BNP Paribas Fortis Annual Report 2015: Financial Overview and Principal Risks, Lecture notes of Decision Making

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BNP PARIBAS FORTIS SA/NV

ANNUAL REPORT 2015

The bank

for a changing

world

Content

BNP Paribas Fortis Financial statements 2015 (Non‑consolidated)

• 4 BNP PariBas Fortis aNNual rePort
  • Introduction
• BNP Paribas Fortis Consolidated annual report - Report of the Board of Directors - ƒ A word from the Chairman and the CEO - ƒ Good business performance in a challenging economic and financial environment - ƒ Core Businesses - ƒ Corporate Social Responsibility - ƒ Liquidity and solvency - ƒ Principal risks and uncertainties - Statement of the Board of Directors - Corporate Governance Statement
• BNP Paribas Fortis Consolidated Financial statements - ƒ Profit and loss account for the year ended 31 December - directly in equity ƒ Statement of net income and changes in assets and liabilities recognised - ƒ Balance sheet at 31 December - ƒ Cash flow statement for the year ended 31 December - ƒ Statement of changes in shareholders’ equity between 1 January 2014 and - December - ƒ Minority interests between 1 January 2014 and 31 December
• Notes to the Consolidated Financial statements
• 1 Summary of significant accounting policies applied by BNP Paribas Fortis - 1.a Applicable accounting standards - 1.b Segment reporting - 1.c Consolidation - 1.d Financial assets and financial liabilities - 1.e Property, plant, equipment and intangible assets - 1.f Leases - 1.g Non-current assets held for sale and discontinued operations - 1.h Employee benefits - 1.i Share-based payments - 1.j Provisions recorded under liabilities - 1.k Current and deferred taxes - 1.l Cash flow statement - 1.m Use of estimates in the preparation of the financial statements - BNP PariBas Fortis aNNual rePort
• 2 Retrospective impact of the IFRIC 21 interpretation
• 3 Notes to the profit and loss account for the year ended 31 December
  • 3.a Net interest income
  • 3.b Commission income and expense
  • 3.c Net gain/loss on financial instruments at fair value through profit or loss
    • not measured at fair value 3.d Net gain/loss on available-for-sale financial assets and other financial assets
  • 3.e Net income from other activities
  • 3.f Cost of risk
  • 3.g Corporate income tax
• 4 Segment information
  • 4.a Operating segments
  • 4.b Information by operating segment
  • 4.c Country-by-country reporting
• 5 Notes to the balance sheet at 31 December
  • 5.a Financial assets, financial liabilities and derivatives at fair value through profit or loss
  • 5.b Derivatives used for hedging purposes
  • 5.c Available-for-sale financial assets
  • 5.d Measurement of the fair value of financial instruments
    • through profit or loss held for trading purposes or as available-for-sale assets 5.e Reclassification of financial instruments initially recognised at fair value
  • 5.f Interbank and money-market items
  • 5.g Customer items
  • 5.h Past-due and doubtful loans
  • 5.i Debt securities and subordinated debt
  • 5.j Held-to-maturity financial assets
  • 5.k Current and deferred taxes
  • 5.l Accrued income/expense and other assets/liabilities
  • 5.m Equity – method investments
    • investment property 5.n Property, plant, equipment and intangible assets used in operations,
  • 5.o Goodwill
  • 5.p Provisions for contingencies and charges
  • 5.q Offsetting of financial assets and liabilities
  • 5.r Transfers of financial assets
• 6 Financing commitments and guarantee commitments
  • 6.a Financing commitments given or received
  • 6.b Guarantee commitments given by signature
  • 6.c Other guarantee commitments
  • 6 BNP PariBas Fortis aNNual rePort
• 7 Salaries and employee benefits - 7.a Salary and employee benefit expenses - 7.b Post-employment benefits - 7.c Other long-term benefits - 7.d Termination benefits
• 8 Additional information - 8.a Contingent liabilities: legal proceeding and arbitration - 8.b Business combinations and other changes of the consolidation scope - 8.c Minority interests - 8.d Significant restrictions in subsidiaries, associates and joint ventures - 8.e Structured entities - 8.f Compensation and benefits awarded to bnp paribas fortis’ corporate officers - 8.g Other related parties - 8.h Financial instruments by maturity - 8.i Fair value of financial instruments carried at amortised cost - 8.j Scope of consolidation - 8.k Fees paid to the statutory auditors - 8.l Events after the reporting period
• risk management and capital adequacy
• 1 Risk management organisation
• 2 Risk measurement and categories
• 3 Capital adequacy
• 4 Credit and counterparty risk
• 5 Market risk
• 6 Sovereign risks
• 7 Operational risk
• 8 Compliance and reputational risk
• 9 Liquidity and refinancing risk - BNP PariBas Fortis aNNual rePort
• report of the accredited statutory auditors
• BNP Paribas Fortis annual report 2015 (Non‑consolidated)
  • Report of the Board of Directors
  • Proposed appropriation of the result for the accounting period
  • Information related to Article 523 of the Belgian companies code
  • Information regarding related party transactions
  • Summary of the accounting policies for the Non-consolidated Financial Statements
• report of the accredited statutory auditors
• other information
• 8 BNP PariBas Fortis aNNual rePort

10 BNP PariBas Fortis CoNsolidated^ aNNual^ rePort 2015

Report of the Board of Directors

a word from the Chairman and the Ceo

The power and speed of change are having a profound effect on our economy, on companies and professions. On top of this, the financial world is having to cope with historically low interest rates and an economy that has not rebounded as well as expected. In spite of these challenging circumstances, BNP Paribas Fortis posted good figures in 2015 thanks to the Bank’s range of products and services. Lending and deposit volumes remained at a high level during the year and our cost of risk remained low. Net profit totalled EUR 1,575 million. Our liquidity and solvency ratios are robust and we continue to have sufficient capital available to invest.

The world is changing as seldom before, with new trends appearing rapidly, one after the other. Innovations are appearing in all walks of life. It now appears that everything can be done smarter, simpler and better. Digitisation is one of the drivers of this wave of innovation. This is a strategic priority for BNP Paribas Fortis, offering widespread opportunities – both to enhance our product and service range for our customers and improve efficiencies inside the Bank – and we are making considerable investments in this area. In 2015 we focused hard on enhancing the customer experience by introducing digital solutions and on improving internal efficiency through end-to-end processing. This process is a two-way street: with these innovations we are able to respond much faster to the express wishes of our customers and also capitalise on opportunities afforded by the digital system to meet needs which the client does not immediately recognise. One illustration of this is ‘Home on the Spot’, our innovative app for housing loans which clients can use throughout their search for a suitable new home.

It is our firm intention to serve as a catalyst for innovation and to help bring our customers’ ideas to fruition. We have various ways of doing this. Staff at our Innovation Hubs all over Belgium are available to provide advice and assistance tailored to the needs of startups and tech-sector companies. Some 140 coaches are there to help young entrepreneurs set up their business. Meanwhile, Co.Station BXL, the growth accelerator for startups and scaleups that we have set up in conjunction with social com- munication expert SocialCom, welcomed Mobistar and USG People on board as new partners in 2015.

We also take an innovative approach in our ongoing commitment to promote sustainable business. We brought to market a number of socially responsible investment vehicles, including our new Climate Care product range and the Smart Fund Plan Private, and we also launched the Portfolio SRI Fund of Funds in conjunction with the King Baudouin Foundation.

We would like to thank our customers for the trust they continue to place in us and our staff for the efforts they have made during 2015 to help build a bank that is fully in line with the spirit of the times. Together we will be making further determined efforts in the coming years to ensure that we continue to provide our clients with the best possible service.

Max Jadot Chief Executive Officer

Herman Daems Chairman of the Board of Directors

BNP PariBas Fortis CoNsolidated aNNual rePort 2015 11

Good business performance in a challenging economic and financial

environment

The economic context in 2015

With the financial crisis and ensuing economic downturn still looming large in the rear-view mirror, 2015 also proved to be an eventful year. The year began with the European Central Bank’s decision to increase the size of its balance sheet by EUR 1,150 billion but soon the Greek debt crisis was back on the agenda, dominating the headlines for much of the 2nd^ quarter. Falling fuel prices and commotion on the Chinese stock market made for a turbulent summer. Both these events served as an opener for what later turned out to be a crisis in Emerging Markets. The divide between the recovering United States and the stagnating European Union came into sharp relief late in the year when their monetary authorities adopted opposite policies. The US Federal Reserve raised short-term interest rates for the first time in nearly a decade, signalling an end to the near-zero borrowing costs that had prevailed since the US was struck by the worst financial crisis in decades.

Following a first step in the right direction in 2014, GDP growth in the euro zone ended up at 1.5% for 2015. Germany posted persistent, albeit somewhat lower, growth rates, while The Netherlands, Ireland and especially Spain picked up the slack. Belgian GDP growth came in at 1.4% for 2015, slightly above the 2014 level. A strong uplift in private consump- tion, combined with some significant investments in the first quarter, have offset the reductions in public spending.

So far unaffected by the slowdown in Emerging Markets, Belgian international trade continued to grow during the year. With exports and imports moving in lock-step since 2014, the country posted a small current account surplus (+/- 2% of GDP). However, apart from these encouraging signs, Belgian business confidence is yet to reach pre-crisis levels.

Average euro zone debt, which stood at 92% of GDP at the end of 2014, barely budged during 2015. Migration and security issues prompted some countries to start rethinking their fiscal discipline, and budget deficits of 2% of GDP and higher are still

prevalent. Belgium’s public debt – which stands at 107.7% of GDP and is not expected to drop below 100% of GDP before 2020 – remains one of the key risk factors for the Belgian economy. The government has taken advantage of the low interest rate environment to cut back significantly on yearly interest charges on the outstanding debt, but a lot more still needs to be done. The short-term goal of keeping the primary deficit below the 3% limit set by the European Union will likely be met, but the tax shift will generate additional financing needs over the 2016-2020 period. With the effective tax rate already among the highest in the world, keeping the deficit under control will be no easy task and more spending cuts may well be required.

Last year, the unemployment rate in the euro zone continued on its downward trajectory, totalling 11% for the year, with unemployment in Belgium just above 8%. As a consequence of the tax shift, a further 60,000 jobs are expected to be created before 2021. Euro zone inflation, on the other hand, worked out at 0.1% for the year as a whole, significantly lower than the ECB target of 2%. Although core inflation actually rose slightly to 0.9%, the declining fuel prices exerted strong deflation- ary pressure in the member states. In Belgium, an earlier energy tax reduction was reversed. This move provided some counterbalance to the sinking fuel prices, leaving inflation at 0.6%, with core inflation stable at 1.5%. Further quantitative easing, as announced by the ECB at the end of 2015, should help to boost inflation. Additionally, the rate hike by the US Federal Reserve will further weaken the euro versus the dollar, entailing higher prices for imported goods.

Annual loan growth in the euro area is slowly stabilising after several consecutive years of decline. Belgian credit markets have been through a similar, albeit less pronounced, cycle. With credit standards easing since 2013, loan demand started to take off in 2015. Mortgage loans showed especially positive signs in Belgium, growing at an average rate of 5%.

BNP PariBas Fortis CoNsolidated aNNual rePort 2015 13

Home on the Spot is a new app designed for people looking to buy a home. It provides a highly convenient step-by-step plan of the purchase process from calculating your budget all the way through to moving in. Prospective home buyers can also quickly work out how much they can afford to borrow, on the basis of a fixed, highly advantageous Home on the Spot interest rate.

In January 2015, the Bank launched two new Daily Banking packages for iBank customers: Comfort Pack and Premium Pack. This range of packages is designed to better meet customer needs and can moreover be handled online. A further novelty was the Prepaid Card, a secure means of payment, both online and in-store, in Belgium and abroad. Offering the same scope and ease of use as a traditional credit card, the Prepaid Card is specially designed for customers seeking an easy means of keeping their outgoings under control. The Prepaid Card is also equipped with contactless payments technology. Small amounts can be transferred very simply, without a PIN code, by holding the card against a payment terminal equipped for the purpose.

Hello bank! became the first bank in Belgium to enable clients to submit a 100% digital request for a mortgage loan by smartphone, tablet or laptop, through the brand new Hello home! platform. In addition to making the loan application, the customer can also work out how much s/he would be able to borrow on the basis of his/her monthly income and the cost of the desired home. 2015 also saw the launch of the ‘Blue Room’, a digital conversation platform for the mobile bank’s member-community. Users will not only obtain answers to their questions, but can also provide their own feedback on given topics and exchange thoughts and ideas with each other. This is a ‘first’ in Belgium.

In order to respond to the rising trend towards tapping new sources of finance, the Bank began to provide support to two crowdfunding platforms – MyMicroInvest and Hello crowd!. MyMicroInvest is a Belgian crowdfunding and microfinance platform which is ranked among the top five in Europe. Hello crowd! is a brand new crowdfunding site set up in conjunction with leading platform provider Ulule, which enables clients to submit projects for financing and/or provide financial support to other people’s projects.

The continuing low interest rates compelled the Bank to reduce the rates on savings accounts still further during

2015. In June RPB launched a new regulated savings account, the Star Savings Account, whose base rate, at 0.1% (on 31 December 2015), remains in line with the current returns on regulated savings, but whose special feature is a high loyalty bonus, set at 1.3%.

Another consequence of the low interest rates was a sharp increase in mortgage lending and also in refinancing of exist- ing mortgages. Consumer credit also saw further growth, underpinned by good results in car finance largely due to Belgium’s popular Automobile Salon. In fact BNP Paribas Fortis won a Digital Marketing Award for its car loan campaign.

The low interest rates also gave rise to considerable customer demand for alternatives to savings accounts. The Flexinvest formula – an automatised programme channelling savings into investments in funds – proved highly popular. The range of investment products was expanded with a new suite of European Strategy Funds and socially responsible investments (SRI) in the form of a World Bank Green Growth Bond issue, plus structured notes linked to Climate Care action. RPB ran a widespread media campaign emphasising just how easy investing can be.

BNP Paribas Fortis Private Banking further expanded its service range during the year. The FRS (Fund Reporting Service) con- tract anticipates regulatory changes. A number of sustainable investment products were brought to market, including the new Climate Care suite of products, the Smart Fund Plan Private, and the launch of an SRI Fund of Funds portfolio in conjunction with the King Baudouin Foundation. This led to an increase in assets under management. The Bank’s digital services are also being expanded. Meanwhile the blog authored by Chief Strategy Officer Philippe Gijsels has a strong following, as does the online video channel Market Tube. Meanwhile the ‘webinar’ information sessions targeted at groups of clients or individual clients are steadily gaining in popularity.

The Bank for Entrepreneurs continued to roll out its inten- sive training programme for ‘Certified Advisor Bank for Entrepreneurs’ during the year in order to ensure that these staff are able to bring a high degree of knowledge and exper- tise to their work as dedicated advisors for our entrepreneur clientele. Meanwhile, the loan application procedure for self- employed people and those from the liberal professionals was considerably shortened and simplified. In addition, the Bank for Entrepreneurs burnished its credentials in 2015 as a banking partner for Social Enterprises, inter alia by setting up an internal community of credit specialists and credit analysts and holding events in Liege and Antwerp on the themes of getting food faster to people ‘Short Chains in Nutrition’ and ‘Build & Care’.

14 BNP PariBas Fortis CoNsolidated^ aNNual^ rePort 2015

In dialogue with a panel of customers, the online banking platform PC Banking Business was expanded and optimised. Meanwhile the new Bizcover initiative provides entrepreneurs with a new online information platform. The highly success- ful Boost your Business campaign ran for a second time in

2015. The campaign, run in conjunction with Belgian soccer club RSC Anderlecht, offered local businesses the chance to win advertising space, top prize being the right to display advertising on team shirts during a league match between Anderlecht and KV Mechelen.

Corporate & Public Bank Belgium

Corporate & Public Bank Belgium (CPBB) provides a compre- hensive range of local and international services to Belgian companies, government institutions and local authorities. With over 600 corporate clients and over 7,000 midcap clients, CPBB is the market leader in these two categories and a strong chal- lenger in public banking, currently with 570 clients. The offer range comprises flow-banking products, specialised financial expertise, securities, insurance products, real estate services, trade finance, cash management, factoring and leasing, plus M&A and capital markets activities. A team comprising more than 35 corporate banking experts and more than 170 rela- tionship managers in 16 Business Centres, aided by skilled officers, ensures that BNP Paribas Fortis has its finger on the pulse of the market.

In 2015, CPBB continued its efforts to remain the ‘top of mind’ provider of financial services to its clients, building further on its long-term relationships and striving to obtain a better grasp of the strategic priorities and long-term objectives of each client. As the financier par excellence of the real economy, CPBB remained well-placed to meet the borrowing needs of these clients in a fully risk-aware manner. In addition to the traditional lending approach, CPBB relationship managers are also able to provide alternative financing solutions, from bond issuance to private placements of debt paper, thanks to the Bank’s profound knowhow in this field.

Moreover CPBB was able to draw throughout the year on the strength of the BNP Paribas Group’s international network. The close links between Corporate & Public Bank Belgium and the 75-plus countries in the network enabled CPBB to bring a number of new clients within the fold.

As corporate customers now have greater expectations for a digital, almost paperless, interaction with their financial service providers, CPBB has accelerated its programme to provide enhanced offerings of digital services. In 2015 CPBB delivered additional, mainly operational, functionalities, inter alia in the fields of e-contracting and lending. In order to ensure an enhanced user experience and raise overall satisfac- tion, CPBB cross-checked development at an early stage with clients, using clickable prototypes and conducting interviews. Moreover, CPBB continued during the year to segment the client base more carefully in order to optimise the relationship banking model and CPBB will continue to approach each client segment through an appropriate mix of multiple channels.

Determined to live up to its status as a full-service banking partner, CPBB has been highly active in promoting tech inno- vation. During 2015 CPBB not only provided more targeted support to clients working in innovation-oriented sectors through the Innovation Hubs CPBB has set up at nine business centres, but also ran an external competition for our exist- ing client base on the theme of coping with change, thereby underlining the importance of an agile approach and a positive entrepreneurial spirit.

The Bank also strove to reinforce its role as a strategic partner to corporate clients in terms of their day-to-day needs, and cement closer relations. While CPBB continued to earn high marks for client satisfaction, it also worked to improve its performance in a number of areas, including making more frequent proactive visits to companies where BNP Paribas Fortis is not the main banking partner. During the year, CPBB clients expressed high appreciation of the professionalism of the Bank’s relationship managers and specialists, the guid- ance and support they provided to those seeking to expand into foreign markets, and the overall range of its products and services.

Corporate & institutional Banking

BNP Paribas Fortis Corporate & Institutional Banking (CIB) provides its clients in Belgium and across Europe with full access to the BNP Paribas CIB product portfolio.

In 2015, CIB was reorganised Group-wide in order to better meet the needs of its Corporate and Institutional clients. In this new context, BNP Paribas Fortis CIB, which is part of CIB EMEA (Europe Middle East and Africa), currently consists of five Business Lines, plus IT and Operational support and a Competence Centre. The five Business Lines are:

16 BNP PariBas Fortis CoNsolidated^ aNNual^ rePort 2015

„ Our Corporate Finance teams remained highly active throughout the – normally slack – summer period, with inter alia the closing of several mid-market transactions and the takeover by the French Groupe One Point of Alternext-listed Vision IT. The Bank acted as advisor to Groupe One Point on an acquisition which was followed by a public takeover bid and a squeeze-out. The transaction was completed in August.

„ In September, Saverco, the controlling shareholder of listed shipping group CMB, announced its intention to take CMB private. The transaction was successfully completed in December, with the Bank advising Saverco.

„ In November, leading Belgian pharmaceuticals group UCB completed the sale of its US specialty generics subsidiary Kremers Urban Pharmaceuticals Inc. to US-based Lannett Company for USD 1.23 billion. The Bank acted as financial advisor to UCB.

„ The year closed with two additional milestone equity capital markets transactions, both linked to Solvay’s merger agreement concluded in July with US-based Cytec. Both Solvay and Solvac made capital increases of respec- tively EUR 1.5 billion and EUR 452 million. In the Solvay rights issue the Bank acted as Joint Global Coordinator and Joint Bookrunner. For the Solvac operation, the Bank took the role of Sole Global Coordinator and Joint Bookrunner.

Global Markets

„ The Bank acted as Sole Bookrunner on two inaugural inflation-linked issues for the Kingdom of Belgium: a EUR 0.15% 150 million June 2035-issue and a EUR 0.25% 150 million June 2040-issue. The inflation reference for these transactions is the Euro HCPI ex-tobacco. The Kingdom of Belgium made inflation-linked issuance possible as part of its 2015 funding plan and these transactions are the first and only such issuance in 2015.

„ The Bank acted as Joint Bookrunner on Solvay’s EUR 500 million 5.118% NC5.5y and EUR 500 million 5.869% NC8.5y Undated Deeply Subordinated Securities. In addition the Bank was also a Joint Bookrunner for Solvay’s USD 800 million 3.4% December 2020 and USD 800 million 4.45% 2025 bond issues. All these transactions were part of the refinancing of Solvay’s acquisition of US-based Cytec for a consideration of USD 5.8 billion which was announced in July 2015 and for which the Bank participated in the

bridge financing. Notably, the BNP Paribas Group has been an active Bookrunner on all Solvay hybrid issues launched to date.

„ The Bank acted as sole Green Bond Structuring Advisor and Joint Lead Manager for the public offer in Belgium and Luxembourg of a 7-year Green Bond issued by Shanks Group plc. The retail subscription period officially opened on May 28 at 9 am to run until June 11, but was early closed on June 2 at 5.30pm. The Green Bond proceeds of around EUR 100 million will be used to finance sustain- able waste management projects and refinance debt on existing similar projects. This transaction was the first Green Corporate Bond ever to be issued in the Belux retail networks.

Financing solutions

Export Finance

„ Export Finance acted as Sole Arranger and Facility Agent for a EUR 37 million Delcredere|Ducroire ‘D|D’ covered investment credit facility to PT Eternit Gresik, Indonesia, a JV between the Etex Group (82.5 %) and PT Semen Indonesia (17.5 %). The facility is intended to finance the purchase of equipment from various Belgian and non- Belgian suppliers in relation to a new construction board production facility to be erected in PT Eternit Gresik plant located in West Java, Indonesia. D|D agreed for the first time ever to provide comprehensive cover on an invest- ment credit facility.

Leveraged Finance

„ The Bank acted as Joint Bookrunner for Cinven’s buyout of German laboratory diagnostic service business Synlab. The acquisition followed shortly after the buyout of French competitor Labco. The Synlab acquisition is being financed via a tap issue on the existing Labco bonds. Our final hold in the combined Synlab/Labco revolving credit facility amounts to EUR 15 million.

Project Finance

„ The Bank acted as Financial Adviser, Mandated Lead Arranger, Agent, Account Bank and Hedging Bank in rela- tion to a EUR 458.6 million limited recourse senior debt package to finance the Nobelwind 165 MW offshore wind project sponsored by Parkwind (part of Colruyt Group), Sumitomo Corporation and Meewind.

BNP PariBas Fortis CoNsolidated aNNual rePort 2015 17

Corporate Debt Platform

„ As part of AB InBev’s acquisition of SABMiller, one of the largest M&A deals ever, BNP Paribas Fortis acted as sole bank committing to deliver cash confirmation for the Belgian offer, and as Agent & Bookrunner for the record- breaking USD 75 billion syndicated financing backing the cash component of the acquisition. BNP Paribas Fortis and BNP Paribas had an aggregate total final take of USD 4 billion in the syndicated facility. BNP Paribas also acted as a Financial Advisor on the announced transaction.

BGL BNP Paribas SA

BGL BNP Paribas is based in Luxembourg, one of the BNP Paribas Group’s four domestic markets. In the Grand Duchy, BGL BNP Paribas ranks as: „ N° 1 in Corporate Banking „ N° 2 in Retail Banking „ N° 1 Financial sector employer „ N° 1 Banking business within the EU economic area known as the ‘Grande Région’

retail Banking & services

BGL BNP Paribas Retail and Corporate Banking in Luxembourg provides a broad range of financial products and services to individual, professional and corporate clients through its network of 41 branches and the specialised departments dedi- cated to serving corporates. The Direct Banking department includes remote banking activities and offers daily banking solutions to resident clients, as well as investment solutions to wealthy international and resident clients.

BGL BNP Paribas is the number 2 bank in Luxembourg for individual customers (16% market share) and the number 1 bank for corporates (29% market share).

In 2015, the Retail Bank pursued its transformation of the branch network and expansion of its fleet of ATMs. Branch opening hours were also extended to offer clients a local service. The Bank adapted its range of solutions for profes- sional clients by creating eight Professional Business Centres.

Digitisation of the Bank’s activities continued during the year, with the launch of a Web Banking app for iPhone and simplification of the login procedure. The Bank also launched the Digicash app and teamed up with Auchan Luxembourg and Digicash Payments to offer a new in-store payment experience. Last but not least, clients now have the possibility of taking out a personal loan online and tracking its progress securely via their Web Banking space.

The Business Banking department has applied the One Bank for Corporates model to the Real Estate Financing department, creating cross-border links with other Group entities in order to better support clients operating in the real-estate sector in Luxembourg. Several cross-selling initiatives have also led to the conclusion of large deals, including the financing by BGL BNP Paribas and BNP Paribas Fortis of a project to redevelop the capital’s city centre, and the financing of a significant proportion of the country’s wind farms.

Meanwhile the Private Bank in Luxembourg has set up a com- mercial development unit tasked with winning new clients. In terms of its range of services, the Private Bank in Luxembourg offers a personalised mandated management service (Crystal), plus also a first SRI product - BGL BNP Paribas Autocallable SRI Note 2020 - certified by Forum Ethibel.

The BNP Paribas Wealth Management business in Luxembourg offers bespoke wealth and financial management solutions, plus a range of high-end services aimed at international private banking clients.

During 2015, the Wealth Management business continued the transformation of its business model focused on VHNWIs and UHNWIs by adjusting its commercial segmentation and enhancing its advisory management and discretionary man- agement services. In order to better respond to the needs of clients with more than €10 million in assets, a family office service – Family Wealth Solutions – was launched. This offers BNP Paribas Wealth Management clients and external clients a personalised overview of the management of their wealth (consolidation of financial and non-financial assets held with several depositories, analysis of asset allocation, intermedia- tion and archiving).

BNP PariBas Fortis CoNsolidated aNNual rePort 2015 19

Corporate social responsibility

Economy

With EUR 93.3 billion in outstanding loans to enterprises and individuals in Belgium at end-2015, BNP Paribas Fortis contin- ues to provide strong support to the real economy. Outstanding lending to ‘Green and Social Profit’ sector investment projects amounted to EUR 6.2 billion. This included, among other pro- jects, EUR 2.4 billion in investment in the social profit sector (hospitals, schools, universities, etc.), EUR 2.1 billion in ‘green’ mortgages, and EUR 1.6 billion (EUR 386 million provided by CPBB and EUR 1,166 million by CIB) to support projects in the renewable energy field.

The ‘Schools for Tomorrow’ public-private partnership for the construction or renovation of 165 schools in Flanders is now well underway with 23 schools already in use and 124 under construction.

The Bank’s Socially Responsible Investment (SRI) portfolio grew to EUR 4.71 billion, representing a 65% increase versus

2014. Two SICAVs promoted through the Retail banking network include an extra social dimension, since part of the entry and management fees are paid to not-for-profit partner organisations. These funds enjoyed strong inflows. In addition, EUR 200,000 in management fees connected to the newly launched BNP Paribas Portfolio Fund of Fund SRI solidarity share classes were donated to the Venture Philanthropy Fund run by the King Baudouin Foundation. We also continued to launch SRI notes, 2015 seeing the first launch of an innovative SRI Social Business Note, whereby the money invested is lent to social businesses.

These initiatives are also a clear illustration of our commit- ment to social entrepreneurship. We have appointed experts throughout our Retail banking network with a view to providing better support to social entrepreneurs, and a series of targeted events designed to bring the actors in this field together were organised in conjunction with our external partners during the year.

All business conducted by BNP Paribas Fortis is subject to the Group’s policies regarding sensitive sectors. In 2015, we introduced a new policy on Agriculture, and existing policies relating to the mining industry and coal-fired power generation became more restrictive. In 2015, 25 proposed transactions were submitted to an in-depth investigation in order to verify compliance with the sector policies, as a result of which the Bank rejected 9 transactions. Some 142 employees who are exposed to sensitive sectors followed training courses designed to increase their understanding of our sector policies.

We also continuously train our staff on Compliance issues. In 2015, 600 hours of face-to-face training sessions were given on subjects such as Financial Security, Protection of Clients’ Interests, Professional Ethics, Market Abuse, Privacy and Data Protection. In addition, the bank creates e-learning modules on specific topics, which are specifically targeted at certain departments or offered to all staff, depending on the topic. The Bank also worked strongly on Customer Satisfaction across all entities, including headquarters, to reduce operational deficiencies and provide transparent and clear information to our clients.

To help our clients to bring their ideas to fruition, BNP Paribas Fortis aims to be a catalyst for innovation. Our innovation- related initiatives include:

„ Co.Station BXL, a Brussels-based accelerator for startups and ‘scaleups’ – i.e. startups that have already developed a working prototype. In a space of some 3,000 m², Co.Station BXL combines three activities: a co-working space called Co.Station village; the Co.Station Virtuology training centre; and the Co.Station Accelerator, an intensive programme designed for scaleups that are moving towards interna- tional expansion. In addition to the two initial partners BNP Paribas Fortis and Socialcom, Mobistar and USG People also came on board as new partners in November 2015, enabling Co.Station to expand the range of expertise that young companies need.

„ The Bank provides tailored services to startups and growing companies through a team of 140 startup coaches spread across the entire branch network who specialise in issues facing fledgling firms.

20 BNP PariBas Fortis CoNsolidated^ aNNual^ rePort 2015

„ To meet the needs of innovation-oriented companies which have already gone a little further in their devel- opment, BNP Paribas Fortis has also set up Innovation Hubs throughout the country, where young innovative enterprises can find appropriate services.

„ The Bank has gone into partnership with leading crowd- funding platform MyMicroInvest to assist business founders and entrepreneurs in their search for funds, thus providing one possible way to strengthen startups’ capital base and complementing the Bank’s traditional business of taking in deposits and distributing these funds in the form of loans.

„ In October 2015 the 100%-mobile Hello bank! also launched

• in conjunction with Ulule, the largest crowdfunding site in Europe – a crowdfunding platform called Hello crowd! Crowdfunding of creative projects via Hello crowd! goes beyond financing and is fully integrated into the product range of BNP Paribas Fortis’s commercial network.

Staff

As in previous years, BNP Paribas Fortis continued to raise awareness of social issues among staff by linking part of employees’ variable salary component to the attainment of a number of CSR targets. We also created the Social Challenge within our Leading Talent Development Trail, where our leaders of tomorrow have the opportunity to work on a busi- ness case for a social entrepreneur. As part of this initiative, 73 managers provided support and assistance to 12 entre- preneurs during 2015.

In recognition of our efforts to promote diversity, the Brussels Region renewed the Bank’s Diversity label for the 2015- period. 2015 also saw the second annual Diversity Week. In addition to a series of events organised for our staff, the Diversity Week also featured a portrait exhibition showing the evolution of diversity among the Bank’s employees throughout its history. Our network of 35 Diversity co-ordinators embed- ded throughout all the Bank’s businesses supports numerous internal and external initiatives.

Society

With five agencies now fully operational, microStart once again posted strong growth in 2015. MicroStart interviewed 3, project originators and granted 869 micro-loans for a total of EUR 6.43 million, representing a 77% increase on the EUR 3.62 million lent in 2014. This brings the total loans allocated since microStart first began its activities in 2011 to EUR 13. million. During the year, some 500 small business founders received support and assistance from a team of volunteers, 50 of whom were from BNP Paribas Fortis.

Since 2010, BNP Paribas Fortis Foundation has supported some 1,080 initiatives by Belgian not-for-profit organisations, grant- ing a total of EUR 5.82 million. In 2015, the Foundation made grants of EUR 1.16 million to assist around 250 organisations in Belgium. Moreover, this basic financial support is ampli- fied by the personal commitment and energy shown by Bank staff. In 2015 some 700 of our staff participated in Foundation activities, for example as community project initiators or by taking part in solidarity team building exercises. In 2015, the Foundation also teamed up with Ulule to assist charities looking to raise funds. Bank employees supported this initia- tive by providing coaching on a voluntary basis. Of the ten organisations that decided to run a crowdfunding campaign, five managed to hit their targeted fundraising amount, while a sixth secured a non-financial donation.

Our ‘Money Matters Made Simple’ financial education pro- gramme, consisting of workshops facilitated by Bank staff on a voluntary basis, was extended in 2015, with dedicated sessions for staff members and online sessions. This proved very successful, with 13,500 participants at the 770 sessions (compared with 6,500 participants at 350 sessions in 2014).

BNP Paribas Fortis also strongly values its partnerships with Belgian universities, sponsoring five academic chairs and one research programme. Following the successful Ports Co-Innovation event in 2015, we renewed our Ports and Logistics Chair at the University of Antwerp.