does in relation to its Moroccan activities Operationally, the Group’s risk management and management information systems are not completely integrated within the Bank of Africa group of banks. As a result, the Group’s management is not

1 World Economic Outlook, October 2013 2 World Economic and Financial Surveys, Regional Economic Outlook, Sub-Saharan Africa – Sustaining Growth amid Global Uncertainty, April 2012

17 currently able to access the same amount of management information in relation to these banks which it has in relation to its Moroccan businesses. This, and other differences in operating procedures between the Bank of Africa banks and the rest of the Group, including in the areas of training, human resources and marketing, may adversely affect the Group’s ability to manage the Bank of Africa group effectively and enhances the risks associated with its investment in Bank of Africa. See also ‘‘—The Group is exposed to credit risk and recent rapid growth in the Group’s loan portfolio, including through gaining control of Bank of Africa, has resulted in an increase in its credit risk profile’’.

The Group’s accounting policies and methods are critical to how it reports its financial condition and results of operations and require management to make estimates about matters that are uncertain Accounting policies and methods are fundamental to how the Group records and reports its financial condition and results of operations. Management must exercise judgement in selecting and applying many of these accounting policies and methods so they comply with IFRS. Management has identified certain accounting policies in the notes to its financial statements as being critical because they require management’s judgement to ascertain the valuations of assets, liabilities, commitments and contingencies. See note 1.6.12 to each of the 2012 Financial Statements and the Interim Financial Statements. These judgements include, for example, the recognition of individual and collective impairment allowances to cover credit risks inherent in banking intermediation transactions, together with goodwill impairment tests (see notes 1.6.2(d) and 4.12 to the 2012 Financial Statements and equivalent notes in the Interim Financial Statements), provisions for employee benefits (see notes 1.6.7 and 6 to the 2012 Financial Statements and equivalent notes in the Interim Financial Statements) and the measurement of provisions for risks and charges (see notes 1.6.9 and 4.13 to the 2012 Financial Statements and equivalent notes in the Interim Financial Statements). The Group’s impairment methodology is described under ‘‘Financial review—Results of operations—Comparison of 2011 and 2012—Cost of risk’’ and ‘‘Risk management—Credit risk—Non-performing loans’’. See also note 1.6.3(d) to the 2012 Financial Statements and note 1.6.3(d) to the Interim Financial Statements. A variety of factors could affect the ultimate value that is obtained either when earning income, recognising an expense, recovering an asset or reducing a liability. The Group has established policies and control procedures that are intended to ensure that these critical accounting estimates and judgements are well controlled and applied consistently. In addition, the policies and procedures are intended to ensure that the process for changing methodologies occurs in an appropriate manner. Because of the uncertainty surrounding the Group’s judgements and the estimates pertaining to these matters, the Group cannot guarantee that it will not be required to make changes in accounting estimates or restate prior period financial statements in the future.

The Group is subject to regulation and changes in this regulation, or the interpretation and enforcement of this regulation, or any failure by the Group to comply with this regulation could have a material adverse effect on the Group The Group, through its operations in Morocco, other African countries and certain European countries (including the UK, France and Spain), is subject to a number of prudential and regulatory controls designed to maintain the safety and soundness of banks, ensure their compliance with economic and other objectives and limit their exposure to risk. In Morocco, these controls include laws and regulations promulgated by the central bank, Bank Al-Maghrib, and the Conseil de Valeurs Mobilie´res (the CDVM, which is the regulatory body for entities listed on the Casablanca Stock Exchange) and these controls are further described under ‘‘Banking industry and regulation in Morocco’’. In addition, in order to carry out and expand its businesses, it is necessary for the Group to maintain or obtain a variety of licences, permits, approvals and consents from various regulatory, legal, administrative, tax and other governmental authorities and agencies. The processes for obtaining these licences, permits, approvals and consents are often lengthy, costly and, sometimes, complex. If the Group is unable to maintain or obtain the relevant licences, permits, approvals and consents, its ability to achieve its strategic objectives could be impaired. The regulations to which the Group is subject may limit its ability to carry on certain parts of its business, increase its loan portfolio or raise capital or may impose significant additional costs on the Group. In the coming years, the Group expects both a new banking law and the new Basel III capital regime to be implemented in Morocco. The new banking law is expected to contain provisions authorising participation (or Islamic) banking in Morocco and this could increase the competition faced by the

18 Group. See ‘‘The banking industry is competitive and, in particular, the Bank is exposed to significant competition in Morocco’’. Changes in applicable regulations may also increase the Group’s cost of doing business. In addition, increased regulations or changes in laws and regulations and the manner in which they are interpreted or enforced in any jurisdiction in which the Group operates may have a material adverse effect on the Group’s business, financial condition, results of operations or prospects. Furthermore, non-compliance by the Group with any applicable regulations could expose the Group to potential liabilities and fines, which may be significant. The Group is also required to comply with applicable , anti money laundering and counter-terrorism financing laws and regulations in Morocco and other jurisdictions where it has operations, including those related to countries subject to sanctions by the United States Office of Foreign Assets Control (OFAC), similar regulations of the European Union (the EU) and other jurisdictions, and applicable anti-corruption laws in the jurisdictions in which it conducts business. To the extent that the Group fails or is perceived to fail to comply with these and other applicable laws and regulations, its reputation could be materially damaged, with consequent adverse affects on its business, financial condition, results of operations and prospects.

A negative change in the Bank’s credit rating could limit its ability to raise funding and may increase its borrowing costs. The Group may also be adversely affected by a negative change in Morocco’s ratings The Bank currently has a solicited standalone Ba3 credit assessment with negative outlook from Moody’s. BMCE is also rated BBB- on an unsolicited basis by Fitch. A downgrade of the Bank’s credit rating may limit its ability to raise funding and increase its cost of borrowing, which could adversely affect its business, financial condition, results of operations and prospects. A downgrade of the Bank’s credit rating may also limit its ability to raise capital. Moreover, actual or anticipated changes in the Bank’s credit rating may affect the market value of the Notes. According to a Moody’s rating report published in October 2012, significant factors underpinning the Bank’s rating include its strong franchise in Morocco as the third largest bank and its growth potential in sub-Saharan Africa, its weakening assets quality with increasing non-performing loans at December 2011 due to an economic slowdown in Morocco and the riskier nature of its African operations, its relatively modest loss absorption capacity and its relatively stable funding profile. The negative outlook reflects elevated risks resulting from the Bank’s rapid expansion in sub-Saharan Africa and the potential for further deterioration in the Bank’s financial metrics, including asset quality in particular, given the higher risk of these operations. Any deterioration in the Bank’s operating environment leading to an acceleration of non-performing loan formation, which would erode its profitability and capital, and any intensification of liquidity pressures are both cited in the Moody’s report as factors which could result in the rating being lowered. It is also possible that a reduction in the ratings of Morocco, which has a long-term issuer default rating of BBB- (stable outlook) from Fitch, a senior secured rating of Ba1 (negative outlook) from Moody’s and a foreign currency sovereign credit rating of BBB- (negative outlook) from S&P, could adversely impact the Bank’s ratings. In addition, the credit rating assigned to the Bank may not reflect the potential impact of all risks related to an investment in the Notes, the market or any additional factors discussed in this document, and other factors may affect the value of the Notes. A securities rating is not a recommendation to buy, sell or hold securities. Ratings may be subject to revision or withdrawal at any time by the assigning rating organisation and each rating should be evaluated independently of any other rating.

The banking industry is competitive and, in particular, the Bank is exposed to significant competition in Morocco The Group faces high levels of competition for all of its products and services in each jurisdiction in which it operates. In particular, in Morocco the Bank competes with other domestic banks and such competition may increase. Certain of the Bank’s competitors have greater resources and experience and the Bank is, therefore, potentially exposed to any aggressive competitive positions taken by those other banks. In addition to domestic banks, international banks are increasing their presence in Morocco, either directly or through strategic investments, and these banks compete with the Bank for wholesale

19 corporate and government business, particularly given their generally greater resources and wider international experience. There are also plans to establish participation (or Islamic) banking in Morocco. Draft new banking legislation is currently under consideration which will permit the grant of participation banking licences. The full details of this regime are not currently known and it is possible that the Bank may be restricted from competing in this area once the legislation is fully enacted. Even if the Bank is permitted to, and elects to, offer these services, there is no certainty that it will be able to compete successfully with other entities who do, some of which may have greater resources and expertise. The establishment of participation banks could also reduce the Bank’s market shares in Morocco in the event that existing customers switch to participation banks, whether for religious or other reasons. In the other African countries in which it operates, the Group competes with domestic banks in each market in which it operates as well as with a number of other pan-African banking groups, some of which have more extensive networks than the Group. According to an IMF report1 prepared in April 2012, at least nine sub-Saharan African financial groups operate banks in seven or more other African countries. The major networks are those operated by Ecobank (a Togo-based financial group), Standard Bank/ Stanbic Bank of South Africa, United Bank for Africa of Nigeria and Bank of Africa. According to the IMF, based on partial bank-level information, these groups manage more than 30 per cent. of deposits in 13 of the 45 sub-Saharan African countries considered. Bank of Africa expects to face increasing competition from these and other banking groups in countries where their networks overlap and the relevant banking group is following a strategy that is similar to Bank of Africa’s. As at 30 June 2013, there were a total of 19 banks registered with Bank Al-Maghrib in Morocco. The competitive nature of the Moroccan banking market and any failure by the Bank to continue to compete successfully in Morocco may adversely affect the Group’s business, financial condition, results of operations and prospects. In addition, increased competition in the other countries where the Group currently operates could similarly adversely affect the Group’s businesses in those countries.

The Group’s financial condition and results of operations could be adversely affected by market risks The Group’s financial condition and results of operations could be adversely affected by market risks that are outside its control, including, without limitation, volatility in interest rates and currency exchange rates and volatility in the prices of the equity securities held by the Group. Fluctuations in interest rates could adversely affect the Group’s financial condition and results of operations in a number of different ways. In particular, an increase in interest rates generally may decrease the value of the Group’s fixed-rate loans and the debt securities in its securities portfolio and may raise the Group’s funding costs. As a result, the Group may experience a reduction in its net interest income. See ‘‘Risk management—Market risk—Interest rate risk’’. Interest rates are sensitive to many factors beyond the Group’s control, including the policies of central banks, such as Bank Al-Maghrib, political factors and domestic and international economic conditions. The Group’s financial condition and results of operations may also be affected by changes in the fair value of its securities portfolio. See ‘‘—Market fluctuations and volatility may adversely affect the value of the Group’s positions in certain securities and make it more difficult to assess the fair value of certain of its assets’’ above. The Group maintains its accounts, and reports its results, in Moroccan dirham. As a result, the Group’s financial results may be adversely affected by movements in the exchange rate of the dirham and the reporting currencies of the Group’s significant international subsidiaries and associated companies, principally the euro (which is the reporting currency of Bank of Africa). Bank of Africa’s results, in turn, may be adversely affected by movements in the exchange rate of the euro and the reporting currencies of its significant bank subsidiaries. The Moroccan dirham is currently pegged to a basket of currencies which principally comprises euro and, to a significantly lesser extent, U.S. dollars. The Group is exposed to the potential impact of any alteration to, or abolition of, this foreign exchange rate peg. Also, as a financial intermediary, the Group is exposed to foreign exchange rate risk. This risk includes the possibility that the value of a foreign currency asset or liability will change due to changes in currency exchange rates as well as the possibility that the Group may have to close out any open position in a foreign currency at a loss due to an adverse movement in exchange rates. The Group generally uses derivative transactions to attempt to match the currencies of its assets and liabilities and any open

1 World Economic Outlook, October 2013

20 currency position is maintained within the limits set by Bank Al-Maghrib. No assurance can be given as to the effectiveness of the Group’s hedging arrangements in all circumstances. Adverse movements in interest rates, foreign exchange rates and the prices of securities may also adversely impact the revenues and financial condition of the Group’s depositors and borrowers which, in turn, may impact the Group’s deposit base and the quality of its exposures to certain borrowers. Ultimately, there can be no assurance that the Group will be able to protect itself from any adverse effects of a currency revaluation or future volatility in interest rates, currency exchange rates or the prices of securities, any or all of which could have a material adverse effect on its business, financial condition, results of operations and prospects.

The Group is exposed to a range of operational risks. In particular, any failure of the Group’s information technology systems could have a material adverse effect on its business and reputation Operational risk and losses can result from a wide range of factors, including fraud, errors by employees, failure to document transactions properly or to obtain proper internal authorisation, failure to comply with regulatory requirements and conduct of business rules, systems and equipment failures, natural disasters or the failure of external systems (for example, those of the Group’s counterparties or vendors). The Group has implemented risk controls and loss mitigation strategies, and substantial resources are devoted to developing efficient procedures and to staff training, but it is not possible to eliminate entirely each of the potential operational risks the Group faces. Any losses arising from the failure of the Group’s system of internal controls could have a material adverse effect on its business, financial condition, results of operations and prospects and could materially adversely affect its reputation. The Group depends on its information technology systems to process a large number of transactions on an accurate and timely basis, and to store and process substantially all of the Group’s business and operating data. The proper functioning of the Group’s financial control, risk management, credit analysis and reporting, accounting, customer service and other information technology systems, as well as the communication networks between its branches and main data processing centres, are critical to the Group’s business and ability to compete effectively. The Group’s business activities would be materially disrupted if there is a partial or complete failure of any of these information technology systems or communications networks. Such failures can be caused by a variety of factors, many of which are wholly or partially outside the Group’s control including natural disasters, extended power outages and computer viruses. The proper functioning of the Group’s information technology systems also depends on accurate and reliable data and other system input, which are subject to human errors. In addition, given the Group’s high volume of transactions, errors may be repeated or compounded before they are discovered and rectified. Any failure or delay in recording or processing the Group’s transaction data could subject it to claims for losses and regulatory fines and penalties. The Group has implemented and tested business continuity plans and processes as well as disaster recovery procedures, but there can be no assurance that these safeguards will be fully effective and any failure may have a material adverse effect on the Group’s business and reputation.

The Group’s risk management policies and procedures may not be effective in all circumstances and may leave it exposed to unidentified or unanticipated risks The Group’s risk management strategies and internal controls may not be effective in all circumstances and may leave the Group exposed to unidentified or unanticipated risks, particularly in relation to Bank of Africa where the Group is implementing a multi-year programme to enhance Bank of Africa’s risk management systems, see ‘‘—The Group has a significant investment in Bank of Africa which exposes the Group to a range of risks’’ above. There can be no assurance that the Group’s risk management and internal control policies and procedures will adequately control, or protect the Group against, all credit, liquidity, market, operational and other risks. In addition, certain risks may not be accurately quantified by the Group’s risk management systems. Some of the Group’s methods of managing risk are based upon the use of historical market data which, as evidenced by events caused by the global financial crisis, may not always accurately predict future risk exposures, which could be significantly greater than historical measures indicate. In addition, certain risks could be greater than the Group’s empirical data would otherwise indicate. Other risk management methods depend upon evaluation of information regarding the markets in which the Group operates, its clients or other matters that are publicly available or where information is otherwise accessible to the Group. This information may not be accurate, complete, up-to-date or properly evaluated in all cases. Any material deficiency in the Group’s risk management or other internal

21 control policies or procedures may expose it to significant credit, liquidity, market or operational risk, which may in turn have a material adverse effect on the Group’s business, financial condition, results of operations and prospects.

The Group’s internal compliance systems might not be fully effective in all circumstances The Group’s ability to comply with all applicable regulations is largely dependent on its maintenance of compliance, audit and reporting systems and procedures, and its ability to attract and retain personnel qualified to manage and monitor such systems and procedures. Although the Group is subject to oversight by regulatory authorities, including regular examination activity, and performs regular internal audits, the Group cannot be certain that these systems and procedures will be fully effective in all circumstances, particularly in the case of deliberate employee misconduct or other frauds perpetrated against the Group. In the case of actual or alleged non-compliance with applicable regulations, the Group could be subject to investigations and judicial or administrative proceedings that may result in substantial penalties or civil lawsuits for damages. Any of these could have a material adverse effect on the Group’s business, financial condition, results of operations and prospects.

Approximately 73 per cent. of the Bank’s shares are controlled by three significant shareholders or shareholder groups who may be able, individually or together, to exert significant control over the Bank and whose interests may, in certain circumstances, conflict with those of Noteholders As at 30 September 2013, 73.43 per cent. of the Bank’s shares were controlled by: . the FinanceCom Group, a major Moroccan business group, which in aggregate held 38.76 per cent. of the Bank’s shares as at 30 September 2013; . Banque Fe´de´rative du Cre´dit Mutuel, the holding company of the Cre´dit Mutuel Centre Est Europe – CIC group, which held 26.21 per cent. of the Bank’s shares as at 30 September 2013; and . CDG Group, a significant institutional investor in Morocco, which held 8.46 per cent. of the Bank’s shares as at 30 September 2013. A proposal at an extraordinary general assembly of shareholders of the Bank requires a vote of two-thirds of the shareholders present at the meeting to be passed, while a simple majority vote is required to pass a proposal at an annual general assembly. As a result, these shareholders acting together or, in certain cases with other major shareholders may be able to block certain actions or resolutions proposed at the Bank’s annual or extraordinary shareholder assemblies. Consequently, investors should note that the interests of these shareholders may, in certain circumstances, be different from those of the Group’s creditors (including the holders of the Notes) and, in those circumstances, the holders of the Notes could be disadvantaged.

The Group may need to raise further capital in the future for a variety of reasons and such capital may be difficult to raise when needed As at 31 December in each of 2011 and 2012 and as at 30 June 2013, the Group’s tier 1 capital adequacy ratio (calculated according to Basel II standards) was 8.73 per cent., 9.68 per cent. and 9.05 per cent., respectively, and its total capital adequacy ratio was 12.26 per cent., 13.14 per cent. and 12.94 per cent., respectively. Although the Basel II required total capital adequacy ratio is 8 per cent., Bank Al-Maghrib increased its required ratio from 8 per cent. in 2007 to 10 per cent. in 2008 and to 12 per cent. with effect from June 2013. A variety of factors affect the Group’s capital adequacy levels, including, in particular, changes in its risk weighted assets and its profitability from period to period. A significant increase in lending in the future is likely to reduce the Group’s capital adequacy ratios and any future losses experienced by it would have a similar effect. In addition, regulatory requirements in relation to the calculation of capital adequacy and required levels of capital adequacy change from time to time. The Group may also need to increase its capital as a result of market perceptions of adequate capitalisation levels and the perceptions of rating agencies. As a result, the Group may need to obtain additional capital in the future. Such capital, whether in the form of debt financing or additional equity, may not be available on commercially favourable terms, or at all. Moreover, should the Group’s capital ratios fall close to regulatory minimum levels or the Group’s own internal minimum levels, the Group may need to adjust its business practices, including reducing the risk and leverage of certain activities. If the Group is unable to maintain satisfactory capital adequacy ratios, its credit ratings may be lowered and its cost of funding may therefore increase.

22 The Group may not be able to recruit and retain qualified and experienced personnel, which could have an adverse effect on its business and its ability to implement its strategy The Group’s success and ability to maintain current business levels and sustain growth will depend, in part, on its ability to continue to recruit and retain qualified and experienced banking and management personnel. The market for such personnel in Morocco and certain other markets where the Group operates is intensely competitive and the Group could face challenges in recruiting and retaining such personnel to manage its businesses. The Group depends on the efforts, skill, reputation and experience of its senior management, as well as synergies among their diverse fields of expertise and knowledge. The loss of key personnel could delay or prevent the Group from implementing its strategies. The Bank is also not insured against losses that may be incurred in the event of the loss of any member of its key personnel.

RISKS RELATING TO SECURITIES ISSUED BY AN ISSUER LOCATED IN MOROCCO Investing in securities involving emerging markets generally involves a higher degree of risk Investing in securities of issuers located in emerging markets, such as Morocco, generally involves a higher degree of risk than investments in securities of issuers from more developed countries. These higher risks include, but are not limited to, higher volatility, limited liquidity and changes in the political and economic environment. Morocco’s budget deficits and other weaknesses characteristic of emerging market economies make it susceptible to future adverse effects similar to those suffered by other emerging market countries. In addition, there can be no assurance that the market for securities bearing emerging market risk, such as the Notes, will not be affected negatively by events elsewhere, especially in emerging markets. Specific risks in Morocco that could have a material adverse effect on the Group’s business, financial condition, results of operations and prospects include, without limitation, the following: . political, economic or social instability; . external acts of warfare, civil clashes or other hostilities or conflict; . criminal activity including organised crime and money laundering; . domestic unrest or violence; . increases in inflation and the cost of living; . changing tax regimes and tax laws, including the imposition of taxes in tax-free jurisdictions or the increase of taxes in low-tax jurisdictions; . government interventions and protectionism; . potential adverse changes in laws and regulatory practices, including legal structures and tax laws; . difficulties in staffing and managing operations; . legal systems which could make it difficult for the Group to enforce its intellectual property and contractual rights; . restrictions on the right to convert or repatriate currency or export assets; . greater risk of uncollectible accounts and longer collection cycles; . currency fluctuations; and . logistical and communications challenges. In addition, international investors’ reactions to events occurring in one emerging market country or region sometimes appear to demonstrate a contagion effect, in which an entire region or class of investment is disfavoured by such investors. If such a contagion effect occurs, Morocco could be adversely affected by negative economic or financial developments in other emerging market countries. Morocco has been adversely affected by contagion effects in the past, including recent volatility in the Middle East and North Africa (MENA) region, as well as the recent global financial crisis. No assurance can be given that it will not be affected by similar effects in the future. Prospective investors should also note that emerging economies, such as Morocco’s, are subject to rapid change and that the information set out in this Prospectus may become outdated relatively quickly. Accordingly, prospective investors should exercise particular care in evaluating the risks involved and

23 must decide for themselves whether, in light of those risks, their investment is appropriate. Generally, investment in emerging markets is suitable only for sophisticated investors who fully appreciate the significance of the risks involved. Prospective investors are urged to consult with their own legal and financial advisers before making an investment decision.

Morocco is located in a region that is subject to ongoing political and security concerns A number of countries located in the MENA region are either experiencing, or have in the recent past experienced, political instability, domestic turmoil and violence, and armed conflict. For example, since the Arab Spring began, a number of Arab countries have experienced significant political and military upheaval, conflict and revolutions leading to the departure of long-time rulers in Tunisia, Egypt, Yemen and Libya. In addition, Syria has experienced significant on-going civil unrest and internal conflict. In July 2012, the Moroccan government expelled the Syrian ambassador to Morocco. Within Morocco, predominantly peaceful demonstrations calling for reform occurred in a number of Moroccan cities commencing on 20 February 2011, which led to the development of the 20 February Movement (the 20 February Movement). In response to the calls for reform of the 20 February Movement, a new Constitution (the 2011 Constitution) was approved by a vote of the Moroccan people in a referendum on 1 July 2011. Since the approval of the 2011 Constitution, there have been further demonstrations, including in May 2012, calling for the implementation of economic and further constitutional reforms. There can be no assurance that further demonstrations or political protests will not take place. Such events could directly or indirectly affect Morocco and its economy. Since 1975, Morocco has been involved in a territorial conflict involving the Western Sahara, a phosphate-rich region in the south. Morocco’s sovereignty over the territory is disputed by the Popular Front for the Liberation of Saguia el Hamra and Rio de Oro (the Polisario Front) which has waged a violent campaign of resistance against Morocco with the logistical and diplomatic support of the Algerian government. In 1991, a ceasefire was arranged with the intention of holding a referendum on self-determination under the supervision of the United Nations. The referendum has been postponed several times due to disputes over who is qualified to vote. Although the ceasefire remains in place, any renewal of violence in the region may require a greater military presence, and the costs associated with such a presence have in the past affected and may in the future affect in a materially adverse manner the Moroccan government’s finances. In addition to the above factors, terrorist acts, acts of maritime piracy and other forms of instability in the MENA region, such as tensions between the United States, Israel and Iran, that may or may not directly involve Morocco, could have an adverse effect on Morocco’s economy and its ability to engage in international trade which, in turn, could have an adverse effect on the Group’s business, financial condition, results of operations and prospects.

The future performance of the Moroccan economy is subject to a range of risks, some of which the Moroccan government is unable to control or influence Morocco’s economic performance has in the past been hampered by its large public sector, the vulnerability of agricultural production to drought, a reliance on exports of phosphates and phosphate derivatives and moderate rates of unemployment. In recent years, the Moroccan economy has experienced uneven growth, with real GDP growth rates of 2.7 per cent. in 2007, 5.6 per cent. in 2008, 4.8 per cent. in 2009, 3.6 per cent. in 2010 and 5.0 per cent. in 2011. The preliminary estimate of the GDP growth rate for 2012 made by the HCP is 2.7 per cent. In addition, in 2011, the Moroccan government increased its spending on fuel and food subsidies and introduced a public sector wage increase. In the absence of adequate reform, the cost of such expenditures may put pressure on the budget. There can be no assurance that any such reforms will be successful or that the government will not face social resistance to the implementation of such reforms. A failure to introduce or implement adequate reforms, in full or in part, could have a material adverse impact on Morocco, its economy and its budget deficit and, consequently, the public debt. Morocco’s current account deficit was 5.4 per cent. of GDP in 2009, before declining to 4.5 per cent. of GDP in 2010 and increasing to 8.0 per cent. of GDP in 2011 and 9.9 per cent. in 2012. Since 2007, the current account deficit has been financed, at least in part, by increased borrowing. If the current account deficit is not reduced, further levels of borrowing will be needed to finance the deficit, which could negatively affect Morocco’s economy.

24 The Moroccan economy also remains vulnerable to external shocks, including events part of, or similar to, the Arab Spring, the global financial crisis and the European sovereign debt crisis, as well as to increased international commodity prices. A continued decline in the economic growth of, or receipt of remittances from, Morocco’s major trading partners, such as France, Spain or the United States, as a result of such external shocks, could have a material adverse impact on Morocco’s balance of trade and adversely affect its economic growth. There are a number of other significant factors that may adversely affect the future performance of the Moroccan economy, including: . Subsidies: The Moroccan government incurs material expenditure on subsidies, principally in relation to petrol, diesel and butane, as well as sugar and wheat. In 2012, subsidies represented 6.6 per cent. of GDP. The cost of subsidies paid by the government is highly dependent on international commodity prices. Unless the government is successful in reforming the subsidy system, future subsidy costs could have a material adverse effect on Morocco’s budget deficit and economy. . Exposure to commodity prices: Morocco is a net importer of energy and imports more than 95 per cent. of its energy requirements, in particular crude oil and oil products. In addition, Morocco does not produce 100 per cent. of its domestic consumption of food and, therefore, relies significantly on food imports, in particular cereals. Disruptions of imports or higher international commodity prices would have a material adverse effect on its economy and finances. . Climate changes: Morocco has a variable climate and water shortages and drought are recurrent problems in many parts of Morocco. Low or unpredictable rainfall impacts on Morocco’s primary sector activities, most notably in the agricultural sector and such yearly rainfall variations continue to have a major effect on GDP, prices and the balance of trade. Periods of drought have generally corresponded to declines in the rate of growth of GDP and periods of abundant rainfall have generally corresponded to increases in the rate of growth of GDP. Droughts and other adverse climatic events, particularly if sustained over a long period, have affected and may in the future affect in a materially adverse manner the government’s finances and rate of GDP growth. . Impact of terrorism: Morocco has experienced terrorist attacks in recent years, including bombings in Casablanca in May 2003 and in March and April 2007 and a bombing in Marrakesh in April 2011. Further incidents of terrorism could hamper several key sectors of the Moroccan economy, most notably tourism.

The statistical data contained in this document should be treated with caution by prospective investors Statistics contained in this document, including in relation to GDP, balance of payments, revenues and expenditures, and indebtedness of the Moroccan government, have been obtained from, among other sources, the HCP, Bank Al-Maghrib, other government ministries and agencies and the IMF. Such statistics, and the component data on which they are based, may not have been compiled in the same manner as data provided by other sources and may be different from statistics published by third parties, reflecting the fact that the underlying assumptions and methodology may vary from source to source. Morocco’s official financial and economic statistics are subject to review as part of a regular confirmation process. Accordingly, financial and economic information may differ from previously published figures and may be subsequently adjusted or revised. Certain of the information and data contained in this Prospectus for all or part of 2011 and 2012 are preliminary and subject to further adjustment or revision. There may also be material variances between preliminary, estimated or projected statistics set forth in this document and actual results, and between statistics set forth in this document and corresponding data previously published by or on behalf of Morocco. Consequently, the statistical data contained in this document should be treated with caution by prospective investors.

RISKS RELATING TO THE NOTES The Notes may not be a suitable investment for all investors In addition to the risks associated with investing in emerging markets such as Morocco, each potential investor in the Notes must determine the suitability of that investment in light of its own circumstances. In particular, each potential investor should:

25 . have sufficient knowledge and experience to make a meaningful evaluation of the Notes, the merits and risks of investing in the Notes and the information contained in this Prospectus; . have access to, and knowledge of, appropriate analytical tools to evaluate, in the context of its particular financial situation, an investment in the Notes and the impact the Notes will have on its overall investment portfolio; . have sufficient financial resources and liquidity to bear all of the risks of an investment in the Notes; . understand thoroughly the terms of the Notes and be familiar with the behaviour of financial markets; and . be able to evaluate (either alone or with the help of a financial adviser) possible scenarios for economic, interest rate and other factors that may affect its investment and its ability to bear the applicable risks. The Notes are complex financial instruments. Sophisticated institutional investors generally do not purchase complex financial instruments as stand-alone investments but as a way to reduce risk or enhance yield with an understood, measured, appropriate addition of risk to their overall portfolios. A potential investor should not invest in the Notes unless it has the expertise (either alone or with a financial adviser) to evaluate how the Notes will perform under changing conditions, the resulting effects on the value of the Notes and the impact this investment will have on the potential investor’s overall investment portfolio.

An active secondary market in respect of the Notes may never be established or may be illiquid and this would adversely affect the value at which an investor could sell his Notes The Notes are new securities which may not be widely distributed and for which there is currently no active trading market. If the Notes are traded after their initial issuance, they may trade at a discount to their initial offering price, depending upon prevailing interest rates, the market for similar securities, general economic conditions and the financial condition of the Issuer. Although an application has been made for the Notes to be admitted to listing on the official list and to trading on the Luxembourg Stock Exchange’s regulated market, there is no assurance that such application will be accepted or that an active trading market will develop. Accordingly, there is no assurance as to the development or liquidity of any trading market for the Notes.

Certain select provisions of the Notes are governed by Moroccan law which could influence the way in which a Noteholder can exercise its rights in respect of its Notes in certain circumstances Condition 13 (Representation of Noteholders and Modification) of the Notes is governed by Moroccan law. As described in Condition 13, there is a mandatory requirement under Moroccan law that Noteholders be represented by a designated representative (the ‘‘Representative’’ as defined in Condition 13) in certain circumstances. The Representative, if duly authorised to do so by the General Assembly of the Noteholders, has the exclusive power to take legal actions on behalf of all the Noteholders for any issue affecting all the Noteholders. Furthermore, in the absence of any decision to the contrary by the General Assembly (as defined in Condition 13), the Representative has the power to take on behalf of the Masse (as defined in Condition 13), management acts (apart from alienation and conservatory actions) necessary to safeguard the common interests of the Noteholders. This does not affect the way in which a Noteholder may, and the ability of a Noteholder to, give notice to the Issuer declaring that the Notes are immediately due and payable after the occurence of an Event of Default (as defined in Condition 9). Pursuant to article 309 of law 17-95, any decision of the Issuer that could affect the rights of the Noteholders, must be approved by the General Assembly. If the General Assembly does not approve such a decision, the Issuer may nevertheless take such a decision, provided that the Noteholders are given an option to redeem their Notes within three months from the date on which the decision is in effect. In such a situation, Noteholders may therefore have to choose between accepting such a decision affecting their rights, or an early redemption of the Notes. The Agency Agreement includes provisions for how Noteholders can convene a meeting of the General Assembly to direct the Representative to act on their behalf (see Schedule 4 (Provisions for Meetings of the Noteholders) of the Agency Agreement). Those provisions, which comply with Moroccan law requirements, include certain notice period requirements and requirements as to quorum and voting that are different from, and lower than, the provisions typical for instruments such as the Notes. Noteholders

26 are deemed to have notice of those provisions and are required to familiarise themselves with their requirements. The quorum and voting requirements mean that the Representative wishing to take legal action on behalf of all the Noteholders in relation to an issue affecting all the Noteholders will need to be authorised in advance by the General Assembly (as set out above) by a simple majority of the requisite quorum of Noteholders (such quorum being (i) a minimum of 25 per cent. of the Notes then outstanding (as defined in the Agency Agreement) at the first General Assembly or, if that meeting is inquorate (ii) those Notes outstanding (in whatever amount) as are represented at an adjourned General Assembly). A failure to comply with the applicable provisions of Moroccan law in this regard may mean that any judgment ultimately obtained outside of Morocco in respect of an issue affecting all the Noteholders without the Representative’s participation may not be enforceable in Morocco. This may affect the way in which, and the ability of, a Noteholder to take legal action that concerns the Masse (as defined in Condition 13) as a whole. The use of the Representative to act on behalf of Noteholders in the context of an international securities offering (like the Notes) is untested. Accordingly, there is no practice or precedent in this regard and whilst the Issuer regards the above as being a fair summary of the position, Noteholders are advised to seek appropriate legal advice before taking any legal or other action in connection with the Notes. No assurance can be given as to the impact of any possible judicial decision or change in Moroccan law or administrative practice after the date of this Prospectus and any such decision or change could materially adversely impact the value of the Notes.

The Notes may be redeemed prior to their stated maturity Payments of interest under the Notes will be subject to Moroccan withholding tax at a rate of 10 per cent. The Issuer has undertaken to pay additional amounts such that holders receive the amount of interest they would have received had there been no such withholding. If the Issuer has or will become obliged to pay additional amounts as provided or referred to in Condition 8 (Taxation) as a result of any change in, or amendment to, the laws or regulations of Morocco or any political subdivision or any authority thereof or therein having power to tax, or any change in the application or official interpretation of such laws or regulations (including a holding by a court of competent jurisdiction), which change or amendment becomes effective on or after 27 November 2013, the Issuer may redeem all outstanding Notes in accordance with the Conditions.

Because the Global Note Certificate is held by or on behalf of Euroclear and Clearstream, Luxembourg, investors will have to rely on their procedures for transfer, payment and communication with the Issuer The Notes will be represented by the Global Note Certificate except in certain limited circumstances described in the Global Note Certificate. The Global Note Certificate will be registered in the name of Citvic Nominees Limited as nominee for, and deposited with, a common depositary for Euroclear and Clearstream, Luxembourg. Individual Note Certificates evidencing holdings of Notes will only be available in certain limited circumstances. Euroclear and Clearstream, Luxembourg will maintain records of the beneficial interests in the Global Note Certificate. While the Notes are represented by the Global Note Certificate, investors will be able to trade their beneficial interests only through Euroclear and Clearstream, Luxembourg. The Issuer will discharge its payment obligations under the Notes by making payments to or to the order of the common depositary for Euroclear and Clearstream, Luxembourg for distribution to their account holders. A holder of a beneficial interest in the Global Note Certificate must rely on the procedures of Euroclear and Clearstream, Luxembourg to receive payments under the Notes. The Issuer has no responsibility or liability for the records relating to, or payments made in respect of, beneficial interests in the Global Note Certificate. Holders of beneficial interests in the Global Note Certificate will not have a direct right to vote in respect of the Notes. Instead, such holders will be permitted to act only to the extent that they are enabled by Euroclear and Clearstream, Luxembourg to appoint appropriate proxies. Similarly, holders of beneficial interests in the Global Note Certificate will not have a direct right under the Global Note Certificate to take enforcement action against the Issuer in the event of a default under the Notes but will have to rely upon their rights under the Deed of Covenant (as defined in the Conditions of the Notes).

27 Investors who purchase Notes in denominations that are not an integral multiple of U.S.$200,000 may be adversely affected if Individual Note Certificates are subsequently required to be issued As the Notes have a denomination consisting of U.S.$200,000 plus higher integral multiples of U.S.$1,000, it is possible that the Notes may be traded in amounts in excess of U.S.$200,000 (or its equivalent) that are not integral multiples of U.S.$200,000 (or its equivalent). In such case a Noteholder who, as a result of trading such amounts, holds a principal amount of less than U.S.$200,000 may not receive an Individual Note Certificate in respect of such holding (should Individual Note Certificates be printed) and would need to purchase a principal amount of Notes such that its holding amounts to at least U.S.$200,000 in order to receive an Individual Note Certificate.

Credit ratings assigned to the Issuer may not reflect all the risks associated with an investment in the Notes The Notes are expected to be rated Ba1 by Moody’s. The rating may not reflect the potential impact of all risks related to structure, market, additional factors discussed above, and other factors that may affect the value of the Notes. A credit rating is not a recommendation to buy, sell or hold securities and may be subject to suspension, reduction or withdrawal at any time by the assigning rating agency. Any adverse change in an applicable credit rating could adversely affect the trading price for the Notes.

The Notes may be subject to withholding taxes in circumstances where the Issuer is not obliged to make gross up payments and this would result in Holders receiving less interest than expected and could significantly adversely affect their returns on the Notes Under EC Council Directive 2003/48/EC (the Directive) on the taxation of savings income, a Member State is required to provide to the tax authorities of another Member State details of payments of interest (or similar income) paid by a person within its jurisdiction to an individual resident in that other Member State. However, for a transitional period, Luxembourg and Austria are instead required (unless during that period they elect otherwise) to operate a withholding system in relation to such payments (the ending of such transitional period being dependent upon the conclusion of certain other agreements relating to information exchange with certain other countries). A number of non EU countries and territories including Switzerland have adopted similar measures (a withholding system in the case of Switzerland). The European Commission has proposed certain amendments to the Directive which may, if implemented, amend or broaden the scope of the requirements described above. If a payment were to be made or collected through a Member State which has opted for a withholding system and an amount of, or in respect of, tax were to be withheld from that payment, neither the Issuer nor any Paying Agent would be obliged to pay additional amounts with respect to the Notes as a result. The Issuer is required to maintain a Paying Agent in a Member State that is not obliged to withhold or deduct tax pursuant to the Directive.

Sales of the Notes may be subject to in Morocco Unless specified otherwise in a treaty signed between Morocco and the residence country of the Noteholder, for Moroccan tax purposes, a capital gain derived from the disposal of Notes issued by a Moroccan entity is considered sourced in Morocco, and therefore subject to taxation in Morocco. The individual or entity that is not resident in Morocco will be subject to Moroccan capital gains tax only by virtue of realising a capital gain on the Notes issued by the Moroccan entity. See further ‘‘Taxation’’ below for further details on the amounts payable. If a double taxation treaty is in effect between Morocco and the country of the holder of the Notes, it may provide for the application of a different taxation aimed at eliminating or reducing double taxation. Each investor should consult its own tax advisers concerning the tax considerations applicable to its particular situation taking into account the existence or not of a double taxation treaty signed between Morocco and the country of the holder of the Notes.

The value of the Notes may be adversely affected by movements in market interest rates Investment in the Notes involves the risk that if market interest rates subsequently increase above the rate paid on the Notes, this will adversely affect the value of the Notes.

28 The Notes are unsecured obligations of the Issuer The Issuer’s obligations under the Notes are unsecured. Accordingly, any claims against the Issuer under the Notes will be unsecured claims. The ability of the Issuer to pay such claims will depend upon, among other factors, its liquidity, overall financial strength and ability to generate cash flows.

The value of the Notes could be adversely affected by a change in law The Conditions of the Notes (apart from Condition 13 (Representation of Noteholders; Modification)) are governed by English law. Condition 13 of the Notes is governed by Moroccan law. No assurance can be given as to the impact of any possible judicial decision or change to English or Moroccan law or administrative practice after the date of this Prospectus and any such decision or change could materially adversely impact the value of the Notes.

If the Notes are not denominated in an investor’s home currency, the investor will be exposed to movements in exchange rates adversely affecting the value of his holding. In addition, the imposition of exchange controls in relation to the Notes could result in an investor not receiving payments on the Notes The Issuer will pay principal and interest on the Notes in U.S. dollars. This presents certain risks relating to currency conversions if an investor’s financial activities are denominated principally in a currency (the Investor’s Currency) other than U.S. dollars. These include the risk that exchange rates may significantly change (including changes due to devaluation of the U.S. dollar or revaluation of the Investor’s Currency) and the risk that authorities with jurisdiction over the Investor’s Currency may impose or modify exchange controls. An appreciation in the value of the Investor’s Currency relative to the U.S. dollar would decrease (1) the Investor’s Currency equivalent yield on the Notes, (2) the Investor’s Currency equivalent value of the principal payable on the Notes and (3) the Investor’s Currency equivalent market value of the Notes. Government and monetary authorities may impose (as some have done in the past) exchange controls that could adversely affect an applicable exchange rate. As a result, investors may receive less interest or principal than expected, or no interest or principal.

29 DOCUMENT INCORPORATED BY REFERENCE The following documents which have previously been published and has been filed with the CSSF shall be incorporated in, and form part of, this Prospectus: The auditors’ report and audited consolidated annual financial statements for the financial year ended 31 December 2011 of the Issuer including the information set out at the following pages in particular: Balance Sheet ...... Page 12 Income Statement ...... Page 13 Statement of Changes in Shareholder’s Equity...... Page 14 Cash Flow Statement...... Page 15 Accounting Principles and Notes...... Pages 2to40 Audit Report...... Page 1

The information incorporated by reference that is not included in the cross-reference list, is considered as additional information and is not required by the relevant schedules of the Prospectus Regulation. Following the publication of this Prospectus a supplement may be prepared by the Issuer and approved by the CSSF in accordance with Article 16 of the Prospectus Directive. Statements contained in any such supplement (or contained in any document incorporated by reference therein) shall, to the extent applicable (whether expressly, by implication or otherwise), be deemed to modify or supersede statements contained in this Prospectus or in a document which is incorporated by reference in this Prospectus. Any statement so modified or superseded shall not, except as so modified or superseded, constitute a part of this Prospectus. Copies of documents incorporated by reference in this Prospectus can be obtained from the registered office of the Issuer and from the specified offices of the Paying Agents for the time being in London. Any documents themselves incorporated by reference in the documents incorporated by reference in this Prospectus shall not form part of this Prospectus as they are either not relevant for the investor or are covered in another part of the prospectus.

30 TERMS AND CONDITIONS OF THE NOTES The following is the text of the Terms and Conditions of the Notes which (subject to completion and amendment) will be endorsed on each Note in definitive form: The U.S.$300,000,000 6.25 per cent. Notes due 2018 (the Notes, which expression includes any further notes issued pursuant to Condition 14 (Further issues) and forming a single series therewith) of Banque Marocaine du Commerce Exte´rieur (the Issuer) are constituted by a deed of covenant dated 27 November 2013 (as amended or supplemented from time to time, the Deed of Covenant) entered into by the Issuer and are the subject of a fiscal agency agreement dated 27 November 2013 (as amended or supplemented from time to time, the Agency Agreement) between the Issuer, Citigroup Global Markets Deutschland AG as registrar (the Registrar, which expression includes any successor registrar appointed from time to time in connection with the Notes), Citibank, N.A., London Branch as fiscal agent (the Fiscal Agent, which expression includes any successor fiscal agent appointed from time to time in connection with the Notes), the transfer agents named therein (the Transfer Agents, which expression includes any successor or additional transfer agents appointed from time to time in connection with the Notes) and the paying agents named therein (together with the Fiscal Agent, the Paying Agents, which expression includes any successor or additional paying agents appointed from time to time in connection with the Notes). References herein to the Agents are to the Registrar, the Fiscal Agent, the Transfer Agents and the Paying Agents and any reference to an Agent is to any one of them. Certain provisions of these Conditions are summaries of the Agency Agreement and the Deed of Covenant and are subject to their detailed provisions. The Noteholders (as defined below) are bound by, and are deemed to have notice of, all the provisions of the Agency Agreement and the Deed of Covenant applicable to them. Copies of the Agency Agreement and the Deed of Covenant are available for inspection by Noteholders during normal business hours at the Specified Offices (as defined in the Agency Agreement) of each of the Agents, the initial Specified Offices of which are set out below.

1. Form, Denomination and Status (a) Form and denomination: The Notes are in registered form in the denomination of U.S.$200,000 and integral multiples of U.S.$1,000 in excess thereof (each, an Authorised Denomination). (b) Status: The Notes constitute direct, general, unsecured, unsubordinated and unconditional obligations of the Issuer which will at all times rank pari passu among themselves and at least pari passu with all other present and future unsecured and unsubordinated obligations of the Issuer, save for such obligations as may be preferred by provisions of law that are both mandatory and of general application.

2. Register, Title and Transfers (a) Register: The Registrar will maintain a register (the Register) in respect of the Notes in accordance with the provisions of the Agency Agreement. In these Conditions, the Holder of a Note means the person in whose name such Note is for the time being registered in the Register (or, in the case of a joint holding, the first named thereof) and Noteholder shall be construed accordingly. A certificate (each, a Note Certificate) will be issued to each Noteholder in respect of its registered holding. Each Note Certificate will be numbered serially with an identifying number which will be recorded in the Register. (b) Title: The Holder of each Note shall (except as otherwise required by law) be treated as the absolute owner of such Note for all purposes (whether or not it is overdue and regardless of any notice of ownership, trust or any other interest therein, any writing on the Note Certificate relating thereto (other than the endorsed form of transfer) or any notice of any previous loss or theft of such Note Certificate) and no person shall be liable for so treating such Holder. No person shall have any right to enforce any term or condition of the Notes under the Contracts (Rights of Third Parties) Act 1999. (c) Transfers: Subject to paragraphs (f) (Closed periods) and (g) (Regulations concerning transfers and registration) below, a Note may be transferred upon surrender of the relevant Note Certificate, with the endorsed form of transfer duly completed, at the Specified Office of the Registrar or any Transfer Agent, together with such evidence as the Registrar or (as the case may be) such Transfer Agent may reasonably require to prove the title of the transferor and the authority of the individuals who have executed the form of transfer; provided, however, that a Note may not be transferred unless the principal amount of Notes transferred and (where not all of the Notes held by a Holder are being transferred) the principal amount of the balance of Notes not transferred are

31 Authorised Denominations. Where not all the Notes represented by the surrendered Note Certificate are the subject of the transfer, a new Note Certificate in respect of the balance of the Notes will be issued to the transferor. (d) Registration and delivery of Note Certificates: Within five business days of the surrender of a Note Certificate in accordance with paragraph (c) (Transfers) above, the Registrar will register the transfer in question and deliver a new Note Certificate of a like principal amount to the Notes transferred to each relevant Holder at its Specified Office or (as the case may be) the Specified Office of any Transfer Agent or (at the request and risk of any such relevant Holder) by uninsured first class mail (airmail if overseas) to the address specified for the purpose by such relevant Holder. In this paragraph, business day means a day on which commercial banks are open for general business (including dealings in foreign currencies) in the city where the Registrar or (as the case may be) the relevant Transfer Agent has its Specified Office. (e) No charge: The transfer of a Note will be effected without charge by or on behalf of the Issuer, the Registrar or any Transfer Agent but against such indemnity as the Registrar or (as the case may be) such Transfer Agent may require in respect of any tax or other of whatsoever nature which may be levied or imposed in connection with such transfer. (f) Closed periods: Noteholders may not require transfers to be registered during the period of 15 days ending on the due date for any payment of principal or interest in respect of the Notes. (g) Regulations concerning transfers and registration: All transfers of Notes and entries on the Register are subject to the detailed regulations concerning the transfer of Notes scheduled to the Agency Agreement. The regulations may be changed by the Issuer with the prior written approval of the Registrar. A copy of the current regulations will be mailed (free of charge) by the Registrar to any Noteholder who requests in writing a copy of such regulations.

3. Negative Pledge So long as any Note remains outstanding (as defined in the Agency Agreement), the Issuer shall not, and the Issuer shall procure that none of its Subsidiaries will, create or permit to subsist any Security Interest (other than a Permitted Security Interest) upon the whole or any part of its present or future undertaking, assets or revenues (including uncalled capital) to secure any Relevant Indebtedness or Guarantee of Relevant Indebtedness without (a) at the same time or prior thereto securing the Notes equally and rateably therewith or (b) providing such other security for the Notes as may be approved by the General Assembly of the Masse (as defined below). In these Conditions: Covered Bond means, a bond, note or similar instrument issued or guaranteed by the Issuer or any of its subsidiaries whereby the payment obligations under the instrument or the guarantee are secured by law on a segregated pool of assets; Guarantee means, in relation to any Indebtedness of any Person, any obligation of another Person to pay such Indebtedness including (without limitation): (a) any obligation to purchase such Indebtedness; (b) any obligation to lend money, to purchase or subscribe shares or other securities or to purchase assets or services in order to provide funds for the payment of such Indebtedness; (c) any indemnity against the consequences of a default in the payment of such Indebtedness; and (d) any other agreement to be responsible for such Indebtedness; Indebtedness means any indebtedness of any Person for money borrowed or raised including (without limitation) any indebtedness for or in respect of: (a) amounts raised by acceptance under any acceptance credit facility; (b) amounts raised under any note purchase facility; (c) the amount of any liability in respect of leases or hire purchase contracts which would, in accordance with applicable law and generally accepted accounting principles, be treated as finance or capital leases;

32 (d) the amount of any liability in respect of any purchase price for assets or services the payment of which is deferred for a period in excess of 60 days; and (e) amounts raised under any other transaction (including, without limitation, any forward sale or purchase agreement) having the commercial effect of a borrowing; Non-recourse Project Financing means any financing of all or part of the costs of the acquisition, construction or development of any project, provided that (i) any Security Interest given by the Issuer or any of its Subsidiaries in connection therewith is limited solely to the assets of the project, (ii) the Persons providing such financing expressly agree to limit their recourse to the project financed and the revenues derived from such project as the principal source of repayment for the moneys advanced and (iii) there is no other recourse to the Issuer or any of its Subsidiaries in respect of any default by any Person under the financing; Permitted Security Interest means: (a) any Security Interest in existence on 27 November 2013; (b) any Security Interest arising in the ordinary course of banking business by operation of mandatory provisions of law; (c) any Security Interest granted to secure a Non-recourse Project Financing or to secure any Indebtedness incurred in connection with a Securitisation; and (d) any Security Interest created in relation to the issuance of a Covered Bond; Person means any individual, company, corporation, firm, partnership, joint venture, association, organisation, state or agency of a state or other entity, whether or not having separate legal personality; Relevant Indebtedness means any Indebtedness which is in the form of or represented by any bond, note, debenture, debenture stock, loan stock, certificate or other instrument which is listed, quoted or traded on any stock exchange or in any securities market (including, without limitation, any over-the-counter market); Securitisation means any securitisation of existing or future assets and/or revenues, provided that (i) any Security Interest given by the Issuer or any of its Subsidiaries in connection therewith is limited solely to the assets and/or revenues which are the subject of the securitisation, (ii) each Person participating in such securitisation expressly agrees to limit its recourse to the assets and/or revenues securitised as the principal source of repayment for the moneys advanced or payment of any other liability and (iii) there is no other recourse to the Issuer or any of its Subsidiaries in respect of any default by any Person under the securitisation; Security Interest means any mortgage, charge, pledge, lien or other security interest including, without limitation, anything analogous to any of the foregoing under the laws of any jurisdiction; and Subsidiary means, in relation to any Person (the first Person) at any particular time, any other Person (the second Person) whose affairs and policies the first Person controls or has the power to control, whether by ownership of share capital, contract or the power to appoint or remove members of the governing body of the second Person.

4. Interest The Notes bear interest from 27 November 2013 (the Issue Date) at the rate of 6.25 per cent. per annum, (the Rate of Interest) payable in arrear on 27 May and 27 November in each year (each, an Interest Payment Date), subject as provided in Condition 7 (Payments). Each Note will cease to bear interest from the due date for redemption unless, upon due presentation, payment of principal is improperly withheld or refused, in which case it will continue to bear interest at such rate (both before and after judgment) until whichever is the earlier of (a) the day on which all sums due in respect of such Note up to that day are received by or on behalf of the relevant Noteholder and (b) the day on which the Fiscal Agent notifies the Noteholders that it has received all sums due in respect of the Notes (except to the extent that there is any subsequent default in payment).

33 The amount of interest payable on each Interest Payment Date shall be U.S.$31.25 in respect of each Calculation Amount. If interest is required to be paid in respect of a Note on any other date, it shall be calculated by applying the Rate of Interest to the Calculation Amount, multiplying the product by the relevant Day Count Fraction, rounding the resulting figure to the nearest cent (half a cent being rounded upwards) and multiplying such rounded figure by a fraction equal to the Authorised Denomination of such Note divided by the Calculation Amount, where: Calculation Amount means U.S.$1,000; Day Count Fraction means, in respect of any period, the number of days in the relevant period, from (and including) the first day in such period to (but excluding) the last day in such period, (such number of days being calculated on the basis of a year of 360 days with 12-30 day months) divided by 360; and Regular Period means each period from (and including) the Issue Date or any Interest Payment Date to (but excluding) the next Interest Payment Date.

5. Covenants (a) Financial information: So long as any of the Notes remain outstanding, the Issuer shall deliver to the Fiscal Agent: (a) not later than 120 days after the end of each of its financial years, copies of the Issuer’s audited consolidated financial statements for such financial year, prepared in accordance with IFRS (together with English translations thereof); and (b) not later than 60 days after the end of the second quarter of each of its financial years, copies of the Issuer’s unaudited consolidated interim financial statements for the six month period ended on the last day of the second quarter, prepared in accordance with IFRS (together with English translations thereof).

(b) Maintenance of capital adequacy and other ratios: (i) the Issuer shall not permit its total capital adequacy ratio to fall below the minimum total capital adequacy ratio required by Bank Al-Maghrib (other than for any period which is permitted by Bank Al-Maghrib); and (ii) the Issuer shall at all times comply with all rules, regulations and prudential supervision ratios of Bank Al-Maghrib applicable to banks in the Kingdom of Morocco, other than the requirements in relation to its permanent liquidity ratio (which requirements the Issuer need not comply with for so long as (i) Bank Al-Maghrib is not enforcing such permanent liquidity ratio and (ii) such permanent liquidity ratio of the Issuer remains consistent with that of comparable banks in the Kingdom of Morocco) and any other requirement in relation to which Bank Al-Maghrib has for the time being given a waiver in writing to the Issuer authorising such non-compliance.

(c) Definitions: In this Condition: (i) references to Bank Al-Maghrib shall include references to any successor to Bank Al-Maghrib as primary regulator of licensed banks in the Kingdom of Morocco. (ii) IFRS means International Financial Reporting Standards, including International Accounting Standards and Interpretations, issued by the International Accounting Standards Board as amended, supplemented or re-issued from time to time.

6. Redemption and Purchase (a) Scheduled redemption: Unless previously redeemed, or purchased and cancelled, the Notes will be redeemed at their principal amount on 27 November 2018, subject as provided in Condition 7 (Payments). (b) Redemption for tax reasons: The Notes may be redeemed at the option of the Issuer in whole, but not in part, at any time, on giving not less than 30 nor more than 60 days’ notice to the Noteholders (which notice shall be irrevocable), at their principal amount, together with interest accrued to but excluding the date fixed for redemption, if:

34 (i) the Issuer has or will become obliged to pay additional amounts as provided or referred to in Condition 8 (Taxation) as a result of any change in, or amendment to, the laws or regulations of Morocco or any political subdivision or any authority thereof or therein having power to tax, or any change in the application or official interpretation of such laws or regulations (including a holding by a court of competent jurisdiction), which change or amendment becomes effective on or after 27 November 2013; and (ii) such obligation cannot be avoided by the Issuer taking reasonable measures available to it; provided, however, that no such notice of redemption shall be given earlier than 90 days prior to the earliest date on which the Issuer would be obliged to pay such additional amounts if a payment in respect of the Notes were then due. Prior to the publication of any notice of redemption pursuant to this paragraph, the Issuer shall deliver to the Fiscal Agent: (A) a certificate signed by a duly authorised officer of the Issuer stating that the Issuer is entitled to effect such redemption and setting forth a statement of facts showing that the conditions precedent to the right of the Issuer so to redeem have occurred; and (B) an opinion of independent legal advisers of recognised standing to the effect that the Issuer has or will become obliged to pay such additional amounts as a result of such change or amendment. Upon the expiry of any such notice as is referred to in this Condition 6(b) (Redemption for tax reasons), the Issuer shall be bound to redeem the Notes in accordance with this Condition 6(b) (Redemption for tax reasons). (c) No other redemption: The Issuer shall not be entitled to redeem the Notes otherwise than as provided in paragraphs (a) (Scheduled redemption) and (b) (Redemption for tax reasons) above. (d) Purchase: The Issuer or any of its Subsidiaries may at any time purchase Notes in the open market or otherwise and at any price. (e) Cancellation: All Notes so redeemed or purchased by the Issuer or any of its Subsidiaries shall be cancelled and may not be reissued or resold.

7. Payments (a) Principal: Payments of principal shall be made by U.S. dollar drawn on, or, upon application by a Holder of a Note to the Specified Office of the Fiscal Agent not later than the fifteenth day before the due date for any such payment, by transfer to a U.S. dollar account maintained by the payee with, a bank in New York City and (in the case of redemption) upon surrender (or, in the case of part payment only, endorsement) of the relevant Note Certificates at the Specified Office of any Paying Agent. (b) Interest: Payments of interest shall be made by U.S. dollar cheque drawn on, or, upon application by a Holder of a Note to the Specified Office of the Fiscal Agent not later than the fifteenth day before the due date for any such payment, by transfer to a U.S. dollar account maintained by the payee with, a bank in New York City and (in the case of interest payable on redemption) upon surrender (or, in the case of part payment only, endorsement) of the relevant Note Certificates at the Specified Office of any Paying Agent. Interpretation: In these Conditions, in respect of payments to be made in euro: TARGET2 means the Trans-European Automated Real-Time Gross Settlement Express Transfer payment system which utilises a single shared platform and which was launched on 19 November 2007; TARGET Settlement Day means any day on which TARGET2 is open for the settlement of payments in euro; and TARGET System means the TARGET2 system. (c) Payments subject to fiscal laws: All payments in respect of the Notes are subject in all cases to any applicable fiscal or other laws and regulations in the place of payment, but without prejudice to the provisions of Condition 8 (Taxation). No commissions or expenses shall be charged to the Noteholders in respect of such payments.

35 (d) Payments on business days: Where payment is to be made by transfer to a U.S. dollar account, payment instructions (for value the due date, or, if the due date is not a business day, for value the next succeeding business day) will be initiated and, where payment is to be made by U.S. dollar cheque, the cheque will be mailed (i) (in the case of payments of principal and interest payable on redemption) on the later of the due date for payment and the day on which the relevant Note Certificate is surrendered (or, in the case of part payment only, endorsed) at the Specified Office of a Paying Agent and (ii) (in the case of payments of interest payable other than on redemption) on the due date for payment. A Holder of a Note shall not be entitled to any interest or other payment in respect of any delay in payment resulting from (A) the due date for a payment not being a business day or (B) a cheque mailed in accordance with this Condition 7 (Payments) arriving after the due date for payment or being lost in the mail. In this paragraph, business day means any day on which banks are open for general business (including dealings in foreign currencies) in New York City and, in the case of surrender (or, in the case of part payment only, endorsement) of a Note Certificate, in the place in which the Note Certificate is surrendered (or, as the case may be, endorsed): (i) in the case of payment by transfer to a euro account (or other account to which euro may be credited or transferred) as referred to above, any day which is a TARGET Settlement Day; and (ii) in the case of surrender (or, in the case of part payment only, endorsement) of a Note Certificate, any day on which banks are open for general business (including dealings in foreign currencies) in the place in which the Note Certificate is surrendered (or, as the case may be, endorsed). (e) Partial payments: If a Paying Agent makes a partial payment in respect of any Note, the Issuer shall procure that the amount and date of such payment are noted on the Register and, in the case of partial payment upon presentation of a Note Certificate, that a statement indicating the amount and the date of such payment is endorsed on the relevant Note Certificate. (f) Record date: Each payment in respect of a Note will be made to the person shown as the Holder in the Register at the opening of business in the place of the Registrar’s Specified Office on the fifteenth day before the due date for such payment (the Record Date). Where payment in respect of a Note is to be made by cheque, the cheque will be mailed to the address shown as the address of the Holder in the Register at the opening of business on the relevant Record Date.

8. Taxation All payments of principal and interest in respect of the Notes by or on behalf of the Issuer shall be made free and clear of, and without withholding or deduction for or on account of, any present or future taxes, duties, assessments or governmental charges of whatever nature imposed, levied, collected, withheld or assessed by or on behalf of Morocco or any political subdivision thereof or any authority therein or thereof having power to tax, unless the withholding or deduction of such taxes, duties, assessments or governmental charges is required by law. In that event the Issuer shall pay such additional amounts as will result in receipt by the Noteholders of such amounts after such withholding or deduction as would have been received by them had no such withholding or deduction been required, except that no such additional amounts shall be payable in respect of any Note: (a) held by a Holder which is liable to such taxes, duties, assessments or governmental charges in respect of such Note by reason of its having some connection with Morocco other than the mere holding of the Note; or (b) where such withholding or deduction is imposed on a payment to an individual and is required to be made pursuant to European Council Directive 2003/48/EC on the taxation of savings income or any law implementing or complying with, or introduced in order to conform to, this Directive; or (c) held by a Holder who would have been able to avoid such withholding or deduction by arranging to receive the relevant payment through another Paying Agent in a member state of the European Union; or (d) where (in the case of a payment of principal or interest on redemption) the relevant Note Certificate is surrendered for payment more than 30 days after the Relevant Date except to

36 the extent that the relevant Holder would have been entitled to such additional amounts if it had surrendered the relevant Note Certificate on the last day of such period of 30 days. In these Conditions, Relevant Date means whichever is the later of (1) the date on which the payment in question first becomes due and (2) if the full amount payable has not been received in New York by the Fiscal Agent on or prior to such due date, the date on which (the full amount having been so received) notice to that effect has been given to the Noteholders. Any reference in these Conditions to principal or interest shall be deemed to include any additional amounts in respect of principal or interest (as the case may be) which may be payable under this Condition 8 (Taxation). If the Issuer becomes subject at any time to any taxing jurisdiction in addition to or other than Morocco, references in these Conditions to Morocco shall be construed as references to Morocco and or as the case may be, such other jurisdiction. Under current Moroccan laws and regulations, interest payment under the Notes to non-resident individuals or non-resident entities is subject to Moroccan withholding tax at a rate of 10 per cent.

9. Events of Default If any of the following events occurs and is continuing: (a) Non-payment: the Issuer fails to pay any amount of principal in respect of the Notes within seven days of the due date for payment thereof or fails to pay any amount of interest in respect of the Notes within 14 days of the due date for payment thereof; or (b) Breach of other obligations: the Issuer defaults in the performance or observance of any of its other obligations under or in respect of the Notes or the Deed of Covenant and such default remains unremedied for 30 days after written notice thereof, addressed to the Issuer by any Noteholder or Representative (as defined below), has been delivered to the Issuer or to the Specified Office of the Fiscal Agent; or (c) Cross-default of Issuer or Material Subsidiary: (i) any Indebtedness of the Issuer or any of its Material Subsidiaries is not paid when due or (as the case may be) within any originally applicable grace period; (ii) any such Indebtedness becomes (or becomes capable of being declared) due and payable prior to its stated maturity otherwise than at the option of the Issuer or (as the case may be) the relevant material Subsidiary or (provided that no event of default, howsoever described, has occurred) any person entitled to such Indebtedness; or (iii) the Issuer or any of its material Subsidiaries fails to pay when due any amount payable by it under any Guarantee of any Indebtedness; provided that no event in this paragraph (c) (Cross-default of Issuer or Material Subsidiary) shall constitute an Event of Default unless the amount of Indebtedness and/or the amount payable under any Guarantee, individually or when aggregated (without duplication) with any other Indebtedness or amount payable under any Guarantee as a result of any other event specified in this paragraph (c) (Cross-default of Issuer or Material Subsidiary) which has occurred and is continuing, exceeds U.S.$20,000,000 (or its equivalent in any other currency or currencies); or (d) Unsatisfied judgment: one or more judgment(s) or order(s) for the payment of an amount in excess of U.S.$20,000,000 (or its equivalent in any other currency or currencies), whether individually or in aggregate, is rendered against the Issuer or any of its Material Subsidiaries and continue(s) unsatisfied and unstayed for a period of 60 days after the date(s) thereof or, if later, the date therein specified for payment; or (e) Security enforced: a secured party takes possession of, a receiver, manager or other similar officer is appointed over the whole or substantially the whole of the undertaking, assets and revenues of the Issuer or any of its Material Subsidiaries; or (f) Insolvency, etc.: (i) the Issuer or any of its Material Subsidiaries becomes insolvent or is unable to pay its debts as they fall due, (ii) any corporate action, legal proceedings or other procedure or step is taken in relation to: (1) the bankruptcy of the Issuer or any of its Material

37 Subsidiaries; or (2) a reorganisation or a similar arrangement with any creditor of the Issuer or any of its Material Subsidiaries unless any petition to commence such legal proceedings or other procedure is discharged, stayed or dismissed within 90 calendar days of such commencement, (iii) an administrator or liquidator is appointed (or an application for any such appointment is made) in relation to the Issuer or any of its Material Subsidiaries, (iv) the Issuer or any of its Material Subsidiaries takes any action for a readjustment or deferment of any of its obligations or makes a general assignment or an arrangement or composition with or for the benefit of its creditors or declares a moratorium in respect of any of its Indebtedness or any Guarantee of any Indebtedness given by it, or (v) the Issuer or any of its Material Subsidiaries ceases or threatens to cease to carry on all or substantially all of its business (otherwise than, in the case of a Material Subsidiary of the Issuer, for the purposes of or pursuant to an amalgamation, consolidation, reorganisation or other similar restructuring whilst solvent); or (g) Winding up, etc.: an order is made or an effective resolution is passed for the winding up, liquidation or dissolution of the Issuer or any of its Material Subsidiaries (otherwise than, in the case of a Material Subsidiary of the Issuer, for the purposes of or pursuant to an amalgamation, consolidation, reorganisation or other similar restructuring whilst solvent); or (h) Analogous event: any event occurs which under the laws of Morocco has an analogous effect to any of the events referred to in paragraphs (d) (Unsatisfied judgment) to (g) (Winding up, etc.) above; or (i) Failure to take action, etc.: any action, condition or thing at any time required to be taken, fulfilled or done in order (i) to enable the Issuer lawfully to enter into, exercise its rights and perform and comply with its obligations under and in respect of the Notes and the Deed of Covenant, (ii) to ensure that those obligations are legal, valid, binding and enforceable and (iii) to make the Note Certificates and the Deed of Covenant admissible in evidence in the courts of Morocco is not taken, fulfilled or done; or (j) Unlawfulness: it is or will become unlawful for the Issuer to perform or comply with any of its obligations under or in respect of the Notes or the Deed of Covenant; then any Note may, by written notice addressed by the Holder thereof to the Issuer and delivered to the Issuer or to the Specified Office of the Fiscal Agent, be declared immediately due and payable, whereupon it shall become immediately due and payable at its principal amount together with accrued interest without further action or formality. For the purposes of this Condition 9 (Events of Default), a Material Subsidiary means at any time a Subsidiary whose total assets (consolidated in the case of a Subsidiary which itself has Subsidiaries) represent not less than 15 per cent. of the consolidated total assets of the Issuer and its Subsidiaries taken as a whole, all as calculated respectively by reference to the then latest audited accounts (consolidated or, as the case may be, unconsolidated) of such Subsidiary and the then latest audited consolidated accounts of the Issuer and its Subsidiaries.

10. Prescription Claims for principal and interest on redemption shall become void unless the relevant Note Certificates are surrendered for payment within ten years of the appropriate Relevant Date.

11. Replacement of Note Certificates If any Note Certificate is lost, stolen, mutilated, defaced or destroyed, it may be replaced at the Specified Office of the Registrar or the Transfer Agent, subject to all applicable laws and stock exchange requirements, upon payment by the claimant of the expenses incurred in connection with such replacement and on such terms as to evidence, security, indemnity and otherwise as the Issuer may reasonably require. Mutilated or defaced Note Certificates must be surrendered before replacements will be issued.

12. Agents In acting under the Agency Agreement and in connection with the Notes, the Agents act solely as agents of the Issuer and do not assume any obligations towards or relationship of agency or trust for or with any of the Noteholders.

38 The initial Agents and their initial Specified Offices are listed below. The Issuer reserves the right at any time to vary or terminate the appointment of any Agent and to appoint a successor registrar, fiscal agent and additional or successor paying agents and transfer agents; provided, however, that the Issuer shall at all times maintain (a) a fiscal agent and a registrar and (b) a paying agent in an EU member state that will not be obliged to withhold or deduct tax pursuant to any law implementing European Council Directive 2003/48/EC. Notice of any change in any of the Agents or in their Specified Offices shall promptly be given to the Noteholders.

13. Representation of Noteholders; Modification (a) The Masse: Pursuant to Law No. 17-95 on Joint-Stock Companies dated 30 August 1996 as modified (Law No. 17-95), the Noteholders are automatically grouped in a masse for the defence of their common interests (the Masse). (b) Legal personality, representatives and general assembly: The Masse has a separate legal personality. It is represented by one or more agents (the Representative). Articles 299 et seq. of Law No. 17-95 define the extent of the respective powers of the Representative and of the general assembly of the Noteholders (the General Assembly), which are summarised in paragraphs (c) and (d) below.

(c) The Representative: (i) In the absence of any decision to the contrary by the General Assembly, the Representative has the power to take on behalf of the Masse management acts (apart from alienation and conservatory actions) necessary to the safeguard of the common interests of the Noteholders. (ii) The Representative, if duly authorised to do so by the General Assembly, is the only person entitled to take legal action on behalf of all the Noteholders. (iii) The Representative may attend shareholder meetings of the Issuer, but without voting rights. (iv) The Representative has the right to access documents made available to the shareholders of the Issuer. (v) Legal actions directed against all the Noteholders can only be brought against the Representative.

(d) The General Assembly: (i) The General Assembly has the power to take all measures designed to ensure the defence of the Noteholders and the execution of their rights and in general all measures of a conservatory or administrative nature. (ii) Any proposal by the Issuer to modify the Conditions in a way that adversely affect the rights of the Noteholders must first be approved by the General Assembly. In the absence of such approval, the Issuer may implement the modification to the Conditions only by offering to repay Noteholders requesting the redemption of their Notes within three months from the date of the decision affecting the Conditions. (iii) Notwithstanding any contractual provision, the general assembly of the shareholders of the Issuer may not increase the financial obligations of the Noteholders, establish an unequal treatment between Noteholders or decide to convert the Notes into shares. The Agency Agreement includes provisions for convening a General Assembly. These provisions reflect normal practice for holding meetings of Noteholders save to the extent that such provisions have been amended to comply with the provisions of Law No. 17-95.

14. Further Issues The Issuer may from time to time, without the consent of the Noteholders, create and issue further notes having the same terms and conditions as the Notes in all respects (or in all respects except for the first payment of interest) so as to form a single series with the Notes.

15. Notices Notices to the Noteholders will be sent to them by first class mail (or its equivalent) or (if posted to an overseas address) by airmail at their respective addresses on the Register. Any such notice shall

39 be deemed to have been given on the second day after the date of mailing. In addition, so long as Notes are listed on the Luxembourg Stock Exchange and the rules of that Exchange so require, notices to Noteholders will be published on the date of such mailing in a daily newspaper of general circulation in Luxembourg (which is expected to be the Luxemburger Wort) or, if such publication is not practicable, in a leading English language daily newspaper having general circulation in Europe and/or on the Luxembourg Stock Exchange’s website, www.bourse.lu. Any such notice shall be deemed to have been given on the date of first publication. The Issuer shall also ensure that notices are duly published in a manner which complies with the rules of any stock exchange or other relevant authority on which the Notes are for the time being listed or by which they have been admitted to trading.

16. Governing Law and Jurisdiction (a) Governing law: The Notes and any non-contractual obligations arising out of or in connection with the Notes are governed by English law, save that the provisions of Condition 13 (Representation of Noteholders; Modification) relating to the Masse and representation of the Noteholders are governed by, and shall be construed in accordance with, Moroccan law. (b) English courts: The courts of England have exclusive jurisdiction to settle any dispute (a Dispute) arising out of or in connection with the Notes (including any non-contractual obligation arising out of or in connection with the Notes). (c) Appropriate forum: The Issuer agrees that the courts of England are the most appropriate and convenient courts to settle any Dispute and, accordingly, that it will not argue to the contrary. (d) Rights of the Noteholders to take proceedings outside England: Condition 16(b) (English courts)is for the benefit of the Noteholders only. As a result, nothing in this Condition 16 (Governing law and Jurisdiction) prevents any Noteholder from taking proceedings relating to a Dispute (Proceedings) in any other courts with jurisdiction. To the extent allowed by law, Noteholders may take concurrent Proceedings in any number of jurisdictions. (e) Service of Process: The Issuer agrees that the documents which start any Proceedings and any other documents required to be served in relation to those Proceedings may be served on it by being delivered to Law Debenture Corporate Services Limited at Fifth Floor, 100 Wood Street, London EC2V 7EX, or to such other person with an address in England or Wales and/or at such other address in England or Wales as the Issuer may specify by notice in writing to the Noteholders. Nothing in this paragraph shall affect the right of any Noteholder to serve process in any other manner permitted by law. This Condition applies to Proceedings in England and to Proceedings elsewhere. There will appear at the foot of the Conditions endorsed on each Note in definitive form the names and Specified Offices of the Registrar and the Paying Agents as set out at the end of this Prospectus.

40 SUMMARY OF PROVISIONS RELATING TO THE NOTES IN GLOBAL FORM The Notes will be represented by a Global Note Certificate which will be registered in the name of Citvic Nominees Limited as nominee for, and deposited with, a common depositary for Euroclear and Clearstream, Luxembourg. The Global Note Certificate will become exchangeable in whole, but not in part, for Individual Note Certificates if (a) both Euroclear and Clearstream, Luxembourg are closed for business for a continuous period of 14 days (other than by reason of legal holidays) or announce an intention permanently to cease business or (b) any of the circumstances described in Condition 9 (Events of Default) occurs. Whenever the Global Note Certificate is to be exchanged for Individual Note Certificates, such Individual Note Certificates will be issued in an aggregate principal amount equal to the principal amount of the Global Note Certificate within five business days of the delivery by or on behalf of the registered Holder of the Global Note Certificate, Euroclear and/or Clearstream, Luxembourg, to the Registrar of such information as is required to complete and deliver such Individual Note Certificates (including, without limitation, the names and addresses of the persons in whose names the Individual Note Certificates are to be registered and the principal amount of each such person’s holding) against the surrender of the Global Note Certificate at the Specified Office of the Registrar. Such exchange will be effected in accordance with the provisions of the Agency Agreement and the regulations concerning the transfer and registration of Notes scheduled thereto and, in particular, shall be effected without charge to any Holder, but against such indemnity as the Registrar may require in respect of any tax or other duty of whatsoever nature which may be levied or imposed in connection with such exchange. If: (a) Individual Note Certificates have not been issued and delivered by 5.00 p.m. (London time) on the thirtieth day after the date on which the same are due to be issued and delivered in accordance with the terms of the Global Note Certificate; or (b) any of the Notes evidenced by the Global Note Certificate has become due and payable in accordance with the Conditions or the date for final redemption of the Notes has occurred and, in either case, payment in full of the amount of principal falling due with all accrued interest thereon has not been made to the Holder of the Global Note Certificate on the due date for payment in accordance with the terms of the Global Note Certificate, then, at 5.00 p.m. (London time) on such thirtieth day (in the case of (a) above) or at 5.00 p.m. (London time) on such due date (in the case of (b) above) each person shown in the records of Euroclear and/or Clearstream, Luxembourg (or any other relevant clearing system) as being entitled to an interest in the Notes (each an Accountholder) shall acquire under the deed of covenant dated 27 November 2013 (the Deed of Covenant) rights of enforcement against the Issuer (Direct Rights) to compel the Issuer to perform its obligations to the Holder of the Global Note Certificate in respect of the Notes represented by the Global Note Certificate, including the obligation of the Issuer to make all payments when due at any time in respect of such Notes in accordance with the Conditions as if such Notes had (where required by the Conditions) been duly presented and surrendered on the due date in accordance with the Conditions. The Direct Rights shall be without prejudice to the rights which the Holder of the Global Note Certificate may have under the Global Note Certificate or otherwise. Payment to the Holder of the Global Note Certificate in respect of any Notes represented by the Global Note Certificate shall constitute a discharge of the Issuer’s obligations under the Notes and the Deed of Covenant to the extent of any such payment and nothing in the Deed of Covenant shall oblige the Issuer to make any payment under the Notes to or to the order of any person other than the Holder of the Global Note Certificate. As a condition of any exercise of Direct Rights by an Accountholder, such Accountholder shall, as soon as practicable, give notice of such exercise to the Noteholders in the manner provided for in the Conditions or the Global Note Certificate for notices to be given by the Issuer to Noteholders. In addition, the Global Note Certificate will contain provisions that modify the Terms and Conditions of the Notes as they apply to the Notes evidenced by the Global Note Certificate. The following is a summary of certain of those provisions: Payments on business days: In the case of all payments made in respect of the Global Note Certificate, business day means any day which is a day on which dealings in foreign currencies may be carried on in New York City and a Clearing System Business Day (as defined below).

41 Payment Record Date: Each payment in respect of the Global Note Certificate will be made to the person shown as the Holder in the Register at the close of business (in the relevant clearing system) on the Clearing System Business Day before the due date for such payment (the Record Date) where Clearing System Business Day means a day on which each clearing system for which the Global Note Certificate is being held is open for business. Notices: Notwithstanding Condition 15 (Notices), so long as the Global Note Certificate is held on behalf of Euroclear, Clearstream, Luxembourg or any other clearing system (an Alternative Clearing System), notices to Holders of Notes represented by the Global Note Certificate may be given by delivery of the relevant notice to Euroclear, Clearstream, Luxembourg or (as the case may be) such Alternative Clearing System, except that, for so long as the Notes are admitted to trading on the Luxembourg Stock Exchange and it is a requirement of applicable law or regulations, such notices shall also be published in a leading newspaper having general circulation in Luxembourg (which is expected to be the Luxemburger Wort) or published on the website of the Luxembourg Stock Exchange (www.bourse.lu).

42 USE OF PROCEEDS The net proceeds of the issue of the Notes, expected to amount to U.S.$296,091,000 after deduction of the combined management and underwriting commission will be used by the Issuer for its general corporate purposes.

43 SELECTED FINANCIAL INFORMATION The following information has been extracted from, and should be read in conjunction with, and is qualified in its entirety by reference to, the Interim Financial Statements and the 2012 Financial Statements, which are included elsewhere in this Prospectus. The table below shows consolidated balance sheet information of the Group as at 31 December 2011, 31 December 2012 and 30 June 2013. As at As at 31 December 30 June 2011 2012 2013 (Dh million) Cash and amounts due from central banks and post office banks 6,392 9,922 9,842 Financial assets at fair value through profit or loss...... 31,732 34,245 28,354 Available for sale financial assets...... 2,330 2,796 3,227 Loans and receivables due from credit institutions ...... 23,823 21,397 17,246 Loans and receivables due from customers ...... 121,343 138,809 140,508 Held to maturity financial assets ...... 9,591 10,519 11,261 Current tax assets...... 409 216 259 Deferred tax assets...... 321 311 384 Accrued income and other assets...... 4,559 4,939 5,489 Investment in associates...... 399 407 428 Investment property...... 547 614 769 Property, plant and equipment ...... 5,064 5,132 5,363 Intangible assets ...... 645 751 772 Goodwill ...... 832 832 832 Total assets...... 207,988 230,889 224,733 Amounts due to central banks and post office banks ...... — 67 67 Financial liabilities at fair value through profit or loss...... 2 2 2 Due to credit institutions ...... 24,849 34,228 32,599 Due to customers ...... 139,152 144,651 147,359 Debt securities ...... 12,009 14,015 11,695 Current tax liabilities...... 325 36 199 Deferred tax liabilities...... 934 983 1,048 Accrued expenses and other liabilities ...... 8,971 13,210 7,534 Provisions for contingencies and charges ...... 457 523 501 Subordinated debt...... 4,904 4,760 5,810 Total liabilities ...... 191,603 212,476 206,815 Share capital...... 1,720 1,795 1,795 Share premium reserve...... 8,732 10,187 10,306 Result and other reserves ...... 1,895 2,193 1,842 Unrealised or deferred gains or losses – Group share...... 82 86 105 Total equity – Group share ...... 12,429 14,260 14,048 Minority interests ...... 3,957 4,153 3,870 Total liabilities and equity ...... 207,988 230,889 224,733

44 The table below shows consolidated income statement information of the Group for each of 2011 and 2012 and for the six-month periods ended on 30 June 2012 and 30 June 2013. Year ended Six months ended 31 December 30 June 2011(1) 2012 2012 2013 (Dh million) Interest income ...... 9,668(1) 10,823 5,255 5,620 Interest expense...... (4,096) (4,580) (2,275) (2,354) Net interest income...... 5,572(1) 6,243 2,979 3,266 Fee income ...... 1,703 1,847 916 1,046 Fee expense...... (280) (321) (143) (227) Net fee income ...... 1,423 1,526 772 820 Net gains on financial instruments at fair value through profit or loss ...... 703(1) 651 271 283 Net gains on available for sale financial assets ... 27 150 137 166 Net income from market transactions ...... 730(1) 801 408 449 Other banking revenue...... 792 781 378 488 Other banking expenses...... (377) (333) (158) (174) Net banking income...... 8,140 9,018 4,380 4,848 General operating expenses...... (4,589) (4,861) (2,329) (2,519) Depreciation and amortisation of tangible and intangible assets...... (535) (574) (275) (324) Gross operating income ...... 3,016 3,583 1,776 2,005 Cost of risk...... (872) (1,108) (1,046) (875) Net operating income ...... 2,144 2,476 730 1,130 Share in net income of companies accounted for by the equity method...... 45 66 32 36 Net gains or losses on other assets...... (7) (390) (17) (4) Profit for the period before tax ...... 2,182 2,151 745 1,162 Tax expense...... (674) (571) (220) (285) Profit for the period...... 1,508 1,579 525 876 Minority interests ...... 658 656 165 281 Group share of profit for the period...... 850 923 360 595

Note: (1) Amounts reclassified during 2012, see ‘‘Presentation of financial and other information’’.

45 The table below shows consolidated statement of comprehensive income information of the Group for each of 2011 and 2012 and for the six-month periods ended on 30 June 2012 and 30 June 2013. Year ended Six months ended 31 December 30 June 2011 2012 2012 2013 (Dh million) Profit for the period...... 1,508 1,579 525 876 Foreign currency translation differences for foreign operations ...... (3) 2 1 (3) Net change in fair value of available for sale securities ...... 82 3 17 24 Other comprehensive income for the period...... 79 5 18 21 Total comprehensive income for the period...... 1,587 1,584 543 897 Minority interest...... 634 657 166 283 Group share of total comprehensive income for the period ...... 953 927 377 615

The table below shows selected consolidated statement of cash flow information of the Group for 2011 and 2012 and for the six-month periods ended on 30 June 2012 and 30 June 2013. Year ended Six months ended 31 December 30 June 2011 2012 2012 2013 (Dh million) Net cash from/(used in) operating activities...... 760 3,978 278 (525) Net cash used in investing activities...... (2,389) (1,622) (990) (1,633) Net cash from financing activities...... 363 3,047 (373) (2,403) Cash and cash equivalents at start of period...... 11,934 10,638 10,638 16,099 Effects of exchange rate changes on cash and cash equivalents held...... (30) 58 (6) (58) Cash and cash equivalents at end of period ...... 10,638 16,099 9,546 11,480

46 The table below shows selected consolidated ratios of the Group as at and for the years ended 31 December 2011 and 31 December 2012 and as at and for the six-month periods ended on 30 June 2012 and 30 June 2013. The ratios have been prepared based on management information and information in the Financial Statements. As at/year ended As at/six months 31 December ended 30 June 2011 2012 2012 2013 (per cent.) Selected ratios: Return on average assets(1) ...... 0.76 0.72 0.50 0.77 Return on equity(2) ...... 10.0 10.1 6.7 10.0 Cost income ratio(3) ...... 62.9 60.3 59.45 58.65 Interest average income yield on loans(4) ...... 6.06 6.10 6.21 6.06 Interest average cost yield on deposits(5) ...... 2.20 2.24 2.32 2.16 Non-performing customer loans ratio(6) ...... 6.07 5.90 5.95 6.3 Provisioning charge/gross loans(7)...... 0.56 0.64 1.37 1.06 Net customer loans/customer deposits...... 87.2 96.0 95.70 95.40 Total capital adequacy ratio(8) ...... 12.26 13.14 12.40 12.94

Notes: (1) Profit for the period divided by average assets for the period. Average assets is determined based on balances at the start and end of each period. (2) Profit for the period divided by average shareholders’ equity for the period. Average shareholders’ equity is determined based on balances at the start of each period less dividend paid during the preceding period. (3) General operating expenses plus depreciation and amortisation of tangible and intangible assets divided by net banking income. (4) Interest income on loans divided by average loans (balances at the start and end of each period). (5) Interest on deposits divided by average deposits (balances at the start and end of each period). (6) Non-performing customer loans (being loans in respect of which a payment of principal or interest is more than 90 days overdue) divided by gross customer loans. (7) Cost of risk (excluding cost of risk relating to off balance sheet commitments) divided by Gross loans at the end of each period. (8) Calculated according to Basel II methodology.

47 FINANCIAL REVIEW The following discussion and analysis should be read in conjunction with the information set out in ‘‘Presentation of financial and other information’’, ‘‘Selected financial information’’, the Interim Financial Statements and the 2012 Financial Statements. The discussion of the Group’s financial condition and results of operations is based upon the Interim Financial Statements and the 2012 Financial Statements which have been prepared in accordance with IFRS. This discussion contains forward-looking statements that involve risks and uncertainties. The Group’s actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those discussed below and elsewhere in this Prospectus, particularly under the headings ‘‘Cautionary statement regarding forward-looking statements’’ and ‘‘Risk factors’’. See ‘‘Presentation of financial and other information’’ for a discussion of the source of the numbers presented in this section and certain other relevant information.

OVERVIEW The Group commenced business in 1959. The Bank is the holding company for the Group and offers a wide range of retail and corporate banking services to individuals, small and medium sized enterprises (SMEs) and large corporate customers in Morocco. A wide range of other banking services, including investment banking, brokerage, asset management, custody, leasing, factoring, consumer credit, debt recovery and insurance, are offered by other Group companies based in Morocco. In addition, through its majority owned subsidiary, Bank of Africa, and direct holdings in two associated companies, the Group provides banking services in 17 other African countries. The Group also has a banking subsidiary in London (with a branch in Paris) and a banking subsidiary in Madrid. The principal activities of the Group comprise the provision of loans and advances and other financing facilities, principally to customers in Morocco, which generate interest income and fee income, and investment activities, which principally relate to its significant portfolio of equity and fixed income securities and which generate dividend and interest income as well as trading gains or losses. The Group’s principal sources of funding are its customer and interbank deposits (including sale and repurchase (repo) transactions with mutual funds and banks) and, to a lesser extent, issues of certificates of deposit and other senior and subordinated debt securities, principally in the domestic capital market. As at 30 June 2013, the Group had total loans and advances to customers of Dh 141 billion, total trading, available for sale and held to maturity securities of Dh 43 billion and total interbank lending of Dh 17 billion. As at the same date, the Group’s total customer deposits (including repurchase agreements with mutual funds) amounted to Dh 147 billion. In 2012, the Group recorded net operating income of Dh 2,476 million and net profit for the year of Dh 1,579 million. In the six months ended 30 June 2013, the Group’s net operating income was Dh 1,130 million and its net profit for the period was Dh 876 million.

PRINCIPAL FACTORS AFFECTING RESULTS OF OPERATIONS The following is a discussion of the principal factors that have affected, or are expected to affect, the Group’s results of operations.

Economic conditions The Group’s revenues and results of operations are affected by economic and market conditions in Morocco. As at 30 June 2013, 74.8 per cent. of its total assets were attributable to its Activities in Morocco (compared to 75.8 per cent. at 31 December 2012 and 76.0 per cent. as at 31 December 2011), 78 per cent. of its customer loans were attributable to its Activities in Morocco (compared to 79.1 per cent. as at 31 December 2011) and 70.4 per cent. of its total customer deposits were attributable to its Activities in Morocco (compared to 73.3 per cent. as at 31 December 2011). Based on IMF data derived from the World Economic Outlook (October 2013) following the conclusion of its Article IV consultation with Morocco in February 2013, Morocco’s real GDP growth was 3.6 per cent. in 2010, 5.0 per cent. in 2011 and 2.7 per cent. in 2012. The low GDP growth in 2012 reflects a deteriorating external environment and poor rainfall which resulted in a lower-than-average cereal crop. The IMF expects growth in Morocco to be 5.1 per cent. in 2013, although this is dependent on the government’s programme of fiscal consolidation, prudent monetary and financial policies, and structural reforms to boost competitiveness and inclusive growth and to rebuild shock buffers being successfully implemented.

48 Although Morocco was affected by the global financial crisis and the European sovereign debt crisis, it continued to record real GDP growth in both 2008 (of 5.6 per cent.) and in 2009 (of 4.8 per cent.) when many other countries experienced recessionary conditions. As a result, the Group has not operated through a severe economic downturn in its principal domestic market and is potentially vulnerable to a significant deterioration in economic conditions in Morocco; see ‘‘Risk factors—Factors that may affect the Issuer’s ability to fulfil its obligations under the Notes—The Group’s business, financial condition, results of operations and prospects are and will continue to be affected by global and regional financial markets and economic conditions and any further deterioration in these conditions could materially adversely impact the Group’’.

Factors affecting net interest income The Group’s net interest income is a major contributor to its total net banking income, comprising 68.4 per cent. of net banking income in 2011 and 69.2 per cent. in 2012. Within net interest income: . interest earned on customer loans and advances is the major contributor to total interest income, comprising 72.3 per cent. of total interest income in 2011 and 73.8 per cent. in 2012; and . interest paid on customer deposits is the major contributor to total interest expense, comprising 63.5 per cent. of total interest expense in 2011 and 59.0 per cent. in 2012. In the six months ended 30 June 2013, the Group’s net interest income equalled 67.4 per cent. of its net banking income, with interest earned on customer loans and advances equalling 74.3 per cent. of its total interest income and interest paid on customer deposits equalling 61.5 per cent. of its total interest expense. The Group’s net interest income is affected by a number of factors. It is primarily determined by the volume of interest-earning assets relative to interest-bearing liabilities, as well as the differential between rates earned on interest-earning assets and interest-bearing liabilities. The Group’s interest-earning assets principally consist of its customer loan portfolio and, to a lesser extent, its interbank lending and the fixed income securities held by it. The Group’s interest-bearing liabilities principally comprise its interest bearing customer deposits and, to a lesser extent, its interbank deposits and the debt securities issued by it. The Group’s Moroccan demand deposits, which represented 41.5 per cent. of its total customer deposits at 31 December 2011 and 44.0 per cent. at each of 31 December 2012 and 30 June 2013, do not pay interest. In addition, Moroccan savings accounts are required by Bank Al-Maghrib to bear interest at Bank Al-Maghrib’s one-year treasury rate less 0.5 per cent. (adjusted semi-annually) and are limited in amount to Dh 400,000 per depositor. As a result, the Group’s customer deposits represent a comparatively cheap source of funding to it. The changes in the Group’s net interest income in 2012 compared to 2011 have principally been driven by increases in the volumes of its interest bearing assets and liabilities rather than by changes in interest rates given that interest rates in Morocco remained largely unchanged throughout 2011 and 2012. In Morocco, Bank Al-Maghrib announces minimum yields for different maturities that banks are invited to respect. Where a bank wishes to lend below these yields, it is free to do so although it is required to inform Bank Al-Maghrib in advance of doing so. In addition, the Moroccan Banks’ Association also recommends minimum rates to its members, which are generally higher than the Bank Al-Maghrib minimum rates. At the end of 2012 and the start of 2013, the minimum rates set by Bank Al-Maghrib increased by 0.5 per cent. for one year lending and equivalent amounts for other maturities. If this rate increase is sustained throughout 2013 this should have a positive overall impact on the Group’s net interest income in 2013.

Changes in factors affecting the fair valuation of the Group’s securities portfolio The Group has a significant portfolio of securities, principally comprising: . equity and other variable income trading securities, held on a fair value through profit and loss (FVTPL) basis, which amounted to Dh 19.9 billion at 30 June 2013 (compared to Dh 21.0 billion at 31 December 2012 and Dh 23.8 billion at 31 December 2011); . principally fixed rate debt securities, held on an FVTPL basis, which amounted to Dh 8.4 billion at 30 June 2013 (compared to Dh 13.3 billion at 31 December 2012 and Dh 7.9 billion at 31 December 2011);

49 . equity and other variable income trading securities, held on an available for sale basis, which amounted to Dh 3.5 billion at 30 June 2013 (compared to Dh 3.1 billion at 31 December 2012 and Dh 2.6 billion at 31 December 2011), in each case before impairment charges; and . principally fixed rate debt securities, held on a held to maturity basis, which amounted to Dh 11.3 billion at 30 June 2013 (compared to Dh 10.5 billion at 31 December 2012 and Dh 9.6 billion at 31 December 2011) and represented the fixed income securities portfolio of Bank of Africa. The fixed income securities generate interest income for the Group, the amount of which principally depends on the rates paid on the different securities held and the ability of the issuers to pay those rates. In the six months ended 30 June 2013, Dh 801 million, or 14.2 per cent., of the Group’s interest income was derived from its securities portfolio. In 2012 and 2011, the equivalent figures were Dh 1,511 million and 14.0 per cent. and Dh 1,324 million and 13.7 per cent., respectively. The Group’s FVTPL and available for sale securities also generate gains or losses that are recorded in the income statement when they are sold and the FVTPL securities generate fair value gains and losses that are recorded in the income statement when they are re-valued at each balance sheet date. In the six months ended 30 June 2013, these net gains were Dh 239 million compared to Dh 271 million in the corresponding period of 2012. In 2012, these net gains were Dh 694 million compared to Dh 688 million in 2011. Net gains or losses realised on sales and fair valuation of securities may vary significantly from period to period, based on a wide range of factors. The equity and variable income securities generate dividend income for the Group which varies by reference to factors affecting the ability of the issuers of the securities to pay dividends, including changes in economic conditions and other factors affecting their results of operations. In the six months ended 30 June 2013, these securities generated Dh 159 million in dividend income compared to Dh 155 million in the corresponding period of 2012. In 2012, these securities generated Dh 169 million in dividend income compared to Dh 203 million in 2011. In certain circumstances, the Group’s securities may become impaired. This could result from a deterioration in the price of the securities held or, in the case of fixed income securities, in the credit standing of the issuer or a sustained adverse movement in interest or currency exchange rates or from other factors. In such a case, the Group will incur impairment losses which will reduce its net operating income. For example, in 2012 the Group incurred impairment charges of Dh 62 million in respect of its available for sale securities compared to Dh 160 million in 2011.

Expansion in Morocco and international diversification The Group has expanded significantly in Morocco since 2007, having opened approximately 400 of its approximately 600 branches as at 31 December 2012 in that period and having acquired a wholly-owned subsidiary, Locasom, and established another wholly-owned subsidiary, RM Experts, since 31 December 2007. This expansion has contributed considerably to the 135.6 per cent. increase in the Group’s customer loan portfolio between 31 December 2007 and 31 December 2012. The Group expects to continue to expand its activities in Morocco in future years; see ‘‘Description of the Group—Strategy’’. The Group’s international activities principally comprise its 72.6 per cent. shareholding in Bank of Africa as well as its wholly-owned subsidiaries in London and Madrid and its minority investments in two associated African banks. The Group first acquired an interest (of 42.5 per cent.) in Bank of Africa in 2008 and, as at 30 June 2013, held 68.58 per cent. of the shares in Bank of Africa. When it was acquired, Bank of Africa had nearly 2,500 staff working in nine commercial banks and 11 African countries. Bank of Africa is the principal contributor to the Group’s international banking income and is fully consolidated. Small contributions are made by the Group’s two European subsidiaries whilst some of its associated African banks are fully consolidated and some are accounted for by the equity method, which means that the Group’s share of their net profit or loss is separately recorded in the Group’s income statement. Bank of Africa is a holding company with investments in 16 banks in 15 different African countries as at 30 June 2013. These investments are all fully consolidated, although Bank of Africa’s shareholding in each subsidiary ranges from 20 per cent. to 99 per cent.

50 SIGNIFICANT ACCOUNTING POLICIES The Financial Statements have been prepared in accordance with IFRS. For a discussion of the accounting policies applied by the Group generally, see note 1.6 to each of the Interim Financial Statements and the 2012 Financial Statements.

CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY In preparing the Group’s financial statements, management is required to make certain estimates, judgments and assumptions. These affect the reported amounts of the Group’s assets and liabilities, including disclosure of contingent assets and liabilities, at the date of the financial statements as well as the reported amounts of its revenues and expenses during the periods presented. Management bases its estimates and assumptions on historical experience and other factors that it believes to be reasonable at the time the estimates and assumptions are made and evaluates the estimates and assumptions on an ongoing basis. However, future events and their effects cannot be predicted with certainty and the determination of appropriate estimates and assumptions requires the use of judgment. Actual outcomes may differ from any estimates or assumptions made and such differences may be material to the financial statements. The most significant estimates, judgments and assumptions made by management in the preparation of the Group’s financial statements are disclosed under ‘‘Risk Factors—Factors that may affect the Issuer’s ability to fulfil its obligations under the Notes—The Group’s accounting policies and methods are critical to how it reports its financial condition and results of operations and require management to make estimates about matters that are uncertain’’.

REPORTING SEGMENTS The Group’s five reporting segments comprise: . Activity in Morocco, which principally comprises the corporate and retail banking businesses undertaken by the Bank; . Asset management and investment banking, which comprises the investment banking business undertaken by the Group’s wholly-owned subsidiary, BMCE Capital; the stock brokerage business undertaken by the Group’s wholly-owned subsidiary, BMCE Capital Bourse; and the asset management business undertaken by the Group’s wholly-owned subsidiary, BMCE Capital Gestion; . Specialised financial services, which comprises the consumer credit business undertaken by the Group’s majority-owned subsidiary, Salafin; the debt collection business undertaken by the Group’s wholly-owned subsidiary, RM Experts; the leasing business undertaken by the Group’s majority-owned subsidiary, Maghrebail; the factoring business undertaken by the Group’s wholly-owned subsidiary, Maroc Factoring; and the credit insurance business undertaken by the Group’s 20.0 per cent. owned associate, Euler Hermes Acmar; . International activities, which comprises the banking businesses undertaken by the Group’s wholly-owned subsidiaries, BMCE International Madrid and BMCE Bank International UK; its majority owned subsidiary, Bank of Africa; its 25.0 per cent. owned associate, La Congolaise de Banque; and its 27.4 per cent. owned associate, Banque de Development du Mali; and . Other activities, which comprises the car rental business undertaken by the Group’s wholly-owned subsidiary, Locasom; the information technology businesses undertaken by the Group’s 45.6 per cent. owned associate, Hanouty, and its 41.0 per cent. owned associate, Eurafric Information; and the engineering business undertaken by its 38.9 per cent. owned associate, Conseil Ingenierie et Development.

51 The table below shows the contribution of each of the Group’s reporting segments in each of the six-month periods ended 30 June 2012 and 30 June 2013. Asset management and Specialised Activity in investment financial Other International Morocco banking services activities activities Total (Dh million) Six months ended 30 June 2012 Net interest income...... 1,369 6 271 (3) 1,336 2,979 Net fee income ...... 332 52 76 – 313 772 Net banking income...... 1,930 85 277 73 2,015 4,380 General operating expenses and allowances for depreciation and amortisation...... (1,202) (94) (78) (38) (1,192) (2,604) Operating income...... 728 (9) 200 34 823 1,776 Corporate income tax...... (136) (10) (42) (4) (28) (220) Net profit (Group share)...... 156 12 48 18 126 360

As at 30 June 2012 Customer loans ...... 88,814 – 12,405 – 27,923 129,144 Total assets...... 144,665 346 13,517 161 53,566 212,256 Customer deposits...... 93,647 – 1,069 – 40,190 134,906 Shareholders’ equity ...... 11,892 75 1,106 (99) 2,894 15,868

Six months ended 30 June 2013 Net interest income...... 1,494 2 283 (3) 1,490 3,266 Net fee income ...... 355 51 2 – 411 820 Net banking income...... 2,106 107 291 77 2,266 4,848 General operating expenses and allowances for depreciation and amortisation...... (1,283) (101) (84) (41) (1,333) (2,843) Operating income...... 823 5 207 37 933 2,005 Corporate income tax...... (129) (12) (44) (4) (97) (285) Net profit (Group share)...... 261 36 52 20 227 595

As at 30 June 2013 Customer loans ...... 96,553 8 12,982 – 30,965 140,508 Total assets...... 159,188 444 8,341 121 56,639 224,733 Customer deposits...... 102,626 – 1,080 – 43,654 147,359 Shareholders’ equity ...... 13,711 107 1,131 (111) 3,080 17,918

52 The table below shows the contribution of each of the Group’s reporting segments in each of 2011 and 2012. Asset management and Specialised Activity in investment financial Other International Morocco banking services activities activities Total (Dh million) Year ended 31 December 2011 Net interest income...... 2,460 6 649 (6) 2,464(1) 5,572(1) Net fee income ...... 633 116 (9) – 683 1,423 Net banking income...... 3,561 185 656 131 3,608 8,141 General operating expenses and allowances for depreciation and amortisation...... (2,442) (196) (145) (75) (2,266) (5,124) Operating income...... 1,119 (11) 510 56 1,342 3,016 Corporate income tax...... (298) (16) (143) (8) (208) (674) Net profit (Group share)...... 342 38 153 18 299 850

As at 31 December 2011 Customer loans ...... 83,659 1 12,291 25,391 121,343 Total assets...... 144,683 397 12,932 153 49,823 207,988 Customer deposits...... 100,669 – 1,343 – 37,140 139,152 Shareholders’ equity ...... 11,723 97 1,189 (59) 3,436 16,385

Year ended 31 December 2012 Net interest income...... 2,757 15 592 (7) 2,885 6,243 Net fee income ...... 702 105 3 – 716 1,526 Net banking income...... 4,020 212 621 150 4,015 9,018 General operating expenses and allowances for depreciation and amortisation...... (2,564) (209) (155) (80) (2,426) (5,435) Operating income...... 1,456 2 466 69 1,590 3,583 Corporate income tax...... (240) (19) (101) (9) (203) (571) Net profit (Group share)...... 286 44 114 26 453 923

As at 31 December 2012 Customer loans ...... 95,426 6 13,186 — 30,192 138,809 Total assets...... 160,442 370 14,060 171 55,846 230,889 Customer deposits...... 102,082 — 1,184 — 41,384 144,651 Shareholders’ equity ...... 13,567 104 1,213 (98) 3,626 18,414

Note: Adjusted to reflect the reclassification described under ‘‘Presentation of financial and other information’’.

RESULTS OF OPERATIONS Comparison of the six months ended 30 June 2012 and the six months ended 30 June 2013 Net interest income Interest income is the Group’s principal source of income. The Group principally earns interest income on the customer loans and advances made by it, but also earns interest income on its portfolio of fixed income securities (including Bank of Africa’s portfolio of held to maturity fixed income securities), on its interbank lending activities and on the finance leases granted by it. The Group principally incurs interest expense on its customer deposits, but also pays interest on its deposits from other banks, on certificates of deposit issued by it and on its issued debt securities. Interest income and expense is recognised in the income statement using the effective interest method. In segmental terms, in the first six months of 2012 46.0 per cent. of the Group’s net interest income was derived from the Activity in Morocco segment, 44.8 per cent. was derived from the International activities segment and 9.1 per cent. was derived from the Specialised segment, principally representing finance lease income generated by Maghrebail. In the first six months of 2013, 45.7 per cent. of the Group’s net interest income was derived from the Activity in Morocco segment, 45.6 per cent. was derived from the International activities segment and 8.7 per cent. was derived from the Specialised Financial Services segment.

53 The table below shows a breakdown of the Group’s net interest income in each of the six-month periods ended 30 June 2012 and 30 June 2013. Six months ended 30 June

2012 2013

(Dh (Dh million) (% of total) million) (% of total) Interest income Loans and advances to customers ...... 3,886 74.0 4,173 74.3 Fixed income securities ...... 414 7.9 438 7.8 Due from banks...... 367 7.0 358 6.4 Finance leases ...... 283 5.4 288 5.1 Held to maturity financial assets ...... 304 5.8 362 6.4 Total interest income...... 5,255 100.0 5,620 100.0 Interest expense Customer deposits...... 1,371 60.3 1,447 61.5 Due to banks...... 476 20.9 450 19.1 Certificates of deposit...... 257 11.3 283 12.0 Debt securities issued ...... 111 4.9 135 5.7 Repurchase agreements with customers...... 60 2.7 38 1.6 Total interest expense ...... 2,275 100.0 2,354 100.0 Net interest income...... 2,979 3,266

The Group’s total interest income for the six months ended 30 June 2013 amounted to Dh 5,620 million compared to Dh 5,255 million for the corresponding period of 2012. The increase of Dh 365 million, or 7.0 per cent., in the 2013 period compared to the 2012 period principally reflected a Dh 287 million, or 7.4 per cent., increase in interest income from loans and advances to customers. This increase was due mainly to the increase in total customer loans to Dh 140,508 million at 30 June 2013 from Dh 129,144 million for the corresponding period of 2012, or 8.8 per cent. The Group’s total interest expense for the six months ended 30 June 2013 amounted to Dh 2,354 million compared to Dh 2,275 million for the corresponding period of 2012. The increase of Dh 79 million, or 3.5 per cent., in the 2013 period compared to 2012 period principally reflected a Dh 77 million, or 5.6 per cent., increase in interest expense on customer deposits. The increase in interest expense on customer deposits principally reflects an increase in total customer deposits to Dh 147,359 million at 30 June 2013 from Dh 134,906 million for the corresponding period of 2012, or 9.2 per cent. Reflecting the above factors, the Group’s net interest income in the six months ended 30 June 2013 amounted to Dh 3,266 million, an increase of Dh 287 million, or 9.6 per cent., from the Dh 2,979 million net interest income recorded in corresponding period of 2012. In terms of reporting segments: . Net interest income from International Activities for the six months ended 30 June 2013 amounted to Dh 1,490 million compared to Dh 1,336 million in the corresponding period of 2012, an increase of Dh 154 million, or 11.5 per cent. This increase was due mainly to the increase in the total international customer loans portfolio to Dh 30,965 million at 30 June 2013 from Dh 27,923 million for the corresponding period of 2012, or 10.9 per cent. . Net interest income from Activity in Morocco for the six months ended 30 June 2013 amounted to Dh 1,494 million compared to Dh 1,369 million in the corresponding period of 2012, an increase of Dh 125 million, or 9.1 per cent. This increase was in line with the overall increase in Group net interest income and reflected the factors described above. The net interest margin for the Bank in Morocco reporting segment was 5.46 per cent. in the six months ended 30 June 2013 compared to 5.43 per cent. in the corresponding period of 2012. The net interest spread (the difference between the average interest rate on interest-bearing assets and the average interest rate on interest-bearing liabilities) for the Bank in Morocco reporting segment was 3.40 per cent. in the six months ended 30 June 2013 compared to 3.44 per cent. in the corresponding period of 2012; and

54 . Net interest income from Specialised Financial Services for the six months ended 30 June 2013 amounted to Dh 283 million compared to Dh 271 million in the corresponding period of 2012, an increase of Dh 12 million, or 4.3 per cent. This increase principally reflected an increase of 4.6 per cent. of the Specialised financial services segment of the customer loans portfolio. Net fee income The Group’s principal sources of fee income are on transactions with customers (including fees charged for arranging loans, guarantees and documentary credits and providing customer accounts), on foreign exchange transactions conducted by the Group for third parties, and on electronic payment (including card fees charged to customers and merchants) and custody services provided by it. The Group also provides a wide range of other services for which it receives less material sources of fee income. The Group principally pays fees in respect of repo transactions entered into by it with mutual funds which it classifies as custody fees, on foreign exchange transactions undertaken for it and on electronic payment services used by it (including fees to major companies). In segmental terms, in the six-month period ended 30 June 2012 42.9 per cent. of the Group’s net fee income was derived from the Activity in Morocco segment, 40.5 per cent. was derived from the International Activities segment. 9.8 per cent. was derived from the Specialised Financial Services segment, principally representing fee income generated by Maroc Factoring, and 6.7 per cent. was derived from the Asset Management and Investment Banking segment, principally representing custody services provided by the segment. In the six-month period ended 30 June 2013, 50.2 per cent. of the Group’s net fee income was derived from the International Activities segment, 43.3 per cent. was derived from the Activity in Morocco segment and 6.2 per cent. was derived from the Asset Management and Investment Banking segment. The table below shows a breakdown of the Group’s net fee income in each of the six-month periods ended 30 June 2012 and 30 June 2013. Six months ended 30 June

2012 2013

(Dh (Dh million) (% of total) million) (% of total)

Fee income ...... Transactions with customers...... 131 14.3 143 13.7 Custody transactions...... 71 7.8 70 6.7 Foreign exchange transactions ...... 125 13.6 241 23.0 Electronic payment services ...... 123 13.4 140 13.3 Other ...... 465 50.8 453 43.2 Total fee income...... 916 100.0 1,046 100.0 Custody transactions...... 66 46.2 85 37.5 Foreign exchange transactions ...... 25 17.5 22 9.5 Electronic payment services ...... 19 13.3 20 8.6 Other ...... 34 23.8 101 44.4 Total fee expense ...... 143 100.0 227 100.0 Net fee income ...... 772 820

The Group’s total fee income for the six-month period ended 30 June 2013 amounted to Dh 1,046 million compared to Dh 916 million for the corresponding period of 2012. The increase of Dh 131 million, or 14.3 per cent., in the 2013 period compared to the 2012 period principally reflected an increase of Dh 116 million, or 92.6 per cent., in fees from foreign exchange transactions, principally driven by increases in the volume of business undertaken by the Group in the 2013 period compared to the 2012 period. The Group’s fee and commission expense for the six-month period ended 30 June 2013 amounted to Dh 227 million compared to Dh 143 million for the corresponding period of 2012. The increase of Dh 83 million, or 58.1 per cent., in the 2013 period compared to the 2012 period principally reflected an

55 increase of Dh 66 million, or 192.5 per cent., in other fees along with a Dh 19 million, or 29.3 per cent., increase in custody fees paid by the Group. Reflecting the above factors, the Group’s net fee income in the six-month period ended 30 June 2013 amounted to Dh 820 million, an increase of Dh 47 million, or 6.1 per cent., from the Dh 772 million net fee income recorded in the corresponding period of 2012. In terms of reporting segments: . Net fee income from International Activities for the six-month period ended 30 June 2013 amounted to Dh 411 million compared to Dh 313 million in the corresponding period of 2012, an increase of Dh 98 million, or 31.4 per cent. This increase principally reflected an increase in the volume of fee-based banking services and income from foreign exchange transactions generated by Bank of Africa; . Net fee income from Activity in Morocco for the six-month period ended 30 June 2013 amounted to Dh 355 million compared to Dh 332 million in the corresponding period of 2012, an increase of Dh 24 million, or 7.1 per cent. This increase principally reflected increased volumes of fee generating business undertaken by the Group in Morocco and an increase in fees linked to customer account management (including payment cards) to Dh 208 million at 30 June 2013 from Dh 185 million for the corresponding period of 2012, or 12 per cent.; and . Net fee income from Asset management and investment banking for the six-month period ended 30 June 2013 amounted to Dh 51 million compared to Dh 52 million in the corresponding period of 2012, a decrease of Dh 1 million, or 2.0 per cent. This decrease principally reflected a declining balance of assets under management as a result of a general decline in equity prices during 2012 and the first six months of 2013. This reduced the custody fees charged by the Group as they are charged by reference to the value of assets under management. Income from financial assets The Group maintains a significant portfolio of trading securities, principally comprising equity securities and other variable income instruments as well as fixed income securities such as negotiable certificates of deposit and treasury bills and other instruments eligible for central bank repo operations. All of these trading securities are accounted for at fair value through profit and loss, which means that both gains and losses realised on the sale of these securities and unrealised gains and losses derived from the fair valuation of these securities at each balance sheet date are recorded in the statement of income. The Group also has a smaller portfolio of available for sale equity securities. These securities generate dividend income for the Group and the Group also realises gains or losses on the sale of these securities which are recognised in the income statement at the time of sale. In addition, any impairment losses on these securities are also recognised in the income statement when the impairment occurs. However, any changes in fair value between balance sheet dates in available for sale securities are recorded in equity on each balance sheet date until the securities are sold, at which point the cumulative fair value gain or loss is transferred to the income statement. The table below shows a breakdown of the Group’s income from financial assets in each of the six-month periods ended 30 June 2012 and 30 June 2013. Six months ended 30 June

2012 2013

(Dh million) Net gains or losses on FVTPL financial assets...... 271 283 Dividend income on available for sale securities...... 155 159 Impairment losses/(reversals) on available for sale securities ...... (18) 51 Net losses realised on disposals of available for sale securities...... – (44) Total income from financial assets ...... 408 449

The Group’s total income from financial assets for the six-month period ended 30 June 2013 amounted to Dh 449 million compared to Dh 408 million for the corresponding period of 2012. The increase of Dh 41 million, or 10.0 per cent., in the 2013 period compared to the 2012 period principally reflected a

56 reversal of impairment on available for sale securities in the 2013 period compared to an impairment charge in the 2012 period which was partly offset by losses realised on disposals of available for sale securities in the 2013 period compared to no loss or gain in the 2012 period. The impairment reversal in the 2013 period reflected an improvement in the value of the equity securities portfolio of the Bank. Other banking revenue and expenses In the six-month period ended 30 June 2013, the Group recorded other banking revenue, which principally comprises leasing income from assets leased by Maghrebail and Locasom under operating leases but also includes income from a range of other businesses carried on by the Group, of Dh 488 million, an increase of Dh 109 million, or 28.9 per cent., compared to other banking revenue of Dh 378 million in the corresponding period of 2012. In the six-month period ended 30 June 2013, the Group recorded other banking expenses, which principally comprise the Group’s deposit guarantee fee of 0.2 per cent. of all its Moroccan customer deposits and rental payments by the Group under operating leases in respect of which it is a lessee, but also includes expenses incurred in a range of other businesses, of Dh 174 million, an increase of Dh 16 million, or 10.2 per cent., compared to other banking expenses of Dh 158 million in the corresponding period of 2012. Net banking income Reflecting the above factors and the increase in net interest income in particular, the Group’s net banking income increased by Dh 468 million, or 10.7 per cent., in the six-month period ended 30 June 2013 from Dh 4,380 million in the six-month period ended 30 June 2012 to Dh 4,848 million. In segmental terms, in the six-month period ended 30 June 2012 46.0 per cent. of the Group’s net banking income was derived from the International Activities segment, 44.1 per cent. was derived from the Activity in Morocco segment and 6.3 per cent. was derived from the Specialised Financial Services segment, with the Asset Management and Investment Banking and Other Activities segments accounting for 1.9 per cent. and 1.7 per cent., respectively. In the six-month period ended 30 June 2013, 46.7 per cent. of the Group’s net banking income was derived from the International Activities segment, 43.5 per cent. was derived from the Activity in Morocco segment and 6.0 per cent. was derived from the Specialised Financial Services segment, with the Asset Management and Investment Banking and Other Activities segments accounting for 2.2 per cent. and 1.6 per cent., respectively.

General operating expenses, depreciation and amortisation In segmental terms, in the six-month period ended 30 June 2012 46.2 per cent. of the Group’s combined general operating expenses and depreciation and amortisation was derived from the Activity in Morocco segment and 45.8 per cent. was derived from the International Activities segment. In the six-month period ended 30 June 2013, 46.9 per cent. of the Group’s combined general operating expenses and depreciation and amortisation was derived from the International Activities segment and 45.1 per cent. was derived from the Activity in Morocco segment. General operating expenses The Group classifies its general operating expenses as staff costs (and taxes on staff costs), external expenses and other general operating expenses. In the six-month period ended 30 June 2013, the Group’s general operating expenses were Dh 2,519 million, an increase of Dh 191 million, or 8.2 per cent., over the Dh 2,329 million recorded in the corresponding period of 2012. The Group’s staff costs increased by Dh 104 million or 8.3 per cent., in the six-month period ended 30 June 2013 and its other general operating expenses (which include costs relating to the Group’s branch network) increased by Dh 49 million, or 8.8 per cent., reflecting the impact of the Group’s expanded branch network. The Group does not provide a more detailed breakdown of these expenses in its consolidated financial statements. Depreciation and amortisation The Group incurs depreciation costs on its tangible fixed assets, principally its equipment, furniture and fittings and its land and buildings. All tangible fixed assets are depreciated on a straight line basis over their estimated useful lives, which range between 10 and 80 years, depending on the asset. The Group incurs amortisation costs on its intangible fixed assets, principally purchased software. These assets are amortised over varying periods of up to 20 years.

57 The Group’s depreciation and amortisation costs amounted to Dh 324 million in the six-month period ended 30 June 2013 and Dh 275 million in the corresponding period of 2012. The increase of Dh 49 million, or 17.7 per cent., principally reflected an increase in the Group’s depreciable asset base. Cost of risk At each reporting date, the Group assesses its financial assets (principally its customer loan portfolio but also its securities portfolio) for objective evidence of impairment. In particular: . all individually significant non-performing loans and advances to customers are assessed for specific impairment and non-performing loans which are not individually significant are not individually assessed but are specifically impaired on the basis of the impairment approach adopted for individually significant loans; . all other loans, including any non-performing loans which have not been specifically impaired as above, are collectively assessed for any impairment that has been incurred but not yet identified based on criteria established by the Group, using statistical analysis based on past impairment rates; and . impairment losses are measured as the difference between the carrying amount of the relevant asset and the present value of the estimated future cash flows from it discounted at the asset’s original effective interest rate. For further information, see note 2.6 to the Interim Financial Statements. The Group does not provide a segmental breakdown of cost of risk. The Group’s cost of risk comprises its impairment provisions and write offs net of reversals of provisions and recoveries. The table below shows details of the Group’s cost of risk in each of the six-month periods ended 30 June 2012 and 30 June 2013. Six months ended 30 June

2012 2013 (Dh million) Impairment provisions...... (1,213) (985) Write back of provisions ...... 180 271 Gain/(loss) on impaired loans and advances ...... (13) (161) Total cost of risk ...... (1,046) (875)

The Group’s total cost of risk amounted to Dh 875 million in the six-month period ended 30 June 2013 and Dh 1,046 million in the corresponding period of 2012. The decrease of Dh 171 million, or 16.3 per cent., reflected a decrease of Dh 228 million in impairment provisions and an increase of Dh 91 million in provisions written back reflecting exceptional total cost of risk amounts for the first half of 2012 (compared to a total cost of risk for the full year 2012 of Dh 1,108 million). These positive developments were, in part, offset by a Dh161 million write off on impaired loans and advances in the 2013 period compared to a small recovery of Dh 13 million in respect of loans previously written off in the 2012 period.

Total net operating income Reflecting the above factors, the Group’s total net operating income increased by Dh 400 million, or 54.8 per cent., in the six-month period ended 30 June 2013 from Dh 730 million in the six-month period ended 30 June 2012 to Dh 1,130 million.

Other income and expenses, net The Group’s other net income and expenses were net income of Dh 32 million in the six-month period ended 30 June 2013 compared to net income of Dh 15 million in the corresponding period of 2012. The Group’s other income and expenses principally comprise its share in the net income of associates accounted for by the equity method, which increased by 13.8 per cent. from Dh 32 million in the 2012 period to Dh 36 million in the 2013 period.

58 Profit for the period before tax The Group’s profit for the period before tax was Dh 1,162 million in the six-month period ended 30 June 2013 compared to Dh 745 million in the corresponding period of 2012, an increase of Dh 417 million, or 55.9 per cent. Tax expense The Group’s corporate income tax charge in the six-month period ended 30 June 2013 amounted to Dh 285 million compared to Dh 220 million in the corresponding period of 2012, reflecting current tax expense of Dh 331 million in the 2013 period and Dh 253 million in the 2012 period and net deferred tax income of Dh 45 million in the 2013 period and Dh 33 million in the 2012 period. The Group’s average effective in the six-month period ended 30 June 2012 and 30 June 2013 were 41.9 per cent. and 32.6 per cent., respectively. Profit for the period Reflecting the above factors, the Group’s profit for the period was Dh 876 million in the six-month period ended 30 June 2013 compared to Dh 525 million in the corresponding period of 2012, an increase of Dh 351 million, or 66.8 per cent. Excluding minority interests, the Group’s share of the net profit was Dh 595 million in the six-month period ended 30 June 2013 compared to Dh 360 million in the corresponding period of 2012. In segmental terms, in the six-month period ended 30 June 2012 43.4 per cent. of the net profit attributable to shareholders of the Group was derived from the Activity in Morocco segment, 34.9 per cent. was derived from the International Activities segment and 13.4 per cent. was derived from the Specialised Financial Services segment, with the Asset Management and Investment Banking and Other Activities segments accounting for 3.2 per cent. and 5.1 per cent., respectively. In the six-month period ended 30 June 2013, 43.8 per cent. of the net profit attributable to shareholders of the Group was derived from the Activity in Morocco segment, 38.1 per cent. was derived from the International Activities segment and 8.8 per cent. was derived from the Specialised Financial Services segment, with the Asset Management and Investment Banking and Other Activities segments accounting for 6.0 per cent. and 3.3 per cent., respectively. Other comprehensive income The Group’s other comprehensive income principally comprises the net change in the fair value of its available for sale securities. In the six month period ended 30 June 2012 , the Group recorded a positive net change in the fair value of its available for sale securities of Dh 17 million and, in the six-month period ended 30 June 2013, the Group recorded a positive net change in the fair value of its available for sale securities of Dh 24 million. Total comprehensive income Reflecting the above factors and the Group’s net profit for the period, the Group’s total comprehensive income for the six-month period ended 30 June 2013 was Dh 897 million compared to Dh 543 million in the corresponding period of 2012, an increase of Dh 354 million. Net of minority interests, the total comprehensive income for the the six-month period ended 30 June 2013 attributable to the Group was Dh 615 million compared to Dh 377 million in the corresponding period of 2012. Comparison of 2011 and 2012 Net interest income In segmental terms, in 2011 44.2 per cent. of the Group’s net interest income was derived from the International activities segment, 44.1 per cent. was derived from the Activity in Morocco segment and 11.6 per cent. was derived from the Specialised financial services segment, principally representing finance lease income generated by Maghrebail. In 2012, 46.2 per cent. of the Group’s net interest income was derived from the International activities segment, 44.2 per cent. was derived from the Activity in Morocco segment and 9.5 per cent. was derived from the Specialised financial services segment.

59 The table below shows a breakdown of the Group’s net interest income in each of 2011 and 2012. Year ended 31 December 2011 2012

(Dh million) (% of total) (Dh million) (% of total) Interest income Loans and advances to customers ...... 6,988 72.1 7,991 73.8 Fixed income securities ...... 740 7.6 842 7.8 Due from banks...... 729 7.5 730 6.7 Finance leases ...... 627 6.5 590 5.5 Held to maturity financial assets ...... 583 6.0 669 6.2 Total interest income...... 9,668 100.0 10,823 100.0 Interest expense Customer deposits...... 2,602 63.5 2,703 59.0 Due to banks...... 633 15.5 1,019 22.2 Certificates of deposit...... 457 11.2 526 11.5 Debt securities issued ...... 233 5.7 217 4.7 Repurchase agreements with customers...... 171 4.2 116 2.5 Total interest expense ...... 4,096 100.0 4,580 100.0 Net interest income...... 5,572 6,243

The Group’s total interest income for 2012 amounted to Dh 10,823 million compared to Dh 9,668 million for 2011. The increase of Dh 1,155 million, or 11.9 per cent., in 2012 compared to 2011 principally reflected a Dh 1,003 million, or 14.4 per cent., increase in interest income from loans and advances to customers. This increase was driven by increased volumes of lending in Morocco. The Group’s total interest expense for 2012 amounted to Dh 4,580 million compared to Dh 4,096 million for 2011. The increase of Dh 484 million, or 11.8 per cent., in 2012 compared to 2011 principally reflected a Dh 386 million, or 61.0 per cent., increase in interest expense on interbank borrowings and a Dh 101 million, or 3.9 per cent., increase in interest expense on customer deposits. The Group’s interbank borrowing is short-term in nature and varies significantly from period to period. The increase in interest expense on customer deposits principally reflects increased volumes of interest bearing deposits. Reflecting the above factors, the Group’s net interest income in 2012 amounted to Dh 6,243 million, an increase of Dh 671 million, or 12.0 per cent., from the Dh 5,572 million net interest income recorded in 2011. In terms of reporting segments: . Net interest income from International activities for 2012 amounted to Dh 2,885 million compared to Dh 2,464 million in 2011, an increase of Dh 421 million, or 17.1 per cent. This increase principally reflected growth in Bank of Africa’s held to maturity investment securities portfolio; . Net interest income from Activity in Morocco for 2012 amounted to Dh 2,757 million compared to Dh 2,460 million in 2011, an increase of Dh 297 million, or 12.1 per cent. This increase was in line with the overall increase in Group net interest income and reflected the factors described above. The net interest margin (net interest income as a percentage of total average customer loans, calculated on the basis of balances at the start and end of each year) for the Activity in Morocco reporting segment was 5.49 per cent. in 2012 compared to 5.43 per cent. in 2011. The net interest spread (the difference between the average interest rate on interest-bearing assets and the average interest rate on interest-bearing liabilities) for the Activity in Morocco reporting segment was 3.53 per cent. in 2012 compared to 3.36 per cent. in 2011; and . Net interest income from Specialised financial services for 2012 amounted to Dh 592 million compared to Dh 649 million in 2011, a decrease of Dh 57 million, or 8.8 per cent. This decrease principally reflected a change in accounting regulation which affected the timing of recognition of leasing income in 2012.

60 Net fee income In segmental terms, in 2011 48.0 per cent. of the Group’s net fee income was derived from the International activities segment, 44.5 per cent. was derived from the Activity in Morocco segment and 8.2 per cent. was derived from the Asset management and investment banking segment, principally representing custody services provided by the segment. In 2012, 46.9 per cent. of the Group’s net fee income was derived from the International activities segment, 46.0 per cent. was derived from the Activity in Morocco segment and 6.9 per cent. was derived from the Asset management and investment banking segment. The table below shows a breakdown of the Group’s net fee income in each of 2011 and 2012. Year ended 31 December 2011 2012

(Dh million) (% of total) (Dh million) (% of total) Fee income Transactions with customers...... 245 14.4 268 14.5 Custody transactions...... 159 9.3 147 8.0 Foreign exchange transactions ...... 238 14.0 326 17.7 Electronic payment services ...... 233 13.7 250 13.5 Other ...... 829 48.7 856 46.3 Total fee income...... 1,703 100.0 1,847 100.0 Custody transactions...... 99 35.4 125 38.9 Foreign exchange transactions ...... 61 21.9 70 21.8 Electronic payment services ...... 40 14.1 43 13.4 Other ...... 80 28.5 82 25.5 Total fee expense ...... 280 100.0 321 100.0 Net fee income ...... 1,423 1,526

The Group’s total fee income for 2012 amounted to Dh 1,847 million compared to Dh 1,703 million for 2011. The increase of Dh 144 million, or 8.5 per cent., in 2012 compared to 2011 principally reflected an increase of Dh 88 million, or 37.0 per cent., in fees from foreign exchange transactions coupled with smaller increases in fees from customer loans transactions, electronic payment services and other transactions, all principally driven by increases in the volume of business undertaken by the Group in 2012 compared to 2011. The Group’s fee and commission expense for 2012 amounted to Dh 321 million compared to Dh 280 million for 2011. The increase of Dh 41 million, or 14.6 per cent., in 2012 compared to 2011 principally reflected an increase of Dh 26 million, or 26.3 per cent., in custody fees paid by the Group, principally driven by an increased number of repo transactions entered into by the Group with mutual funds in 2012 compared to 2011. Reflecting the above factors, the Group’s net fee income in 2012 amounted to Dh 1,526 million, an increase of Dh 103 million, or 7.2 per cent., from the Dh 1,423 million net fee income recorded in 2011. In terms of reporting segments: . Net fee income from International activities for 2012 amounted to Dh 716 million compared to Dh 683 million in 2011, an increase of Dh 33 million, or 4.9 per cent. This increase principally reflected an increase in the volume of fee-based banking services provided by Bank of Africa; . Net fee income from Activity in Morocco for 2012 amounted to Dh 702 million compared to Dh 633 million in 2011, an increase of Dh 69 million, or 10.9 per cent. This increase principally reflected increased volumes of business undertaken by the Group in Morocco; and . Net fee income from Asset management and investment banking for 2012 amounted to Dh 105 million compared to Dh 116 million in 2011, a decrease of Dh 11 million, or 9.5 per cent. This decrease principally reflected a declining balance of assets under management as a result of a general decline in equity prices during 2012. This reduced the custody fees charged by the Group as they are charged by reference to the value of assets under management.

61 Income from financial assets The table below shows a breakdown of the Group’s income from financial assets in each of 2011 and 2012. Year ended 31 December 2011 2012 (Dh million) Net gains or losses on FVTPL financial assets...... 703 651 Dividend income on available for sale securities...... 203 169 Impairment losses on available for sale securities...... (160) (62) Net gains or losses realised on disposals of available for sale securities ...... (16) 43 Total income from financial assets ...... 730 801

The Group’s total income from financial assets for 2012 amounted to Dh 801 million compared to Dh 730 million for 2011. The increase of Dh 71 million, or 9.7 per cent., in 2012 compared to 2011 principally reflected lower impairment losses on available for sale securities in 2012 compared to 2011 coupled with a small net gain from sales of available for sale securities in 2012 compared to a small net loss on such sales in 2011. These positive developments were substantially offset by lower net gains realised on FVTPL securities and a reduction in dividend income on available for sale securities, in each case in 2012 compared to 2011.

Other banking revenue and expenses In 2012, the Group recorded other banking revenue of Dh 781 million, a decrease of Dh 11 million, or 1.4 per cent., compared to other banking revenue of Dh 792 million in 2011. In 2012, the Group recorded other banking expenses of Dh 333 million, a decrease of Dh 44 million, or 11.7 per cent., compared to other banking expenses of Dh 377 million in 2011.

Net banking income Reflecting the above factors and the increase in net interest income in particular, the Group’s net banking income increased by Dh 878 million, or 10.8 per cent., in 2012 from Dh 8,140 million in 2011 to Dh 9,018 million. In segmental terms, in 2011 44.3 per cent. of the Group’s net banking income was derived from the International activities segment, 43.7 per cent. was derived from the Activity in Morocco segment and 8.1 per cent. was derived from the Specialised financial services segment, with the Asset management and investment banking and Other activities segments accounting for 2.3 per cent. and 1.6 per cent., respectively. In 2012, 44.5 per cent. of the Group’s net banking income was derived from the International activities segment, 44.6 per cent. was derived from the Activity in Morocco segment and 6.9 per cent. was derived from the Specialised financial services segment, with the Asset management and investment banking and Other activities segments accounting for 2.3 per cent. and 1.7 per cent., respectively.

General operating expenses, depreciation and amortisation In segmental terms, in 2011 47.7 per cent. of the Group’s combined general operating expenses and depreciation and amortisation was derived from the Activity in Morocco segment and 44.2 per cent. was derived from the International activities segment. In 2012, 47.2 per cent. of the Group’s combined general operating expenses and depreciation and amortisation was derived from the Activity in Morocco segment and 44.6 per cent. was derived from the International activities segment.

General operating expenses In 2012, the Group’s general operating expenses were Dh 4,861 million, an increase of Dh 272 million, or 5.9 per cent., over the Dh 4,589 million recorded in 2011. The Group’s staff costs increased by Dh 95 million or 3.8 per cent., in 2012 and its other general operating expenses (which include costs relating to the Group’s branch network) increased by Dh 167 million, or 20.6 per cent., reflecting the impact of the Group’s expanded branch network. The Group does not provide a more detailed breakdown of these expenses in its consolidated financial statements.

62 Depreciation and amortisation The Group’s depreciation and amortisation costs amounted to Dh 574 million in 2012 and Dh 535 million in 2011. The increase of Dh 39 million, or 7.3 per cent., principally reflected an increase in the Group’s depreciable asset base.

Cost of risk The table below shows details of the Group’s cost of risk in each of 2011 and 2012. Year ended 31 December 2011 2012 (Dh million) Impairment provisions...... (1,221) (1,542) Write back of provisions ...... 443 717 Loss on impaired loans and advances...... (109) (288) Recoveries on amortised loans and advances...... 14 5 Total cost of risk ...... (872) (1,108)

The Group’s total cost of risk amounted to Dh 1,108 million in 2012 and Dh 872 million in 2011. The increase of Dh 236 million, or 27.0 per cent., reflected an increase of Dh 321 million in impairment provisions in part reflecting an increase in the Group’s customer loan portfolio and in part reflecting a more conservative approach to provisioning, as evidenced by the Group’s provision charge to gross loans ratio which was 0.56 per cent. at 31 December 2011 and 0.64 per cent. at 31 December 2012. In addition, the Group’s write offs of impaired loans increased by Dh 179 million in 2012 compared to 2011. These negative trends were partially offset by a Dh 274 million increase in the write back of provisions in 2012 compared to 2011.

Total net operating income Reflecting the above factors, the Group’s total net operating income increased by Dh 332 million, or 15.5 per cent., in 2012 from Dh 2,144 million in 2011 to Dh 2,476 million.

Other income and expenses, net The Group’s other net income and expenses were net expenses of Dh 324 million in 2012 compared to net income of Dh 38 million in 2011. The Group’s other income and expenses principally comprise its share in the net income of associates accounted for by the equity method, which increased by 46.7 per cent. from Dh 45 million in 2011 to Dh 66 million in 2012. In 2012, the Group’s other net income and expenses included a one-off cost of Dh 387 million incurred in settling a tax dispute.

Profit for the year before tax The Group’s profit for the year before tax was Dh 2,151 million in 2012 compared to Dh 2,182 million in 2011, a decrease of Dh 31 million, or 1.4 per cent. Excluding the one-off tax cost referred to above, the Group’s profit before tax would have increased by 16.3 per cent. in 2012.

Tax expense The Group’s corporate income tax charge in 2012 amounted to Dh 571 million compared to Dh 674 million in 2011, reflecting current tax expense of Dh 514 million in 2012 and Dh 606 million in 2011 and net deferred tax expense of Dh 57 million in 2012 and Dh 68 million in 2011. The Group’s average effective tax rates in 2011 and 2012 were 44.7 per cent. and 36.2 per cent., respectively.

Profit for the year Reflecting the above factors, the Group’s profit for the year was Dh 1,579 million in 2012 compared to Dh 1,508 million in 2011, an increase of Dh 71 million, or 4.7 per cent. Excluding the one-off tax cost referred to above, the Group’s profit for the year would have increased by 25.3 per cent. in 2012. Net of minority interests, the profit for the year attributable to the Group was Dh 923 million in 2012 and Dh 850 million in 2011.

63 In segmental terms, in 2011 40.3 per cent. of the net profit attributable to shareholders of the Group was derived from the Activity in Morocco segment, 35.2 per cent. was derived from the International activities segment and 18.0 per cent. was derived from the Specialised financial services segment, with the Asset management and investment banking and Other activities segments accounting for 4.5 per cent. and 2.1 per cent., respectively. In 2012, 31.0 per cent. of the net profit attributable to shareholders of the Group was derived from the Activity in Morocco segment, 49.1 per cent. was derived from the International activities segment and 12.4 per cent. was derived from the Specialised financial services segment, with the Asset management and investment banking and Other activities segments accounting for 4.8 per cent. and 2.8 per cent., respectively. The decline in the contribution of the Activity in Morocco segment in 2012 was principally the result of the one-off tax cost incurred in 2012.

Other comprehensive income In 2011, the Group recorded a positive net change in the fair value of its available for sale securities of Dh 82 million and, in 2012, the Group recorded a positive net change in the fair value of its available for sale securities of Dh 3 million.

Total comprehensive income Reflecting the above factors and the Group’s net profit for the year, the Group’s total comprehensive income for 2012 was Dh 1,584 million compared to Dh 1,587 million in 2011, a decrease of Dh 3 million. Net of minority interests, the total comprehensive income for the year attributable to the Group was Dh 927 million in 2012 and Dh 953 million in 2011.

LIQUIDITY AND FUNDING Overview The Group’s liquidity needs arise primarily from making loans and advances to customers, investments in securities, purchases of property, plant and equipment and paying dividends. To date, the Group’s liquidity needs have been funded largely through customer and interbank deposits (including repo financing), issued debt securities and retained earnings. See ‘‘—Funding’’.

Liquidity The tables below show the Group’s cash flow from operating activities, investing activities and financing activities for each of the six-month periods ended 30 June 2012 and 30 June 2013 and for each of 2011 and 2012. Six months ended 30 June 2012 2013 (Dh million) Net cash (used in)/from operating activities...... 278 (525) Net cash used in investing activities...... (990) (1,633) Net cash used in financing activities ...... (373) (2,403) Exchange rate changes ...... (6) (58) Cash and cash equivalents at the start of the period ...... 10,638 16,099 Cash and cash equivalents at the end of the period...... 9,546 11,480

2011 2012 (Dh million) Net cash from operating activities...... 760 3,978 Net cash used in investing activities...... (2,389) (1,622) Net cash from financing activities...... 363 3,047 Exchange rate changes ...... (30) 58 Cash and cash equivalents at the start of the year...... 11,934 10,638 Cash and cash equivalents at the end of the year ...... 10,638 16,099

Net cash (used in)/from operating activities Net cash used in operating activities in the six-month period ended 30 June 2013 was Dh 525 million compared to net cash from operating activities of Dh 278 million in the corresponding period of 2012. Net

64 cash from or used in operating activities is driven by the Group’s net profit for the year with the principal adjustment (before changes in operating assets and liabilities) being an addition in respect of the Group’s depreciation and amortisation expense. Net cash from operating activities in 2012 was Dh 3,978 million compared to Dh 760 million in 2011. Net cash from operating activities is driven by the Group’s net profit for the year with the principal adjustments (before changes in operating assets and liabilities) being an addition in respect of the Group’s depreciation and amortisation expense and a deduction in respect of net unrealised gains on the Group’s FVTPL securities portfolio.

Net cash used in investing activities Net cash used in investing activities in the six-month period ended 30 June 2013 was Dh 1,633 million compared to Dh 990 million in the corresponding period of 2012. In each period, the principal investments made were net acquisitions of securities and purchases of property, plant and equipment and intangible assets. Net cash used in investing activities in 2012 was Dh 1,622 million compared to Dh 2,389 million in 2011. In each year, the principal investments made were net acquisitions of securities and purchases of property, plant and equipment and intangible assets.

Net cash used in financing activities Net cash used in financing activities in the six-month period ended 30 June 2013 was Dh 2,403 million compared to Dh 373 million in the corresponding period of 2012. In the 2013 period, the Group made net repayments of debt in the amount of Sh 1,371 million and paid dividends to shareholders of Dh 1,031 million. In the 2012 period, the Group borrowed a net Dh 520 million and paid dividends of Dh 893 million. Net cash from financing activities in 2012 was Dh 3,047 million compared to Dh 363 million in 2011 and in each year principally comprised new debt financing (net of repayments) by the Group. In 2012, the Group also raised significant proceeds from an issue of share capital which, net of dividends paid by the Bank to its shareholders, amounted to DH 516 million. In 2011, the dividend paid by the Bank to its shareholders amounted to Dh 508 million.

Funding The Group’s principal source of funding is its customer deposits, including certain certificates of deposit issued and repo transactions with mutual funds. The Group also obtains funding from the interbank market (including repo transactions with other banks) and from subordinated and unsubordinated debt securities (including negotiable certificates of deposit) issued by it. The table below shows the Group’s funding in the form of customer deposits, interbank deposits, issued debt securities and subordinated debt as at 31 December in each of 2011 and 2012 and as at 30 June 2013. As at 31 December As at 30 June 2011 2012 2013

(Dh million) (%) (Dh million) (%) (Dh million) (%) Customer deposits..... 139,152 76.9 144,651 73.2 147,359 74.6 Interbank funding...... 24,849 13.7 34,228 17.3 32,599 16.5 Issued debt securities 12,009 6.6 14,015 7.1 11,695 5.9 Subordinated debt..... 4,904 2.7 4,760 2.4 5,810 2.9 Total ...... 180,914 100.0 197,654 100.0 197,464 100.0

Customer deposits The table below shows a breakdown of the Group’s customer deposits by type as at 31 December in each of 2011 and 2012 and as at 30 June 2013.

65 As at 31 December As at 30 June 2011 2012 2013

(Dh million) (%) (Dh million) (%) (Dh million) (%) Demand deposits...... 57,769 41.5 63,670 44.0 64,806 44.0 Term accounts...... 23,097 16.6 20,207 14.0 20,795 14.1 Savings accounts ...... 19,882 14.3 17,904 12.4 18,474 12.5 Cash certificates...... 4,911 3.5 4,108 2.8 4,521 3.1 Repurchase agreements...... 3,602 2.6 1,500 1.0 1,726 1.2 Other items(1)...... 29,890 21.5 37,263 25.8 37,038 25.1 Total ...... 139,152 100.0 144,651 100.0 147,359 100.0

Note: (1) Principally represents deposits in Bank of Africa group banks which are classified in a different manner.

The Group’s customer deposits were Dh 139,152 million, or 66.9 per cent. of its total liabilities and shareholders’ equity, at 31 December 2011, Dh 144,651 million, or 62.6 per cent. of the Group’s total liabilities and shareholders’ equity, at 31 December 2012 and Dh 147,359 million, or 65.6 per cent. of its total liabilities and shareholders’ equity, at 30 June 2013. The Group’s Moroccan deposits principally comprise demand deposits, term accounts and saving accounts, which together comprised 70.6 per cent. of its total deposits at 30 June 2013. The Group’s Moroccan demand deposits do not bear interest. The Group issues cash certificates as an alternative to accepting term accounts. The Group’s cash certificates generally have lower yields than its term accounts and are usually issued at times when the Group has strong liquidity ratios. The Group classifies its repurchase transactions with mutual funds as customer deposits and this funding is generally short-term in nature and matched with short-term assets. The table below shows a geographic breakdown of the Group’s customer deposits (based on the location of the entity accepting the deposit) as at 31 December in each of 2011 and 2012 and as at 30 June 2013. As at 31 December As at 30 June 2011 2012 2013

(Dh million) (%) (Dh million) (%) (Dh million) (%) Morocco...... 102,012 73.3 103,266 71.4 103,705 70.4 Sub-Saharan Africa... 36,115 26.0 40,318 27.9 42,856 29.1 Europe ...... 1,025 0.7 1,067 0.7 798 0.5 Total ...... 139,152 100.0 144,651 100.0 147,359 100.0

Note 8.6 to the 2012 Financial Statements provides a maturity analysis of the Group’s balance sheet, including its customer deposits. No equivalent information appears in the Interim Financial Statements.

Interbank funding The Group’s interbank funding is short-term in nature and principally comprises borrowing from Bank Al-Maghrib as well as overnight and other short-term deposits and short-term repurchase agreements with banks. The table below shows a breakdown of the Group’s interbank funding as at 31 December in each of 2011 and 2012 and as at 30 June 2013. As at 31 December As at 30 June 2011 2012 2013

(Dh million) (%) (Dh million) (%) (Dh million) (%) Demand deposits...... 2,348 9.4 1,829 5.3 2,950 9.0 Borrowings ...... 13,584 54.7 18,433 53.9 19,237 59.0 Repurchase agreements...... 8,917 35.9 13,966 40.8 10,413 31.9 Total ...... 24,849 100.0 34,228 100.0 32,599 100.0

66 The Group does not have any committed borrowing facilities or other lines of credit that it can access to meet liquidity needs but it does have limited cash balances and placements with central banks, and has a Group asset and liability committee which actively manages internal funding lines between different Group banks.

Issued debt securities The Group’s issued debt securities comprise negotiable certificates of deposit which are principally short-term fixed rate instruments issued by the Bank but also include instruments issued by certain other Group companies such as Bank of Africa, Salafin and Maghrebail.

Subordinated debt The Group’s subordinated debt comprises both perpetual and dated securities bearing interest at fixed rates, primarily denominated in dirham and issued to domestic investors. As at 30 June 2013, the Group also had outstanding two issues of euro-denominated subordinated debt securities issued to two development financial institutions which are both also shareholders in Bank of Africa. The Group’s perpetual subordinated debt increased in 2012 and its dated subordinated debt increased by 51 per cent. in the first half of 2013, reflecting the Group’s efforts to increase its capital. The table below shows a breakdown of the Group’s subordinated debt as at 31 December in each of 2012 and 2011 and as at 30 June 2013. As at As at 31 December 30 June 2011 2012 2013 (Dh million) Dated subordinated debt securities...... 3,803 1,853 2,801 Perpetual subordinated debt ...... 860 2,780 2,778 Public funds and special guarantee funds ...... 241 127 231 Total debt securities and subordinated debt...... 4,904 4,760 5,810

CAPITAL ADEQUACY The adequacy of the Group’s capital is monitored using, among other measures, the rules and ratios established by the Basel Committee and adopted by Bank Al-Maghrib in supervising the Group. Bank Al-Maghrib supervises the Group on a consolidated basis and, as such, receives information on the capital adequacy of, and sets capital requirements for, the Group as a whole. Individual banking subsidiaries are directly regulated by their local supervisors, who set their capital adequacy requirements. The primary objectives of the Group’s capital management are to ensure that the Group complies with externally imposed capital requirements and that the Group maintains strong credit ratings and healthy capital ratios in order to support its business and to maximise shareholders’ value. The Group’s regulatory capital consists of tier 1 capital (which principally comprises the Group’s issued share capital, certain reserves and its minority interest) and tier 2 capital (which comprises both upper and lower tier 2 capital). The minimum total capital adequacy ratio required by Bank Al-Maghrib is 12 per cent. and the minimum required by Basel II is 8 per cent. The Group is currently compliant with Basel II having adopted the Standardised approach for each of credit risk, operational risk and market risk. The Group is currently undertaking projects that are designed to allow it to move to the advanced approach for both credit and market risk. The Bank has implemented an internal rating system in accordance with Basel II second pillar recommendations. The modelling process has started in June 2013, and the system is expected to be implemented across the Group. In response to the global financial crisis, there has been a worldwide focus on the regulation of financial institutions, with many new regulations and changes in existing regulation having been implemented or in the process of being implemented. Examples of such new regulations include the new regime proposed by the Basel Committee on Banking Supervision (the Basel Committee) in December 2010 (referred to as Basel III). The aim of the Basel III framework is to improve the banking sector’s ability to absorb shocks

67 arising from financial and economic stress, improve risk management and governance and strengthen banks’ transparency and disclosures. The framework raises both the quality and quantity of the capital base and increases capital requirements for certain positions. The minimum requirements for capital will be underpinned by a leverage ratio that serves as a backstop to the risk-based capital measures. In addition to the minimum requirements, there will also be buffer requirements in the form of both a capital conservation buffer and a countercyclical capital buffer. The framework also introduces internationally harmonised minimum requirements for liquidity risk. The Basel III framework is expected to be implemented in Morocco in stages from 2014 up to 2019. The Bank believes that it would currently be able to comply with the proposed minimum liquidity ratio if it were now in force. However both this ratio and the increased capital requirements under Basel III may adversely impact the Group’s results of operations, financial position and business when they are fully implemented. The table below shows the composition of the Group’s regulatory capital, a breakdown of its risk-weighted assets and its capital ratios as at 31 December in each of 2011 and 2012 and as at 30 June 2013. As at As at 31 December 30 June 2011 2012 2013 (Dh million, except percentages) Tier 1 capital...... 13,931 15,838 15,408 Tier 2 capital...... 5,628 5,658 6,626 Total regulatory capital...... 19,559 21,497 22,034

Risk weighted assets for credit risk...... 128,788 136,566 141,237 Risk weighted assets for market risk ...... 17,552 12,400 13,656 Risk weighted assets for operational risk...... 13,213 14,664 15,383 Total risk weighted assets ...... 159,553 163,631 170,276 Tier 1 capital adequacy ratio...... 8.73% 9.68% 9.05% Total capital adequacy ratio...... 12.26% 13.14% 12.94%

The Group is currently targeting a total capital ratio of just above 12 per cent. During 2012 and the first six months of 2013, the Group increased its total capital ratio through the issue of new equity securities and retained earnings and by reducing its risk weighted assets for market risk principally through a reduction in the size of its mutual funds portfolio. The Group is working on moving to the advanced approach for market risk and has scope to further reduce its mutual funds portfolio to ensure that it is able to accommodate continued customer loan growth.

CAPITAL EXPENDITURE AND OTHER COMMITMENTS The Group does not have any material ongoing capital expenditure or other commitments.

CONTINGENT LIABILITIES The Group has contingent liabilities in respect of funding commitments it has made as well as in relation to guarantees issued by it. The table below shows these contingent liabilities as at 31 December in each of 2011 and 2012 and as at 30 June 2013. As at As at 31 December 30 June 2011 2012 2013 (Dh million) Unutilised credit facilities ...... 17,113 14,795 15,460 Guarantees ...... 18,996 17,822 19,493 Total contingent liabilities ...... 36,109 32,617 34,954

68 The majority of the Group’s commitments to extend credit expire within one year. As commitments may expire without being drawn, and as guarantees are contingent upon specific events occurring, the amounts stated above do not necessarily represent future cash requirements.

RELATED PARTY TRANSACTIONS The Group’s principal related party transactions are with its parent company (FinanceCom), other companies owned by its parent company and consolidated companies. These transactions principally comprise lending and deposit taking. All such transactions have been entered into on arm’s-length terms. The Group does not consider transactions entered into with its directors and senior management or their close family members or entities owned by them to be related party transactions, although in the 2012 Financial Statements (but not the Interim Financial Statements) it separately disclosed the remuneration paid to members of the Bank’s general management team and the aggregate amount of loans granted to such persons, see note 7.3 to the 2012 Financial Statements. Further information on the Group’s related party transactions in 2011, 2012 and in the first six months of 2013 is set out in note 7.4 to the 2012 Financial Statements and in note 7.4 to the Interim Financial Statements.

DISCLOSURES ABOUT RISK The Group is exposed to a number of financial risks and takes steps to mitigate certain of these risks as described in ‘‘Risk management’’ and in note 8 to each of the Interim Financial Statements and the 2012 Financial Statements.

69 DESCRIPTION OF THE GROUP

OVERVIEW The Group, through the Bank, offers a wide range of retail and corporate banking services to individuals, small and medium sized enterprises (SMEs) and large corporate customers in Morocco. Other Group companies based in Morocco offer a range of other banking services, including investment banking, brokerage, asset management, custody, leasing, factoring, consumer credit, debt recovery and credit insurance. In addition, through its majority-owned subsidiary, Bank of Africa, and direct holdings in two associated companies, the Group provides banking services in 17 other African countries, almost all of which are in sub-Saharan Africa, see ‘‘—International activities’’. The Group also has a banking subsidiary in London (with a branch in Paris), a banking subsidiary in Madrid and representative offices in Belgium, Germany, Italy, the United Arab Emirates and China. As at 31 December 2012, the Bank was the third largest Moroccan commercial bank in terms of total assets and shareholders’ equity, with Dh 230,889 million in total consolidated assets and Dh 18,413 million in consolidated shareholders’ equity. As at 31 December 2012, the Bank was also the third largest Moroccan commercial bank in terms of total deposits, with Dh 144,651 million in total consolidated deposits. As at 30 June 2013, the Bank had the third largest branch network among commercial banks in Morocco, with 605 branches, 27 business centres and a corporate centre in Morocco. The Bank’s principal activities in Morocco consist of retail banking, including the acceptance of deposits, lending, the sale of bancassurance products, money transfers and electronic banking services and commercial lending, including the making of short-, medium- and long-term loans. The Bank’s branches are delegated primary responsibility for most of its customers and offer the full range of the Bank’s products and services. The Group’s international activities, principally in sub-Saharan Africa through Bank of Africa and minority investments in two associated African banks, encompass a range of standard banking services across 17 other African countries. In Europe, principally through subsidiary banks in London and Madrid, the Group focuses on international payments and trade finance, including granting export- and import-related credits to, and issuing letters of credit and guarantees for the account of, companies engaged in Morocco’s foreign trade, as well as cross-border retail banking services which are primarily targeted at Moroccans resident abroad. The majority of Group’s assets and net income is derived from its operations in Morocco. At 30 June 2013, the Bank’s domestic banking activity accounted for 71 per cent. of the Group’s total assets and the activities of the Group’s other Moroccan entities accounted for a further 4 per cent. of the Group’s total assets. In 2012, the Bank’s domestic banking activity accounted for 31 per cent. of the net profit attributable to shareholders of the Group and the activities of the Group’s other Moroccan entities accounted for a further 20 per cent. In the six months ended 30 June 2013, the Bank’s domestic banking activity accounted for 44 per cent. of the net profit attributable to shareholders of the Group and the activities of the Group’s other Moroccan entities accounted for a further 18 per cent. As at 30 September 2013, members of the FinanceCom Group, a major Moroccan business group, owned, directly and indirectly, 38.76 per cent. of the Bank. The Bank’s other significant shareholders include Banque Fe´de´rative du Cre´dit Mutuel, the holding company of the Cre´dit Mutuel Centre Est Europe – CIC group (the CM-CIC Group) and CDG Group, a significant institutional investor in Morocco, which held 26.21 per cent. and 8.46 per cent., respectively, of the Bank’s shares as at 30 September 2013. The Bank’s registered office is located at 140 Avenue Hassan II, 20000 Casablanca, Morocco and its telephone number is +212 22 49 80 04.

HISTORY The Bank was established by the Moroccan government as a national credit institution responsible for the promotion and financing of foreign trade. The Bank was incorporated in Morocco on 31 August 1959 for a period of 99 years and its registered number is CASA 27.129. It is a public joint stock company and it operates under Moroccan law no. 17-95 relating to joint stock companies. Reflecting the reason for the Bank’s establishment, its focus was principally on providing banking services for corporate customers in the period up to its privatisation in 1995. During that period, the Bank grew, both organically and through a series of acquisitions, including the purchase of the Moroccan branch network of Banca Commerciale Italiana in 1962, the purchase of two-thirds of the assets of Socie´te´ de Banque du Maghreb in 1971 and the purchase of Banco Espanol en Marruecos and of the Moroccan subsidiary of Bank of America, N.T. & S.A. in 1975.

70 Until the Bank’s privatisation in 1995, the Moroccan government and certain government-owned entities owned 50.01 per cent. of the share capital of the Bank, with the remaining shares being held by Moroccan financial institutions, foreign commercial banks and the public. Between January and April 1995, the government privatised the Bank in three tranches by selling shares representing 14.01 per cent. of the Bank’s share capital through a public offering and associated listing on the Casablanca Stock Exchange in Morocco, 3.0 per cent. through an offering to employees of the Bank and 26.0 per cent. through a private placement to a group of foreign and Moroccan investors, including an 8.8 per cent. stake sold to a pension fund for government employees. In 1996, the Bank issued U.S.$60 million of B shares, which were deposited into a Global Depositary Receipt (GDR) programme. The GDRs are listed on the London Stock Exchange (Symbol: BMED). In 2002, the Bank began an aggressive programme to develop a retail banking business with a view to diversifying away from an almost exclusively corporate banking model, whilst at the same time consolidating its strong market position with respect to its traditional corporate customers. Thus, with the assistance of a foreign consulting firm, the Bank launched ‘‘Cap Client’’, a customer focused initiative aimed at improving the services that its customers receive. In 2003, the Bank established a dedicated corporate banking division which provides its largest corporate customers (those with annual revenue over Dh 500 million) with an integrated service and which has helped to consolidate the Bank’s leading position in the corporate sector, including in project financings. Reflecting the strategy to build a substantial retail business, the Bank opened approximately 70 branches in Morocco in each year between 2007 and 2010. In 2011 and 2012, the Bank significantly reduced the rate of new branch openings and, during the three years to 2015, it currently expects to open around 50 branches annually. In February 2008, the Bank acquired a 35.0 per cent. shareholding in Bank of Africa which it increased to 42.5 per cent. later in the same year. In 2010, the Bank increased its shareholding in Bank of Africa to a controlling interest of 55.8 per cent. and Bank of Africa was fully consolidated in the Bank’s consolidated financial statements for the first time in that year. During 2012 and 2013, the Bank increased its stake in Bank of Africa to its current level of 72.6 per cent. Bank of Africa itself began in 1982 with the establishment of Bank of Africa – Mali. Further Bank of Africa banks were established or acquired with the most recent bank, Bank of Africa – Togo, being established in 2013; see ‘‘—International activities’’.

BUSINESS STRENGTHS Management believes that the Bank has a number of key strengths that enable it to compete effectively in Morocco. These strengths include:

Recognised and trusted reputation in Morocco The Group believes that its reputation is one of its strongest assets and that the Bank is one of the most widely recognised, respected and trusted banks in Morocco, as evidenced by the numerous awards it has gained including being awarded Best Bank in Morocco by The Banker Magazine six times since 2000 and Best Bank in Morocco by EMEAFINANCE in 2011. The Bank has been in business for more than 50 years and has an established record of financial stability. The strength of the Bank’s brand, together with its modern branch network and growing customer base, have enabled the Group to become one of the leading banking groups in Morocco as well as a trusted banking partner for customers. As at 30 June 2013, 74.8 per cent. of the Group’s assets are related to activities in Morocco, as the Group has focused most of its business in a market it believes it understands well.

High quality and diverse major shareholders The Bank’s major shareholders include FinanceCom, a leading Moroccan business group controlled by the Bank’s chairman, Mr Othman Benjelloun. FinanceCom directly and indirectly owns 38.8 per cent. of the Bank’s shares and the Bank has been able to exploit a number of synergies with FinanceCom group companies, including offering bancassurance products of RMA Watanya, an insurance company that is a majority-owned subsidiary in the FinanceCom group. The Bank’s other major shareholders are the CM-CIC Group, a large French banking group that owns 26.2 per cent. of the Bank. The CM-CIC Group has provided significant assistance to the Bank in developing its know-how and systems, including the creation of Eurafric Information, a joint venture between CM-CIC, the Bank and RMA Watanya to serve as an IT platform for the Group. The Bank’s third major shareholder is the CDG Group, which is a significant institutional investor in Morocco and owns 8.5 per cent. of the Bank’s shares.

71 Strategy focused on creating significant further value Management believes that there is considerable scope for creating further value in the Group’s business in a number of areas. Management has developed a strategy for the period to 2015 that focuses on controlled further growth in the branch network in Morocco while fully exploiting the growth which has already taken place and controlled and opportunistic expansion in sub-Saharan Africa. See ‘‘—Strategy’’. The Bank has experienced significant growth in customer loans and deposits in recent years which has principally been driven by its expanding branch network. One adverse consequence of this growth has been a high cost income ratio relative to its peers, who already had established branch networks. The Bank is now focused on reducing costs to improve its cost income ratio and increase its profitability. Within Africa, the Bank intends to increase its holdings in certain African banks to increase its share of the profit earned by those banks whilst at the same time exploiting opportunities to expand into new countries which offer significant growth potential.

Prudent risk management in the Bank Management believes it has instilled a prudent and effective risk management culture at all levels of the Bank, beginning with careful customer selection to support a quality asset base and including the establishment of conservative provisioning policies that, where appropriate, exceed applicable regulatory requirements. The Bank monitors its credit quality on an ongoing basis. Between 2010 and 2012, the Bank grew its loan portfolio at a compound annual growth rate of 11 per cent. and maintained Bank-only NPL ratios of 4.6 per cent., 4.9 per cent. and 4.2 per cent. as at 31 December 2010, 2011 and 2012, respectively, compared to 4.8 per cent., 5.0 per cent. and 5.0 per cent. for the Moroccan banking sector as a whole according to the Moroccan Banks’ Association, demonstrating its ability to expand its loan portfolio without compromising credit quality. Within its African operations, the Group has started a project to implement risk management procedures across the Bank of Africa network that are comparable to those used by the Bank in Morocco whilst maintaining local practices that enhance risk management in the relevant jurisdictions. This project is expected to take two to three years to be fully implemented. Management believes that its focus on enhanced internal controls and risk management systems will enable the Bank to maintain the high quality of its loan portfolio in the future as the Bank seeks to continue to grow its business in Morocco and will significantly enhance risk management across the Bank of Africa network and establish a sound platform for further growth in sub-Saharan Africa.

Experienced management and young employees The Bank believes that a key element of its success in Morocco has been the expertise and experience of its management, as well as its emphasis on the quality, training and development of its employees. The Bank is led by its chairman and chief executive officer, Mr Othman Benjelloun, who is also the Chairman of the Moroccan Banks’ Association, FinanceCom and a number of other Moroccan entities. Mr. Benjelloun has also established a senior management team that has on average 25 years’ experience in the banking industry. The Bank’s employee turnover rate averaged 5.2 per cent. over the five years to 31 December 2012. Management believes that the Bank’s well-trained employees form a cornerstone of its focus on superior customer service and developing long-standing customer relationships, and also provide the Bank with a competitive advantage, particularly in a growing market where there is a high demand for skilled personnel.

STRATEGY The Group’s strategy focuses on strengthening and expanding its retail, corporate and other banking services, both in Morocco and abroad. The Group believes that there is scope both to increase its customer numbers and to improve product penetration per customer, particularly in the retail and SME sectors. The Group seeks to achieve and maintain good levels of profitability and is focusing on improving its efficiency ratios, such as return on equity, return on assets and cost/income ratios. It intends to do this by concentrating on its core banking business, through minimising market risk, applying sound risk management policies and developing efficient operational processes. From its base of core competitive strengths, the Group has developed a business strategy that includes the following elements:

72 Focus on prudent and sustainable growth in Morocco The Group intends to continue to focus on the Moroccan market, where it has substantial local knowledge, so as to reach additional retail and corporate customers, including SME customers in particular, through the introduction of a tailored product offering. Morocco has a growing economy with real GDP growth of 3.6 per cent. in 2010, 5.0 per cent. in 2011 and 2.7 per cent. in 2012. Real GDP growth in Morocco is projected to be 5.1 per cent. in 2013, based on IMF data derived from the World Economic Outlook (October 2013). As Morocco’s economy grows and the private sector expands, the Group expects to see continued demand from private sector companies for financial services, including a range of financing. In addition, as only approximately 57 per cent. of the Moroccan population currently has a , according to Bank Al-Maghrib, the Group’s management believes that demand for retail banking in Morocco will increase. Reflecting the fact that proximity to a branch is one of the principal factors behind a new customer’s selection of its bank, management aims to consolidate the Bank’s position in the Moroccan market by continuing its branch network expansion programme and expects to open new branches at a rate of approximately 50 new branches in each of 2013, 2014 and 2015. This rate of growth is intended to maintain the Bank’s current market share in terms of branch network of around 15 per cent.

Focus on improving efficiency Principally as a result of the significant expansion of its branch network in the last five years, the Bank is currently experiencing high cost income ratios and low return on equity ratios. In each of 2010, 2011 and 2012, the Bank’s cost income ratios were 61.8 per cent., 64.9 per cent. and 60.5 per cent., respectively, compared to average cost income ratios of 43 per cent., 45 per cent. and 46 per cent., respectively, for the Moroccan commercial banking sector as a whole. In 2012, the Bank implemented a project aimed at automating processes and centralising its back office functions. This project is intended to free up time in branches to focus on customers’ needs, reduce the costs of processing and improve security with regard to transactions, particularly due to the reduction of manual processing. The centralisation of certain back-offices within the Bank’s 27 business centres generated savings in human resources of approximately 50 staff as at 31 December 2012 and these staff are being redeployed in the Bank’s network to strengthen its sales force. In addition, during 2011, the Bank decided to reduce significantly the rate of new branch openings and began to focus on cost containment. In particular, the Bank sought to control staff numbers as its staff expenses make up approximately 50 per cent. of its general operating expenses. A policy of not replacing all staff who leave the Bank as well as a programme to redeploy staff whose positions are lost as a result of internal efficiency measures such as those described above has resulted in staff numbers falling by 188, or 3.7 per cent., from 5,027 at 31 December 2010 to 4,839 at 30 June 2013. The Bank believes that there is considerable scope for further staff redeployment and is targeting a cost income ratio of 55 per cent. by 2015.

Leverage the new Moroccan branch network and regional organisation In 2011, partly in response to the significant growth in its branch network, the Bank re-organised its Moroccan operations into eight territorial divisions covering all the regions of Morocco. The purpose of this re-organisation was to bring the Bank closer to its customers and to improve the Bank’s commercial efficiency. In addition, the Bank intends to implement new commercial practices, such as improving service quality and increasing cross selling, with a view to improving the product penetration per customer and enhancing customer loyalty. The Bank’s new regionalisation approach is also intended to help the Bank delegate additional decision-making throughout the management levels rather than maintaining an entirely centralised, and perhaps less responsive, decision-making model. As part of this delegation process, regional credit committees have been established and granted broad delegations of powers. In addition, business development and monitoring and certain support activities have also been delegated to the regional territories.

Continue strengthening and expanding the Group’s operations in Africa In Africa, Bank of Africa’s strategy, which was introduced in 2011 after the Bank had acquired control, focuses on: . enhancing Bank of Africa’s control over, and corporate governance within, its subsidiary banks with a view to increasing overall net income and deploying its strategy more precisely and rapidly. In particular, Bank of Africa is focusing on optimising the tax efficiency of its shareholdings in

73 subsidiary banks and, where appropriate, increasing its shareholdings in subsidiaries to maximise its returns from them; . at the time it was acquired, Bank of Africa principally focused on providing banking services to corporate customers. The new strategy envisages that each bank within the Bank of Africa network should aim to develop a retail banking business with a view to diversifying its lending portfolio, increasing its volumes of business and improving profitability. This strategy replicates that adopted by the Bank in Morocco in 2003 and management believes that it can apply many of the lessons learned by the Bank when implementing this new strategy in Africa; . improving risk management and pooling financing capacities of subsidiary banks to finance major projects and business customers; stronger controls over financial and operating expenses, including improved asset and liability maturity matching and the creation of a cost control centre to increase purchasing power and improve the break even of new branches; closer credit monitoring, principally through a better system of monitoring and provisioning committees across the network; and a more professional approach to debt recovery through specialised recovery training provided by two of the Bank’s subsidiaries, RM Experts and Salafin; . consolidating its current position (having established or acquired eight new banks in the period between 2007 and 2012) with a view to achieving organic growth, particularly in markets such as Kenya, Uganda, Tanzania, Ghana, the Ivory Coast and Senegal where market shares are at or below 5 per cent., and targeted geographical expansion in countries with large populations or high GDP per capita as and when attractive opportunities appear; and . exploiting the synergies between the Bank and Bank of Africa (for example through the secondment of Bank executives and the introduction of Bank marketing, customer segmentation, sales and managerial and risk management procedures) and increasing the co-operation between different banks in the Bank of Africa network with a view to exploiting synergies and cross-selling opportunities.

Reorganising the European operations The Group is currently reorganising the structure of its holdings in Europe. In particular, the banking subsidiary in Madrid is being transferred to the holding company for the banking subsidiary in London. This reorganisation is intended to consolidate the governance system within the European platform, to exploit synergies between the two banks as both focus on capturing European – African trade flows and providing services to Moroccans who are resident abroad, to reinforce operational efficiency by establishing a single back office function and to exploit the increased combined shareholders’ equity of the two banks.

BUSINESS SEGMENTS Overview The Group’s core banking businesses are corporate and retail banking. In Morocco, the Bank offers most traditional corporate and retail banking products and services including deposit taking, originating loans, issuance of payment cards, foreign currency exchange transactions, issuance of bank guarantees and securities, correspondent banking, cash and transfer operations, trust operations, collateral operations, cash collection, transactions with precious metals, clearing operations, safe keeping operations, issuance of cheque books, and promissory note and bill of exchange operations. In addition, the Bank’s Moroccan subsidiaries offer a range of ancillary banking and financial services, including investment banking, asset management, leasing, factoring, forfeiting, brokerage, debt collection, credit insurance and other services. In Africa, the banks in which the Group is invested offer a range of traditional banking services to their customers and, in Europe, the Group’s subsidiary banks principally focus on trade finance and providing services to Moroccans resident abroad. The Group currently operates through the following reporting segments. The first three segments comprise businesses principally focused on Morocco and the fourth comprises the Group’s international activities: . Activity in Morocco, which principally comprises the corporate and retail banking businesses undertaken by the Bank; . Asset management and investment banking, which comprises the investment banking business undertaken by the Group’s wholly-owned subsidiary, BMCE Capital; the stock brokerage business

74 undertaken by the Group’s wholly-owned subsidiary, BMCE Capital Bourse; and the asset management business undertaken by the Group’s wholly-owned subsidiary, BMCE Capital Gestion; . Specialised financial services, which comprises the consumer credit business undertaken by the Group’s majority-owned subsidiary, Salafin; the debt collection business undertaken by the Group’s wholly-owned subsidiary, RM Experts; the leasing business undertaken by the Group’s majority-owned subsidiary, Maghrebail; the factoring business undertaken by the Group’s wholly-owned subsidiary, Maroc Factoring; and the credit insurance business undertaken by the Group’s 20.0 per cent. owned associate, Euler Hermes Acmar; . International activities, which comprises the banking businesses undertaken by the Group’s wholly-owned subsidiaries, BMCE International Madrid and BMCE Bank International UK; its majority owned subsidiary, Bank of Africa; its 25.0 per cent. owned associate, La Congolaise de Banque; and its 27.4 per cent. owned associate, Banque de Development du Mali; and . Other activities, which comprises the car rental business undertaken by the Group’s wholly-owned subsidiary, Locasom; the distribution business undertaken by the Group’s 45.6 per cent. owned associate, Hanouty, the information technology business undertaken by the Group’s 41.0 per cent. owned associate, Eurafric Information; and the engineering business undertaken by its 38.9 per cent. owned associate, Conseil Inge´nierie et De´velopment. The table below shows the contribution of each of the Group’s reporting segments to consolidated net banking income and consolidated net profit attributable to shareholders in each of 2011 and 2012 and for each of the six-month periods ended 30 June 2012 and 30 June 2013. Asset management and Specialised Activity in investment financial Other International Morocco banking services activities activities Total (Dh million) Net banking income 2011 3,561 185 656 131 3,608 8,141 % of total 43.7 2.3 8.1 1.7 44.3 100.0 2012 4,020 212 621 150 4,015 9,018 % of total 44.6 2.4 6.9 1.6 44.5 100.0 Six months ended 30 June 2012 1,930 85 277 73 2,015 4,380 % of total 44.1 1.9 6.3 1.7 46.0 100.0 Six months ended 30 June 2013 2,106 107 291 77 2,266 4,848 % of total 43.5 2.2 6.0 1.6 46.7 100.0

Net profit attributable to shareholders 2011 342 38 153 18 299 850 % of total 40.2 4.5 18.0 2.1 35.2 100.0 2012 286 44 114 26 453 923 % of total 31.0 4.8 12.4 2.8 49.1 100.0 Six months ended 30 June 2012 156 12 48 18 126 360 % of total 43.4 3.2 13.4 5.1 34.9 100.0 Six months ended 30 June 2013 261 36 52 20 227 595 % of total 43.8 6.0 8.8 3.3 38.1 100.0

Activity in Morocco The Group’s activities in Morocco comprise the business of the Bank and accounted for 44.6 per cent. of the Group’s net banking income and 31.0 per cent. of its net profit attributable to shareholders in 2012. The Bank’s principal activities in Morocco consist of retail banking, including the acceptance of deposits, money transfers and electronic banking services, and corporate banking, including the making of short-,

75 medium- and long-term loans, and international trade-related financing. Through its retail network, the Bank also distributes certain financial products offered by other Group members and by other companies within the FinanceCom group, particularly bancassurance products offered in partnership with RMA Watanya. As at 30 June 2013, the Bank had the third largest branch network in Morocco, with 605 branches, 27 business centres and a corporate centre in Morocco. The Bank also had three branches in Europe and one branch in the free-trade zone of Tangier, as well as 23 representative offices in Europe and one representative office in each of the United Arab Emirates and China. The Bank also has 28 BMCE desks within the CM-CIC branches that cater exclusively to expatriate Moroccans. At 30 June 2013, retail customers (individuals, professionals (including sole traders and small partnerships), Moroccans residing abroad and private clients) accounted for 72 per cent. of the deposits in the Bank, and corporate customers accounted for 28 per cent. (compared to 77 per cent. and 22 per cent., respectively, at 31 December 2012 and 75 per cent. and 23 per cent., respectively, at December 31, 2011). As at 30 June 2013, the Bank maintained approximately 2.2 million active customer accounts, compared to approximately 2.2 million at 31 December 2012 and 2.1 million as at 31 December 2011. Approximately 185,000 new accounts were opened in 2012, which represents an increase of 8.5 per cent. over 2011. As at 30 June 2013, the Bank had Dh 54,379 million in cheque and current accounts, Dh 17,663 million in savings accounts and Dh 23,371 million in term accounts. The Group’s Activity in Morocco business segment accounted for Dh 102,626 million of customer deposits as at 30 June 2013, equal to 69.6 per cent. of the Group’s total customer deposits. As at 30 June 2013, the Bank’s total loan portfolio (net of provisions for loan losses) was Dh 96,936 million, of which 37 per cent. consisted of short-term loans and 63 per cent. consisted of medium- and long-term loans. The Bank’s short-term loans and facilities include overdraft and other working capital facilities, such as advances on goods, industrial warrants, export- and import-related financing, consumer credits and bills discounting. The substantial majority of the Bank’s loan portfolio (94 per cent. at 30 June 2013) is denominated in dirham, with the remaining portion denominated mainly in euro. The Bank’s debtors on its loan portfolio are spread over a range of economic sectors and industries. Virtually all of the loans made by the Bank, including medium- and long-term loans, carry variable interest rates.

Retail banking In the retail banking area, one of the Bank’s principal objectives is to develop a diversified and stable deposit base to provide a low-cost source of funding for its lending activities. In order to attract customer deposits, the Bank offers a wide range of products, including current accounts, cheque accounts, savings accounts, term accounts, money market instruments, money transfers, electronic banking services, including payment cards, and automatic teller machines (ATMs) and point-of-sale machines linked to international networks, such as Cirrus, Visa and Mastercard, as well as bancassurance products written by a sister insurance company, RMA Watanya.

Retail lending As at 30 June 2013, the Bank had Dh 29,037 million in gross retail loans (that is, mortgage and consumer loans), equal to 30 per cent. of the Bank’s total gross loan portfolio. The Bank’s mortgage lending products include: . A range of mortgage loans for primary or secondary housing for periods from three to 25 years with a minimum loan of Dh 70,000 up to a ceiling that depends on the credit worthiness of the individual customer. The applicable interest rate, whether variable or fixed, depends on the duration and amount of the loan. A range of repayment terms are permitted, including tranches with different maturity dates, partial and total pre-payment, and other features. . Mortgage loans to customers who wish to repay only interest during the term of the mortgage, with the full amount of principal falling due at the end of the mortgage. The end payment is funded by a , into which the borrower has contributed during the term of the mortgage, which can provide the borrower with certain tax advantages and a resulting reduction in the total cost of capital for the borrower. . Social housing mortgage loans which are offered within the framework of a programme approved by the Ministry of Finance and Privatisation with defined maturity parameters. No deviations from these parameters are permitted.

76 The Bank also offers short- to medium-term loans to retail customers with regular income. The Bank currently extends this type of credit for a period of six to 60 months in amounts from Dh 5,000 to Dh 150,000.

Retail distribution channels The Bank’s retail business has expanded rapidly, with approximately 70 branches opening annually between 2007 and 2010. As at 30 June 2013, the Bank had 605 branches in Morocco that serve its retail customer base. The Bank intends to open approximately 50 branches in each of 2014 and 2015. The Bank has also sought to expand its ATM operations. As at 30 June 2013, the Bank operated 698 ATMs of which 209 were installed in the five years to 31 December 2012. The Bank has approximately one million payment cards which can be used at an ATM in circulation, of which approximately 75 per cent. are active cards. See ‘‘—Payment cards’’ below. Including the Moroccan Post Office, the Bank operated the third largest ATM network in Morocco at 31 December 2012, according to the interbank electronic payment centre (Centre Mone´tique Interbancaire (CMI)). The Bank also operates ‘‘Caravane Salaf’’, which are mobile banks that periodically and regularly visit under-banked areas in Morocco and provide customers with access to all of the products that are accessible in its branches. The Bank also operates a network of 41 foreign exchange counters in Morocco. The Bank’s customers can also access their accounts and conduct certain transactions through BMCE Direct, the Bank’s internet banking platform, their smartphones and through an interactive voice system.

Payment cards The Bank currently offers both MasterCard and Visa branded payment cards to its customers, and the number of active cards issued by the Bank has increased from approximately 638,000 as at 31 December 2007 to approximately 837,000 as at 30 June 2013. As at 31 December 2012, the Bank was the fourth largest issuer by number of cards of MasterCard and Visa cards in Morocco, with a 9.7 per cent. share of the market, and was the fourth largest issuer of all payment cards in Morocco, with a 14.5 per cent. share of the market, according to CMI. The Bank’s payment cards are not traditional credit cards but are instead enhanced debit cards. The Bank’s payment card options include immediate (where funds are immediately deducted from the customer’s account) and delayed (where funds are deducted from the customer’s account at the end of each month) debit cards for domestic payments, cards for international payments and cards for Moroccans travelling abroad. The Bank’s domestic debit cards are typically used both to retrieve money from ATMs and to make payments. The Bank’s international payment cards are targeted at Moroccans resident abroad and, subject to certain regulations, to Moroccan customers of the Bank.

Bancassurance products Through its partnership with RMA Watanya, a member of the FinanceCom group of companies, the Bank offers a range of bancassurance products through its retail distribution network across Morocco. The bancassurance products currently offered by the Bank include: . life and total disability insurance products targeted at different customer segments and with varying levels of pay out upon the occurrence of an event insured against; . a ‘‘key-man’’ death and total disability insurance product that can be structured to provide a payment either to the business or to the manager or professional involved; . a product that guarantees final repayment of loans and other credit in the event of the insured’s death or total disability; . health insurance for the insured and designated family members which provides cover in the event of hospitalisation, whether in a private clinic or at a hospital, in Morocco or abroad, in the event of disease, surgery or an accident; . a range of guaranteed savings products, with different terms and for different purposes including for education fees and retirement; and . home and office insurance products.

77 Corporate banking Lending to large Moroccan public and private sector entities is the Bank’s traditional core business. In addition, the Bank is now focusing on the SME sector which enables it to diversify its portfolio, and is a sector which the Bank believes is both less competitive and potentially more profitable. SMEs, as defined by Bank Al-Maghrib, are companies with an annual turnover of between Dh 3 million and Dh 175 million, and approximately 95 per cent. of companies in Morocco are SMEs. The Bank offers three broad categories of financial services to its corporate customers: traditional banking services such as working capital lending and deposit taking, project finance facilities and products that are cross-sold with other parts of the Bank and other members of the FinanceCom group of companies. As at 30 June 2013, the Bank held Dh 26,635 million in deposits from corporate customers and had Dh 60,639 million in outstanding loans to corporate customers. The Bank believes that it has an advantage in servicing these entities, due to its relative size compared to most other Moroccan banks and the range of its financial products and services. The Bank also offers these customers access to investment banking services through its subsidiaries. See ‘‘—Asset management and investment banking’’ below. The Bank intends to maintain its close relationships with large corporate customers, focusing on providing prompt responses to their requirements and offering competitive terms. In this regard, the Bank operates 27 dedicated business centres in Morocco and one corporate centre in Casablanca to serve its corporate customers. The Bank’s project finance lending focuses on two principal sectors: infrastructure; and real estate and tourism. In the infrastructure category, the Bank offers project finance facilities both to governmental entities and private customers. In the real estate and tourism industries, the Bank offers facilities to large hotel groups, building contractors and other investors. The Bank experiences significant competition in this area, particularly from the other two leading banks in Morocco. The Bank’s target market for project financing is to lead arrange financings of up to Dh 2 billion and to participate in larger financings. The Bank’s corporate business also serves SMEs in Morocco. The Bank believes that there are significant lending opportunities to SMEs in Morocco which, in part reflecting the greater risks associated with lending to them, generally pay higher margins than larger companies. In addition, the Group believes that SMEs should benefit significantly from economic improvements in Morocco and that these companies will increasingly require the same broad range of services made available to the Bank’s large corporate customers. As with larger corporate customers, the Bank services its SME customers through dedicated teams which also operate through the Bank’s 27 dedicated business centres in Morocco. In order to target SMEs effectively, the Bank has developed a simplified range of packaged products and also offers SMEs value added services such as free training, strategic consultation and business plan advisory services. Since 2011, the Bank gained around 2,600 new SME customers and, in the first eight months of 2013, it gained a further 1,055 new SME customers.

Asset management and investment banking The Group’s asset management and investment banking reporting segment principally comprises investment banking, stock brokerage and asset management, each of which is offered through its Moroccan subsidiary, BMCE Capital, and is targeted at Moroccan clients. BMCE Capital undertakes: . Asset management through BMCE Capital Gestion, which operates a range of collective investment funds and, through a subsidiary, conducts discretionary portfolio management activities on behalf of certain institutional investors. As at 30 June 2013, BMCE Capital Gestion had 36 employees and assets under management of Dh 32.5 billion. . Brokerage activities through BMCE Capital Bourse, which arranges listings on the Casablanca Stock Exchange as well as providing its customers with online brokerage services. BMCE Capital Bourse also provides investment advice, portfolio management, custodial services, and securities issuer services. Within the corporate centre in Morocco, a dedicated space provides customers with investment tutorials and direct access to the stock exchange and their investment portfolio. As at 30 June 2013, BMCE Capital Bourse had 15 employees. . Capital markets activities through BMCE Capital Markets, which arranges currency exchange, hedging, options, structured products and commodities trading. BMCE Capital Markets is a domestic market maker in interest rate derivatives and also publishes the Moroccan Bond Index. As at 30 June 2013, BMCE Capital Markets had 35 employees.

78 . Custody activities through BMCE Capital Titres, which provides custody services to individual and corporate Moroccan clients as well as foreign investors in Morocco. As at 30 June 2013, BMCE Capital Titres had 18 employees and assets under custody of Dh 176 billion. . Private services through BMCE Capital Gestion Prive´e which provides portfolio management services to high net worth individuals with significant investment portfolios. As at 30 June 2013, BMCE Capital Gestion Prive´e had 10 employees. . Corporate finance activities through BMCE Capital Conseil which provides advice in relation to mergers and acquisitions, debt issuance, initial public offerings and other similar transactions. As at 30 June 2013, BMCE Capital Conseil had 15 employees.

Specialised financial services The Group’s specialised financial services business segment provides a range of ancillary financial services, including consumer credit, leasing, factoring and debt collection, which are targeted at customers based in Morocco by subsidiaries of the Bank based in Morocco. The principal companies operating within the specialised financial services reporting segment are: . Salafin, which was established in 1997 and is 74.5 per cent. owned by the Bank. As at 30 June 2013, Salafin had 222 employees. Salafin’s activities are divided into three categories: automobile financing including traditional lending to acquire automobiles as well as leasing with an option to purchase, revolving credit (including with the Oxygen revolving payment card which is funded through a reserve so that the customer only pays interest when the reserve is used) and other personal credit. . Maghrebail, which was established in 1972 and is 51 per cent. owned by the Bank. As at 30 June 2013, it had 88 employees. Maghrebail is a leasing company that finances the leasing of equipment and real estate assets for professional use in various sectors and also offers packages that include maintenance and insurance of the leased goods. . Maroc Factoring, which was established in 1988 and is wholly-owned by the Bank. As at 30 June 2013, Maroc Factoring had 33 employees. Maroc Factoring offers corporate customers several cash flow management products, including immediate financing of their invoices (either in full or partially), management and collection of invoices and a guarantee against the risk of non- payment by certain purchasers. . RM Experts, which was established in 2011 and is wholly-owned by the Bank. As at 30 June 2013, RM Experts had 22 employees. RM Experts is a specialised debt collection company. The Bank also has a 20 per cent. shareholding in Euler Hermes Acmar, which is a credit insurance company that is a 55 per cent. subsidiary of the Euler Hermes group.

International activities The Group’s international activities business segment provides traditional banking services in a number of African countries, as well as trade finance and other banking services through subsidiaries in London and Madrid and investment banking services through subsidiaries in Tunisia and Cameroon. The Group’s principal investment in this segment is its 72.6 per cent. shareholding in Bank of Africa (which is described further below) and which has increased in 2013 from 65.0 per cent. at 31 December 2012. In addition, the Group has minority shareholdings in two African banks, La Congolaise de Banque, which operates in the Republic of Congo (also known as Congo-Brazzaville) and in which the Group had a 25.0 per cent. shareholding at 31 December 2012, and Banque de De´veloppement de Mali, which operates in Mali and in which the Group had a 27.4 per cent. shareholding at 31 December 2012. In addition, the Group has two wholly-owned European-based subsidiaries, BMCE International, which was established in 1989 in Madrid, and BMCE Bank International, which was launched in 2007 in London. These entities principally focus on trade finance with companies engaged in African foreign trade and also provide other banking services principally to Moroccans resident abroad. The Group also owns 100 per cent. of BMCE Capital Cameroon and 59 per cent. of Axis Capital, which operates in Tunisia. Both subsidiaries provide a range of investment banking services in their respective countries.

79 Bank of Africa Bank of Africa is a fully consolidated subsidiary of the Bank. As at 30 June 2013, Bank of Africa had equity interests in 16 banks in 15 different sub-Saharan countries as well as interests in a range of other financial services companies in those countries. The map below shows the location of Bank of Africa’s network of banking subsidiaries at 30 June 2013 as well as certain geographic, population and per capita GDP information on each country derived from the CIA World Factbook (area and population, which is estimated at 31 July 2013) and the IMF’s World Economic Database (October 2013) (estimated GDP per capita in 2012, based on purchasing power parity). Bank of Africa’s Banks and Subsidiaries

BANK OF AFRICA – NIGER BANK OF AFRICA – MER ROUGE

Population 16.9 million Population 792 thousand Area 1.3 million sq. kms Area 23 thousand sq. kms per capita GDP U.S.$807 per capita GDP U.S.$2,648

BANK OF AFRICA – MALI BANK OF AFRICA – KENYA

Population 16.0 million Population 44.0 million Area 1.2 million sq. kms Area 580 thousand sq. kms per capita GDP U.S.$1,088 per capita GDP U.S.$1,781

BANK OF AFRICA – SENEGAL BANK OF AFRICA – UGANDA

Population 13.3 million Population 34.8 million Area 197 thousand sq. kms Area 241 thousand sq. kms per capita GDP U.S.$2,005 per capita GDP U.S.$1,424

BANK OF AFRICA – BURKINA FASO BANK OF AFRICA – TANZANIA

Population 17.8 million Population 48.3 million Area 274 thousand sq. kms Area 947 thousand sq. kms per capita GDP U.S.$1,415 per capita GDP U.S.$1,627

BANK OF AFRICA – CÔTE D’IVOIRE BUJUMBURA CREDIT BANK

Population 22.4 million Population 10.9 million Area 322 thousand sq. kms Area 28 thousand sq. kms per capita GDP U.S.$1,707 per capita GDP U.S.$619

BANK OF AFRICA – GHANA BANK OF AFRICA – MADAGASCAR

Population 25.2 million Population 22.6 million Area 239 thousand sq. kms Area 587 thousand sq. kms per capita GDP U.S.$3,316 per capita GDP U.S.$945 BANK OF AFRICA – DEMOCRATIC BANK OF AFRICA – BENIN BANK OF AFRICA – TOGO REPUBLIC OF CONGO BANQUE DE L’HABITAT DU BENIN Population 7.1 million Population 75.5 million Population 9.9 million Area 57 thousand sq. kms Area 2.3 million sq. kms Area 112 thousand sq. kms per capita GDP U.S.$1,093 per capita GDP U.S.$365 per capita GDP U.S.$1,556

In order to fully exploit its investment in Bank of Africa, the Group has adopted a new strategy which, as described under ‘‘—Strategy’’, anticipates the development of a retail business in each of the African banks as well as significant investments in a range of other areas, including, in particular, risk management to ensure that the Group operates to a single consistent set of risk management policies. Since the acquisition of Bank of Africa, the Bank has appointed new managers at holding company and subsidiary levels and is engaged in a long-term project to implement BMCE governance and risk management standards across the Bank of Africa group. See ‘‘Risk Factors—Factors that may affect the Issuer’s ability to fulfil its obligations under the Notes—The Group’s risk management and management information systems are not completely integrated and the Group receives less management information in relation to its international activities than it does in relation to its Moroccan activities’’. Within sub-Saharan Africa, Bank of Africa’s strategy envisages controlled and opportunistic expansion, particularly in countries which have high populations, such as Nigeria, or high GDP per capita, such as Equatorial Guinea. Bank of Africa has recently commenced business in Togo and has applied for a banking licence in Cameroon. Other potential target countries include Mozambique and Angola. Bank of Africa’s shareholders include the Bank, private shareholders and three development financial institutions: Proparco of France, FMO of The Netherlands and BIO of Belgium. The Bank believes that shareholder support and new finance should provide Bank of Africa with sufficient financial resources to implement its strategy. Bank of Africa benefits from the diversity of its African operations as this reduces the risk of adverse political and economic developments in any one or more of the countries in which it operates. Although

80 its provisioning levels are relatively higher than those of BMCE, Bank of Africa subsidiaries operating in countries affected by recent crises, such as Mali, the Democratic Republic of Congo and the Ivory Coast, have remained profitable throughout the crises. Within Africa, Bank of Africa banks compete both with local banks in each country in which they operate and with other pan-African bank networks. Regarding local bank competition, Bank of Africa banks have significant competitive advantages in terms of the relationship between Bank of Africa and BMCE and, in many cases, greater resources to draw on. According to an IMF report prepared in April 2012, at least nine sub-Saharan African financial groups operate banks in seven or more other African countries. The major networks are those operated by Ecobank (a Togo-based financial group), Standard Bank/Stanbic Bank of South Africa, United Bank for Africa of Nigeria and Bank of Africa. According to the IMF, based on partial bank-level information, these groups manage more than 30 per cent. of deposits in 13 of the 45 sub-Saharan African countries considered. Bank of Africa expects to face increasing competition from these and other banking groups in countries where their networks overlap and the relevant banking group is following a strategy that is similar to Bank of Africa’s. The table below shows Bank of Africa’s direct and indirect shareholding in its subsidiary banks, the number of branches and employees of each bank as at 30 June 2013 and summary balance sheet and income statement information for each Bank of Africa bank (taken from each bank’s audited financial statements) as at, and for the period ended, 30 June 2013. Bank of Total Total Africa Number of Number of customer Customer Net Banking Subsidiary bank Shareholding Branches Employees Loans Deposits income (per cent.) (B million) (B million) (B million) Bank of Africa – Benin 53.5 41 489 325.9 650.4 20.9 Bank of Africa – Madagascar ...... 41.3 77 981 211.0 422.1 19.8 Bank of Africa – Burkina Faso ...... 56.5 28 270 344.4 424.7 15.5 Bank of Africa – Coˆte d’Ivoire ...... 72.5 23 247 214.7 312.3 11.2 Bank of Africa – Mali .. 76.9 37 307 224.2 287.3 12.7 Bank of Africa – Kenya 80.0 27 368 275.0 327.5 13.3 Bank of Africa – Niger 57.8 17 189 192.9 173.6 9.6 Bank of Africa – Senegal...... 73.9 26 164 160.9 164.7 6.3 Bujumbura Credit Bank 20.3 19 348 – – – Bank of Africa – Tanzania ...... 49.7 19 256 96.8 122.0 8.3 Bank of Africa – Uganda ...... 72.5 34 309 59.0 89.2 6.4 Bank of Africa – Ghana 92.8 20 340 139.1 158.9 14.2 Bank of Africa – Democratic Republic of Congo... 60.0 8 96 28.5 17.0 2.5 Bank of Africa – Mer Rouge...... 60.0 4 146 60.5 250.3 6.0 Banque de l’Habitat du Be´nin...... 73.9 2 26 34.9 28.8 1.0

LENDING AND FUNDING Lending The Group’s customer loan portfolio amounted to Dh 140.5 billion, or 62.5 per cent. of its total assets, at 30 June 2013. As at 31 December 2012, the Group’s customer loan portfolio amounted to Dh 138.8 billion, or 60.1 per cent. of its total assets. As at 31 December 2011, the Group’s customer loan portfolio amounted to Dh 121.3 billion, or 58.3 per cent. of its total assets. The Group’s customer loan portfolio has grown steadily in the last five years, driven by a significant branch expansion programme.

81 The tables below show a breakdown of the Group’s customer loans by geographic area as at 31 December in each of 2011 and 2012 and as at 30 June 2013. At 31 December 2011 At 31 December 2012 Performing NPLs Provisions Performing NPLs Provisions (Dh million) Morocco...... 94,282 5,260 3,590 107,270 5,250 3,903 Europe ...... 2,598 9 8 2,604 14 13 Sub-Saharan Africa...... 22,088 2,424 1,720 26,145 3,262 1,821 Total ...... 118,967 7,693 5,318 136,019 8,526 5,737

At 31 December 2011 At 31 December 2012 Performing NPLs Provisions Performing NPLs Provisions (per cent.) Morocco...... 79.3 68.4 68.0 78.9 61.6 68.0 Europe ...... 2.2 0.1 0.2 1.9 0.2 0.2 Sub-Saharan Africa...... 18.6 31.5 32.6 19.2 38.3 31.7 Total ...... 100.0 100.0 100.0 100.0 100.0 100.0

As at 30 June 2013 Performing NPLs Provisions Performing NPLs Provisions (Dh million) (per cent.) Morocco...... 108,337 5,484 4,255 78.8 59.2 67.3 Europe ...... 2,109 109 35 1.5 1.2 0.6 Sub-Sahran Africa...... 27,125 3,663 2,029 19.7 39.6 32.1 Total ...... 137,571 9,256 6,319 100.0 100.0 100.0

The Bank’s customer loan portfolio amounted to 68.7 per cent. of the Group’s customer loan portfolio at 30 June 2013 compared to 68.7 per cent. at 31 December 2012 and 68.9 per cent. at 31 December 2011.

82 The table below shows the Bank’s gross customer loan portfolio by industry segment (as specified by Bank Al-Maghrib) as at December in each of 2011 and 2012. As at 31 December 2011 2012

(Dh million) (%) (Dh million) (%) Textiles and leather ...... 1,838 1.5 2,077 1.5 Administration...... 1,535 1.3 1,287 0.9 Commercial ...... 8,819 7.3 11,952 8.6 Food and tobacco...... 2,544 2.1 3,927 2.8 Building and public works ...... 4,393 3.6 4,952 3.6 Agriculture and fisheries ...... 1,434 1.2 1,435 1.0 Services ...... 2,362 1.8 2,680 1.9 Other manufacturing industries ...... 2,956 2.4 2,543 1.8 Metal, mechanical, electrical and electronic industries...... 2,772 2.3 3,553 2.6 Chemical industries...... 2,040 1.7 2,491 1.8 Others (including individuals and other small corporate sectors) ...... 39,645 32.7 50,631 36.5 Real estate...... 10,038 8.3 10,240 7.4 Transport and communications...... 7,407 6.1 7,131 5.1 Extractive industries ...... 2,152 1.8 1,841 1.3 Financial activities...... 23,304 19.2 22,595 16.3 Hotels and restaurants...... 2,960 2.4 3,180 2.3 Water and electricity ...... 5,028 4.1 6,106 4.4 Manufacture of wood and paper ...... 115 0.1 189 0.1 Total gross loans and advances...... 121,343 100.0 138,809 100.0

The Group also has a significant portfolio of loans to financial institutions. The tables below show a breakdown of the Group’s loans to financial institutions by geographic area as at 31 December in each of 2011 and 2012 and as at 30 June 2013. At 31 December 2011 At 31 December 2012 Performing NPLs Provisions Performing NPLs Provisions (Dh million) Morocco...... 15,303 60 35 13,880 60 35 Europe ...... 2,009 – – 2,084 – – Sub-Saharan Africa...... 6,486 4 4 5,409 3 3 Total ...... 23,798 64 39 21,373 63 38

At 31 December 2011 At 31 December 2012 Performing NPLs Provisions Performing NPLs Provisions (per cent.) Morocco...... 64.4 93.7 89.7 64.9 95.2 92.1 Europe ...... 8.4 – – 9.8 – – Sub-Saharan Africa...... 27.3 6.3 10.3 25.3 4.8 7.9 Total ...... 100.0 100.0 100.0 100.0 100.0 100.0

As at 30 June 2013 Performing NPLs Provisions Performing NPLs Provisions (Dh million) (per cent.) Morocco...... 11,268 60 35 65.5 82.5 91.3 Europe ...... 1,688 – – 9.8 – – Sub-Sahran Africa...... 4,255 13 3 24.7 17.5 8.7 Total ...... 17,212 73 39 100.0 100.0 100.0

83 See ‘‘Risk management—Credit risk’’ for a discussion of the Group’s loan origination and monitoring procedures, its loan classification system and an analysis of its non-performing loans and provisioning and write-off policies.

Funding For a description of the Group’s funding, see ‘‘Financial review—Liquidity and funding—Funding’’.

SECURITIES PORTFOLIO The Group maintains a significant portfolio of securities which comprises debt and equity securities held at fair value through profit and loss, debt securities on a held to maturity basis as well as equity securities held on an available for sale basis. This portfolio provides the Group with a significant source of interest income and is also used by the Group as a funding tool. In 2012, interest income from the Group’s securities portfolio comprised 14.0 per cent. of the Group’s total interest income compared to 13.6 per cent. in 2011. As at 31 December 2012, debt securities with a carrying value of Dh 14 million were pledged as collateral under repurchase and other borrowing agreements with other banks. As at 30 June 2013, 65.8 per cent. of the Group’s gross securities portfolio represented securities at fair value through profit and loss, 8.1 per cent. represented available for sale securities and 26.1 per cent. were held to maturity securities. As at 30 June 2013, all of the Group’s securities held at fair value through profit and loss and 3.9 per cent. of its available for sale securities were fair valued on the basis of level 1 inputs, meaning that the securities all had quoted prices in liquid markets. 96.1 per cent. of the Group’s available for sale financial assets were fair valued using level 3 inputs. These securities are principally unlisted equity securities and have been valued using a range of methods, including net carrying amount, net adjusted value, stock market multiples and equity issue pricing. As at 30 June 2013, 46.0 per cent. of the Group’s securities were interest bearing with the balance being equity securities. All of the Group’s interest bearing securities carried interest at a fixed rate at 30 June 2013. The table below shows a breakdown of the Group’s securities by type as at 31 December in each of 2011 and 2012 and as at 30 June 2013. As at As at 31 December 30 June 2011 2012 2013 (Dh million) Fair value through profit and loss Negotiable certificates of deposit...... 7,493 12,855 7,974 Other debt securities ...... 434 399 452 Equity and other variable income securities...... 23,764 20,971 19,915 Trading book derivatives ...... 41 19 12 Total fair value through profit and loss...... 31,732 34,245 28,354 Available for sale Listed equity securities...... 435 240 330 Unlisted equity securities...... 2,193 2,895 3,171 Total available for sale...... 2,629 3,135 3,501 Held to maturity Negotiable certificates of deposit...... 8,757 9,690 10,262 Other debt securities ...... 834 829 998 Total held to maturity ...... 9,591 10,519 11,261 Total securities...... 43,952 47,899 43,116

As at 30 June 2013, the Group had made impairment provisions of Dh 274 million in respect of its available for sale securities. Total fair value through profit and loss fell by Dh 5.891 million or 17 per cent. reflecting the reduction in risk weighted assets for market risk.

84 The Group’s debt securities portfolio is split between the securities at fair value through profit and loss held by the Bank and the securities held by Bank of Africa on a held to maturity basis. The Bank’s portfolio focuses on Moroccan government treasury bills and bonds and debt securities issued by financial institutions. The Bank of Africa portfolio focuses on bonds and treasury bills issued by West African governments. The Group’s investment strategy in respect of each portfolio is to invest in securities with the desired credit quality while hedging the associated market risk. The Group’s equity and other variable income securities portfolio is split between securities held at fair value through profit and loss and securities held on an available for sale basis, with the majority of the portfolio being held at fair value through profit and loss. The portfolios principally comprise shares in financial institutions.

COMPETITION There are 19 banks in Morocco, the six largest of which – Attijariwafa Bank, Banque Centrale Populaire, BMCE, BMCI, Cre´dit du Maroc and Socie´te´Ge´ne´rale de Banque – are listed on the Casablanca Stock Exchange and accounted in 2012 for approximately 88 per cent. of customer deposits and 82 per cent. of customer loans, according to the Moroccan Banks’ Association. Of these, the three largest banks in terms of deposits and loans (including the Bank) controlled approximately 68 per cent. of the total loans and approximately 64 per cent. of the total deposits in the Moroccan banking system. The Bank competes with these banks in its day to day banking business. There is also a significant foreign, particularly French, bank presence in Morocco, with French banks accounting for approximately 20 per cent. of the Moroccan banking sector’s total assets. The Bank competes with these banks principally for the business of major Moroccan corporate and governmental customers. For a discussion of the competition experienced by the Group in sub-Saharan Africa, see ‘‘Business segments—International activities’’ above.

INFORMATION TECHNOLOGY The Group’s IT strategy is focused on providing reliable and available information and systems to its customers and employees in a secure environment. It also assesses the Group’s future operational needs and develops and implements new IT systems to meet them, in each case with reference to the Group’s overall technology strategy and with the primary aim of delivering efficient and cost-effective systems. For the Group’s internal businesses, the focus is on providing effective methods and processes for promoting and delivering services to their customers. The Group uses a centralised real-time architecture based on new technologies such as Webfarm and Java/J2EE/Oracle on UNIX AIX mainframes. For the Group’s customers, the focus is on delivering a convenient and efficient banking service, offering a range of remote banking applications including ATMs, telephone banking and certain online financial services through BMCE Direct, which the Group is enhancing to increase the range of available financial transactions. The Group has implemented a disaster and recovery site on remote premises that can be activated when required, to ensure that critical systems and data continue to be fully operational and to provide essential services to its customers. The Group carries out daily and other periodic data back-ups which are stored at a location 30 kilometres from its head office in Morocco. Additionally, the Group sends a copy of its critical systems and data to an international location in compliance with Bank Al-Maghrib’s instructions. The Group also carries out annual intrusion tests on its IT network with the assistance of an external vendor who performs continuous remote intrusion monitoring on the Group’s behalf, providing the Bank with a daily activity report. To date, service disruptions have been limited and there is no evidence of successful intrusion attempts.

85 RISK MANAGEMENT

OVERVIEW The Group faces a wide range of risks in its business and operations, and therefore risk management is a key function and an important area of focus for the Group. The main risks are: . Credit risk, which is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Group’s customer loan portfolio, interbank lending and debt securities portfolio; . Liquidity risk, which is the risk that the Group will be unable to meet its obligations when they fall due as a result of customer deposits being withdrawn, cash requirements from contractual commitments, or other cash outflows. In extreme circumstances, lack of liquidity could result in losses on sales of assets, or potentially an inability to fulfil lending commitments; . Market risk, which is the risk arising from changes in the value of financial instruments due to changes in interest rates and foreign exchange rates, as well as in the prices of securities and commodities; . Operational risk, which is the risk of loss resulting from inadequate or failed internal processes, people and systems or from external events; . Country risk, which includes political risk and transfer risk. Political risk is usually caused by government action, such as nationalisation or expropriation, or by independent events, such as a war or a revolution, which affect the ability of customers to meet their obligations. Transfer risk is the risk that a customer cannot acquire foreign currency in his country of residence to meet his commitments abroad; and . Regulatory and legal risks, which are managed by Group’s legal and compliance departments. In order to identify, monitor and manage these risks, a risk management framework has been put in place. The framework applies a robust set of policies, procedures and limits, including transaction analysis and suitability, risk ratings, risk limits, approval authorities and periodic reporting, which are binding on the Group’s risk management professionals, business segments and other functional teams. The section below describes the risk management policies and procedures as applied by the Group in all relevant operations except in Bank of Africa companies, reflecting the fact that the Group only acquired control of Bank of Africa in 2010. Bank of Africa applies its own risk management policies and procedures, many of which are similar to those of the Group. The Group is currently undertaking a project to harmonise the risk management policies and procedures across the Group (including Bank of Africa entities, subject to the constraints of national legislation). This project is expected to take several years to complete.

RISK MANAGEMENT FRAMEWORK AND GOVERNANCE The Group Risk division is the unit charged with the day to day management of credit, market and operational risk activities across the Group. The Group Risk division comprises three units working together: . the Risk Management group (Morocco); . the Risk Management group (International); and . the Commitments Analysis and Management group. The first two units are responsible for monitoring the credit, market and operational risks incurred by the Bank and its subsidiaries, both in Morocco and overseas. The third unit is in charge of analysing and monitoring the Bank’s lending processes. The Group Risk division aims to manage the Group’s credit, market and operational risks through: . defining the Group’s risk policy; . implementing a risk control system for credit, market and operational risks; and . defining and managing the credit granting and loan monitoring processes.

86 The Group operates three separate control levels. The first level of control comprises staff engaged in all risk management activities who are tasked with applying the Group’s risk management policies and procedures. The second level comprises regional risk management committees who supervise the risk management activities for their respective regions and report to the Audit and Internal Control Committee (the AICC) and its sub-committees. The AICC operates under the direct supervision of the Board and is the third level of control. The AICC: . assesses the accounting methods applied by the Group, including monitoring the reliability of the collection, processing, distribution and storage of accounting data; . monitors the internal control procedures and all other risk management systems, with a view to measuring and controlling risk, ensuring the suitability and consistency across the Group of all control systems in place and evaluating all proposed or implemented corrective measures taken; . ensures that effective risk management documentation and information is circulated within the Group; . reviews the Group’s accounts before they are submitted to the Board for approval, prepares annual reports on risk management activities and the internal control system results for the Board to approve and reports, at least twice a year, to the Board on overdue loans, including the results of enforcement proceedings with respect to corporate loans and details of negotiated restructurings and the progress of their repayment; and . monitors the quality of the information delivered to shareholders. The Major Risks Monitoring Committee is a sub-committee of the AICC and comprises non-executive directors who are members of the AICC. This committee meets quarterly and: . assesses risk and issues recommendations on risk quality; . ensures that credit risk standards and internal credit risk procedures set by competent bodies are being complied with; and . monitors compliance with all applicable credit risk limits. Another body involved in risk management is the General Management Committee, which is chaired by the chief executive officer and reports to the Chairman. This committee includes the Bank’s managing directors, the adviser to the general management team and the general controller. The committee meets on a weekly basis and is the principal executive body of the Bank. In the risk management area, it focuses on implementing internal control and risk control policies.

CREDIT RISK Loan approval process The Group has separate retail and corporate credit approval processes. Retail loans are usually advanced in accordance with specific credit procedures applicable to the product being sold. As a result, the credit approval process is based on a standardised check list of approval criteria. Retail loan applications are increasingly screened on a computerised basis. If an application does not satisfy all the conditions specified in the check list it is rejected, subject to special exemptions authorised by an appropriate credit approval body. A hierarchy of credit approval committees (as described below) approves retail credits which are not subject to check list procedures or which are considered to be exceptional applications. The Group is in the early stages of implementing a retail credit scoring project which is intended to include an approval score plus, where applicable, a behavioural score based on a customer’s existing credit history with the Group. Corporate loans are considered on a case by case basis using both quantitative and qualitative analysis. Quantitative factors are based on a review of the borrower’s financial statements and take into account the financial strength of the business and its cash generating potential to repay the loan. Qualitative factors include the strength of the economic sector in which the borrower operates, the competition it faces and the quality of its management. The availability of collateral is a relevant consideration but is secondary to the quantitative and qualitative analysis. The corporate decision making process involves the preparation of a standardised credit application by the relevant customer relationship officer within the Corporate Banking business, an analysis of the application by the Group Risk division, a decision taken at both the Corporate Banking and the Group Risk levels (based on appropriate delegated

87 authorities) and the implementation of the loan through the back office, which is independent from both the Corporate Banking and Group Risk functions. The Group typically requires that a retail borrower’s salary should be paid to an account with the Group as a precondition to advancing a retail loan. In addition, loans for the acquisition or improvement of real estate are typically required to be secured by a first ranking mortgage over the real estate concerned. In relation to corporate borrowers, where a loan is extended to finance a particular project it is the Group’s standard practice to seek security over the assets being financed. In relation to working capital loans, the collateral requirement is based on an analysis of the risk exposure and the available collateral. In relation to SME lending, the Group typically seeks personal guarantees from the borrower’s shareholders. In addition, for both SMEs and very small companies (such as sole traders), the Bank seeks to structure the loans so that they fall within the scope of a Bank Al-Maghrib guarantee scheme. The Group’s credit risk policy focuses on ensuring appropriate levels of loan portfolio diversification both in terms of individual client and client group limits as well as in terms of sectoral diversification. The Group’s sectoral limits are based on internal analysis of economic sectors and the risks associated with them. See further ‘‘—Exposure to credit risk and concentrations’’ below. The Group has a hierarchy of credit committees, with the highest level of authority being the Bank’s Chairman, followed by the Senior Credit Committee and, in Morocco, Regional Credit Committees and, outside Morocco, credit committees for the Bank of Africa group and the European operations. Below these levels is a hierarchy of branch and individual officer approval limits. Regional Credit Committees have been established for each of the eight regions in Morocco into which the Group divides its activities. These committees meet weekly and have approval limits of up to Dh 15 million for corporate credits and up to Dh 3.5 million for retail credits. In addition, Regional Credit Committees dedicated to recovery and anomalous accounts meet monthly. The Senior Credit Committee is chaired by the Bank’s Chairman. It comprises two sub-committees, one which deals with credit applications by corporate borrowers and one which deals with retail credit applications. Each sub-committee meets twice weekly. Independent credit quality control and adherence to credit approval procedures is monitored by the Group’s General Control unit and by the external auditors.

Loan monitoring and internal rating system The Group Risk division is charged with loan monitoring and uses a rating system to categorise its corporate loan portfolio for customers of the Bank and of the local subsidiaries. The rating scale comprises 11 risk categories, with the first seven categories (1 through 7) being considered to be investment grade and corresponding to limited or average risk and the remaining categories (8 through 11) being considered to be high or very high risk and requiring constant monitoring. Ratings are attributed based on a validation process involving rating officers at an operational level and reviewers who are not involved in the credit approval process and are subject to final approval by the Group Risk division. Ratings are granted at the point when approval is required for a new transaction, are revised whenever justified by a change in risk and are reviewed on any renewal date for the application and otherwise at least once a year. The Group’s rating model takes into account four separate and successive factors as follows: . intrinsic rating: this rating measures the customer’s ability to fulfil its financial commitments and is determined based on recent financial information, qualitative information such as the quality of management and the competitiveness of the customer and, for SMEs, previous credit behaviour; . supporting information: this rating is based on the intrinsic rating but also considers other information supporting the credit application; . counterparty country rating: this rating takes into account the counterparty’s country of origin; and . debtor rating: this is the final rating attributed to the customer and represents the Group’s actual risk level as regards the customer.

88 The table below summarises the Group’s rating categories. Grade Definition Category 1 Extremely stable in the short and medium term; very stable in the long term; Limited risk bankable even after serious turmoil. 2 Very stable in the short and medium term; stable in the long term; bankable even during persistent negative circumstances. 3 Bankable in the short and medium term even after serious difficulties; slight negative downturns may be absorbed in the long run. 4 Very stable in the short term; no modifications threatening the credit expected in the year to come; sufficient substance in the medium term to survive; uncertain long term evolution. 5 Stable in the short term; no modifications threatening the credit expected in Average risk the year to come; can only absorb small negative downswings in the medium term. 6 Limited capacity to absorb expected negative downswings. 7 Very limited capacity to absorb expected negative downswings. 8 Limited capacity to pay interest and principal on time. Any change in High risk internal and external economic and commercial condition will make commitments difficult to fulfil. 9 No capacity to pay interest and principal on time. Ability to comply with commitments is linked to the evolution of both internal and external commercial and economic conditions. 10 Very high risk of default; no capacity to pay interest and principal on time. Very high risk Partial default in payment of both interest and principal. 11 Total payment default in respect of both interest and principal.

The table below shows the Group’s Moroccan loans at 31 December in each of 2011 and 2012 and at 30 June 2013, classified by risk class. Principal amount at Percentage of total at 31 December 30 June 31 December 30 June Risk class Score 2011 2012 2013 2011 2012 2013 (Dh million)(per cent.) Limited risk...... 1 2,387 2,236 3,162 3.93 3.59 4.87 2 14,123 11,380 11,258 23.28 18.24 17.35 3 5,548 6,380 8,315 9.14 10.23 12.81 4 3,852 6,258 8,512 6.35 10.03 13.12 Average risk...... 5 4,530 6,874 6,978 7.47 11.02 10.75 6 6,208 5,820 4,289 10.23 9.33 6.61 7 17,377 16,955 16,407 28.64 27.18 25.29 High risk ...... 8 2,216 2,659 1,900 3.65 4.26 2.93 9 954 295 174 1.57 0.47 0.27 Very high risk ...... 10 935 698 692 1.54 1.12 1.07 11 2,084 2,125 2,355 3.43 3.41 3.63 Total ...... 60,215 61,679 64,043 99.24 98.88 98.70 Unrated...... 463 698 841 0.76 1.12 1.30 Total corporate loans...... 60,678 62,377 64,884 100.00 100.00 100.00 Retail loans ...... 27,516 30,613 31,514 Total customer loans ...... 88,194 92,990 96,398

The Group is currently using the standardised approach which does not require this rating scale to be mapped to those of external rating agencies. Bank of Africa group companies currently use a different ratings approach based on expert opinion, although the Group’s Moroccan rating scale is expected to be implemented across all Group companies within the next few years.

89 In discharging its loan monitoring functions, the Group Risk division seeks to anticipate situations in which credit risk may increase and to make appropriate limit and other adjustments to the Group’s risk management procedures to take account of this anticipated increased risk. In particular, the Group Risk division: . monitors the use of proceeds of each loan to ensure that they conform to the purpose stated in the loan application as well as compliance with the other conditions specified in the loan documentation and the timeliness of all payments under the loan; . identifies loans showing signs of weakness, both through missed payments and non-compliance with other loan conditions as well as through any deterioration in the borrower’s financial condition or other factors impacting the borrower such as economic, competitive or management changes; . closely monitors the major risk areas within the Group’s network, including high risk loans and other significant loans in terms of individual size or concentrations; and . identifies loans to be considered for downgrading.

Non-performing loans The Group has its own internal policy in relation to provisioning and follows IFRS provisioning methodology in the preparation of its Financial Statements. Under IFRS, the Group assesses whether there is objective evidence that a loan may be impaired based on whether a loss event has occurred and, if so, whether the loss event has a negative impact on the future cash flows expected under the loan in a manner which can be reliably measured. Objective evidence may include significant financial difficulty being experienced by a borrower, a borrower’s loans being restructured in a manner that reduces their future cash flows, indications that the borrower may become bankrupt or the occurrence of economic conditions that correlate with increased defaults. Under IFRS, management assesses all individually material loans and advances for impairment. Where loans are impaired as a result, the amount of the impairment is the difference between the carrying value of the loan and the present value of the expected future cash flows discounted at the loan’s original effective interest rate, after taking account of the value of collateral net of the estimated costs of realising that collateral. All loans which are not individually impaired are included within a group of loans with a similar credit risk profile (for example in terms of credit quality, portfolio size, concentrations and economic factors) and subjected to an impairment test on a collective basis. In order to determine the amount of the collective provision, assumptions are made to define the manner in which inherent losses are modelled and to determine the necessary inputs, based on historical experience and current economic conditions.

Loan recoveries and write offs In order to improve the efficiency of its collection procedures in relation to non-performing loans, the Bank has established two dedicated entities, one to follow up on corporate non-performing loans and one to follow up on retail non-performing loans. These entities are responsible for ensuring that follow-up procedures are applied in respect of all customers in payment default, either by the relevant relationship managers or directly by the entity concerned. The Bank’s policy is to be timely and pro-active in its follow up procedures so as to minimise future losses arising under the defaulted loan. Bank Al-Maghrib permits a loan to be written off when: . it has been the subject of recovery procedures for more than five years; . there is no prospect of further recovery in respect of the loan; and . the loan has been fully provided for.

Exposure to credit risk and concentrations The Group’s total exposure to credit risk (including through loans, securities and other financial assets with credit risk) was Dh 163,659 million at 31 December 2012 and Dh 148,977 million at 31 December 2011. A breakdown of this credit risk exposure by customer type is set out in note 8.4 to the 2012 Financial Statements. No equivalent information is disclosed in the Interim Financial Statements.

90 The Group monitors credit concentrations at individual counterparty, interest group and industry and country levels. Individual counterparty concentrations are monitored monthly by reference to the Group’s and the Bank’s 10, 20 and 100 largest customer commitments. At 31 December 2012, the Bank’s 10 largest customer commitments amounted to 8 per cent. of the Group’s total customer commitments, its 20 largest customer commitments amounted to 12 per cent. of the Group’s total customer commitments and its 100 largest customer commitments amounted to 24 per cent. of the Group’s total customer commitments. The figures at 31 December 2011 were 10 per cent., 15 per cent. and 28 per cent., respectively. At an industry level, the Group uses a probability of default model to identify the appropriate industry limits to be applied as well as to identify those industries on which it should focus its new lending activity or to which it should reduce its exposure. During 2012, the Group reviewed its country risk policy with a view to developing a system based on an internal rating model for assessing, limiting, reducing and, if necessary, suspending its commitments to high risk countries. See ‘‘—Country risk’’ below.

LIQUIDITY RISK The principal body responsible for liquidity management within the Bank is the Bank’s Asset and Liability Management Committee. The aim of the Bank’s liquidity management is to ensure that it is always in a position to honour its payment obligations and to minimise its costs of funding. The Bank uses two types of tool to measure its liquidity risk: a liquidity ratio and cumulative static gaps for a 12 month period in both dirham and foreign currencies. Both tools aim to quantify the current and expected gap between cash inflows (from new funding or asset maturities or sales) and cash outflows (from funding maturities, deposit withdrawals and the acquisition of new assets). Stress testing is also performed for three different scenarios. The liquidity ratio used by the Bank for managing its liquidity risk is the ratio set by Bank Al-Maghrib of one month liquid assets to one month liabilities. Bank Al-Maghrib requires that this ratio should be at least 100 per cent. and BMCE is required to report on this ratio to Bank Al-Maghrib on a monthly basis. For this purpose, liquid assets are considered as including cash and cash equivalents and investment grade debt securities for which there is an active and liquid market, less any deposits from banks, debt securities, other borrowings and commitments maturing within the next month. The table below shows details of the Bank’s liquidity ratio as at 31 December 2011 and 2012 and as at 30 June 2013. As at As at 31 December 30 June 2011 2012 2013 (per cent.) Liquidity ratio...... 101.87 105.6 107.0

At 31 December 2011 and 2012 and at 30 June 2013, the Bank’s cumulative 12-month liquidity gap showed a liquidity surplus of Dh 9.9 billion, Dh 7.0 billion and Dh 8.7 billion, respectively. A maturity analysis of the Group’s financial assets and liabilities is contained in note 8.6 to the 2012 Financial Statements. No equivalent information is disclosed in the Interim Financial Statements. In addition, the Group is exposed to liquidity risk through its off balance sheet obligations to lend money and its contingent obligations under guarantees and letters credit.

MARKET RISK The Group is exposed to the following four types of market risk: . Interest rate risk, being the risk that changes in interest rates will adversely impact the value of the Group’s fixed income securities and, to the extent that there are mismatches between its interest earning assets and its interest bearing liabilities, its net interest income and profitability. In addition, significant increases in interest rates could affect the ability of the Group’s borrowers with variable rate loans to make payments on those loans thus resulting in increased loan losses for the Group. . Equity price risk, which is the risk that changes in the prices of the equity securities held by the Group will adversely affect the fair valuation of the portfolio and could result in fair valuation

91 losses being recorded in the income statement or equity and impairment charges being recorded against certain securities. . Exchange rate risk, which is the risk that changes in foreign exchange rates could affect the Group’s results of operations both through the consolidation of the results of Group entities whose functional currency is not the dirham and through the effect of such changes on any assets denominated in foreign currencies which are not matched by liabilities in such currencies. . Commodity price risk, which is the risk that changes in the prices of commodities could impact the value of commodity derivative instruments entered into by the Group.

Market risk management The Group’s principal market risk management bodies are: . its general management, which implements market risk management policies and strategies approved by the Board; . the Group Market Risk Committee, which monitors the Group’s exposure to market risk, approves new products from a market risk perspective and approves all market risk limits applied within the Group; . the Group’s market risk department, which centralises the Group’s market risk management; . risk management units within each relevant Group entity, which ensure compliance with applicable market risk policies and report to Group Risk Management; and . Internal Audit, which ensures the implementation of the market risk management system and compliance with required procedures and limits. The Group’s market risk management system is based on the following main pillars: . limits; . risk indicators; . capital requirements; and . counterparty risk for derivatives activities.

Limits The Group applies counterparty limits, market limits and regulatory limits as part of its market risk management activities. There is a delegation system in place within the Group for setting appropriate counterparty limits which is subject to procedures which vary based on the counterparty type concerned. Authorised limits are individually monitored on a daily basis by the risk management unit within each relevant Group entity and on a consolidated basis by Group Risk Management. In order to manage market risk within the Group and the diversification of its trading book, a set of market risk limits has been implemented jointly by Group Risk Management and the risk management unit of each relevant Group entity. These limits reflect the Group’s market risk profile and enable optimum market risk management through arbitrage between the different market activities. The Group’s market limits include: . stop loss limits which are applied by business line over different time horizons; . position limits by activity; . open position limits by duration for dirham and other currency foreign exchange business; . open position limits by foreign currency and duration for the foreign currency cash business; and . transaction limits. The Group is also subject to regulatory limits set by Bank Al-Maghrib, including an individual foreign currency exposure limit that may not exceed 10 per cent. of the Bank’s shareholders’ equity and an aggregate foreign currency exposure limit that may not exceed 20 per cent. of the Bank’s shareholders’ equity.

92 Risk indicators The Group has different risk indicators reflecting the level of market risk exposure as follows: . Overall Value at Risk (VaR) and by type of asset: VaR is a probability-based measure of market risk. It summarises the risk through the calculation of potential loss over a given timeframe and with a given degree of probability. Unlike traditional risk indicators, VaR combines various risk factors and measures their interaction, thereby taking into account portfolio diversification. The Group calculates VaR daily using both the historical and Monte Carlo approaches. To verify and assure the VaR model’s accuracy, it is back-tested on a daily basis by comparing past VaR estimates with the profit or loss for the corresponding days. The Group has also established scenarios for calculating stressed VaR as described in note 8.7.1.2.2 to the 2012 Financial Statements. . Stress testing by risk factor: a set of stress tests are conducted every day for each trading activity. These stress tests are based on hypothetical scenarios and reflect the Group’s exposure to trading losses in the case of moderate, average and extreme fluctuations in defined parameters such as changes in interest rates and the yield curve, changes in exchange rates, a significant devaluation or a change the currency basket to which the dirham is pegged and changes in equity prices. The Group’s stress text scenarios are described in more detail in note 8.7.1.2.2 to the 2012 Financial Statements. . Sensitivity analyses for interest rate positions. . Delta, gamma, vega, theta and rho sensitivities for derivatives positions.

Capital requirements The Group’s regulatory capital requirements for market risk also enable the Group to assess its exposure to various market risks. Accordingly, the Group calculates its capital requirements on a daily basis using the standard approach for market risks. The Group is currently seeking to transition to the advanced approach for calculating its market risk-based capital requirements and is in discussions with Bank Al-Maghrib in relation to implementing an internal VaR-based tool to achieve this.

Counterparty risk on derivatives transactions The Group manages its counterparty risk on derivatives by calculating its effective and potential credit risk for each derivative contract and ensuring that an adequate credit line is in place where appropriate. The Group also contracts using model documentation published by the International Swaps and Derivatives Association, which allows netting of debit and credit positions between the same parties.

OPERATIONAL RISK The Group’s operational risk management system aims to: . assess and prevent operational risks; . evaluate the control process; and . implement corrective or preventative actions when major risks occur. The Group’s operational risk management framework is structured around three principles: . define an operational risk management system that is consistent with the Group’s organisation and is in line with best practice; . entrust the Group’s business units and subsidiaries with the daily management of operational risk; and . ensure clear segregation between the audit and control functions and operational risk management. Operational risk management is undertaken at four levels within the Group: . the Group’s Operational Risk Department which is centralised within the Bank; . the Group’s branch network; . individual business lines within the Bank; and . subsidiaries.

93 In addition, three operational risk committees (the Group Operational Risk Committee, the Business Line Operational Risk Follow-up Committee and the Subsidiaries’ Operational Risk Committee) provide oversight of the risk management activities and are responsible for identifying the main risk areas, in terms or activities and risk categories, and taking appropriate preventive and corrective actions to reduce operational risk. The committees also review changes in the Group’s exposure to operational risks and in the environment for controlling such risks as well as the amount of capital to be allocated to operational risks, the costs of any preventive action required and the costs of insurance. The major strategic objectives of the Group’s operational risk management system are to reduce operational risk exposure and to optimise the capital requirements in relation to operational risk. Exposure to operational risk and incurred losses undergone are regularly reported to the relevant operational risk entity, general management and the Board. The operational risk management system is properly documented to ensure compliance with a set of formalised controls, internal procedures and corrective measures in the case of non-compliance. The Group’s internal and external auditors periodically review the management processes and the systems for measuring operational risk. Operational risk management within the Group is largely automated, with risk event collection, operational risk mapping and key risk indicators being managed by a dedicated tool, which has been deployed within the Bank and its Moroccan and European subsidiaries. The Group seeks to manage its operational risk through enhancing its controls, taking out insurance where appropriate, avoiding risks where possible and developing business continuity plans. In addition, all identified major risks are reported to the Bank’ senior management which ensures that corrective and/ or preventive measures are developed and implemented. The implementation of these measures is monitored by the Operational Risk Monitoring Committee, which meets quarterly.

COUNTRY RISK The Group maintains an internal rating system for country risk based on an analysis of information from multiple reporting sources, including international organisations, such as the IMF and the World Bank, and rating agencies, such as Coface and S&P. The Group Risk Management division reviews monthly reports that address the Group’s risk exposure by country, geographic zone, industry, risk classification, provisions and non-performing loans. The division then calculates the Group’s country risk to identify any highly concentrated risk exposure. Credit limits per country are then established, based on both this analysis and the diversified loan portfolio of each subsidiary and across the Group’s subsidiaries.

COMPLIANCE Overview Each Group company currently has its own compliance department reporting to senior management of that company, whilst the Bank’s compliance department reports to the General Management Committee. A project is ongoing to implement integrated risk management and internal controls (including compliance) across the Group. In the compliance area, the project aims to ensure that all individual compliance representatives report to a centralised compliance body on a periodic basis and according to defined parameters. The Bank’s compliance programme has three main pillars: advise, monitor and report, built on a foundation of a sound understanding of the appropriate regulatory requirements. Advising encompasses internal notification of regulatory change, new products and services and internal processes as well as other internal communications including training and a compliance calendar. Monitoring includes procedures for compliance reviews, breach escalation, complaints handling, whistleblowing, issues management and compliance indicators. Reporting is done to senior management, the Board and regulators. Other Group entities are subject to the Group’s compliance charter and are required to implement compliance programmes that comply with both Moroccan requirements and those of their country of incorporation. As compliance requirements are constantly evolving, the Bank has established an online portal which creates a central focus where the compliance team and employees can access and perform their compliance duties as well as view their compliance risk profiles and information. This is expected to be made available to other Group companies as part of the project referred to above.

94 Compliance confidence indicators (CCIs) are used as a key tool in providing the AICC with a measurable way to monitor compliance across the Bank. Every department head is assigned a CCI which also forms part of his appraisal. This is also expected to be implemented in other Group companies as part of the project referred to above.

AML and CTF Every business relationship within the Group is reviewed and rated against defined risk parameters that comply with applicable regulatory requirements. These relationships are subject to either reduced, standard or enhanced know your customer due diligence procedures, depending on the level of assessed risk. Compliance and the business units work together to ensure that clients and transactions are screened to enable relevant Group entities to comply with all local regulations and to ensure that transactions are not conducted with entities on OFAC and other international watch lists.

Internal Audit The internal audit function is an independent function reporting directly to the Board. The internal audit process begins with determination of an audit strategy and an annual audit plan that are approved by the Board. The strategy and plan are based on: . the periodic audit cycle covering all of the Group’s entities, activities and processes; . an assessment of the inherent risks faced by the Group; and . specific requests of the Board, and are subject to available resourcing. The approved strategy and plan forms the basis for performing audits for the period. Typically, the internal audits focus on reviewing processes (including in particular risk management processes), information technology systems and all branches and subsidiaries. In relation to Bank of Africa, the Bank’s internal audit function reviews Bank of Africa internal audit reports and also conducts inspections of individual Bank of Africa banks. The intention, over time, is both to harmonise the internal audit procedures used by the Bank and Bank of Africa and to establish a hierarchical link and direct reporting line from Bank of Africa’s internal audit function to the Bank’s internal audit function.

95 MANAGEMENT AND EMPLOYEES

BOARD OF DIRECTORS Overview The Board is responsible for the overall direction, supervision and control of the Group. The day-to-day management of the Group is conducted by the Chief Executive Officer, with the support of a General Management Committee composed of the Delegate General Managers of the Group. Under its Articles of Association, the Board is required to comprise between six and 15 members which are elected by the General Assembly of Shareholders. The Board’s duties and responsibilities include: . providing leadership and guidance; . overseeing the executive management team in their execution of the Group’s business strategies; . managing, monitoring and overseeing the business and the corporate governance framework of the Group; . adopting strategic and financial plans; . adopting and ensuring the implementation of appropriate risk assessment and risk management policies and processes; . monitoring and assessing the internal controls and the Group’s compliance with applicable laws and regulations; and . adopting a compensation strategy, performance review process and a succession plan for senior management. The Board meets regularly (and is required to meet at least twice a year). Decisions of the Board are, with limited exceptions, made by majority votes of those present (in person or by proxy) at the meeting. The Board and senior management have delegated certain powers to committees, as described below.

Board Members The table below shows the members of the Board of Directors, the year in which they were first appointed to the Board, the year in which their current term expires and their principal activities outside the Group. Year in Year of first which current Name election term expires Principal outside activities Mr. Othman Benjelloun 1995 2019 Chairman and Chief Executive Officer of Chairman and Chief FinanceCom, FinanceCom Afrique, CAP Executive Officer ESTATE, Revly’s, Interfina and SFCM; Chairman of the Supervisory Board of RMA Watanya; Director of Meditel, Argan Invest, MBT, RMA Capital Holding, RMA Asset Management, RMA Alternative Investment and OKB; and FinanceCom representative in Jaguar and Villajena. Mr. Michel Lucas 2005 2014 Chairman and Chief Executive Officer of Representing Banque CM-CIC Group; Chairman of the Board Fe´de´rative du Cre´dit of Directors of Banque Fe´de´rative du Mutuel Cre´dit Mutuel; Chairman of the National Confederation of Cre´dit Mutuel; and Chairman of Cre´dit Mutuel Centre- East-Europe.

96 Year in Year of first which current Name election term expires Principal outside activities

Mr. Pedro Mosqueira 2000 2018 Director of Espirito Santo International Do Amaral SA, Banco Espirito Santo International Representing Banco (Cayman Islands) and Banco Espirito Espirito Santo Santo SA (Portugal). Mr. Anass Houir Alami 2009 2016 General Manager of Caisse de De´poˆt et Representing Caisse de de Gestion and Chairman of Me´ditel. De´poˆ t et de Gestion Mr. Zouheir Bensaid 2001 2015 Vice-Chairman and Chief Executive Representing FinanceCom Officer of FinanceCom; Chairman of the Board of Manager of RMA Watanya; Director of Lydec and Mutandis. Mr. Azeddine Guessous 1995 2019 Chairman and Chief Executive Officer at Representing RMA Maghrebail; Vice-Chairman of the Watanya Supervisory Board of RMA Watanya; Vice-Chairman of the Board of Directors of Lydec; and Director of Conseil De´ontologique des Valeurs Mobilie`res, Al Akhawayn University, SONASID and Imperial Tobacco Morocco. Mr. Adil Douiri 2008 2016 Promoter and manager of Mutandis and Director Director of CFG Group. Mr. Amine Bouabid 2007 2019 Chairman of the Board of Managers of Director SALAFIN. Mr. Mamoun Belghiti 2004 2016 Chairman and Executive Officer of RM Director & Delegate Experts and Director of Bank of Africa General Manager Ivory Coast. Mr. Brahim Benjelloun 2004 2016 Member of the Supervisory Board of Touimi RMA Watanya and Director in EURO Director & Delegate INFORMATION. General Manager Mr. Mohamed Bennani 2004 2016 Chairman and Chief Executive Officer of Director Bank of Africa Group; Board Member of Bank of Africa West Africa, AFH Oce´an Indien, AFH Services, Bank of Africa Benin, Bank of Africa Burkina Faso, Bank of Africa Ivory Coast, Bank of Africa Ghana, Bank of Africa Kenya, Bank of Africa Madagascar, Bank of Africa Mer Rouge, Bank of Africa Mali, Bank of Africa Niger, Bank of Africa Senegal, Bank of Africa Tanzania, Bank of Africa Uganda, Banque De Credit De Bujumbura (Vice-Chairman), Banque De l’Habitat du Benin, Bank of Africa France, ACTIBOURSE; and Chairman at Bank of Africa Democratic Republic of Congo, Bank of Africa Asset Management, AGORA Mali and AGORA Holding.

The business address of each member of the Board is 140 avenue Hassan II, Casablanca, Morocco. No member of the Board has any actual or potential conflict of interest between his duties to the Bank and his private interests and/or other duties.

97 Board CVs Othman Benjelloun, Chairman and Chief Executive Officer of BMCE Bank Group A nationally recognised business executive, particularly in banking and finance, Mr. Benjelloun has been the Chairman and Chief Executive Officer of the Bank since its privatisation in 1995. He is also the Chairman of FinanceCom, an operational holding company involved in four sectors: banking and related financial services, with the Bank as the major subsidiary; insurance, with RMA Watanya as the major subsidiary; telecommunications, media and technologies; and industry and services. Mr. Benjelloun chairs the Moroccan Banks’ Association. He also chaired the Maghreb Banking Union, from 2007 to 2009, and the Board of Directors of Medi Telecom, the first private operator of mobile telephony in Morocco, from January 2005 to July 2012. He is also a counsellor at the Centre for Strategic International Studies in Washington DC. In the field of Corporate Social Responsibility, Mr. Benjelloun is the founder of BMCE Bank Foundation, to which he has assigned two main priorities: education, particularly the fight against illiteracy with the Medersat.com programme of construction and management of several dozen rural community schools throughout Morocco, and environmental protection. In April 2010, Mr. Benjelloun has been nominated Commandeur de l’Ordre du Troˆne –Wissam Al arch – by His Majesty the King Mohamed VI and Commandeur des Arts et des Lettres of the French Republic. Mr. Benjelloun has also been nominated Officier de L’Ordre du Troˆne of the Kingdom of Morocco and Commandeur de l’Etoile Polaire of the Kingdom of Sweden. He was also awarded La Me´daille de Commandeur dans l’Ordre National du Lion of the Republic of Senegal. Mr. Benjelloun is married to Dr. Leı¨la Mezian, an ophthalmologist, and President of BMCE Bank Foundation. Mr. and Mrs. Benjelloun have two children.

Michel Lucas, Director representing CM-CIC Group Mr. Michel Lucas is the chairman of CM-CIC Group. Since 2010, Mr. Lucas has chaired the National Confederation of Cre´dit Mutuel and the Federation of Credit Mutuel Centre-East-Europe. In 2004, Mr. Lucas was appointed as a Director of the Bank, representing CM-CIC Group. Mr. Lucas is also the Chief Executive Officer of Banque Fe´de´rative du Cre´dit Mutuel. He chairs Assurances du Cre´dit Mutuel and the board of management of Cre´dit Industriel et Commercial. In January 1998, Mr. Lucas was appointed as a Chief Executive Officer of the Group Cre´dit Mutuel. Four months later, the Group Cre´dit Mutuel acquired Cre´dit Industriel et Commercial. In 1971, Mr. Lucas started his career in Cre´dit Mutuel Strasbourg as Information System Analyst. Mr. Lucas holds a Engineering Diploma from Institut Industriel du Nord.

Pedro Mosqueira Do Amaral, Director representing the Banco Espirito Santo group In January 2013, Mr. Mosqueira Do Amaral was appointed as a Director of the Bank, representing the Portuguese Banco Espirito Santo group. Mr. Mosqueira Do Amaral is also a director of Espirito Santo International SA, Espirito Santo International in the Cayman Islands and Banco Espirito Santo SA. In 2001, he joined Banco Espirito Santo GmbH (Germany) and was appointed as its Chief Executive Officer in 2006. In 1996, Mr. Mosqueira Do Amaral started his career in the Treasury Division of Banco Espirito International.

Anass Houir Alami, Director representing la Caisse de De´poˆ t et de Gestion In May 2010, Mr. Alami was appointed as a Director of the Bank, representing la Caisse de De´poˆ t et de Gestion. Since 2009, Mr. Alami has been appointed by His Majesty the King Mohamed VI as the Chief Executive Officer of Caisse de De´poˆ t et de Gestion. From 2006 to 2009, Mr. Alami was the Chief Executive Officer of Barid Al Maghrib. In 2005, Mr. Alami had chaired the Supervisory Board of Socie´te´ de la Bourse des Valeurs de Casablanca (SBVC). In 1994, he co-founded a brokerage firm called Upline Securities. Mr. Alami obtained an engineering diploma from Ecole Mohammedia des Inge´nieurs of Rabat in 1990. In 1993, he completed his MBA in finance and international trade from the Stern School of Business, New York University.

98 Zouheir Bensaı¨d,Director representing FinanceCom Mr. Bensaı¨dis currently Chairman of the Management Board at RMA Watanya. Mr. Bensaı¨dhas been Vice Chairman and Chief Executive Officer of FinanceCom since January 2005. He is a director on various boards, including the Bank, Meditelecom, CGI, Maghrebail, RISMA LYDEC and CTM. He is also a member of several audit committees. Mr. Bensaı¨d has over 26 years experience in the banking, financial and industrial sectors. In the mid-1980s, he was in charge of financial institutions at Citibank Maghreb, in which he initiated the development of the ABN AMRO network in the north-eastern region of Morocco. In 1994, after a period of three years as the head of an agro-industrial company, Mr. Bensaı¨dparticipated in the financial sector reform of the Moroccan capital markets. He was General Manager of MIT, a brokerage subsidiary of the Bank where he launched the first capital raising operations and participated in privatisations and initial public offerings in Morocco. Mr. Bensaı¨dwas the Vice Chairman of the Casablanca Stock Exchange and the Professional Association of Brokerage Companies from 1996 to 1998. Between 1998 and 1999, he chaired the Casablanca Stock Exchange, a period in which the development of the modernisation of the capital market was accelerated. A former student at Cornell, Mr. Bensaı¨dgraduated in finance from the University of Nevada in 1985 and was a member of the Phi Kappa Phi Honor Society.

Azeddine Guessous, Director representing RMA Watanya Mr. Guessous has been a Director of the Bank since 1995. From 2010 to 2012, Mr. Guessous was Chairman of the Management Board of RISMA. In 2004, he was appointed as the Chairman and Executive Officer of Maghrebail. In 2001, he was the Chairman and Executive Officer of Compagnie d’Assurance Al Watanya and Caisse Interprofessionnelle Marocaine de Retraite. From 1986 to 1994, Mr. Guessous was Ambassador of Morocco in Spain. He was Minister of Commerce, Industry and Tourism in 1978 and Minister charged with relations with the European Economic Community in 1985. Mr. Guessous is Vice Chairman of Lydec, Vice Chairman of the Supervisory Board of RMA Watanya, and a director of Conseil De´ontologique des Valeurs Mobilie`res, Al Akhawayn University, SONASID and Imperial Tobacco Morocco. Mr. Guessous was nominated for Wissam Reda de l’Ordre d’Officier, de l’Ordre du Me´rite Civil Espagnol, de l’Ordre de la distinction Grand-Croix, de l’Ordre National du Me´rite Franc¸ais de la me´daille de chevalier and de l’ordre of British Empire de la me´daille de Knight.

Adil Douiri, Director Intuitu Personae Mr. Douiri co-managed the stock market investments of Paribas, a European investment bank (now BNP Paribas) and those of its US clients over a six-year period (1986-1992). On his return to Morocco in 1992, Mr. Douiri co-founded the Kingdom’s first investment bank, Casablanca Finance Group (now CFG Group), pioneering several initiatives in the Moroccan stock market. He was Chairman of this investment bank’s supervisory board until November 2002. CFG Group is today one of the leading investment banks in Morocco and Mr. Douiri remains one of the Bank’s primary shareholders and a director. In November 2002, Mr. Douiri was appointed Minister of Tourism, then in June 2004, Minister of Tourism, Handicrafts and the Social Economy. Mr. Douiri holds an engineering degree from Paris’ Ecole Nationale des Ponts et Chausse´es.

Amine Bouabid, Director Intuitu Personae Mr. Bouabid has held the position of Chairman of the Management Board of SALAFIN since 2000. In 1997, Mr. Bouabid founded SALAFIN and became its Director and Chief Executive Officer. From 1993 to 1996, he was deputy Chief Executive Officer at CFG Group. Mr. Bouabid is an engineer from INSEA, Rabat and holds an MBA in Finance from Drexel University in Philadelphia, USA.

99 Mamoun Belghiti, Director and Delegate General Manager in charge of RM Experts Mr. Mamoun Belghiti is the Chairman and Chief Executive Officer of RM Experts. Mr. Belghiti began his career with the Bank in 1972 in general services, and later in the inspection division. He was appointed manager of the credit and treasury division in 1981, and of the investment and credit division in 1991. In this capacity and on behalf of the Bank, Mr. Belghiti negotiated several credit lines, in particular with the World Bank, IFC, IMF, EIB and ADB. In early 1996, he became manager of the financial affairs division where he actively participated in the establishment of the development strategy plan and reorganisation of the Bank. The same year, along with the Chairman and other senior executives, he participated in the GDR issue enabling the Bank to raise capital on the international capital markets and was promoted Deputy General Manager. In February 1998, he was appointed General Manager in charge of the financial affairs division as well as retail banking. In April 2002, he became the main adviser to the Chairman in charge of representation of the Bank to national and international institutions as well as relations with monetary authorities. He sits on the Boards of the entities in which the Bank holds direct and indirect interests. In March 2004, Mr. Belghiti was appointed Director and General Manager in charge of the Remedial Management Group. He also participated in several seminars held in Morocco and abroad. Mr. Belghiti is married and father of two children.

Brahim Benjelloun Touimi, Director and Delegate General Manager to the Chairman Mr. Brahim Benjelloun-Touimi is a Director and Delegate General Manager to the Chairman of the Bank and has been in charge of coordinating the Group’s activities since March 2010. He is also the Chairman of the General Management Committee, the Vice Chairman of the Senior Credit Committee and the Chairman of the Supervisory Board of BMCE Capital, BMCE Capital Bourse, Salafin and Maroc Factoring. He is also on the Board of other Specialised Financial Subsidiaries such as Maghrebail and RM Experts. Likewise, he is on the Board of Bank of Africa Holding, BMCE Bank International UK and BMCE International Madrid and is the chairman of the Board of BMCE Euroservices, a business unit dedicated to expatriate Moroccans living in Europe. He also sits on the Board of Proparco. After joining the Bank in 1990, his career was marked by the creation of dedicated subsidiaries, the setting up of stock brokerage and asset management activities, as well as the launch of the first mutual funds on the Casablanca Stock Exchange. Mr. Brahim Benjelloun-Touimi is the Chairman of the Supervisory Board of Euroafric Information, a joint venture specialising in IT created by the Bank, RMA Watanya and the CM-CIC Group. He is a board member of Euro Information in France, the IT subsidiary of Credit Mutuel Group, Mr. Brahim Benjelloun-Touimi chairs the Board of Directors of several IT subsidiaries of the Bank. He is also board member of RMA Watanya and Chairman of the Board of BMCE Assurances. Mr. Brahim Benjelloun-Touimi is a board member of BMCE Bank Foundation and other educational non-governmental organisations. He is Chairman of the National Association of Moroccan Business Corporation (ANMA). Mr. Brahim Benjelloun-Touimi holds a PhD in money, finance and banking from the University of Paris I/Pantheon-Sorbonne. During his PhD studies he was selected by the IMF to conduct research on the financial system of one of the member countries. He began his career on the French financial market and headed research on the trading floor of a large French investment bank. Mr. Benjelloun- Touimi is married and the father of three children.

Mohamed Bennani, Director Intuitu Personae Mr. Bennani has been the Chairman and Chief Executive Officer of the Bank of Africa Group since January 2011. From 2002 to 2009, Mr. Bennani was a Director and General Manager of the Bank in charge of Retail Banking. From 1997 to 2002, he was General Manager in charge of large corporate and international activities. From 1992 to 1997, Mr. Bennani founded BMCE International Madrid, the Spanish subsidiary of the Bank, and was its General Manager. From 1989 to 1992, he was the General Manager of Banque de De´veloppement du Mali in charge of its restructuring. From 1976 to 1989, he was a senior officer of the international department of the Bank in charge of the Middle East and the Arabian Gulf. From 1974 to 1976, Mr. Bennani was the head of the Bank’s representative office in Beirut, in charge of the Middle

100 East and the Arabian Gulf. From 1972 to 1974, he was an officer at the international department in charge of Europe. Mr. Bennani holds a Master’s Degree in Economics from the University Hassan II, Casablanca. Mr. Bennani was nominated by the Moroccan Ouissam Achchoughl Addahabi, the Chevalier de l’Ordre National of Mali and l’Ordre du me´rite grade d’Officier of the Republic of Congo.

Board Committees The Board has delegated certain of its duties to the following committees: . Audit and Internal Group Control Committee: The Board established the Audit and Internal Group Control Committee to review and monitor the integrity of the Group’s financial statements and financial reporting, its internal control systems, its audit responsibilities and all internal and external audit matters in relation to the Group. The Audit and Internal Group Control Committee comprises four non-executive board members and is chaired by Mr. Azedine Guessous. The other members are Mr Zouheir Bensaı¨d, Mr Jean-Jacques Tamburini and Mr Pedro Mosqueira Do Amaral. Members of the executive team of the Bank are also invited to participate at meetings of this committee. In 2012, the Audit and Internal Group Control Committee held three meetings. . Audit and Internal Bank Control Committee: The Board established the Audit and Internal Bank Control Committee to review and monitor the integrity of the Bank’s financial statements and financial reporting, its internal control systems, its audit responsibilities and all internal and external audit matters in relation to the Bank. The Audit and Internal Bank Control Committee comprises four non-executive board members and is chaired by Mr Jean-Jacques Tamburini. The other members are Mr Azeddine Guessous, Mr Zouheir Bensaı¨dand Mr Pedro Mosqueira Do Amaral. Members of the executive team of the Bank can also be invited to participate at meetings of this Committee. In 2012, the Audit and Internal Bank Control Committee held three meetings. . Governance Committee: The Board established the Governance Committee to ensure the Group’s compliance with governance principles and applicable laws and regulations, to examine and formulate recommendations regarding the composition, mission and tasks of the Board and its committees, to anticipate and resolve potential conflicts of interest between Board members and the Group, to formulate recommendations regarding the appointment of new Board members and to provide guidance with respect to the remuneration of the Directors and members of the executive management. The Governance Committee comprises three non-executive board members and is chaired by Mr Michel Lucas. The other members are the representative of CDG and Mr Adil Douiri. The Governance Committee can, at its discretion, invite members of the Group or third party consultants to participate at its meetings. The Committee meets at least quarterly. . Group Strategy Committee: The Group Strategy Committee is in charge of developing strategic thinking within the Group and issues recommendations to the Board regarding the Group’s strategy. Its mission revolves around four main priorities: defining strategic views within the Group; cross-functional initiation and execution of strategy and launching large crossover projects; evaluation, for the Board, of new Group strategy operations; and monitoring the competitive environment and its strategic development, both nationally and internationally.

SENIOR MANAGEMENT The Chief Executive Officer is accountable for executing the Group’s strategy and running the business of the Group on a day-to-day basis. The Chairman and Chief Executive Officer reports directly to the Board and keeps the Board fully informed of all important aspects of business performance. The Chairman and Chief Executive Officer is supported by the General Management Committee. The General Management Committee is responsible for implementing the strategy approved by the Board. The General Management Committee monitors the Group’s activities and resolves any operational and functional issues through internal management and committees, it monitors the development of the Bank’s strategic plan and it ensures that risk monitoring and management is properly carried out and that risk exposures are adequately defined. The senior management team which comprises the Director and Delegate General Manager to the Chairman and five main executive positions: Delegate General Manager in charge of the Group’s Risk and Finance, Delegate General Manager in charge of Business Banking, Delegate General Manager in

101 charge of the Group’s IT and Processes, the Delegate General Manager in charge of Retail Banking and the Delegate General Manager in charge of International Activities. In addition to the General Management Committee, the Chairman and Chief Executive Officer’s work is supported in the day-to-day business operations by additional senior managers with extensive backgrounds in banking and financial matters and by management committees with defined roles and responsibilities. The table below shows the members of the Group’s senior management and their titles. Name Title Mr. Othman Benjelloun Chairman and Chief Executive Officer

Mr. Brahim Benjelloun-Touimi Director and Delegate General Manager to the Chairman Mr. Mamoun Belghiti Director and Delegate General Manager in charge of RM Experts Mr. Driss Benjelloun Delegate General Manager in charge of the Group’s Risk and Finance Mr. M’Fadel El Halaissi Delegate General Manager in charge of Corporate Banking Mr. Mounir Chraibi Delegate General Manager in charge of the Group’s IT and Processes Mr. Omar Tazi Delegate General Manager in charge of Retail Banking Mr. Mohamed Agoumi Delegate General Manager in charge of International Activities

Senior management CVs Mr. Driss Benjelloun, Delegate General Manager in charge of the Group’s Risk and Finance Mr. Benjelloun is Delegate General Manager in charge of the Group’s Risk and Finance. He is also Director of a number of Group subsidiaries, including Bank of Africa, Bank of Africa Benin and BMCE Capital. When he joined the Bank in 1986, Mr. Benjelloun was tasked with the project of creating a management control unit to improve the steering of activities. In 1990, he was entrusted with establishing an Audit and Management Control Department. Following the privatisation of the Bank, Mr. Benjelloun was put in charge of the Bank’s back office with a view to restructuring it in order to better serve the Bank’s customers. In 1998, Mr. Benjelloun was appointed Deputy General Manager in charge of several departments within the Bank which make up the Group Support Division, including Banking Production; Information Systems; Organisation; Logistics; and Security. The prime mission of the Division consisted in coordinating and harnessing the entities in such a way as to better meet the new challenges facing the Bank and its development both at the national and international levels. In 2003, Mr. Benjelloun took charge of the Group’s Financial Division with a view to improving the integration of the various subsidiaries in Morocco, Europe and Africa. In parallel, Mr. Benjelloun was tasked with leading two major structuring projects: the adoption of IFRS standards for the Group’s accounts and the implementation of Basel II. He has also steered the process of establishing BMCE International Madrid; Maroc Factoring; Interbank Card-use Centre and Docuprint. In Africa, he participated in the restructuring of the BDM and was in charge of its merger with the BMCD. Mr. Benjelloun started his career as a consultant auditor in various overseas firms and also served as a professor at Picardie University. He holds a doctorate in finance from Paris Dauphine University and a Diploma in Advanced Accounting Studies. Mr. Benjelloun is married and the father of three children.

Mr. M’Fadel El Halaissi, Delegate General Manager in charge of Corporate Banking Mr. El Halaissi is Delegate General Manager in charge of Business Banking. This new position was set up within the Bank at the beginning of 2010 in order to gather together and boost the business banking markets, both SME and larger corporates. This new responsibility was assigned to Mr. El Halaissi after

102 25 years of service within the Bank where he served in many areas: credit activities; investment financing; credit-restructuring; off balance sheet solutions; and other activities pertaining to the enterprise market. He has actively participated in the growth of project financing and financial advisory services and has worked with operators that have used these types of products. When he joined BMCE Bank, Mr. El Halaissi was entrusted with the creation of an Investments Credit Restructuring Department. He also participated in the negotiation and the implementation of several foreign credit lines, including World Bank lines; IFC lines; and EIB lines. Thereafter, in 1998, he was put in charge of the Investment and Corporate Market Division. In April 2002, he was appointed Deputy General Manager in charge of the Corporate Bank, a division which was to be extended to cover international business activities. Mr. El Halaissi holds a doctorate in economics from the University of Lille and is married and the father of two children.

Mr. Mounir Chraibi, Delegate General Manager in charge of the Group’s IT and Processes Mr. Chraibi is the Delegate General Manager in charge of the Group’s IT and Processes, a position he has held since March 2010. As such, he is responsible for the support of the Bank’s organisation, quality, information, systems, banking back-office, logistics and group purchasing. In this context, he led strategic projects of the Bank such as the realisation of the blueprint of the Bank’s information and insurance system (SIBEA), the implementation of the industrialisation programme of the back-office of the Bank and centralised group purchasing in an effort to rationalise costs. Mr. Chraibi began his career in 1987 as a project manager in charge of the Cre´dit du Maroc Information Systems master scheme. He then served as Head of Organisation and Information systems at the Harbours’ Operating Office. During this period, he helped to simplify foreign trade for the Ministry in charge of Foreign Trade. In 1994, Mr. Chraibi was appointed General Manager of the Vocational Training and Employment Promotion Office. His term in this office was marked by the development of ongoing in-house training and the launch of programmes for the recruitment of young people, notably in IT areas. During his period with this office, he contributed to the creation of the National Agency for the Employment of Young People (ANAPEC). In 2001, Mr. Chraibi was appointed Manager General of the National Social Security Fund (CNSS). During his term there, he helped modernise CNSS’s management methods and participated in the launch of Mandatory Health Insurance, a new branch within the social security scheme. In 2005, Mr. Chraibi was appointed Wali (Governor) of the Marrakech, Tensift and Al-Haouz Region. During his term, the region saw an upsurge in private investment as well as the implementation of major structuring public investments throughout the Marrakech region. Mr. Chraibi graduated as an engineer from the Paris-based Ecole Polytechnique and the National Higher School of Telecommunications in Paris. In 2008, he was awarded the Wissam Al Arch de l’Ordre Chevalier. He was awarded the Order of Leopold by the Kingdom of Belgium. Mr. Chraibi is married and is the father of two children.

Mr. Omar Tazi, Delegate General Manager in charge of the Retail Bank Mr. Tazi serves as the Delegate General Manager in charge of the Retail Bank within the Bank. Mr. Tazi previously served as manager in charge of customers’ portfolio within Canada Development Bank, a bank specialising in the funding of investment projects launched by SMEs. He then worked as Deputy Credit Manager for the Montreal District. In 1992, he joined Wafa-Bank in the capacity of officer in charge of cash-management. Between 1993 and 2005, Mr. Tazi held several senior positions within the Socie´te´Ge´ne´rale Marocaine de Banques (SGMB), notably as officer in charge of Investment Credit; officer in charge of operating the network of private persons, professionals and corporate markets; and Deputy General Manager of the Commercial Bank. During this period, he likewise served respectively as Manager, Vice-President, and President of several of SGMB’s subsidiaries, namely: Sogebourse, Gestar, Sogecredit, Sogefinancement, and Acmar Morocco. From 2005 to 2010, Mr. Tazi held a senior position in AFMA Group, a consulting, brokerage, and insurance firm, where he served as Director and General Manager.

103 In June 2011, Mr. Tazi joined the Bank and was charged with improving the Bank’s sales force. In 2012, Mr. Tazi was appointed as a member of Salafin’s monitoring committee and as Delegate Director of BMCE’s Euroservices. Mr. Tazi is holder of an MSF from the University of Sherbrook in Canada. Mr. Tazi is married with two children.

Mr. Mohamed Agoumi, Delegate General Manager in charge of International Activities Mr. Agoumi is the Delegate General Manager of the Bank in charge of International Activities. After working for the audit firm, Peat Marwick (now KPMG), for seven years where he specialised in auditing and advising financial institutions, Mr. Agoumi joined Eurogroup in 1987 where he became a partner in 1990 and head of the Banking and Finance Division in 1997. During this time he led assignments relating to strategy and business planning, governance, mergers, IT cooperation, industrialisation and back offices with major French banking groups. During the financial market reform in Morocco, he assisted several local institutions in implementing their market activities. More recently, he has led several interventions relating to the organisation and implementation of risk management under Basel II. From 2006 to 2009, he held various positions and responsibilities within the Cre´dit Agricole Group France (CASA). He was appointed Delegate General Manager of LCL – Le Cre´dit Lyonnais in 2006 and a member of the Group Executive Committee of CASA, where he was in charge of operations, strategy and the credit department. He also completed the integration of LCL as well as the reorganisation of distribution networks, including and corporate banking. In 2008, he was appointed to the Group Executive Committee to manage CASA’s international development. Since 2010, he has been chairman and Founder of Europa Corporate Business Group (ECBG), which specialises in investment banking, strategic consulting and support for SMEs, part of the programme of La Passerelle Group for investment advice between Europe and Morocco. He is also Chairman of the ECBG subsidiary created in Morocco, Financing Access Maroc, that provides assistance to SMEs in refinancing their bank loans. Mr. Agoumi graduated from ESSEC in 1979 and holds a DEA in Mathematical Economics and Econometrics (which he gained in 1980). He is also a qualified chartered accountant in Paris (1993) and taught for two years at ESSEC as an Assistant Professor in the Economics Department. Mr. Agoumi is married and the father of two children. The business address of each member of senior management is 140 avenue Hassan II, Casablanca, Morocco. No member of senior management has any actual or potential conflict of interest between his duties to the Bank and his private interests and/or other duties.

EMPLOYEES As at 31 December 2012, the Group employed 11,983 members of staff compared to 11,585 as at 31 December 2011 and the Bank employed 4,894 members of staff compared to 4,941 as at 31 December 2011. The success of both the Bank and the Group is dependent in part upon their respective ability to attract, retain, train and motivate highly qualified and dedicated personnel. The Bank maintains a medical and life insurance plan pursuant to which the Bank contributes on a monthly basis. Employees of the Bank are also entitled to participate in the Caisse Interprofessionnelle Marocaine de Retraites (CIMR), an organisation which private sector employers may join on behalf of employees to provide a retirement pension. The retirement age for the Bank’s employees is 60. The Bank pays annual bonuses to all of its staff, which vary according to age, length of service, seniority and performance. As at 31 December 2012, 100 of the Bank’s employees belonged to the Union Syndicate Interbancaire, affiliated with Union Marocaine du Travail, a national trade union. The Bank’s relations with its unionised employees are governed by an industry-wide collective bargaining agreement, reviewed in 2006 to adapt to the Nouveau Code du Travail. The Bank considers its relationship with its employees to be good.

104 Employee Stock Sales The Bank has set up a programme whereby employees of the Bank can acquire shares in BMCE. To date, the Bank has conducted two offers under this programme. The aims of this programme are to align the interests and incentives of the Bank’s employees with its shareholders and to allow the Bank’s employees to participate in the success of the Bank.

105 THE KINGDOM OF MOROCCO

OVERVIEW OF THE KINGDOM The Kingdom of Morocco is situated in the north-west corner of the African continent and covers an area of approximately 710,850 square kilometres. It has a coastline of approximately 3,500 kilometres on the shores of the Atlantic Ocean and, east of the Straits of Gibraltar, on the Mediterranean Sea, facing southern Spain. Morocco is bordered to the north by the Mediterranean Sea, to the east by Algeria, to the south by Mauritania and to the west by the Atlantic Ocean. At the end of 2012, the total population of Morocco was estimated by the HCP at 32.6 million. The latest census figures in 2004 and 1994 placed the total population of Morocco at 29.8 million and 26.1 million, respectively. The population grew at an average rate of 1.3 per cent. per year during the period 1994 to 2004. An increasing proportion of the population lives in the cities (the largest of which are Casablanca, Marrakesh, Fez and Rabat, the capital) growing from 55.1 per cent. in 2004 to an estimated 58.2 per cent. in 2011. An estimated three million Moroccans live overseas, predominantly in Europe, with the greatest concentration in France, Spain, Belgium, Italy, The Netherlands and Germany. The demographic structure shows a predominantly young population living in Morocco. As at the end of 2011, an estimated 27.1 per cent. of the population was under the age of 15. The state religion of Morocco is Islam. Pursuant to the 2011 Constitution, freedom of religion is respected. Almost the entire population is Sunni Muslim, and His Majesty King Mohammed VI, as Commander of the Faithful, is the supreme Muslim authority in the country. About 1 per cent. of the population consists of Christian and Jewish Moroccans. Morocco is a constitutional monarchy with a bicameral Parliament. The King is the Head of State and selects the Head of Government from the party with the largest number of seats in Parliament. The Kingdom’s first Constitution was adopted in 1962 and was subsequently amended several times. In 2011, a commission was convened to draft a new constitution. This followed demonstrations in Casablanca (Morocco’s largest city), Rabat and other major cities in Morocco beginning on 20 February 2011 in the context of the events of the Arab Spring and an address on 9 March 2011 by King Mohammed VI to the nation in response to the calls for reform of the 20 February Movement. The 2011 Constitution was approved by referendum on 1 July 2011. The principal changes implemented by the 2011 Constitution include: . enhancing the separation of powers and strengthening the powers of the Parliament and the Head of Government; . enhancing the rule of law; . defining the constitutional roles of political parties and the Parliamentary opposition, which is granted official recognition; . further regionalisation; and . other measures to promote civil society, such as encouraging good governance and combating corruption. In addition, the 2011 Constitution strengthens civil rights in the Kingdom. It guarantees, among other matters: . equal rights for women; . freedom of movement, of opinion, of expression and of worship; . freedom of association and to belong to any union or political group; . the right to strike; . the right of free enterprise and to own property; and . rights for freedom of thought, ideas, artistic expression and creation. It prohibits discrimination based on gender, race, belief, culture, social or religious origin, language or disability. The 2011 Constitution provides that the official languages of the Kingdom are Arabic and Amazigh, a Berber language. A number of other Berber dialects, including Tachelhit and Tarifit, are spoken in many rural areas. French, English and Spanish are also spoken.

106 MOROCCAN ECONOMY The size of the Moroccan economy, measured in terms of GDP, was Dh 802.6 billion in 2011 and Dh 828.2 billion in 2012. Morocco’s economic growth depends to various degrees on several key sectors, including: . trade, transport, communication and other services, which in 2011 represented 41.5 per cent. of GDP at current prices; . energy, mining, manufacturing, construction and public works, which in 2011 represented 30.0 per cent. of GDP at current prices; . agriculture, forestry and fishing, which in 2011 represented 14.3 per cent. of GDP at current prices; . public administration, education and social policy, which in 2011 represented 8.7 per cent. of GDP at current prices; and . taxes and subsidies, which in 2011 represented 7.5 per cent of GDP at current prices. No sectoral breakdown for 2012 is currently available. Although the agricultural sector plays an important role in the Moroccan economy and is volatile due to the impact of a variable climate on agricultural output, the secondary and tertiary sectors’ share of GDP have been steadily increasing over the last five years, lessening the Moroccan economy’s dependence on agriculture. Upon taking office in January 2012, the Government announced its programme for the next five years, which is based on five pillars: . strengthening national identity while encouraging diversity within Moroccan society; . improving the rule of law and governance, advancing regionalisation and guaranteeing civil rights; . fostering an environment that supports a strong, competitive economy and job creation; . strengthening national sovereignty; and . establishing solidarity between social groups, generations and regions in Morocco and guaranteeing equal access to basic social services. The Government’s programme contains the following economic targets (among others): . increasing the economic growth rate in the medium term by 1 per cent. to reach an average growth rate of 5.5 per cent. during the period 2012-2016; . maintaining inflation at 2 per cent.; . reducing unemployment to a rate of 8 per cent. by 2016; and . reducing the fiscal deficit to 3 per cent. of GDP by 2016. In order to achieve these aims, the Government intends to implement the following reforms: . improving the business climate and competitiveness by strengthening governance, the rule of law and the independence of the judiciary; . enhancing transparency and accountability and fighting corruption; . further improving the infrastructure in Morocco, including through public-private partnerships; . improving access to social services, such as education and healthcare; . developing active labour market policies; . promoting small- and medium-sized businesses; . encouraging informal economy participants to shift to the formal economy through the implementation of incentives; . using sectoral policies to target high value-added and job-creating sectors, such as the aerospace sector; . reforming tax laws to broaden the tax base and lower tax rates; . introducing subsidy reforms;

107 . reviewing the public sector compensation system to link it to productivity and reviewing the state pension system to ensure long-term sustainability and reduced risk to the budget; and . improving governance and monitoring of the performance of public companies. The table below shows the principal economic indicators for Morocco as at the end of, or for, the periods indicated. 2010 2011 2012(1) GDP at current prices (Dh billion)...... 764.0 802.6 828.2 Real GDP growth (per cent.) ...... 3.6 5.0 2.7 GDP per capita at current prices (Dh) ...... 23,988 24,936 25,465 Unemployment rate (per cent.)...... 9.1 8.9 9.0 Consumer price index increase(2) (per cent.) ...... 0.9 0.9 1.3 Current account balance (Dh billion)...... (34.3) (64.6) (82.4) Current account balance (as % of GDP) ...... (4.5) (8.0) (9.9) Government budget balance(3)(Dh billion) ...... (35.8) (55.8) (63.3) Government budget balance(3) (as % of GDP)...... (4.7) (6.9) (7.6) Total public debt(4)(Dh billion) ...... 354.8 403.5 423.6 Total public debt(4) (as % of GDP) ...... 46.4 50.3 50.8 Exchange rate (Dh per U.S.$)...... 8.357 8.577 8.627 Exchange rate (Dh per B) ...... 11.171 11.106 11.071

Notes: (1) Preliminary data. (2) Period average to period average. Index based upon prices of 478 items in 17 urban areas. Inflation, as measured by the CPI, increased by 2.55 per cent. in December 2012 compared to December 2011. (3) Excluding privatisation receipts. (4) Public debt comprises consolidated general Government debt (which in turn comprises the domestic and external debt of the central Government, debt of certain administrative public establishments and debt of local authorities) and external debt of state-owned enterprises. It excludes Government debt held by social security funds. Sources: HCP and Ministry of Economy and Finance

In August 2012, the IMF and the Government agreed an SDR 4.117 billion (approximately U.S.$6.2 billion) Precautionary and Liquidity Line (the PLL) to be provided by the IMF. The PLL is intended to ensure that the Kingdom has the necessary resources in the event of a further economic shock, including fluctuations in oil prices and the potential impact of the economic downturn in Europe and the Eurozone crisis, as well as to reinforce confidence in the Moroccan economy. The PLL has a duration of 24 months, and it remains unused to date. In September 2013, the IMF concluded its second review under the PLL. The IMF reported that the Moroccan authorities had taken significant actions to strengthen their fiscal framework and reduce the impact of world commodity price fluctuations on the budget and that the authorities remain committed to achieving a fiscal deficit of 5.5 per cent. of GDP in 2013. The IMF also concluded that the short-term outlook for Morocco is improving with real GDP growth likely to exceed 5 per cent. in 2013 and the country experiencing improving fiscal and external positions, stable reserves and strong capital inflows to date in 2013. The IMF also noted that the banking sector continued to be resilient as a result of prudent regulation by the central bank.

MOROCCO’S RATINGS Morocco’s long-term debt is rated BBB- with stable outlook by Fitch and BBB- with negative outlook by S&P. Morocco also has a senior secured rating of Ba1 with negative outlook from Moody’s. According to Fitch, the absence of progress in subsidy reforms, any inability to correct the large central government and current account deficits, further erosion in international reserves and a material weakening of economic performance in the face of external shocks would all be ratings negative while over the longer term reforms that allow improvements in social indicators that are a relative weakness compared with peers (such as youth unemployment and poverty) would support Morocco’s ratings. According to S&P, Morocco’s ratings could be lowered if the fiscal and current accounts do not narrow significantly and sustainably, social pressures escalate to a degree that jeopardises political stability or

108 impedes coherent reforms or Morocco’s economic performance is materially harmed by a weakening external economic environment. S&P suggest that Morocco’s ratings could stabilise if the government implemented reforms that lastingly reduce the twin deficits and reduce the country’s external debt ratios, while maintaining social peace and political stability. According to Moody’s, any failure by the government to follow through with its announcements regarding subsidy and public pension reforms would likely lead to negative rating action. Other factors that could negatively impact the rating include would be a deeper and longer lasting recession in Europe that impacts Morocco’s growth perspectives and external accounts and a sharp escalation of social and political tensions with a negative impact on the authorities’ ability to deliver on fiscal and economic reforms. On the other hand, the implementation of measures to arrest the deterioration in the public finances and reversal of the rising trend in the debt ratio would support the return of the outlook to stable.

109 BANKING INDUSTRY AND REGULATION IN MOROCCO

OVERVIEW Until 2005, banking activities in Morocco were regulated under a banking law passed in 1993 which placed the supervision and control of the Moroccan banking system in the hands of the central bank, Bank Al-Maghrib, and of the Ministry of Economy and Finance, together with a number of consultative bodies. In 2006, a new banking law (the Banking Law) introduced a number of reforms, including strengthening the supervisory powers of Bank Al-Maghrib, extending the application of the Banking Law to all institutions engaged in banking and financial activities, increasing depositors’ and borrowers’ protections and redefining the roles of a number of consultative bodies, including the National Monetary and Savings Council. In March 2006, a new central bank law (the Central Bank Law) was published in the official gazette, promulgating a new charter for Bank Al-Maghrib and granting it a larger degree of autonomy.

BANK AL-MAGHRIB Bank Al-Maghrib was established in 1959. Its responsibilities and powers include: . the exclusive power to issue currency in Morocco; . the control and management of the foreign currency reserves of Morocco; . the power to formulate and implement monetary policy; . the power to issue licences to, and remove licences from, banks operating in Morocco; . the authority to supervise the operations and financial condition of Moroccan banks and financing companies, including through the establishment of capital adequacy, credit ratios and liquidity co-efficients; and . the authority to oversee payment systems in Morocco. The Governor of Bank Al-Maghrib, who is not appointed for any fixed term, is the head of Bank Al-Maghrib. The Central Bank Law introduced the following principal amendments: . it increased Bank Al-Maghrib’s autonomy by, among other measures, making the maintenance of price stability its primary objective and creating an independent board of directors, whose members must include professionals known for their competence in financial or economic matters and who may not be removed prior to the expiration of their respective terms except for cause. The Director of the Treasury is a member of the board of directors but has no vote on monetary policy decisions; . it restricted the Treasury from borrowing from Bank Al-Maghrib, except in exceptional circumstances and within statutorily-prescribed limits; and . it mandated the withdrawal of Bank Al-Maghrib from the capital and representation on the boards of directors of various financial institutions in order to eliminate potential conflicts with Bank Al-Maghrib’s supervisory authority over such institutions. Bank Al-Maghrib has a variety of monetary policy instruments available to it, including the imposition on commercial banks of interest-bearing reserve requirements, auction and repurchase agreements, open market operations and foreign exchange swaps.

THE MOROCCAN BANKING SYSTEM Overview In addition to Bank Al-Maghrib and the Caisse de De´poˆ t et de Gestion (CDG), which is a Government owned financial institution established to centralise and manage long-term savings and ensure that these funds are invested in assets that are profitable to the country’s economic development, Morocco’s banking system comprises 19 commercial banks and six commercial banks in the offshore banking centre of Tangier. In addition, the wider financial system includes insurance companies, consumer credit companies, mutual funds, financing companies, including leasing companies and brokerage houses authorised to operate on the Casablanca Stock Exchange (the CSE), microfinance associations and cash transfer intermediation companies.

110 The table below shows the aggregate statement of financial position of commercial banks operating in Morocco as at the dates indicated. As at 31 December 2010 2011 2012 (Dh million) Assets Cash in hand, central banks, treasury and post office ...... 36,512.8 33,708.3 28,484.7 Claims on credit institutions and similar...... 115,857.5 113,760.6 110,938.5 Customer loans ...... 552,558.4 613,938.8 649,704.1 Factoring claims...... 1,063.4 3,452.3 6,667.2 Trading and investment securities ...... 88,779.0 116,733.6 147,179.6 Other assets...... 18,973.7 13,846.0 15,694.0 Investment securities ...... 25,476.4 25,471.4 29,116.1 Shareholdings and similar assets...... 26,606.8 28,893.1 30,494.6 Subordinated claims...... 1,357.0 1,355.6 1,356.2 Leases and lettings ...... 550.4 695.8 813 Intangible assets ...... 3,889.2 4,326.9 4,653.0 Tangible assets...... 13,790.9 14,753.0 15,547.5 Total assets...... 885,616.0 970,935.3 1,040,648.4 Liabilities and capital Central banks, treasury and post office giro.... 0.1 1.2 2.8 Amounts owed to credit institutions and similar...... 59,226.1 90,150.9 119,591.6 Customer deposits...... 647,852.4 677,248.1 696,640.1 Issued debt securities...... 48,472.0 62,707.7 66,841.3 Other liabilities...... 23,410.2 26,363.5 30,888.8 Provisions for losses and expenses ...... 3,129.4 4,357.7 5,932.1 Subsidies, assigned public funds and special guarantee funds...... 4,174.4 3,050.4 2,817.3 Subordinated debts ...... 20,073.9 21,610.4 22,724.8 Revaluation differential...... 0.4 0.4 409.8 Reserves and share premiums...... 48,225.2 51,732.3 59,269.4 Capital...... 20,073.9 21,531.2 22,585.3 Non paid up capital ...... (77.0) (48.0) (340.0) Retained earnings...... 1,267.3 2,173.0 3,404.2 Before allocation of net profit...... (5.3) (3.6) (6.8) Net profit for the period ...... 9,719.0 1,060.1 9,890.5 Total liabilities and capital ...... 885,616.0 970,935.3 1,040,648.4

Source: Bank Al-Maghrib

Government stakes in banks The Government controls significant stakes in three banks: . it indirectly controls 71.2 per cent. of the share capital of Cre´dit Immobilier et Hoˆtelier (CIH), which primarily provides credit in the housing sector; . it directly and indirectly controls 85 per cent. of the share capital of Cre´dit Agricole du Maroc (CAM), which primarily provides credit to the agricultural sector; and . it controls directly and indirectly 13.3 per cent. of the share capital of Banque Centrale Populaire, which is a full-service bank and focuses on financing of small- and medium-sized businesses and providing banking services to Moroccan residents abroad. Two other financial institutions are wholly owned owned by the Government: CDG (which administers public sector funds) and Al-Barid Bank (which is a national savings institution).

111 In order to increase access to banking services and leverage the Post Office’s nationwide network, the Government opened Al-Barid Bank on 8 June 2010. Al-Barid Bank aims to facilitate access to banking for all Moroccans, particularly those in lower income categories. To further this aim, Al-Barid Bank’s stated objective is to have six million customers (up from approximately four million at 31 December 2012) by 2016.

Key banking sector statistics The table below shows certain key statistics for the Moroccan banking industry as at 31 December in each of 2009, 2010, 2011 and 2012. 2009 2010 2011 2012 Customer deposits(1) (Dh billion)...... 598 619 650 662 Customer loans(1) (Dh billion)...... 577 624 687 709 Loans to deposits(1) (per cent.) ...... 87.5 92.4 97.5 101.6 Return on equity(2) (per cent.) ...... 15.2 14.2 13.4 11.8 Tier 1 ratio(3) (per cent.) ...... 9.6 9.6 9.8 10.2 Total capital ratio(3) (per cent.)...... 12.0 12.7 12.4 12.9 Non-performing loan ratio(1) (per cent.)...... 5.75 5.02 4.84 4.96

Notes: (1) Excluding Al Barid Bank. Source: Moroccan Banks’ Association. (2) Source: Bank Al-Maghrib (for 2009 to 2011) and Moroccon Banks’ Association (for 2012). (3) Source: Bank Al-Maghrib

Prudential requirements There has been a continuing reform and modernisation programme of prudential requirements, which has accelerated in recent years in order to meet the capital adequacy ratio requirements set forth in Basel II and Basel III. According to Bank Al-Maghrib, Moroccan banks comply with Basel II capital adequacy ratio requirements, which have been mandatory since June 2007. The minimum capital adequacy ratio required by Bank Al-Maghrib, which was 8 per cent. until 2007, was increased to 10 per cent. in 2008 and to 12 per cent. in June 2013. The most recent increase is intended to help prepare Moroccan banks for Basel III. Banks are also subject to a minimum liquidity requirement to maintain short-term liquid assets to cover in full all of their short-term obligations. In addition, the risk ratio for lending to any one borrower or group of borrowers, which was set at 7 per cent. of shareholders equity in 1992, was increased to 10 per cent. in 1996 and to 20 per cent. in 2000. Banks are also required to ensure that their total risk exposure to any one borrower or group of borrowers does not exceed 20 per cent. Consumer credit companies must also maintain a minimum capitalisation of Dh 50 million (increased from Dh 20 million in 2011).

Banking system deregulation Since the 1990s, Bank Al-Maghrib has implemented reforms aimed at improving the effectiveness of the banking sector in promoting savings and allocating financial resources. These reforms include the phasing out of banks’ mandatory holdings and the full liberalisation of interest rates, which resulted in increased competition between banks. As a result, lending rates have generally decreased in recent years and were on average 6.20 per cent. in December 2012. Also, Morocco’s commercial banks are subject to increased competition from foreign banks, and customers may access non-bank financial instruments through the CSE and money-market instruments, such as treasury bonds and commercial paper.

Reserve requirements A legal reserve requirement for banks of up to 4 per cent. of demand deposits exists (except for deposits in accounts denominated in foreign currencies or in convertible dirham). This reserve requirement was set at 10 per cent. from 1992 until the end of 2002, when it was increased to 14 per cent. and then to 16.5 per cent. in September 2003 in order to absorb excess liquidity in the banking system. It was subsequently reduced five times, as a result of the global financial crisis, between January 2008 and 1 April 2010, when it was set at 6 per cent. In April 2011, the reserve requirement was abolished for certain savings accounts. In September 2012, the reserve requirement ratio was reduced to 4 per cent.

112 Since February 1996, interest rates on loans have been freely negotiable. Banks are now simply required to publish a prime lending rate. In addition, a foreign exchange market was established in June 1996. Under this regime, banks have been authorised to conduct foreign currency transactions among themselves and with their clients in dirham or any other convertible currency.

Non-performing loans Banks are required to classify non-performing loans according to risk criteria in three categories, which were defined in a 1993 Bank Al-Maghrib Circular, as amended in 2002: . pre-doubtful claims; . doubtful claims; and . compromised claims, and to cover them by provisions of 20 per cent., 50 per cent. and 100 per cent., respectively. As at 31 December 2012, non-performing loans amounted to Dh 35.3 billion, as compared to Dh 33.3 billion as at 31 December 2011, an increase of Dh 2 billion, or 6.0 per cent. Non-performing loans represented 4.9 per cent. of the total outstanding credit granted by all banks in 2012 and 4.85 per cent. in 2011. Excluding provisions, non-performing loans represented 1.5 per cent. of the total outstanding credit granted by all banks in 2011. Non-performing loans were covered by provisions up to 70 per cent. and 69 per cent. in 2010 and 2011, respectively.

Treatment of financial institutions in difficulty The Banking Law provides a procedure for the treatment of financial institutions in difficulty, which departs from normal procedures of conciliatory settlement and rehabilitation, as provided in the Moroccan Commercial Code. If a financial institution is not in compliance with administrative provisions or the Banking Law, or is otherwise in financial difficulty, the Governor of Bank Al-Maghrib may nominate an interim administrator to prepare a report outlining the nature, origin and seriousness of the institution’s difficulties, as well as the measures likely to ensure its rehabilitation, its partial or total disposal, or its liquidation. In the event of a court-ordered winding-up of the financial institution, the Governor of Bank Al-Maghrib will nominate liquidators. During the liquidation period, the institution in question will remain under the control of Bank Al-Maghrib. The Government has participated in the financial restructuring of Cre´dit Immobilier et Hoˆtelier (CIH), Banque Nationale pour le De´veloppement Economique (BNDE) and Cre´dit Agricole du Maroc (CAM). Each of these restructurings took place in the period from 2000 to 2009. CIH was created in 1967 as a specialised finance institution for the financing of real estate activities in the tourism sector, before being transformed into a commercial bank in 1986. CIH’s financial difficulties following the first Gulf War led to a restructuring plan being put in place by the monetary authorities, CIH and its main shareholders (which included the Government). The plan included a capital increase of Dh 1.85 billion, the provisioning of non-performing loans, the improvement of risk management systems and the introduction of new strategic investors. A restructuring plan was implemented in relation to BNDE in 2003, which was partially funded by the Government. This included the sale of its domestic loan portfolio to CDG, a wholly owned Government institution, the repayment of its external borrowings, the sale of its shareholdings mostly to CDG and the sale of both its local branches and its subsidiary to Caisse Nationale de Cre´dit Agricole. The Government spent approximately Dh 2 billion over the 2003-2007 period on the restructuring of BNDE. CAM was created in 1961 as a public entity with the objective of financing the agricultural sector. As a result of variations in climatic conditions, CAM experienced financial difficulties between 1998 and 2000, which led to a capital injection from the Government and loans of Dh 9 billion owed by customers to CAM were rescheduled. Further restructuring measures were subsequently taken, including a Dh 1 billion recapitalisation programme which was completed in 2008 and in December 2009, the Government participated in a capital increase in an amount of Dh 300 million, which resulted in an overall reduction in the percentage shareholding of the Government. The Government does not have a specific policy for intervening in financial institutions in difficulty. Any such intervention would be considered a last resort according to an agreement in respect of the management of financial crises signed by the Government, Bank Al-Maghrib and the Conseil De´ontologique des Valeurs Mobilie`res in June 2012.

113 A working group of representatives from the same parties are also collaborating on a project to reform and clarify the law applicable to the deposit insurance scheme in the Kingdom.

Proposed new banking legislation New banking legislation is currently in draft form and under consideration by the Moroccan Government Council. If and when the draft legislation is approved by the Government Council, it will be forwarded to the Parliament for discussion and a vote. The draft legislation currently contemplates: . the introduction of a participatory banking (or Islamic banking) system, with relevant participation banking principles, activities and contracts (such as , ijara, musharaka and mudaraba) being expressly contemplated in the draft legislation. The draft legislation also anticipates the Shari’a compliance of participatory banks’ activities being subject to the supervision of a national Shari’a committee as well as an internal Shari’a compliance department; . the introduction of additional risk prevention and management measures, including the establishment of a new supervisory body to assess financial system risks and revisions to applicable insolvency provisions and the rules of the deposit guarantee fund; and . a strengthening of the supervision of credit institutions, including micro-finance associations, offshore banks, funds transfer companies and financial conglomerates. In addition, the draft legislation contemplates additional powers for the Central Bank to enable more effective supervision of banks’ compliance with applicable anti-money laundering and terrorism funding laws and regulations.

114 TAXATION The following is a general description of certain Moroccan, Luxembourg and EU tax considerations relating to the Notes. It does not purport to be a complete analysis of all tax considerations relating to the Notes whether in those countries or elsewhere. Prospective purchasers of Notes should consult their own tax advisers as to the consequences under the tax laws of the country in which they are resident for tax purposes and the tax laws of Morocco, Luxembourg and the EU of acquiring, holding and disposing of Notes and receiving payments of interest, principal and/or other amounts under the Notes. This summary is based upon the law as in effect on the date of this Prospectus and is subject to any change in law that may take effect after such date. Also investors should note that the appointment by an investor in Notes, or any person through which an investor holds Notes, of a custodian, collection agent or similar person in relation to such Notes in any jurisdiction may have tax implications. Investors should consult their own tax advisers in relation to the tax consequences for them of any such appointment.

MOROCCO The following section describes the principal tax consequences of an investment in the Notes by a person or entity that is not resident in Morocco. This summary is not a comprehensive description of all of the tax considerations that may be relevant to a decision to make an investment in the Notes. Each investor should consult its own tax advisers concerning the tax considerations applicable to its particular situation. This summary is based upon laws and relevant interpretations thereof in effect as of the date of this Prospectus, all of which are subject to change, possibly with a retroactive effect. In addition, it does not describe any tax considerations: (a) arising under the laws of any taxing jurisdiction other than Morocco; or (b) applicable to a resident of Morocco. As used in this section, a non-resident individual is a person who does not have his permanent home (or domicile) in Morocco, who does not have the centre of his economic interest in Morocco and who is present in Morocco for less than 183 days in any period of 365 days, and a non-resident entity is a legal entity which has neither its registered office (seat) nor a in Morocco. A Noteholder will not become resident in Morocco for Moroccan income tax purposes merely by acquiring Notes.

Interest Under current Moroccan laws and regulations, interest payment under the Notes to non-resident individuals or non-resident entities is subject to Moroccan withholding tax at a rate of 10 per cent. Such withholding tax is the final tax for a non-resident individual or entity and no further declaration is required. If a double taxation treaty is in effect between Morocco and the residence country of the holder of the Notes, it may provide for the application of a different rate of taxation. Each investor should consult its own tax advisers concerning the tax considerations applicable to its particular situation taking into account the existence or not of a double taxation treaty signed between Morocco and such investor’s country of residence.

Capital gains Unless otherwise specified in a double taxation treaty signed between Morocco and the country of residence of the holder of the Notes, for Moroccan tax purposes, a capital gain derived from the disposal of Notes issued by a Moroccan entity is considered sourced in Morocco, and therefore subject to taxation in Morocco. A non-resident individual or non-resident entity will be subject to Moroccan capital gains tax only by virtue of realising a capital gain on the Notes issued by the Moroccan entity.

Non-resident entity Under current Moroccan laws and regulations, the capital gain made by a non-resident entity from the disposal of the Notes is taxed in Morocco at a rate of 30 per cent. This tax is subject to a declaration in Morocco, it is the responsibility of the non-resident entity to file a tax return and to pay the applicable tax no later than 30 days after the month of sale.

Non-resident individual Under current Moroccan laws and regulations, the capital gain made by a non-resident individual from the disposal of the Notes is subject to tax levied at a rate of 20 per cent. A is applicable to

115 the capital gain or the portion thereof corresponding to a sale price less or equal to Dh 30,000. As the Notes are not registered in an account with a Moroccan financial intermediary, it is the responsibility of the seller to file a tax return and to pay the applicable tax by no later than 31 March of the calendar year following the date of sale.

Double taxation treaties If a double taxation treaty is in effect between Morocco and the residence country of the holder of the Notes, it may provide for the application of a different rate of taxation aimed at eliminating or reducing double taxation. Each investor should consult its own tax advisers concerning the tax considerations applicable to its particular situation taking into account the existence or not of a double taxation treaty signed between Morocco and such investor’s country of residence. The double taxation treaties signed between Morocco and the following countries clarify that taxation of capital gains arising from the disposal of Notes issued by a Moroccan entity shall not be chargeable in Morocco:

Arab Maghreb Union France Lebanon Poland Switzerland Austria Germany Luxembourg* Portugal Syria Bahrain Hungary Qatar Belgium India Malta Romania United Arab Emirates (UAE) Bulgaria Netherlands Russia United Kingdom (UK) Canada Ireland Norway Senegal United States of America (USA)** China Italy Oman South Korea Denmark Kuwait Spain

(*) The double taxation treaty signed with Luxembourg is not applicable in the case of ‘‘holding companies’’ within the meaning of the Luxembourg law. (**) The double taxation treaty signed with the United States of America provides exceptions to the general rule only in some cases. However, a non-resident individual that has been a resident of Morocco at any point of time should consult his own tax advisers concerning the tax considerations applicable to his particular situation.

Inheritance taxes No Moroccan inheritance or similar tax will be payable by a Noteholder who is a non-resident of Morocco.

Stamp duties No stamp, registration or similar duties or taxes will be payable in Morocco by Noteholders on the creation, offering, issue and delivery of the Notes.

EU SAVINGS TAX DIRECTIVE Under EC Council Directive 2003/48/EC on the taxation of savings income, each Member State is required to provide to the tax authorities of another Member State details of payments of interest or other similar income paid by a person within its jurisdiction to, or collected by such a person for, an individual resident or certain limited types of entity established in that other Member State; however, for a transitional period, Austria and Luxembourg may instead apply a withholding system in relation to such payments, deducting tax at rates rising over time to 35 per cent. The transitional period is to terminate at the end of the first full fiscal year following agreement by certain non-EU countries to the exchange of information relating to such payments. A number of non-EU countries, and certain dependent or associated territories of certain Member States, have adopted similar measures (either provision of information or transitional withholding) in relation to payments made by a person within its jurisdiction to, or collected by such a person for, an individual resident or certain limited types of entity established in a Member State. In addition, the Member States have entered into provision of information or transitional withholding arrangements with certain of those dependent or associated territories in relation to payments made by a person in a Member State to, or collected by such a person for, an individual resident or certain limited types of entity established in one of those territories.

116 On 13 November 2008, the European Commission published a proposal for amendments to this Directive, which included a number of suggested changes which, if implemented, would broaden the scope of the requirements described above. The European Parliament approved an amended version of this proposal on 24 April 2009. Investors who are in any doubt as to their position should consult their professional advisers.

LUXEMBOURG The following is a general description of certain Luxembourg tax considerations relating to the Notes. It specifically contains information on taxes on the income from the Notes withheld at source and provides an indication as to whether the Issuer assumes responsibility for the withholding of taxes at source. It does not purport to be a complete analysis of all tax considerations relating to the Notes, whether in Luxembourg or elsewhere. Prospective purchasers of the Notes should consult their own tax advisers as to which countries’ tax laws could be relevant to acquiring, holding and disposing of the Notes and payments of interest, principal and/or other amounts under the Notes and the consequences of such actions under the tax laws of Luxembourg. This summary is based upon the law as in effect on the date of this Prospectus. The information contained within this section is limited to withholding taxation issues, and prospective investors should not apply any information set out below to other areas, including (but not limited to) the legality of transactions involving the Notes. All payments of interest and principal by the Luxembourg Paying Agent under the Notes can be made free and clear of any withholding or deduction for or on account of any taxes of whatsoever nature imposed, levied, withheld, or assessed by Luxembourg or any political subdivision or taxing authority thereof or therein, in accordance with the applicable Luxembourg law, subject however to: (i) the application of the Luxembourg law of 21 June 2005 implementing the European Union Savings Directive (Council Directive 2003/48/EC) and providing for the possible application of a withholding tax (15 per cent. from 1 July 2005 to 30 June 2008, 20 per cent. from 1 July 2008 to 30 June 2011 and 35 per cent. from 1 July 2011) on interest paid to certain non Luxembourg resident investors (individuals and certain types of entities called ‘‘residual entities’’) in the event of the Issuer appointing a paying agent in Luxembourg within the meaning of the above-mentioned directive (see ‘‘—EU Savings Tax Directive’’ above); (ii) the application as regards Luxembourg resident individuals of the Luxembourg law of 23 December 2005 which has introduced a 10 per cent. final withholding tax on savings income (that is, with certain exemptions, savings income within the meaning of the Luxembourg law of 21 June 2005 implementing the European Union Savings Directive). This law should apply to savings income accrued as from 1 July 2005 and paid as from 1 January 2006. Responsibility for the withholding of tax in application of the above-mentioned Luxembourg laws of 21 June 2005 and 23 December 2005 is assumed by the Luxembourg paying agent within the meaning of these laws and not by the Issuer.

117 SUBSCRIPTION AND SALE Citigroup Global Markets Limited, BNP Paribas, London branch, Barclays Bank PLC and BMCE Capital (the Joint Lead Managers) have, in a subscription agreement dated 26 November 2013 (the Subscription Agreement) and made between the Issuer and the Joint Lead Managers upon the terms and subject to the conditions contained therein, jointly and severally agreed to subscribe for the Notes at their issue price of 98.947 per cent. of their principal amount less a combined management and underwriting commission. The Issuer has agreed to reimburse the Joint Lead Managers for certain expenses incurred in connection with the management of the issue of the Notes. The Joint Lead Managers are entitled in certain circumstances to be released and discharged from their obligations under the Subscription Agreement prior to the closing of the issue of the Notes.

DUBAI INTERNATIONAL Each Joint Lead Manager has represented and agreed that it has not offered and will not offer the Notes to any person in the Dubai International Financial Centre unless such offer is: (a) an Exempt Offer in accordance with the Markets Rules 2012 of the Dubai Financial Services Authority (the DFSA); and (b) made only to persons who meet the Professional Client criteria set out in Rule 2.3.2 of the DFSA Conduct of Business Module.

KINGDOM OF BAHRAIN Each Joint Lead Manager has represented, warranted and undertaken that it has not offered or sold, and will not offer or sell any Notes except on a private placement basis to persons in Bahrain who are ‘‘accredited investors’’. For this purpose, an ‘‘accredited investor’’ means: (a) an individual holding financial assets (either singly or jointly with a spouse) of U.S.$1,000,000 or more; (b) a company, partnership, trust or other commercial undertaking which has financial assets available for investment of not less than U.S.$1,000,000; or (c) a government, supranational organisation, central bank or other national monetary authority or a state organisation whose main activity is to invest in financial instruments (such as a state pension fund)

STATE OF QATAR Each Joint Lead Manager has represented, warranted and undertaken that it has not offered or sold, and will not offer or sell or deliver, directly or indirectly, any Notes in the State of Qatar, except: (a) in compliance with all applicable laws and regulations of the State of Qatar; and (b) through persons or corporate entities authorised and licensed to provide investment advice and/or engage in brokerage activity and/or trade in respect of foreign debt financing instruments in the State of Qatar.

UNITED ARAB EMIRATES (EXCLUDING THE DUBAI INTERNATIONAL FINANCIAL CENTRE) Each Joint Lead Manager has represented and agreed that the Notes have not been and will not be offered, sold or publicly promoted or advertised by it in the United Arab Emirates other than in compliance with any laws applicable in the United Arab Emirates governing the issue, offering and sale of securities.

FRANCE Each of the Joint Lead Managers has represented and agreed that it has not offered or sold and will not offer or sell, directly or indirectly, any Notes to the public in France and it has not distributed or caused to be distributed and will not distribute or cause to be distributed to the public in France, this Prospectus or any other offering material relating to the Notes and such offers, sales and distributions have been and will be made in France only to (a) persons providing investment services relating to portfolio management for the account of third parties (personnes fournissant le service d’investissement de gestion de portefeuille pour compte de tiers), and/or (b) qualified investors (investisseurs qualifie´s) acting for their

118 own account, as defined in, and in accordance with, Articles L.411-1, L.411-2 and D.411-1 to D411-3 of the French Code mone´taire et financier.

KINGDOM OF MOROCCO Each Joint Lead Manager has represented, warranted and agreed that it has not offered or sold, and will not offer and sell, directly or indirectly, any Notes to the public in the Kingdom of Morocco, and that it will not distribute this Prospectus or any other offering material relating to the Notes to the public in the Kingdom of Morocco, other than as required under article 16-1 of Moroccan law 1-93-212 of 21 September 1993, as amended. The Issuer has represented, warranted and agreed that it has not offered and will not offer, directly or indirectly, any Notes to the public in the Kingdom of Morocco.

REPUBLIC OF ITALY The offering of the Notes has not been registered with the Commissione Nazionale per le Societa`ela Borsa (CONSOB) pursuant to Italian securities legislation. Each Joint Lead Manager has represented and agreed that any offer, sale or delivery of the Notes or distribution of copies of this Prospectus or any other document relating to the Notes in the Republic of Italy will be effected in accordance with all Italian securities, tax and exchange control and other applicable laws and regulations. Any such offer, sale or delivery of the Notes or distribution of copies of this Prospectus or any other document relating to the Notes in the Republic of Italy must be: (i) made by an investment firm, bank or financial intermediary permitted to conduct such activities in the Republic of Italy in accordance with Legislative Decree No. 58 of 24 February 1998, CONSOB Regulation No. 16190 of 29 October 2007 and Legislative Decree No. 385 of 1 September 1993 (in each case as amended from time to time); and (ii) in compliance with any other applicable laws and regulations or requirement imposed by CONSOB or any other Italian authority.

UNITED KINGDOM Each Joint Lead Manager has represented, warranted and undertaken that: (a) it has only communicated or caused to be communicated and will only communicate or cause to be communicated an invitation or inducement to engage in investment activity (within the meaning of Section 21 of the FSMA) received by it in connection with the issue or sale of the Notes in circumstances in which Section 21(1) of the FSMA does not apply to the Issuer; and (b) it has complied and will comply with all applicable provisions of the FSMA with respect to anything done by it in relation to the Notes in, from or otherwise involving the United Kingdom.

HONG KONG Each Joint Lead Manager has represented, warranted and undertaken that: (i) it has not offered or sold and will not offer or sell in Hong Kong, by means of any document, any Notes other than: (a) to ‘‘professional investors’’ as defined in the Securities and Futures Ordinance (Cap. 571) (the SFO) of Hong Kong and any rules made under the SFO; or (b) in other circumstances which do not result in the document being a ‘‘prospectus’’ as defined in the Companies Ordinance (Cap. 32) (the CO) of Hong Kong or which do not constitute an offer to the public within the meaning of the CO; and (ii) it has not issued or had in its possession for the purposes of issue, and will not issue or have in its possession for the purposes of issue, whether in Hong Kong or elsewhere, any advertisement, invitation or document relating to the Notes, which is directed at, or the contents of which are likely to be accessed or read by, the public of Hong Kong (except if permitted to do so under the securities laws of Hong Kong) other than with respect to Notes which are or are intended to be disposed of only to persons outside Hong Kong or only to ‘‘professional investors’’ as defined in the SFO and any rules made under the SFO.

119 JAPAN The Notes have not been and will not be registered under the Financial Instruments and Exchange Act of Japan (Act No.25 of 1948, as amended, the FIEA) and each Joint Lead Manager has represented and agreed that it will not offer or sell any Notes, directly or indirectly, in Japan or to, or for the benefit of, any resident of Japan (as defined under Item 5, Paragraph 1, Article 6 of the Foreign Exchange and Foreign Trade Act (Act No. 228 of 1949, as amended)), or to others for reoffering or resale, directly or indirectly, in Japan or to, or for the benefit of, a resident of Japan, except pursuant to an exemption from the registration requirements of, and otherwise in compliance with, the FIEA and any other applicable laws, regulations and ministerial guidelines of Japan.

SINGAPORE This Prospectus has not been registered as a prospectus with the Monetary Authority of Singapore under the Securities and Futures Act, Cap. 289 of Singapore (the SFA) and, accordingly, the Notes may not be offered or sold, nor may the Notes be the subject of an invitation for subscription or purchase, nor may this Prospectus or any other document or material in connection with the offer or sale, or invitation for subscription or purchase of the Notes be circulated or distributed, whether directly or indirectly, to any person in Singapore other than (a) to an institutional investor (as defined in Section 4A of the SFA) pursuant to Section 274 of the SFA, (b) to a relevant person (as defined in Section 275(2) of the SFA) pursuant to Section 275(1) of the SFA, or any person pursuant to an offer referred to in Section 275(1A) of the SFA and in accordance with the conditions specified in Section 275 of the SFA or (c) otherwise pursuant to, and in accordance with the conditions of, any other applicable provision of the SFA. Where the Notes are acquired by persons who are relevant persons specified in Section 276 of the SFA, namely: (a) a corporation (which is not an accredited investor (as defined in Section 4A of the SFA)) the sole business of which is to hold investments and the entire share capital of which is owned by one or more individuals, each of whom is an accredited investor; or (b) a trust (where the trustee is not an accredited investor) whose sole purpose is to hold investments and each beneficiary of the trust is an individual who is an accredited investor, the shares, debentures and units of shares and debentures of that corporation or the beneficiaries’ rights and interest (howsoever described) in that trust shall not be transferred within six months after that corporation or that trust has acquired the Notes pursuant to an offer made under Section 275 of the SFA except: (i) to an institutional investor (under Section 274 of the SFA) or to a relevant person as defined in Section 275(2) of the SFA, or any person pursuant to an offer that is made on terms that such shares, debentures and units of shares and debentures of that corporation or such rights or interest in that trust are acquired at a consideration of not less than S$200,000 (or its equivalent in a foreign currency) for each transaction, whether such amount is to be paid for in cash or by exchange of securities or other assets and further for corporations, in accordance with the conditions specified in Section 275(1A) of the SFA; (ii) where no consideration is or will be given for the transfer; (iii) where the transfer is by operation of law; (iv) as specified in Section 276(7) of the SFA; or (v) as specified in Regulation 32 of the Securities and Futures (Offers of Investments) (Shares and Debentures) Regulations 2005 of Singapore.

UNITED STATES OF AMERICA The Notes have not been and will not be registered under the Securities Act and may not be offered or sold within the United States or to, or for the account or benefit of, U.S. persons except in certain transactions exempt from the registration requirements of the Securities Act. Terms used in this paragraph have the meanings given to them by Regulation S. The Notes are subject to U.S. tax law requirements and may not be offered, sold or delivered within the United States or its possessions or to a United States person, except in certain transactions permitted by U.S. tax regulations. Terms used in this paragraph have the meanings given to them by the United States Internal Revenue Code and regulations thereunder.

120 Each Joint Lead Manager has agreed that, except as permitted by the Subscription Agreement, it will not offer, sell or deliver the Notes, (a) as part of their distribution at any time or (b) otherwise, until 40 days after the later of the commencement of the offering and the issue date of the Notes, within the United States or to, or for the account or benefit of, U.S. persons, and that it will have sent to each dealer to which it sells Notes during the distribution compliance period a confirmation or other notice setting forth the restrictions on offers and sales of the Notes within the United States or to, or for the account or benefit of, U.S. persons. In addition, until 40 days after commencement of the offering, an offer or sale of Notes within the United States by a dealer (whether or not participating in the offering) may violate the registration requirements of the Securities Act.

GENERAL Each Joint Lead Manager has represented, warranted and agreed that it has complied and will comply with all applicable laws and regulations in each country or jurisdiction in which it purchases, offers, sells or delivers Notes or possesses, distributes or publishes this Prospectus or any other offering material relating to the Notes. Persons into whose hands this Prospectus comes are required by the Issuer and the Joint Lead Managers to comply with all applicable laws and regulations in each country or jurisdiction in which they purchase, offer, sell or deliver Notes or possess, distribute or publish this Prospectus or any other offering material relating to the Notes, in all cases at their own expense.

121 GENERAL INFORMATION

AUTHORISATIONS 1. The creation and issue of the Notes has been authorised by a resolution of the Ordinary General Assembly of Shareholders of the Issuer dated 4 June 2013. 2. The Terms and Conditions of the Notes have been approved by a resolution of the Board of Directors of the Issuer dated 25 November 2013. 3. The Foreign Exchange Office (Office des Changes) has approved all the payments to be made by the Issuer outside Morocco in relation to the Notes, by a letter dated 27 May 2013.

LISTING 4. Application has been made to the CSSF to approve this document as a prospectus. Application has also been made to the Luxembourg Stock Exchange for the Notes to be admitted to trading on the Luxembourg Stock Exchange’s regulated market and to be listed on the Official List of the Luxembourg Stock Exchange with effect from 27 November 2013. The Luxembourg Stock Exchange’s regulated market is a regulated market for the purposes of the Markets in Financial Instruments Directive (Directive 2004/39/EC). The Issuer estimates that the total expenses related to admission of the Notes to trading will be approximately A9,350.

CLEARING SYSTEMS 5. The Notes have been accepted for clearance through Euroclear and Clearstream, Luxembourg (which are the entities in charge of keeping the records). 6. The address of Euroclear is Euroclear Bank SA/NV, 1 Boulevard du Roi Albert II, B-1210 Brussels, Belgium and the address of Clearstream, Luxembourg is Clearstream Banking, 42 Avenue JF Kennedy, L-1855 Luxembourg.

LEGAL AND ARBITRATION PROCEEDINGS 7. There are no governmental, legal or arbitration proceedings (including any such proceedings which are pending or threatened, of which the Issuer is aware), which may have, or have had during the 12 months prior to the date of this Prospectus, a significant effect on the financial position or profitability of the Issuer and the Group.

SIGNIFICANT/MATERIAL CHANGE 8. Since 31 December 2012 there has been no material adverse change in the prospects of the Issuer and the Group nor any significant change in the financial or trading position of the Issuer and the Group.

AUDITORS 9. The consolidated financial statements of the Issuer have been audited for the years ended 31 December 2011 and 2012 by Ernst & Young, independent accountants and Fidaroc Grant Thornton independent accountants. The audit report in respect of the consolidated financial statements of the Issuer for the year ended 31 December 2011 were qualified; see ‘‘Presentation of financial and other information’’. The registered address of Ernst & Young is 37, Bd Abdellatif Ben Kaddour – 20 050 Casablanca and the registered address of Fidaroc Grant Thornton is 47, rue Allal Ben Abdallah – 20 000 Casablanca.

DOCUMENTS ON DISPLAY 10. Copies of the following documents (together with English translations thereof) may be inspected during normal business hours at the offices of the Issuer at the registered address for a period of 12 months from the date of this Prospectus: (a) the constitutive documents of the Issuer; (b) drafts (subject to modification) of the Fiscal Agency Agreement and the Deed of Covenant; and (c) the audited consolidated financial statements of the Issuer for the years ended 31 December 2011 and 31 December 2012, and as shall be delivered in accordance with Condition 5(a).

122 YIELD 11. On the basis of the issue price of the Notes of 98.947 per cent. of their principal amount, the gross real yield of the Notes (assuming an inflation rate of 0 per cent.) is 6.5 per cent. on an annual basis. This is not an indication of future yield.

ISIN AND COMMON CODE 12. The Notes have been accepted for clearance through Euroclear and Clearstream, Luxembourg. The ISIN is XS0998123037 and the common code is 099812303.

INFORMATION IN MOROCCO 13. The Issuer has complied with article 16-1 of Moroccan law 1-93-212 of 21 September 1993, as amended.

123 FINANCIAL STATEMENTS AND AUDITORS’ REPORTS Contents Limited review attestation and consolidated financial statements of the Issuer as at and for the six month period ended 30 June 2013...... F-2 Auditors’ report and consolidated financial statements of the Issuer as at and for the year ended 31 December 2012...... F-41

F-1 This is a free translation into English of the auditor’s limited review report on the interim consolidated financial position issued in French and it is provided solely for the convenience of English-speaking users. This report should be read in conjunction with and construed in accordance with Moroccan law and professional auditing standards applicable in Morocco. AUDITOR’S LIMITED REVIEW REPORT ON THE INTERIM CONSOLIDATED FINANCIAL POSITION AS AT JUNE 30, 2013

We have conducted a limited review of the interim consolidated financial position of the Banque Marocaine du Commerce Extérieur and its subsidiaries (BMCE Bank Group), which comprise the consolidated balance sheet, the consolidated income statement, the consolidated statement of comprehensive income, the consolidated statement of changes in equity and the consolidated cash flow statement, as well as a selection of explanatory notes for the period from January 1st, 2013 to June 30, 2013. This interim consolidated financial position shows a consolidated shareholders’ equity of KMAD 17.917.889 including a consolidated net income of KMAD 876.140.

We conducted our limited review in accordance with professional standards applicable in Morocco. Those standards require that we plan and perform the limited review to obtain moderate assurance about whether the interim consolidated financial statements mentioned in the first paragraph above are free from material misstatement. A limited review consists essentially of making inquiries of the personnel of the company and applying analytical procedures to the financial data; it gives a lower assurance level than an audit. We did not perform an audit, accordingly, we do not express an audit opinion. Based on our limited review, nothing has come to our attention that causes us to believe that these half- yearly consolidated financial statements do not give a true and fair view of the results of the operations for the first half year and of the financial position and the assets of the BMCE Bank Group as at June 30, 2013, in accordance with the International Accounting Standards (IAS/IFRS).

Casablanca, September 20th, 2013

Faïçal MEKOUAR Bachir TAZI Partner Partner

F-2 I. CONSOLIDATED BALANCE SHEET, CONSOLIDATED INCOME STATEMENT, consolidated STATEMENT of comprehensive INCOME, STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY, CASH FLOW STATEMENTS AND SUMMARY OF ACCOUNTING POLICIES 1.1. Consolidated Balance Sheet The consolidated financial statements at 30 June 2013 were approved by the board of directors on 20 september 2013.

Balance Sheet Assets NOTES june-13 dec-12 Cash and amounts due from central banks and post office banks 9 842 349 9 922 200 Financial assets at fair value through profit or loss 4.1 28 353 972 34 244 677 Derivatives used for hedging purposes - - Available-for-sale financial assets 4.2 3 227 109 2 795 923 Loans and receivables due from credit institutions 4.3 17 245 764 21 396 946 Loans and receivables due from customers 4.4 140 508 316 138 808 778 Remeasurement adjustment on interest rate risk hedged assets - - Held-to-maturity financial assets 4.6 11 260 752 10 518 941 Current tax assets 4.7 258 850 215 856 Deferred tax assets 4.7 383 548 310 849 Accrued income and other assets 4.8 5 489 026 4 938 775 Non current assets held for sale - - Investment associates 4.9 427 535 406 928 Investment property 4.10 769 158 614 160 Property, plant and equipment 4.10 5 362 592 5 131 528 Intangible assets 4.10 771 669 751 455 Goodwill 4.11 832 470 832 470 TOTAL ASSETS 224 733 110 230 889 486 (In thousand MAD)

LIABILITIES & SHAREHOLDERS EQUITY NOTES June-13 dec-12 Due to Central Banks and Post Office Banks 67 402 67 382 Financial liabilities at fair value through profit or loss 4.1 1 614 1 614 Derivatives used for hedging purposes - - Due to credit institutions 4.3 32 598 936 34 228 166 Due to customers 4.4 147 359 029 144 650 757 Debt securities 4.5 11 695 325 14 014 898 Remeasurement adjustment on interest rate risk hedged portfolios - - Current tax liabilities 4.7 199 158 36 296 Deferred tax liabilities 4.7 1 048 459 983 149 Accrued expenses and other liabilities 4.8 7 533 972 13 210 127 Liabilities related to non-current assets held for sale - - Technical reserves of insurance companies - - Provisions for contingencies and charges 4.12 500 860 523 235 Subsidies, assigned public funds and special guarantee funds - - Subordinated debts 4.5 5 810 466 4 760 333 TOTAL DEBTS 206 815 221 212 475 957 Capital and related reserves 12 100 684 11 981 368 Consolidated reserves - - - Attributable to parent 1 246 769 1 269 541 - Non-controlling interests 3 606 028 3 516 000 Unrealized or deferred gains or losses, attributable to parent 105 499 86 129 Unrealized or deferred gains or losses, non-controlling interests -17 231 -18 970 Net Income - Attributable to parent 595 289 923 152 - Non-controlling interests 280 851 656 309 TOTAL CONSOLIDATED SHARE HOLDERS’S EQUITY 17 917 889 18 413 529 TOTAL 224 733 110 230 889 486 (In thousand MAD)

F-3 1.2. CONSOLIDATED INCOME STATEMENT

NOTES june-13 june-12 + Interests and similar income 5 620 006 5 254 568 - Interests and similar expense -2 353 901 -2 275 228 Net Interest income 2.1 3 266 105 2 979 340 + Fees received and commission income 1 046 386 915 761 - Fees paid and commission expense -226 798 -143 418 Net fee income 2.2 819 588 772 343 +/- Net gains or losses on financial instruments at fair value through profit or loss 2.3 282 694 271 001 +/- Net gains or losses on available for sale financial assets 2.4 166 437 137 140 Income from market transactions 449 131 408 141 + Other banking revenues 2.5 487 629 378 421 - Other banking expenses 2.5 -174 455 -158 318 Net Banking Income 4 847 998 4 379 927 - General Operating Expenses -2 519 412 -2 328 814 - Allowances for depreciation and amortization PE and intangible assets -323 716 -274 995 Gross Operating Income 2 004 870 1 776 118 - Cost of Risk 2.6 -875 174 -1 046 198 Operating Income 1 129 696 729 920 +/- Share in net income of companies accounted for by equity method 36 331 31 916 +/- Net gains or losses on other assets 2.7 -4 487 -16 921 +/- Change in goodwill - - Pre-tax earnings 1 161 540 744 915 +/- Corporate income tax 2.8 -285 400 -219 803 Net income 876 140 525 112 Non-controlling interests 280 851 164 923 Net income attributable to parent 595 289 360 189 Earnings per share (in MAD) 3,3 2,1 Diluted Earnings per share (in MAD) 3,3 2,1 (In thousand MAD)

1.3. CONSOLIDATED STATEMENT OF COMPREHENSIVE InCOME

june-13 june-12 Net income 876 140 525 112 Currency translation adjustment -3 039 -1 936 Reevaluation of available for sale financial assets 24 148 82 378 Reevaluation of hedging instruments Reevaluation of fixed assets Actuarial gains and losses on defined plans Proportion of gains and losses directly recognised in shareholders equity on companies consolidated under equity method Total gains and losses directly recognised in shareholders equity 21 109 80 442 Net income and gains and losses directly recognised in shareholders equity 897 249 605 554 attributable to parent 614 659 459 606 Non-controlling interests 282 590 145 948 (In thousand MAD)

F-4 1.4. STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY

Reserves Unrealised Shareholder’s Reserves Non- Share Treasury & or deferred Equity related to controlling Total Capital stock consolidated gains or attributable stock interests earnings losses to parent Ending balance of Shareholder’s Equity 1 719 634 8 731 500 0 1 895 284 82 186 12 428 604 3 956 693 16 385 297 12.31.2011 Change in the accounting methods Ending Balance of adjusted Shareholder’s Equity 1 719 634 8 731 500 0 1 895 284 82 186 12 428 604 3 956 693 16 385 297 12.31.2011 Operations on capital 75 000 1 455 234 151 846 1 682 080 45 587 1 727 667 Share-based payment plans 0 0 Operations on treasury stock 0 0 0 0 Dividends -530 954 -530 954 -329 259 -860 213 Net income 923 152 923 152 656 309 1 579 461 PP&E and intangible assets : Revaluations and 0 disposals (A) 0 0 Financial instruments : change in fair Value and 2 254 2 254 695 2 949 transfer to earnings (B) Currency translation adjustments : Changes and 1 689 1 689 1 689 transfer to earnings (C) Unrealized or deferred gains or losses (A)+ (B) 0 3 943 3 943 695 4 638 + (C) Change in the scope of consolidation -251 218 -251 218 -187 508 -438 726 Others 4 583 4 583 10 822 15 405 Ending Balance of Shareholder’s Equity 1 794 634 10 186 734 0 2 192 693 86 129 14 260 190 4 153 339 18 413 529 12.31.2012 Impact of changes in accounting methods Ending Balance of adjusted Shareholder’s Equity 1 794 634 10 186 734 0 2 192 693 86 129 14 260 190 4 153 339 18 413 529 12.31.2012 Operations on capital 119 316 -105 186 14 130 100 063 114 193 Share-based payment plans 0 0 Operations on treasury stock 0 0 0 Dividends -596 876 -596 876 -341 412 -938 288 Net income 595 289 595 289 280 851 876 140 PP&E and intangible assets: Revaluations and disposals (E) 0 0 Financial instruments: change in fair Value and 22 409 22 409 1 739 24 148 transfer to earnings (F) Currency translation adjustments: Changes and -3 039 -3 039 -3 039 transfer to earnings (G) Unrealized or deferred gains or losses (E)+ (F) 0 19 370 19 370 1 739 21 109 + (G) Change in the scope of consolidation (*) -254 982 -254 982 -326 620 -581 602 Others 11 120 11 120 1 688 12 808 Ending Balance of adjusted Shareholder’s Equity 1 794 634 10 306 050 0 1 842 058 105 499 14 048 241 3 869 648 17 917 889 06.30.2013 (In thousand MAD) (*) : Change in scope in 2012/2013 This primarily relates to the impact from the acquisition of new stakes in BOA and the acquisitions made by BOA Group.

F-5 1.5. CASH FLOW STATEMENTS AT 30 JUNE 2013

1.5.1. Cash Flow Statement june-13 dec-12 june-12 Pre-tax net income 1 161 540 2 150 943 744 915 +/- Net depreciation/amortization expense on property, plant, and equipment and intangible assets 1 643 226 3 054 760 1 483 097 +/- Impairment of goodwill and other non- current assets 0 0 0 +/- Impairment of financial assets -19 056 109 300 29 606 +/- Net allowances for provisions 592 166 665 231 939 009 +/- Share of earnings in subsidiaries accounted for by equity method -41 545 -55 215 -31 916 +/- Net loss (income) from investing activities -435 601 -990 901 -420 746 +/- Net loss (income) from financing activities 0 0 0 +/- Other movements -528 220 195 374 -116 826 Non monetary items included in pre-tax net income and other adjustments 1 210 970 2 978 549 1 882 224 +/- Cash flows related to transactions with credit institutions -1 290 280 13 027 531 9 530 466 +/- Cash flows related to transactions with customers -737 510 -14 814 540 -14 115 328 +/- Cash flows related to transactions involving other financial assets and liabilities 5 313 867 -2 343 396 -423 774 +/- Cash flows related to transactions involving non financial assets and liabilities -5 969 757 3 581 880 2 931 019 +/- Taxes paid -213 844 -602 893 -271 580 Net Increase (Decrease) in cash related to assets and liabilities generated by operating activities -2 897 524 -1 151 418 -2 349 197 Net Cash Flows from Operating Activities -525 014 3 978 074 277 942 +/- Cash flows related to financial assets and equity investments -842 609 -1 093 317 -435 023 +/- Cash flows related to investment property -107 -286 -284 +/- Cash flows related to PP&E and intangible assets -790 633 -528 089 -555 044 Net Cash Flows from Investing Activities -1 633 348 -1 621 692 -990 351 +/- Cash flows related to transactions with shareholders -1 031 226 1 096 982 -893 348 +/- Cash flows generated by other financing activities -1 371 329 1 949 786 519 848 Net Cash Flows from Financing Activities -2 402 554 3 046 768 -373 500 Effect of movements in exchange rates on cash and equivalents -57 542 57 761 -6 490 Net Increase in Cash and equivalents -4 618 459 5 460 911 -1 092 399 Beginning Balance of Cash and Equivalents 16 098 912 10 638 001 10 638 001 Net Balance of cash accounts and accounts with central banks and post office banks 9 854 817 6 391 958 6 391 958 Net Balance of demand loans and deposits- credit institutions 6 244 095 4 246 043 4 246 043 Ending Balance of Cash and Equivalents 11 480 453 16 098 912 9 545 602 Net Balance of cash accounts and accounts with central banks and post office banks 9 699 147 9 854 817 7 389 560 Net Balance of demand loans and deposits- credit institutions 1 781 305 6 244 095 2 156 042 Net increase in cash and equivalents -4 618 458 5 460 911 -1 092 399 (In thousand MAD) 1.5.2. Cash Flow Statement by Geographical Region morocco EUROPE AFRICA Pre-tax net income 624 147 42 714 494 679 +/- Net depreciation/amortization expense on property, plant, and equipment and intangible assets 1 483 731 9 989 149 506 +/- Impairment of goodwill and other non- current assets -45 590 142 45 448 +/- Impairment of financial assets -19 056 0 0 +/- Net allowances for provisions 282 959 10 601 298 606 +/- Share of earnings in subsidiaries accounted for by equity method -10 535 0 -31 010 +/- Net loss (income) from investing activities -312 820 -3 884 -118 897 +/- Net loss (income) from financing activities 0 0 0 +/- Other movements -545 979 1 942 15 817 Non monetary items included in pre-tax net income and other adjustments 832 710 18 790 359 470 +/- Cash flows related to transactions with credit institutions -1 208 414 387 915 -469 781 +/- Cash flows related to transactions with customers -2 048 883 126 670 1 184 703 +/- Cash flows related to transactions involving other financial assets and liabilities 5 316 917 17 334 -20 384 +/- Cash flows related to transactions involving non financial assets and liabilities -5 981 516 -89 530 101 289 +/- Taxes paid -107 241 0 -106 603 Net Increase (Decrease) in cash related to assets and liabilities generated by operating activities -4 029 138 442 390 689 224 Net Cash Flows from Operating Activities -2 572 279 503 894 1 543 371 +/- Cash flows related to financial assets and equity investments -492 432 0 -350 177 +/- Cash flows related to investment property -107 0 0 +/- Cash flows related to PP&E and intangible assets -332 538 -6 404 -451 690 Net Cash Flows from Investing Activities -825 077 -6 404 -801 867 +/- Cash flows related to transactions with shareholders -505 102 -27 474 -498 650 +/- Cash flows generated by other financing activities 87 670 -722 694 -736 305 Net Cash Flows from Financing Activities -417 432 -750 168 -1 234 955 Effect of movements in exchange rates on cash and equivalents -415 -35 313 -21 813 Net Increase in Cash and equivalents -3 815 203 -287 991 -515 264 Beginning Balance of Cash and Equivalents 6 635 988 551 901 8 911 023 Net Balance of cash accounts and accounts with central banks and post office banks 3 764 729 -12 496 6 102 585 Net Balance of demand loans and deposits- credit institutions 2 871 259 564 397 2 808 438 Ending Balance of Cash and Equivalents 2 820 785 263 910 8 395 758 Net Balance of cash accounts and accounts with central banks and post office banks 2 690 198 -26 793 7 035 742 Net Balance of demand loans and deposits- credit institutions 130 587 290 703 1 360 015 Net increase in cash and equivalents -3 815 203 -287 991 -515 264 F-6 (In thousand MAD) 1.6. SUMMARY OF ACCOUNTING POLICIES APPLIED BY Elimination of intragroup balances and transactions THE GROUP Intragroup balances arising from transactions between 1.6.1. Applicable accounting standards consolidated companies, and the transactions themselves, including income, expenses and dividends, are eliminated. The first consolidated financial statements to be prepared Profits and losses arising from intragroup sales of assets by BMCE Bank Group in accordance with international are eliminated, except where there is an indication that the accounting standards (IFRS) were those for the period ended asset sold is impaired. 30 June 2008 with an opening balance on 1 January 2007. Translation of financial statements prepared in foreign The consolidated financial statements of BMCE Bank currencies Group have been prepared in accordance with international accounting standards (International Financial Reporting BMCE Bank Group’s consolidated financial statements are Standards – IFRS), as approved by the IASB. prepared in . The financial statements of companies whose functional currency is not the dirham are translated The Group did not choose to early-adopt the new standards, using the closing rate method. Under this method, all amendments, and interpretations adopted by the IASB which assets and liabilities, both monetary and non-monetary, may be applied retrospectively. The standards in question are translated using the spot exchange rate at the balance are IFRS 10 “Consolidated Financial Statements”, IFRS 11 sheet date. Income and expenditures are translated at the “Joint Arrangements”, IFRS 12 “Disclosure of involvement average rate for the period. with Other Entities”, IFRS 13 “Fair Value Measurement” and the amendment to IAS 19 “Employment Benefits”, replacing d. Business combinations and measurement of goodwill the Corridor Method. For the IASB, these standards are Cost of a business combination effective for the periods starting on or after 1 January 2013. The cost of a business combination is measured as the It is worth noting that application of the standards IFRS 10, aggregate fair value of assets acquired, liabilities incurred 11, 12 and 13 is not deemed to have any material impact or assumed and equity instruments issued by the acquirer on the Group’s financial statements. Analysis is currently in consideration for control of the acquired company. Costs being undertaken to estimate the impact from applying the attributable to the acquisition are recognised through amendment to IAS 19. income. 1.6.2. Consolidation principles Allocating the cost of a business combination to the a. Scope of consolidation assets acquired and liabilities incurred or assumed The scope of consolidation includes all Moroccan and The Group allocates, at the date of acquisition, the cost of foreign entities in which the Group directly or indirectly a business combination by recognising those identifiable holds a stake. assets, liabilities and contingent liabilities of the acquired company which meet the criteria for fair value recognition BMCE Bank Group includes within its scope of consolidation at that date. all entities, whatever their activity, in which it directly or indirectly holds 20% or more of existing or potential voting Any difference between the cost of the business combination rights. In addition, it consolidates entities if they meet the and the Group’s share of the net fair value of the identifiable following criteria: assets, liabilities and contingent liabilities is recognised under goodwill. • The subsidiary’s total assets exceed 0.5% of the parent company’s; Goodwill • The subsidiary’s net assets exceed 0.5% of the parent At the date of acquisition, goodwill is recognised as an company’s; asset. It is initially measured at cost, that is, the difference • The subsidiary’s banking income exceeds 0.5% of the between the cost of the business combination over the parent company’s ; Group’s share of the net fair value of the identifiable assets, • “Cumulative” thresholds which ensure that the combined liabilities and contingent liabilities. total of entities excluded from the scope of consolidation The Group has adopted from 2012 the “full goodwill” does not exceed 5% of the consolidated total. method for new acquisitions. This method consists of measuring goodwill based on the difference between the b. Consolidation methods cost of the business combination and minority interests The method of consolidation adopted (fully consolidated over the fair value of the identifiable assets, liabilities and or accounted for under the equity method) will depend on contingent liabilities. whether the Group has full control, joint control or exercises It is worth noting that the Group has not restated business significant influence. combinations occurring before 1 January 2008, the date of At 30 june 2013, no Group subsidiary was jointly controlled. first-time adoption of IFRS, in accordance with IFRS 3 and as permitted under IFRS 1. c. Consolidation rules Measurement of goodwill The consolidated financial statements are prepared using uniform accounting policies for reporting like transactions Following initial recognition, goodwill is measured at cost and other events in similar circumstances. less cumulative impairment. F-7 In accordance with IAS 36, impairment tests must be charges) that are regarded as an adjustment to the effective conducted whenever there is any indication of impairment interest rate on the loan. that a unit may be impaired and at least once a year to Loans and receivables are subsequently measured at ensure that the goodwill recognised for each CGU does not amortised cost. The income from the loan, representing need to be written down. interest plus transaction costs and fees and commission At 30 June 2013, the Group conducted impairment test to included in the initial value of the loan, is calculated using ensure that the carrying amount of cash-generating units the effective interest method and taken to income over the was still lower than the recoverable amount. life of the loan. The recoverable amount of a cash-generating unit is the b. Securities higher of the net fair value of the unit and its value in use. Classification of securities Fair value is the price that is likely to be obtained from Securities held by the Group are classified under one of selling the CGU in normal market conditions. three categories. Value in use is based on an estimate of the current value of Financial assets at fair value through P&L future cash flows generated by the unit’s activities as part of the Bank’s market activities: This category includes financial assets and liabilities held for trading purposes. They are measured at fair value at • If the subsidiary’s recoverable amount is more than the balance sheet date under “financial assets at fair value the carrying amount, then there is no reason to book an through P&L”. Changes in fair value are recognised in the impairment charge; income statement under “Net gains or losses on financial • If the subsidiary’s recoverable amount is less than instruments at fair value through P&L”. the carrying amount, the difference is recognised as an It is worth noting that the Group has not designated, impairment charge. It will be allocated to goodwill as a on initial recognition, non-derivative financial assets priority and subsequently to other assets on a pro-rata and liabilities at fair value through income using option basis. available under IAS 39. The Bank has employed a variety of methods for measuring Held-to-maturity financial assets CGU value in use depending on the subsidiary. These methods are based on assumptions and estimates: Held-to-maturity financial assets include securities with fixed or determinable payments and fixed maturity • A revenue-based approach, commonly known as the securities that the Group has the intention and ability to “dividend discount model”, is a standard method used by hold until maturity. the banking industry. The use of this method depends on the subsidiary’s business plan and will value the subsidiary Assets in this category are accounted for at amortised based on the net present value of future dividend payments. cost using the effective interest method, which builds in These flows are discounted at the cost of equity. amortisation of premium and discount, corresponding to the difference between the asset’s purchase price and • The “discounted cash flow method” is a standard method redemption value and acquisition costs, if material. They for measuring firms in the services sector. It is based on may be written down, if applicable, in the event of issuer discounting available cash flows at the weighted average default. Income earned from this category of assets is cost of capital. included in “Interest and similar income” in the income Step acquisitions statement. In accordance with revised IFRS 3, the Group does not Available-for-sale financial assets calculate additional goodwill on step acquisitions once Available-for-sale financial assets are fixed income and control has been obtained. floating rate securities other than those classified under the In particular, in the event that the Group increases its two previous categories. percentage interest in an entity which is already fully Assets included in the available-for-sale category are consolidated, the difference at acquisition date between initially recognised at fair value plus transaction costs, if the cost of acquiring the additional share and share material. At the balance sheet date, they are re-measured already acquired in the entity is recognised in the Group’s at fair value, with changes in fair value shown on a separate consolidated reserves. line in shareholders’ equity. Upon disposal, these unrealised 1.6.3. Financial assets and liabilities gains and losses are transferred from shareholders’ equity to the income statement, where they are shown on the line a. Loans and receivables “Net gains or losses on available-for-sale financial assets”. The same applies in the event of impairment. Loans and receivables include loans provided by the Group. Income recognised using the effective interest method for Loans and receivables are initially measured at fair value fixed income available-for-sale securities is recorded under or equivalent, which, as a general rule, is the net amount “Interest and similar income” in the income statement. disbursed at inception including directly attributable origination costs and certain types of fees or commission Dividend income from floating rate securities is recognised (syndication commission, commitment fees and handling under “Net gains or losses on available-for-sale financial F-8 assets” when the Group’s right to receive payment is financial assets which are not individually material. established. If the Group determines that there is no objective evidence Temporary acquisitions and sales of impairment to a financial asset, whether considered individually material or not, it includes this asset within a Repurchase agreements group of financial assets with a similar credit risk profile Securities subject to repurchase agreements are recorded in and subjects them to an impairment test on a collective the Group’s balance sheet in their original category. basis. The corresponding liability is recognised in the under At an individual level, objective evidence that a financial “Borrowings” as a liability on the balance sheet. asset is impaired includes observable data relating to the following events: Securities temporarily acquired under reverse repurchase agreements are not recognised in the Group’s balance • The existence of accounts which are past the due date; sheet. The corresponding receivable is recognised under • Any knowledge or evidence that the borrower is experiencing “Loans and receivables”. significant financial difficulty, such that a risk can be Securities lending and borrowing transactions considered to have arisen, regardless of whether the borrower has missed any payments; Securities lending transactions do not result in de- recognition of the lent securities while securities borrowing • Concessions in respect of the credit terms granted to the transactions result in recognition of a debt on the liabilities borrower that the lender would not have considered had the side of the Group’s balance sheet. borrower not been experiencing financial difficulty. Date of recognition of securities transactions Impairment is measured as the difference between the carrying amount and the present value, discounted at the Securities recognised at fair value through income or asset’s original effective interest rate, of those components classified under held-to-maturity or available-for-sale (principal, interest, collateral, etc.) regarded as recoverable. financial assets are recognised at the trade date. The Group’s portfolio doubtful loan portfolio is categorised Regardless of their classification (recognised as loans and as follows : receivables or debt), temporary sales of securities as well as sales of borrowed securities are initially recognised at the Individually material loans : Each of these loans is reviewed settlement date. individually in order to estimate recovery payments and determine recovery schedules. Impairment under IFRS These transactions are carried on the balance sheet until relates to the difference between amounts owing and the the Group’s rights to receive the related cash flows expire net present value of expected recovered payments. or until the Group has substantially transferred all the risks and rewards related to ownership of the securities. Non-individually material loans : Loans not reviewed on an individual basis are segmented into different risk c. Foreign currency transactions categories having similar characteristics and are assessed Monetary assets and liabilities denominated in foreign using a statistical model, based on historical data, of annual currencies recovery payments by each risk category. Monetary assets and liabilities denominated in foreign Counterparties not showing any evidence of impairment currencies are translated into the functional currency of These loans are risk-assessed on a portfolio basis with similar the relevant Group entity at the closing rate. Translation characteristics. This assessment draws upon historical data, differences are recognized in the income statement, except adjusted if necessary to reflect circumstances prevailing at for those arising from financial instruments earmarked as a the balance sheet date. This analysis enables the Group to cash flow hedge or a net foreign currency investment hedge, identify counterparty groups which, as a result of events which are recognised in shareholders’ equity. occurring since inception of the loans, have collectively d. Impairment and restructuring of financial assets acquired a probability of default at maturity that provides objective evidence of impairment of the entire portfolio Impairment of loans and receivables and held-to-maturity but without it being possible at that stage to allocate the financial assets, provisions for financing and guarantee impairment to individual counterparties. commitments. This analysis also estimates the loss relating to the At each balance sheet date, the Group determines whether portfolios in question, taking account of trends in the there is objective evidence of impairment to a financial economic cycle during the assessment period. asset or group of financial assets as a result of an event or several events occurring after initial recognition, whether Based on the experienced judgement of the Bank’s divisions this event affects the amount or timing of future cash flows or Risk Division, the Group may recognise additional and whether the consequences of the event can be reliably collective impairment provisions in respect of an economic measured. sector or geographical region affected by exceptional economic events. In this regard the Group established The Group assesses, in the first instance, whether there watch lists of the accounts at risk. is objective evidence of impairment on an individual basis for individually material assets or on a collective basis for Provisions and provision write-backs are recognised in the F-9 income statement under “Cost of risk” while the theoretical • The sum, at the renegotiation date, of the renegotiated income earned on the carrying amount of impaired loans contractual repayments discounted at the effective interest is recognised under “Interest and similar income” in the rate. The discount, net of amortisation, is recognised by income statement. reducing loan outstandings through income. Amortisation will be recognised under net banking income. Impairment of available-for-sale financial assets e. Issues of debt securities Impairment of “available-for-sale financial assets”, which mainly comprise equity instruments, is recognised through Financial instruments issued by the Group are qualified income if there is objective evidence of impairment as a as debt instruments if the Group company issuing the result of one or more events occurring since acquisition. instruments has a contractual obligation to deliver cash or The Group has determined two types of non-cumulative another financial asset to the holder of the instrument. The impairment for equity instruments recorded under same applies if the Group is required to exchange financial “available-for-sale financial assets”. The first one is a assets or liabilities with another entity on terms that significant decline in the security’s price. By “significant” is are potentially unfavourable to the Group, or to deliver a implied a fall of more than 40% from the acquisition price. variable number of the Group’s treasury shares. The second is a prolonged decline, defined as an unrealised In the Group’s case, this concerns certificates of deposit loss over a one-year period. issued by Group banks such as BMCE BANK and BANK For financial instruments quoted on a liquid market, OF AFRICA as well as notes issued by finance companies impairment is determined using quoted prices and, for MAGHREBAIL and SALAFIN. unquoted financial instruments, is based on valuation models. f. Treasury shares Impairment losses taken against equity securities are “Treasury shares” refer to shares issued by the parent company, recognised as a component of net banking income under BMCE Bank SA, or by its fully consolidated subsidiaries. Treasury “Net gains or losses on available-for-sale financial assets” shares held by the Group are deducted from consolidated and may only be reversed through income after these shareholders’ equity regardless of the purpose for which they are securities are sold. Any subsequent decline in fair value held. Gains and losses arising on such instruments are eliminated constitutes an additional impairment loss, recognised in from the consolidated income statement. through income. At 30 june 2013 and at 31 December 2012, the Bank did not In the case of debt instruments, impairment is assessed hold any treasury shares. on the basis of the same criteria applied to loans and receivables, that is, on an individual basis if there is objective g. Derivative instruments evidence of impairment or on a collective basis if there is no All derivative instruments are recognised in the balance evidence of impairment. sheet on the trade date at the trade price and are re- Given the characteristics of its portfolio, the Group is not measured to fair value on the balance sheet date. concerned by debt instruments. Derivatives held for trading purposes are recognised Restructuring of assets classified as “Loans and receivables” “Financial assets at fair value through income” when their An asset classified in “Loans and receivables” is considered fair value is positive and in “Financial liabilities at fair value to be restructured due to the borrower’s financial difficulty through income” when their fair value is negative. when the Group, for economic or legal reasons related to Realised and unrealised gains and losses are recognised the borrower’s financial difficulty, agrees to modify the in the income statement under “Net gains or losses on terms of the original transaction that it would not otherwise financial instruments at fair value through income”. consider, resulting in the borrower’s contractual obligation to the Group, measured at present value, being reduced h. Determining the fair value of financial instruments compared with the original terms. Fair value is defined as the amount for which an asset could At the time of restructuring, a discount is applied to the loan be exchanged, or a liability settled, between knowledgeable, to reduce its carrying amount to the present value of the willing parties in an arm’s length transaction. new expected future cash flows discounted at the original Financial assets classified under “Financial assets at fair effective interest rate. value through income” and “Available-for-sale financial The decrease in the asset value is recognised through assets” are measured at fair value. income under “Cost of risk”. Fair value in the first instance relates to the quoted price if For each loan, the discount is recalculated at the the financial instrument is traded on a liquid market. renegotiation date using original repayment schedules and If no liquid market exists, fair value is determined by using renegotiation terms. valuation techniques. The discount is calculated as the difference between: Depending on the financial instrument, these involve the • The sum, at the renegotiation date, of the original use of data taken from recent arm’s length transactions, the contractual repayments discounted at the effective interest fair value of substantially similar instruments, discounted rate; cash flow models or adjusted book values. F-10 Characteristics of a liquid market include regularly available a period that is considerably shorter than the estimated prices for financial instruments and the existence of real useful life for any residual value to be adopted. arm’s length transactions. This residual value is the amount remaining after deducting Characteristics of an illiquid market include factors such from the acquisition cost all allowable depreciable charges. as a significant decline in the volume and level of market Given the Group’s activity, it has adopted a component- activity, a significant variation in available prices between based approach for property. The option adopted by the market participants or a lack of recent observed transaction Group is a component-based amortised cost method by prices. applying using a component-based matrix established as i. Income and expenses arising from financial assets and a function of the specific characteristics of each of BMCE liabilities Bank Group’s buildings. The effective interest rate method is used to recognise Component-based matrix adopted by BMCE BANK income and expenses arising from financial instruments, which are measured at amortised cost. Head office property Other property Period Share Period Share The effective interest rate is the rate that exactly discounts estimated future cash flows through the expected life of the Structural works 80 55% 80 65% financial instrument or, when appropriate, a shorter period, Fasade 30 15% to the net carrying amount of the asset or liability in the General & balance sheet. The effective interest rate calculation takes technical 20 20% 20 15% into account all fees received or paid that are an integral installations part of the effective interest rate of the contract, transaction Fixtures and 10 10% 10 20% costs, and premiums and discounts. fittings j. Cost of risk Impairment “Cost of risk” includes impairment provisions net of write- The Group has deemed that impairment is only applicable to backs and provisions for credit risk, losses on irrecoverable buildings and, as a result, the market price (independently- loans and amounts recovered on amortised loans as well as assessed valuation) will be used as evidence of impairment. provisions and provision write-backs for other risks such as b. Investment property operating risks. IAS 40 defines investment property as property held to earn k. Offsetting financial assets and liabilities rentals or for capital appreciation or both. An investment A financial asset and a financial liability are offset and property generates cash flows that are largely independent the net amount presented in the balance sheet if, and from the company’s other assets in contrast to property only if, the Group has a legally enforceable right to offset primarily held for use in the production or supply of goods the recognised amounts and intends either to settle on or services. a net basis or to realise the asset and settle the liability The Group qualifies investment property as any non- simultaneously. operating property. 1.6.4. Property plant and equipment and intangible assets BMCE Bank Group has opted for the cost method to value its a. Property, plant and equipment investment property. The method used to value investment property is identical to that for valuing operating property. The Group has opted for the cost model to measure property, plant and equipment and intangible assets. c. Intangible assets It is worth noting that, in application of the option provided Intangible assets are initially measured at cost which is under IFRS 1, the Group has chosen to measure certain equal to the amount of cash or cash equivalent paid or any items of property, plant and equipment at the transition other consideration given at fair value to acquire the asset date at their fair value and use this fair value as deemed at the time of its acquisition or construction. cost at this date. Subsequent to initial recognition, intangible assets are In accordance with IAS 23, borrowing costs directly measured at cost less cumulative amortisation and attributable to the acquisition are included in the acquisition impairment losses. cost of items of property, plant and equipment. The amortisation method adopted reflects the rate at which As soon as they are available for use, items of property, future economic benefits are consumed. plant and equipment are amortised over the asset’s Impairment is recognised when evidence (internal or estimated useful life. external) of impairment exists. Evidence of impairment is Given the character of BMCE Bank Group’s property, plant assesses at each balance sheet date. and equipment, it has not adopted any residual value except Given the character of the intangible assets held, the Group for transport equipment owned by LOCASOM, a subsidiary. considers that the concept of residual value is not relevant In respect of the Group’s other assets, there is neither a in respect of its intangible assets. As a result, residual value sufficiently liquid market nor a replacement policy over has not been adopted. F-11 1.6.5. Leases Operating leases Group companies may either be the lessee or the lessor in a The asset is not recognised in the balance sheet of the lease agreement. lessee. Lease payments made under operating leases are Leases contracted by the Group as lessor are categorised as taken to the lessee’s income statement on a straight-line either finance leases or operating leases. basis over the lease term. a. Lessor accounting 1.6.6. Non-current assets held for sale and discontinued activities Finance leases An asset is classified as held for sale if its carrying amount In a finance lease, the lessor transfers the substantial is obtained through the asset’s sale rather than through its portion of the risks and rewards of ownership of an asset continuous use in the business. to the lessee. It is treated as a loan made to the lessee to finance the purchase of the asset. At 30 june 2013, the Group did not recognise any assets as held for sale or discontinued activities. The present value of the lease payments, plus any residual value, is recognised as a receivable. 1.6.7. Employee benefits The net income earned from the lease by the lessor is equal Classification of employee benefits to the amount of interest on the loan and is taken to the income statement under “Interest and other income”. The a. Short-term benefits lease payments are spread over the lease term and are Short-term benefits are due within twelve months of the allocated to reducing the principal and to interest such that close of the financial year in which employees provided the the net income reflects a constant rate of return on the corresponding services. They are recognised as expenses in outstanding balance. The rate of interest used is the rate the year in which they are earned. implicit in the lease. b. Defined-contribution post-employment benefits Individual and portfolio impairments of lease receivables are determined using the same principles as applied to The employer pays a fixed amount in respect of contributions other loans and receivables. into an external fund and has no other liability. Benefits Operating leases received are determined on the basis of cumulative contributions paid plus any interest and are recognised as An operating lease is a lease under which the substantial expenses in the year in which they are earned. portion of the risks and rewards of ownership of an asset are not transferred to the lessee. c. Defined-benefit post-employment benefits The asset is recognised under property, plant and equipment Defined-benefit post-employment benefits are those in the lessor’s balance sheet and depreciated on a straight- other than defined-contribution schemes. The employer line basis over the lease term. The depreciable amount undertakes to pay a certain level of benefits to former excludes the asset’s residual value. The lease payments employees, whatever the liability’s cover. This liability is are taken to the income statement in full on a straight-line recognised as a provision. basis over the lease term. The Group accounts for end-of-career bonuses as defined- Lease payments and depreciation expenses are taken to the benefit post-employment benefits: these are bonuses paid income statement under “Income from other activities” and on retirement and depend on employees’ length of service. “Expenses from other activities”. d. Long-term benefits b. Lessee accounting These are benefits which are not settled in full within twelve Leases contracted by the Group as lessee are categorised as after the employee rendering the related service. Provisions either finance leases or operating leases. are recognised if the benefit depends on employees’ length Finance leases of service. A finance lease is treated as an acquisition of an asset by The Group accounts for long-service awards as long-term the lessee, financed by a loan. The leased asset is recognised benefits: these are payments made to employees when they in the balance sheet of the lessee at the lower of fair value reach 6 different thresholds of length of service ranging or the present value of the minimum lease payments from 15 to 40 years. calculated at the interest rate implicit in the lease. e. Termination benefits A matching liability, equal to the fair value of the leased asset or the present value of the minimum lease payments, Termination benefits are made as a result of a decision is also recognised in the balance sheet of the lessee. The by the Group to terminate a contract of employment or a asset is depreciated using the same method as that applied decision by an employee to accept voluntary redundancy. to owned assets after deducting the residual value from the The company may set aside provisions if it is clearly amount initially recognised over the useful life of the asset. committed to terminating an employee’s contract of The lease obligation is accounted for at amortised cost. employment. F-12 Principles for Calculation they retain the shares for a specified period. a. Calculation method The expense related to share purchase plans is spread over the vesting period if the benefit is conditional upon the The recommended method for calculating the liability under beneficiary’s continued employment. IAS 19 is the “projected unit credit” method. The calculation is made on an individual basis. The employer’s liability is This expense, booked under “Salaries and employee equal to the sum of individual liabilities. benefits”, with a corresponding adjustment to shareholders’ equity, is calculated on the basis of the plan’s total value, Under this method, the actuarial value of future benefits is determined at the allotment date by the Board of Directors. determined by calculating the amount of benefits due on retirement based on salary projections and length of service at In the absence of any market for these instruments, the retirement date. It takes into consideration variables such financial valuation models are used that take into account as discount rates, the probability of the employee remaining in performance-based criteria relating to the BMCE Bank share service up until retirement as well as the likelihood of mortality. price. The plan’s total expense is determined by multiplying The liability is equal to the actuarial value of future benefits the unit value per option or bonus share awarded by the in respect of past service within the company prior to the estimated number of options or bonus shares acquired at the calculation date. This liability is determined by applying to end of the vesting period, taking into account the conditions the actuarial value of future benefits the ratio of length of regarding the beneficiary’s continued employment. service at the calculation date to length of service at the 1.6.9. Provisions recorded under liabilities retirement date. Provisions recorded under liabilities on the Group’s balance The annual cost of the scheme, attributable to the cost of an sheet, other than those relating to financial instruments additional year of service for each participant, is determined and employee benefits mainly relate to restructuring, by the ratio of the actuarial value of future benefits to the litigation, fines, penalties and tax risks. anticipated length of service on retirement. A provision is recognised when it is probable that an outflow b. Accounting principles of resources providing economic benefits will be required to A provision is recognised under liabilities on the balance settle an obligation arising from a past event and a reliable sheet to cover for all obligations. estimate can be made about the obligation’s amount. The amount of such obligations is discounted in order to Actuarial gains or losses arise on differences related to determine the amount of the provision if the impact of changes in assumptions underlying calculations (early discounting is material. retirement, discount rates etc.) or between actuarial assumptions and what actually occurs (rate of return on A provision for risks and charges is a liability of uncertain pension fund assets etc.) constitute actual difference gains timing or amount. a losses. The accounting standard provides for three conditions when They are amortised through income over the average an entity must recognise a provision for risks and charges: anticipated remaining service lives of employees using the • A present obligation towards a third party ; corridor method. • An outflow of resources is probable in order to settle the The past service cost is spread over the remaining period for obligation; acquiring rights. • The amount can be estimated reliably. The annual expense recognised in the income statement under “Salaries and employee benefits” in respect of 1.6.10. Current and deferred taxes defined-benefit schemes comprises: The current income tax charge is calculated on the basis of • The rights vested by each employee during the period (the the tax laws and tax rates in force in each country in which cost of service rendered); the Group has operations. • The interest cost relating to the effect of discounting the Deferred taxes are recognised when temporary differences obligation ; arise between the carrying amount of an asset or liability in the balance sheet and its tax base. • The expected income from the pension fund’s investments (gross rate of return); A deferred tax liability is a tax which is payable at a future date. Deferred tax liabilities are recognised for all taxable • The amortisation of actuarial gains and losses and past temporary differences other than those arising on initial service costs; recognition of goodwill or on initial recognition of an • The effect of any plan curtailments or settlements. asset or liability for a transaction which is not a business combination and which, at the time of the transaction, has 1.6.8. Share-based payments not impact on profit either for accounting or tax purposes. The Group offers its employees the possibility of A deferred tax asset is a tax which is recoverable at a future participating in share issues in the form of share purchase date. Deferred tax assets are recognised for all deductible plans. temporary differences and unused carry-forwards of tax New shares are offered at a discount on the condition that losses only to the extent that it is probable that the entity in F-13 question will generate future taxable profits against which • Provisions for employee benefits; these temporary differences and tax losses can be offset. • The measurement of provisions for risks and charges. The Group has opted to assess the probability of recovering deferred tax assets. Deferred taxes assets are not recognised if the probability of recovery is uncertain. Probability of recovery is ascertained by the business projections of the companies concerned. 1.6.11. Cash flow statement The cash and cash equivalents balance is composed of the net balance of cash accounts and accounts with central banks and the net balances of sight loans and deposits with credit institutions. Changes in cash and cash equivalents related to operating activities reflect cash flows generated by the Group’s operations, including cash flows related to investment property, held-to-maturity financial assets and negotiable debt instruments. Changes in cash and cash equivalents related to investing activities reflect cash flows resulting from acquisitions and disposals of subsidiaries, associates or joint ventures included in the consolidated group, as well as acquisitions and disposals of property, plant and equipment excluding investment property and property held under operating leases. Changes in cash and cash equivalents related to financing activities reflect the cash inflows and outflows resulting from transactions with shareholders, cash flows related to subordinated debt, bonds and debt securities (excluding negotiable debt instruments). 1.6.12. Use of estimates in the preparation of the financial statements Preparation of the financial statements requires managers of business lines and corporate functions to make assumptions and estimates that are reflected in the measurement of income and expense in the income statement and of assets and liabilities in the balance sheet and in the disclosure of information in the notes to the financial statements. This requires the managers in question to exercise their judgement and to make use of information available at the time of preparation of the financial statements when making their estimates. The actual future results from operations where managers have made use of estimates may in reality differ significantly from those estimates depending on market conditions. This may have a material impact on the financial statements. Those estimates which have a material impact on the financial statements primarily relate to: • Impairment (on an individual or collective basis) recognised to cover credit risks inherent in banking intermediation activities ; Other estimates made by the Group’s management primarily relate to : • Goodwill impairment tests ;

F-14 II. NOTES TO THE INCOME STATEMENT for the PERIOD ended 30 june 2013 2.1. NET INTEREST INCOME Net interest income comprises interest income (expenses) related to customer transactions, interbank transactions, debt securities issued by the Group, the trading portfolio (fixed income securities, repurchase agreements, loan/borrowing transactions and debt securities), available-for-sale financial assets and held-to-maturity financial assets.

30-june-13 30-june-12 Income Expense Net Income Expense Net Customer Items 4 460 990 1 485 645 2 975 345 4 169 163 1 431 331 2 737 832 Deposits, loans and borrowings 4 172 981 1 447 474 2 725 507 3 885 914 1 370 905 2 515 009 Repurchase agreements 38 171 -38 171 60 426 -60 426 Finance leases 288 009 288 009 283 249 283 249 Interbank items 358 480 450 238 -91 758 367 242 475 612 -108 370 Deposits, loans and borrowings 222 345 440 856 -218 511 247 338 450 006 -202 668 Repurchase agreements 136 135 9 382 126 753 119 904 25 606 94 298 Debt securities issued 0 0 0 0 0 0 Cash flow hedge instruments 0 0 0 0 0 0 Interest rate portfolio hedge instruments 0 0 0 0 0 0 Trading book 438 384 418 018 20 366 413 959 368 285 45 674 Fixed income securities 438 384 283 301 155 083 413 959 257 391 156 568 Repurchase agreements 0 0 Loans/borrowings 0 0 Debt securities 0 134 717 -134 717 0 110 894 -110 894 Available for sale financial assets 0 0 Held to maturity financial assets 362 152 362 152 304 204 304 204 Total interest income (expense) 5 620 006 2 353 901 3 266 105 5 254 568 2 275 228 2 979 340

(In thousand MAD)

At 30 june 2013, net interest income rose by 9.63% compared to 30 june 2012 to MAD 3 266 million. This was primarily due to a 7% increase in income from customer loans to MAD 4 461 million versus MAD 4 169 million at 30 june 2012 and a 19% increase in income from held to maturity financial assets to MAD 362 million versus MAD 304 million at 30 june 2012. It is worth noting that the Group has corrected the accounting classification for interest income from debt securities held by BOA Group. In respect of the 2012 financial statements, an amount equal to MAD 215 million was reclassified from the entry “Net gains or losses on financial instruments at fair value” to “Interest and similar income – net interest income” resulting in interest income of MAD 304 million after reclassification versus MAD 88 million prior to reclassification. Net interest income at 30 june 2013 prior to reclassification was MAD 2 763 million and MAD 2 979 million after reclassification as explained above. 2.2. NET FEE INCOME

30-june-13 30-june-12 Income Expense Net Income Expense Net Net fee on transactions 454 155 106 579 347 576 327 420 90 282 237 138 With credit institutions - - With customers 143 289 143 289 131 015 131 015 On custody 70 177 84 960 -14 783 71 424 65 733 5 691 On foreign exchange 240 689 21 619 219 070 124 981 24 549 100 432 On financial instruments and off balance sheet - - Banking and financial services 592 231 120 219 472 012 588 341 53 136 535 205 Income from mutual funds management - - Income from electronic payment services 139 688 19 553 120 135 122 877 18 725 104 152 Insurance - - Other 452 543 100 666 351 877 465 464 34 411 431 053 NET FEE INCOME 1 046 386 226 798 819 588 915 761 143 418 772 343

(In thousand MAD)

Net fee income rose by 6% from MAD 772 million at 30 june 2012 to MAD 819 million at 30 june 2013. This can primarily be explained by a strong increase in fees from foreign exchange activities which rose from MAD 100 million at 30 june 2012 to MAD 219 million at 30 june 2013.

F-15 2.3. NET GAINS ON FINANCIAL INSTRUMENTS AT FAIR VALUE THROUGH profit or loss This entry includes all items of income (excluding interest income and expenses classified under “Net interest income” as described above) relating to financial instruments managed as part of the Group’s trading portfolio. This includes capital gains and losses on disposals, capital gains and losses on mark-to-market accounting and dividends from floating rate securities.

30-june-13 30-june-12 Assets Assets measured under measured under Trading Book Total Trading Book Total the fair value the fair value option option Fixed income and variable income securities 257 047 257 047 305 152 305 152 Derivative instruments 25 647 25 647 -34 151 -34 151 Repurchase agreements Loans Borrowings Remeasurement of interest rate risk hedged portfolios Remeasurement of currency positions TOTAL 282 694 0 282 694 271 001 0 271 001

(In thousand MAD)

2.4. NET GAINS ON AVAILABLE-FOR-SALE FINANCIAL ASSETS The entry comprises: - Dividends and other income from equities and other floating rate securities classified under “Available-for-sale financial assets”; - Capital gains and losses on disposal of fixed and floating rate securities classified under “Available-for-sale financial assets”; - Impairment provisions on floating rate securities classified under “Available-for-sale financial assets”.

30-june-13 30-june-12 Fixed income securities 0 0 Disposal gains and losses Equity and other variable-income securities 166 437 137 140 Dividend income 159 175 154 903 Impairment provisions 51 322 -17 708 Net disposal gains -44 060 -55 TOTAL 166 437 137 140

(In thousand MAD) 2.5. NET INCOME FROM OTHER ACTIVITIES

30-june-13 30-june-12 Income Expense Net Income Expense Net Net income from insurance activities 0 0 Net income from investment property 0 0 0 0 0 0 Net income from assets held under operating leases 125 102 46 839 78 263 118 746 44 571 74 175 Net income from property development activities 0 0 0 0 0 0 Other banking income & expenses 200 720 97 156 103 564 147 409 95 452 51 957 Other operating income 161 807 30 460 131 347 112 266 18 296 93 970 Total net income from other activities 487 629 174 455 313 174 378 421 158 319 220 102

(In thousand MAD)

F-16 2.6. COST OF RISK Cost of risk comprises expenses in respect of credit risks, counterparty risks and litigation inherent in the Group’s banking activity with third parties. Impairment provisions unrelated to such risks are classified under the different entries in the income statement depending on their character. Cost of risk for the period

30-june-13 30-june-12 Impairment provisions -985 406 -1 213 013 Impairment provisions on loans and advances -910 420 -1 148 597 Impairment provisions on held to maturity financial assets (excluding interest rate risks) Provisions on off balance sheet commitments -3 917 -1 423 Other provisions for contingencies and charges -71 069 -62 993 Write back of provisions 271 097 180 243 Write back of impairment provisions on loans and advances 200 115 110 697 Write back of impairment provisions on held to maturity financial assets (excluding interest rate risks) Write back of provisions on off balance sheet commitments 412 823 Write back of other provisions for contingencies and charges 70 570 68 723 Changes in provisions -160 865 -13 429 Losses on counterparty risk on available for sale financial assets (fixed income securities) Losses on counterparty risk held to maturity financial assets Loss on irrecoverable loans and advances not covered by impairment provisions Loss on irrecoverable loans and advances covered by impairment provisions -160 865 13 428 Discount on restructured products Recoveries on amortized loans and advances 0 0 Losses on off balance sheet commitments Other losses Cost of Risk -875 174 -1 046 198 (In thousand MAD)

30-june-13 30-june-12 Net allowances to impairment -714 309 -1 032 770 Recoveries on loans and receivables previously written off Irrecoverable loans and receivables not covered by impairment provisions -160 865 -13 428 Total cost of risk for the period -875 174 -1 046 198 (In thousand MAD) 2.7. NET GAINS ON OTHER ASSETS

30-june-13 30-june-12 PP&E and intangible assets used in operations 0 0 Capital gains on disposals Capital losses on disposals Equity interests Capital gains on disposals 0 0 Capital losses on disposals 0 0 Others -4 487 -16 921 Net Gain/Loss on Other Assets -4 487 -16 921

(In thousand MAD) 2.8 - Income Tax 2.8.1 - Current and deferred tax

30-june-13 30-june-12 Current tax 258 850 272 847 Deferred tax 383 548 377 969 Current and deferred tax assets 642 397 650 816 Current tax 199 158 163 954 Deferred tax 1 048 459 967 348 Current and deferred tax liabilities 1 247 618 1 131 302

(In thousand MAD)

F-17 2.8.2 - Net income tax expense

30-june-13 30-june-12 Current tax expense -330 732 -253 269 Net deferred tax expense 45 332 33 466 Net Corporate income tax expense -285 400 -219 803

(In thousand MAD) 2.8.3 - Effective tax rate

30-june-13 30-june-12 Net income 876 140 525 112 Net corporate income tax expense -285 400 -219 803 Average effective tax rate -32,6% -41,9%

(In thousand MAD) Analysis of effective tax rate

30-june-13 30-june-12 Standard tax rate 37,0% 37,0% Differential in tax rates applicable to foreign entities Reduced tax rate Permanent differences Change in tax rate Deficit carry over

Other items -4,4% 4,9% Average effective tax rate 32,6% 41,9%

(In thousand MAD)

F-18 III. SEGMENT INFORMATION BMCE Bank Group is composed of four core business activities for accounting and financial information purposes : - Banking in Morocco: includes BMCE Bank’s Moroccan business ; - Asset management and Investment banking: includes investment banking (BMCE Capital), securities brokerage (BMCE Capital Bourse) and asset management (BMCE Capital Gestion) ; - Specialised financial services: includes consumer credit (Salafin), leasing (Maghrébail), factoring (Maroc Factoring), recovery (RM Experts) and credit insurance (Euler Hermes Acmar) ; - International activities: includes BMCE International (Madrid), Banque de Développement du Mali, La Congolaise de Banque, BMCE Bank International and Bank Of Africa. 3.1. INCOME BY BUSINESS ACTIVITY

30-june-13 SPECIALISED ACTIVITY IN ASSET INTERNATIONAL FINANCIAL OTHERS TOTAL MOROCCO MANAGEMENT ACTIVITIES SERVICES Net interest Income 1 493 988 2 330 282 859 -2 982 1 489 910 3 266 105 Net fee income 355 321 50 817 2 131 0 411 319 819 588 Net Banking Income 2 106 461 106 777 291 078 77 374 2 266 308 4 847 998 General Operating Expenses & allowances for -1 283 443 -101 479 -84 410 -40 741 -1 333 055 (2 843 128) depreciation and amortization Operating Income 823 019 5 298 206 667 36 633 933 253 2 004 870 Corporate income tax -128 837 -11 560 -43 551 -4 409 -97 043 ( 285 400) Net Earnings Group Share 260 747 35 739 52 401 19 652 226 750 595 289

(In thousand MAD)

30-june-12 SPECIALISED ACTIVITY IN ASSET INTERNATIONAL FINANCIAL OTHERS TOTAL MOROCCO MANAGEMENT ACTIVITIES SERVICES Net interest Income 1 369 286 6 216 271 072 ( 2 881) 1 335 647 2 979 340 Net fee income 331 710 51 835 75 697 0 313 101 772 343 Net Banking Income 1 930 410 84 715 277 360 72 796 2 014 646 4 379 926 General Operating Expenses & allowances for (1 201 970) ( 94 031) ( 77 832) ( 38 460) (1 191 516) (2 603 809) depreciation and amortization Operating Income 728 440 ( 9 316) 199 528 34 336 823 130 1 776 117 Corporate income tax ( 135 691) ( 9 859) ( 41 820) ( 4 483) ( 27 950) ( 219 803) Net Earnings Group Share 156 373 11 502 48 271 18 482 125 561 360 189 (In thousand MAD)

3.2. ASSETS AND LIABILITIES BY BUSINESS ACTIVITY

30-june-13 SPECIALISED ACTIVITY IN ASSET INTERNATIONAL FINANCIAL OTHERS TOTAL MOROCCO MANAGEMENT ACTIVITIES SERVICES Total assets 159 187 684 443 988 8 341 420 120 828 56 639 190 224 733 110 Assets items Available for sale assets 1 371 380 109 938 15 799 25 440 1 704 552 3 227 109 Customer loans 96 553 332 7 859 12 982 161 0 30 964 964 140 508 316 Held to maturity assets 2 390 723 0 27 0 8 870 002 11 260 752 Liabilities & shareholders equity items Customer deposits 102 625 531 0 1 079 751 0 43 653 747 147 359 029 Shareholders equity 13 711 439 107 160 1 130 784 -111 141 3 079 647 17 917 889 (In thousand MAD)

31-dec-12 SPECIALISED ACTIVITY IN ASSET INTERNATIONAL FINANCIAL OTHERS TOTAL MOROCCO MANAGEMENT ACTIVITIES SERVICES Total assets 160 441 588 370 334 14 060 260 170 880 55 846 424 230 889 486 Assets items 0 Available for sale assets 1 312 325 101 008 5 711 25 440 1 351 439 2 795 923 Customer loans 95 425 585 5 824 13 185 602 0 30 191 767 138 808 778 Held to maturity assets 1 790 606 0 27 0 8 728 308 10 518 941 Liabilities & shareholders equity items 0 Customer deposits 102 081 985 0 1 184 435 0 41 384 337 144 650 757 Shareholders equity 13 567 426 104 114 1 213 349 -97 626 3 626 266 18 413 529 (In thousand MAD)

F-19 3.3. BREAKDOWN OF LOANS AND RECEIVABLES Breakdown of loans and receivables to credit institutions by geographical region

30-june-13 31-dec-12 Performing loans NPL(*) Provisions Performing loans NPLS Provisions Morocco 11 268 940 59 838 35 258 13 880 138 59 838 35 258 Europe 1 687 989 0 0 2 083 561 0 0 Subsaharian Africa 4 254 916 12 713 3 374 5 408 667 3 382 3 382 Total 17 211 845 72 551 38 632 21 372 366 63 220 38 640 Allocated debts Provisions Net Value 17 211 845 72 551 38 632 21 372 366 63 220 38 640 (In thousand MAD)

Breakdown of loans and receivables to customers by geographical region

30-june-13 31-dec-12 Performing loans NPL Provisions Performing loans NPLS Provisions Morocco 108 337 266 5 483 719 4 254 613 107 269 792 5 250 297 3 903 078 Europe 2 108 956 108 869 35 041 2 604 230 14 201 12 863 Subsaharian Africa 27 124 746 3 663 395 2 028 981 26 145 245 3 262 008 1 821 054 Total 137 570 968 9 255 983 6 318 635 136 019 267 8 526 506 5 736 995 Allocated debts Provisions Net Value 137 570 968 9 255 983 6 318 635 136 019 267 8 526 506 5 736 995 (In thousand MAD)

F-20 IV. NOTES TO THE BALANCE SHEET for the period ended 30 june 2013 4.1. ASSETS AND LIABILITIES AT FAIR VALUE THROUGH PROFIT OR LOSS Financial assets and liabilities recognised at fair value through income consist of negotiated transactions for trading purposes.

30-june-13 31-dec-12 Assets desig- Assets desig- nated at fair nated at fair Trading book Total Trading book Total value through value through profit or loss profit or loss FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS Negotiable certificates of deposits 7 974 415 0 7 974 415 12 855 398 0 12 855 398 Treasury bills and other eligible for central bank 6 300 836 6 300 836 5 751 851 5 751 851 refinancing Other negotiable certificates of deposits 1 673 579 1 673 579 7 103 547 7 103 547 Bonds 452 132 0 452 132 399 217 0 399 217 Government bonds 0 0 Other bonds 452 132 452 132 399 217 399 217 Equities and other variable income securities 19 915 004 0 19 915 004 20 970 684 0 20 970 684 Repurchase agreements 0 0 0 0 0 0 Loans 0 0 0 0 0 0 To credit institutions To corporate customers To private individual customers Trading Book Derivatives 12 421 0 12 421 19 378 0 19 378 Currency derivatives 11 844 11 844 18 801 18 801 Interest rate derivatives 577 577 577 577 Equity derivatives Credit derivatives Other derivatives TOTAL FINANCIAL ASSETS AT FAIR VALUE 28 353 972 0 28 353 972 34 244 677 0 34 244 677 THROUGH PROFIT OR LOSS Of which loaned securities Excluding equities and other variable-income securi- ties FINANCIAL LIABILITIES AT FAIR VALUE THROUGH PROFIT OR LOSS Borrowed securities and short selling Repurchase agreements Borrowings 0 0 0 0 0 0 Credit institutions Corporate customers Debt securities Trading Book Derivatives 1 614 0 1 614 1 614 0 1 614 Currency derivatives 1 614 1 614 1 614 1 614 Interest rate derivatives 0 0 Equity derivatives 0 0 Credit derivatives Other derivatives TOTAL FINANCIAL LIABILITIES AT FAIR VALUE 1 614 0 1 614 1 614 0 1 614 THROUGH PROFIT OR LOSS

(In thousand MAD)

F-21 Breakdown of financial instruments by type of fair price measurement 30-june-13 31-dec-12 Model with Model with Model with Model with non observ- non observ- Market Price observable TOTAL Market Price observable TOTAL able param- able param- parameters parameters eters eters FINANCIAL ASSETS Financial assets held for trading purposes at fair value through 28 353 972 28 353 972 34 244 677 34 244 677 profit or loss Financial assets at fair value through profit or loss under the fair value option FINANCIAL LIABILITIES Financial liabilities held for trading purposes at fair value through 1 614 1 614 1 614 1 614 profit or loss Financial liabilities at fair value through profit or loss under the fair value option (In thousand MAD) 4.2. AVAILABLE-FOR-SALE FINANCIAL ASSETS Available-for-sale financial assets are non-derivative financial assets other than those classified as: a) Loans and receivables; b) Held-to-maturity financial assets; c) Financial assets at fair value through profit or loss.

30-june-13 31-dec-12 Negotiable certificates of deposit 0 0 Treasury bills and other bills eligible for central bank refinancing Other negotiable certificates of deposit Bonds 0 0 Government bonds Other bonds Equities and other variable-income securities 3 500 941 3 135 119 Of which listed securities 329 839 240 129 Of which unlisted securities 3 171 102 2 894 990 Total available-for-sale financial assets, before impairment provisions 3 500 941 3 135 119 Of which unrealized gains and losses -273 832 -339 196 Of which fixed-income securities Of which loaned securities -273 832 -339 196 Total available-for-sale financial assets, net of impairment provisions 3 227 109 2 795 923 Of which fixed-income securities, net of impairment provisions

(In thousand MAD) 4.3. INTERBANK TRANSACTIONS, RECEIVABLES AND AMOUNTS DUE FROM CREDIT INSTITUTIONS Loans and receivables due from credit institutions

30-june-13 31-dec-12 Demand accounts 6 093 173 6 731 875 Loans 10 987 975 13 251 828 Repurchase agreements 203 248 1 451 883 Total loans and receivables due from credit institutions, before impairment provisions 17 284 396 21 435 586 Provisions for impairment of loans and receivables due from credit institutions -38 632 -38 640 Total loans and receivables due from credit institutions, net of impairment provisions 17 245 764 21 396 946

(In thousand MAD) Amounts due to credit institutions

30-june-13 31-dec-12 Demand accounts 2 949 527 1 829 261 Borrowings 19 236 553 18 433 119 Repurchase agreements 10 412 856 13 965 786 Total Due to Credit Institutions 32 598 936 34 228 166

(In thousand MAD) F-22 4.4. LOANS, RECEIVABLES AND AMOUNTS DUE FROM CUSTOMERS Loans and receivables due from customers

30-june-13 31-dec-12 Demand accounts 24 906 347 20 455 562 Loans to customers 100 640 321 100 796 021 Repurchase agreements 10 578 177 12 780 120 Finance leases 10 701 876 10 514 070 Total loans and receivables due from customers, before impairment provisions 146 826 721 144 545 773 Impairment of loans and receivables due from customers -6 318 405 -5 736 995 Total loans and receivables due from customers, net of impairment provisions 140 508 316 138 808 778

(In thousand MAD) Breakdown of amounts due from customers by business activity

30-june-13 31-dec-12 Activity in Morocco 96 553 333 95 425 585 Specialized Financial Services 13 005 180 13 185 606 International Activities 30 941 944 30 191 767 Asset Management 7 859 5 820 Other Activities 0 0 Total 140 508 316 138 808 778 Allocated Debts Value at Balance sheet 140 508 316 138 808 778

(In thousand MAD) Breakdown of amounts due from customers by geographical region

30-june-13 31-dec-12 Morocco 109 566 372 108 617 015 Sub saharan Africa 28 759 161 27 586 199 Europe 2 182 784 2 605 564 Total 140 508 316 138 808 778 Allocated Debts Value at Balance sheet 140 508 316 138 808 778

(In thousand MAD) Amounts due to customers

30-june-13 31-dec-12 On demand deposits 64 805 522 63 669 813 Term accounts 20 794 916 20 207 095 Savings accounts 18 474 034 17 903 838 Cash certificates 4 521 328 4 107 980 Repurchase agreements 1 725 565 1 499 500 Other items 37 037 664 37 262 531 TOTAL LOANS AND RECEIVABLES DUE TO CUSTOMERS 147 359 029 144 650 757

(In thousand MAD) Breakdown of amounts due to customers by business activity

30-june-13 31-dec-12 Activity in Morocco 102 625 531 102 081 985 Specialized Financial Services 1 079 751 1 184 434 International Activities 43 653 747 41 384 338 Asset Management 0 0 Other Activities 0 0 Total 147 359 029 144 650 757 Allocated Debts Value at Balance sheet 147 359 029 144 650 757

(In thousand MAD)

F-23 Breakdown of amounts due to customers by geographical region

30-june-13 31-dec-12 Morocco 103 705 282 103 266 419 Sub saharan Africa 42 855 675 40 317 675 Europe 798 072 1 066 663 Total 147 359 029 144 650 757 Allocated Debts Value at Balance sheet 147 359 029 144 650 757

(In thousand MAD) 4.5. DEBT SECURITIES, SUBORDINATED DEBT AND SPECIAL GUARANTEE FUNDS

30-june-13 31-dec-12 Other debt securities 11 695 325 14 014 897 Negotiable certificates of deposit 11 695 325 14 014 897 Bond issues Subordinated debts 5 579 323 4 633 718 Subordinated debt 5 579 323 4 633 718 Redeemable subordinated debt 2 801 133 1 853 463 Undated subordinated debt 2 778 190 2 780 255 Subordinated Notes 0 0 Redeemable subordinated notes Undated subordinated notes 0 0 Public Funds and special guarantee funds 231 143 126 616 Total 17 505 791 18 775 231

(In thousand MAD) Special purpose public funds and special guarantee funds only relate to BOA Group. They are non-repayable funds aimed at subsidising lending rates and provisioning for credit losses in specific sectors and business activities.

F-24 4.6. HELD-UNTIL-MATURITY FINANCIAL ASSETS

30-june-13 31-dec-12 Negotiable certificates of deposit 10 262 408 9 689 814 Treasury bills and other bills eligible for central bank refinancing 10 257 874 9 669 842 Other negotiable certificates of deposit 4 534 19 972 Bonds 998 344 829 127 Government bonds Other bonds 998 344 829 127 Total held-to-maturity financial assets 11 260 752 10 518 941

(In thousand MAD) 4.7. CURRENT AND DEFERRED TAXES

30-june-13 31-dec-12 Current taxes 258 850 215 856 Deferred taxes 383 548 310 849 Current and deferred tax assets 642 398 526 705 Current taxes 199 158 36 296 Deferred taxes 1 048 459 983 149 Current and deferred tax liabilities 1 247 617 1 019 445

(In thousand MAD) 4.8. ACCRUED INCOME AND EXPENSES, OTHER ASSETS AND LIABILITIES

30-june-13 31-dec-12 Guarantee deposits and bank guarantees paid 76 657 5 257 Settlement accounts related to securities transactions 3 630 23 329 Collection accounts 338 839 329 945 Reinsurers' share of technical reserves Accrued income and prepaid expenses 739 205 381 273 Other debtors and miscellaneous assets 3 942 840 2 859 026 Inter-related Accounts 387 855 1 339 945 TOTAL ACCRUED INCOME AND OTHER ASSETS 5 489 026 4 938 775 Guarantee deposits received 40 280 42 250 Settlement accounts related to securities transactions 1 565 084 9 297 681 Collection accounts 1 426 539 770 861 Accrued expenses and deferred income 502 483 537 031 Other creditors and miscellaneous assets 3 999 586 2 562 304 TOTAL ACCRUED EXPENSES AND OTHER LIABILITIES 7 533 972 13 210 127

(In thousand MAD) 4.9. INVESTMENTS IN COMPANIES ACCOUNTED FOR UNDER THE EQUITY METHOD

30-june-13 31-dec-12 Euler Hermes Acmar 25 678 27 177 Banque de Développement du Mali 223 882 214 595 Eurafric -5 915 -4 888 Hanouty 7 171 -5 544 Société Conseil en Ingénierie et Développement 126 241 123 141 Investments in equity methods companies belonging to subsidiaries 50 478 52 447 Investments in equity methods companies 427 535 406 928

(In thousand MAD) Financial data of the main companies accounted for under the equity method

Contribution to the Net Banking Income or Total Assets Company Income group share of profit Net Revenues for the period Euler Hermes Acmar 470 481 47 944 13 496 2 699 Banque de Développement du Mali 7 665 758 246 908 89 445 24 505 Eurafric Information 197 172 92 423 782 -333 Hanouty 23 165 535 -1 025 -467 Société Conseil Ingenierie et Développement 524 517 159 420 22 293 8 635

(In thousand MAD) F-25 4.10. PROPERTY, PLANT AND EQUIPMENT AND INTANGIBLE ASSETS USED IN OPERATIONS AND INVESTMENT PROPERTY

30-june-13 31-dec-12 Accumulated Accumulated depreciation depreciation Carrying Carrying Gross Value amortization Gross Value amortization Amount Amount and impair- and impair- ment ment PP&E 9 392 028 4 029 436 5 362 592 8 936 538 3 805 010 5 131 528 Land and buildings 1 865 039 508 685 1 356 354 2 031 429 516 758 1 514 671 Equipment, furniture and fixtures 3 677 561 1 615 388 2 062 173 3 551 517 1 507 439 2 044 078 Plant and equipment leased as lessor under operating leases 0 0 0 0 0 Other PP&E 3 849 428 1 905 363 1 944 065 3 353 592 1 780 813 1 572 779 Intangible Assets 1 668 267 896 598 771 669 1 592 323 840 868 751 455 Purchased software 1 085 732 569 370 516 362 1 020 384 520 987 499 397 Internally-developed software 0 0 0 0 0 Other intangible assets 582 535 327 228 255 307 571 939 319 881 252 058 Investment Property 853 981 84 823 769 158 693 382 79 222 614 160

(In thousand MAD) 4.11. GOODWILL The following table provides a breakdown of goodwill:

30-june-13 31-dec-12 Gross value at start of period 832 470 832 470 Accumulated impairment at start of period Carrying amount at start of period 832 470 832 470 Acquisitions Cessions Impairment losses recognized during the period Translation adjustments Subsidiaries previously accounted for by the equity method Other movements Gross value at end of period 832 470 832 470 Accumulated impairment at end of period Carrying amount at end of period 832 470 832 470 (In thousand MAD)

F-26 The following table provides a breakdown of goodwill: The Caisse Mutualiste Interprofessionnelle Marocaine (CMIM) is a private mutual insurance company. The 30-june-2013 31-dec-2012 book Value book Value company reimburses employees for a portion of their Maghrébail 10 617 10 617 medical, pharmaceutical, hospital and surgical expenses. It Banque de Développement is a post-employment scheme providing medical cover for 3 588 3 588 du Mali retired employees. Salafin 5 174 5 174 The CMIM is a multi-employer scheme. As BMCE Bank is Maroc Factoring 1 703 1 703 unable to determine its share of the overall liability (as is BMCE Capital Bourse 2 618 2 618 the case for all other CMIM members), under IFRS, expenses BMCE International (Madrid) 3 354 3 354 are recognised in the year in which they are incurred. No Bank Of Africa 692 136 692 136 provision is recognised in respect of this scheme. Locasom 98 725 98 725 CID 14 555 14 555 6.2. SUMMARY OF PROVISIONS AND DESCRIPTION OF TOTAL 832 470 832 470 EXISTING SCHEMES 4.12. PROVISIONS FOR CONTINGENCIES AND CHARGES 6.2.1. Provisions in respect of post-employment and other long-term benefits provided to employees 30-june-13 31-dec-12 Total provisions at start of period 523 235 457 440 30-june-13 31-dec-12 Retirement allowances and equivalents 238 566 559 235 228 400 Additions to provisions 79 986 131 271 Special seniority premiums allowances Reversals of provisions -89 527 -83 187 Other Gross value at end of period -12 060 16 737 TOTAL 238 566 559 235 228 400 Effect of movements in NB: The provision for employee benefits calculated in exchange rates and other -774 974 accordance with IAS 19 is recognised in “Provisions for risks movements and charges” under liabilities. Total provisions at end of period 500 860 523 235 6.2.2. Basic assumptions underlying calculations V / FINANCING AND GUARANTEE COMMITMENTS 30-june-13 31-dec-12 5.1. FINANCING COMMITMENTS Discount rate 4,50% 4,50% Rate of increase in salaries 3% 3% 30-june-13 31-dec-12 Expected return on assets N/A N/A Financing commitments given 15 460 473 14 794 963 Other 11% 11% - To credit institutions 1 245 268 1 630 754 - To customers: 14 215 205 13 164 209 6.2.3. Cost of post-employment schemes Confirmed letters of credit 30-june-13 31-dec-12 Other commitments given to Normal cost 8 778 832 17 046 276 customers Interest cost 5 022 688 9 773 304 Financing commitments 2 462 582 1 451 765 received Expected returns of funds From credit institutions 2 462 582 1 451 765 Amortization of actuarial gains/ losses Amortization of net gains/ losses - - From customers 0 0 Additional allowances Other 5.2. GUARANTEE COMMITMENTS Net cost of the period 13 801 520 26 819 580 30-june-13 31-dec-12 Guarantee commitments given 19 493 474 17 822 232 6.2.4. Changes in the provision recognised on the ba- To credit institutions 6 423 071 6 212 808 lance sheet To customers: 13 070 403 11 609 424 Sureties provided to tax and other 30-june-13 31-dec-12 authorities, other sureties Actuarial liability, beginning of 235 228 400 230 679 497 Other guarantees the period Guarantee commitments re- Normal cost 8 778 832 17 046 276 36 178 444 36 315 329 ceived Interest cost 5 022 688 9 773 304 From credit institutions 35 418 438 35 106 346 Experience gains/ losses From the State and guarantee Other actuarial gains/ losses 760 005 1 208 983 institutions Depreciation of net gains/losses Paid benefits -10 463 361 -22 270 677 VI / SALARY AND EMPLOYEE BENEFITS Additional benefits Other 6.1. DESCRIPTION OF CALCULATION METHOD Actuarial liability, end of the 238 566 559 235 228 400 period Employee benefits relate to long-service awards and end- of-career bonuses. The method used for calculating the liability relating to both these benefits is the “projected unit credit” method as recommended by IAS 19. - Caisse Mutualiste Interprofessionnelle Marocaine (CMIM) scheme

F-27 VII / ADDITIONAL INFORMATION 7.2. SCOPE OF CONSOLIDATION 7.1. CHANGES IN SHARE CAPITAL AND EARNINGS PER % of % of own- SHARE Company Activity voting ership Method interests interests Parent 7.1.1. Share capital transactions BMCE BANK Banking company Unit BMCE Investment Full 100,00% 100,00% TRANSACTIONS ON CAPITAL In number val- In MAD CAPITAL Bank consolidation ue BMCE CAPITAL Asset Full 100,00% 100,00% Number of shares outstanding at GESTION Management consolidation 171 963 390 1 719 633 900 31 December 2010 10 BMCE CAPITAL Financial Full 100,00% 100,00% Number of shares outstanding at BOURSE Intermediation consolidation 171 963 390 1 719 633 900 31 December 2011 10 Full Number of shares outstanding at MAROC FACTORING Factoring 100,00% 100,00% 179 463 390 1 794 633 900 consolidation 31 December 2012 10 Full Number of shares outstanding at MAGHREBAIL Leasing 51,00% 51,00% 179 463 390 10 1 794 633 900 consolidation 30 june 2013 Consumer Full SALAFIN 74,50% 74,50% In 2012, BMCE BANK increased share capital by MAD Loans consolidation BMCE 1,500,000K through an equity issue exclusively for key Full INTERNATIONAL Banking 100,00% 100,00% consolidation shareholders. This increase resulted in the creation of MADRID 7,500,000 new shares. LA CONGOLAISE DE Full Banking 25,00% 25,00% BANQUE consolidation 7.1.2. Earnings per share BMCE BANK Full Banking 100,00% 100,00% INTERNATIONAL UK consolidation Basic earnings per share is calculated by dividing the net Full BANK OF AFRICA Banking 68,58% 68,58% income for the period attributable to holders of ordinary consolidation Full share s by the weighted average number of ordinary shares LOCASOM Car Rental 100,00% 97,31% outstanding during the period. consolidation Full RM EXPERTS Recovery 100,00% 100,00% 30-june-13 31-dec-12 consolidation BANQUE DE SHARE CAPITAL (IN MAD) 1 794 633 900 1 794 633 900 Equity DEVELOPPEMENT Banking 27,38% 27,38% method Number of common shares 179 463 390 179 463 390 DU MALI outstanding during the year EULER HERMES Equity Insurance 20,00% 20,00% NET INCOME ATTRIBUTABLE TO the 595 289 422 923 152 000 ACMAR method sharholder’s OF THE PARENT Equity HANOUTY Distribution 45,55% 45,55% (IN MAD) method BASIC EARNINGS PER SHARE (IN MAD) 3,3 5,1 Information EURAFRIC Equity Diluted Earning per share (IN MAD) Technology 41,00% 41,00% 3,3 5,1 INFORMATION method Services

The Bank does not have any dilutive instruments for CONSEIL INGENIERIE Equity Study Office 38,90% 38,90% conversion into ordinary shares. As a result, diluted ET DEVELOPPEMENT method earnings per share equates to basic earnings per share. 7.4. RELATIONS WITH RELATED PARTIES Relations between BMCE Bank and fully-consolidated companies and the parent company Transactions and period-end balances between fully-consolidated entities are of course eliminated. Period-end balances resulting from transactions between companies accounted for under the equity method and the parent company are maintained in the consolidated financial statements.

F-28 Related-party balance sheet items VIII / RISK MANAGEMENT SYSTEM

Consolidat- Fully con- 8.1. Types of Risks Parent ed entities solidated company under equity entites 8.1.1. Credit risk method Assets Inherent in the banking activity, credit risk is the risk of Loans, advances and 7 463 9 622 044 clients default on the bank’s loans in full or in time. This securities might cause a financial loss for the bank. It is the most Demand accounts 6 237 286 0 widespread type of risk and can be correlated with other Loans 7 463 384 023 Securities 3 000 735 risk categories. Finance Leases Other Assets 9 156 8.1.2. Market risk Total 7 463 9 631 200 Market risk is the risk of loss caused by the unfavourable Liabilities Deposits 30 469 6 390 784 market factors such as exchange rates, interest rates, stock Demand accounts 30469 6 279 113 prices, mutual funds... It is also related to settlement risk, Other borrowings 111 671 which can be described as follows: Debt securities 2 998 067 Other liabilities 242 349 - Pre-settlement risk : pre-settlement risk is the risk of loss Total 30 469 9 631 200 due to a counterparty defaulting on a contract with the Financing Commitments & Guarantee Commitments Bank during the life of a transaction. The Presettlement Financing commitments 619 603 risk is calculated in terms of the replacement cost of such given contract by another one on a mark to market basis, Guarantee commitments 619 603 given - Settlement risk : settlement risk takes place at a simultaneous exchange of values with counterparty for Related-party income statement items the same value date, when the Bank is not able to verify if the settlement has actually taken place, while it has Consolidated Entreprises Consolidated en- entities under consolidées already initiated the transfer of its side. tities under the the proportion- par intégration equity method 8.1.3. Interest rate and liquidity risks ate method gobale Interest income -3 783 -133 875 The interest rate risk is the vulnerability of the financial Interest expense 8 506 154 829 situation of an institution to unfavorable change in interest Commission -16 661 income rates. Commission 12 779 expense Liquidity risk is defined as the risk for the institution of Services pro- not being able to honour its commitments to maturity in vided normal conditions. Services received Lease income -74 563 8.1.4. Operational risk Other 57 476 Operational risk is the possibility of losses arising from inadequate or failed internal processes, people and systems 7.5. LEASES or from external events. Information concerning finance leases This definition includes legal risk but excludes strategic and Present value Unguaranteed reputation risks. Gross of minimum residual value Investissement lease payments accruing to the 8.1.5. Other Risks under the lease lessor ≤ 1 year 2 159 454 282 887 44 691 Risk of Equity Investments > 1 year ≤ 5 years 7 012 205 4 107 316 208 385 > 5 years 4 529 505 3 865 904 384 215 This risk occurs when BMCE Bank invests, holds in its TOTAL 13 701 164 8 256 107 637 292 portfolio, or acquires equity or quasi equity holdings in entities other than its own subsidiaries. These investments may include ordinary shares, preferred stock, derivatives, warrants, options or futures. Country Risk The country risk includes political risk and transfer risk. The political risk is usually caused by an action of a country’s government, such as nationalization or expropriation, or independent events such as a war or a revolution, which affect the ability of customers to meet their obligations. The transfer risk is the risk that a resident client cannot acquire foreign currency in his country so that he can meet his commitments abroad.

F-29 The country risk management system is based on the • Effective flow of documentation and information internally following axes: and externally ; • Identification of Country Risk • Assessment of coherence and adequacy of the established control systems ; • Exposure Calculation and consolidation by country • Assessment of the pertinence of the corrective measures • Development of internal rating and Country Profile proposed or implemented ; • Allocation of Limits by Country • Ensure compliance of accounting and coherence of the • Reporting and Alerts internal control systems at the level of each entity with a financial vocation belonging to the Group ; • Provisioning • Examination of aggregated and consolidated accounts 8.2. Risk-Management Organisation before submittal to approval by the Board of Directors ; 8.2.1. General control system • Devising of the annual report on activity, earnings and At the Group level, BMCE Bank has a General Control body internal control submitted for examination by the Board of that is mandated to carry out inspections and audit in Directors ; different operational segments both in Morocco and abroad. • Information at least once per year, to the Board of Directors 8.2.3. Group Risk Management regarding the amount of nonperforming loans, the debt collection processes, as well as the outstanding amount of The mission of Group Risk Management is to monitor credit, restructured loans and the situation of reimbursement ; market and operational risks, with an active contribution to: • Keep close watch on the quality of the information released • The definition of BMCE Bank’s risk policy ; to the shareholders. • The set up of a control system for credit, market and Furthermore, back in July 2007, the Board of Directors operational risks ; set up the CACI Group –a body instituted within the Bank, • The definition and management of a decision-making its subsidiaries, as well as entities integrated into the process and monitoring of commitments. consolidation scope. The Group Risk Management is composed of : CACI’s tasks consist of seeing the integrity of accounts and ensure full adherence to the legal and regulatory • Group Risk Management Division, which is in charge of obligations across the various structures of the Bank and monitoring risks (credit, market and operational) for all the subsidiaries/branches of the Bank, both in Morocco BMCE Bank Group, supported by Group entities ; and abroad. • The Credit Analysis and Management Division, which The tasks of the Group CACI (or, AICC) intertwine with those of examines the lending policy for BMCE Bank clients. the Bank CACI, even if they are extended to cover the entities 8.3. Governance Bodies placed within the consolidation scope. More explicitly, they include: (i) reviewing proposals for the appointment or renewal 8.3.1. The Audit and Internal Control Committee of the statutory auditors for Group entities, by analyzing their The Audit and Internal Control Committee (AICC) is a intervention programmes, checking the outcomes of their governance body established within the Bank and is directly verification, their recommendations, as well as the corrective under its Board of Directors. Its mission is to ensure a third measures proposed or implemented; (ii) whenever it is level control through the structures of the Bank. In other necessary, asks for any internal or external audit. words, the AICC 8.3.2. Major Risks Monitoring Committee  Assess the relevance and permanence of accounting The Major Risks Monitoring Committee is issued from the policies. Internal Audit and Control Committee. It consists of non-  Controls the existence, the adequacy and implementation executive directors (CACI members). The meetings of the of internal procedures and processes for control, monitoring committee are held on a quarterly basis. In the framework and surveillance of banking risks and prudential ratios of the prerogatives devolving to it, the Committee :  Examine aggregated and consolidated accounts before • Evaluates and makes recommendations on the quality of submission to the Board of Directors, and keep close watch risks; on the quality of information released to shareholders. • Ascertains that management norms and internal In this regard, the Committee permanently ensures the procedures, as set by the competent bodies in the area of follow up and the achievement of the objectives and credit risks ; missions, defined as below : • Monitors the limits of credit risks (sector-based, major • Verification of internal operations and procedures ; risks…). • Assessment, control and supervision of risks ; 8.3.3. General Management Committee • Verification of the reliability of collection, processing, The General Management Committee, which is chaired by dissemination and conservation of accounting data ; the Director & Delegate General Manager to the Chairman, F-30 gathers together the Director & Delegate General Manager Other Prerogatives : in charge of Remedial Management; Delegate General • Sees to it that there is a coherent commercial, corporate, Managers, the Adviser to the General Management, and the and financial communication; General Controller. Associate Members include the Chairman of the Board of BMCE Capital and the other Deputy General • Arbitrates on possible conflicts of interest and all Managers of BMCE Bank. The meetings of the Committee unresolved files falling within the competency of the are held on a weekly basis. various Bank entities and internal committees; In the framework of the prerogatives devolving to it, the • Proposes the main Bank development poles to the Group Committee is in charge of : Strategic Committee. Steering Activities : 8.3.4. The Credit Committee • Steers the drawing up of the strategic plan of BMCE Bank Senior Credit Committee and affiliated entities, in tandem with the decisions taken It is chaired by the Chief Executive Officer of the Bank and by the Group Strategic Committee and takes care of its vice-chaired by the Director & Delegate General Manager to implementation ; the Chairman. Depending on the market concerned, there are • Give impetus to the main cross-cutting projects which two committees: one is in charge of the Enterprise market impact on the operation and the development of the Bank; while the other is in charge of the Private/Professionals market. The committees, which gather together the Bank’s • Translates the strategic plan into clear budgetary senior managers, convene twice a week. objectives for the Bank’s various entities; The Regional Credit Committee • Validates annual budgets and follows up on the allocation and optimisation of resources made available to the The Regional Credit Committee is held once a week. Its dates entities of the Bank; are determined by the Regional Director of each region, provided to all members and time respected. • Monitors the effective execution of the Bank’s budgetary plan and that of each of its entities. It also sees to the 8.3.5. Declassification Committee implementation of corrective actions in case of gaps; In the context of portfolio monitoring, the Declassification • Decides on the policy relating to products and Committee (normal and selected) meets monthly to review services, while ensuring that the business lines remain the accounts anomalies. profitable; Also, recovery committees and anomaly accounts were • Evaluates opportunities for launching new activities, introduced into regions and they meet monthly. products, and services and follows up on implementation; 8.3.6. Group Risk Committee • Arbitrates on operational questions pertaining to the various Bank’s Divisions, and internal committees for The Group Risk Committee sees to the efficiency of the which it also sets the objectives; steering mechanism as it applies to risks related to BMCE Bank Group operations and to ensure its adequacy and • Sees to the efficiency of organisation by undertaking conformity with the established risk management policy. all the actions necessary relating to human resources, organisation, computing, logistics, and security as would In this respect, the Committee takes care of the following contribute to the development of the Bank. missions, among others : Internal Control, Audit, and Risk Management : • Ensures the implementation of the management policy for credit risk, market risk and operational risk across • Formulates orientations in terms of the Bank’s risk policy BMCE Bank Group ; and ascertains its alignment with the Group’s risk policy; • Valid any inherent change in control of credit risk, market • On the basis of the propositions made by the entity in risk and operational risk, and in the implementation at charge of risk management, it sets and follows the limits different entities within the perimeter ; and levels of aggregate risks for each of the Bank’s business lines; • Becomes aware of the evolution of different indicators for assessing credit risk, market risk and operational risk ; • Ensures observance of regulatory ratios, compliance with the regulations governing risks, and the efficiency of • Becomes aware of events since the last Committee internal control. including : Human Resources : - Results from the work of regulatory and methodological standby ; • Examines the policy of Bank personnel remuneration, training, mobility, and recruitment; - Work done in the context of cross-organizational or IT projects inherent in managing risks. • Ascertains that operational priorities are in adequacy with the recruitment and training policy; • Follows up on the career management of the Bank’s high- flyers. F-31 8.4. Credit risk 8.4.4. Monitoring 8.4.1. Decision Procedures Through the entity in charge of “the Group Credit Risk Management”, the Group Risk Division takes care of the The procedure for granting loans at BMCE Bank is based on following tasks at BMCE Bank Group : two approaches : • Prevention of credit risks ;  A standardised approach for products to individuals subject to ‘‘Product Programmes’’, which define, for each • Contribution to the overall credit policy ; product, the rules of risk management for the marketing • On-going monitoring of credit risk. of the product. Indeed, risk policy relies on two pillars : As a key function in risk control process, such preventive • The use of a fact sheet, which states the approval criteria, management consists in anticipating situations where risk is and based on which the assessment Risk is conducted. likely to worsen and to bring in the appropriate adjustments. This fact sheet explains the credit terms and verifies In the exercise of this function, the entity is called upon to : compliance and the meeting of the loan standards. If the • Monitor the regularity of commitments: conformity of loan does not meet the standards set by all the acceptance the purpose for which the loan is sought, observance of risk criteria, the request must be rejected unless an the authorised rating, examination of default in payment, exception is granted by the Committee ; review of overdue loan repayments. • A system of delegation which identifies the authority levels • Detect debts showing persistent weakness signs, on the for loan granting. It ensures compliance of the decision basis of a certain number of flashing warning signals ; making process and the integrity of the credit agent. Each • Together with the branch network, follow up on the evolution loan application passes through all subordinated entities of the main risks (non performing loans, the most important until its approval. commitments/ or the most sensitive ones) ;  A customised approach based on the specific needs • Determine files that are eligible for downgrading, in view of of clients based on three principles: (i) loan portfolio the regulations in force governing non performing loans. management, which allows the Senior Management to have sufficient information to assess the risk profile of 8.4.5. Non Performing Loans the customer; (ii) the delegation of approval authority With a view to identify non performing loans which are to individuals (intuitu personae) on the basis of their eligible for provisioning in compliance with the regulation experience, judgment, competence, education and in force, an exhaustive review of the Bank’s portfolio is professional training; (iii) the balance of power, the undertaken on a monthly basis, with the help of a statement facilities being granted based on the judgment of at least of risk-prone accounts, designed by means of reference to three persons « Troika ». the criteria governing the classification of non performing For certain levels of risk, approval of the Senior Credit loans instituted by Circular no. 19 issued by the Central Committee or the President of the Bank must be sought. Bank, as well as other additional security criteria adopted Note also that an independent control of the credit quality by the Bank. and compliance with procedures is provided by the General It should be noted that the additional risk management control and external auditors. Similarly, the Group’s Risks indicators have been set up in order to spot forerunning Division independently ensures the continuity of the risk signs of a worsening risk. management quality and respect for rules and procedures. The provisioning is subject to supervision and monitoring Implementation of the new network reorganization by Region by the General Control Group, the External Auditors and the within BMCE Bank was accompanied by a change in the Audit and Internal Control Committee. delegation system to include this new dimension, through the allocation of delegations of authority to these regional structures 8.4.6. Remedial Management and the establishment of a Regional Credit Committee. Recovery 8.4.2. Diversification by Counterparty In order to improve the efficiency of the recovery of failed Assessed by taking the entire loans granted to a single debts, a revamped out-of-court recovery system was set up beneficiary, the diversification of the loan portfolio remains within the Bank. The system consists of two entities –one a major concern for the Bank’s risk policy. Possible dedicated to the activities of the corporate network, while concentrations are subject to regular review, and if the need the other is devoted to the Private/Professional network. should arise, corrective measures are taken. The entities are tasked with the following : 8.4.3. Sector-based Diversification • Permanently oversee the regularity and the quality of the Sector-based diversification of the credit portfolio, likewise, entire Bank’s commitments ; receives particular attention, sustained by prospective • Follow-up on the settlement of any insufficiency, either analysis which allows for a proactive and dynamic through the network, or directly with the customers concerned; management of the Bank’s exposures. It relies on research and studies which express an opinion on the evolution of • Adopt a proactive approach designed to prevent any given sectors and identify the factors which account for the degradation of the outstanding debts. risks incurred by the main actors.

F-32 8.4.7. Internal Ratings Distribution of commitments by class of risk Under the Basel Agreements, BMCE Bank Group has opted for the IRBF Approach for credit risk (excluding retail). 98.70% Regarding the internal rating project excluding Retail, the deployment of internal rating tool FACT was widespread. 25.29% 17.35%

Training has been provided to all members in the commercial 13.12% 12.81% 10.75% 6.61% 2.93% network. Thus, the operational anchor of the internal ratings 3.63% 0.27% 4.87% 1.07% in the various processes of granting credit is effective. 1.30% 1 2 3 4 5 6 7 8 9 10 11 The draft Scoring for Retail customer segment, continues with effective implementation expected in 2013. June 2013 Subtotal No notation These projects fall within the scope of BMCE Bank Group (TPE non retail) (including local subsidiaries), in order to operationally reinforce the internal rating and the Retail scoring in the bank’s and its subsidiaries business process (eg: use of the 8.4.8. Hedging and Risk Mitigation Policy rating system for delegation, pricing, sales targeting and Credit Guarantees marketing) hence facilitating the credit grant decision- making. For individual customers, the Bank requires for every loan application a salary deduction authority. Mortgage loans Rating Definition Category are covered by first mortgage. For agreement loans, i.e. Extremely stable in the short and medium loans granted to the employees of client enterprises. In this 1 terms; very stable in the long term ; solvent or case, the Bank has the legal guarantee of the employer. creditworthy even in serious financial distress Very stable in the short and medium terms; For client enterprises, the guarantees policy is based on 2 stable in the long term; sufficient solvency detailed analysis of counterparties and risks involved. For even in persistent negative events some Corporations, the Bank holds guarantees (collaterals Solvent in the short and medium terms; even and bank guarantees). after serious hardship or difficulties ; slightly

3 Low risk negative events might be absorbed in the long For medium and small sized companies, and very small term businesses, guarantees are supported by a systematic Very stable in the short term; no material ad- recourse to the ‘‘Caisse Centrale de Garantie’’. As for verse effect expected within the year; sufficient 4 project finance, the financed asset is taken as collateral, financial strength to survive in the medium

Investment grade and according to the size of the project and the sector, term ; uncertain long term creditworthiness guarantee funds are required. Stable in the short term ; no material adverse effect expected within the year ; only slightly 5 8.4.9. Sector concentration Limits negative events could be absorbed in the me- dium term These limits are defined on the basis of historical default Limited capacity to absorb unexpected nega- and on the basis of an optimisation of the consumption 6 tive events of capital. These limits are fixed according to the portfolio

Very limited capacity to absorb unexpected Moderate risk vision and they are stated in terms of sector, type, and 7 negative events maturity. Weak creditworthiness (principal and inte- rests). Any change in the economic and com- Breakdown of loans to credit institutions by geographic 8 mercial conditions would make timely reim- area bursement difficult 30-june-13 31-dec-12 Inability to serve debt (principal and interests) Performing Provi- Perform- Provi- in due time. Creditworthiness is linked to posi- High risk NPLs NPLs 9 Loans sions ing Loans sions tive evolution of economic and commercial conditions Morocco 11 268 940 59 838 35 258 13 880 138 59 838 35 258 Very high default risk, inability to serve debt Europe 1 687 989 0 0 2 083 561 0 0 10 (principal and interests) in due time. Default sub saha- Sub-investment grade 4 254 916 12 713 3 374 5 408 667 3 382 3 382

payment on part of principal and interests risk ran Africa

11 Default payment on principal and interests high Very Total 17 211 845 72 551 38 632 21 372 366 63 220 38 640 Allocated Debts Provisions Net Value 17 211 845 72 551 38 632 21 372 366 63 220 38 640 In thousand MAD 8.4.10. Counterpart concentration limits The limits of counterparts are handled, according to two approaches whose fundaments, principles and methodologies differ :

F-33 • For non-standard loans: the counterpart limits are set by 8.5. Market Risk decision-making entities, depending on customers’ needs Market risks are defined as potential losses on balance the risks incurred. The maximum is set at 20% of our sheet positions and off-balance sheet after changes in equity capital. market prices, they cover: • For standard loans: the counterpart limits for this type • The interest rate risk ; of loans are provided for by the Product Programme governing standard products. In the framework of the • The equity price risk ; execution of budgets, product-based limits are set during • The exchange rate risk ; the drawing up of the provisional budgets. • The commodity risk. Breakdown of loans to customers by geographic area And two types of credit risk on market transactions: 30-june-13 31-dec-12 Performing Provi- Perform- Provi- • Counterparty risk ; NPLs NPLs Loans sions ing Loans sions • Settlement risk. Morocco 108 337 266 5 483 719 4 254 613 107 269 792 5 250 297 3 903 078 Europe 2 108 956 108 869 35 041 2 604 230 14 201 12 863 Foreign Exchange Cash instruments sub saha- 27 124 746 3 663 395 2 028 981 26 145 245 3 262 008 1 821 054 Instruments Spot Foreign Exchange ran Africa Forward Foreign Exchange Total 137 570 968 9 255 983 6 318 635 136 019 267 8 526 506 5 736 995 Foreign exchange Derivatives Allocated Foreign exchange Swaps Debts Equity Instruments Equity shares Provisions Derivatives on equity or and Indices Net Value 137 570 968 9 255 983 6 318 635 136 019 267 8 526 506 5 736 995 Mutual funds on equities In thousand MAD Fixed income Instru- I- Corporate and Interbank loans and borrowing ments Fixed rate (in MAD and Foreign Currency) 8.4.11. Commitments Breakdown Floating Rate (in MAD and Foreign Currency) II- Negotiable Debt Securities and bonds The mechanism governing the bank’s concentration risk II-1 Sovereign Debt (Including bonds issued by management is based on quantitative measurement of the Kingdom of Morocco) different types of concentration and their confrontation Fixed rate (in MAD) with their respective limits (per activity sector; contra Floating Rate (in MAD and Foreign Currency) II-2 Securities issued by Credit institutions and groups, and so forth….). This strategy, which is validated Companies by the Bank’s decision-taking authorities, is reviewed on a Fixed rate (in MAD and Foreign Currency) yearly basis. Floating Rate (in MAD and Foreign Currency) III- Loans / borrowing of Securities 8.4.12. Breakdown of Commitments per Sector Loans / borrowing of securities Repo / Reverse repo The Bank’s exposures as of end of june 2013 -domestic IV- Rate Derivatives activity- by sector are as follows : Rate Swaps Rate Futures 0.47% Forward Rate Agreement 1.93% 0.44% 2.69% 0.06% V- Fixed income mutual funds 4.15% Money market mutual funds Debt mutual funds 1.68% Commodity Products Commodity futures 1.94% 2.62% Commodity futures options 2.78% 36.50% Credit Default Swap (CDS) 2.78% Credit Linked Note (CLN) 3.44% On a consolidated basis

7% Capital Requirements Amounts

8.14% Capital Requirement for raw material prices Risk 4 576

11% 12.39% Capital Requirement for Interest Rate Risks 901 907 Capital Requirement for change Risks on Property 80 024 Others Hotels & Restaurants Investment Dont particuliers Extractives industries Capital Requirement for Foreign Exchange Risks 105 960 Financial Activities Textile & Leather Real Estate Transport Communications Capital Requirement for market Risks 1 092 467 Commerces, réparations Fisheries Other manufacturing automobiles et d'articles Chemical industries Total Risk Weighted Assets on Market Risk 13 655 837 domestiques Administration Water & Electricity Agriculture 8.5.1. Market risk management process Food & Tobacco Pêche, Aquaculture Building & Public works Governance industries Metallurgical, Main players of the market risk management system within Mechanical, Electrical & Electronic BMCE Bank Group are : • General Management, which sets up market risk management policies and strategies approved by the Board of Directors ;

F-34 • The Group Risk Committee, which ensures efficiency of 8.5.2.2. Risk indicators the policy of market operations risk management within Different risk indicators reflecting the level of exposure to the BMCE Bank Group and its consistency with the Group’s market risk are used within the BMCE Bank Group and are risk management policy ; as follows: • The Group’s market risk department centralizes the • Overall Value at Risk (VaR) and by type of asset whole Group market risk management. BMCE Bank, as an independent function of Front Offices of the Group’s different Value-at-Risk is a probabilistic global measure of the entities, enjoys maximum objectivity in the management market risk. It summarizes the risk through the calculation of market risk. of any potential loss on a time horizon and a given degree of probability. Unlike traditional indicators of risk, value • Risk Management Units of BMCE Bank Group, which at risk combines various risk factors and measures their ensure market activities’ control within their entity, report interaction, thus taking into account the diversification of to Group Risk Management. portfolios. • Internal Audit ensures the implementation of the market • Stress Testing by Risk Factor risk management system and the respect of procedures in force. A set of stress tests are conducted daily for each activity of trading. These stress tests are based on hypothetical 8.5.2. Description of the market risk management sys- tem scenarios set up, and reflect the exposure of the trading group’s losses in case of moderate fluctuations, averages BMCE Bank’s market risk management system is based on : and extremes of market risk factors. • Limits ; Thus, hypothetical scenarios are based on the following • Risk Indicators ; stress components: • Capital Requirement ; - Change in interest rates ; 8.5.2.1. Limits - Translation of the yield curve ; - Change in exchange rates ;  Counterparty limits on market transactions - Change in the basket ; The process of granting counterparty limits and excess in - Movement of currency volatility ; exposure limits on market transactions is governed within BMCE Bank Group via a system of delegation of powers - Change in the price of the underlying asset ; framed by different procedures depending on the type of • Overall Sensitivity and portfolio duration or by activity for counterparty. the intereset rate exposure.  Market limits • The sensitivities of type delta, gamma, vega, theta, rho for Taken to control the market risks within the Group BMCE derivative exposure. Bank and diversification of trading, a set of market limits 8.5.2.2. Capital Requirements was introduced, and is available as follows: The regulatory capital requirements under the Market Risk • Stop / Loss limits by business line over different time of BMCE Bank Group can appropriately assess the exposure horizons ; of the Group to various market risks. • Exposure limits by activity ; 8.6. Operational Risk • Exposure limits by duration for the Dirham denominated interest rate ; Operational risk can be defined as the risk of loss or incident resulting from insufficient or unsuccessful internal • Exposure limits by currency and time for the currency processes, people and systems, or from external events cash FX ; • Greeks limits for derivatives ; 8.6.1. Operational Risk Management Policy • Exposure limits by currency for the FX activity ; 8.6.1.1. Objective of Operational Risk Management • Transaction limits The Operational Risk Management system seeks to achieve  Regulatory limits the following objectives : Apart from monitoring the limits put in place internally, • Assess and prevent operational risks ; BMCE Bank Group ensures compliance with regulatory • Evaluate the control process ; limits set by Bank Al-Maghrib as : • Undertake corrective actions in the face of major risks. • The minimum capital regulatory adequacy ratio ; 8.6.1.2. Classification • The exposure limit on the foreign currency should not exceed 10% on Capital ; Operational risks or loss may be analysed and categorised according to two principles, which need to be distinguished: • The limit on the aggregate foreign exchange which does not exceed 20% of Capital. causes and consequences, in terms of impact (financial or other). They are then categorised per Basel Event type.

F-35 8.6.1.3. Links with credit and market risks 8.6.4. Fundamental Principles Operational risk management is potentially linked to the The major strategic objective of the operational risk management of credit and market risks. The link is two-fold : management system at BMCE Bank is twofold : • At the global level, reflection on the global level of aversion • Reduce the exposure to operational risks ; to risks incurred by the Bank (and eventually the allocation • Optimize capital requirements for operational risks. of capital) calls for “trans-risk” analysis and follow up The internal system for measuring operational risk is • More specifically, certain operational risks may be linked closely related to the daily management of risk through : directly to the management of market and credit risks. • Collection of events ; 8.6.2. Organisation of Operational Risk Management • Risk mapping ; The framework for the operational risk management at BMCE Bank Group is structured around three guiding • Key risk indicators principles : Exposure to operational risks and incurred losses are • Set a target system in line with the Group’s organisation regularly reported to the entity concerned, general and the best practices ; management, and to the Board. The management system is properly documented, to ensure compliance with a set of • Entrust the different Group’s business units and subsidiaries formalised controls, procedures and corrective measures with the daily management of operational risk ; for non-compliance. • Ensure the separation of the functions ‘‘Audit/Control’’ Internal and/or external auditors are called to periodically and operational risk management. review the management process and systems for measuring The operational risks management at the Bank implies 4 operational risk. These reviews concern the activities of the major entities : units and the independent function of the operational risk management. • Operational Risk Management Department ; The management of BMCE Bank Group operational risks • BMCE Bank branch network ; has been fully automated through the use of a dedicated • Functional entities of BMCE Bank ; tool, namely MEGA GRC. Accordingly, the gathering of data pertaining to risk events, the mapping of operational risks, • Subsidiaries. as well as the key risk indicators are today handled by this Operational risks interlocutors have been appointed at the tool which has been deployed at the level of the bank as well level of the aforementioned entities, namely : as its Morocco and Europe-based subsidiaries. • Operational Risk Correspondents (or, CRO) ; 8.6.4.1. Containment and Mitigation of Operational Risks • Operational Risk Coordinators (or, CORO) ; Several types of attitudes may be considered in the management of operational risks : • Operational Risk Relays (RRO). • Enhancing controls ; The scope of operational risk management also concerns the various group subsidiaries : • Covering risks, by taking out insurance ; 8.6.3. Governance of Operational Risk Management • Avoiding risks, notably by the re-deployment of activities ; The governance of operational risk within the BMCE is • Elaborating business continuity plans. divided into three Operational Risk Committees BMCE Bank Group has a secure and very strong control • The Group Operational Risk Committee ; system apt to considerably reduce operational risks. Nevertheless, as far as the management of operational risk • The Business-line-based Operational Risk Follow-up Committee ; via a dedicated apparatus is concerned, it reserves itself all • The Subsidiary Operational Risk Committee. the latitude necessary to identify on a case-per-case basis optimal behavior to adopt, depending on the different risk The task of these committees consists in the periodic review types which are made explicit beforehand. of the following : Furthermore, the Group has insurance policies designed • Evolution of exposure to operational risks and the control to mitigate risks attendant to damage to premises, fraud, environment of these risks ; theft of valuables, and third party liability … • Identification of the main risk areas, in terms of activities 8.6.5. Business Continuity Plan and type of risk ; Driven by a regulatory trend, the Business Continuity • Definition of preventive and corrective actions to take in Plan responds to the growing importance granted to the order to curb risk levels ; minimisation of the effects of interruption of activities, • The amount of equity capital allocated to operational owing to the interdependence links between them and to risks, the cost of preventive actions to take, and the cost of the resources they rely on (being human, computing, or insurance to take out. logistical). Based on sundry crisis scenarios –including

F-36 situations of extreme shock—the plan consists of a set Entering into of measures and procedures aimed to keep up (albeit in a a relationship and temporary and eroded fashion, if the need should arise) identification the provision of essential services and thereafter to ensure of exposures by country Individual planned resumption of business activities. Internal and country The cross-cutting strategic principles underlying the consolidated ratings business continuity are as follows : reporting • BMCE Bank has social responsibility vis-à-vis its clientele. The risk This means that the latter should be able to avail itself of management the liquidity it has entrusted with the Bank. Non compliance framework Allocation with this obligation in times of crisis may well have an Alerts and and impact on public law and order. This principle prevails above provisioning monitoring all the other principles ; of limits

• BMCE Bank must guarantee its commitments through the Stress interbank compensation system on the Moroccan market ; Testing • BMCE Bank, as a matter of priority, intends to abide by the legal and contract commitments (as they relate to the credit and commitments area) which it has already underwritten, 8.8.1. Description of the Country Risk Management before making any other commitments ; 8.8.1.1. Country rating system • BMCE Bank intends to uphold its international credibility BMCE Bank has developed an internal country rating which and guarantee its commitments vis-à-vis foreign is based on the combination of information gathered from correspondents. various reports from the country authorities, international • BMCE Bank customers are given priority over other organizations (World Bank, IMF ...) and international rating beneficiaries to benefit from the Bank’s services. agencies (Coface, S & P ...). The internal rating can have its own appreciation over the group risks in each country, • The latter are taken into account in front-to-back operations taking into account the most relevant criteria. –in other words, from the branch office to the accounting service. 8.8.1.2. Country Allocation Limits The year 2009 saw the deployment of the business The commitments limits are established by country continuity plan. Several simulations to test the reliability considering the following: and performance of this plan have been carried out in • Assessing country risk incurred in the light of the internal several regions across the Kingdom rating of the country as described above; 8.7. Stress Testing • Allocation and portfolio diversification for each subsidiary The Stress Testing analyzes different scenarios due to and for the group respecting a maximum concentration by extreme portfolio shocks and aims to: country based on a percentage of regulatory capital. • Strengthen risk measurement tools to predict and 8.8.1.3. Country Risk Monitoring system anticipate potential credit risk; 8.8.1.3.1. Identification of country exposures • A better allocation of capital, taking into account the The breakdown of categories of transactions by business continuous increase of the credit portfolio. lines are as follows: BMCE BANK Group includes stress testing as a fundamental • Credit transactions on foreign counterparties; component of its risk management policy, as such, exercise stress tests are regularly carried in excess of the new interim • Operations in foreign securities; reporting established by the regulator during fiscal 2012. • Market transactions inducing risks on foreign 8.8. Description of the country risk counterparties; Country risk is the possibility that a given sovereign • Foreign trade operations and various guarantees. counterparty is unable or refuses country, and the other 8.8.1.3.2. Reporting of exposures by country counterparts of this country will not be able to fulfill their obligations abroad for reasons of socio-political, economic Tracking and monitoring of BMCE Bank Group exposures or financial. Country risk can also result from limiting the on foreign counterparties are provided through a monthly free movement of capital or from other political or economic rise in the form of reporting, from 36 branches to the Risk factors, this is called risk transfer. It may also result from Management Group. other risks in connection with the occurrence of events These reporting stand the situation at the end of the month: affecting the value of liabilities on the country (natural disasters, external shocks). • Exposures by country, geographic area, industry, risk class, type of line in the balance sheet and the off balance sheet ... F-37 • Indicators of Credit Risk (NPL ratio, provisions, coverage • Non backing of assets and liabilities or the financing of ratio ...) medium and long term assets by means of short-term liabilities The Risk Management Group calculates exposure to country risk as well as the consolidation of the Group’s exposures in A liquidity level is deemed acceptable when it enables the order to identify the areas and countries with high exposure. Bank to finance the evolution of its assets and to meet its commitments as soon as they are due for payment, thereby 8.9. asset liabilitiy management shielding the Bank against any possible crisis. In order to maintain a balance sheet at equilibrium, in a In this respect, two indicators serve to assess the Bank’s context of a strong growth in assets, the management of liquidity profile : liquidity and interest rate risks system should : • Liquidity ratio, as defined by the central bank ; • Ensure the stability of earnings against the change in interest rates, with a sustained net interest income and • Cumulative static gaps for a 12 months period. optimised economic value of equity ; Periodic or cumulative gaps in local or foreign currency measure • Manage an adequate level of liquidity, allowing the bank to the bank’s risk of liquidity in the short, medium and long terms. meet its obligations at any time, away of any potential crisis ; This allows estimating the net refinancing needs on different buckets and determining the appropriate coverage. • Ensure that the risk inherent in foreign exchange does reduce the margin of the bank ; 8.9.2. Interest Rate Risk • Adjust the bank’s strategy so as to fully capture the growth Interest rate risk is the risk of reducing the margins of opportunities offered by the macroeconomic environment. the Bank due to changes in interest rates. The latter also impacts the discounted value of expected future cash flows. • The Bank has set the ALCO Committee to monitor the achievement of these objectives, with as the main missions : The degree of the impact on the economic value of assets and liabilities depends on how sensitive the balance sheet - Formulates the ALM policy items are to the change in interest rates. - Organize and facilitate the ALM subcommittees The interest rate risk can be assessed through stress - Have a thorough knowledge of the types of risks inherent testing, based on an interest rate shock of 200 basis points, in the Bank’s activities and stay informed of the evolution as recommended by Basel Committee. of these risks based on the trend of financial markets, of The Bank’s strategy in terms of interest rate risk risk management practices, and activity of the Bank; management aims at stabilizing earnings against any - Review and approve procedures to limit risks inherent in change in interest rates, with a sustained net interest the Bank’s credit activity, investment, trading and other income and optimised economic value of equity. activities and significant products; Changes in interest rates can have negative impact on - Master the reporting systems that measure and daily the Bank’s net interest income, and thus cause serious control the main sources of risk; deviation from initial forecasts. - Periodically review and approve risk limits accordance with any To counter these discrepancies, the ALM department changes in the institution’s strategy, approve new products and regularly matches uses with resources of the same nature, respond to significant changes in market conditions; and defines the tolerance level for a maximum deviation in net interest income from the forecasted net banking income. - Ensure that the various lines of business are properly managed by HR with a level of knowledge, experience and Periodic or cumulative gaps in local or foreign currency expertise consistent with the nature of supervised activities. measure the bank’s risk of liquidity in the short, medium and long terms. 8.9.1. Liquidity Risk This allows estimating the net refinancing needs on different The bank’s strategy in terms of liquidity risk management buckets and determining the appropriate coverage. aims at adjusting the structure of its resources in phase with the development of its business activity. 8.9.3. Sensitivity of the value of banking book Liquidity risk is defined as the inability of the Bank to meet Interest Rate Stress Testing and Sensitivity Analysis its obligations when unexpected needs occur and that the ALM department performs stress testing simulations in bank’s liquid assets cannot cover them. order to measure the impact of a change in interest rates Such an event might be induced by other causes than on net interest income and the economic value of equity. liquidity, such as default of counterparts, or adverse An interest rate shock of 200 basis points on the Net Banking changes in the market, resulting in potential losses. Income is estimated at MAD +57 million at june 30, 2013. Two major factors may generate a liquidity risk : Likewise, an interest rate shock of 200 basis points would have an impact of MAD 183 million on the economic value of equity • The inability of the establishment to raise the necessary or 1,45% of the regulatory capital. funds to face unexpected situations over the short term, notably in case of massive withdrawal of deposited assets and maximal drawing of off-balance-sheet commitments. F-38 Stress Testing applied to Liquidity on an individual basis for each entity in the Group and on a consolidated basis at the level of BMCE Bank Group. In order to assess the Bank’s liquidity in a crisis situation, ALM department performs stress testing in case of a NB: In 2009, BMCE Bank Group launched an internal rating pressure on resources (massive withdrawal of deposits). project for the purpose of preparing for advanced methods These scenarios allow an assessment of the bank’s capacity 8.10.2. Capital Components to meet its obligations in situations of liquidity crisis. Pursuant to the standardised approach, BMCE Bank Three Scenarios are defined : Group capital is calculated in conformity with Circular no. • Scenario 1 : this scenario takes into account a pressure 26/G/2006 relative to regulatory capital requirements for on demand deposits for 3 months, while maintaining the credit institutions and similar entities and to Circular no. credit activity. The liquidity behaviour is studied thanks to 24/G/2006 relative to capital. liquidity gaps on the first three months. This stress test Capital Requirements by Type of Risks on a Consolidated assumes the withdrawal of 30% of time deposits (10% per Base month) ; • Scenario 2 : this scenario takes into account a pressure Risk weighted assets on demand deposits for 10 days, while maintaining the Credit Risk 141 237 447 credit activity. Market Risk 13 655 837 The objective of this scenario is to test the capacity of the Operational Risk 15 383 016 Bank to meet its obligations, following the withdrawal of Other risks (Pilier II) volatile time deposits, on a very short period (10 days) ; Total of Weighted Risks 170 276 300 • Scenario 3 : This is the worst case scenario, with a maximum pressure on deposits in a major crisis situation, where the bank looses the totality of demand deposits in 10 days. Regulatory capital adequacy ratio At june 30, 2013, the 12-month-span liquidity gap shows a liquidity surplus of 8,7 billion MAD compared with +9.9 billion amount MAD to the end of December 2012. Furthermore, the liquidity Tier I 15 408 008 ratio (1 month liquid assets to 1 month liabilities) stands at Total of eligible equity 22 033 649 107%. Total risk-weighted assets 170 276 300 8.10. Capital Components and Capital Adequacy Ratio Tier I 9,05% The Main Characteristics of the components of Capital Capital adequacy ratio 12,94% Share Capital BMCE Bank has a capital of MAD 1,794,633 900, consisting of 179,463,390 ordinary shares with a nominal value of 10 MAD, fully paid. Each action usually gives a right to vote. Subordinated debts Total subordinated debt added up to about 5.4 billion MAD at june 30, 2013. 8.10.1. Evaluation of the Capital Adequacy BMCE BANK Group has opted for the standard approach, as presented in the circulars issued by Bank Al-Maghrib (BAM), (or, the Central Bank of Morocco). The circulars in question are : • Circular no. 26/G/2006 relative to regulatory requirements in equity capital for credit institutions and similar entities ; • Circular no. B3/G/2006 relative to the methods of calculating credit risk weighted assets ; • Circular no. 25/G/2006 relative to the minimum requirement of capital adequacy ratio for credit institutions and similar entities; • Circular no. 24/G/2006 relative to capital. These circulars cover all the risks taken by the Bank. In fact, the methods of calculating market risks are governed by these selfsame circulars, according to the standard approach. Regulatory capital requirements for credit risks are applied F-39 BMCE Bank

Capital : 1 794 633 900 dirhams Headoffice : 140, avenue Hassan II, 20 000, Casablanca BP 13425 Casa Principale Arrêté du Ministre des Finances n° 2348-94 du 14 rabii I 1415 (23 août 1994) Trade register : casa 27.129 Swift : bmce ma mc Telex : 21.931 - 24.004

Group GENERAL SECRETARIAT Tel. : 05 22 49 80 04 Fax : 05 22 26 46 55

FINANCIAL COMMUNICATION Tel. : 05 22 49 80 03 / 05 22 46 21 97 Fax : 05 22 26 49 65 E-mail : [email protected]

BMCE BANK web site : www.bmcebank.ma INTERNATIONAL TRADE web site : www.bmcetrade.com investment Bank web site : www.bmcecapital.com

F-40

Auditors’ Report on the Consolidated Financial Statements Period from January 1st to December 31st 2012

This is a free translation into English of the auditor’s report on the consolidated financial statements issued in French and it is provided solely for the convenience of English-speaking users. This report should be read in conjunction with and construed in accordance with Moroccan law and professional auditing standards applicable in Morocco. We have audited the attached consolidated financial statements of the Banque Marocaine du Commerce Extérieur and its subsidiaries (BMCE Bank Group), which comprise the consolidated balance sheet as at December 31st, 2012, the consolidated income statement, the consolidated statement of comprehensive income, the consolidated statement of changes in equity and the consolidated cash flow statement for the year then ended, as well as notes containing a summary of main accounting policies and other explicative notes. These consolidated financial statements show a consolidated shareholders’ equity of KMAD 18,413,529 including a consolidated net income of KMAD 1,579,461. Management’s Responsibility The Management is responsible for the preparation and the fair presentation of these consolidated financial statements in accordance with the International Accounting Standards (IAS/IFRS). This responsibility includes designing, implementing and maintaining internal control relevant to the preparation and presentation of consolidated financial statements that are free from material misstatements, and making accounting estimates that are reasonable with regards to the circumstances. Auditors’ Responsibility Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with professional standards applicable in Morocco. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, resulting from fraud or errors. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall consolidated financial statements presentation. We believe that the audit evidence that we have obtained is sufficient and appropriate to provide a reasonable basis for our audit opinion. Opinion on the consolidated financial statements In our opinion, the consolidated financial statements referred to in the first paragraph above give, in all their significant aspects, a fair view of the financial position of BMCE Bank Group composed of entities included in the consolidation as at December 31st, 2012 as well as the financial performance and the cash flows for the year then ended, in accordance with accounting standards and policies described in the notes. Without qualifying the opinion expressed above, we draw your attention to note 2.7 which describes the final outcome of the tax audit of BMCE Bank which took as an effect the recognition in 2012 of a gross expense of KMAD 387,058.

Casablanca May 20, 2013

Faïçal MEKOUAR Bachir TAZI Partner Partner

F-41 I. CONSOLIDATED BALANCE SHEET, CONSOLIDATED INCOME STATEMENT, CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME, STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY, CASH FLOW STATEMENTS AND SUMMARY OF ACCOUNTING POLICIES The consolidated financial statements at 31 December 2012 were approved by the board of directors on 22 March 2013. 1.1. Consolidated Balance Sheet

Balance Sheet Assets NOTES 2012 2011 Cash and amounts due from central banks and post office banks 4.1 9 922 200 6 391 958 Financial assets at fair value through profit or loss 4.2 34 244 677 31 732 316 Derivatives used for hedging purposes - - Available-for-sale financial assets 4.3 2 795 923 2 330 377 Loans and receivables due from credit institutions 4.4 21 396 946 23 822 680 Loans and receivables due from customers 4.5 138 808 778 121 342 658 Remeasurement adjustment on interest rate risk hedged assets - - Held-to-maturity financial assets 4.7 10 518 941 9 590 911 Current tax assets 4.8 215 856 408 979 Deferred tax assets 4.8 310 849 321 084 Accrued income and other assets 4.9 4 938 775 4 559 041 Non current assets held for sale - - Investment associates 4.10 406 928 399 358 Investment property 4.11 614 160 547 099 Property, plant and equipment 4.11 5 131 528 5 064 126 Intangible assets 4.11 751 455 645 081 Goodwill 4.12 832 470 832 470 TOTAL ASSETS 230 889 486 207 988 138 (In thousand MAD)

LIABILITIES & SHAREHOLDERS EQUITY NOTES 2012 2011 Due to Central Banks and Post Office Banks 67 382 - Financial liabilities at fair value through profit or loss 4.2 1 614 1 752 Derivatives used for hedging purposes - - Due to credit institutions 4.4 34 228 166 24 848 609 Due to customers 4.5 144 650 757 139 152 010 Debt securities 4.6 14 014 898 12 008 860 Remeasurement adjustment on interest rate risk hedged portfolios - - Current tax liabilities 4.8 36 296 324 592 Deferred tax liabilities 4.8 983 149 934 127 Accrued expenses and other liabilities 4.9 13 210 127 8 971 070 Liabilities related to non-current assets held for sale - - Technical reserves of insurance companies - - Provisions for contingencies and charges 4.13 523 235 457 440 Subsidies, assigned public funds and special guarantee funds - - Subordinated debts 4.6 4 760 333 4 904 381 TOTAL DEBTS 212 475 957 191 602 841 Capital and related reserves 11 981 368 10 451 134 Consolidated reserves - - - Attributable to parent 1 269 541 1 045 085 - Non-controlling interests 3 516 000 3 318 803 Unrealized or deferred gains or losses, attributable to parent 86 129 82 186 Unrealized or deferred gains or losses, non-controlling interests -18 970 -19 665 Net Income - Attributable to parent 923 152 850 199 - Non-controlling interests 656 309 657 555 TOTAL CONSOLIDATED SHARE HOLDERS’S EQUITY 18 413 529 16 385 297 TOTAL 230 889 486 207 988 138 (In thousand MAD)

F-42 1.2. CONSOLIDATED INCOME STATEMENT

NOTES 2012 2011 + Interests income 10 822 706 9 667 668 - Interests expense -4 579 824 -4 095 844 Net Interest income 2.1 6 242 882 5 571 824 + Fees income 1 846 607 1 703 136 - Fees expense -320 911 -280 201 Net fee income 2.2 1 525 696 1 422 935 +/- Net gains or losses on financial instruments at fair value through profit or loss 2.3 651 021 702 730 +/- Net gains or losses on available for sale financial assets 2.4 150 157 27 075 Income from market transactions 801 178 729 805 + Other banking revenues 2.5 781 350 792 174 - Other banking expenses 2.5 -333 330 -376 675 Net Banking Income 9 017 776 8 140 063 - General Operating Expenses 2.9 -4 860 566 -4 588 896 - Allowances for depreciation and amortization of tangible and intangible assets 2.9 -573 940 -535 299 Gross Operating Income 3 583 270 3 015 868 - Cost of Risk 2.6 -1 107 613 -872 214 Operating Income 2 475 657 2 143 654 +/- Share in net income of companies accounted for by equity method 65 770 44 590 +/- Net gains or losses on other assets 2.7 -390 484 -6 717 +/- Change in goodwill - - Pre-tax earnings 2 150 943 2 181 527 +/- Corporate income tax 2.8 -571 482 -673 773 Net income 1 579 461 1 507 754 Non-controlling interests 656 309 657 555 Net income attributable to parent 923 152 850 199 Earnings per share 5,1 4,9 Diluted Earnings per share 5,1 4,9 (In thousand MAD)

1.3. CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME 2012 2011 Net income 1 579 461 1 507 754 Currency translation adjustment 1 689 -2 912 Net Reevaluation of available for sale financial assets 2 949 81 959 Reevaluation of hedging instruments Reevaluation of fixed assets Actuarial gains and losses on defined plans Proportion of gains and losses directly recognised in shareholders equity on companies consolidated under equity method Total gains and losses directly recognised in shareholders equity 4 638 79 047 Net income and gains and losses directly recognised in shareholders equity 1 584 099 1 586 801 attributable to parent 927 095 953 364 Non-controlling interests 657 004 633 437 (In thousand MAD)

F-43 1.4. STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY

Reserves Unrealised Shareholder’s Reserves Non- Share Treasury & or deferred Equity related to controlling Total Capital stock consolidated gains or attributable stock interests earnings losses to parent Ending balance of Shareholder’s Equity 1 719 514 8 719 711 0 1 972 189 -20 979 12 390 435 3 428 530 15 818 965 12.31.2010 Change in the accounting methods Ending Balance of adjusted Shareholder’s Equity 1 719 514 8 719 711 0 1 972 189 -20 979 12 390 435 3 428 530 15 818 965 12.31.2010 Operations on capital 11 909 -36 548 -24 639 276 523 251 884 Share-based payment plans Operations on treasury stock Dividends -510 486 -510 486 -242 559 -753 045 Net income 850 199 850 199 657 555 1 507 754 PP&E and intangible assets : Revaluations and disposals (A) Financial instruments : change in fair Value and 106 077 106 077 -24 118 81 959 transfer to earnings (B) Currency translation adjustments : Changes and -2 912 -2 912 -2 912 transfer to earnings (C) Unrealized or deferred gains or losses (A)+ (B) 0 0 0 0 103 165 103 165 -24 118 79 047 + (C) Change in the scope of consolidation (1) -177 271 -177 271 -120 522 -297 793 Others (2) -202 799 -202 799 -18 716 -221 515 Ending Balance of Shareholder’s Equity 1 719 514 8 731 620 0 1 895 284 82 186 12 428 604 3 956 693 16 385 298 12.31.2011 Impact of changes in accounting methods Ending Balance of adjusted Shareholder’s Equity 1 719 514 8 731 620 0 1 895 284 82 186 12 428 604 3 956 693 16 385 298 12.31.2011 Operations on capital (3) 75 000 1 455 234 151 846 1 682 080 45 587 1 727 667 Share-based payment plans Operations on treasury stock Dividends -530 954 -530 954 -329 259 -860 213 Net income 923 152 923 152 656 309 1 579 461 PP&E and intangible assets: Revaluations and disposals (E) Financial instruments: change in fair Value and 2 254 2 254 695 2 949 transfer to earnings (F) Currency translation adjustments: Changes and 1 689 1 689 1 689 transfer to earnings (G) Unrealized or deferred gains or losses (E)+ (F) 0 0 0 0 3 943 3 943 695 4 638 + (G) Change in the scope of consolidation (4) -251 218 -251 218 -187 508 -438 726 Others 4 583 4 583 10 822 15 405 Ending Balance of adjusted Shareholder’s Equity 1 794 514 10 186 854 0 2 192 693 86 129 14 260 190 4 153 339 18 413 529 12.31.2012 (In thousand MAD) (1) : Change in scope in 2011 This primarily relates to the impact from acquisition of new stakes in BOA and LOCASOM as well as acquisitions by BOA Group.

(2) : Miscellaneous This relates to corrections to goodwill in 2011, particularly in respect of Hanouty.

(3) : Share capital and reserves related to share capital In 2012, BMCE BANK increased share capital by MAD 1,500,000K through an equity issue exclusively for key shareholders. This increase resulted in the issue of 7,500,000 new shares at a unit price of 200 dirhams per share, the par value being 10 dirhams and the share premium 190 dirhams.

Issue of 7,500,000 shares with a par value of 10 dirhams per share 75,000

Issue premium : 7,500,000 shares with an issue premium of 190 per share through reserves 1,425,000

4) : Change in scope in 2012 This primarily relates to the impact from the acquisition of new stakes in BOA and the acquisitions made by BOA Group.

F-44 1.5. CASH FLOW STATEMENTS AT 31 DECEMBER 2012

1.5.1. Cash Flow Statement 2012 2011 Pre-tax net income 2 150 943 2 181 527 +/- Net depreciation/amortization expense on property, plant, and equipment and intangible assets 3 054 760 2 963 886 +/- Impairment of goodwill and other non- current assets 0 0 +/- Impairment of financial assets 109 300 165 026 +/- Net allowances for provisions 665 231 659 723 +/- Share of earnings in subsidiaries accounted for by equity method -55 215 -44 591 +/- Net loss (income) from investing activities -990 901 -1 465 434 +/- Net loss (income) from financing activities 0 0 +/- Other movements 195 374 95 910 Non monetary items included in pre-tax net income and other adjustments 2 978 549 2 374 520 +/- Cash flows related to transactions with credit institutions 13 027 531 10 723 883 +/- Cash flows related to transactions with customers -14 814 540 -10 060 593 +/- Cash flows related to transactions involving other financial assets and liabilities -2 343 396 -3 805 482 +/- Cash flows related to transactions involving non financial assets and liabilities 3 581 880 -28 000 +/- Taxes paid -602 893 -626 156 Net Increase (Decrease) in cash related to assets and liabilities generated by operating activities -1 151 418 -3 796 348 Net Cash Flows from Operating Activities 3 978 074 759 699 +/- Cash Flows related to financial assets and equity investments -1 093 317 -1 090 685 +/- Cash flows related to investment property -286 -177 +/- Cash flows related to PP&E and intangible assets -528 089 -1 298 024 Net Cash Flows from Investing Activities -1 621 692 -2 388 886 +/- Cash flows related to transactions with shareholders 1 096 982 -339 866 +/- Cash flows generated by other financing activities 1 949 786 703 344 Net Cash Flows from Financing Activities 3 046 768 363 478 Effect of movements in exchange rates on cash and equivalents 57 761 -30 074 Net Increase in Cash and equivalents 5 460 911 -1 295 783 Beginning Balance of Cash and Equivalents 10 638 001 11 933 784 Net Balance of cash accounts and accounts with central banks and post office banks 6 391 958 8 033 096 Net Balance of demand loans and deposits- credit institutions 4 246 043 3 900 688 Ending Balance of Cash and Equivalents 16 098 912 10 638 001 Net Balance of cash accounts and accounts with central banks and post office banks 9 854 817 6 391 958 Net Balance of demand loans and deposits- credit institutions 6 244 095 4 246 043 Net increase in cash and equivalents 5 460 911 -1 295 783 (In thousand MAD) 1.5.2. Cash Flow Statement by Geographical Region morocco EUROPE AFRICA Pre-tax net income 994 251 66 060 1 090 753 +/- Net depreciation/amortization expense on property, plant, and equipment and intangible assets 2 786 704 24 487 243 569 +/- Impairment of goodwill and other non- current assets -86 389 284 86 105 +/- Impairment of financial assets 109 300 0 0 +/- Net allowances for provisions 261 647 28 727 374 857 +/- Share of earnings in subsidiaries accounted for by equity method -10 157 0 -45 058 +/- Net loss (income) from investing activities -843 863 -14 178 -132 860 +/- Net loss (income) from financing activities 0 0 0 +/- Other movements 175 881 34 802 -15 430 Non monetary items included in pre-tax net income and other adjustments 2 393 123 74 122 511 183 +/- Cash flows related to transactions with credit institutions 10 460 395 -1 049 898 3 617 034 +/- Cash flows related to transactions with customers -14 131 874 55 536 -738 202 +/- Cash flows related to transactions involving other financial assets and liabilities -1 579 885 16 039 -779 550 +/- Cash flows related to transactions involving non financial assets and liabilities 4 819 766 -50 461 -1 187 425 +/- Taxes paid -447 704 3 023 -158 212 Net Increase (Decrease) in cash related to assets and liabilities generated by operating activities -879 302 -1 025 761 753 645 Net Cash Flows from Operating Activities 2 508 072 -885 579 2 355 581 +/- Cash Flows related to financial assets and equity investments -644 483 -11 800 -437 034 +/- Cash flows related to investment property -286 0 0 +/- Cash flows related to PP&E and intangible assets -327 339 4 718 -205 468 Net Cash Flows from Investing Activities -972 108 -7 082 -642 502 +/- Cash flows related to transactions with shareholders 1 167 095 94 260 -164 373 +/- Cash flows generated by other financing activities 1 406 465 -31 588 574 909 Net Cash Flows from Financing Activities 2 573 560 62 672 410 536 Effect of movements in exchange rates on cash and equivalents -4 083 27 195 34 649 Net Increase in Cash and equivalents 4 105 441 -802 794 2 158 264 Beginning Balance of Cash and Equivalents 2 530 547 1 354 696 6 752 758 Net Balance of cash accounts and accounts with central banks and post office banks 1 712 872 85 154 4 593 932 Net Balance of demand loans and deposits- credit institutions 817 675 1 269 542 2 158 826 Ending Balance of Cash and Equivalents 6 635 988 551 902 8 911 022 Net Balance of cash accounts and accounts with central banks and post office banks 3 764 729 -12 496 6 102 584 Net Balance of demand loans and deposits- credit institutions 2 871 259 564 398 2 808 438 Net increase in cash and equivalents 4 105 441 -802 794 2 158 264 F-45 (In thousand MAD) 1.6. SUMMARY OF ACCOUNTING POLICIES APPLIED BY Elimination of intragroup balances and transactions THE GROUP Intragroup balances arising from transactions between 1.6.1. Applicable accounting standards consolidated companies, and the transactions themselves, including income, expenses and dividends, are eliminated. The first consolidated financial statements to be prepared Profits and losses arising from intragroup sales of assets by BMCE Bank Group in accordance with international are eliminated, except where there is an indication that the accounting standards (IFRS) were those for the period ended asset sold is impaired. 30 June 2008 with an opening balance on 1 January 2007. Translation of financial statements prepared in foreign The consolidated financial statements of BMCE Bank currencies Group have been prepared in accordance with international accounting standards (International Financial Reporting BMCE Bank Group’s consolidated financial statements are Standards – IFRS), as approved by the IASB. prepared in dirhams. The financial statements of companies whose functional currency is not the dirham are translated The Group did not choose to early-adopt the new standards, using the closing rate method. Under this method, all amendments, and interpretations adopted by the IASB which assets and liabilities, both monetary and non-monetary, may be applied retrospectively. The standards in question are translated using the spot exchange rate at the balance are IFRS 10 “Consolidated Financial Statements”, IFRS 11 sheet date. Income and expenditures are translated at the “Joint Arrangements”, IFRS 12 “Disclosure of involvment average rate for the period. with Other Entities”, IFRS 13 “Fair Value Measurement” and the amendment to IAS 19 “Employment Benefits”, replacing d. Business combinations and measurement of goodwill the Corridor Method. For the IASB, these standards are Cost of a business combination effective for the periods starting on or after 1 January 2013. The cost of a business combination is measured as the It is worth noting that application of the standards IFRS 10, aggregate fair value of assets acquired, liabilities incurred 11, 12 and 13 is not deemed to have any material impact or assumed and equity instruments issued by the acquirer on the Group’s financial statements. Analysis is currently in consideration for control of the acquired company. Costs being undertaken to estimate the impact from applying the attributable to the acquisition are recognised through amendment to IAS 19. income. 1.6.2. Consolidation principles Allocating the cost of a business combination to the a. Scope of consolidation assets acquired and liabilities incurred or assumed The scope of consolidation includes all Moroccan and The Group allocates, at the date of acquisition, the cost of foreign entities in which the Group directly or indirectly a business combination by recognising those identifiable holds a stake. assets, liabilities and contingent liabilities of the acquired company which meet the criteria for fair value recognition BMCE Bank Group includes within its scope of consolidation at that date. all entities, whatever their activity, in which it directly or indirectly holds 20% or more of existing or potential voting Any difference between the cost of the business combination rights. In addition, it consolidates entities if they meet the and the Group’s share of the net fair value of the identifiable following criteria: assets, liabilities and contingent liabilities is recognised under goodwill. • The subsidiary’s total assets exceed 0.5% of the parent company’s; Goodwill • The subsidiary’s net assets exceed 0.5% of the parent At the date of acquisition, goodwill is recognised as an company’s; asset. It is initially measured at cost, that is, the difference • The subsidiary’s banking income exceeds 0.5% of the between the cost of the business combination over the parent company’s ; Group’s share of the net fair value of the identifiable assets, • “Cumulative” thresholds which ensure that the combined liabilities and contingent liabilities. total of entities excluded from the scope of consolidation The Group has adopted from 2012 the “full goodwill” does not exceed 5% of the consolidated total. method for new acquisitions. This method consists of measuring goodwill based on the difference between the b. Consolidation methods cost of the business combination and minority interests The method of consolidation adopted (fully consolidated over the fair value of the identifiable assets, liabilities and or accounted for under the equity method) will depend on contingent liabilities. whether the Group has full control, joint control or exercises It is worth noting that the Group has not restated business significant influence. combinations occurring before 1 January 2008, the date of At 31 December 2012, no Group subsidiary was jointly controlled. first-time adoption of IFRS, in accordance with IFRS 3 and as permitted under IFRS 1. c. Consolidation rules Measurement of goodwill The consolidated financial statements are prepared using uniform accounting policies for reporting like transactions Following initial recognition, goodwill is measured at cost and other events in similar circumstances. less cumulative impairment. F-46 In accordance with IAS 36, impairment tests must be charges) that are regarded as an adjustment to the effective conducted whenever there is any indication of impairment interest rate on the loan. that a unit may be impaired and at least once a year to Loans and receivables are subsequently measured at ensure that the goodwill recognised for each CGU does not amortised cost. The income from the loan, representing need to be written down. interest plus transaction costs and fees and commission At 31 December 2012, the Group conducted impairment included in the initial value of the loan, is calculated using test to ensure that the carrying amount of cash-generating the effective interest method and taken to income over the units was still lower than the recoverable amount. life of the loan. The recoverable amount of a cash-generating unit is the b. Securities higher of the net fair value of the unit and its value in use. Classification of securities Fair value is the price that is likely to be obtained from Securities held by the Group are classified under one of selling the CGU in normal market conditions. three categories. Value in use is based on an estimate of the current value of Financial assets at fair value through P&L future cash flows generated by the unit’s activities as part of the Bank’s market activities: This category includes financial assets and liabilities held for trading purposes. They are measured at fair value at • If the subsidiary’s recoverable amount is more than the balance sheet date under “financial assets at fair value the carrying amount, then there is no reason to book an through P&L”. Changes in fair value are recognised in the impairment charge; income statement under “Net gains or losses on financial • If the subsidiary’s recoverable amount is less than instruments at fair value through P&L”. the carrying amount, the difference is recognised as an It is worth noting that the Group has not designated, impairment charge. It will be allocated to goodwill as a on initial recognition, non-derivative financial assets priority and subsequently to other assets on a pro-rata and liabilities at fair value through income using option basis. available under IAS 39. The Bank has employed a variety of methods for measuring Held-to-maturity financial assets CGU value in use depending on the subsidiary. These methods are based on assumptions and estimates: Held-to-maturity financial assets include securities with fixed or determinable payments and fixed maturity • A revenue-based approach, commonly known as the securities that the Group has the intention and ability to “dividend discount model”, is a standard method used by hold until maturity. the banking industry. The use of this method depends on the subsidiary’s business plan and will value the subsidiary Assets in this category are accounted for at amortised based on the net present value of future dividend payments. cost using the effective interest method, which builds in These flows are discounted at the cost of equity. amortisation of premium and discount, corresponding to the difference between the asset’s purchase price and • The “discounted cash flow method” is a standard method redemption value and acquisition costs, if material. They for measuring firms in the services sector. It is based on may be written down, if applicable, in the event of issuer discounting available cash flows at the weighted average default. Income earned from this category of assets is cost of capital. included in “Interest and similar income” in the income Step acquisitions statement. In accordance with revised IFRS 3, the Group does not Available-for-sale financial assets calculate additional goodwill on step acquisitions once Available-for-sale financial assets are fixed income and control has been obtained. floating rate securities other than those classified under the In particular, in the event that the Group increases its two previous categories. percentage interest in an entity which is already fully Assets included in the available-for-sale category are consolidated, the difference at acquisition date between initially recognised at fair value plus transaction costs, if the cost of acquiring the additional share and share material. At the balance sheet date, they are re-measured already acquired in the entity is recognised in the Group’s at fair value, with changes in fair value shown on a separate consolidated reserves. line in shareholders’ equity. Upon disposal, these unrealised 1.6.3. Financial assets and liabilities gains and losses are transferred from shareholders’ equity to the income statement, where they are shown on the line a. Loans and receivables “Net gains or losses on available-for-sale financial assets”. The same applies in the event of impairment. Loans and receivables include credit provided by the Group. Income recognised using the effective interest method for Loans and receivables are initially measured at fair value fixed income available-for-sale securities is recorded under or equivalent, which, as a general rule, is the net amount “Interest and similar income” in the income statement. disbursed at inception including directly attributable origination costs and certain types of fees or commission Dividend income from floating rate securities is recognised (syndication commission, commitment fees and handling under “Net gains or losses on available-for-sale financial F-47 assets” when the Group’s right to receive payment is for individually material assets or on a collective basis for established. financial assets which are not individually material. Temporary acquisitions and sales If the Group determines that there is no objective evidence of impairment to a financial asset, whether considered Repurchase agreements individually material or not, it includes this asset within a Securities subject to repurchase agreements are recorded in group of financial assets with a similar credit risk profile the Group’s balance sheet in their original category. and subjects them to an impairment test on a collective basis. The corresponding liability is recognised in the under “Borrowings” as a liability on the balance sheet. At an individual level, objective evidence that a financial asset is impaired includes observable data relating to the Securities temporarily acquired under reverse repurchase following events: agreements are not recognised in the Group’s balance sheet. The corresponding receivable is recognised under • The existence of accounts which are past the due date; “Loans and receivables”. • Any knowledge or evidence that the borrower is Securities lending and borrowing transactions experiencing significant financial difficulty, such that a risk can be considered to have arisen, regardless of whether the Securities lending transactions do not result in de- borrower has missed any payments; recognition of the lent securities while securities borrowing transactions result in recognition of a debt on the liabilities • Concessions in respect of the credit terms granted to the side of the Group’s balance sheet. borrower that the lender would not have considered had the borrower not been experiencing financial difficulty. Date of recognition of securities transactions Impairment is measured as the difference between the Securities recognised at fair value through income or carrying amount and the present value, discounted at the classified under held-to-maturity or available-for-sale asset’s original effective interest rate, of those components financial assets are recognised at the trade date. (principal, interest, collateral, etc.) regarded as recoverable. Regardless of their classification (recognised as loans and The Group’s portfolio doubtful loan portfolio is categorised receivables or debt), temporary sales of securities as well as as follows : sales of borrowed securities are initially recognised at the settlement date. Individually material loans : Each of these loans is reviewed individually in order to estimate recovery payments and These transactions are carried on the balance sheet until determine recovery schedules. Impairment under IFRS the Group’s rights to receive the related cash flows expire relates to the difference between amounts owing and the or until the Group has substantially transferred all the risks net present value of expected recovered payments. and rewards related to ownership of the securities. Non-individually material loans : Loans not reviewed c. Foreign currency transactions on an individual basis are segmented into different risk Monetary assets and liabilities denominated in foreign categories having similar characteristics and are assessed currencies using a statistical model, based on historical data, of annual recovery payments by each risk category. Monetary assets and liabilities denominated in foreign currencies are translated into the functional currency of Counterparties not showing any evidence of impairment the relevant Group entity at the closing rate. Translation These loans are risk-assessed on a portfolio basis with similar differences are recognised in the income statement, except characteristics. This assessment draws upon historical data, for those arising from financial instruments earmarked as a adjusted if necessary to reflect circumstances prevailing at cash flow hedge or a net foreign currency investment hedge, the balance sheet date. This analysis enables the Group to which are recognised in shareholders’ equity. identify counterparty groups which, as a result of events d. Impairment and restructuring of financial assets occurring since inception of the loans, have collectively acquired a probability of default at maturity that provides Impairment of loans and receivables and held-to- objective evidence of impairment of the entire portfolio maturity financial assets, provisions for financing and but without it being possible at that stage to allocate the guarantee commitments impairment to individual counterparties. At each balance sheet date, the Group determines whether This analysis also estimates the loss relating to the there is objective evidence of impairment to a financial portfolios in question, taking account of trends in the asset or group of financial assets as a result of an event economic cycle during the assessment period. or several events occurring after initial recognition, whether Based on the experienced judgement of the Bank’s divisions this event affects the amount or timing of future cash flows or Risk Division, the Group may recognise additional and whether the consequences of the event can be reliably collective impairment provisions in respect of an economic measured. sector or geographical region affected by exceptional The Group assesses, in the first instance, whether there economic events. In this regard the Group established is objective evidence of impairment on an individual basis watch lists of the accounts at risk.

F-48 Provisions and provision write-backs are recognised in the e. Issues of debt securities income statement under “Cost of risk” while the theoretical Financial instruments issued by the Group are qualified income earned on the carrying amount of impaired loans as debt instruments if the Group company issuing the is recognised under “Interest and similar income” in the instruments has a contractual obligation to deliver cash or income statement. another financial asset to the holder of the instrument. The Impairment of available-for-sale financial assets same applies if the Group is required to exchange financial assets or liabilities with another entity on terms that Impairment of “available-for-sale financial assets”, which mainly comprise equity instruments, is recognised through are potentially unfavourable to the Group, or to deliver a income if there is objective evidence of impairment as a variable number of the Group’s treasury shares. result of one or more events occurring since acquisition. In the Group’s case, this concerns certificates of deposit The Group has determined two types of non-cumulative issued by Group banks such as BMCE BANK and BANK impairment for equity instruments recorded under OF AFRICA as well as notes issued by finance companies “available-for-sale financial assets”. The first one is a MAGHREBAIL and SALAFIN. significant decline in the security’s price. By “significant” is f. Treasury shares implied a fall of more than 40% from the acquisition price. The second is a prolonged decline, defined as an unrealised “Treasury shares” refer to shares issued by the parent loss over a one-year period. company, BMCE Bank SA, or by its fully consolidated subsidiaries. Treasury shares held by the Group are deducted For financial instruments quoted on a liquid market, from consolidated shareholders’ equity regardless of the impairment is determined using quoted prices and, for purpose for which they are held. Gains and losses arising unquoted financial instruments, is based on valuation models. on such instruments are eliminated from the consolidated Impairment losses taken against equity securities are income statement. recognised as a component of net banking income under “Net At 31 December 2012 and at 31 December 2011, the Bank gains or losses on available-for-sale financial assets” and did not hold any treasury shares. may only be reversed through income after these securities are sold. Any subsequent decline in fair value constitutes an g. Derivative instruments additional impairment loss, recognised in through income. All derivative instruments are recognised in the balance Otherwise, and given the characteristics of its portfolio, the sheet on the trade date at the trade price and are re- Group is not concerned by debt instruments. measured to fair value on the balance sheet date. Restructuring of assets classed as “Loans and receivables” Derivatives held for trading purposes are recognised “Financial assets at fair value through income” when their An asset classified in “Loans and receivables” is considered fair value is positive and in “Financial liabilities at fair value to be restructured due to the borrower’s financial difficulty through income” when their fair value is negative. when the Group, for economic or legal reasons related to the borrower’s financial difficulty, agrees to modify the Realised and unrealised gains and losses are recognised terms of the original transaction that it would not otherwise in the income statement under “Net gains or losses on consider, resulting in the borrower’s contractual obligation financial instruments at fair value through income”. to the Group, measured at present value, being reduced compared with the original terms. h. Determining the fair value of financial instruments At the time of restructuring, a discount is applied to the loan Fair value is defined as the amount for which an asset could to reduce its carrying amount to the present value of the be exchanged, or a liability settled, between knowledgeable, new expected future cash flows discounted at the original willing parties in an arm’s length transaction. effective interest rate. Financial assets classified under “Financial assets at fair The decrease in the asset value is recognised through value through income” and “Available-for-sale financial income under “Cost of risk”. assets” are measured at fair value. For each loan, the discount is recalculated at the Fair value in the first instance relates to the quoted price if renegotiation date using original repayment schedules and the financial instrument is traded on a liquid market. renegotiation terms. If no liquid market exists, fair value is determined by using The discount is calculated as the difference between: valuation techniques (internal valuation models as outlined in Note 4.15 on fair value). • The sum, at the renegotiation date, of the original contractual repayments discounted at the effective interest Depending on the financial instrument, these involve the rate; and use of data taken from recent arm’s length transactions, the fair value of substantially similar instruments, discounted • The sum, at the renegotiation date, of the renegotiated cash flow models or adjusted book values. contractual repayments discounted at the effective interest rate. The discount, net of amortisation, is recognised by Characteristics of a liquid market include regularly available reducing loan outstandings through income. Amortisation prices for financial instruments and the existence of real will be recognised under net banking income. arm’s length transactions. F-49 Characteristics of an illiquid market include factors such as a Given the Group’s activity, it has adopted a component- significant decline in the volume and level of market activity, based approach for property. The option adopted by the a significant variation in available prices between market Group is a component-based amortised cost method by participants or a lack of recent observed transaction prices. applying using a component-based matrix established as a function of the specific characteristics of each of BMCE i. Income and expenses arising from financial assets and liabilities Bank Group’s buildings. The effective interest rate method is used to recognise Component-based matrix adopted by BMCE BANK income and expenses arising from financial instruments, Head office property Other property which are measured at amortised cost. Period Share Period Share The effective interest rate is the rate that exactly discounts Structural works 80 55% 80 65% estimated future cash flows through the expected life of the Fasade 30 15% financial instrument or, when appropriate, a shorter period, to the net carrying amount of the asset or liability in the General & balance sheet. The effective interest rate calculation takes technical 20 20% 20 15% into account all fees received or paid that are an integral installations Fixtures and part of the effective interest rate of the contract, transaction 10 10% 10 20% costs, and premiums and discounts. fittings j. Cost of risk Impairment “Cost of risk” includes impairment provisions net of write- The Group has deemed that impairment is only applicable to backs and provisions for credit risk, losses on irrecoverable buildings and, as a result, the market price (independently- loans and amounts recovered on amortised loans as well as assessed valuation) will be used as evidence of impairment. provisions and provision write-backs for other risks such as b. Investment property operating risks. IAS 40 defines investment property as property held to earn k. Offsetting financial assets and liabilities rentals or for capital appreciation or both. An investment A financial asset and a financial liability are offset and property generates cash flows that are largely independent the net amount presented in the balance sheet if, and from the company’s other assets in contrast to property only if, the Group has a legally enforceable right to offset primarily held for use in the production or supply of goods the recognised amounts and intends either to settle on or services. a net basis or to realise the asset and settle the liability The Group qualifies investment property as any non- simultaneously. operating property. 1.6.4. Property plant and equipment and intangible assets BMCE Bank Group has opted for the cost method to value its a. Property, plant and equipment investment property. The method used to value investment property is identical to that for valuing operating property. The Group has opted for the cost model to measure property, plant and equipment and intangible assets. c. Intangible assets It is worth noting that, in application of the option provided Intangible assets are initially measured at cost which is under IFRS 1, the Group has chosen to measure certain equal to the amount of cash or cash equivalent paid or any items of property, plant and equipment at the transition other consideration given at fair value to acquire the asset date at their fair value and use this fair value as deemed at the time of its acquisition or construction. cost at this date. Subsequent to initial recognition, intangible assets are In accordance with IAS 23, borrowing costs directly measured at cost less cumulative amortisation and attributable to the acquisition are included in the acquisition impairment losses. cost of items of property, plant and equipment. The amortisation method adopted reflects the rate at which As soon as they are available for use, items of property, future economic benefits are consumed. plant and equipment are amortised over the asset’s estimated useful life. Impairment is recognised when evidence (internal or external) of impairment exists. Evidence of impairment is Given the character of BMCE Bank Group’s property, plant assesses at each balance sheet date. and equipment, it has not adopted any residual value except for transport equipment owned by LOCASOM, a subsidiary. Given the character of the intangible assets held, the Group considers that the concept of residual value is not relevant In respect of the Group’s other assets, there is neither a in respect of its intangible assets. As a result, residual value sufficiently liquid market nor a replacement policy over has not been adopted. a period that is considerably shorter than the estimated useful life for any residual value to be adopted. 1.6.5. Leases This residual value is the amount remaining after deducting Group companies may either be the lessee or the lessor in a from the acquisition cost all allowable depreciable charges. lease agreement. F-50 Leases contracted by the Group as lessor are categorised as 1.6.6. Non-current assets held for sale and discontinued either finance leases or operating leases. activities a. Lessor accounting An asset is classified as held for sale if its carrying amount is obtained through the asset’s sale rather than through its Finance leases continuous use in the business. In a finance lease, the lessor transfers the substantial At 31 December 2012, the Group did not recognise any portion of the risks and rewards of ownership of an asset assets as held for sale or discontinued activities. to the lessee. It is treated as a loan made to the lessee to finance the purchase of the asset. 1.6.7. Employee benefits The present value of the lease payments, plus any residual Classification of employee benefits value, is recognised as a receivable. a. Short-term benefits The net income earned from the lease by the lessor is equal to Short-term benefits are due within twelve months of the the amount of interest on the loan and is taken to the income close of the financial year in which employees provided the statement under “Interest and other income”. The lease corresponding services. They are recognised as expenses in payments are spread over the lease term and are allocated to the year in which they are earned. reducing the principal and to interest such that the net income reflects a constant rate of return on the outstanding balance. b. Defined-contribution post-employment benefits The rate of interest used is the rate implicit in the lease. The employer pays a fixed amount in respect of contributions Individual and portfolio impairments of lease receivables into an external fund and has no other liability. Benefits are determined using the same principles as applied to received are determined on the basis of cumulative other loans and receivables. contributions paid plus any interest and are recognised as expenses in the year in which they are earned. Operating leases c. Defined-benefit post-employment benefits An operating lease is a lease under which the substantial portion of the risks and rewards of ownership of an asset Defined-benefit post-employment benefits are those are not transferred to the lessee. other than defined-contribution schemes. The employer undertakes to pay a certain level of benefits to former The asset is recognised under property, plant and equipment employees, whatever the liability’s cover. This liability is in the lessor’s balance sheet and depreciated on a straight- recognised as a provision. line basis over the lease term. The depreciable amount excludes the asset’s residual value. The lease payments The Group accounts for end-of-career bonuses as defined- are taken to the income statement in full on a straight-line benefit post-employment benefits: these are bonuses paid basis over the lease term. on retirement and depend on employees’ length of service. Lease payments and depreciation expenses are taken to the d. Long-term benefits income statement under “Income from other activities” and These are benefits which are not settled in full within twelve “Expenses from other activities”. after the employee rendering the related service. Provisions b. Lessee accounting are recognised if the benefit depends on employees’ length of service. Leases contracted by the Group as lessee are categorised as either finance leases or operating leases. The Group accounts for long-service awards as long-term benefits: these are payments made to employees when they Finance leases reach 6 different thresholds of length of service ranging A finance lease is treated as an acquisition of an asset by from 15 to 40 years. the lessee, financed by a loan. The leased asset is recognised e. Termination benefits in the balance sheet of the lessee at the lower of fair value or the present value of the minimum lease payments Termination benefits are made as a result of a decision calculated at the interest rate implicit in the lease. by the Group to terminate a contract of employment or a decision by an employee to accept voluntary redundancy. A matching liability, equal to the fair value of the leased The company may set aside provisions if it is clearly asset or the present value of the minimum lease payments, committed to terminating an employee’s contract of is also recognised in the balance sheet of the lessee. The employment. asset is depreciated using the same method as that applied to owned assets after deducting the residual value from the Principles for calculating and accounting for defined- amount initially recognised over the useful life of the asset. benefit post-employment benefits and other long-term The lease obligation is accounted for at amortised cost. benefits Operating leases a. Calculation method The asset is not recognised in the balance sheet of the The recommended method for calculating the liability under lessee. Lease payments made under operating leases are IAS 19 is the “projected unit credit” method. The calculation taken to the lessee’s income statement on a straight-line is made on an individual basis. The employer’s liability is basis over the lease term. equal to the sum of individual liabilities. F-51 Under this method, the actuarial value of future benefits is determined at the allotment date by the Board of Directors. determined by calculating the amount of benefits due on In the absence of any market for these instruments, retirement based on salary projections and length of service at financial valuation models are used that take into account the retirement date. It takes into consideration variables such performance-based criteria relating to the BMCE Bank share as discount rates, the probability of the employee remaining in price. The plan’s total expense is determined by multiplying service up until retirement as well as the likelihood of mortality. the unit value per option or bonus share awarded by the The liability is equal to the actuarial value of future benefits estimated number of options or bonus shares acquired at the in respect of past service within the company prior to the end of the vesting period, taking into account the conditions calculation date. This liability is determined by applying to regarding the beneficiary’s continued employment. the actuarial value of future benefits the ratio of length of 1.6.9. Provisions recorded under liabilities service at the calculation date to length of service at the retirement date. Provisions recorded under liabilities on the Group’s balance sheet, other than those relating to financial instruments The annual cost of the scheme, attributable to the cost of an and employee benefits mainly relate to restructuring, additional year of service for each participant, is determined litigation, fines, penalties and tax risks. by the ratio of the actuarial value of future benefits to the anticipated length of service on retirement. A provision is recognised when it is probable that an outflow of resources providing economic benefits will be required to b. Accounting principles settle an obligation arising from a past event and a reliable A provision is recognised under liabilities on the balance estimate can be made about the obligation’s amount. sheet to cover for all obligations. The amount of such obligations is discounted in order to determine the amount of the provision if the impact of Actuarial gains or losses arise on differences related to discounting is material. changes in assumptions underlying calculations (early retirement, discount rates etc.) or between actuarial A provision for risks and charges is a liability of uncertain assumptions and what actually occurs (rate of return on timing or amount. pension fund assets etc.) constitute. The accounting standard provides for three conditions when They are amortised through income over the average an entity must recognise a provision for risks and charges: anticipated remaining service lives of employees using the • A present obligation towards a third party ; corridor method. • An outflow of resources is probable in order to settle the The past service cost is spread over the remaining period for obligation; acquiring rights. • The amount can be estimated reliably. The annual expense recognised in the income statement under “Salaries and employee benefits” in respect of 1.6.10. Current and deferred taxes defined-benefit schemes comprises: The current income tax charge is calculated on the basis of • The rights vested by each employee during the period (the the tax laws and tax rates in force in each country in which cost of service rendered); the Group has operations. • The interest cost relating to the effect of discounting the Deferred taxes are recognised when temporary differences obligation ; arise between the carrying amount of an asset or liability in the balance sheet and its tax base. • The expected income from the pension fund’s investments (gross rate of return); A deferred tax liability is a tax which is payable at a future date. Deferred tax liabilities are recognised for all taxable • The amortisation of actuarial gains and losses and past temporary differences other than those arising on initial service costs; recognition of goodwill or on initial recognition of an • The effect of any plan curtailments or settlements. asset or liability for a transaction which is not a business combination and which, at the time of the transaction, has 1.6.8. Share-based payments not impact on profit either for accounting or tax purposes. The Group offers its employees the possibility of A deferred tax asset is a tax which is recoverable at a future participating in share issues in the form of share purchase date. Deferred tax assets are recognised for all deductible plans. temporary differences and unused carry-forwards of tax New shares are offered at a discount on the condition that losses only to the extent that it is probable that the entity in they retain the shares for a specified period. question will generate future taxable profits against which these temporary differences and tax losses can be offset. The expense related to share purchase plans is spread over the vesting period if the benefit is conditional upon the The Group has opted to assess the probability of recovering beneficiary’s continued employment. deferred tax assets. This expense, booked under “Salaries and employee Deferred taxes assets are not recognised if the probability of benefits”, with a corresponding adjustment to shareholders’ recovery is uncertain. Probability of recovery is ascertained equity, is calculated on the basis of the plan’s total value, by the business projections of the companies concerned. F-52 1.6.11. Cash flow statement The cash and cash equivalents balance is composed of the net balance of cash accounts and accounts with central banks and the net balances of sight loans and deposits with credit institutions. Changes in cash and cash equivalents related to operating activities reflect cash flows generated by the Group’s operations, including cash flows related to investment property, held-to-maturity financial assets and negotiable debt instruments. Changes in cash and cash equivalents related to investing activities reflect cash flows resulting from acquisitions and disposals of subsidiaries, associates or joint ventures included in the consolidated group, as well as acquisitions and disposals of property, plant and equipment excluding investment property and property held under operating leases. Changes in cash and cash equivalents related to financing activities reflect the cash inflows and outflows resulting from transactions with shareholders, cash flows related to subordinated debt, bonds and debt securities (excluding negotiable debt instruments). 1.6.12. Use of estimates in the preparation of the financial statements Preparation of the financial statements requires managers of business lines and corporate functions to make assumptions and estimates that are reflected in the measurement of income and expense in the income statement and of assets and liabilities in the balance sheet and in the disclosure of information in the notes to the financial statements. This requires the managers in question to exercise their judgement and to make use of information available at the time of preparation of the financial statements when making their estimates. The actual future results from operations where managers have made use of estimates may in reality differ significantly from those estimates depending on market conditions. This may have a material impact on the financial statements. Those estimates which have a material impact on the financial statements primarily relate to: • Impairment (on an individual or collective basis) recognised to cover credit risks inherent in banking intermediation activities ; Other estimates made by the Group’s management primarily relate to : • Goodwill impairment tests ; • Provisions for employee benefits; • The measurement of provisions for risks and charges.

F-53 II. NOTES TO THE INCOME STATEMENT for the year ended 31 December 2012 2.1. NET INTEREST INCOME Net interest income comprises interest income (expenses) related to customer transactions, interbank transactions, debt securities issued by the Group, the trading portfolio (fixed income securities, repurchase agreements, loan/borrowing transactions and debt securities), available-for-sale financial assets and held-to-maturity financial assets.

2012 2011 Income Expense Net Income Expense Net Customer Items 8 581 131 2 818 182 5 762 949 7 614 768 2 772 953 4 841 815 Deposits, loans and borrowings 7 991 041 2 702 532 5 288 509 6 987 941 2 601 939 4 386 002 Repurchase agreements 115 650 -115 650 171 014 -171 014 Finance leases 590 090 0 590 090 626 827 626 827 Interbank items 730 430 1 018 766 -288 336 729 381 633 259 96 122 Deposits, loans and borrowings 487 627 969 104 -481 477 524 514 576 358 -51 844 Repurchase agreements 242 803 49 662 193 141 204 867 56 901 147 966 Debt securities issued 0 0 0 0 0 0 Cash flow hedge instruments 0 0 0 0 0 0 Interest rate portfolio hedge instruments 0 0 0 0 0 0 Trading book 841 682 742 876 98 806 740 126 689 632 50 494 Fixed income securities 841 682 525 899 315 783 740 126 456 680 283 446 Repurchase agreements 0 0 Loans/borrowings 0 0 Debt securities 0 216 977 -216 977 0 232 952 -232 952 Available for sale financial assets 0 0 Held to maturity financial assets 669 463 669 463 583 393 583 393 Total interest income (expense) 10 822 706 4 579 824 6 242 882 9 667 668 4 095 844 5 571 824

(In thousand MAD)

At 31 December 2012, net interest income rose by 12% compared to 31 December 2011 to MAD 6,243 million. This was primarily due to a 14% increase in income from customer loans to MAD 7,991 million versus MAD 6,988 million at 31 December 2011 and a 19% increase in income from repurchase agreements to MAD 243 million versus MAD 205 million at 31 December 2011. It is worth noting that the Group has corrected the accounting classification for interest income from debt securities held by BOA Group. In respect of the 2011 financial statements, an amount equal to MAD 317 million was reclassified from the entry “Net gains or losses on financial instruments at fair value” to “Interest and similar income – net interest income” resulting in interest income of MAD 583 million after reclassification versus MAD 266 million prior to reclassification. Net interest income for the year ended 31 December 2011 prior to reclassification was MAD 5,254 million and MAD 5,572 million after reclassification as explained above. 2.2. NET FEE INCOME

DEC 2012 DEC 2011 Income Expense Net Income Expense Net Net fee on transactions 741 051 195 633 545 418 640 935 160 602 480 333 With credit institutions - - With customers 267 891 267 891 244 679 244 679 On custody 146 743 125 284 21 459 158 633 99 168 59 465 On foreign exchange 326 417 70 349 256 068 237 623 61 434 176 189 On financial instruments and off balance sheet - - Banking and financial services 1 105 556 125 278 980 278 1 062 201 119 599 942 602 Income from mutual funds management - - Income from electronic payment services 249 979 43 237 206 742 233 288 39 639 193 649 Insurance - - Other 855 577 82 041 773 536 828 913 79 960 748 953 NET FEE INCOME 1 846 607 320 911 1 525 696 1 703 136 280 201 1 422 935

(In thousand MAD)

Net fee income encompasses fees from interbank market and money market transactions, customer transactions, securities transactions, foreign exchange transactions, securities commitments, financial derivatives and financial services. Net fee income rose by 7% from MAD 1,423 million at 31 December 2011 to MAD 1,525 million at 31 December 2012. This can primarily be explained by (i) a strong increase in fees from foreign exchange activities which rose by 37% from MAD 237 million at 31 December 2011 to MAD 327 million at 31 December 2012 and (ii) strong growth (+10%) in fees from customer transactions which rose from MAD 244 million to MAD 268 million.

F-54 2.3. NET GAINS ON FINANCIAL INSTRUMENTS AT FAIR VALUE THROUGH profit or loss This entry includes all items of income (excluding interest income and expenses classified under “Net interest income” as described above) relating to financial instruments managed as part of the Group’s trading portfolio. This includes capital gains and losses on disposals, capital gains and losses on mark-to-market accounting and dividends from floating rate securities.

2012 2011 Assets Assets measured under measured under Trading Book Total Trading Book Total the fair value the fair value option option Fixed income and variable income securities 654 050 654 050 711 421 711 421 Derivative instruments -3 029 -3 029 -8 691 -8 691 Repurchase agreements Loans Borrowings Remeasurement of interest rate risk hedged portfolios Remeasurement of currency positions TOTAL 651 021 0 651 021 702 730 0 702 730

(In thousand MAD)

At 31 December 2012, net gains on financial instruments at fair value through income fell by 7% compared to 31 December 2011 to MAD 651 million. This was primarily due to an 8% decline in returns from fixed and floating rate securities from MAD 711 million in 2011 to MAD 654 million in 2012. 2.4. NET GAINS ON AVAILABLE-FOR-SALE FINANCIAL ASSETS The entry comprises: - Dividends and other income from equities and other floating rate securities classified under “Available-for-sale financial assets”; - Capital gains and losses on disposal of fixed and floating rate securities classified under “Available-for-sale financial assets”; - Impairment provisions on floating rate securities classified under “Available-for-sale financial assets”.

2012 2011 Fixed income securities 0 0 Disposal gains and losses Equity and other variable-income securities 150 157 27 075 Dividend income 168 564 202 827 Impairment provisions -61 578 -159 959 Net disposal gains 43 171 -15 793 TOTAL 150 157 27 075

(In thousand MAD)

At 31 December 2012, net gains on available-for-sale financial assets rose strongly compared to 31 December 2011 to MAD 150 million. This was primarily due to a 62% fall in impairment provisions which declined from MAD 160 million to MAD 61 million. 2.5. NET INCOME FROM OTHER ACTIVITIES

2012 2011 Income Expense Net Income Expense Net Net income from insurance activities 0 0 Net income from investment property 0 0 0 0 0 0 Net income from assets held under operating leases 250 971 90 322 160 649 237 638 91 090 146 548 Net income from property development activities 0 0 0 0 0 0 Other banking income & expenses 257 671 187 139 70 532 175 182 223 870 -48 688 Other operating income 272 708 55 869 216 839 379 354 61 715 317 639 Total net income from other activities 781 350 333 330 448 020 792 174 376 675 415 499

(In thousand MAD)

F-55 2.6. COST OF RISK Cost of risk comprises expenses in respect of credit risks, counterparty risks and litigation inherent in the Group’s banking activity with third parties. Impairment provisions unrelated to such risks are classified under the different entries in the income statement depending on their character. Cost of risk for the period

2012 2011 Impairment provisions -1 541 885 -1 220 654 Impairment provisions on loans and advances -1 415 449 -1 125 287 Impairment provisions on held to maturity financial assets (excluding interest rate risks) Provisions on off balance sheet commitments -2 467 -1 385 Other provisions for contingencies and charges -123 969 -93 982 Write back of provisions 717 256 443 494 Write back of impairment provisions on loans and advances 634 113 375 716 Write back of impairment provisions on held to maturity financial assets (excluding interest rate risks) Write back of provisions on off balance sheet commitments 1 743 2 916 Write back of other provisions for contingencies and charges 81 400 64 862 Changes in provisions -282 984 -95 054 Losses on counterparty risk on available for sale financial assets (fixed income securities) Losses on counterparty risk held to maturity financial assets Loss on irrecoverable loans and advances not covered by impairment provisions Loss on irrecoverable loans and advances covered by impairment provisions -288 237 -109 023 Discount on restructured products Recoveries on amortized loans and advances 5 253 13 969 Losses on off balance sheet commitments Other losses Cost of Risk -1 107 613 -872 214

(In thousand MAD) Cost of risk for the period 2012 2011 Net allowances to impairment -824 629 -777 161 Recoveries on loans and receivables previously written off 5 253 13 969 Irrecoverable loans and receivables not covered by impairment provisions -288 237 -109 022 Total cost of risk for the period -1 107 613 -872 214 (In thousand MAD) Cost of risk for the period by asset type

2012 2011 Loans and receivables due from credit institutions Loans and receivables due from customers -1 064 320 -844 624 Available-for-sale financial assets Held-to-maturity financial assets Financial instruments on trading activities Other assets Off-balance sheet commitments and other items -43 293 -27 590 TOTAL COST OF RISK FOR THE PERIOD -1 107 613 -872 214 (In thousand MAD) Change in customer impairment provisions during the period

2012 2011 TOTAL IMPAIRMENT PROVISIONS AT START OF PERIOD 5 317 746 4 476 057 Net allowance to impairment 1 347 068 1 064 343 Recoveries of impairment provisions -655 099 -402 911 Utilisation of impairment provisions -279 404 194 949 Effect of exchange rate movements and other items 6 684 -14 692 TOTAL IMPAIRMENT PROVISIONS AT END OF PERIOD 5 736 995 5 317 746 (In thousand MAD) Change in credit institution impairment provisions during the period

2012 2011 TOTAL IMPAIRMENT PROVISIONS AT START OF PERIOD 39 325 29 816 Net allowance to impairment - 13 000 Recoveries of impairment provisions - - Utilisation of impairment provisions -685 -3 491 Effect of exchange rate movements and other items - - TOTAL IMPAIRMENT PROVISIONS AT END OF PERIOD 38 640 39 325 (In thousand MAD)

F-56 Impairment provisions for credit risk by asset type 2012 2011 Impairment of assets Loans and receivables due from credit institutions 38 640 39 325 Loans and receivables due from customers 5 736 995 5 317 771 Financial instruments on trading activities Available-for-sale financial assets Held-to-maturity financial assets Other assets TOTAL IMPAIRMENT PROVISIONS AGAINST FINANCIAL ASSETS 5 775 635 5 357 096 of wich specific provisions 5 154 707 4 950 694 of wich collective provisions 620 928 406 402 Provisions recognised as liabilities Provisions for off-balance sheet commitments to credit institutions to customers Other items subject to provisions TOTAL PROVISIONS RECOGNISED AS LIABILITIES - - of which specific provisions of which collective provisions - - TOTAL IMPAIRMENT PROVISIONS 5 775 635 5 357 096 (In thousand MAD) 2.7. NET GAINS ON OTHER ASSETS

2012 2011 PP&E and intangible assets used in operations 0 0 Capital gains on disposals 0 Capital losses on disposals 0 Equity interests 0 0 Capital gains on disposals 0 0 Capital losses on disposals 0 0 Others* -390 484 -6 717 Net Gain/Loss on Other Assets -390 484 -6 717

(In thousand MAD)

After being notified on 12 January 2010 that BMCE Bank’s accounting procedures would be officially audited, the Bank underwent a tax audit in 2010, completed in December of that year in respect of financial years 2006-2009 inclusive. This tax audit related to corporate tax, personal income tax and value-added tax. - On 16 December 2010, BMCE Bank received initial notification of the items for reassessment in respect of the four financial years audited to which it replied on 16 January 2011; - On 1 March 2011, BMCE Bank received a second notification against which it made an appeal on 30 March 2011 before the local tax commission in application of the legal provisions in force relating to tax rectification procedures; - On 28 September 2012, a memorandum of agreement was signed with the tax authorities resulting in a tax adjustment totalling MAD 387,058K in principal, interest and penalty charges in respect of corporate tax, personal income tax and value-added tax for the four financial years audited. - Payment of the aforementioned sum of MAD 387,058K relating to the tax audit plus additional fees resulted in the Group recognising an expense of equal amount under “Net gains on other assets” in the 2012 consolidated income statement.

F-57 2.8 - Income Tax 2.8.1 - Current and deferred tax

2012 2011 Current tax 215 856 408 979 Deferred tax 310 849 321 084 Current and deferred tax assets 526 705 730 063 Current tax 36 296 324 592 Deferred tax 983 149 934 127 Current and deferred tax liabilities 1 019 445 1 258 719

(In thousand MAD) 2.8.2 - Net income tax expense

2012 2011 Current tax expense -514 122 -606 067 Net deferred tax expense -57 360 -67 706 Net Corporate income tax expense -571 482 -673 773

(In thousand MAD) 2.8.3 - Effective tax rate

2012 2011 Net income 1 579 461 1 507 754 Net corporate income tax expense -571 482 -673 773 Average effective tax rate -36,2% -44,7%

(In thousand MAD) Analysis of effective tax rate

2012 2011 Standard tax rate 37,0% 37,0% Differential in tax rates applicable to foreign entities -0,2% Reduced tax rate Permanent differences -0,6% Change in tax rate Deficit carry over

Other items 7,7%

Average effective tax rate 36,2% 44,7% (In thousand MAD) 2.9 - GENERAL OPERATING EXPENSES

2012 2011 Staff expenses 2 617 957 2 523 244 Taxes 74 477 76 234 External expenses 1 192 450 1 180 441 Other general operating expenses 975 682 808 979 Allowances for depreciation and provisions of tangible and intangible assets 573 940 535 296 General operating expenses 5 434 506 5 124 194 (In thousand MAD) General operating expenses rose by 6.1% in 2012 from MAD 5,124 million at 31 December 2011 to MAD 5,434 million at 31 December 2012. The can be explained by a 3.8% rise in staff expenses from MAD 2,523 million in 2011 to MAD 2,618 million in 2012 and an 8.3% increase from MAD 2,600 million in 2011 to MAD 2,816 million in 2012 in other operating expenses, including taxes other than on income, amortisation provisions and other external expenses. BMCE Bank Group’s cost-to-income ratio registered a 2.6 point improvement to 60.3% in 2012 versus 62.9% in 2011. This was due to a 6.1% rise in expenses which rose less rapidly than net banking income, the latter rising by 10.8% to MAD 9,018 million in 2012 versus MAD 8,140 million in 2011.

F-58 III. SEGMENT INFORMATION BMCE Bank Group is composed of four core business activities for accounting and financial information purposes: - Banking in Morocco: includes BMCE Bank’s Moroccan business; - Asset management and Investment banking: includes investment banking (BMCE Capital), securities brokerage (BMCE Capital Bourse) and asset management (BMCE Capital Gestion); - Specialised financial services: includes consumer credit (Salafin), leasing (Maghrébail), factoring (Maroc Factoring), recovery (RM Experts) and credit insurance (Acmar); - International activities: includes BMCE International (Madrid), Banque de Développement du Mali, La Congolaise de Banque, BMCE Bank International and Bank Of Africa. 3.1. INCOME BY BUSINESS ACTIVITY

2012 SPECIALISED ACTIVITY IN ASSET INTERNATIONAL FINANCIAL OTHERS TOTAL MOROCCO MANAGEMENT ACTIVITIES SERVICES Net interest Income 2 757 212 15 497 591 988 -6 771 2 884 956 6 242 882 Net Fee income 701 661 105 417 2 727 0 715 891 1 525 696 Net Banking Income 4 019 818 211 639 621 378 149 712 4 015 229 9 017 776 General Operating Expenses & allowances for -2 564 334 -208 723 -155 289 -80 480 -2 425 680 (5 434 506) depreciation and amortization Operating Income 1 455 604 2 916 466 089 69 112 1 589 549 3 583 270 Corporate income tax -239 534 -19 326 -101 087 -8 728 -202 807 ( 571 482) Net Earnings Group Share 285 945 43 573 114 449 26 437 452 748 923 152

(In thousand MAD)

2011 SPECIALISED ACTIVITY IN ASSET INTERNATIONAL FINANCIAL OTHERS TOTAL MOROCCO MANAGEMENT ACTIVITIES SERVICES Net interest Income 2 459 516 6 257 648 868 -6 378 2 463 561 5 571 824 Net Fee income 633 071 116 311 -9 121 0 682 674 1 422 935 Net Banking Income 3 560 669 184 886 655 610 131 202 3 607 696 8 140 063 General Operating Expenses & allowances for -2 441 749 -195 785 -145 168 -75 470 -2 266 023 (5 124 195) depreciation and amortization Operating Income 1 118 918 -10 899 510 442 55 732 1 341 675 3 015 868 Corporate income tax -298 334 -15 916 -142 916 -8 318 -208 289 ( 673 773) Net Earnings Group Share 342 440 37 843 152 807 18 149 298 960 850 199 (In thousand MAD)

3.2. ASSETS AND LIABILITIES BY BUSINESS ACTIVITY

2012 SPECIALISED ACTIVITY IN ASSET INTERNATIONAL FINANCIAL OTHERS TOTAL MOROCCO MANAGEMENT ACTIVITIES SERVICES Total assets 160 441 588 370 334 14 060 259 170 881 55 846 424 230 889 486 Assets items Available for sale assets 1 312 325 101 008 5 711 25 440 1 351 439 2 795 923 Customer loans 95 425 585 5 824 13 185 602 0 30 191 767 138 808 778 Held to maturity assets 1 790 606 0 27 0 8 728 308 10 518 941 Liabilities & shareholders equity items Customer deposits 102 081 985 0 1 184 435 0 41 384 337 144 650 757 Shareholders equity 13 567 426 104 114 1 213 349 -97 626 3 626 266 18 413 529 (In thousand MAD)

2011 SPECIALISED ACTIVITY IN ASSET INTERNATIONAL FINANCIAL OTHERS TOTAL MOROCCO MANAGEMENT ACTIVITIES SERVICES Total assets 144 682 530 396 558 12 932 271 153 339 49 823 440 207 988 138 Assets items Available for sale assets 1 291 928 116 662 13 534 18 126 890 127 2 330 377 Customer loans 83 659 440 1 122 12 290 687 0 25 391 409 121 342 658 Held to maturity assets 1 816 492 0 27 0 7 774 392 9 590 911 Liabilities & shareholders equity items Customer deposits 100 669 457 0 1 342 613 0 37 139 940 139 152 010 Shareholders equity 11 722 730 97 450 1 188 619 -59 131 3 435 629 16 385 297 (In thousand MAD)

F-59 3.3. INFORMATION BY GEOGRAPHICAL REGION

2012 MOROCCO EUROPE sub saharan africa TOTAL Total Assets 175 043 062 3 805 281 52 041 143 230 889 486 Net Banking Income 5 002 546 289 607 3 725 623 9 017 776

2011 MOROCCO EUROPE sub saharan africa TOTAL Total Assets 158 164 699 4 451 637 45 371 802 207 988 138 Net Banking Income 4 532 367 309 690 3 298 006 8 140 063

(In thousand MAD) 3.4. ANALYSIS OF CONCENTRATIONS Breakdown of loans and receivables to credit institutions by business activity

2012 2011 Activity in Morocco 13 777 974 15 244 367 Specialised Financial Services 36 8 298 Asset management 120 890 74 752 Other activities 5 818 154 European Activities 2 083 561 2 008 660 Subsaharan Activities 5 408 667 6 486 449 21 396 946 23 822 680 (In thousand MAD) Breakdown of loans and receivables to customers by business activity

2012 2011 Activity in Morocco 95 425 585 83 659 446 Specialised Financial Services 13 185 602 12 290 686 Asset management 5 824 1 122 Other activities 0 European Activities 2 605 568 2 599 304 Subsaharan Activities 27 586 199 22 792 100 138 808 778 121 342 658 (In thousand MAD) Available-for-sale financial assets by business activity

2012 2011 Activity in Morocco 1 312 325 1 291 928 Specialised Financial Services 5 711 13 534 Asset management 101 008 116 662 Other activities 25 440 18 126 European Activities 11 849 0 Subsaharan Activities 1 339 590 890 127 2 795 923 2 330 377 (In thousand MAD) Held-to-maturity financial assets by business activity

2012 2011 Activity in Morocco 1 790 606 1 816 492 Specialised Financial Services 27 27 Subsaharan Activities 8 728 308 7 774 392 10 518 941 9 590 911 (In thousand MAD) Held-to-maturity financial assets are held by BMCE Bank (Moroccan business) and BOA (African business).

F-60 Financial assets at fair value by business activity

2012 2011 Activity in Morocco 33 641 060 31 111 994 Specialised Financial Services 26 909 9 011 Asset management 29 506 76 891 European Activities 547 202 534 420 34 244 677 31 732 316 (In thousand MAD) Financial assets at fair value are concentrated within BMCE Bank. 3.5. BREAKDOWN OF LOANS AND RECEIVABLES Breakdown of loans and receivables to credit institutions by geographical region

2012 2011 Performing loans NPL(*) Provisions Performing loans NPLS Provisions Morocco 13 880 138 59 838 35 258 15 302 990 59 838 35 257 Europe 2 083 561 0 0 2 008 660 0 0 Subsaharian Africa 5 408 667 3 382 3 382 6 486 360 4 177 4 088 Total 21 372 366 63 220 38 640 23 798 010 64 015 39 345 Allocated debts Provisions Net Value 21 372 366 63 220 38 640 23 798 010 64 015 39 345 (In thousand MAD)

Breakdown of loans and receivables to customers by geographical region

2012 2011 Performing loans NPL(*) Provisions Performing loans NPLS Provisions Morocco 107 269 792 5 250 297 3 903 078 94 281 552 5 260 133 3 590 437 Europe 2 604 230 14 201 12 863 2 597 726 9 199 7 621 Subsaharian Africa 26 145 245 3 262 008 1 821 054 22 087 836 2 423 958 1 719 688 Total 136 019 267 8 526 506 5 736 995 118 967 114 7 693 290 5 317 746 Allocated debts Provisions Net Value 136 019 267 8 526 506 5 736 995 118 967 114 7 693 290 5 317 746 (In thousand MAD) (*) NPL : Non Performing Loans

F-61 IV. NOTES TO THE BALANCE SHEET for the year ended 31 December 2012 4.1. CASH, AMOUNTS DUE FROM CENTRAL BANKS, THE banks AND THE POST OFFICE

2012 2011 Cash 2 651 608 2 122 765 CENTRAL BANKS 6 305 199 4 243 638 TREASURY 960 708 5 255 GIRO 4 684 20 300 CENTRAL BANKS, TREASURY, GIRO 7 270 591 4 269 193 Cash, Central Banks, Treasury, Giro 9 922 200 6 391 958

(In thousand MAD) 4.2. ASSETS AND LIABILITIES AT FAIR VALUE THROUGH PROFIT OR LOSS Financial assets and liabilities recognised at fair value through income consist of negotiated transactions for trading purposes.

2012 2011 Assets desig- Assets desig- nated at fair nated at fair Trading book Total Trading book Total value through value through profit or loss profit or loss FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS Negotiable certificates of deposits 12 855 398 0 12 855 398 7 493 340 0 7 493 340 Treasury bills and other eligible for central bank 5 751 852 5 751 852 6 979 579 6 979 579 refinancing Other negotiable certificates of deposits 7 103 546 7 103 546 513 761 513 761 Bonds 399 217 0 399 217 433 914 0 433 914 Government bonds 0 0 Other bonds 399 217 399 217 433 914 433 914 Equities and other variable income securities 20 970 684 0 20 970 684 23 763 897 0 23 763 897 Repurchase agreements 0 0 0 0 0 0 Loans 0 0 0 0 0 0 To credit institutions To corporate customers To private individual customers Trading Book Derivatives 19 378 0 19 378 41 165 0 41 165 Currency derivatives 18 801 18 801 40 588 40 588 Interest rate derivatives 577 577 577 577 Equity derivatives Credit derivatives Other derivatives TOTAL FINANCIAL ASSETS AT FAIR VALUE 34 244 677 0 34 244 677 31 732 316 0 31 732 316 THROUGH PROFIT OR LOSS Of which loaned securities Excluding equities and other variable-income securi- ties FINANCIAL LIABILITIES AT FAIR VALUE THROUGH PROFIT OR LOSS Borrowed securities and short selling Repurchase agreements Borrowings 0 0 0 0 0 0 Credit institutions Corporate customers Debt securities Trading Book Derivatives 1 614 0 1 614 1 752 0 1 752 Currency derivatives 1 614 1 614 1 752 1 752 Interest rate derivatives 0 0 Equity derivatives 0 0 Credit derivatives Other derivatives TOTAL FINANCIAL LIABILITIES AT FAIR VALUE 1 614 0 1 614 1 752 0 1 752 THROUGH PROFIT OR LOSS

(In thousand MAD) 4.3. AVAILABLE-FOR-SALE FINANCIAL ASSETS Available-for-sale financial assets are non-derivative financial assets other than those classified as: a) Loans and receivables; b) Held-to-maturity financial assets; c) Financial assets at fair value through profit or loss. F-62 2012 2011 Negotiable certificates of deposit 0 0 Treasury bills and other bills eligible for central bank refinancing Other negotiable certificates of deposit Bonds 0 0 Government bonds Other bonds Equities and other variable-income securities 3 135 119 2 628 596 Of which listed securities 240 129 435 416 Of which unlisted securities 2 894 990 2 193 180 Total available-for-sale financial assets, before impairment provisions 3 135 119 2 628 596 Of which unrealized gains and losses -339 196 -298 219 Of which fixed-income securities Of which loaned securities -339 196 -298 219 Total available-for-sale financial assets, net of impairment provisions 2 795 923 2 330 377 Of which fixed-income securities, net of impairment provisions

(In thousand MAD) 4.4. INTERBANK TRANSACTIONS, RECEIVABLES AND AMOUNTS DUE FROM CREDIT INSTITUTIONS Loans and receivables due from credit institutions

2012 2011 Demand accounts 6 731 875 5 911 143 Loans 13 251 828 17 945 572 Repurchase agreements 1 451 883 5 310 Total loans and receivables due from credit institutions, before impairment provisions 21 435 586 23 862 025 Provisions for impairment of loans and receivables due from credit institutions -38 640 -39 345 Total loans and receivables due from credit institutions, net of impairment provisions 21 396 946 23 822 680

(In thousand MAD) Amounts due to credit institutions

2012 2011 Demand accounts 1 829 261 2 348 107 Borrowings 18 433 119 13 583 608 Repurchase agreements 13 965 786 8 916 894 Total Due to Credit Institutions 34 228 166 24 848 609

(In thousand MAD) 4.5. LOANS, RECEIVABLES AND AMOUNTS DUE FROM CUSTOMERS Loans and receivables due from customers

2012 2011 Demand accounts 20 455 562 17 335 789 Loans to customers 100 796 021 89 763 953 Repurchase agreements 12 780 120 9 910 252 Finance leases 10 514 070 9 650 410 Total loans and receivables due from customers, before impairment provisions 144 545 773 126 660 404 Impairment of loans and receivables due from customers -5 736 995 -5 317 746 Total loans and receivables due from customers, net of impairment provisions 138 808 778 121 342 658

(In thousand MAD) Breakdown of amounts due from customers by business activity

2012 2011 Activity in Morocco 95 425 585 83 659 441 Specialized Financial Services 13 185 606 12 290 691 International Activities 30 191 767 25 391 404 Asset Management 5 820 1 122 Other Activities 0 0 Total 138 808 778 121 342 658 Allocated Debts Value at Balance sheet 138 808 778 121 342 658

(In thousand MAD) F-63 Breakdown of amounts due from customers by geographical region

2012 2011 Morocco 108 617 015 95 951 254 Sub saharan Africa 27 586 199 22 792 100 Europe 2 605 564 2 599 304 Total 138 808 778 121 342 658 Allocated Debts Value at Balance sheet 138 808 778 121 342 658

(In thousand MAD) Amounts due to customers

2012 2011 On demand deposits 63 669 812 57 769 414 Term accounts 20 207 095 23 097 066 Savings accounts 17 903 838 19 881 953 Cash certificates 4 107 980 4 911 391 Repurchase agreements 1 499 500 3 602 366 Other items 37 262 532 29 889 820 TOTAL LOANS AND RECEIVABLES DUE TO CUSTOMERS 144 650 757 139 152 010

(In thousand MAD) Breakdown of amounts due to customers by business activity

2012 2011 Activity in Morocco 102 081 985 100 669 553 Specialized Financial Services 1 184 434 1 342 518 International Activities 41 384 338 37 139 939 Asset Management 0 0 Other Activities 0 0 Total 144 650 757 139 152 010 Allocated Debts Value at Balance sheet 144 650 757 139 152 010

(In thousand MAD) Breakdown of amounts due to customers by geographical region

2012 2011 Morocco 103 266 419 102 012 071 Sub saharan Africa 40 317 675 36 114 558 Europe 1 066 663 1 025 381 Total 144 650 757 139 152 010 Allocated Debts Value at Balance sheet 144 650 757 139 152 010

(In thousand MAD) 4.6. DEBT SECURITIES, SUBORDINATED DEBT AND SPECIAL GUARANTEE FUNDS

2012 2011 Other debt securities 14 014 897 12 008 860 Negotiable certificates of deposit 14 014 897 12 008 860 Bond issues Subordinated debts 4 633 718 3 803 161 Subordinated debt 4 633 718 3 803 161 Redeemable subordinated debt 1 853 463 3 803 161 Undated subordinated debt 2 780 255 Subordinated Notes 0 860 172 Redeemable subordinated notes Undated subordinated notes 0 860 172 Public Funds and special guarantee funds 126 616 241 048 Total 18 775 231 16 913 241

(In thousand MAD) Special purpose public funds and special guarantee funds only relate to BOA Group. They are non-repayable funds aimed at subsidising lending rates and provisioning for credit losses in specific sectors and business activities.

F-64 4.7. HELD-UNTIL-MATURITY FINANCIAL ASSETS

2012 2011 Negotiable certificates of deposit 9 689 814 8 756 623 Treasury bills and other bills eligible for central bank refinancing 9 669 842 8 721 040 Other negotiable certificates of deposit 19 972 35 583 Bonds 829 127 834 288 Government bonds Other bonds 829 127 834 288 Total held-to-maturity financial assets 10 518 941 9 590 911

(In thousand MAD) 4.8. CURRENT AND DEFERRED TAXES

2012 2011 Current taxes 215 856 408 979 Deferred taxes 310 849 321 084 Current and deferred tax assets 526 706 730 063 Current taxes 36 296 324 592 Deferred taxes 983 149 934 127 Current and deferred tax liabilities 1 019 445 1 258 719

(In thousand MAD) 4.9. ACCRUED INCOME AND EXPENSES, OTHER ASSETS AND LIABILITIES

2012 2011 Guarantee deposits and bank guarantees paid 5 257 5 110 Settlement accounts related to securities transactions 23 329 24 020 Collection accounts 329 945 297 910 Reinsurers' share of technical reserves Accrued income and prepaid expenses 381 273 356 710 Other debtors and miscellaneous assets 2 859 026 3 072 004 Inter-related Accounts 1 339 945 803 287 TOTAL ACCRUED INCOME AND OTHER ASSETS 4 938 775 4 559 041 Guarantee deposits received 42 250 60 221 Settlement accounts related to securities transactions 9 297 681 4 230 455 Collection accounts 770 861 685 798 Accrued expenses and deferred income 537 031 365 626 Other creditors and miscellaneous assets 2 562 304 3 628 970 TOTAL ACCRUED EXPENSES AND OTHER LIABILITIES 13 210 127 8 971 070

(In thousand MAD) 4.10. INVESTMENTS IN COMPANIES ACCOUNTED FOR UNDER THE EQUITY METHOD

2012 2011 Euler Hermes Acmar 27 177 21 180 Banque de Développement du Mali 214 595 184 792 Casablanca Finance Markets 0 31 752 Eurafric Information -4 888 -3 503 Hanouty -5 544 7 165 Investments in associates 123 141 112 177 Inverstments in equity methods companies belonging to subsidiaries 52 447 45 795 Investments in equity methods companies 406 928 399 358

(In thousand MAD) Financial data of the main companies accounted for under the equity method

Net Banking Income or Total Assets Company Income Net income Net Revenues Euler Hermes Acmar 333 421 125 337 29 982 5 996 Banque de Développement du Mali 7 665 758 414 523 141 442 38 567 Eurafric Information 203 766 4 422 1 824 -531 Hanouty 27 146 21 025 -24 018 -10 940 Société Conseil Ingenierie et Développement 92 303 297 341 40 473 15 632

F-65 (In thousand MAD) 4.11. PROPERTY, PLANT AND EQUIPMENT AND INTANGIBLE ASSETS USED IN OPERATIONS AND INVESTMENT PROPERTY

2012 2011 Accumulated Accumulated depreciation depreciation Carrying Carrying Gross Value amortization Gross Value amortization Amount Amount and impair- and impair- ment ment PP&E 8 936 538 3 805 010 5 131 528 8 152 649 3 088 523 5 064 126 Land and buildings 2 031 429 516 758 1 514 671 2 617 698 534 135 2 083 563 Equipment, furniture and fixtures 3 551 517 1 507 439 2 044 078 2 859 747 1 290 230 1 569 517 Plant and equipment leased as lessor under operating leases 0 0 0 0 0 Other PP&E 3 353 592 1 780 813 1 572 779 2 675 204 1 264 158 1 411 046 Intangible Assets 1 592 323 840 868 751 455 1 339 715 694 634 645 081 Purchased software 1 020 384 520 987 499 397 821 009 410 414 410 595 Internally-developed software 0 0 0 0 0 Other intangible assets 571 939 319 881 252 058 518 706 284 220 234 486 Investment Property 693 382 79 222 614 160 594 302 47 203 547 099

(In thousand MAD) Change in property, plant and equipment

2012 2011 Net value as of January, 1st 5 064 126 4 795 142 Acquisition of the year 398 059 620 077 Depreciation, Amortization of impaiment -421 110 -407 956 Disposal of the year -132 495 -165 782 Reclassifications 222 948 222 645 Net value at end of period 5 131 528 5 064 126

(In thousand MAD) Change in intangible assets

2012 2011 Net value as of January, 1st 645 081 651 205 Acquisition of the year 378 772 351 495 Depreciation, Amortization of impaiment -152 930 -127 343 Disposal of the year -119 568 -230 276 Net Value at end of periode 751 455 645 081

(In thousand MAD) 4.12. GOODWILL The following table provides a breakdown of goodwill:

2012 2011 Gross value at start of period 832 470 531 006 Accumulated impairment at start of period Carrying amount at start of period 832 470 531 006 Acquisitions** 403 987 Cessions Impairment losses recognized during the period Translation adjustments Subsidiaries previously accounted for by the equity method Other movements* -102 523 Gross value at end of period 832 470 832 470 Accumulated impairment at end of period Carrying amount at end of period 832 470 832 470 (In thousand MAD)

(*) Recognition of corrections to the GoodWill previously Recognized on Hanouty. (**) This relates to goodwill recognised following acquisition by BOA Group.

F-66 The following table provides a breakdown of goodwill: risk factor, reflecting the specific risks relating to the economic, political, institutional and financial conditions of 2012 book 2011 book Value Value the country in which the company has its operations. Maghrébail 10 617 10 617 BOA’s cost of capital has been determined on the basis of Banque de Développement 3 588 3 588 the observed average discount rate, calculated by weighting du Mali the discount rate of each bank by net banking income, in Salafin 5 174 5 174 each of the countries in which BOA has operations. The Maroc Factoring 1 703 1 703 discount rate ranges from 16% to 18% for BOA and from BMCE Capital Bourse 2 618 2 618 7% to 8.5% for Locasom. BMCE International (Madrid) 3 354 3 354 Bank Of Africa 692 136 692 136 Growth rate Locasom 98 725 98 725 Hanouty 0 0 BOA’s business forecasts have been prepared using the CFA CID 14 555 14 555 Franc. The CFA Franc is guaranteed by the French Treasury TOTAL 832 470 832 470 and has a fixed exchange rate against the euro. As a result, the long-term growth rate adopted by BOA is 2%, in line Goodwill impairment tests with estimates of inflation in France. The recoverable amount of a cash-generating unit has been Locasom’s growth rate has been set at 3%, in line with determined on the basis of value in use. assumptions for the rate of growth of its sector in Morocco. An intrinsic value approach has been adopted to determine Regulatory capital requirements value in use at BOA and Locasom as follows: BOA’s risk weighted assets must satisfy Core Tier One - At BOA, the “dividend discount model” (hereafter, the regulatory capital requirements over the entire period for “DDM”) has been adopted. This is a standard method used which BOA has made estimates. by the banking industry to determine an activity’s value Net banking income by reference to the net present value of dividends that the activity is likely to generate in the future. The value thus Estimates of net banking income have been made on the calculated corresponds to the value in shareholders’ equity; basis on the currently low level of bank penetration in Africa and, as a result, the strong growth potential. - At Locasom, the “discounted cash flow method” (hereaf- ter, the “DCF” method) has been adopted. This is a standard EBITDA method used by the services sector to determine an activ- ity’s value by reference to the net present value of avail- Estimates of EBITDA and operating margins have been able cash flows that the activity is likely to generate in the made on the basis of historical data. future. The value thus calculated corresponds to enterprise Cost-to-income ratio value. Estimates of the cost-to-income ratio are highly correlated Cash-flow projections are based on financial estimates over with growth in expenses, particularly those relating to the a three-year period approved by management. opening of branches, which are required in order to attract new customers. Bank Of Africa Locasom % % Sensitivity to changes in assumptions Discount rate 18% 8.5% BANK OF AFRICA Growth rate 2% 3% Cost of Capital 18% A certain number of assumptions of estimated net banking income, the cost-to-income ratio, the costs of risk and Unfavorable change of 200 risk-weighted assets (hereafter, “RWA”) underpin the DDM, basis points - 311 823 which is used to determine recoverable value. These are Favorable change of 200 basis taken from medium-term (3-year) business plans for the points 333 237 first three years, representing the duration of the economic cycle to which the banking industry is sensitive and then in perpetuity, based on sustainable growth rates to calculate LOCASOM terminal value. Cost of Capital 8.50% Key cash flow variables are EBITDA and the operating margin Unfavorable change of 150 which underpin the DCF method. This is a standard method basis points - 14 624 used by the services sector to determine an activity’s value by reference to the net present value of available cash flows Favorable change of 150 basis that the activity is likely to generate in the future. The value points 15 342 thus calculated corresponds to enterprise value. For the cash-generating units in question, there is no Discount rate reason to amortise goodwill, even after factoring in, for impairment tests, the most adverse change in the cost of The indirect approach has been used to determine the cost capital, considered by management to be the assumption of capital. The indirect approach consists of adjusting the most sensitive to any reasonable change. cost of capital of a reference country (France) by a country

F-67 4.13. PROVISIONS FOR CONTINGENCIES AND CHARGES Carrying Carrying amounts amounts of of associated li- 2012 2011 transferred as- abilities Total provisions at start of period 457 440 349 988 sets Additions to provisions 131 271 93 783 Securities lending operations Reversals of provisions -83 187 14 713 Securities at fair value through Effect of movements in exchange profit or loss 16 737 rates and other movements Repurchase agreements 15 466 581 15 456 536 Gross value at end of 974 -1 044 period Securities at fair value through 15 466 581 15 456 536 Total provisions at end of period 523 235 457 440 profit or loss Securities classified as loans and receivables Available-for-sale assets Loan Obliga- Total 15 466 581 15 456 536 Legal commit- tions for Oner- Total and ments Other post-em- ous book fiscal and provisions 4.15. FAIR VALUE ployment contrats value risks guaran- benefits tees 4.15.1. Fair value of financial instruments carried at Total provi- amortised cost sions at start 12 010 230 680 7 047 0 207 703 457 440 of period The information supplied in this note must be used and Net addi- interpreted with the greatest caution because these fair values tions to 2 799 4 548 2 467 0 121 457 131 271 are an estimate of the value of the relevant instruments as provisions of 31 December 2012. They are liable to fluctuate from day Provisions -625 -1 743 0 -80 819 -83 187 used to day as a result of changes in different variables such as Effect of interest rates and credit quality of the counterparty. movements -43 0 16 780 16 737 in exchange In particular, they may differ significantly from the amounts rates actually received or paid on maturity of the instrument. In Other most cases, the fair value is not intended to be realised move- 12 18 0 944 974 immediately, and in practice might not be realised ments immediately. Consequently, this fair value does not reflect Total provi- sions at end 14 196 235 228 7 746 0 266 065 523 235 the actual value of the instruments on the assumption that of period BMCE Bank Group remained a going concern. The fair value of a financial instrument is defined as the amount for which an asset could be exchanged, or a liability 4.14. TRANSFERS OF FINANCIAL ASSETS settled, between knowledgeable, willing parties in an arm’s length transaction. Financial assets that have been transferred by the Group are mainly composed of securities sold temporarily under The valuation techniques and assumptions used ensure that repurchase agreements or securities lending transactions. the fair value of financial assets and liabilities is measured on a consistent basis throughout the BMCE Bank Group. The liabilities associated with securities temporarily sold under repurchase agreements consist of amounts owing Fair value is based on prices quoted on a liquid market when from credit institutions and customers under “Repurchase these are available. In other cases, fair value is determined agreements”. using commonly-used valuation techniques. Transferred financial assets not derecognised The table below shows the fair value of the Group’s financial assets and liabilities at 31 December 2012: These include repurchase agreements or securities lending Estimated market transactions resulting in a transfer of securities without Book value them being derecognised. value FINANCIAL ASSETS The assets that have been transferred by the Group are: Loans and receivables due from 21 396 946 21 398 555 credit institutions • Treasury securities; Loans and receivables due from 138 808 778 138 880 801 • Certificates of deposit; customers FINANCIAL LIABILITIES • Bonds. Loans and receivables due to 34 228 166 34 228 166 credit institutions Transfers of derecognised financial assets Loans and receivables due to 144 650 757 144 650 757 These include securitisation transactions resulting in a customers transfer of securities leading to de-recognition. Debt securities 14 014 898 14 014 898 Subordinated debts 4 760 333 4 760 333 There have been no significant transfers of derecognised securities by the Group in 2011 and 2012. The techniques and assumptions used to determine fair value for each category are described hereafter:

F-68 Loans and receivables Outstandings of term deposits totalled MAD 24.3 billion, with an average maturity of less than one year consisting The fair value of receivables is determined by estimating the due to the predominance of 3-month, 6-month and fair value of assets held after conducting sensitivity analysis 12-month maturities. on each asset class on the basis of each instrument’s duration and convexity by observing historical returns as a In the case of customer term deposits, fair value equates to function of changes in market conditions. the carrying amount. In the absence of a market yield curve reflecting actual rates Debt securities along the different segments of the curve, average yields on origination for the financial year in question have been used Outstandings of debt securities totalled MAD 14 billion, as indicative of actual market rates. consisting primarily of certificates of deposit issued by the Bank with predominantly 3-month, 6-month and 12-month In the case of loans and receivables that have a maturity maturities. of less than one year (demand liabilities) or are granted on floating-rate terms, fair value equates to the carrying In the case of debt securities, fair value equates to the amount due to their limited sensitivity to changes in rates carrying amount. or by the simple fact that they are granted on the basis of Subordinated debt actual market conditions. Outstandings of subordinated debt, which totalled MAD Loans and receivables due from credit institutions 4.7 billion, are recognised at the carrying amount due to Loans and receivables due from credit institutions totalled the predominance of floating-rate issues and perpetual MAD 21.3 billion with a fair value close to the carrying subordinated debt outstandings. amount. This is due to the predominance of short-term money market transactions (in the form of cash loans, 4.15.2. Breakdown by measurement method of financial interbank loans and repurchase agreements). instruments recognised at fair value presented in accor- dance with IFRS 7 recommendations Outstandings of loans to finance companies totalled MAD 6.2 billion, amortisable over a short period, with a fair value Fair value measurement of financial instruments that is MAD 1.6 million higher than the carrying amount. Financial instruments measured at fair value are classified Loans and receivables due from customers at three levels in accordance with IFRS 7: Outstandings of loans and receivable due from customers totalled • Level 1 MAD 138 billion at 31 December 2012, consisting primarily of cash loans, overdraft facilities and floating rate loans. Quoted prices on liquid markets for identical assets or liabilities : Outstandings of fixed-rate loans primarily consist of consumer loans amortisable over a short period (average This level includes financial instruments with quoted prices maturity 2.3 years) and fixed-rate mortgage loans in a liquid market that can be used directly. amortisable over an average period of almost 7 years. For BMCE Bank Group, it includes listed equities, mutual The sensitivity analysis of the Bank’s fixed rate loan book funds, bonds and Treasury bonds. (with outstandings of nearly 26.4 billion MAD) shows a faire value that is 72 million MAD higher than the carrying amount. • Level 2 Financial liabilities Observable inputs other than Level 1 quoted prices for the asset or liability in question either directly (prices) or In the case of financial liabilities that have a maturity of indirectly (price-derived inputs): less than one year (demand liabilities) or are granted on floating-rate terms, or for an indefinite period (as is the case This level includes financial instruments quoted on markets for perpetual subordinated debt) as well as most regulated considered insufficiently liquid as well as those traded savings products, fair value equates to the carrying amount. on over-the-counter markets. Prices published by an external source, derived from the measurement of similar Amounts due to credit institutions instruments, are considered to be price-derived inputs. Amounts due to credit institutions totalled MAD 34.2 billion and are recognised at their carrying amount. They consist The Group does not have any financial instruments primarily of short-term cash borrowing transactions in the measured at Level 2. form of 7-day advances from the Central Bank amounting • Level 3 to almost MAD13 billion in outstandings, interbank borrowings and borrowings from local banks or foreign Inputs relating to the asset or liability that are not based on correspondent banks in addition to repurchase agreements. observable market data (non-observable inputs: Amounts due to customers Given the diversity of instruments and the reasons for including them in this category, calculating the sensitivity Amounts due to customers totalled MAD 145 million, of fair value to changes in variables would appear to be of consisting primarily of non-interest-bearing sight deposits little relevance. in the form of cheque accounts, current accounts in credit and immediate-access regulated savings account. This level includes unlisted equities valued by various methods including the net carrying amount, net adjusted Repurchase agreements with customers, particularly asset value, net asset value, stock market multiples and in respect of mutual funds, are also recognised under equity issue pricing. “Amounts due to customers”. F-69 2012 - Financing commitments given to customers Level 1 Level 2 Level 3 Total This entry relates to commitments to make liquidity FINANCIAL ASSETS facilities available to customers such as confirmed credit Financial instru- lines and commitments on securities issuance. ments at-fair-value through profit or 34 244 677 34 244 677 - Financing commitments received from credit and similar loss held for trading institutions of which financial assets at-fair-value This entry relates to financing commitments received from through profit or 34 225 876 34 225 876 credit and similar institutions such as refinancing agreements loss and back-up commitments on securities issuance. of which derivative financial instru- 18 801 18 801 Financing commitments given fell by 14% from MAD ments 17,113 million at 31 December 2011 to MAD 14,795 million Financial at 31 December 2012. Similarly, financing commitments instruments received experienced and even steeper decline (-25%) from designated as - at-fair-value 1,926 million to MAD 1,452 million. through profit 5.2. GUARANTEE COMMITMENTS or loss Derivatives 2012 2011 used for hedg- - Guarantee commitments given 17 822 232 18 996 469 ing purposes To credit institutions 6 212 808 6 745 730 Available for To customers: 11 609 424 12 250 739 sale financial 159 840 2 636 083 2 795 923 Sureties provided to tax and other assets authorities, other sureties FINANCIAL Other guarantees LIABILITIES Guarantee commitments re- 36 315 329 32 303 600 Financial ceived instruments From credit institutions 35 106 346 30 263 580 at-fair-value From the State and guarantee 1 208 983 2 040 020 1 614 - - 1 614 through profit institutions or loss held for trading - Guarantee commitments given to credit and similar institutions of which fi- nancial assets This entry relates to commitments to assume responsibility at-fair-value for an obligation entered into by a credit institution if the latter through profit is not satisfied with it. This includes guarantees, warranties or loss and other guarantees given to credit and similar institutions. of which deriv- ative financial 1614 1 614 - Guarantee commitments given to customers instruments Financial This entry relates to commitments to assume responsibility instruments for an obligation entered into by a customer if the latter is not designated as satisfied with it. This includes guarantees given to government at-fair-value through profit institutions and real estate guarantees, among others. or loss - Guarantee commitments received from credit and similar Derivatives used for hedg- institutions ing purposes This entry includes guarantees, warranties and other guarantees received from credit and similar institutions. V / FINANCING AND GUARANTEE COMMITMENTS - Guarantee commitments received from the State and oth- 5.1. FINANCING COMMITMENTS er organisations 2012 2011 Financing commitments given 14 794 963 17 113 203 This entry relates to guarantees received from the State - To credit institutions 1 630 754 1 401 513 and other organisations. - To customers: 13 164 209 15 711 690 Confirmed letters of credit Guarantee commitments given fell by 6% from MAD 18,996 million at 31 December 2011 to MAD 17,822 million at 31 Other commitments given to customers December 2012, while guarantee commitments received rose Financing commitments 1 451 765 1 926 289 by 12% from MAD 32,304 million to MAD 36,315 million. received From credit institutions 1 451 765 1 926 289 VI / SALARY AND EMPLOYEE BENEFITS From customers 0 0 6.1. DESCRIPTION OF CALCULATION METHOD - Financing commitments given to credit and similar insti- Employee benefits relate to long-service awards and end- tutions of-career bonuses. This entry relates to commitments to make liquidity facilities The method used for calculating the liability relating to available to other credit institutions such as refinancing both these benefits is the “projected unit credit” method as agreements and back-up commitments on securities issuance. recommended by IAS 19.

F-70 - Caisse Mutualiste Interprofessionnelle Marocaine (CMIM) Approved by an Extraordinary General Meeting of 10 No- scheme vember 2010 and the regulatory authorities, an increase in the Bank’s share capital in December 2010 resulted in the The Caisse Mutualiste Interprofessionnelle Marocaine issue of 2,500,000 new shares, representing almost 1.5% of (CMIM) is a private mutual insurance company. The its share capital, at a share price of 200 dirhams, inclusive company reimburses employees for a portion of their of share premium. medical, pharmaceutical, hospital and surgical expenses. It is a post-employment scheme providing medical cover for This offering follows two public offers, exclusively for em- retired employees. ployees, in 2003 and 2005, aimed at enabling employees to participate in the success and growth of BMCE Bank Group. The CMIM is a multi-employer scheme. As BMCE Bank is unable to determine its share of the overall liability (as is There was no allotment of shares under the share purchase the case for all other CMIM members), under IFRS, expenses plan in 2011 and 2012. are recognised in the year in which they are incurred. No provision is recognised in respect of this scheme. 6.3.2. Cost of share-based payments 2012 2011 6.2. SUMMARY OF PROVISIONS AND DESCRIPTION OF Overall expense of the equity incentive 43456 43 456 EXISTING SCHEMES plan

6.2.1. Provisions in respect of post-employment and Principles for valuing share purchase plans other long-term benefits provided to employees As required under IFRS 2, BMCE Bank values the fair value 2012 2011 of shares granted to employees at adjusted market value Retirement allowances and equivalents 235 228 230 680 Special seniority premiums allowances in order to take into consideration the characteristics and Other conditions in respect of share allotment. This measurement TOTAL 235 228 230 680 gives rise to recognition of a general expense which is NB: The provision for employee benefits calculated in spread over the vesting period. accordance with IAS 19 is recognised in “Provisions for risks Exercice 2010 and charges” under liabilities. BMCE BANK share price on the grant 234 date 6.2.2. Basic assumptions underlying calculations Option exercise price 200 Implied volatility of BMCE BANK 2012 2011 18% shares Discount rate 4,50% 4,50% Risk-free interest rate 4,00% Rate of increase in salaries 3% 3% 3 years for the first half and 4 years for Expected return on assets N/A N/A Maturity the remaining Other 11% 11% VII / ADDITIONAL INFORMATION 6.2.3. Cost of post-employment schemes

2012 2011 7.1. CHANGES IN SHARE CAPITAL AND EARNINGS PER Normal cost 17 046 14 571 SHARE Interest cost 9 773 9 843 Expected returns of funds 7.1.1. Share capital transactions Amortization of actuarial gains/ losses Unit Amortization of net gains/ losses - 11 353 TRANSACTIONS ON CAPITAL In number val- In MAD Additional allowances ue Other Number of shares outstanding at 171 963 390 1 719 633 900 Net cost of the period 26 819 35 767 31 December 2010 10 Number of shares outstanding at 171 963 390 1 719 633 900 6.2.4. Changes in the provision recognised on the ba- 31 December 2011 10 Capital increase by means of scrip lance sheet 7 500 000 75 000 000 issue 10 2012 2011 Number of shares outstanding at 179 463 390 1 794 633 900 Actuarial liability, beginning of 230 679 219 186 31 December 2012 10 the period In 2012, BMCE BANK increased share capital by MAD Normal cost 17 046 25 924 1,500,000K through an equity issue exclusively for key Interest cost 9 773 9 843 Experience gains/ losses shareholders. This increase resulted in the creation of Other actuarial gains/ losses 7,500,000 new shares. Depreciation of net gains/losses Paid benefits -22 271 -24 273 7.1.2. Earnings per share Additional benefits Basic earnings per share is calculated by dividing the net Other Actuarial liability, end of the 235 228 230 680 income for the period attributable to holders of ordinary period share s by the weighted average number of ordinary shares outstanding during the period. 6.3. SHARE-BASED PAYMENTS 6.3.1. Share purchase plan BMCE Bank has established a share-based payment scheme for its employees in the form of a share purchase plan.

F-71 2012 2011 Post-employment benefits relate to end-of-career bonuses SHARE CAPITAL (IN MAD) 1 794 633 900 1 719 633 900 and other long-term benefits relate to long-service awards. Number of common shares 179 463 390 171 963 390 outstanding during the year Directors’ fees paid to members of the board of directors NET INCOME ATTRIBUTABLE TO the 923 152 000 850 199 000 sharholder’s OF THE PARENT 2012 2011 with Net Net (IN MAD) Gross Gross Tax with- holding amount amount BASIC ERNINGS PER SHARE (IN MAD) 5,1 4,9 amount amount holding Tax paid paid Diluted Earning per share (IN MAD) 5,1 4,9 Natural and legal persons 1 212 312 900 1 212 312 900 The Bank does not have any dilutive instruments for Resident in conversion into ordinary shares. As a result, diluted Morocco earnings per share equates to basic earnings per share. Physical and legal persons 333 33 300 556 56 500 7.2. SCOPE OF CONSOLIDATION non Resident in Morocco % of % of own- TOTAL 1 546 346 1 200 1 768 368 1 400 Company Activity voting ership Method interests interests Parent BMCE BANK Banking Loans granted to the main Executive Corporate Officers company BMCE Investment full 100,00% 100,00% CAPITAL Bank consolidation BMCE CAPITAL Asset full 2012 2011 100,00% 100,00% GESTION Management consolidation Consumer loans 1871 371 BMCE CAPITAL Financial full Mortgage loans 17062 18006 100,00% 100,00% BOURSE Intermediation consolidation Total 18 933 18 377 full MAROC FACTORING Factoring 100,00% 100,00% consolidation 7.4. RELATIONS WITH RELATED PARTIES full MAGHREBAIL Leasing 51,00% 51,00% consolidation Relations between BMCE Bank and fully-consolidated Consumer full companies and the parent company SALAFIN 74,50% 74,50% Loans consolidation BMCE Transactions and period-end balances between fully-consolidated full INTERNATIONAL Banking 100,00% 100,00% entities are of course eliminated. Period-end balances resulting consolidation MADRID from transactions between companies accounted for under the LA CONGOLAISE DE full Banking 25,00% 25,00% equity method and the parent company are maintained in the BANQUE consolidation consolidated financial statements. BMCE BANK full Banking 100,00% 100,00% INTERNATIONAL UK consolidation Related-party balance sheet items full BANK OF AFRICA Banking 65,02% 65,02% consolidation Consol- Consol- idated full Parent idated LOCASOM Car Rental 100,00% 97,31% entities Fully consolidation compa- Sister entities under consoli- full ny (FI- Compa- under RM EXPERTS recovery 100,00% 100,00% the dated consolidation NANCE nies the BANQUE DE propor- entities Equity COM) equity DEVELOPPEMENT Banking 27,38% 27,38% tionale method method DU MALI method EULER HERMES Equity Assets Insurance 20,00% 20,00% Loans, advances ACMAR method 1 203 644 1 255 333 23 627 8 960 910 and securities Equity HANOUTY Distribution 45,55% 45,55% method Demand accounts 14 315 3 526 878 Information EURAFRIC Equity Loans 1 203 644 1 255 333 9 312 1 892 863 Technology 41,00% 41,00% INFORMATION method Services Securities 3 541 169 Finance Leases CONSEIL INGENIERIE Equity Other Assets 444 311 Study Office 38,90% 38,90% ET DEVELOP-PEMENT method Total 1 203 644 1 255 333 23 627 9 405 221 Liabilities 7.3. COMPENSATION PAID TO THE MAIN EXECUTIVE COR- Deposits - 3 099 30 848 5 036 253 PORATE OFFICERS Demand accounts 3 084 30 848 4 785 499 Remuneration paid to the main directors Other borrowings 15 250 754 Debt securities 3 508 809 By “main directors” is meant the members of the bank’s Other liabilities 860 159 general management team. Total - 3 099 30 848 9 405 221 2012 2011 Financing Commit- Short-term benefits 19 777 17 352 ments & Guarantee Post-employment benefits 3 100 3 100 Commitments Other long-term benefits 5 342 5 342 Financing commit- 7 580 24 328 879 154 ments given Short-term benefits relate to the fixed remuneration inclusive Guarantee commit- 300 000 879 154 of social security contributions received by the main Executive ments given Corporate Officers in respect of the 2012 financial year. F-72 Related-party income statement items settlement date. PSR is calculated in terms of the financial cost of replacing the said contract by another on the basis Con- Consoli- Entrepris- Consoli- solidated Entrepris- of “mark to market”. dated enti- es consoli- dated enti- entities es consoli- ties under dées par ties under under the dées par Delivery risk arises on the simultaneous exchange of values the pro- mise en the equity full con- intégration with a counterparty for the same value date, whereby the portionate équiva- method solidation gobale method lence Bank is unable to verify if the said payment has actually method been made at the time of it initiating the transfer on its side. Interest 11 840 62 451 -7 565 -258 736 income 8.1.1.3. Global liquidity and interest rate risk Interest 14 511 272 127 expense Interest rate risk arises when an institution is financially Com- vulnerable to adverse changes in interest rates. Liquidity mission -75 928 income risk is defined as the risk of the institution being unable to Com- meet its commitments when they fall due under normal cir- mission 35 405 cumstances. expense Services 8.1.1.4. Operational risk provided Services Operational risk is defined as the risk of loss due to inad- received equate or failed internal procedures, employee error or sys- Lease -139 920 tems failure. This definition includes legal risk but excludes income strategic risk and reputational risk. Other 167 057 8.1.1.5. Other risks 7.5. LEASES Equity investment risk Information concerning finance leases This risk arises when BMCE Bank invests in, holds in its Present value Unguaranteed portfolio, or acquires equity or quasi-equity investments in Gross of minimum residual value Investissement lease payments accruing to the entities other than its subsidiaries. These investments may under the lease lessor comprise ordinary shares, preferential shares, derivative in- ≤ 1 year 2 488 414 535 355 64 732 struments, warrants, equity options or futures. > 1 year ≤ 5 years 6 744 456 4 062 165 222 253 > 5 years 3 943 210 3 348 246 374 553 Country risk TOTAL 13 176 080 7 945 766 661 538 Country risk comprises political risk as well as transfer risk. Political risk generally arises from action taken by the Information concerning operating leases government of a country such as nationalisation or expro- Present value of Total contingent rents priation or an independent event such as war or revolution, minimum lease recognized as income which may affect a customer’s ability to honour its obliga- payments under the in the period lease tions. ≤ 1 year 200 000 Transfer risk can be defined as the risk of a resident cus- > 1 year ≤ 5 years 880 000 tomer being unable to acquire foreign currency in its coun- > 5 years try so as to honour its overseas commitments. TOTAL 1 080 000 - 8.1.2. Risk management organization VIII / NOTE CONCERNING RISKS 8.1.2.1. Risk control bodies 8.1. RISK MANAGEMENT POLICY BMCE Bank’s Group General Control is responsible for con- 8.1.1. Risk categories ducting inspections and audits across the Group’s various 8.1.1.1. Credit risk operational entities both in Morocco and overseas. Credit risk, inherent in banking activity, is the risk of cus- Group Risk Division tomers not repaying their financial obligations toward the The Group Risk Division’s task is to correctly manage credit, Bank in full or within the allotted time, resulting in potential market and operational risks while actively contributing to: losses for the Bank. It is the broadest risk category and may be correlated with other risk categories. • Defining BMCE Bank Group’s risk policy; 8.1.1.2. Market risk • Defining and managing the credit approval and monitor- ing processes; Market risk is the risk of loss due to adverse changes in mar- ket factors such as foreign exchange rates, interest rates, • Implementing a risk control system related to credit, mar- share prices, mutual fund prices etc. It is also related to ket and operational risks. settlement/delivery risk which may be described as follows: The Group Risk Division consists of three entities : Pre-settlement Risk or “PSR” is the risk that a customer, • The Risk Management Division (Morocco) monitors the with which the Bank has entered into a contract, fails to credit, market and operational risks incurred by BMCE Bank honour its contractual obligations before the contract’s and all its subsidiaries in Morocco; F-73 • The Analysis and Monitoring of Commitments Division Management, managing directors, the advisor to the gener- analyses criteria for approving credit lines to BMCE Bank al management team and the General Controller. Associate customers; members include the Chairman of the Board of Directors of BMCE Capital and BMCE Bank’s other deputy managing di- • The primary task of the Risk Management Division (Inter- rectors. The main tasks of this committee, which meets on national) is to implement risk control policy and to ensure a weekly basis, include steering the Bank’s activities and risk supervision and monitoring at subsidiary level. implementing internal control and risk control policies. 8.1.2.2.4. Credit Committees Senior Credit Committee This committee is chaired by the Bank’s Chairman and Chief Executive Officer with the Deputy Chief Executive Of- fice reporting to the Chairman in the role of Vice-Chairman. It is sub-divided by market segment into two committees, one specialising in Corporate Banking, the other in Personal and Professional Banking. These committees meet twice- weekly and include senior managers of the Bank. Regional Credit Committee The Regional Credit Committee (RCC) meets on a weekly 8.1.2.2. Governance bodies basis. Regional Directors decide on meeting dates and in- 8.1.2.2.1. Audit and Internal Control Committee form committee members. The Audit and Internal Control Committee (AICC) is a gover- 8.1.2.2.5. Downgrading Committee nance body within the Bank, reporting directly to the Board As part of the portfolio monitoring process, the Downgrading of Directors. Its task is to ensure a third level of control of Committee (full- or mini-committee) meets on a monthly basis the Bank’s various units by: to examine accounts which are showing anomalies. A recovery • Assessing whether the accounting policies adopted by the committee and an accounts showing anomalies committee Bank are relevant and sustainable; were also established at regional level and meet monthly. • Ensuring that internal procedures exist, are suitable and 8.1.2.2.6. Group Risk Committee are applied and controlling policies for measuring, control- The Group Risk Committee ensures the effectiveness of ling and monitoring banking risk and prudential ratios; BMCE Bank Group’s risk steering policy and that it is con- • Examining the parent company’s and consolidated finan- sistent with the risk management policy relating to credit, cial statements before submitting them to the Board of market and operational risks. For this purpose, it: Directors, while monitoring the quality of the information • Ensures implementation of the credit, market and opera- provided to shareholders. tional risk management policy at BMCE Bank Group level ; The Group Audit and Internal Control Committee (AICC • Validates any inherent change in the steering of credit, Group) was also established in July 2007. Reporting directly market and operational risk management implemented by to the Board of Directors, its remit extends to the Bank, its the Group’s various entities; subsidiaries and other entities included within the scope of consolidation. • Is aware of any changes to the various indicators for mea- suring credit, market and operational risks; Its task is to ensure that the financial statements of all enti- ties and subsidiaries in Morocco and overseas provide a true • Is aware of any key events since the last committee meet- and fair view and comply with legal and regulatory require- ing, particularly: ments. - Results of work relating to monitoring at a regulatory level 8.1.2.2.2. Major Risks Monitoring Committee or in terms of methodology; The Major Risks Monitoring Committee is a sub-committee - Work carried out in connection with cross-disciplinary of the Audit and Internal Control Committee. It includes projects relating to organisational or IT issues inherent in non-executive directors (members of the AICC). The com- steering risk. mittee meets on a quarterly basis. Its responsibilities in- 8.2. CREDIT RISK clude assessing risk quality and ensuring that manage- ment standards and internal procedures are complied with The Bank’s credit division operates in accordance with in respect of credit risk. the general credit policy approved by the Bank’s senior management. The key guiding principles include the 8.1.2.2.3. General Management Committee Group’s requirements related to ethics, distribution of The General Management Committee is chaired by the responsibilities, existence and adherence to procedures and Chief Executive Officer reporting to the Chairman and in- rigour in risk analysis. This general policy is further divided cludes the Chief Executive Officer responsible for Remedial into specific policies and procedures depending on the character of specific operations or counterparties. F-74 8.2.1. Credit decision cycle 8.2.1.5. Approval rules 8.2.1.1. General principles The credit approval decision is sent for consideration to the Troïka or to Credit Committees depending on the approval The approval process at BMCE Bank Group level respects the levels required. “Troïka” principle and is based on the following principles: The present delegation system defines the following decision • All credit requests adhere to the same approval process levels: which ensures that the Troïka principle is respected (minimum requirement). Therefore, at least 3 people, one of which is from • At local branch level; the Risk Division, should approve all credit requests except for • At “hub” level (BOA Group and Europe); some predefined specific cases; • At central BMCE Bank level. • The decision, jointly taken by the Risk and Commercial The local branch level may involve a sub-delegation depending Divisions – which includes at least one preliminary on the entity’s organisation, volume, products and risks. counterfactual analysis – applies to the applications assigned to the local decision committees as well as to the central 8.2.1.6. Credit application contents decision committees. This involves a multi-level pyramid All requests for obtaining credit should meet the product’s structure, where the higher level acts as an arbitrator in the eligibility criteria as defined in the product factsheets. All event that consensus is not reached; credit decisions are taken on the basis of a standard credit • The Risk Division can use the escalation procedure (n+1) if application whose format is defined in consultation with the there is a disagreement with the Commercial Division. Commercial Division and Risk concerned and in coordination with the Group Risk Division. 8.2.1.2. Credit approval process A credit application is prepared for each counterparty or The following diagram provides an overview of the credit transaction to which the entity wishes to make a commitment approval process : or for which the entity has already made a commitment in the case of an annual review or renewal. This is done on the basis of the documents mentioned in the product checklist and provided by the client. The document checklist to be sent by the client and the analysis form should be identical to the one at Group level and these will be modified based on the type of credit. The contents of the credit application should provide the decision-makers • The Commercial Division in charge of customer relations is with the necessary information as well as the quantitative and responsible for preparing the credit application; qualitative analysis required for taking the credit decision. • Counterfactual analysis of the credit application is performed The Commercial Division is responsible for preparing the by credit analysts from the entity’s Risk Division; credit application and its contents. The credit application shall remain the single point of reference for any credit decision; it • The decision is jointly taken by the Risk and Commercial should contain all the signatures or stamps that guarantee Divisions, based on their respective levels of delegation; the accuracy of the information provided therein. • The loan is actually implemented by the back-office, which 8.3. RATING MODEL is a unit independent from the Risk and Commercial Divisions. Since 2008, BMCE Bank has adopted an internal IRBF 8.2.1.3. Decision-making process ating model to calculate the minimum capital requirements In order to facilitate the notification process, the rule relating to required under Basel II. This has involved implementing several a ‘single decision for every credit proposal’ should be respected. sub-projects in order to meet the pre-requisites of the rating Credit decisions are taken either by circulating the application policy including those relating to upgrading management or by holding a Credit Committee meeting, either in person or information systems (MIS). by electronic means. This transition has taken place in partnership with our 8.2.1.4. Delegation supervisor, Bank Al-Maghrib, which regularly requests progress reports about this project. These reports help to The credit decision process is based on a delegation system improve the on-going process as well as pre-validating the whereby an entity’s Board of Directors delegates powers to methodology adopted, thereby facilitating final approval. its employees or a group of employees by setting limits, as In late 2012, BMCE Bank finalised the first rating for all its it sees fit. customers. The delegation may in turn involve a sub-delegation depending The Group’s African subsidiaries (LCB, BOA) and European on the organisation, volume, products and risks. subsidiaries are informed of this project’s progress. They have The delegation of authority to employees is assigned intuitu established a mechanism for exchanging information relating personae on the basis of their decision-making ability, to the rating of counterparties of Moroccan subsidiaries in experience, personal skills, professional skills and training. order to standardise the use of the attributed rating.

F-75 8.3.1. Rating objective but with data specific to each counterparty. BMCE Bank thus ensures the rating’s singularity for each counterparty. Our continued efforts for improving risk management within the BMCE Bank Group has led to the implementation 8.3.3. Rating process of internal ratings for all non-retail Basel counterparty 8.3.3.1. Methodology approval entities credit risks. This internal rating model includes risk-based as well as commercial factors. The methodology underlying the internal rating process has been defined by two entities within the BMCE Bank: The following five key rules underpin the macro-process for Group Risk Management (GRM) and Project Management rating counterparties, irrespective of the segment concerned : and Technological Synergies Division (PMTSD). 1) All BMCE Bank Group counterparties and transactions should After process implementation, these same entities will be have a single internal rating within the BMCE Bank Group; responsible for any changes made to the system. 2) The rating is attributed based on a validation process involving “rating officers” (at operational level) and 8.3.3.2. Rating scope “reviewers/approvers” (within entities not involved in the This project involves a multi-entity process whose remit credit approval process); encompasses all “non-retail” counterparty segments in 3) The Group Risk Management Division provides final respect of Basel regulations. The following counterparty approval for calculated ratings; segments are involved: 4) Ratings should be approved prior to being entered in the MIS and should be used thereafter; State 5) A rating is attributed to each counterparty when State and Central banks Public administration bodies approval is required for any new transaction. It is revised public sector whenever justified by an increase in risk and reviewed at the Government organisations Local government authorities application’s renewal date and at least once a year. BMD 8.3.2. Key rating rules International financial institutions Institutional Credit and similar institutions 8.3.2.1. Rating’s uniqueness Insurance companies A rating is attributed to each client since the latter is considered Financial companies to be a third party. The rating process is therefore carried out Large companies SMEs for each third party in such a way that one and only one rating Corporates Corporate professionals is attributed. In this way, BMCE ensures the uniqueness of the Specialised financing agencies rating attributed to each assessed counterparty. 8.3.3.3. Rating responsibility 8.3.2.2. Rating’s integrity The rating process involves three categories of person: As per the regulatory principles, the attribution of the rating and its periodic review should be carried out or approved Profile Description by a party that does not benefit directly from the credit Rating officer The rating officer is responsible for approval. It is for this reason that the rating is validated (Account rep) initiating the counterparty rating in the back office by the Group Risk Management Division process. He is responsible for ensuring following initial attribution by front-office commercial the quality and the completeness of the operations. The rating’s integrity is a key component in the data entered into the rating model credit risk management process and should reinforce and “Local” The “local” approver/reviewer checks encourage independence in the rating process. Approver / that the information used by the rating Reviewer officer is relevant (consistency in the Ratings attributed to borrowers and to facilities are reviewed (Branch financial statements and in the answers at least once a year (each time the application is renewed) Manager / to the qualitative questionnaire). This and whenever justified by an increase in risk (if BMCE Bank Account rep) action leads to first level validation of has important information in this regard). the data provided as well as a rating calculated prior to final approval/review From this perspective, BMCE Bank has an efficient process by the “central” validation entity for acquiring and updating relevant and significant “Central” The “central” approver/reviewer checks information concerning the borrower’s financial situation Approver / that the information used by the rating and the characteristics of the facility likely to impact Reviewer officer is relevant and confirms the exposure at default (EAD) and loss given default (LGD) (e.g. (DASE / RMG) counterparty’s final rating, which can information about collateral). As soon as this information is then be entered in the Bank’s MIS. received, the rating is quickly updated. He also has the option to modify 8.3.2.3. Rating’s singularity the quantitative and qualitative information entered by the rating A counterparty code is assigned to each of the Bank’s officer after first consulting the latter. counterparties. The rating of each third party is carried out Within certain guidelines, he can opt to using the counterparty reference code in such a manner that, manually adjust the rating in order to manage for all third parties (the counterparty type is single and unique), any possible limitations to the rating model. the assessment will be carried out by using a single rating model F-76 8.3.3.4. Rating review and update calculate the Bank’s risk-weighted assets (RWA) under the “internal rating” approach. The following are the minimum Rating procedures provide a detailed description of the requirements: rating review and update process in the FACT tool at different stages of the rating process. - 7 categories for healthy counterparties 8.3.4. Rating’s model frame of reference - 1 category for defaulting counterparties 8.3.4.1. Characteristics BMCE Bank Group has adopted an 11-level rating scale to attribute a final counterparty rating : Determining the final counterparty rating involves several factors: the rating models (excluding sovereign & specialised financing) are built upon four successive ratings attributed to 1 the counterparty and include different levels of information: 2 3 1. Intrinsic rating Increasing “Healthy” 4 probability of 2. Rating including supporting information ratings 5 default (PD) 6 3. Counterparty rating 7 4. Debtor rating 8 9 Pre-doubtful Intrinsic rating • The intrinsic rating measures a coun- “In default” 10 Doubtful terparty’s ability to fulfil its financial ratings 11 Irrecoverable commitments without requiring any, support or specific constraint As of 31 December 2012, the breakdown of the portfolio by • This rating is determined by taking asset class was as follows : into account only a certain number of Total Total criteria specific to the counterparty: Risk class Rating Dec-12 exposure Dec-11 exposure o Financial information from the latest bal- % % ance sheet and income statement provid- ed to the bank or officially available 1 2,236 3.59% 2,387 3.93% o Qualitative information (manage- 2 11,380 18.24% 14,123 23.28% ment, competitiveness) Limited risk o Behavioural information (for very 3 6,380 10.23% 5,548 9.14% small enterprises) 4 6,258 10.03% 3,852 6.35%

Rating including • Based on the intrinsic rating, this rat- 5 6,874 11.02% 4,530 7.47% supporting ing takes into account all the important Medium risk 6 5,820 9.33% 6,208 10.23% information subordinate items • This rating is determined after consider- 7 16,955 27.18% 17,377 28.64% ing all information supporting the coun- 8 2,659 4.26% 2,216 3.65% terparty’s application (when this rating is High risk better than the counterparty rating) or to 9 295 0.47% 954 1.57% show the extent to which the counterpar- 10 698 1.12% 935 1.54% ty is dependent on its supporting docu- Very high ments (when the counterparty rating is risk 11 2,125 3.41% 2,084 3.43% better than this rating) Sub-total 61,679 98.88% 60,215 99.24% Counterparty • This rating is determined by taking No rating (non-retail rating into account the risk relating to the 698 1.12% 463 0.76% counterparty’s country of origin very small enterprises) Debtor rating • This is the final rating attributed to Total loans a counterparty and it represents the to corporate 62,377 100% 60,678 100% Bank’s actual risk level of the bank in customers Retail respect a counterparty 30,613 27,516 • This rating is determined after con- customers BMCE Bank sidering information 92,990 88,194 Total Other subsidiaries 45,819 33,149 8.3.4.2. Rating scale of which BOA 25,293 20,920 In accordance with the Basel regulations, Bank Al-Maghrib Group has set a minimum number of categories that a rating BMCE Bank 138,809 121,343 model should contain for it to qualify as being able to Group Total

F-77 The Group is currently using the standardised approach loans to credit institutions (MAD 23.3 billion), public insti- which does not require the rating scale to be mapped tutions (MAD 9.9 billion dirhams). Receivables from large to those of external rating agencies. Furthermore, this enterprises accounted for 42% of total assets, while SMEs mapping is not applicable in Africa since external rating and very small enterprises accounted for 27%. agencies do not rate companies on this continent with the exception of a few large banks with unsolicited ratings. Balance sheet items by gross exposure Exposure category 2012 2011 Change Since BOA accounts for the majority of the Group’s Due from international commitments, it has a different rating model sovereign 16,127,984 13,638,203 2,489,781 based on expert opinion. In order to improve this system, borrowers BMCE Bank has decided to implement its own rating model Due from public 9,997,460 7,722,588 2,274,872 in all international subsidiaries within a 2-year framework as institutions part of its project to implement a Group risk control policy. Due from credit 23,304,426 26,703,814 -3,399,388 In 2012, the Bank undertook a detailed review of its institutions Due from large risk management procedures at Group level in order to 69,605,370 60,025,972 9,579,398 streamline and implement its risk management and control companies procedures in all international subsidiaries. Due from small and medium size 13,037,711 13,090,236 -52,525 The Bank also established the International Risk Division enterprises (SME) and hired a consulting firm to oversee implementation of Due from retail internal control and risk management procedures for the customers 31,585,863 27,796,478 4,089,385 entire Group. and very small The results of this project to date include, in terms of Risk enterprises Management, a target model being defined for the Group TOTAL 163,658,814 148,977,292 14,981,523 Risk Division and the drawing up of an implementation plan. The group’s gross exposure to credit risk rose by MAD 14 billion between December 2011 and December 2012. This increase 8.3.5. Scoring of retail customers concerned all categories except loans to credit institutions In accordance with the Basel Accords, BMCE Bank Group has which fell by MAD 3 million. opted for the IRBF Approach for Credit Risk. For this purpose, Furthermore, off-balance sheet items totalled MAD 32 the scoring project, initiated in 2012, is consistent with this billion, accounting for 16% of total exposure, of which large approach and involves statistical modelling of customers in enterprises represented the largest part. These commitments default and the risk behaviour of retail customers. are sub-divided into financial commitments and guarantee Two types of score have been developed : commitments. • APPROVAL SCORE: one-off score when the credit line is 8.5. CREDIT RISK CONTROL AND MONITORING PROCEDURE opened. New and existing customers will be rated using this The credit risk control and monitoring procedure ensures a score. second level check in addition to daily monitoring carried out • BEHAVIOURAL SCORE (Basel II rating model): real-time as- by the Commercial Division. sessment of risk based on a client’s behaviour for an exist- This procedure may be adapted depending on how each subsidiary ing account. Only existing customers can be rated using the is organised in consultation with the Group Risk Division. behavioural score. The Commercial Division is entirely responsible for monitoring • To obtain a FINAL APPROVAL SCORE, the final score will be is- risks. The account representative is responsible for monitoring sued by combining the approval and behavioural scores. New risks related to transactions on a daily basis. The Commercial customers will be rated only on the basis of the approval score. Division is assisted by the Risk Division in carrying out this Until now, the first behavioural and approval scores have task, with the latter providing the necessary alerts. been developed for customers holding a government-ap- The Risk Division’s main objective is to ensure the efficient proved instant access loan. Implementation is expected for running of a forward-looking alert system that allows the 2013. Work in progress for other segments includes mort- Commercial Division to optimise risk management as well as gage loan customers, professional banking customers etc. anticipating potential risks so that the Bank’s portfolio may 8.4. EXPOSURE TO CREDIT RISK be properly managed. The Risk Division also ensures that the Commercial Division is monitoring risks properly and provides The following table shows all of BMCE Bank Group’s finan- alerts for accounts in default. cial assets, including securities which are exposed to credit risk from a prudential standpoint. Credit risk exposure does The Risk Division is not responsible for checking and approving not include guarantees and other collateral obtained by the every transaction executed for an approved and validated Group for its credit operations nor purchases of credit pro- facility. This task is performed by an independent back-office tection. which implements the transaction when instructed by the Commercial Division. The Risk Division’s main operational In the prudential balance sheet dated 31 December 2012, tasks, which relate to credit risk control and monitoring, can exposure to credit risk relates to outstandings of sovereign be summarised as follows: borrower deposits net of depreciation (MAD 16.1 billion),

F-78 • Performs pre-checks; particularly the most obvious ones, over the financial year. • Performs post-checks; 8.5.2.2. Concentration limits - Identifies and monitors the portfolio of commitments Credit Risk Management has adopted a policy of analysing based on several factors: products, maturities, beneficiaries, business line strategies from a risk perspective, especially business sectors, branches, geographical regions etc.; in respect of new activities or product launches, by setting formal limits on these risks. Credit concentration risk incurred - Fixes and monitors concentration limits; by BMCE Bank Group can arise from exposure to: - Detects and monitors accounts showing anomalies and • Individual counterparties; high-risk accounts; • Interest groups; • Categorised the portfolio based on regulatory criteria and • Counterparties belonging to the same industry or country. proposes provisioning; 8.5.2.2.1. Individual counterparties • Performs stress tests; Every month, the Group monitors concentration of individuals • Produces regulatory reports and internal steering reports. at the parent company and consolidated levels, thereby 8.5.1. Pre-checks ensuring that the commitments of its 10, 20 and 100 largest customers are monitored and reconciled. Pre-checks include all compliance checks carried out prior to a credit mine’s initial authorisation and use. These checks The following table shows commitments to the Bank’s main are performed in addition to automatic checks and checks debtors at 31 December 2011 and 2012 : carried out by the Commercial Division, Back-office and Legal Department etc. Dec-12 Dec-11 Balance Balance These checks are implemented by the Risk Division. They % of % of sheet sheet mainly relate to: total total outstandings outstandings - Credit proposal data: Commitments - Compliance with the appropriate delegation level; to 10 largest 12,594 8% 14,603 10% customers - Legal documentation compliance; Commitments to 20 largest 19,406 12% 21,603 15% - Conditions and reservations expressed before initial use of customers funds or the facility; Commitments - Data entered in the information systems. to 100 largest 38,774 24% 40,085 28% customers 8.5.2. Post-checks Total 160,204 - 145,165 - Like pre-checks, post-checks are also performed by the Risk commitments Division. The level of concentration of its 10, 20, 100 largest These checks are aimed at ensuring measurement, control and customers accounted for 59%, 90% and 180% respectively monitoring of credit risks in terms of the entire portfolio and of prudential shareholders’ equity at 31 December 2012. not just the counterparty. Special attention is therefore paid 8.5.2.2.2. Interest groups to credit quality, anticipating and preventing irregularities and risks as well as controlling and monitoring risks by the Diversification of the portfolio by counterparty is monitored Commercial Division. on a regular basis, notably under the Group’s individual risk concentration policies. Credit risks that result from 8.5.2.1. Portfolio monitoring concentration on a single counterparty or group of The first post-check consists of identifying and monitoring the counterparties with a relative high level of outstandings (more entity’s total commitments based on several factors including than 5% of shareholders’ equity) are specifically monitored products, maturities, customers, business groups, customer from an individual as well as consolidated perspective. segments, counterparty ratings, loan categories (healthy In addition, monitoring of major risks also ensures that the loans and non-performing loans), industries, branches, aggregate exposure to each beneficiary does not exceed 20 % geographical regions, type of collateral etc. of the Group’s net consolidated shareholders’ equity capital The Risk Division’s information systems’ enable it to list and as recommended by the Moroccan banking regulations. centralise all credit risks for the same individual counterparty BMCE Bank remains well below the concentration limits or interest group on a daily basis. Risks incurred by economic defined by the Bank Al Maghrib directive. sector, geographical region, country, type of guarantee or 8.5.2.2.3. Counterparties belonging to the same company collateral are identified and centralised at least once a month. In 2011, BMCE Bank implemented a new methodology The Risk Division uses its information systems to generate to determine and manage industry-specific limits. This reports that include items at each balance sheet date as well procedure uses a statistical data-based model which as changes compared to the previous balance sheet date. One includes historical default rates and the number of of the main objectives of this analysis is to explain changes, counterparties by industry and by risk category (rating).

F-79 The objective is to model the probability of default by using in this country, is unable or refuses to fulfil its foreign appropriate econometric techniques and a dependent obligations due to socio-political, economic or financial random variable whose value is derived from the number of reasons. occurrences of defaulting events. Country risk can also result from limits on the free This procedure is based on the assumption that the movement of capital or due to other political or economic counterparties are independent and the defaulting factors, in which case it is qualified as transfer risk. It can events are not correlated. Thus, the key concept of this also result from other risks related to the occurrence of methodological approach is the probability of default for a events impacting the value of commitments for a given given counterparty. This probability is measured by using country (natural disasters, external shocks). the rate of default of the rating-industry pair. In 2012, the Group reviewed its country risk policy in detail. For every rating-industry pair, this top-down approach It set itself the primary objective of implementing a system counts the number of customers that have defaulted in for assessing, limiting, reducing and, if necessary, prudently order to calculate the average historical rate of default. suspending its commitments to high-risk countries across the Group. The model therefore enables the Bank to identify those industries from which it needs to withdraw or reduce its The proposed policy, in addition to outlining a strategy commitments as well as those industries to which is needs for managing Country Risk, includes rules for identifying, to increase its exposure. managing and controlling these risks as well as the Group entities responsible. The main feature of this risk The model also enables the Bank to identify priority prevention policy is the system of delegation and limitation industries for credit expansion in the context of the Bank’s of commitments. development plan as well as bad loan experience by industry. This approach, adopted by the Group Risk Division, is This system has been designed in such a way that limits complemented by back-testing the model every six months. rise in proportion to the increase in country risk. The level of commitments is determined on the basis of the country risk Industry-specific limits are reviewed every six months in level, reflected in the rating attributed to each country and consultation with the Commercial Division and the Bank’s the percentage of shareholders’ equity of each Group entity. Economic Intelligence Centre, which provide both business line experience as well as estimation of macroeconomic and BMCE Bank’s commitments are primarily within Morocco. industry growth. Advice provided by these entities therefore The Bank’s commitments to foreign counterparties relate helps to challenge and confirm the suitability of the model to foreign credit institutions. These commitments require: in respect of the economic context. • Post-rating authorisation and fundamental analysis of The following table shows the Group’s commitments to each counterparty; customers by industry at 31 December 2011 and 2012 : • Monthly monitoring, with the findings sent to the Central 31 Dec 31 Dec Bank in the form of a regulatory statement. Sectors Weighting Weighting 2012 2011 Textile, clothing and leather industries 2 077 1% 1 838 2% The Group Risk Management Division publishes monthly Public administration bodies 1 287 1% 1 535 1% reports for regulatory purposes which are sent to the Central Small businesses 11 952 9% 8 819 7% Bank. These relate to foreign exposure on an individual and Agribusiness and tobacco industry 3 927 3% 2 544 2% consolidated basis. Construction and public works 4 952 4% 4 393 4% Agriculture and fisheries 1 435 1% 1 434 1% These reports provide an overview of BMCE Bank Group’s Services 2 680 2% 2 362 2% overall commitment in respect of foreign banking Miscellaneous manufacturing 2 543 2% 2 956 2% counterparties. They reflect the overall commitment by industries Metallurgical, mechanical, electrical country and include all balance sheet and off-balance sheet 3 553 3% 2 772 2% and electronic industries assets relating to loans to foreign residents. Chemical and specialty chemical 2 491 2% 2 040 2% industries In addition to these statements, the Group Risk Management Forestry and paper industries 189 0% 115 0% Division prepares a monthly analytical report concerning Transportation and 7 131 5% 7 407 6% BMCE Bank Group’s foreign exposure which is distributed to telecommunications all members of the Management Committee. Mining industries 1 841 1% 2 152 2% Financial activities 22 595 16% 23 304 19% This report helps to assess BMCE Bank Group’s level of Hotels and restaurants 3 180 2% 2 960 2% foreign exposure and provides guidelines for monitoring the Production and distribution of water 6 106 4% 5 028 4% and electricity increase in each country’s inherent risk. Real estate development 10 240 7% 10 038 8% BMCE Bank has developed an internal rating country model Retail (Morocco) 34 727 25% 30 329 25% Others* 15 904 11% 9 316 8% which based on a combination of information collected Total 138 809 100% 121 343 100% from various reports issued by authorities in the countries

* “Others” relates to a number of African subsidiaries that mainly include retail customers in question, international organisations and international and very small enterprises across a large diversity of industries. rating agencies. 8.5.2.2.4. Counterparties belonging to the same country Every year, its Economic Intelligence Centre produces factsheets for the different foreign countries in which the Country risk refers to the possibility that a sovereign Bank has operations. counterparty in a given country, as well as other counterparties F-80 The internal rating model and the country factsheet provide 8.5.2.3. Control of accounts showing anomalies and an assessment of risks presented by each country by taking high-risks accounts into consideration the most relevant criteria. 8.5.2.3.1. Control of accounts showing anomalies These reports provide a general overview of the situation The purpose of this post-check is to detect the irregular use in each country and, as mentioned above, provide a basis of accounts and identify recurring anomalies. This is carried for attributing a country limit. The rating is reviewed on an out to ensure that the Commercial Division regularises the annual basis. account or at least provides justification for the irregularity. This check is therefore carried out in addition to daily Country specific Country Country Country table M data score rating monitoring by the Commercial Division. The most important cases of accounts showing anomalies relate to credit applications where: Heading Rule-of-thumb Data table • Credit authorisations have expired;

Management Mapping to Score or rating F M • Guarantees have not been provided; rule rating scale • Credit lines have not been used for more than 6 months. The country risk policy can be illustrated as follows : These criteria constitute the minimum conditions for accounts showing anomalies that are detected automatically and monitored jointly with the Commercial Division. 8.5.2.3.2. Monitoring high-risk accounts High-risk accounts relate to those for which the risk is likely to subsequently increase, thereby resulting in a cost to the Bank. They consist of commitments which show either a visible deterioration in risk quality as measured against quantitative criteria or a potential deterioration in risk quality as measured against qualitative criteria. • Are frozen: meaning sight deposit accounts for which there have not been any actual credit entries over 60 days (excluding the release of loan funds) to at least cover the account fees as well as a significant portion (10%) of the said outstanding debit balance; • Are in arrears, such as: - Amortisable loan outstandings for which a repayment instalment has still not been paid 30 days after the due date; - Loan outstandings repayable in a single instalment which has still not been honoured 30 days after the due date; - Trade receivables discounted by the Banks and returned unpaid; The Group Risk Management Division has carried out work • Have exceeded limits, beyond one month, in respect of to extend the country risk management policy to all its authorisations granted. To avoid any potential operational subsidiaries in Africa as part of the project to implement risks, however, entities carry out a weekly check to ascertain the Internal Control and Group Risk Management policy. to what extent authorised limits have been exceeded (at the The following pie-charts show the Group’s overall exposure discretion of each entity); to customers by major geographical areas at 31 December 2011 and 2012: • Have exposures for which recovery is doubtful due to other negative quantitative or qualitative information about the customer such as: a high risk rating, special events or litigation surrounding the main shareholders (death, bankruptcy etc.). These are the minimum criteria for detecting high-risk accounts. The Commercial Division, given the information at its disposal and through its daily contacts, together with the Risk Division are responsible for identifying and indicating any other account which may be considered a high-risk account, if they deem it necessary. Assessment, intervention and the complementary nature of the Commercial and Risk Divisions

F-81 remain the determining factors for identifying high-risk Provisions recognised for impaired assets in the Moroccan accounts. business activity were MAD 3,590 million and MAD 3,903 million respectively in 2011 and 2012. Responsibility for the daily monitoring of these risks lies with the Commercial Division. However, it is the Risk Division’s Impaired assets of the other subsidiaries rose from MAD 2,431 responsibility to detection high-risk accounts. This is million in 2011 to MAD 3,276 million in 2012, primarily due to done using quantitative criteria extracted from the Bank’s efforts made by the Group to clean-up its portfolio. Provisions appropriate applications and IT systems. for these assets totalling MAD 1,727 million and MAD 1,834 million respectively were recognised in 2011 and 2012. When these risks are considered certain, the Risk Division requests the Commercial Division to provide explanations. 8.5.4. Guarantees The latter uses all the means at its disposal to ensure that the The Group receives different types of guarantee in arrears are recovered. consideration for loan outstandings. As a general rule, the 8.5.2.3.3. Annual account review guarantees required are based on the following two factors: the loan type and the counterparty quality. All retail customers with a revolving credit or corporate customers with a commitment to any of the Group’s entities Thus, for all property loans (home purchase loans and must undergo an annual review process carried out by the real estate development loans), the Group systematically relevant Credit Committee, irrespective of whether a facility possesses mortgages on the financed property as well as needs to be approved or renewed. insurance cover. The Risk Division is responsible for continuously updating Mortgage guarantees are systematically assessed, prior the planned annual review schedule in consultation with the to acceptance, by a specialised independent body or by the Commercial Division. Responsibility lies with the Credit Risk relevant departments within the Group in all cases where the Management, Monitoring and Reporting Manager. value declared by the customer exceeds one million dirhams. 8.5.2.3.4. Theme-based checks Similarly, the financing of public contracts, merchandise, equipment and trade premises is systematically guaranteed Unlike the checks mentioned above, theme-based checks are by collateral in respect of the financed items as well as through not performed on a regular basis and are related to a specific insurance cover. point or risk. These checks are carried out by the Risk Division on the request of senior management or other bodies. In addition to these guarantees, the Group generally secures its position by requesting personal guarantees from 8.5.3. Loan classification counterparties whenever deemed necessary, depending on the After the monthly review of the Bank’s portfolio and analysis of quality of such counterparties. high-risk accounts, each subsidiary reviews its regulatory loan It is also worth noting that 35% of the Group’s exposure to classification as required by local regulatory requirements. customers is guaranteed by mortgages, 3% by bank guarantees This review is finalised by the committees for monitoring high-risk or cash collateral and 10% by sovereign guarantees. accounts on the recommendation of each entity’s Risk Division. Finally, almost one half of the Group’s exposure qualifies for The latter is also responsible for implementing these decisions by credit risk mitigation techniques under the Basel II Accord. monitoring and transferring these accounts from the “healthy” to the “non-performing, requires provisioning” category. Transferable guarantees The following table shows the net carrying amount of non- The Group does not hold any assets held as collateral which it amortised loan outstandings in arrears and amortised is authorised to sell or return in the absence of default on the doubtful loans in the Moroccan business activity : part of the guarantee’s owner. The guarantees that are usually taken by the Group are for the

2012 2011 purpose of hedging customers’ commitments in the event of Maturities of unimpaired loan Maturities of unimpaired failure to comply with the legal provisions governing all credit Im- outstandings in arrears Impaired loan outstandings in arrears paired agreements. assets > 30 > 90 > 180 > 30 > 90 > 180 assets days days days (NPL) days days days Total Total (NPL) Loan guarantees obtained < 90 < 180 < 1 < 90 < 180 < 1 days days year days days year Large En- In 2011, the Group obtained two real estate assets by taking 314 141 108 563 1,161 133 404 122 659 1,009 terprises possession of collateral valued at MAD 488 million. In 2012, it Corporate took possession of two other assets held as collateral valued Banking 862 263 182 1,306 1,944 278 137 123 538 2,318 at MAD 162 million. Network Personal 8.5.5. Stress testing and Profes- sional 840 390 273 1,503 2,145 432 523 237 1,192 1,933 Every six months, BMCE Bank conducts crisis simulations Banking (stress tests) to assess the vulnerability of its credit Network Morocco portfolio in the event of an adverse event or deterioration of Business the quality of its counterparties. 2,016 793 563 3,372 5,250 844 1,064 482 2,390 5,260 Activity Total The stress tests are conducted in order to assess the Bank’s resilience in the face of unexpected, extreme events. F-82 Operationally, they consist of simulating scenarios relating The Bank also established the International Risk Division and to the default of a certain percentage of the Group’s hired a consulting firm to oversee implementation of internal counterparties. The ultimate objective is to measure the control and risk management procedures for the entire Group. impact on provisions and, as a result, on profitability and This project has resulted in the drawing up and validation, the prudential shareholders’ equity. among other things, of the Group’s Internal Control Charter and the Group Risk Division’s responsibility charter. The various scenarios are reviewed regularly and at least twice per year to ensure that they are relevant. This In addition, this project has also resulted, in terms of risk assessment is carried out on the basis of the objectives management, in a target model being defined for the Group set for conducting stress tests and whenever the market Risk Division and the drawing up of an implementation plan. conditions suggest any potentially adverse changes 8.6. DESCRIPTION OF THE POLICY FOR MANAGING LIQUID- that are likely to seriously impact the Group’s ability to ITY AND INTEREST RATE RISKS withstand them. BMCE Bank has established a policy for controlling balance The Group Risk Division will endeavour, as a part of the sheet risks such as liquidity and interest rate risks so that Group Convergence project, to transfer its expertise to all it is able to as to continuously monitor changes in financial subsidiaries to enable them to conduct their own stress market trends and their impact on the Bank’s operations. tests, on a half-yearly basis, and communicate the result to the Hub Risk and Group Risk Divisions so that they may be In order to maintain balance sheet stability from a medium- consolidated and communicated to the Central Bank and to to long-term perspective, the Bank’s liquidity and interest rate the Group’s management. risk management policy aims to: 8.5.6. Credit risk reporting • Ensure income stability when interest rates change, thereby maintaining net interest income and optimising the economic In order to monitor credit risks, the Group Risk Division value of equity; has established a specific procedure for producing credit risk reports in order to improve and streamline credit risk • Ensure an adequate level of liquidity, thereby enabling the control across the entire Group. These reports are aimed Bank to meet its obligations at any given time and protecting at satisfying the requirements of all concerned parties for it from any eventual crisis; monitoring, steering or regulatory purposes. They are also • Ensure that the risk inherent in its foreign exchange positions used by BMCE Bank Group’s financial communications does not have a negative impact on the Bank’s profit margins; department. • Steer the bank’s strategy so as to take full advantage of These reports are in addition to the various regulatory growth opportunities available in the market. reports that have to be prepared by the Risk Division in order The Bank has established an ALCO committee to ensure that to satisfy regulatory requirements at the Group and local these targets are met. The main tasks of this committee are levels. These also include reports relating to the financial as follows: statements as well as other risk-related reports prepared by • Set asset-liability policy; other departments of the entity. These reports are designed • Organise and direct asset-liability sub-committees; to present and overview of risk management carried out by the various entities. • Possess in-depth knowledge of types of risk inherent in the Bank’s operations and keep abreast of any changes in these Credit risk reporting relates to all credit risks resulting risks based on trends, risk management from the activities of all entities of the entire BMCE Bank practices and the Bank’s operations; Group. Each entity organises itself as a function of local • Review and approve procedures aimed at limiting the risks in- particularities in order to satisfy the requirements of the herent in the Bank’s operations in terms of credit approval, in- reporting process. vestments, trading and other significant activities and products; 8.5.7. Implementation of the risk control policy at inter- • Master the reporting systems that measure and control the national subsidiaries main sources of risk on a daily basis; The Group Risk Division has established a quarterly reporting • Review and approve risk limits periodically given changes to process relating to each subsidiary’s risk situation in the the institutional strategy, approve new products and respond form of a matrix and a procedure describing all information to important changes in market conditions; required. Specialised risk control software is expected to be • Ensure that the different business lines are properly man- introduced in due course. In 2012, several adjustments were aged by HR, the latter possessing a high level of competence, made regarding each subsidiary’s specific requirements experience and expertise in relation to supervised activities. in order to facilitate the communication process and streamline the various matrices. Responsibilities of the different parties involved in interest rate and liquidity risk management In 2012, the Bank radically reviewed its risk management process at Group level in order to (i) Strengthen the Group’s Maintaining short- and medium-term balance sheet stability executive governance by implementing risk management entails the involvement of all parties within the Bank and and control procedures as well as internal control at all requires that each party’s responsibilities are clearly defined subsidiaries; (ii) Support its international growth strategy in respect of interest rate and liquidity risk management. as outlined in its latest three-year development plan. In this regard, each of the Bank’s entities will have its own budget and objectives, validated by the general management F-83 team on a medium-term basis. This enables the relevant From 1 year More Due date not 3 months Demand D/D to 1 to 5 than 5 Total bodies to ensure orderly monitoring and control of the three- determined to 1 year year plan while balance sheet stability and compliance with month years years Cash, Central regulatory capital requirements. Banks, Treasury, 9,922 9,922 Post Office The ALM department regularly tracks changes in the Financial assets at Bank’s balance sheet structure by comparison with the fair value through 34,245 34,245 plan’s objectives and indicates any divergence during ALCO income Available-for-sale committee meetings, attended by representative of all 2,796 2,796 entities, and any required corrective measures. financial assets Loans and receiv- ables due from Liquidity Risk 2,934 8,392 3,287 2,284 4,348 153 21,397 credit and similar The Bank’s strategy in terms of liquidity risk management institutions aims to ensure that its financing mix is adapted to its growth Loans and receiv- ables due from 9,364 22,097 32,105 23,149 28,013 24,082 138,809 ambitions to enable it successfully expand its operations in a customers stable manner. Held-to-maturity 0 1,275 1,184 5,998 2,061 10,518 financial assets Liquidity risk is the risk of the Bank being unable to fulfil its TOTAL FINANCIAL 49,338 40,411 36,666 26,616 38,358 26,296 217,687 commitments in the event of unforeseen cash or collateral ASSETS requirements by using its liquid assets. Central banks, Treasury, Post 67 67 Such an event may be due to reasons other than liquidity, for Office example, significant losses that result from counterparties in Financial liabilities default or due to adverse changes in market conditions. at fair value 2 2 through income The following two major sources may generate liquidity risk : Amounts due to credit and similar 360 3,236 23,133 5,234 2,102 163 34,228 • Inability of the institution to raise the required funds to deal institutions Amounts due to with unexpected situations in the short term, such as a mas- 245 119,097 9,836 12,316 3,157 0 144,651 customers sive withdrawal from deposits or a maximum drawdown of Debt securities 3,588 5,440 4,987 14,015 off- balance sheet commitments; issued Subordinated • A mismatch of assets and liabilities or the financing of me- debt and special 127 216 4,417 4,760 dium- or long- term assets by short-term liabilities. guarantee funds TOTAL FINANCIAL 733 122,401 36,557 22,990 10,463 4,580 197,723 An acceptable liquidity level is a level that enables the bank to LIABILITIES finance asset growth and to fulfil its commitments when they TOTAL LIABILITIES 733 122 401 36 557 22 990 10 463 4 580 197 723 are due, thereby protecting the bank from any eventual crisis. • The maturities of financial assets and liabilities at fair Two indicators are used to evaluate the Bank’s liquidity profile: value in the trading portfolio and the portfolio of available- for-sale financial assets are deemed to be “undetermined” • The liquidity ratio must be greater than %100 (as defined by the Central Bank). This indicator helps to measure the one- given that these instruments are liquid and earmarked for month asset coverage ratio. sale, repaid or temporarily sold under repurchase agree- ment prior to their contractual maturity. The liquidity ratio stood at 105.6% on 31 December 2012, above the regulatory limit. • Financing and guarantee commitments given, which to- talled MAD 14,795 million and MAD 17,822 million respec- Ø Profile of cumulative liquidity gaps: the method of periodic tively on 31 December 2012 (MAD 17,113 million and MAD or cumulative gaps in dirhams and in foreign currencies helps 18,996 million respectively at 31 December 2011), can measure the level of liquidity risk incurred by the Bank over largely be drawn down at sight. the short, medium and long term. Interest Rate Risk This method is used to estimate the net refinancing require- ments over different time periods and determine an appropri- Interest rate risk is the risk that future changes in interest ate hedging strategy. rates have a negative impact on the Bank’s profit margins. Balance sheet by maturity Changes in interest rates also impact the net present value of expected cash flows. The extent to which the economic • The following table gives a breakdown of the balance sheet value of assets and liabilities is impacted will depend on the by contractual maturity : sensitivity of the various components of the balance sheet Residual value accounts for 55% of the total financing to changes in interest rates. amount. Interest rate risk is measured by conducting simulation- based stress tests under a scenario in which interest rates are raised by 200 basis points as recommended by the Basel Committee.

F-84 The Bank’s strategy in terms of interest rate risk Foreign Exchange Cash instruments management aims to ensure the stability of results against Instruments Spot Foreign Exchange changes in interest rates, thereby maintaining net interest Forward Foreign Exchange income and optimising the economic value of equity. Foreign exchange Derivatives Foreign exchange Swaps Changes in interest rates may negatively impact net interest Equity Instruments Equity shares income and result in the Bank significantly undershooting Derivatives on equity or and Indices Mutual funds on equities its initial projections. Fixed income Instruments I- Corporate and Interbank loans and borrowing In order to counter such risks, the ALM department regularly Fixed rate (in MAD and Foreign Currency) Floating Rate (in MAD and Foreign Currency) steers the Bank’s strategy by establishing rules for II- Negotiable Debt Securities and bonds matching assets and liabilities by maturity and by defining II-1 Sovereign Debt (Including bonds issued by a maximum tolerance departure threshold for net interest the Kingdom of Morocco) income by comparison with projected net banking income. Fixed rate (in MAD) Floating Rate (in MAD and Foreign Currency) The method of periodic or cumulative gaps in dirhams and II-2 Securities issued by Credit institutions and in foreign currencies helps measure the level of interest rate Companies Fixed rate (in MAD and Foreign Currency) risk incurred by the Bank over the short, medium and long Floating Rate (in MAD and Foreign Currency) term. III- Loans / borrowing of Securities Loans / borrowing of securities This method is used to estimate asset-liability mismatches Repo / Reverse repo over different time periods and determine an appropriate IV- Rate Derivatives hedging strategy Rate Swaps Rate Futures Sensitivity of the value of the banking portfolio Forward Rate Agreement V- Fixed income mutual funds Simulation-based stress-tests are conducted to measure Money market mutual funds the impact of changes in interest rates on net interest Debt mutual funds income and on economic value of equity. Commodity Products Commodity futures Commodity futures options At 31 December 2012, the impact of a 200 basis point Credit Default Swap (CDS) change in interest rates on net banking income was Credit Linked Note (CLN) estimated to be positive MAD 122 million. The change in the economic value of equity in the event of a 200 basis 8.7.1. Market risk management policy point shock was estimated to be MAD 108 million or 0.78% 8.7.1.1. Governance of regulatory capital. The main contributors to BMCE Bank Group’s market risk 8.7. MARKET RISK management policy are as follows: The majority of the Group’s market activity is focused at • General Management, which implements market risk manage- BMCE Bank level which accounts for 99% of total activity. ment strategies and policies approved by the Board of Directors; The remainder is undertaken by the Group’s London subsidiary. • Group Market Risk Committee, which defines Group mar- ket risk management policy and validates any amendment Market risk management at BMCE Bank Group adheres to to the steering of market risk across the entire Group; regulatory standards as defined by supervisory authorities and in application of best international management • Group Market Risk Department, which centralises market practices as defined by the Basel Accords. risk management for BMCE Bank Group as a department which is independent from the Group’s front-offices. This Market risk is defined as the risk of loss on balance sheet gives it maximum objectivity in steering market risks and and off-balance sheet positions due to changes in market arbitrating between the Group’s various market activities; prices. For BMCE Bank, these risks encompass the following: • Risk Management Units of BMCE Bank Group entities, which • Interest rate risk; provide a first level check on market activities within their en- • Foreign currency risk; tity and send regular reports to Group Risk Management; • Credit risk on market transactions. • Internal Audit, which ensures implementation of the mar- ket risk management policy and rigorous compliance with Mapping of financial instruments procedures. The following table shows products traded as part of BMCE 8.7.1.2. Description of the Market Risk Management Policy Bank Group’s trading portfolio, mapped by risk factor : BMCE Bank Group’s market risk management policy is based on four main factors: • Limits; • Risk indicators; • Capital requirements; • Counterparty risk related to derivatives transactions.

F-85 8.7.1.2.1. Limits Unlike traditional risk indicators, Value-at-Risk combines several risk factors and measures their interaction, thereby • Counterparty limits in market transactions taking into consideration the diversification of portfolios. The process for approving limits for counterparties and BMCE Bank Group uses KVar software to calculate overall applications to exceed those limits in market transactions Value-at-Risk and VaR by asset class as well as back-testing is governed within BMCE Bank Group by a system of by using different methods. delegation of powers within a framework of procedures specific to each counterparty type. CHANGES IN VAR (1 DAY, 99 %) IN DIRHAMS IN 2012 • Market limits In order to control market risk within BMCE Bank Group and to diversify the trading portfolio, a set of market limits has been adopted. These limits reflect the Group’s risk profile and help to steer market risk management by arbitrating between the Group’s various market activities. BMCE Bank Group’s set of market limits are as follows : • Stop-loss limits by activity over different time horizons; • Position limits by activity; 31/12/2012 31/12/2011 VaR (10 days; 99%) 101,295,069 82, 498, 848 • Open position limits by duration for the dirham foreign exchange business; The historical VaR (10 days) with a confidence level of 99% at 31 December 2012 was MAD 101 million. • Open position limits by foreign currency and duration for the foreign currency cash business; Stressed VaR • “Greek” limits for the derivatives business; The Group has established different scenarios for calculating stressed VaR. The Group opted for the period from 1 • Open position limits by foreign currency for the foreign September 2008 to 1 September 2009. In fact, there were a exchange rate business; number of events during this period generating a high level of volatility in financial markets. These events were: • Transaction limits. • The bankruptcy of Lehman Brothers, which was unable to Market limits are monitored using MLS software which withstand the sub-prime crisis; enables real-time monitoring of limits and overruns. • USD 1,000 billion widening in the US budget deficit to VaR limits are in the process of being defined and will be support financial markets; included in the project relating to adoption of the advance • The Greek crisis and the threat of contagion spreading to approach in respect of market risks. This is a dynamic limit the “PIIGS” countries. management policy that takes into account fluctuations in different risk factors as well as existing correlations in The reaction by Morocco’s financial markets to these events order to assess more accurately the diversification of the was limited however. A number of scenarios were applied to portfolio. simulate global market conditions: • Fluctuation in the Casablanca stock market identical to • Regulatory limits that of the United States; In addition to the limits adopted for internal purposes, BMCE • Fluctuation in the dirham rate identical to that of USD; Bank Group also complies with regulatory limits defined by • Repercussion of EURUSD volatility on EURMAD and USDMAD; Bank Al-Maghrib such as: • Repercussion of EURUSD volatility on EURMAD volatility • Limits on Tier 1 solvency ratios; and USDMAD volatility. • Limits on foreign currency positions which should not • Stress-testing by risk factor exceed 10% of shareholders’ equity ; BMCE Bank Group conducts stress tests to assess the • Limit on the overall foreign exchange position which vulnerability of the Group’s trading portfolio to extreme should not exceed 20% of shareholders’ equity. scenarios. Stress tests cover all components of the trading portfolio by simulating all risk factors which have an impact 8.7.1.2.2. Risk indicators on the portfolio. The results of stress tests for interest rate Different risk indicators reflecting the level of exposure to risks and exchange rate risks on the trade portfolio are market risks are used within BMCE Bank Group as follows: described below : • Overall Value-at-Risk (VaR) and VaR by asset class a. STRESS TESTS RESULTS: INTEREST RATE RISK Value-at-Risk is a probability-based technique used to 1. Portfolio of Treasury securities measure overall market risk. It helps to measure the risk 1st scenario: 50 basis point increase in the yield curve on a incurred by calculating the potential loss a given time constant basis. This scenario resulted in an impact of MAD horizon and degree of probability. 16 million on income at 31 December 2012.

F-86 2nd scenario: 100 basis point increase in the yield curve on a between them: cause and effect, in terms of their financial constant basis. This scenario resulted in an impact of MAD or other impact. They are classified under Basel by event 32 million on income at 31 December 2012. type. 2. Portfolio of corporate debt 8.8.1.2.1. Links to other risk types (market/credit risks) Corporate financial issuers. The management of operational risks is potentially linked to the management of other risks (market/credit risks) at 1st scenario: 50 basis point increase in the yield curve on a two levels: constant basis together with a 50 basis point increase in the risk premium. This scenario resulted in an impact of • Overall level, analysis of the Bank’s overall level of risk MAD 3 million on income at 31 December 2012. aversion (and in terms of allocation of capital) must be carried and monitoring of “trans-risks”; 2nd scenario: 100 basis point increase in the yield curve on a constant basis together with a 75 basis point increase in • Detailed level, some operational risks can be directly the risk premium. This scenario resulted in an impact of linked to market and credit risk management. MAD 5 million on income at 31 December 2012. 8.8.1.2.2. Operational risk management organisation Corporate non-financial issuers The framework governing operational risk management 1st scenario: 100 basis point increase in the yield curve on within BMCE Group is based on three main objectives: a constant basis together with a 100 basis point increase • Define a target policy consistent with BMCE Bank Group’s in the risk premium. This scenario resulted in an impact of business organisation and inspired by best practice; MAD 21 million on income at 31 December 2012. • Involve and empower business lines and subsidiaries in the 2nd scenario: 200 basis point increase in the yield curve on day-to-day management of operational risk management; a constant basis together with a 200 basis point increase in the risk premium. This scenario resulted in an impact of • Ensure that Audit/Control function is separate from the MAD 44 million on income at 31 December 2012. Operational Risk Management function. b. STRESS TESTS FOR FOREIGN EXCHANGE RISK Operational risk management at BMCE Bank Group involves four major entities : 1st scenario: 10% rise in the value of the dirham against the euro. This scenario resulted in an impact of MAD 103 - BMCE Bank’s Group Operational Risk Department; million on income at 31 December 2012. - BMCE Bank network; 2nd scenario: 10% rise in the value of the dirham against - BMCE Bank business divisions; the US dollar. This scenario resulted in an impact of MAD 20 million on income at 31 December 2012. - Subsidiaries. The results of the stress test conducted shows that the Operational risks coordinators have been appointed by the Group has a sufficient level of shareholders’ equity to aforementioned entities. These include: withstand adverse scenarios and to comply with regulatory standards even in the event of a crisis. - Operational Risk Correspondents (CRO); It is also worth noting that the project for adoption of the advance - Operational Risk Coordinators (CORO); approach in respect of market risk is being finalised with the - Operational Risk Liaison Officers (RRO). implementation of an internal model based on the VaR approach. The operational risk management’s remit includes 8 Group 8.8. OPERATIONAL RISK subsidiaries. Operational risk is defined as the risk of loss due to 8.8.1.2.3. Governance of operational risk management inadequate or failed internal procedures, employee error, systems failure or external events, liable to impact the Governance of operational risks within BMCE Bank Group is smooth running of the business. organised by three Operational Risk Committees: 8.8.1. Operational risk management policy • Group Operational Risks Committee; 8.8.1.1. Operational risk management objective • Operational Risk Monitoring (Business Lines) Committee; The operational risk management policy has the following • Operational Risk (Subsidiaries) Committee. objectives: These committees are tasked with periodically: • Assess and prevent operational risks; • Reviewing changes in the exposure to operational risks • Assess controls; and in the environment for controlling such risks; • Implement preventive and/or corrective action for major risks. • Identifying the main areas of risk, in terms of activities 8.8.1.2. Classification • and risk types; Operational risks or losses can be analysed and categorised •Defining preventive and corrective action required to on the basis of two factors and it is important to differentiate reduce the level of risk;

F-87 • Reviewing the amount of capital to be allocated to The business continuity plan is a set of measures and operational risks, the cost of preventive action required and procedures aimed at ensuring that the Bank, under different the costs of insurance. crisis scenarios such as major shock, maintains essential services in fail-soft mode on a temporary basis, prior to a 8.8.1.3. Fundamental methodology principles planned resumption of normal operations. BMCE Bank Group’s operational risk management policy The strategic principles underpinning the business continuity has two strategic objectives: plan are as follows: • Reduce exposure to operational risks; • BMCE Bank has a moral responsibility to allow its customers • Optimise capital requirements relating to operational risks. access to the cash which they have entrusted to it. Any breach of this obligation in times of crisis may have an impact on The internal system for measuring operational risks is public order. This principle prevails above any other; closely linked to the Group’s day-to-day risk management process via: • BMCE Bank must guarantee its commitments towards Morocco’s interbank clearing system; • Collecting risk events; • Mapping operational risks, • BMCE Bank intends to first and foremost comply with all existing legal and contractual commitments entered into • Key risk indicators. (relating to loans and other commitments), prior to entering The management of the entity in question, general man- into any other commitment; agement and the board of directors are regularly notified of • BMCE Bank intends to maintain its international credibility operational risk exposure and losses incurred. Management by guaranteeing first and foremost its commitments vis-à-vis systems are properly documented, ensuring compliance foreign correspondents; with a formalised set of controls, internal procedures and corrective measures in the event of non-compliance. • BMCE Bank Group’s existing customers take priority over others; Internal and/or external auditors are invited to periodically review management processes and systems for measuring • Services are executed in their entirety, beginning in the front- operational risk. These audits relate to units’ activities and office and culminating in the back-office (e.g. from branch the independent operational risk management function. level up until accounting recognition). Management of operational risks at BMCE Bank Group The Business Continuity Plan was introduced in 2009. Several is entirely automated by means of a dedicated system, test simulations have since been carried out across the “MEGA GRC”. The collection of risk events, the mapping of Kingdom. operational risks and the key risk indicators are currently 8.8.3. Measurement of capital adequacy managed by this system which is used at Bank level as well as by Moroccan and European subsidiaries. The BMCE Bank Group has opted for the standardised approach as outlined in Bank Al Maghrib circulars (BAM). 8.8.1.4. Operational risk control and mitigation The latter require banks to have a Tier 1 capital ratio of 9% Several types of action may be taken to manage operational and a solvency ratio of 12% at both the parent company and risks: consolidated levels. • Reinforce checks; BMCE Bank Group already satisfies these new requirements • Hedge risks, especially through insurance contracts; as at 31 December 2012. Strict compliance with these • Avoid risks, in particular, by redeploying activities; requirements is required from June 2013. • Draw up business continuity plans. BMCE Group has a very strong control policy, resulting in a significant reduction in operational risks. However, in terms of operational risk management and via its dedicated policy, the Group is at liberty to identify optimal behaviour, on a case by case basis, depending on the different types of risks described above. Additionally, the Group has insurance policies to mitigate risks such as damage to office buildings, fraud, theft of valuable items and third-party liability cover etc. 8.8.2. Business continuity plan Under a changing regulatory environment, the Business Continuity plan is a response to the rising demand to minimise the impact in the event of any interruption to the Bank’s activities. This is due to the increasing reliance on the resources underpinning those activities including human, IT or logistics resources.

F-88 REGISTERED OFFICE OF THE ISSUER

Banque Marocaine du Commerce Exte´rieur 140 Avenue Hassan II Casablanca 20000 Morocco

FISCAL AND PAYING AGENT REGISTRAR

Citibank, N.A., London Branch Citigroup Global Markets Deutschland AG Citigroup Centre, Canada Square Reuterweg 16 Canary Wharf 60323 Frankfurt London E14 5LB Gemany United Kingdom

JOINT LEAD MANAGERS

Barclays Bank PLC BMCE Capital BNP Paribas 5 The North Colonnade Tour BMCE 10 Harewood Avenue Canary Wharf Rond-Point Hassan II London NW1 6AA London E14 4BB Casablanca United Kingdom United Kingdom Morocco

Citigroup Global Markets Limited Citigroup Centre Canada Square Canary Wharf London E14 5LB United Kingdom

LEGAL ADVISERS To the Issuer as to English law: To the Issuer as to Moroccan law:

Allen & Overy LLP Naciri & Associe´s Allen & Overy One Bishops Square Anfaplace, Boulevard de la Corniche London E1 6AD Casablanca 20000 United Kingdom Morocco

To the Managers as to English law: To the Managers as to Moroccan law:

Clifford Chance LLP Clifford Chance International LLP 10 Upper Bank Street 169 Boulevard Hassan 1er London E14 5JJ Casablanca United Kingdom Morocco

AUDITORS TO THE ISSUER Ernst & Young Fidaroc Grant Thornton 37, Bd Abdellatif Ben Kaddour 47, rue Allal Ben Abdallah Casablanca 20050 Casablanca 20000 Morocco Morocco RF65936 Printed by Royle Financial Print