2019 Report of the Board of Directors Crédit Immobilier de France Développement – CIFD Parent Company and Consolidated Financial Statements Crédit Immobilier de France Développement French Corporation (société anonyme) Capital stock: €124,821,703 Registered Office: 26-28 Rue de Madrid, 75008 Paris, France Corporate and Commercial Registry n° B 379 502 644 RCS Paris Contents Message from the Chairman Risk Management and and from the Chief Executive 3 51 Monitoring Officer 51 Credit Risk Management and Monitoring Organization 1. Presentation of the CIF 52 Risk Management 5 Group 5 The Group in Orderly Resolution 56 Permanent Control 6 The State Guarantee 57 Periodic Control 9 Simplified Group Organization Chart 10 The Group’s Financial Organization 6. Social Information 59 (Consolidated) 2. Significant Events of the Year 14 59 Employment 14 Significant Events in 2019 61 Remuneration and Fringe Benefits 19 Events Occurring After the Balance 64 Labor Management Relations Sheet Date 70 Training and Skill Enhancement 7. The Group’s Strategic 3. Business Review 22 71 Orientations 71 Organization and Operational Key Figures and Performance Indicators 22 Efficiency 72 Human Resources Policy 22 Operations in 2019 (Consolidated) 33 Operations in 2019 (Parent Company) 72 Optimized Management 36 Going Concern 73 Risk Management 37 4. Corporate Governance 74 Appendixes 37 Corporate Governance Bodies 41 Governance of Affiliated Companies of the CIFD Network 41 Specialized Committees Reporting to the Board of Directors 46 Shareholding Structure 49 Investments in Affiliated Companies 49 Other Information 2019 Report of the Board of Directors – Crédit Immobilier de France Développement–CIFD | 2 Message from the Chairman and from the Chief Executive Officer Chairman Chief Executive Officer Yannick Borde Jérôme Lacaille Business in 2019 was once again characterized by an intense pace of work on projects undertaken to enhance the robustness of CIF’s assets and optimize their management. In the interest of all stakeholders—notably our customers, our shareholders the SACICAPs, the Republic of France, and our employees—CIF once again demonstrated its ability to master the complex process of resolution. It has managed to do so by continually seeking the highest degree of excellence in its core competency: the management, collection, and value enhancement of the home loans in its portfolio. CIF achieved considerable success in all areas in 2019: • Finance—After having been Europe’s first institution to complete a securitization that satisfies the STS (Simple, Transparent, Standard) criteria, CIF made its first public securitization of receivables since it undertook its orderly resolution in 2013. • Human resources—Within the framework of the 5th job-saving plan (PSE), the rate of employee outplacement remained high (> 90% over an 18-month period), and CIF topped the league table in the employers category in Décideurs magazine’s sixth “Victoires des Leaders du Capital Humain” HR awards. • Financial statements—Results clearly exceeded forecasts, mainly thanks to operational performance in loan collection and its impact credit risk management. • Operations—CIF was an industry leader thanks to its focus on employee competencies, upgrading tools largely incorporating machine learning, and company-wide encouragement of innovation and optimal workplace relations. Investments in computerizing a number of processes via the online Customer Service Space (ECS) enabled CIF to simplify most customer transactions, while making them more robust and accelerating their execution. Excellence in real estate valuations and their integration within the collection process stood out as a unique factor of efficiency in the industry. 2019 Report of the Board of Directors – Crédit Immobilier de France Développement–CIFD | 3 • Legal affairs—CIF’s persistent efforts over the years to assert its rights as an aggrieved party in the Apollonia fraud have led to major advances, with the closure of the preparatory inquiry criminal investigation after nearly ten years of inquiry. CIF’s efforts in 2019 will stand out in the history of extinctive management for reasons of the wealth of expertise and strong commitment it built up. 2019 Report of the Board of Directors – Crédit Immobilier de France Développement–CIFD | 4 1. PRESENTATION OF THE CREDIT IMMOBILIER DE FRANCE GROUP 1.1. Summary: The Group in Orderly Resolution In its decision dated 27 November 2013 the European Commission approved the Crédit Immobilier de France Group’s orderly resolution plan (”the Plan”) and authorized the Republic of France to grant the Group a permanent State guarantee, for which it charges remuneration. That same day, the Republic of France and the Group signed the protocol and the guarantee agreement. Since that date, Crédit Immobilier de France has been operating as a banking network in orderly resolution. In order to prevent any distortion of competition, the Plan prohibits the Group from originating loans. Its sole activity now consists in managing its residual assets and liabilities for extinction no later than 2035. Under the terms of the European Commission’s decision, the shareholders shall assume the costs of the orderly resolution and the Group will preserve its earnings. Crédit Immobilier de France Développement (CIFD) has agreed to maintain a common equity Tier 1 ratio (as construed under Regulation (EU) No. 575/2013 of the European Parliament and of the Council of 26 June 2013) on a consolidated basis (as calculated at 31 December of the last completed fiscal year) of 12% or more. The payment of commissions may be deferred if such payment would cause the common equity Tier 1 ratio to fall below 12%. CIFD’s special shareholders’ meeting on 6 November 2013 approved the creation of a preferred share reserved for the Republic of France. That share, issued on 28 November 2013, allows the State, as preferred shareholder, to receive a preferred dividend taken from CIFD’s funds available for distribution if it receives no payment of commissions in remuneration for the State guarantee. Under the terms of the protocol establishing the permanent State guarantee, responsibility for implementing and monitoring the Plan falls, on the one hand, to a Monitoring Committee whose members are representatives of France’s Treasury Department, corporate officers of CIFD, and a government commissioner, and on the other hand, to an independent expert designated by CIFD in accordance with conditions set by the Republic of France and the European Commission. On 27 January 2014 the European Commission approved the appointment of the firm of Duff & Phelps as independent expert. Furthermore, the Plan requires that the Crédit Immobilier de France Group simplify its organization and centralize its corporate governance. CIFD is the central entity (“organe central”) and financial holding company of the Crédit Immobilier de France network as construed under Sections L.511-30 and L.517-1 of France’s Monetary and Financial Code (CMF). Following the share swaps and the buyouts of minority interests in 2014, CIFD owned virtually all the shares of the Group’s financial subsidiaries. In 2015, 2016, and the first half of 2017, all the financial operating subsidiaries, as well as the two entities that provided support functions for the Group, were merged with the parent company, CIFD, 2019 Report of the Board of Directors – Crédit Immobilier de France Développement–CIFD | 5 which is authorized to operate as a financial company. Since 2015 CIFD has been responsible for the management and collection of loans granted by its subsidiaries. At 31 December 2019 the Group’s credit institutions that are part of the banking network operating under the supervision of CIFD are Caisse Centrale du Crédit Immobilier de France (3CIF) and CIF Euromortgage. 1.2. The State Guarantee of the Republic of France The State guarantee of the Republic of France was granted under Section 108 of France’s Appropriation Law for 2013 (Law #2012-1509 of 29 December 2012). 1.2.1. Conditions of the Guarantee This guarantee comprises two parts. One part (the “securities guarantee” or “external guarantee”) is intended to cover the Group’s liquidity needs while the Plan is executed, and the other (the “deposit guarantee” or “internal guarantee”) is intended to secure the cash deposits that CIF Euromortgage makes with 3CIF, thereby allowing the Group to optimize its cash management and limit its need to raise additional liquidity from external sources. These two components—the securities guarantee and the deposit guarantee—are explicit guarantees as construed by financial analysts. 1.2.1.1. Securities Guarantee (External Guarantee) The State guarantee is an independent unconditional irrevocable guarantee as construed under Section 2321 of France’s Civil Code. It covers all securities benefiting from the State guarantee issued by 3CIF on or after 28 February 2013 (date of the initial protocol between the Republic of France and the Crédit Immobilier de France Group) and maturing no later than 31 December 2035, in an amount of up to €16 billion outstanding. The term “financial securities”, in this case, refers to all unsecured debt instruments issued by 3CIF, benefiting from the external guarantee since the signature date of the initial protocol, and maturing in 3 months to 5 years. The guarantee may be invoked individually by any of the beneficiaries, by the representative of the class of beneficiaries, or by the Bank of France. Requests for enforcement of the guarantee