2014 ANNUAL REPORT

ECONOMIC AND FINANCIAL REPORT 1 2014 ANNUAL REPORT

ECONOMIC AND FINANCIAL REPORT 3 TABLE OF CONTENTS

Letter from the Chairman 6 ECONOMIC AND HOLDINGS OF 00 Board of Directors 10 01 FINANCIAL REPORT 03 CORPORACIÓN Executive Committee 10 Key figures 22 FINANCIERA ALBA Risk Committee 11 Banca March Group 24 Investment portfolio 66 Audit Committee 11 Analysis of the consolidated Affiliated companies 67 Remuneration balance sheet 30 Listed companies 67 and Appointments Committee 11 Customer funds 32 ACS 67 The economy in 2014 12 Loans to customers 34 Acerinox 68 The outlook for 2015 18 Capital markets 36 BME 68 Investments in affiliated companies 37 Indra 69 Consolidated income statement 38 Ebro Foods 69 Viscofan 70 Clínica Baviera 70 Non-listed companies 71

Mecalux 71 MAIN BANK Panasa 71 02 BUSINESS AREAS Pepe Jeans 72 Wealth Management 42 Ros Roca 72 Retail and Private Banking 44 Flex 73 Large companies 51 Ocibar 73 Subsidiaries 56 EnCampus 73 March A.M. 56 March JLT 58 March Vida 59 360 CORPORATE 60 Consulnor 61 Banco Inversis 62

4 2014 ANNUAL REPORT TABLE OF CONTENTS 3 00 INTRODUCTION

Letter from the Chairman 6 Board of Directors 10 Executive Committee 10 Risk Committee 11 Audit Committee 11 Remuneration and Appointments Committee 11 The economy in 2014 12 The outlook for 2015 18

4 2014 ANNUAL REPORT ECONOMIC AND FINANCIAL REPORT 5 or the first time since the beginning of the need to be intensified, in such a way as to support Fcrisis, the Spanish economy showed clear signs economic growth whilst also aiming to balance the LETTER of recovery in 2014 following a complex process of government budget within a reasonable period. adjustments and reforms. Real GDP grew by 1.4% last year, with six consecutive quarters of expansion FROM THE There are still geopolitical risks on the economic since June 2013. Growth for 2015 is expected to be horizon, such as the situation in Greece, the conflict around 3%, driven not only by exports but also by in Eastern Ukraine and instability in the Middle domestic demand, both through consumer spending CHAIRMAN East. Another short-term source of uncertainty and business investment. Two new factors have is the intense elections calendar in 2015, both in recently become catalysts of progress: fuel prices Spain and in other major nearby countries including have fallen, which is allowing an acceleration of the the United Kingdom, France and Portugal. In the recovery of heavily energy-dependent economies case of Spain, maintaining political stability and like Spain, and the Euro has depreciated in 2014, guaranteeing governability is important. making Spanish companies more competitive abroad. The positive trend held firm in the early months of 2015, as demonstrated by indicators such as price This improved situation is reflected in the stability, the increase in real estate transactions, unemployment rate, which according to the Spanish the drop in default rates and the improved flow of labour force survey (EPA) dropped from a 26.9% credit in the financial sector. high in March 2013 to 23.7% in December 2014.

With regard to Banca March, our robust financial However, despite this change of trend, there ratios continue to demonstrate the strength of our are still macroeconomic imbalances which are unique business model: we have one of the highest encumbering the economic upturn. Long-term and levels of solvency in the sector and the lowest NPL youth unemployment are at unacceptable levels, rate, 4.5% in December 2014, with a coverage ratio so it is necessary to promote employment of those of 82.9%. groups by offering incentives to companies and providing training to make them more employable. The deficit and public debt are still too high, which Banca March has emerged from the crisis stronger, means tax revenue reforms need to be stepped up, thanks to its own particular way of doing business, but public spending and investment reforms also which is based on personal relationships, mutual

6 2014 ANNUAL REPORT LETTER FROM THE CHAIRMAN 7 trust, co-investment of customers and shareholders year on year increase of 39.6%. As for the number specialist areas such as Capital Markets, and million Euros in 2014, a 6.3% increase on the 226.9 in the same assets, wealth preservation and long- of SICAV, the AM house had 137 at the end of 2014, through our subsidiaries 360 CORPORATE and million Euros reported in 2013. 2014 saw intense term sustained profitability. This commitment to up 23% on the end of 2013. March JLT. investment activity, with highlights including the creating sustainable value is an essential part of acquisition of shares in Bolsas y Mercados and Viscofan and the increases in our positions in Indra Banca March, the only completely family-owned At the end of 2014, Banco Inversis, which is wholly- Banca March is undergoing a process of systems and Ebro foods. Corporacion financiera Spanish bank. owned by Banca March, began its new venture transformation in order to meet the demands Alba has a fairly positive outlook for its affiliated specialising in offering services to institutional of 21st Century customers, who need a dynamic, companies in 2015, thanks to the new backdrop of clients. Banco Inversis has the objective of flexible bank with cutting-edge technology. In March 2015, Banca March received notification economic recovery in Spain and low financing costs strengthening its range of services for both Spanish from Moody’s rating agency that its rating is under which, together with the significant international and international financial institutions, and boosting review for a possible upgrade. The bank currently At the end of last year, Banca March carried out expansion efforts carried out over recent years, its capital markets division. has a Baaa3/P-3 debt and deposit rating and a a strategic revision of its brand, which was an should translate into a guaranteed improvement in financial strength rating of D+. Banca March is one important milestone in this transformation. The new results. of just seven Spanish banks that are currently rated Our objective is to consolidate our position as a logo, an “M” made up of 3 triangles, represents an as investment grade. leading Private Banking and Corporate Advisory alignment of the interests of customers, employees Finally, I wish to express my thanks to the members provider, spearheading the concept of responsible and shareholders, the three pillars of Banca March’s of the Banca March team; I truly believe that their The business registered an outstanding performance management in Spain, whilst continuing to gain business philosophy, and symbolises joint growth. hard work and dedication will help us to continue in 2014 in all strategic areas. In Private Banking and market share in the Balearic Islands. We have a to consolidate our unique business model and strong position in high net worth management and Wealth Management the business volume grew by The bank is investing heavily in technology and allow our customers, employees and shareholders we want to expand that business model and offer 18.8% and the number of customers increased by human resources, seeking to establish a corporate to continue to grow together. that expertise to all private Banking customers. 25.1%. culture which underpins growth. Likewise, quality In Corporate Banking, we are undertaking a rating systems are being implemented in all the transformation process in the advisory services Carlos March Delgado business areas which will serve as a reference March Asset Management, the Group’s asset offered to medium-sized and family companies, Chairman for ongoing improvements and the search for management subsidiary, closed last year with a providing a range of products with more added excellence in customer service. 32.5% increase in assets under management. March value beyond strict financing: disintermediation of Asset Management is the third largest Spanish asset balance sheets, mergers and acquisitions and risk manager by volume of AuM in SICAVs, with 2,644 hedging. This unique model allows us to establish Corporación Financiera Alba, the Group’s investment million Euros at December 2014, representing a long-term links with our customers through company, obtained a consolidated net profit of 241.3

8 2014 ANNUAL REPORT LETTER FROM THE CHAIRMAN 9 BOARD OF EXECUTIVE RISKS AUDIT DIRECTORS COMMITTEE COMMITTEE COMMITTEE*

Chairman Chairman Chairman Chairman Mr. Carlos March Delgado (proprietary) Mr. Juan March de la Lastra Mr. Juan March de la Lastra Mr. Luis Javier Rodríguez García

Vice-chairman Members Members Vice-chairman Mr. Juan March de la Lastra (proprietary) Mr. José Nieto de la Cierva Mr. Santos Martínez-Conde Gutiérrez-Barquín Mr. Antonio Matas Segura Mr. Juan March Juan Mr. Ignacio Muñoz Pidal CEO Mr. Moisés Israel Abecasis Mr. Luis Javier Rodríguez García Members Mr. José Nieto de la Cierva (executive) Mr. Santos Martínez-Conde Gutiérrez-Barquín Mr. Ignacio Muñoz Pidal Mr. Ignacio Muñoz Pidal Secretary Directors Mr. Luis Javier Rodríguez García Mr. José Ignacio Benjumea Alarcón Secretary Mr. Juan March Delgado (proprietary) Mr. José Ignacio Benjumea Alarcón Mr. Juan March Juan (proprietary) Mr. Juan Carlos Villalonga March (proprietary) Secretary * As of 30 April 2015 Mr. Javier Vilardell March (proprietary) Mr. José Ignacio Benjumea Alarcón Mr. Jorge Bergareche Busquet (executive) Mr. Albert Esteve Cruella (independent) Mr. Moisés Israel Abecasis (independent) Chairman Mr. Santos Martínez-Conde Gutiérrez-Barquín (executive) REMUNERATION Mr. Ignacio Muñoz Pidal Mr. Antonio Matas Segura (external) Mr. Ignacio Muñoz Pidal (independent) AND APPOINTMENTS Members Mr. Luis Javier Rodríguez García (independent) Mr. Albert Esteve Cruella COMMITTEE Mr. Moisés Israel Abecasis Company secretary Mr. Santos Martínez-Conde Gutiérrez-Barquín Mr. José Ignacio Benjumea Alarcón (executive)

Secretary Mr. José Ignacio Benjumea Alarcón

10 2014 ANNUAL REPORT STRUCTURE OF BOARD AND COMMITTEES 11 2014. GLOBAL GROWTH REMAINED BELOW HISTORIC AVERAGE

The global economy closed 2014 with growth of Globally, moderate growth and low use of Against this backdrop of moderate growth and low 3.3%, making it the third consecutive year with productive capacity – reflected in many economies inflation, monetary policy remains accommodative. growth below the average over recent decades. through still high unemployment rates – slowed The ECB implemented a series of stimulus It is worth highlighting that 2014 saw increased down inflation. Likewise, the drop in crude oil measures: it cut official interest rates to a new low disparity between the economic cycles of the main prices during the second half of the year led to a (0.05%), pushed deposit rates in negative territory, economic blocs. substantial reduction in energy costs, which drove offered new targeted longer-term refinancing the CPI down. In the United States, the CPI grew by operations (TLTROs) and finally implemented an Among the developed economies, the US economy 1.6% year on year, whilst in the Eurozone inflation asset purchase programme. The Bank of Japan also accelerated and its GDP for 2014 was up 2.4% was very low, with an average of 0.4% in 2014, continued with stimulus measures, expanding its year-on-year, whilst in the Eurozone growth fuelling fears of deflation in the region. In the large balance sheet by between 60 and 80 trillion yen remained weak – around 0.8% – and Japan went emerging economies (the BRICs - Brazil, Russia, per year. through a recession. In the emerging world, China’s India and China) inflation was around 4.2%, but with economy continued to head towards a soft landing major imbalances once again: in China the CPI fell to The Federal Reserve was able to end the QE3 and forecasts in India improved after a change of 2%, whilst in Brazil it stood at 6.3% and in Russia it stimulus programme launched in 2012 thanks to government, whilst Brazil and Russia performed increased to 7.8% due to the sharp depreciation of an upturn in economic activity in the United States. worse. the rouble. However, official rates remained at record lows and

RISE IN GDP. LEADING ECONOMIES INFLATION TRENDS

10.0 5.0 8.0 4.0 2013 6.0 3.0 2014 2.0 4.0 2015 p 1.0 2.0

0.0 0.0

-1.0 -2.0 -2.0 2007 2008 2009 2010 2011 2012 2013 2014 World Developed Emerging USA Eurozone Spain BRIC ination (YoY) US and Eurozone ination (CPI YoY)

Source: IMF and Banca March Source: Bloomberg and Banca March

12 2014 ANNUAL REPORT THE ECONOMY IN 2014 13 the Fed continues to reinvest principal payments 10 YEAR BOND YIELDS upon maturity, meaning its monetary policy remains expansionary. Dec.13 Dec.14 USA 3.0% 2.2% As for the large emerging economies, Russia Germany 1.9% 0.5% suffered capital flight due to geopolitical tension, leading the Central Bank to intervene in the market Spain 4.1% 1.6% by using its dollar reserves and raising official rates Italy 4.1% 1.9% - from 5.5% to 17% - to halt the rouble’s slide. The Central Bank of Brazil, faced with rising inflation, raised official rates by 175 bps to 11.7%. In Asia, lower 3 MONTH INTEREST RATESS inflationary pressure allowed for less restrictive monetary policy in both China and India. Dec.13 Dec.14 USA The year was also marked by the increase in (3 month Libor) 0.2% 0.2% geopolitical tensions, with several ongoing issues generating increased market uncertainty, including Eurozone armed conflicts like the one between Russia and (3 month Euribor) 1.9% 0.5%

Ukraine, and the turbulence in the Middle East, with Source: Bloomberg and Banca March the uprising of the Sunni militia Islamic State (IS). In the forex market, the disparity between countries’ The worst-performing emerging currencies were In Europe, political headlines centred around the economic cycles was reflected in the monetary the Eastern European currencies, headed by the referendum on independence for Scotland, which policies they implemented, which impacted the rouble, which depreciated 46% against the dollar. resulted in a victory for the “no” campaign. This Equities also performed well, especially in performance of their currencies. The main trends Asian currencies held firmer: the Indian Rupiah and increase in nationalist tension was also evident developed economies. Gains were bolstered by were a weak Euro and weak currencies in the the Chinese Yuan fell just 2% and 2.4% against the in the European Parliament elections, where profit growth: the MSCI World rate gained 2.1% with emerging markets with greatest imbalances and/ dollar, respectively. Eurosceptic parties increased their presence. an estimated increase in profits of 5%. By countries, or political risks, while the dollar recovered its the US market outperformed the Japanese market strength in the global markets thanks to increased The Spanish economy picked up and over the year In spite of the political tensions at the heart of (11.4% vs. 7.1%), and European markets also closed economic activity in the US. the country’s GDP grew by 1.4% year on year. The the Eurozone, further steps were taken in 2014 to up: the Eurostoxx 600 rose by 4.3% and the Ibex35 quarter-on-quarter trend was also positive, with a deepen the financial integration of the Monetary increased by 3.7%. The exception to this strong The year 2014 closed with the Euro-Dollar rate at sharper increase in activity in the second half of Union. Since November, the single supervisory performance were, for the second year running, 1.21 EUR/USD, after the greenback rose 12%. The the year. Mechanism (SSM) came into operation, through the emerging markets: the MSCI Emerging markets Euro also depreciated (6.5%) against the Pound which the ECB will supervise the Eurozone’s 128 Index fell 4.6%. Sterling to 0.77 EUR/GBP. largest financial institutions. The single Resolution Mechanism (SRM), a common fund to finance In the commodities market the performance of oil restructuring and provide liquidity for European prices was key; the barrel of Brent crude plummeted financial institutions, was also created. by 48% in the second half of the year due to a drop OIL PRICES in global demand and increased supply. This is added The fixed income markets performed well, to the fact that the main OPEC members (including 160 supported by low inflation and expansionary Saudi Arabia and Kuwait) supported these lower 140 monetary policies, with European markets doing prices as a method of discouraging investment in 120 especially well. The best-rated bonds (the US and alternative prospecting (fracking, among others). 100 Germany) continued to enjoy strong support and The ensuing price war to maintain market share 80 10-year yields dropped to 0.5% for German bunds quickly impacted the markets (see graphs). 60 and 2.2% for US treasury bonds. However, what 40 stood out the most was the drop in peripheral Gold prices fell over the year by 1.7% to $1,274 per 20 sovereign credit spreads. In Spain, 10-year yields ounce. Base metals performed worse, especially 0 dropped by 250 bps over the year to 1.6% and the copper, which dropped by 14% due to a decreased 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Spanish sovereign bond index gained 16.7%. demand from China.

Brent crude prices Source: Bloomberg and Banca March

14 2014 ANNUAL REPORT THE ECONOMY IN 2014 15 This improvement in activity was driven by a greater still very high unemployment rate will continue to Public accounts are another issue that is yet to be Finally, inflation was impacted by the high contribution by domestic demand, which for the hamper the economy. resolved for the Spanish economy. During the year, unemployment rate and the drop in oil prices. The first time since 2007 contributed decimals to GDP and largely as a reflection of improved tax revenue, CPI showed a strong downward trend, closing the growth of the GDP (see graphs). This improvement The property sector showed the first signs of the tax deficit was reduced to 5.5% of GDP, in line year with an average year-on-year drop of 0.2%, in the domestic economy is reflected in retail sales, stabilisation. Although the high number of homes with the government’s targets. compared with the 1.5% increase registered in 2013. which closed the year up 1%, the first increase in the for sale will take years to be absorbed, the main last seven years. part of the drop in prices is now behind us. After There were mixed data from the foreign trade falling 37% from record highs, property prices sector. Stronger domestic demand considerably This major improvement in economic activity registered their first year-on-year increases since reduced the current account surplus; in 2014 allowed for some unbalances to begin to adjust. 2008 in Q2 2014. Spain had a current account deficit of 0.1% of The labour market established a change of trend by GDP, compared to a surplus of 1.5% in 2013. The not destroying jobs. The unemployment rate was The restructuring of the financial sector, the outstanding performance of the tourism sector is down 2bp to 23.7% at the end of 2014 and more measures taken by the ECB and the economic worth highlighting: the number of international importantly, and additional 433,900 persons were upturn itself helped slow the increase in default tourist arrivals hit a new annual record at 65 million, in employment, with a year-on-year increase in the rates in the financial sector. representing a 7.1% year-on-year increase. number of people employed of 2.5%. However, the

QUARTERLY GDP AND ECONOMIC CONFIDENCE

2.0 120 1.5 115 110 1.0 105 0.5 100 0.0 95 -0.5 90 INFLATION 85 -1.0 80 -1.5 75 6.0% -2.0 70 5.0% Mar-01 Dec-02 Sep-04 Jun-06 Mar-08 Dec-09 Sep-11 Jun-13 Mar-15 4.0% 3.0% Quarterly GDP Economic con dence Source: Bloomberg and Banca March 2.0% 1.0% 0.0% GDP COMPONENTS. -1.0% -2.0% Jan-05 Nov-05 Sep-06 Jul-07 May-08 Mar-09 Jan-10 Nov-10 Sep-11 Jul-12 May-13 Mar-14 8.0

6.0 CPI Core CPI Source: Bloomberg and Banca March 4.0 2.0 0.0 -2.0 -4.0 -6.0 -8.0 -10.0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Domestic Demand Foreign Demand Source: Bloomberg and Banca March

16 2014 ANNUAL REPORT THE ECONOMY IN 2014 17 The outlook for 2015 points to an acceleration in The major drop in crude oil prices will keep global global growth to a rate of 3.5%, which is in line with inflation under control. The base effect of lower THE OUTLOOK FOR 2015: the historic average. The factors underpinning this energy costs will remain at least until the middle positive forecast are an expansionary monetary of the year. As a result, the main risk for developed IMPROVED ACTIVITY policy and the drop in energy costs, which will economies with less dynamic growth (the Eurozone encourage consumer spending. and Japan) is a situation of deflation. However, we believe that this will be avoided thanks to the AND MEASURES TO The US economy is expected to lead this stimulus measures implemented by Central Banks improvement in economic activity, with growth and improved global growth. of 3.5%. In the Eurozone, the growth rate will be AVOID DEFLATION modest, although the pace will gradually increase. This core scenario is not free of danger. One of the The depreciation of the Euro will favour the foreign main risks in 2015 is exogenous to fundamental sector, whilst a less restrictive tax policy will economics and is centred on the busy elections support domestic demand. calendar in Europe. Likewise, geopolitical risks will remain present, through the ongoing armed On the domestic scene, having begun its recovery, conflicts. We also foresee greater uncertainty Spain will see an acceleration of its growth rate to derived from disparity in monetary policies: less around 3% in 2015. That said, the main challenge for stimulus measures by the Fed, while the ECB and the economy will be to create more jobs in order the Bank of Japan will continue to seek to avoid to reduce the high unemployment rate and also to deflation. The effect of these monetary policies bring about an adjustment in the public accounts. on the real economy and the financial markets could be worse than expected, above all due to the The emerging economies will record weaker normalisation of interest rates by the Fed. growth than in previous decades, but the worst of their economic slowdown will be behind them. By regions, Asia will continue to be the fastest- growing area, led by its two great economies: China and India. In Latin America, lower commodity prices will slow growth, and geopolitical risks and the foreseeable recession in Russia are negative factors for Eastern Europe.

18 2014 ANNUAL REPORT THE OUTLOOK FOR 2015 19 01 ECONOMIC AND FINANCIAL REPORT

Key figures 22 Banca March Group 24 Analysis of the consolidated balance sheet 30 Customer funds 32 Loans to customers 34 Capital markets 36 Investments in affiliated companies 37 Consolidated income statement 38

20 2014 ANNUAL REPORT ECONOMIC AND FINANCIAL REPORT 21 KEY FIGURES

BANCA MARCH GROUP BANCA MARCH, S.A.

In millions of Euros In millions of Euros 2014 2013* CHANGE 2014 2013* CHANGE

KEY BUSINESS FIGURES KEY BUSINESS FIGURES Shareholders’ equity 3,793.5 3,486.8 306.7 Shareholders’ equity 874.9 757.8 117.1 Customer deposits and Off-BalanceSheet AuM 14,976.5 13,446.7 1,529.8 Customer deposits 9,519.5 9,031.3 488.2 Loans to customers 6,870.5 7,323.4 -452.9 Loans to customers 6,805.6 7,074.2 -268.6 Investments in affiliated companies 2,260.3 2,067.9 192.4 Total assets 11,899.7 11,334.4 565.3 Total assets 15,459.2 15,398.7 60.5 RESULTS RESULTS Net interest income 157.7 134.9 22.8 Net interest income 209.8 177.3 32.5 Gross income 307.2 251.6 55.6 Gross income 617.9 452.7 165.2 Operating income 84.0 2.4 81.6 Operating income 319.4 145.2 174.2 Consolidated pre-tax income 327.9 230.6 97.3 NUMBER OF EMPLOYEES AND POINTS OF SALE Profit attributable to the Group 114.9 51.2 63.7 No. of employees 1,306 1,307 No. of branches 209 214 CAPITAL ADEQUACY AND FINANCIAL STRENGHT (%) No. of ATMs 489 480 Total capital ratio 19.7 22.3 NPL ratio 4.5 5.5 NPL coverage ratio 82.9 76.1

NUMBER OF EMPLOYEES AND POINTS OF SALE No. of employees 1,535 1,503 No. of branches 209 214 No. of ATMs 489 480

* The implementation of the IFRIC 21 interpretation on levies, the accounting principle for outflows imposed on banks by the Deposit * The implementation of the IFRIC 21 interpretation on levies, the accounting principle for outflows imposed on banks by the Deposit Insurance Scheme was modified in 2014. This caused retroactive adjustments in the figures from 2013. Insurance Scheme was modified in 2014. This caused retroactive adjustments in the figures from 2013.

22 2014 ANNUAL REPORT ECONOMIC AND FINANCIAL REPORT 23 BANCA MARCH TOTAL BRANCHES GROUP 209

COMMERCIAL NETWORK 31/12/2014 31/12/2013

Retail and Private Banking 196 201 Wealth management 7 7 Large Companies 4 4 International Branches 2 2

Total branches 209 214

The structure of Banca March Group reflects a series of expected prior conditions The Bank the development of two activities: banking and expects this sale to go through during 2015. GEOGRAPHICAL NETWORK investment in industrial holdings. Banca March, 31/12/2014 31/12/2013 S.A., the parent company, has been operating The Group has a commercial network of 209 in the banking sector since 1926, specialising in branches, two of which are located in London and wealth management, private banking and corporate Luxembourg. Seven centres are specialist wealth The Balearic Islands 118 120 banking with a particular focus on family businesses management branches, located in the Basque The Canary Islands 37 37 and entrepreneurs, as well as high net worth Country, the Levante region, Madrid, Catalonia, the Catalonia 11 9 individuals. Balearic Islands, the Canary Islands and Aragon, Valencia 11 14 plus the Luxembourg office. Banca March has four Madrid 14 14 The Banca March Group also operates in the specialist corporate banking centres located in Andalusia 12 14 insurance sector through March Unipsa Correduría Palma de Mallorca, Madrid, Barcelona and Valencia, Zaragoza 2 2 de Seguros, S.A. and March Vida, S.A. de Seguros as well as the specialist Banca March Private Bilbao 2 2 London y Reaseguros, and the asset management sector Banking branches and the Consulnor offices. This London 1 1 through March Gestión de Fondos, S.G.I.I.C., commercial network allows us to offer tailored Luxembourg 1 1 S.A., March Gestión de Pensiones, S.G.F.P., S.A., advisory services to our customers. In 2014, two new Luxembourg Artá Capital S.G.E.C.R., S.A. and Inversis Gestión Retail and Private Banking branches were opened in Total branches 209 214 S.G.I.I.C.. It sells financial products and services Catalonia, specifically, in Lleida and Girona. for private banking clients through Consulnor and offers corporate financial advisory services 360 CORPORATE. Bilbao San Sebastián Lleida Last year saw the completion of the sale process of Vitoria Zaragoza Girona the retail private banking business of Banco Inversis, La Rioja S.A. to Andorra Banc Agrícol Reig, S.A. for 179.8 Barcelona Tarragona million Euros. At 31 December 2014, the Bank holds Menorca Valencia 100% of the shares of Banco Inversis, S.A. which, Lanzarote Cádiz Málaga once it has split from the retail private banking Alicante Mallorca La Palma Tenerife Fuerteventura Ibiza Formentera business, will carry out institutional business only. Gran Canaria Elsewhere, on 12 July 2013, the Bank agreed to sell 50% of Banco Inversis, S.A. to Sociedade Comercial Orey Antunes, S.A. following the fulfilment of

24 2014 ANNUAL REPORT GRUPO BANCAECONOMIC MARCH AND FINANCIAL REPORT 25 MARCH JLT MARCH MARCH MARCH CORREDURÍA DE GESTIÓN CANARIAS DE SEGUROS INVERSIONES DE PENSIONES 100% 75.0% 100% 100%

MARCH GESTIÓN MARCH 360 IGALCA DE FONDOS VIDA CORPORATE 100% (MARCH A.M.) 100% 72.0% 100%

MARCH MARCH CONSULNOR PATRIMONIOS CORPORACIÓN INMUEBLES 100% 100% 47.2% Investment in industrial holdings was undertaken FINANCIERA through Corporación Financiera Alba, S.A which ALBA is controlled by Banca March with a direct 28.9% 28.9% stake.

BANCO Control by Banca March, S.A. is exercised by INVERSIS INMOBILIARIA 100% Juan, Carlos, Gloria and Leonor March Delgado, MARHIGAL who together own 100% of the share capital, 75.0% without any of them, whether on the basis of their shareholdings or any kind of agreement, doing this individually. EBRO CLÍNICA ACS ACERINOX FOODS BAVIERA 13.9% 23.1% Banca March, S.A. together with its shareholders 10.0% 20.0% control 66.7% of Corporación Financiera Alba, S.A.

INDRA BME VISCOFAN ANTEVENIO SISTEMAS 8.3% 6.8% 14.5% 12.5%

ROS ROCA OCIBAR PEPE JEANS MECALUX 17.4% 21.7% 12.0% 24.4%

SIRESA PANASA FLEX EN CAMPUS CAMPUS 26.5% 19.7% 32.7% 17.4%

Fully consolidated Holdings accounted Financial assets Non-current holdings for using the equity measured at assets held method fair value for sale

26 2014 ANNUAL REPORT ECONOMIC AND FINANCIAL REPORT 27 The investments of Corporación Financiera Alba, During the 2014 financial year the group has The NPL ratio (credit risk and OBS exposure) stood S.A. focus on the management of real estate rental registered a substantial increase in net interest at 4.5% at the end of 2014, significantly lower than assets and on owning stable, long-term holdings income, which rose by 32.5 million Euros to 209.8 the sector average. The NPL coverage ratio stood in sector leading companies, among which the million Euros, reflecting an 18.3% increase in at 82.9%. following stakes are noteworthy: 13.9% in ACS, comparison with the previous financial year. At Actividades de Construcción y Servicios, S.A., 23.1% the same time the asset management, insurance in Acerinox, S.A., 12.5% in Indra Sistemas, S.A., 10% and specialist financial product business generated NPL RATIO in Ebro foods, S.A. and 8.3% in Bolsas y Mercados 128.9 million Euros in fees, representing a 21% AND NPL COVERAGE RATIO Españoles, S.A. increase in comparison with the previous financial year. Capital gains obtained through the sale of 2.4% 31/12/14 31/12/13 Likewise, through Deyá Capital, a development of Actividades de Construcción y Servicios, S.A. for NPL ratio 4.5% 5.5% capital vehicle, the Group offers its customers the sum of 95.9 million Euros must be added to NPL coverage ratio 82.9% 76.1% opportunities to acquire holdings in co-investment the result of the operating activity, which therefore projects. At December 31, 2014 the Group has rises to 319.4 million Euros. The profit attributable various holdings for this purpose in important non- to the Group for the 2014 financial year amounted listed companies: Mecalux, S.A., Pepe Jeans, S.A., to 114.9 million Euros. Ros Roca Environment, S.L., Ocibar, S.A., Panasa, Flex, S.A., student housing manager EnCampus, S.A. As of 31 December 2014, for the purposes of and Siresa Campus, S.A. calculating the capital ratio, the Banca March Group proportionally includes 28.9% of Corporación CAPITAL EQUITY RATIO NPL RATIO NPL COVERAGE RATIO At 31 December 2014 total assets on the Financiera Alba. In compliance with the regulations consolidated balance sheet are up 0.4% to in force on 31 December 2014, the total Group capital 30 10 100 15,459.2 million Euros. Loans and discounts stand ratio is 19.7%. Capital requirements amounted to 27.1% 25 8 90 at 9,385.9 million Euros, 5.2% higher than the 652.3 million Euros, bringing Banca March’s capital 22.3% 82.9% 79.2% previous financial year, while managed funds have surplus to 952.3 million Euros. 19.7% 80 76.1% 20 6 5.5% 5.3% risen to 14,976.5 million Euros, an 11.4% increase 4.5% 70 15 4 in comparison to the previous financial year. The 60 Group’s equity stands at 1,718.8 million Euros. 10 8% 8% 8% 2 50

5 0 0 2012 2013 2014 2012 2013 2014 2012 2013 2014

Capital equity ratio NPL ratio NPL coverage ratio Minimum required under regulations

CAPITAL EQUITY RATIO

In millions of Euros 2014 %

CET1 1,596.7 19.6 Tier 1 Capital 1,564.6 Tier 2 Capital 40.0 Tier Total 1,604.6 19.7 Surplus CET 1 944.5 Surplus Tier Total 952.3 Capital requirements 652.3

28 2014 ANNUAL REPORT ECONOMIC AND FINANCIAL REPORT 29 In millions of Euros CONSOLIDATED BALANCE SHEET Change ANALYSIS 31/12/2014 31/12/2013* Absolute % Cash and balances with central banks 167.7 628.4 -460.7 -73.3 OF THE CONSOLIDATED Trading portfolio 190.1 330.4 -140.3 - 42.5 Other financial assets at fair value through P&L 284.4 252.1 32.3 100.0 Available-for-sale financial assets 1,759.8 1,903.8 -143.9 -7.6 BALANCE SHEET Debt securities 1,580.1 1,812.4 -232.3 -12.8 Other equity securities 179.8 91.3 88.4 96.8 Loans and discounts 9,385.9 8,924.6 461.3 5.2 Deposits with credit institutions 2,545.4 1,636.1 909.3 55.6 Loans to customers 6,840.5 7,288.5 -448.0 -6.1 Investment portfolio held to maturity 105.5 71.9 33.6 46.7 Hedging derivatives 208.2 173.5 34.8 - 20.0 Non-current assets held for sale 391.4 410.2 -18.8 -4.6 Investments in affiliated companies 2,260.3 2,067.9 192.4 9.3 Reinsurance assets 0.6 0.6 0.0 -4.5 On 31 December 2014, consolidated balance sheet Customer deposits were up 4.7% to 8,743.6 million Tangible assets 328.7 329.7 -1.0 -0.3 assets stood at 15,459.2 million Euros, 0.4% more Euros. Equity stood at 3,793.5 million Euros on 31 Intangible assets 7.6 23.3 -15.8 -67.6 than the previous year. Loans to customers were December 2014. 6,840.5 million Euros, down by 6.1% year-on-year. Tax assets 326.9 225.2 101.7 45.1 Other assets 42.1 57.1 -15.0 - 26.2

TOTAL 15,459.2 15,398.7 60.5 0.4

BREAKDOWN OF ASSETS BREAKDOWN OF LIABILITIES Trading portfolio 194.8 115.3 79.4 68.9 In millions of Euros In millions of Euros 20 20 Financial liabilities at amortised cost 10,234.5 10,687.3 -452.7 -4.2 Deposits with central banks 0.0 639.1 -639.1 -100.0 Credit institution deposits 812.7 951.8 -139.1 -14.6 15 15 1,550 1,483 3,181 3,225 Customer deposits 8,743.6 8,348.5 395.1 4.7

3,794 3,487 Debts represented by tradable securities 557.5 489.1 68.4 14.0 2,724 2,620 10 10 Other financial liabilities 120.8 258.8 -138.1 -53.3 9,302 8,838 6,841 7,289 Hedging derivatives 22.8 20.8 2.0 9.5

5 5 Liabilities under insurance contracts 1,055.0 938.3 116.7 12.4 Provisions 51.6 37.9 13.7 36.1

2,713 2,265 Tax liabilities 64.6 68.8 -4.2 -6.1 0 0 813 1,591 2014 2013 2014 2013 Other liabilities 42.5 43.6 -1.1 -2.5 Valuation adjustments -16.3 -45.8 29.5 -64.4

Other assets Investments in aliate companies Other liabilities Shareholders’ equity Shareholders’ equity 1,718.8 1,666.5 52.3 3.1 Minority interests 2,091.0 1,866.1 224.9 12.0 Loans to customers Interbank Customer deposits Interbank TOTAL 15,459.2 15,398.7 60.5 0.4

* The implementation of the IFRIC 21 interpretation on levies, the accounting principle for outflows imposed on banks by the Deposit Insurance Scheme was modified in 2014. This caused retroactive adjustments in the figures from 2013.

30 2014 ANNUAL REPORT ECONOMIC AND FINANCIAL REPORT 31 In millions of Euros CUSTOMER FUNDS Change CUSTOMER 31/12/2014 31/12/2013 Absolute %

FUNDS CUSTOMER FUNDS 9,741.4 9,229.1 512.3 5.6 On-balance sheet balances 9,516.1 9,021.0 495.1 5.5 Demand accounts 2,947.4 2,393.5 553.9 23.1 Time deposits 5,116.6 5,423.7 -307.1 -5.7 Reverse repurchase agreements 454.3 323.2 131.1 40.6 Insurance-based saving plans 997.8 880.6 117.2 13.3 Valuation adjustments 225.3 208.1 17.2 8.3

MARKETABLE DEBT SECURITIES 557.5 489.1 68.4 14.0 On-balance sheet balances 555.9 483.6 72.3 15.0 Commercial paper and trade bills 55.9 183.6 -127.7 -69.6 Mortgage-backed securities 500.0 300.0 200.0 66.7 Valuation adjustments 1.6 5.5 -3.9 -70.9 As of 31 December 2014, customer funds managed During 2014 the Bank registered the “XII Commercial by the Group stood at 14,976.5 million Euros, an Paper Programme” for a nominal amount of 1 billion increase of 1,529.8 million Euros compared to the Euros. This corporate paper is represented by book OBS ASSETS UNDER MANAGEMENT 4,677.6 3,728.5 949.1 25.5 previous financial year. Increases in absolute terms entries and issued at a discount, with no restrictions Investment funds and private equity 1,099.6 1,034.0 65.6 6.3 correspond both to clients’ bank balances, which on free transferal. The notes have a nominal unit SICAV and private equity 3,262.7 2,405.1 857.6 35.7 amount to 9,741.4 million Euros with an increase of value of 1,000 Euros. The maturities of the paper Pension plans 315.3 289.4 25.9 8.9 512.3 million Euros or 5.6% versus the previous year, range from 3 working days to 364 calendar days. and to off-balance sheet assets under management The nominal interest rate is agreed by the issuer (AuM) which amount to 4,677.6 million Euros, up and the holder of each note, and is set individually TOTAL CUSTOMER FUNDS MANAGED 14,976.5 13,446.7 1,529.8 11.4 by 949.1 million Euros or 25.5%. for each note or group of notes. The paper is traded on Spain’s AIAF corporate debt market.

The Group manages off-balance-sheet funds MANAGED FUNDS (investment funds and private equity , SICAV and private equity, pension plans) through Grupo In millions of Euros 15 Artá Capital, S.G.E.C.R., March Gestión de Fondos, 4,678 S.G.I.I.C. (March A.M.) and March Gestión de 3,729 Pensiones E.G.F.P. 12 558 489 9

6

3

9,741 9,229 0 2014 2013

O-balance Marketable debt Customer sheet assests securities deposits

32 2014 ANNUAL REPORT ECONOMIC AND FINANCIAL REPORT 33 LOANS TO CUSTOMERS

In millions of Euros On 31 December 2014 the balance of loans to 2014. The balance of other term loans remains at LOANS TO CUSTOMERS Change customers managed by the Group was 6,870.5 2,064.5 million Euros. 31/12/2014 31/12/2013 Absolute % million Euros. At 31 December 2014, gross impaired assets were During 2014, the balance of mortgage loans declined down 89.6 million Euros to 299.3 million Euros. CREDIT ARRANGEMENTS 6,810.8 7,227.4 -416.6 -5.8 by 263 million Euros, to 3,810.8 million Euros at 31 The NPL ratio (credit risk and OBS exposures) was Trading portfolio 184.9 100.3 84.6 8.3 December 2014, due to the reduction in the Group’s 4.5% at the end of 2014, significantly lower than Secured loans 4,239.7 4,285.3 -45.6 -1.1 exposure to the property development sector. On the sector average. The NPL coverage ratio stood the other hand, other secured loans, primarily with at 82.9%. Mortgage 3,810.8 4,073.8 -263.0 -6.5 cash and securities as collateral, increased by 217.4 Other collateral 428,9 211,5 217,4 102,8 million Euros to 428.9 million Euros at the end of Other term loans 2,064.5 2,604.8 -540.3 -20.7 Demand and miscellaneous debtors 157.9 140.6 17.3 12.3 Financial leasing 147.2 78.9 68.3 86.6 GROSS LOANS MANAGED Other financial assets 16.6 17.5 -0.9 -5.1 In millions of Euros 8 267 7 368 389 Impaired assets 299.3 388.9 -89.6 -23.0 299 79 Valuation adjustments 9.2 8.9 0.3 3.4 6 148 Less: impairment losses -248.8 -301.8 53.0 -17.6 5 2,064 2,605 Total managed loans 6,870.5 7,323.4 -452.9 -6.2 4 of which: securitised assets excluded 3 from the balance sheet 30.1 34.9

2

1 4,240 4,285 0 2014 2013

Other loans Impaired assets

Financial leasing Other term loans Secured loans

34 2014 ANNUAL REPORT ECONOMIC AND FINANCIAL REPORT 35 CAPITAL INVESTMENTS MARKETS IN AFFILIATED COMPANIES

As of 31 December 2014 the balance of available in portfolio, in addition to the balance available on The Group continues to follow its strategy of Details of the investment portfolio as of 31 liquid assets rose by 64%, totalling 3,889.2 million the European Central Bank facility, which is a credit holding stable, long-term positions in well-run December 2014 and 2013 are as follows: Euros. Available liquid assets of Banca March line obtained by pledging certain assets to the Bank sector leaders with a strong international presence. include interbank balances plus liquid assets held of Spain.

In millions of Euros INVESTMENTS IN AFFILIATED 31/12/2014 31/12/2013 COMPANIES Group’s voting Group’s voting rights Cost rights Cost

CONSOLIDATED COSTS VALUE: ACS, Actividades de construcción In millions of Euros y servicios, S.A. 13.9% 737.6 16.3% 931.5 AVAILABLE LIQUIDITY ASSETS Change Acerinox, S.A. 23.1% 678.7 23.5% 618.9 31/12/2014 31/12/2013 Absolute % Indra Sistemas, S.A. 12.5% 209.4 11.3% 277.3 Antevenio, S.A. 0.0% 0.0 18.7% 2.0 Cash 83.2 105.2 -22.0 -20.9 Viscofan, S.A. 6.8% 132.6 0.0% 0.0 Central banks (assets) 84.5 523.2 -438.7 -83.8 Ebro Foods, S.A. 10.0% 249.5 8.2% 191.2 Central banks (liabilities) 0.0 -639.1 639.1 -100.0 Clínica Baviera, S.A. 20.0% 27.9 20.0% 37.2 Marketable securities 1,153.7 796.1 357.6 44.9 Consulnor, S.A. 47.2% 10.0 47.2% 9.8 Financial Institutions (Assets) 2,545.4 1,636.1 909.3 55.6 Bolsas y Mercados, S.A. 8.3% 214.6 0.0% 0.0 Financial Institutions (Liabilities) -812.7 -951.8 139.1 -14.6 TOTAL 2,260.3 2,067.9 TOTAL NET LIQUID ASSETS 3,054.1 1,469.7 1,584.4 107.8

Available on Bank of Spain’s credit line 835.1 901.4 -66.3 -7.4 Through Deyá Capital, a development capital Ros Roca Environment, S.L., Ocibar, S.A., Panasa, vehicle, the Group holds a portfolio of investments Flex, S.A., student housing manager EnCampus, S.A. in leading non-listed companies, in which our clients and Siresa Campus, S.A. TOTAL AVAILABLE LIQUIDITY 3,889.2 2,371.1 1,518.1 64.0 have co-invested: Mecalux, S.A., Pepe Jeans, S.A.,

36 2014 ANNUAL REPORT ECONOMIC AND FINANCIAL REPORT 37 In millions of Euros NET PROFIT ATTRIBUTABLE Change CONSOLIDATED TO THE BANCA MARCH GROUP 31/12/2014 31/12/2013* Absolute %

INCOME STATEMENT NET INTEREST INCOME 209.8 177.3 32.5 18.3 Return on equity investments 4.5 2.4 2.1 89.1 Results from affiliated companies accounted for using the equity method 150.4 149.4 1.0 0.7 Net fees 128.9 106.5 22.4 21.0 Profit attributable to the Group on 31 December at fair value through profit and loss, stands at Gains on financial transactions (net) 130.6 21.1 109.5 519.0 2014 stood at 114.9 million Euros. All income 130.6 million Euros. Gains on foreign exchange increased substantially over the year thanks to amounted to 22.4 million Euros. As a result, gross Gains on foreign exchange (net) 22.4 14.8 7.6 51.2 increases in net interest, fees and gains on financial income at 31 December 2014 was up 36.5% to 617.9 Other operating income 194.6 460.2 -265.6 -57.7 transactions. Income was also boosted by lower million Euros. Other operating expenses 223.3 479.0 -255.7 -53.4 loan loss provisions thanks to the quality of debt and the results of restructuring the balance sheet, Personnel and other general administration costs and by the capital gains generated through the rose to 187.4 million Euros on 31 December 2014, GROSS INCOME 617.9 452.7 165.2 36.5 sale of 2.4% of Actividades de Construcción y up 5.9% compared to the previous year. The lower Administrative expenses 187.4 177.0 10.4 5.9 Servicios, S.A. loan loss provisions due to the quality of debt Depreciation and amortisation 19.1 19.2 -0.1 -0.5 and the results of restructuring the balance sheet Provisions 19.3 5.6 13.7 242.4 Net interest income rose by 32.5 million Euros to allowed for a reduction of 32.9 million of Euros to 209.8 million Euros. Net fees generated through 72.7 million Euros. Operating income stood at 319.4 Revaluation (impairment) of financial assets 72.7 105.6 -32.9 -31.2 collection and payment services - basically through million Euros on 31 December. drafts, credit and debit cards and payment orders OPERATING INCOME 319.4 145.2 174.2 120.0 - and fees generated through bank guarantees and In 2014, the Group recorded 70.4 million Euros Revaluation (impairment) on other assets 70.4 0.0 70.4 - securities-related services and sales of insurance, under impairment of equity investments. The Group Gains (losses) on the disposal of assets investment funds and pensions, and specialised also sold 2.4% of its stake in ACS, Actividades de financial products, increased by 21%, reaching 128.9 Construcción y Servicios, S.A. for 234.9 million not classified as non-current assets held for sale 97.3 118.9 -21.6 -18.2 million Euros. Euros, with capital gains of 95.9 million Euros. Both Gains (losses) of non-current assets for amounts have been registered as “Gains (loss) on sale, not classified as discontinued operations -18.4 -33.6 15.2 -45.2 Results from companies accounted for using the the disposal of assets not classified as non-current equity method stood at 150.4 million Euros on assets held for sale.” 31 December 2014. Likewise gains on financial PROFIT BEFORE TAXES 327.9 230.6 97.3 42.2 transactions, mainly from trading activity and the Tax on profit 55.9 28.8 27.1 94.1 sale of available-for-sale portfolio securities, as well as the increase in value of other financial assets, PROFIT FOR THE FINANCIAL YEAR FROM CONTINUING OPERATIONS 272.0 201.8 70.2 34.8 Profit from discontinued operations 10.8 0.6 10.2 1590.1

NET INTEREST INCOME FEES COLLECTED GROSS INCOME CONSOLIDATED PROFIT FOR THE YEAR 282.8 202.4 80.4 39.7 Profit or loss attributable to minority interests 167.9 151.2 16.7 11.1 In millions of Euros In millions of Euros In millions of Euros 250 140 700 Profit or loss attributable to the parent company 114.9 51.2 63.7 124.3 120 200 128,9 600 209,8 100 617,9 150 106,5 500 177,3 80

100 60 400 452,7 40 50 300 20 * The implementation of the IFRIC 21 interpretation on levies, the accounting principle for outflows imposed on banks by the Deposit 0 0 0 Insurance Scheme was modified in 2014. This caused retroactive adjustments in the figures from 2013. 2014 2013 2014 2013 2014 2013

38 2014 ANNUAL REPORT ECONOMIC AND FINANCIAL REPORT 39 02 MAIN BUSINESS AREAS

Wealth management 42 Retail and Private Banking 44 Large companies 51 Subsidiaries 56 March A.M. 56 March JLT 58 March Vida 59 360 CORPORATE 60 Consulnor 61 Banco Inversis 62

40 2014 ANNUAL REPORT LA ECONOMÍA EN 2014 41 and the number of clients rose by 20% compared At December 2014, EnCampus - a project created at to the previous year. the end of 2012 to create a portfolio of university WEALTH residences in Spain by acquiring existing residences The biggest milestone in 2014 was the opening and building new ones - had invested 75% of its MANAGEMENT of the new office in Logroño. Since Banca March equity, with 75% of its investment concentrated entered Consulnor’s capital, the Logroño office in Madrid, Barcelona, the Basque Country and has doubled its assets under management and the Valencia. Some residences have been refurbished number of customers. For that reason, and to and others are in the process of being refurbished. continue promoting growth and provide better 2014 also saw the inauguration of the La Salle customer service, a change of office was necessary residence in Barcelona and the Santa Maria del to ensure access to adequate facilities for the new Estudiante residence in Madrid. situation. In 2014 the Mezzanine debt fund managed by Grupo March continues to be the third largest Oquendo Capital invested in Ingesport, a group that Spanish bank by assets under management in manages municipal sports centres under the brand SICAVs, according to Inverco Ranking. on 31 name Go Fit. December 2014 March Gestión had 129 SICAVs and AuM of over 2,600 million Euros. Looking forward to 2015, the Wealth Management area’s objectives include further expanding its With regard to the performance of co-investment customer base and consolidating the brand, Wealth management is the area which specialises in Prudence, austerity and careful management of products, the main landmark of the year was the especially in Catalonia, where the company still has providing services for family business owners, and reputation risk have been allowed us to emerge divestment of the company Alcudia, which owned huge growth potential, and in the Basque Country high-net worth individuals and families who require stronger from the crisis. Our robust results are buildings and branches leased to the bank BBVA through Consulnor, as well as reinforcing and personalised monitoring of both their savings and due both to the considerable growth in off-balance through sale and leaseback transactions, via the optimising the Luxembourg office. their investments over the medium and long term. sheet funds, with a 30% increase in 2013, mainly in sale of these buildings to the SOCIMI (REIT) Merlin Our main goal is to help our customers preserve funds and SICAV, and to the 20% increase in the Properties. This deal allowed investors to double and increase their wealth, as well as passing it on to number of customers versus 2013. their initial investment in 5 years. future generations. As of 31 December, the Wealth Management division Our competitive edge is based on the fact that we had over 6,376 million Euros under management, have been working with the same business model up 17% year on year. since 1926 and we are the only private family bank in Spain. We offer vast experience and robust Wealth Management in all regions performed solvency thanks to prudent, excellent management extremely well in terms of attracting new and a relationship of mutual trust with our business volume and new clients. This growth was clients, investing with them as proof of our strong distributed as follows: the Basque Country (130%, commitment. with constant growth since its recent opening in 2012), the Balearic Islands (22%), the Levante region We offer a wide range of products and services, (18%), Catalonia (15%), Aragon (15%), Madrid (14%) including discretional management, pension and the Canary Islands (5%). and retirement planning products, financing, structured products, investment funds and all the In 2014, we continued to boost the workforce at traditional banking products. We also believe in our Luxembourg office. One of the main objectives open architecture to allow for independent, flexible of the Wealth Management division was to broaden advisory services, and we therefore also sell other the range of value-added services offered through international financial institutions’ products. We this branch. offer a comprehensive advisory service, not only from a financial perspective, but also in terms of Also, in the month of November we opened a new business and asset-planning and insurance. office in Las Palmas de Gran Canaria, in order to better serve our clients. 2014 was a year of strong management results. Peripheral and high yield bonds, equities and the The assets managed by Consulnor grew by more dollar all contributed to a strong performance. than 20% last year, exceeding 1,200 million Euros,

42 2014 ANNUAL REPORT MAIN BUSINESS AREAS 43 RETAIL AND PRIVATE BANKING

BRANCH AND ATM NETWORK CUSTOMER EVENTS

Banca March continued to transform its retail The opening in 2014 of two branches in Girona and The Private Banking division carries out a range of of the year. During this presentation, our Market network in 2014. This transformation is based on Lleida, Catalonia, are worth mentioning, as are the events for the bank’s clients and potential clients, strategy department and March A. M. give an in- a model that opts for a smaller number of offices closure/relocation/redeployment of seven others, in which specialists and managers from Grupo depth view of the investment outlook, offer an with more physical space and more employees. This taking the number of exclusive Retail and Private March participate. This is something that sets us overview of the macroeconomic scenario, and model is in keeping with our philosophy of long- Banking branches from 196 to 201. apart from the rest and is truly appreciated by the analyse the distribution of assets and asset classes, term relationship banking, focused on counselling attendees. These events include, among others, the as well as highlighting recommended funds, among the client, rather than just traditional transaction In 2014, Banca March had 489 ATMs, of which more following: other topics. banking. than 59% were located in busy public places to make life easier and provide better quality service - Lunches and breakfasts. Banca March’s family background means it has Our aim is to provide better service to our to our customers and the general public: shopping - Conferences and presentations. close links to family businesses, and as a result customers by ensuring our employees are highly centres, department stores, leisure areas, hospitals, - Entertainment events. these events include a whole series of exclusive specialised and that their workspaces are optimal, hotels and airports, among others. - Exclusive meetings for European residents, held meetings for these companies. Examples of these relocating and inaugurating offices in city centres in English and German. are the meetings held in collaboration with Unilco, a and high potential areas. consultancy firm specialising in the family business, We host these events, which are held in various and the 6th Conference on Family Business hosted geographical areas and attract over 2,500 by Banca March’s Family Business Chair at the attendees, throughout the year. Their popularity led University of the Balearic Islands. STREAMLINING THE BRANCH NETWORK to a substantial increase in the number of events in In millions of Euros 2014 compared to the previous year, from 52 to 85. PRODUCT DEVELOPMENT AND SALES 300 70.00 4.0 60.8 60.00 250 254 54.5 4.0 The most popular events are the now traditional 2014 was the year Banca March launched its 231 217 50.00 Investment forums. At these forums, experts new corporate image. This new image shows 200 201 196 40.00 from March Asset Management, together with our commitment to customers, shareholders, 150 46.7 3.7 representatives from other prestigious AM houses, professionals and society. It is a way of showcasing 28.8 42.3 30.00 100 3.5 offer their points of view regarding the market the values that are already present in our products 85 20.00 68 66 3.5 situation and hold debates on the best investment through the new logo. We offer a way to invest in 50 43 39 10.00 opportunities. our ideas and our projects. That is why, in addition 0 0.00 3.3 to the range of traditional financial products, we Average number of employees per branch 2010 2011 2012 2013 2014 3.2 The presentation of the 2014 Annual Strategy are focusing our efforts on products that allow our 3.0 report is also one of the most important events clients to share our vision. International 1 or 2 employee branches Volume/Branch 2010 2011 2012 2013 2014

44 2014 ANNUAL REPORT MAIN BUSINESS AREAS 45 One of the best ambassadors for this message is • Unit Linked life insurance plans with various March Asset Management. The asset management possibilities: arm grows every year and offers a wide range of investment alternatives. - March Vida Multifondos, UL is a savings insurance plan focused on investment, • SICAV with a small additional death coverage, We offer co-investment opportunities through through which contributions are invested in our Torrenova, Bellver and Lluc Institutional investment funds and where the policyholder SICAVs, which the company has managed for fully accepts the investment risks. over 20 years to serve as an investment vehicle both for the March family and Banca March - The Structured Deposit Unit Linked plans, customers. Another example of co-investment is which invest in Banca March’s structured the private equity company Deyá Capital, which deposits, through which the customer can invests in non-listed companies in the so-called combine the underlying assets or products capital development sector. and maturities that fit their needs.

• Portfolio Management Service The portfolios are comprised of Banca March CARDS funds representing the various asset classes (money market, fixed income, equities and During this financial year the implementation of balanced) and geographic areas (Spain, Europe, contactless technology was completed for the cards BANK INSURANCE AND PENSIONS Global, etc.). in circulation and for the VISA and MASTERCARD brands. This payment system allows purchases to Bank insurance and pensions performed well in Revenue reached 18.7 million Euros, for which the • Profiled funds be made just by placing the card near the point of 2014. Revenue increased by 5.1% compared to breakdown is as follows: 6.2 million in risk products, Currently, the fund portfolio features: March sale terminal in stores. This new payment system 2013, despite the absence of sales of the deposits 7.2 million in savings products and 5.3 million in Patrimonio Defensivo, F.I., March Cartera saves time as it is much quicker and easier than Unit Linked plan, the drop in net interest income pension fund products. Conservadora, F.L., March Cartera Moderada, F.L. conventional payment. and the decline in pension plan fees, driven by a and March Cartera Decidida, F.L. modification of the law. The corporate banking and The distribution of revenues by customer segments Contactless technology is supported by NFC (Near private banking segments led this growth. shows a clear increase in Large Companies, up Given the affinity of interests and Banca March’s Field Communication) and to function it requires 40.3% on 2013, and in Retail and Private Banking, special understanding of family-owned companies, contactless cards, contactless card readers and a 2014 saw the launch of development and sales up 8.4% year-on-year. we highlight the global equity fund which invests contactless cash register. of specific products for the corporate banking exclusively in a selection of the best listed family segment (credit insurance, Industrial Multi-risk IM, Of total revenue, 65.2% is generated by the retail businesses worldwide: The Family Businesses Fund. All Banca March point of sale terminals have group health, vehicle fleets and civil liability, among banking segment, 32.8% by Retail and Private This fund invests in listed companies where more already been adapted to NFC technology. This is a others). Banking and 2% by Large Companies. than 25% of the capital belongs to a single family, step forward in the value proposition of our cards, at least one member of the family is involved in which is why they have all been adapted to this the management of the company and there is next-generation technology. an interest in transferring ownership to the next generation. At the same time, processes were also implemented REVENUE DISTRIBUTION REVENUE DISTRIBUTION BY SEGMENTS to modernise circuits and improve the efficiency of Just like Torrenova and March Vini Catena, a sector the card business. € 5.3 MM 2.0% fund investing in the wine sector value chain, the 10.6% € 6.2 MM family Businesses fund is registered for sale in An agreement was also signed with REDSYS in 2014 5.5% 32.8% 65.2% Spain, Italy, Austria and Luxembourg. for the development of the future IUPAY BANCA MARCH digital wallet. This will allow customers March Vida is Banca March’s insurance company, to store their credit and debit cards in their mobile which allows us to further expand our range of phones and use these for both online and over the products. counter payments. € 7.2 MM 1.2%

Risk Savings Pensions and Retirement Retail Private Companies

46 2014 ANNUAL REPORT MAIN BUSINESS AREAS 47 The distribution of Industrial Multi-risk (IM) led Training, especially focused on promoting new MULTI-CHANNEL BANKING to growth in Large Companies. Complementary company products, both on-site and through the insurance products for individuals, with more E-learning platform, was a priority in 2014. Via This area continues to seek to provide the most Mobile App than 2,800 new contracts in 2014, accounted for this platform, we offered the continuous training efficient multi-channel combination possible Our mobile app is the answer to our customers’ a substantial part of the business activity of the that we are required to provide under the current depending on the needs of each customer segment mobility needs. This channel has registered dramatic Retail Banking segment. Mediation Law, with different programmes for at any given time. growth from 5.2% of Remote Banking operations to managers in private banking and corporate banking 9.3%. Savings and Pension funds balances both increased focusing on the most relevant products for their Online Banking by more than 15%. The collapse of the net interest customer segment. In 2014 we continued to move forward in the Contact Centre income on savings products was offset by strong continuous improvement of our application, Our Contact Centre began a transformation process sales of the structured Deposits Unit Linked plan In 2015 our aim is to achieve growth through our completing our product catalogue and incorporating in 2014, going from only providing user support for and Pension Plus, which allowed us to close the sales actions, with ongoing advice to both our new features such as a demo of Remote Banking online Banking to providing specialist knowledge year at 1.2% above 2013 (a decline was forecast). internal and external customers. to facilitate the migration of our customers, and value for all banking areas. The participation in segmented advertising that has allowed the various campaigns to attract new business and the In Pension funds, we closed the year with a 16% Our top priority this year is to increase the insured development of multiple online campaigns directed generation of leads in Private Banking and Large increase in volumes and a 10.6% increase in client ratio and reinforce the bank’s relationship at the appropriate customer profile, and payment Businesses are worth mentioning. revenues, despite the drop in fees that started in with these clients, as well as creating after-sales of card charges in instalments. October and thanks to the success of the campaign and claims circuits that set us apart from the rest Corporate website to attract plans carried out at the end of the year. of the market in terms of quality and customer care In order to improve the rate of use, the operation and Taking advantage of the internal release of the the uptake of products through different channels, new brand image and renewed internal culture, we In millions of Euros The distribution of our products, through new a number of joint measures were implemented inaugurated a new, more agile technology platform, VOLUMES % models prioritising customer advisory, will be with the network. Branches were provided with which is absolutely aligned with our values and Savings (balances) 923.6 15.0 vital to continue the growth of the area, as will new retail tools such as the demo of the Remote brand, offering valuable multimedia content in a Pension funds (balances) 338.2 16.0 the constant specific training of managers of the Banking service and the mobile app, in order to more attractive, dynamic format. different segments and the retail network. familiarise customers with the service. Also, a pilot program was carried out thanks to which eighteen Our website is a window to our customers, a FEES % In 2015 we will expand the range of Bankassurance branches were equipped with iPads with access to communication channel which registered annual Risk 6.2 5.5 and Pension products, with new savings and Unit Remote and Mobile Banking, both test and real growth of 25.4%, from 194,382 visits in December Savings 7.2 1.2 Linked varieties, and updating life risk and civil versions, plus access to the bank’s social networks, of 2013 to 243,837 visits in December 2014. liability products. in order to train and migrate their customers. Pension funds 5.3 10.6

TOTAL FEES 18,7 5,1

48 2014 ANNUAL REPORT MAIN BUSINESS AREAS 49 LARGE COMPANIES

Social Networks Agility when taking decisions and the ability to drop in Spain’s Sovereign bond spread against the In 2014 we established our presence on the social - In 2014 we opened up our YouTube channel, adapt to each customer’s circumstances are of German bund and a slight but positive reduction in networks, which involved taking our strategy one which had been private until 2013. We publish fundamental importance in the Large Companies the unemployment rate. This macro scenario lays step further. Now we don’t just monitor social videos monthly with our market views and division. To achieve this, the area has a portfolio the foundations for progress along the long road networks, we create specialised content that investment strategies, interviews with our of products and services which, in addition to that lies ahead; 2015 is set to be a year in which supports the positioning of our brand as experts in representatives and experts, events of interest financing solutions, transaction banking and cash the achievements of 2014 are consolidated and advisory services. and relevant facts about our company. In just management, provide comprehensive corporate enhanced. one year, our videos have been watched 38,146 advisory services through the Capital Markets Unit, - LinkedIn is the main platform for the development times. 360 CORPORATE and March JLT insurance brokers. Highlights in the financial sector include the launch of personal and professional relationships, where of the ECB’s single supervisory mechanism and the we use a “one to one” strategy that allows our - In January 2014 we joined Twitter. This social 2014 was a step closer to the end of the crisis robust results obtained by all Spanish financial managers to position themselves as experts and network allows us to share financial and The sustained quarter-on-quarter growth of institutions in the last stress tests. The restructuring reach highly segmented customer target. Our institutional content of interest to our customers the economy, with an annual GDP increase of of the financial system in Spain is now complete, profile already has 3,932 contacts, compared to (we have 505 followers). This is the most approximately 2% was due, to a large degree, to and is reflected by strong, increasing competition 2,121 at the end of 2013, an increase of 85.4%. bidirectional network, which gives us the most the strong performance of the foreign sector, the between the banks to reactivate the flow of credit insight into what is being said about us and our competition.

50 2014 ANNUAL REPORT MAIN BUSINESS AREAS 51 to the private sector, especially for medium and to provide family businesses with advice in the CAPITAL MARKET large enterprises. However, effective demand for fields of capital market financing, corporate finance credit remains low. (360 CORPORATE) and comprehensive industrial In 2013 Banca March strengthened the March Banca March participated in 13 transactions insurance (March JLT) in the mid-level client Capital Markets (MCM) area by incorporating in 2014 totalling over 2,000 million Euros in All of these factors, added to the widespread segment. professionals with extensive experience in financing. Banca March’s participation stood at over deleveraging of the economy and all economic structured financial markets. €200 million. players, have led to downward pressure on In 2015 we plan to further develop this advisory companies’ financing costs, with a consequent model for medium-size companies through our This area’s main aim is to seek solutions to the The aforementioned transactions took various reduction in banks’ intermediation margins. This specialised business areas and strengthen our structured financing needs of Banca March clients, different formats, including corporate transactions reduction will be reflected and exacerbated in the physical network to allow us to serve a wider market. whether in banking or as alternative investors. (Gamesa, Ferrer, Aspro Ocio…), capital markets banking sector’s 2015 accounts. In addition, non- To this end, we have created the Large Company transactions (Almirall, Antolín, Europastry…), bank financing sources are on the rise. In fact, 2014 Expansion Unit, implemented to undertake an In order to achieve this, the Capital Markets team acquisition-related transactions (Flos, Goldcar…) was a record year for corporate bond issues in the ambitious expansion throughout the Spanish operates in the following activity areas: and structured transactions (Tree). capital markets. regions which are not covered by the Madrid, Levante and Catalonia-Aragon units. Throughout Syndicated Loans In this difficult context, the Large Companies 2014 and in 2015 too, we have continued to hire This encompasses all corporate financing, acquisition division registered a year-on-year improvement in new professionals, an increasing number of whom financing and structured financing transactions in its results once again, with increases in all margins. come from within the bank’s existing talent. which two or more financial institutions participate. Net interest income grew by 14.3% (supported by the lower cost of funds and by restraint in We also continue to make technological the reduction of the investment margin). What improvements to our banking products which help is particularly noteworthy is the contribution of with the day-to-day financial management of fees, which grew by 16.6%, with a composition that our customers. We continue to incorporate new 2014 2014 2014 2014 2014 makes them sustainable to a great extent in the functions into products such as confirming and Syndicated Syndicated Syndicated Syndicated Syndicated immediate future. factoring, which go much further than managing Loan Loan RCF Loan Loan LEAD ARRANGER ARRANGER ARRANGER MANDATED payments and collections and their financing. The ARRANGER LEAD ARRANGER The overall profit contributed by the area grew Treasury distribution table has created a portfolio to 50%, buoyed by the strong performance of of products that are constantly adapting to changes net interest income, the increase in fees, the in the forex markets, interest rates and commodities streamlining of costs and the reduction of NPLs. markets and, most importantly, it has done so in € 205 M € 180 M € 350 M € 285 M $ 350 M The NPL ratio in this segment is under 1%, the best direct, daily contact with customers. This allows in the sector. us to be more flexible, agile and useful. One of our main challenges for 2015 is to continue to improve All of the specialised units that make up the Large and progress in this way. 2014 2014 2014 2014 2014 Syndicated Loan Syndicated Syndicated Syndicated Syndicated Loan Business area contributed in conjunction to this & Syndicated RCF Loan Loan Loan (inc. Term Loan B) CO MANAGER PARTICIPANT MANDATED MANDATED MANDATED improvement in results. Very few banks are able LEAD LEAD LEAD ARRANGER ARRANGER ARRANGER GRUPO ANTOLIN € 200 M SINDICADO € 200 MM RCF $ 1,000 M € 4,512 M € 6.5 M € 450 M

NET INTEREST INCOME FEES PROFIT CONTRIBUTION

60 25 35 55.7 23.0 29.2 50 48.8 30 6.9 20 19.7 3.3 40.4 25 40 8.4 4.8 9.7 15 14.9 31.2 9.2 20 19.5 30 11.0 3.9 23.4 7.8 10 9.6 15 12.8 13.5 5.9 20 1.4 10 0.8

In millions of Euros In millions of Euros In millions of Euros 7.7 5 5.0 10 5

0 0 0

2010 2011 2012 2013 2014 2010 2011 2012 2013 2014 2010 2011 2012 2013 2014

52 2014 ANNUAL REPORT MAIN BUSINESS AREAS 53 Private Capital Markets This involves long-term financing transactions credit rating and yield level on the financing granted. carried out between middle market companies, i.e. Banca March is the financing bank and the originator those with average annual revenues of between credit company and manager of the credit risk to be 100 million and 1,500 million Euros and institutional underwritten by the Mutua Madrileña. investors. Banca March is firmly committed to this Banca March advises its clients on the process of strategy, which is a bid to bring credit origination identifying opportunities, drafting and coordinating –involving relationships with companies– and all the documentation required for analysis by credit distribution –which involves relationships potential financiers, and optimising and performing with investors– closer together. Its objective is to the entire process of selecting the optimum spearhead a dynamic, demanding market in which alternative financing for the client. the quality of a company’s service, management and reputation are essential for success. Banca March reached an agreement in 2014 with Mutua Madrileña to work together to offer financing for Spanish companies with a certain

Asset & Capital Finance This encompasses all structured asset financing Fixed Income Market (MARF), through which transactions through non-banking capital qualified institutional investors provide financing instruments. Activity in film production and for these companies. shipbuilding and investments in R&D and innovation HIGH YIELD 2014 2014 High Yield Bonds High Yield Bonds are particularly noteworthy. Four new issuers have thereby accessed the MARF BONDS/ JOINT CO-LEAD (Elecnor, Tubacex, Europac and Barceló) since April TERM LOAN B BOOKRUNNER

Banca March 2014 participated again in the 2014. These company’s issuance programme limits GRUPO ANTOLIN structuring of financing for a film production stood at 400 million Euros, and Banca March is with a top level international producer, which sole Lead Arranger, acting as the advisory and € 325 M € 400 M SENIOR NOTES SENIOR SECURED allowed Spain to host the most of the filming and structuring body (Registered Advisor) as well as the NOTES consequently attract a large part of the investment distributor (Bookrunner) on all issuances carried in the project. out under these commercial paper programmes. COMMERCIAL 2014 2014 2014 2014 Banca March also developed a new Tax Lease model At the end of 2014, issuances had been undertaken MARF Commercial MARF Commercial MARF Commercial MARF Commercial PAPER paper Programme paper Programme paper Programme paper Programme for the naval sector, once the new regulations are for over 200 million Euros in the market and the SOLE LEAD SOLE LEAD SOLE LEAD SOLE LEAD approved by the European Commission. In 2014 product proved highly successful, with three of ARRANGER ARRANGER ARRANGER ARRANGER Banca March successfully signed contracts worth the issuers increasing the overall limit of their

€100 million in one of the first transactions closed promissory note programmes. GRUPO TUBACEX in Spain under the new tax lease legal framework. € 200 M € 75 M € 50 M € 75 M These programmes aim to allow the issuers to MARF Commercial paper MARF Commercial paper MARF Commercial paper MARF Commercial paper Regulated Capital Markets optimise financing costs and diversify financing This covers financing transactions on regulated sources. markets, both domestically and on a European level, ASSET 2013/2014 2014 2014 2014 by institutions with and without public ratings. Cinema Financing 442 Financing 442 Financing 442 There was also great demand for the commercial & CAPITAL Tax Equity 6 SHIPS 1 SHIP 1 SHIP paper issued among the bank’s clients, as they FINANCE In 2014 Banca March took part in bond issuances by represent an alternative to investment products COPRODUCCIÓN Almirall (Bookrunner) and Grupo Antolín (Co-Lead). which have seen declining returns over the year, EEUU-ESPAÑA such as deposits and government bonds, . The risk Banca March has also created an initiative to involved is also very controlled given the maturity € 120 M € 46 M € 12 M € 22 M seek short term funding for companies. It led the terms of the instruments and the issuers’ credit PRODUCTION BUDGET INVESTMENT COST INVESTMENT COST INVESTMENT COST creation of commercial paper programmes, taking rating. advantage of the flexibility of Spain’s Alternative

54 2014 ANNUAL REPORT MAIN BUSINESS AREAS 55 The firm was recognised as Best Spanish Asset BENCHMARK- BEATING FUNDS SUBSIDIARIES Management Company in the European funds DATA AS OF 19.01.15 Trophy awards organised by Fundclass and 100% the European newspapers La stampa, Le Jeudi, 90% Tageblatt, El País and LCI. Also, the March A.M. fund portfolios finished among the best in the 80% sector once again this year, ranking second in the 70% conservative category and third in the aggressive 60%

category, according to Expansión and Allfunds 50% Bank. finally, the British publication Citywire 40% awarded its AA classification to our head of fixed 30% income francisco Herrero, a recognition that places him among the best fixed income managers. 20% 10%

0% Performance at 1 year Performance at 3 years Performance at 5 years

MARCH ASSET MANAGEMENT

March A.M has registered robust growth in line with and high net worth clients, generates substantial Banca March in recent years. The investment strategy synergies in terms both of reputation (solvency, performed well again this year, although it is true that solidity, reliability, etc.) and of customer focus. the second half of the year was tougher for the value All of this is perfectly reflected in the brand’s new investing philosophy. That being said, the investment logo, in which the three triangles that form the “M” funds, SICAVs and pension plans all registered very represent the alignment of interests between clients, positive performances and received numerous awards employees and shareholders. 2008 2009 2010 2011 2012 2013 2014 at the national and international level. March A.M. AuM 1.137 1.504 1.628 1.723 2.223 4.032 5.344 During 2014, March A.M. focused its efforts on Sector AuM 192.301 188.538 164.179 151.720 147.344 168.447 226.293 In terms of asset volumes, total assets under improving customer confidence and perfecting its management grew by 32.6% (15% in funds, 39% research methodology, the companies covered and Source: Inverco and March A.M. Data as of December 2014 Millions of Euros Sector includes funds and SICAVs in SICAV, 15% in pension plans and 55% in our the regular monitoring and risk control reports. The Luxembourg SICAV). Over the last five years, March company made major efforts in terms of getting ASSETS UNDER MANAGEMENT (AuM) AM’s AuM grew 470% vs sector growth of 18%. closer to its clients, holding various meetings in Source: Inverco and March A.M. 2008 = 100. Data as of December 2014 different cities to share our view of the financial In a complex landscape characterised by the situation markets and of investment opportunities and risks. 5 250 of the financial markets, the economic crisis and the 226.293 We have broadened the international distribution restructuring of the Spanish financial sector, the 4 192.301 200 188.538 5.344 figures reported by March A.M. are validation of its capacity of our SICAV in Luxembourg (March 168.447 business model specialising in asset management International) by signing several distribution 164.179 151.720 147.344 150 and focusing on global equities, Eurozone fixed agreements in Germany and Austria. As a result, last 3 4.032 income and asset allocation. Thanks to its value year almost a third of our new fund subscriptions investment philosophy, select range of products and came from other European markets. The Spanish 2 100 highly experienced professionals, we have once again SICAVs registered a steady increase in AuM, largely 2.223 fulfilled our commitment to our customers: “Value due to the factors described above. March A.M. 1 1.628 1.723 50 creation and wealth preservation.” was therefore the 3rd largest Spanish AM house 1.504 by assets under management in this type of fund, 1.137 It is important to emphasise that being part of Spain’s which is so characteristic of private banking. 0 0 only private family bank, highly specialised in mid 2008 2009 2010 2011 2012 2013 2014

March A.M. AuM Sector AuM

56 2014 ANNUAL REPORT MAIN BUSINESS AREAS 57 MARCH JLT MARCH VIDA

The trend of excessive competition and reduction in the most important REIT (SOCIMI) projects in the At the end of 2014 the March Vida portfolio had The company plans to continue to expand its range of prices in the industrial risks segment, in which market. 75,000 policies, with managed technical reserves of products in 2015, with a special focus on Private March JLT operates, continued in 2014. The sector of over 1,000 million Euros. Banking and Wealth Management products. 2015 as a whole contracted by 0.8%, a very moderate 2014 also saw the launch of the new reinsurance will be also the last year for preparation before the decrease when compared with last year’s 3% drop. subsidiary, JLT March Re. The initial stages of this The premium income in 2014 was over 180 million new European Solvency II insurance regulations new endeavour far exceeded expectations, and Euros. Unit Linked products performed especially come into force on 1 January, 2016. In this complex environment, March JLT consolidated meant the incorporation of a group of highly well, with 100 million, with the top Unit Linked its commitment to specialisation with a 10% growth experienced professionals. In the coming years, the product being the structured deposit format, with in business volume, although revenues remained reinsurance area, which complements the range more than 60 million. Life annuities exceeded 40 stable year on year. This is primarily due to reduced of specialised brokerage services, should help the million and savings and retirement savings products margins on large accounts due to excessive supply growth and stability of the business with the aim of stood at over 30 million. in the market. The 9% growth in international becoming one of the leaders in the market. business is noteworthy, compared with a 5% drop As for life-risk products, the company continued to in domestic business. To consolidate the company’s presence in key actively market both products linked to financial business centres across the country, the acquisition transactions and free products. Among the free The most significant transactions include the of Camarena, S.A., in Valencia - the first independent products, the March Vida Exclusive Protection, company’s participation in the insurance for the broker in the region, with a strong foothold in aimed at private banking customers, deserves a consortium that was awarded the contract for the businesses in the area – was completed in late special mention. metro in Lima, Peru (the biggest infrastructure December. This transaction will strengthen our project of the year), a highway in Colombia and presence in Valencia and boost our size to allow us The results for the year 2014 were satisfactory, in several energy projects in Mexico, Morocco and to serve larger companies. line with recent years. Notably, 2014 was a key year Saudi Arabia. These contracts allowed for 35% in the preparation for the company’s adaptation to growth in the new energy department, which began In short, 2014 was a difficult year for revenue the solvency II regulations. operations in 2013. generation, but the company has continued its strategy of specialising and focusing on medium For the first time, a full calculation was carried out By specialist area, the 54% growth in the maritime and large companies with international operations, of the capital requirement under the new European business, with significant participation in several which should allow us to maximise profitability regulations, and the first and the first system of shipbuilding projects, also deserves a special when there is an improvement in the general governance and own risk and solvency assessment mention, as does the 21% growth registered by the economic situation and the insurance market in (ORSA) reports were undertaken. financial lines area, with the company participating particular.

58 2014 ANNUAL REPORT MAIN BUSINESS AREAS 59 360 CORPORATE CONSULNOR

360 CORPORATE is the Banca March subsidiary 360 CORPORATE is one of the leading financial Banca March’s entry into the capital of Consulnor The highlights of 2014 were: specialising in financial advisory services. The advisory firms in the Spanish market, having - an independent company founded in 1972 which specialist services provided by 360 CORPORATE completed almost 50 transactions with family specialises in financial services for private banking • Growth in business volume and number of are fully complementary and harness synergies with companies, listed companies and private clients - resulted in one of the leading companies in key clients. Business volume grew by 21.5%, the other activities undertaken by Banca March. equity funds. the private banking sector with one of the sector’s including the business generated for the bank by These services include: strongest teams in the management of high net Consulnor clients. The figure as of 31 December In 2014, despite the ongoing difficult market worth clients, market strategy and generation of 2014 was 1,373 million Euros. The increase in the Mergers and acquisitions environment for mergers and acquisitions, 360 innovative products. number of key clients was 24%. This covers advisory services for companies CORPORATE successfully completed a broad regarding acquisitions, sales, mergers, spin-offs, range of corporate transactions, making it a leading Consulnor is mainly located in the Basque Country • The average return on client portfolios grew LBOs, MBOs takeover bids, etc., both domestically consulting firm in middle-market transactions and also has branches in La Rioja, Madrid and by 7%. and internationally. in Spain. Catalonia.

Debt The transactions completed include advising As a result of this agreement, clients of Consulnor Including restructuring or refinancing and seeking Cinven on the acquisition of Gas natural fenosa Banca March have access to a wide range of long and short-term financing, both banking and Telecomunicaciones (“UFINET”), the sale of the services, supported by the bank’s solvency. non-banking. frozen food chain La sirena, the sale of Laude schools and the sale of a Gamesa photovoltaic Following this transaction, Banca March became Capital Markets plant for a combined total of 650 million Euros. one of the leading Spanish companies in private This covers consultancy on IPOs, investor banking, with the largest number of SICAVs under presentations and capital structure analysis. 360 CORPORATE also advised Viscofan on the sale management. The agreement also meant a of its subsidiary IAN, a canned vegetable producer significant increase in balances from off-balance Other services whose main brand is Carretilla, a 55.8 million Euros sheet AuM, as well as an expansion of the client Including valuations of businesses or companies, deal that was closed in March 2015. base in the Basque Country, where there is a strong business plan design, creation of executive network of family companies and a high level of incentive plans and analysis of strategic options for wealth generation. businesses.

60 2014 ANNUAL REPORT MAIN BUSINESS AREAS 61 BANCO INVERSIS

Since its inception in 2000, Banco Inversis has and securities services to the acquiring entity as Euros, representing an increase of 10.2% over the provided other financial institutions with solutions an institutional client. It was decided that 50% of previous year. Profit after taxes in 2014 stood at for their financial asset investment services. Until Banco Inversis’ capital would later be sold to Orey 10.15 million. November 2014, the company also had a retail Group, a transaction which is yet to go through. banking business line. Following this transaction, Banco Inversis has a Given the above, the year 2014 was dominated by strong, stable shareholder structure which is fully In 2013 there was a change in the company’s a major focus of efforts on the aforementioned focused on the institutional business both in Spain shareholder structure, following a competitive spin-off of the retail business and the adaptation of and abroad with a strong dedication to service process open to a number of investors which systems for the provision of these services. through a technology platform which is undergoing highlighted the strategic attractiveness of a continuous process of innovation and adaptation the business, and which concluded with the Nonetheless, 2014 was once again a year of growth, to the needs of its customers. acquisition of 100% of the capital by Banca March. both in terms of the income statement and of the Banca March also agreed to sell the retail business volume of securities held by the Group, including through a spin-off transaction which was closed in domestic and international investment funds and late november 2014 as well as providing banking pension funds, which amounted to 48,715 million

62 2014 ANNUAL REPORT MAIN BUSINESS AREAS 63 03 HOLDINGS OF CORPORACIÓN FINANCIERA ALBA

Investment portfolio 66 Affiliated companies 67 Listed companies 67 ACS 67 Acerinox 68 BME 68 Indra 69 Ebro Foods 69 Viscofan 70 Clínica Baviera 70 Non-listed companies 71 Mecalux 71 Panasa 71 Pepe Jeans 72 Ros Roca 72 Flex 73 Ocibar 73 EnCampus 73

64 2014 ANNUAL REPORT ECONOMIC AND FINANCIAL REPORT 65 INVESTMENT AFFILIATED PORTFOLIO COMPANIES

Alba’s affiliated companies as of 31 December 2014(1): LISTED COMPANIES

ACS

ACS is one of the world’s largest groups in ACS shares gained 15.8% in 2014 to reach 28.97 CORPORACIÓN FINANCIERA ALBA(2) construction (mainly civil engineering), through Euros per share at the end of the year, with a turnkey projects and infrastructure concessions, market capitalisation of 9,116 million Euros. with a heavy presence in Europe, the US, Australia, Asia and the Middle East. In 2014, according to At the end of 2014 Alba was ACS’s largest ACERINOX ACS HOCHTIEF various specialist publications, ACS once again shareholder with a stake of 13.9%. During the first 23.1% 13.9% 61.4% led global rankings for the largest international quarter of 2015, Alba sold 1.47% of ACS for 147 construction contractors and major transport million Euros, with a gross capital gain of 72 million infrastructure concession groups. It also has a strong Euros, reducing its equity interest in this company presence in urban services and waste treatment, to 12.4%. EBRO BME FOODS mainly in Spain but with increasing operations in 8.3% 10.0% other European countries.

Consolidated sales for ACS in 2014 totalled 34,881 million Euros, 0.8% lower than the INDRA MECALUX(3) FLEX SISTEMAS VISCOFAN previous year. Domestic sales grew by 6.4% due 15.6% 19.7% 12.5% 6.8% to the consolidation of Clece, while international sales declined by 2.1%. ACS posted net profit of 717 million Euros, up 2.2% on 2013 due to lower financial costs and the positive contribution of CLÍNICA ANTEVENIO PANASA ROS ROCA discontinued operations. www.grupoacs.com BAVIERA 14.5% 26.5% 17.4% 20.0%

DEYÁ MECALUX(3) PEPE JEANS OCIBAR CAPITAL S.C.R. 8.8% 12.0% 21.7% 100%

SIRESA EN CAMPUS CAMPUS 32.7% 17.4%

(1) Other affiliated companies: Artá Capital S.G.E.C.R., S.A.U. (81.01%) and Corporación Empresarial de Extremadura, S.A. (1.01%). (2) Holdings through Alba Participaciones, S.A.U., Balboa Participaciones, S.A.U. and Deyá Capital, S.C.R., all of which are wholly-owned by Corporación Financiera Alba, S.A. (3) Corporación Financiera Alba’s stake in Mecalux totals 24.4%, 8.8% directly and 15.6% through Deyá Capital.

66 2014 ANNUAL REPORT HOLDINGS OF CORPORACIÓN FINANCIERA ALBA 67 ACERINOX INDRA

Acerinox is one of the world’s leading stainless steel Acerinox shares gained 35.2% in 2014, reaching Indra is the Spanish leader in information technology Indra shares stood at 8.07 Euros per share on 31 manufacturers, with production plants in Spain, the 12.50 Euros per share. and security and defence systems, and one of the December 2014, placing the company’s market cap USA, South Africa and Malaysia. main companies in its sector in Europe and Latin at 1,325 million Euros. On 31 December 2014 Alba was the largest America. It offers high value-added solutions and During the financial year 2014, Acerinox sales shareholder in the company, with a 23.1% stake. services for the following sectors: security and At the end of 2014, Alba had a 12.5% stake in Indra, rose 10.4% to 4,380 million Euros. The net profit defence, transport and traffic, energy and industry, and was its second largest shareholder. attributable to the group was 136 million Euros financial services, health and public administrations, compared to 22 million last year. telecoms and media.

Its market capitalisation stood at 3,273 million Sales stood at 2,938 million Euros, up 0.8% on the Euros at year-end. www.acerinox.com previous year. However, the company posted a net loss of 92 million Euros in 2014, compared to profit of 116 million Euros the year before. www.indracompany.com

BOLSAS Y MERCADOS ESPAÑOLES EBRO FOODS

Bolsas y Mercados Españoles (BME) is the operator In 2014 Alba acquired a stake of 8.28% in BME for Ebro Foods is a multinational food company that On December 31, Ebro Foods’ market cap stood at of all stock markets and financial systems in Spain a total amount of 217 million Euros, becoming its operates in the rice and pasta segments. It has a 2,109 million Euros and its shares were trading at and the leading platform for transactions involving largest shareholder. retail or industrial presence, through an extensive 13.71 Euros. shares of listed Spanish companies. The company network of subsidiaries and brands, in more than 25 unites the stock exchanges of Madrid, Barcelona, countries in Europe, north America, Asia and Africa, In early 2014, Alba acquired an additional 1.8% in Bilbao and Valencia. which has allowed it to position itself as a world Ebro foods, increasing its stake in the company to leader in the rice sector and the second largest its current 10%. In 2014, its revenues increased by 11.3% to 342 global pasta manufacturer. million Euros. Net profit stood at 165 million Euros, the best annual result since 2008. Ebro Foods’ sales rose by 8.4% in 2014 to 2,121 million Euros, while net profit increased by 10% BME shares climbed 16.2% in 2014 to 32.14 Euros year-on-year to 146 million Euros. www.ebrofoods.es per share, with a market capitalisation of 2,687 million Euros at the end of the financial year. www.bolsasymercados.es

68 2014 ANNUAL REPORT HOLDINGS OF CORPORACIÓN FINANCIERA ALBA 69 VISCOFAN NON-LISTED COMPANIES

Viscofan is the world leader in artificial casing On 31 December 2014 Alba was the top shareholder MECALUX for meat products, and is the only producer that in the company with a stake of 6.8%. manufactures all artificial casing types: cellulose, Mecalux is one of the world’s leading storage At December 31, 2014, Alba had a 24.4% stake in collagen, fibrous and plastic. systems companies. It designs, manufactures, sells Mecalux, 8.8% directly and 15.6% through Deyá and provides services related to metal shelves, Capital. Viscofan sales increased by 4.1% in 2014, reaching automatic warehousing and other warehousing 687 million Euros. Likewise, net profit reached a solutions, with state of the art technology. record high of 106 million Euros, up 4.9% on 2013.

Viscofan shares rose 6.6% in 2014 to 44.06 Euros www.mecalux.es per share, while its market capitalisation was 2,054 million Euros at year-end. www.viscofan.com

CLÍNICA BAVIERA PANASA Panasa (Panaderías Navarras) is one of the leading On 31 December 2014 Alba’s stake in Panasa, Clínica Baviera is Spain’s leading provider of eye company’s market capitalisation on 31 December, manufacturers of fresh and frozen bread, pastries through Deyá Capital, was 26.5%. care services for the correction of problems such 2014 was 138 million Euros. and cakes in Spain. Through Berlys, it provides its as near-sightedness, farsightedness, astigmatism, products to over 24,000 clients including bakeries, presbyopia and cataracts, and has a strong presence In 2014 Alba maintained its 20% stake in Clínica hotels, restaurants, major retail outlets and other in Spain, Germany, Austria and Italy. Baviera, and remains one of its largest shareholders. food shops, thanks to its extensive distribution network which spans the entire Iberian Peninsula, Thanks to the strong performance of the domestic as well as a network of more than 190 exclusive business, consolidated sales rose 3.3% to 83 million bakeries located in Navarra and the Basque Country. www.berlys.es Euros. The net profit attributable to the group was 4 million Euros, compared to 5 million last year.

Following substantial gains of 174.5% in 2013, Clínica Baviera shares dropped by 18.8% in 2014, closing the year at 8.49 Euros per share. The www.clinicabaviera.com

70 2014 ANNUAL REPORT HOLDINGS OF CORPORACIÓN FINANCIERA ALBA 71 FLEX

Flex is one of Europe’s leading bed companies. The Group has a network of over 105 stores under It manufactures and sells mattresses, pillows, the Noctalia, Plumax and And So To Bed brands (UK adjustable beds and other accessories. and Middle East).

Thanks to a strong portfolio of brands it is the On 31 December 2014 Alba had a 19.7% stake in Flex through Deyá Capital. PEPE JEANS leader in sleep equipment in Spain, Portugal and the United Kingdom (luxury segment), and is well- positioned in the USA, Chile, Brazil and Cuba. Pepe Jeans designs and sells of clothes and other At the beginning of 2015, Deyá Capital SCR and fashion items, with Pepe Jeans London and Hackett other shareholders reached an agreement to sell being the Group’s flagship brands. Pepe Jeans is their stakes in Pepe Jeans. The sale is expected to be www.flex.es also the exclusive agent for Tommy Hilfiger and completed during the first half of the year, subject Calvin Klein on the Iberian Peninsula. to approval by the relevant authorities.

On 31 December, 2014, Alba’s stake in the company, through Deyá Capital, was 12%. OCIBAR

www.pepejeans.com OCIBAR develops and operates marinas under In late 2014, Alba had a 21.7% stake in OCIBAR concession agreements. It currently has various through Deyá Capital. active concessions in the Balearic Islands, the largest being Port Adriano (Calvià, Mallorca) and Ibiza Magna. www.ocibar.com

ROS ROCA ENVIRONMENT

Ros Roca Environment specialises in the manufacture On 31 December, 2014, Alba had a 17.4% stake in and sale of special vehicles for waste collection and Ros Roca Environment through Deyá Capital. ENCAMPUS street cleaning. It is currently one of the world’s leading companies in this sector, exporting to over EnCampus buys, develops and manages university On 31 December 2014, Alba’s stake in EnCampus, 70 countries. Ros Roca is headquartered in Tarrega residences, with the objective of creating the largest through Deyá Capital, was 32.7%. (Lleida) and has major subsidiaries and other portfolio of university student residences in Spain. production centres in the UK, France, Germany, Brazil, Mexico, Chile and Malaysia. www.rosrocaenvironment.com

72 2014 ANNUAL REPORT HOLDINGS OF CORPORACIÓN FINANCIERA ALBA 73 Published by: Banca March Communications and Institutional Relations Department Avda. Alexandre Rosselló, 8 07002 Palma de Mallorca Tel. +34 971 779 127 E-mail: [email protected]

Design and layout: Illa de Publicitat i Màrqueting, s.l. www.illapublicitat.com

Photography: Image bank

Printing: Ingrama, s.l.

D.L.: PM-876-1988 Av. Alexandre Rosselló, 8 07002 Palma de Mallorca Tel. 900 111 000 (+34) 971 779 111 www.bancamarch.es