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ANNUAL REPORT 2015

MANAGEMENT DISCUSSION & ANALYSIS

1.0. INTRODUCTION

Founded in 1830, Bank Audi was incorporated in its present form in 1962 as a private joint stock company with limited liability (“société anonyme libanaise”) with a term of 99 years. Bank Audi is licensed by the Central Bank of Lebanon (BDL) and registered on the Lebanese List of Banks under number 56 and on the Beirut Commercial Registry under number 11347. The Central Bank of Lebanon is the lead supervisor of Bank Audi and its subsidiaries. Bank Audi’s head office and registered address is Bank Audi Plaza, Omar Daouk Street, Bab Idriss, P.O. Box: 11-2560, Beirut, Lebanon.

The initial shareholders of Bank Audi were members of the Audi family, together with certain Kuwaiti investors. Since 1983, the shareholder base has expanded with an aim to build a divesified shareholders base in support of the growth story of the Group. At end-December 2015, 399,749,204 of total common shares, ordinary shares and Global Depositary Receipts (GDRs) were held by more than 1,450 shareholders varying between individual investors, institutional investors, and a supranational agency. Ordinary shares are listed on the Beirut Stock Exchange, while its Global Depositary Receipts (GDRs) are listed on both the Beirut Stock Exchange and the London Stock Exchange.

Today, Bank Audi is a leading bank from the Middle East with extensive operations in Lebanon, Turkey, Egypt, France, Switzerland, Jordan, Saudi Arabia, Qatar, Abu Dhabi (through a representative office) and Monaco. The Group operates principally through 11 banks and 2 financial companies in 12 countries, offering a full range of products and services that cover principally Commercial and Corporate Banking, Retail and Individual Banking, Private Banking, as well as ancillary activities such as Investment Banking and on-line brokerage. Throughout a network of 217 branches, 444 ATMs and 6,891 employees, the Bank draws on its experience and expertise in providing more than 950,000 customers with a full range of financial products and solutions. Its main purpose is to achieve quality growth by efficiently meeting the needs of both businesses and individuals in the various countries of presence and ensuring long-term sustainable value to all stakeholders.

Bank Audi ranks first among Lebanese banking groups and is positioned among the top Arab banking groups. Its strategy over the medium term is focused on three geographic development pillars, Lebanon, Turkey and Egypt, in addition to the continued development of its Private Banking business. The Group expects to launch its operation in Iraq during the course of 2016.

The discussion and analysis that follows covers the consolidated performance of Bank Audi in 2015, based on the audited consolidated financial statements of the Bank as at and for the fiscal years ended 31 December 2014 and 31 December 2015. Terms such as “Bank Audi”, “the Bank” or “the Group” refer to Bank Audi sal and its consolidated subsidiaries, principally Audi Private Bank sal, Audi Investment Bank sal, Banque Audi (Suisse) SA, Bank Audi France sa, Audi Capital Gestion SAM, Bank Audi sal - Jordan Branches, Bank Audi Syria sa, Bank Audi sae (Egypt), National Bank of Sudan, Audi Capital (KSA), Bank Audi LLC (Qatar), Arabeya Online Brokerage (AoLb) and Odea Bank A.Ş. (Turkey).

Main development pillars metioned in the disussion and analysis refer to the following: Lebanese entities (consist of Bank Audi sal, Audi Investment Bank, SOLIFAC, other minor Lebanese entities and consolidation adjustments), Turkey (represents Odea Bank), Egypt (represents Bank Audi (Egypt)), Private Banking entities (consist of Audi Private Bank, Banque Audi (Suisse), Audi Capital (KSA), Bank Audi (Qatar) and Audi Capital Gestion (Monaco)), other entitites (consist of Bank Audi - Jordan Branches, Bank Audi Syria, National Bank of Sudan, Arabeya Online Brokerage (AoLb), and other European and MENA entities).

In parallel, investment grade countries mentioned in this document are the countries with a sovereign credit rating of BBB- or above at end-December 2015, and conversly sub-investment grade countries are those with a sovereign credit rating below BBB-. Among the 12 countries where the Bank is currently present, Turkey, Switzerland, France, Saudi Arabia and Qatar had investment grade rating at end-December 2015.

The consolidated financial statements are prepared in accordance with the International Financial Reporting Standards (IFRS).

All figures are presented in US Dollars (“USD”), unless otherwise stated, since the Bank transacts and funds the large majority of its business in US Dollars and functional currencies linked to the US Dollar. US Dollar amounts are translated from Lebanese Pounds (LBP) at the closing rate of exchange published by the Central Bank of Lebanon, (1,507.5 as of each of 31 December 2014 and 31 December 2015). References to foreign currency translation differences or changes reflect the impact of the movement of functional currencies in countries of presence against the US Dollar.

All references to the Lebanese banking sector are to the 52 commercial banks operating in Lebanon, as published by the Central Bank of Lebanon (“BDL”). All references to the Bank’s peer group in Lebanon are to the Alpha Bank Group consisting of 14 banks with total deposits in excess of USD 2.0 billion each, as determined by Bankdata Financial Services WLL (publishers of Bilanbanques). All references to the Bank’s peer group in the MENA region are to the top regional Arab banking groups, as compiled by Bank Audi’s Research department.

Lebanon’s economic and banking data is derived from the International Monetary Fund, the Central Bank of Lebanon, various Lebanese governmental entities, and the Bank’s internal sources. The region’s economic and banking data is derived from the International Monetary Fund, the Economist Intelligence Unit, Bloomberg, the region’s central banks, and the Bank’s internal sources.

This discussion and analysis starts with an overview of the Bank’s strategy, followed by a review of the operating environment and a comparative analysis of the Group’s financial conditions and results of operations for the periods ended 31 December 2014 and 31 December 2015. An overview of risk management comes next, followed by an extensive coverage of share information and dividend policy, resources deployed, investors’ relations, compliance, environmental and social management system, and corporate social responsibility.