Dr. Naaman AZHARI - Chairman of BLOM BANK Group Mr. Saad AZHARI - Chairman and General Manager of BLOM BANK s.a.l. Table of Content

Chairman’s letteR 06 12. Universal banking services 57 Customers’ deposits evolution 08 12.1 Private and investment banking 57 Evolution of main indicators 09 12.2 Commercial and corporate banking 58 Consolidated financial ratios 09 12.3 Retail banking 58 Strong and continuous growth for the 12.4 Islamic banking 61 last 7 years 10 12.5 Insurance products & services 62 BLOM BANK’s group chart 11 13. Information systems and technology 62 BLOM BANK’s organizational chart 12 13.1 Customer relationship management 62 13.2 Advanced electronic payment systems 63 Corporate Governance 13.3 Enterprise application integration (eai) 63 1. BLOM BANK s.a.l. Code of corporate governance 16 13.4 Basel ii & regulatory compliance 63 2. BLOM BANK s.a.l. Major common shareholders 16 13.5 Systems security & high availability 64 3. BLOM BANK s.a.l. Board of directors 17 13.6 Financial reporting & consolidation 64 3.1 List of board members 17 14. People development 64 3.2 Information about board of directors 18 14.1 General overview 64 3.3 Number and date of board meetings held 14.2 Policies and procedures 65 in 2010 23 15. Bank’s operational efficiency 67 4. Information on key members of BLOM BANK s.a.l. 16. Regional expansion 67 Management 24 5. BLOM BANK s.a.l. commercial arrangements 26 BLOM BANK s.a.l. consolidated financial 6. General management of BLOM BANK s.a.l. 27 statements 1. Auditors’ report 72 Management discussion & analysis 2010 2. Consolidated income statement year ended 31 1. Operating environment 32 December 2010 73 2. Overview 34 3. Consolidated statement of comprehensive income year 3. Evolution of total assets 35 ended 31 December 2010 74 4. Sources of funds 36 4. Consolidated statement of financial position at 31 4.1 Customers’ deposits 36 December 2010 75 4.2 Capitalization (tier I & tier II capital) 37 5. Consolidated statement of cash flows for the year 4.3 Banks & financial institutions 38 ended 31 December 2010 77 5. Uses of funds 38 6. Consolidated statement of changes in equity for year 5.1 Cash and balances with the central banks 39 ended 31 December 2010 78 5.2 Lebanese treasury bills and other governmental bills and bonds 39 Notes to the consolidated financial 5.3 Bonds and financial instruments with fixed statements 82 income 41 5.4 Banks and financial institutions Blom bank worldwide correpondent 5.5 Loans and advances to customers 42 banks 170 6. Liquidity 46 7. Profitabilty 46 Blom bank group management and 7.1 Net interest income 47 directory 171 7.2 Non-interest income 47 7.3 Staff and operating expenses 52 8. Dividend distribution and preferred shares revenues 53 9. Capital adequacy ratios 53 10. Interest rate risk 54 11. Risk management and Basel II preparations 55

5 BLOM BANK s.a.l. Annual Report 2010 6 the political and economic changes raging in the Arab world. These developments, though they might they though developments, These world. Arab the in raging of importantly,changes economic more and political and, the economy world the in spots soft the of mindful is Bank the forward, Going reputation, BLOMBANKS.A.L.intooneoftheprimeleading banksintheArabregion. andhelpsturn and name Bank’sbrand the strengthens also it process, the in And sources, base. revenuecustomer our enlargingand and risk our diversifying opportunities, growth exploiting of strategy our into feeds This present. is it which in countries European and Arab twelve the in footprints Bank’soperating the across stretching sense, regional-expansion the in broad-based also were operations BANK’s BLOM 2011 comprisingSaudiassets. mid- in launched one new a and Egypt, and Jordan, Lebanon, including countries Arab different from instruments financial comprising funds mutual in-house own its launched have to Bank Lebanese only management services. The latter services are especially eminent, since BLOM BANK S.A.L. stands income, as operating the and driven by our activities in private and investment banking, and our brokerage, insurance, of and asset 27.2% constituting million, $178 to 23% by increased income fee Accordingly, operation. of Bank’sareas the all across stretching broad-based, also was stream Bank’sincome The Lebanese banksincredit card loansat32%,incar loansat25%,andinhousing14%. lending retail sharemarket among highest the attain to Bank the enabling - is billion 1.56 $ to increased46% which by which among noteworthy billion, saw $5.2 also to lending 28.9% total by Bank’s rising The increase, 2.3%. remarkable some at margin interest net best the and million $495 at interest income net highest the banks Lebanese among produced approach margin-centered its addition, In BLOM BANK’s solid core business and high asset quality continued to ensure a sturdy revenue stream. authorities, andthathasmadetheBankrenowned destinationforsafeandcleanbanking. regulatory the by set regulations and rules the with compliance strict Bank’s the involved control this And 14%. at II Basel ala’ ratio adequacy capital high a and 0.47%, at loans non-performing net of ratio BANK’s low a BLOM 35%, at ratio of income to product cost lowest a the in reflected as as risk, and came expenses over and control reputed banks, Lebanese among out to stood results 7.9% strong by These increasing assets with million. growth, $330.7 to 12.9% by up going profits and balanced billion, $19.6 to 8.8% by rising deposits and billion, $22.4 robust witnessed also sheet balance Its equity at21%andthehighestrateofreturnonaverageassets1.54%. average on best of return rate highest the scoring banks, the Lebanese listed of profitability charts the recorded on ratios Bank The growth. strong and profits record 2010 in achieved S.A.L. BANK BLOM Despite a struggling world economy, a hesitant regional recovery, and a tense domestic political scene, leading banks in the Arab world.” Arab the in banks leading prime the of one BANK BLOM make to helping expansion, regional and areas business of terms in broad-based were operations BANK’s “BLOM Chairman’s Letter cause the Bank to adjust its short-term priorities, they will not detract it from its overall focus and long-term goals. In the medium-to-long term, the Bank sees these developments as leading to more open economic and political systems in the Arab countries, something that will add to their allure as investment and business destinations. It is also something that the Bank will look forward to be a part of, in terms of further and deeper expansions in what could be promising future markets. As for the short term, the Bank aims at strengthening and developing its activities in all universal banking areas, while maintaining its tested conservative approach especially in the countries experiencing transitional changes. We are also cementing our syndicated lending and lending to small - and medium - sized enterprises, towards which a seperate marketing unit has been developed for each; and, of particular interest, strengthening our investment and corporate banking services in the Gulf.

I am pleased to add that, given BLOM BANK’s ­Mr. Saad AZHARI excellent and steady performance, appreciation from international institutions has been unstinting. As a result, BLOM BANK S.A.L. received many accolades in 2010, prominent among them were the awards: “CEO of the Year, Pan-Arab/Middle East” from Emeafinance; “Best Retail Bank in the Middle East” and “Best Investment Bank in the Middle East” from The Banker Middle East; and “Best Bank in Lebanon” from Global Finance, World Finance, and Emeafinance.

BLOM BANK’s success rests on the trust and confidence that its customers, shareholders, and the community place on it. What reinforces these attributes is Blom Bank’s consistent delivery of financial “Peace of Mind” to its customers and better value to its shareholders. In the latter’s case, the Bank attained in 2010 an EPS of $1.46, up by a notable 13% on 2009; and distributed $0.45 per common share to its shareholders, constituting a dividend pay-out ratio of 31%. As to our bondage with the community, this represents an organic part of the Bank’s socially responsible corporate model. For the Bank remains very active in this domain, supporting various charitable organizations, sponsoring the world-class BLOM Beirut Marathon, and pioneering the educational program BLOM Shabeb and the internationally-recognised BLOM MasterCard® “Giving Card” that has as its target the removal of all 425,000 mines in the country, with 26,000 removed so far.

I would like to close by also saying that Blom Bank’s success as a business model is a collective effort, bringing together the hard work of its management and staff to realize efficiently and consistently the Bank’s values and vision.

Thank you.

Saad Azhari

7 BLOM BANK s.a.l. Annual Report 2010 8 years 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 0 595 504 871 1,259 (in USDMillions) BLOM Bank’s ConsolidatedCustomers’DepositsEvolution 1,805 2,000 2,686 3,333 3,861 4,000 4,330 5,056 5,525 6,000 6,215 7,686 8,000 8,992 10,000 10,161 11,735 12,000 13,737 14,000 15,109 16,000 18,024 18,000 19,606 20,000 BLOM Bank’s Consolidated Customers’ Deposits Evolution Evolution of Main Indicators

(in USD Millions) (in USD MIllions or LBP Billions)

2010 2009 Change 10/09 Total Assets LBP 33,683.85 31,208.84 7.93% USD 22,344.18 20,702.38 7.93%

Customers’ Deposits LBP 29,555.89 27,170.74 8.78% USD 19,605.90 18,023.71 8.78%

Total Net Liquidity LBP 19,520.02 18,889.72 3.34% USD 12,948.60 12,530.49 3.34%

Shareholders’ Equity LBP 2,739.63 2,454.64 11.61% USD 1,817.34 1,628.28 11.61%

Capital Funds LBP 2,850.58 2,575.55 10.68% USD 1,890.93 1,708.49 10.68%

Total Loans And Advances LBP 7,806.53 6,058.12 28.86% USD 5,178.46 4,018.66 28.86%

Net Income After Tax LBP 498.38 441.73 12.82% USD 330.60 293.02 12.82%

Consolidated Financial Ratios

(in % or USD) 2010 2009 Liquidity Ratios Net liquidity in LBP 101.39% 103.82% Net immediate liquidity in Foreign Currency 52.80% 56.76% Liquid assets over total assets 58.87% 62.58% Loans to Deposits Ratios LBP 11.68% 7.63% F/C 32.45% 28.39% Total 26.41% 22.36% Assets Quality - Not Including General Provision Net Doubtful Loans over Total Net Loans 0.46% 0.85% Provision over Doubtful Loans 83.24% 76.24% Total Provision over Total Net loans 2.46% 2.93% Gross Doubtful Loans / Gross Total Loans 2.69% 3.44% Capital Adequacy Ratios After dividend distribution (Basel I) 26.39% 26.33% After dividend distribution (Basel II) 13.81% 13.96% Profitability Ratios Return on average equity 19.20% 19.06% Return on average assets 1.54% 1.52% Earnings per share USD USD 1.46 USD 1.29 Dividend per common share USD USD 0.45 USD 0.40 Dividend payout ratio 31.50% 30.93% Retention Ratio 68.50% 69.07% Net asset value per common share USD USD 7.38 USD 6.46

9 10 BLOM BANK s.a.l. Annual Report 2010 years years years 2004 2005 2004 2005 2004 2005 2006 2007 2008 2010 2006 2007 2008 2009 2010 2006 2007 2008 2010 Tier I & Tier II Capital Net Profits Total Assets 2009 2009 0 0 0 Strong andcontinuousgrowth forthelast7years (in USDMillions) 200 2,000 (in USDMillions) 50 400 4,000 91.15 (in USDMillions) 100 6,000 600 136.85 8,000 800 790.61 150 10,000 1,000 957.80 10,835 180.30 11,918 12,000 200 204.70 1,200 1,271.34 14,000 14,212 1,400 1,388.00 1,458.92 250 16,000 251.58 16,639 1,600 17,898 18,000 300 293.02 1,700 20,000 1,708.49 330.60 20,702 1,800 22,000 1,890.93 22,344 350 BLOM BANK Group Chart

BLOM BANK S.A.L.

Head Office: Beirut Branches: Lebanon - 61 Branches Cyprus - Damascus Free Zone - Jordan (8 Branches) - Abu Dhabi (Representative Office)

BLOM BANK FRANCE S.A. 99.99% 100% BLOM BANK (SWITZERLAND) S.A.

Head Office: Paris Head Office: Geneva Branches: London - Dubai - Sharjah - Jabal Ali Romania (5 Branches)

BANK OF SYRIA & OVERSEAS SYRIA & OVERSEAS FOR S.A. 49.00% 52% FINANCIAL SERVICES

Head Office: Damascus Head Office: Damascus Branches: Syria - 27 Branches* *2 under establishment

23.5% BLOMINVEST BANK S.A.L. 99.89%

Head Office: Beirut

BLOMINVEST SAUDI ARABIA 10% 50% 51%

Head Office: Riyadh BLOM EGYPT SECURITIES S.A.E.

Head Office: Cairo BLOM DEVELOPMENT BANK S.A.L. 33.33% 66.64% 5% Head Office: Beirut Branches: Lebanon - 2 Branches AROPE INSURANCE OF PROPERTIES & RESPONSIBILITIES - Egypt S.A.E. AROPE INSURANCE S.A.L. 88.93% Head Office: Cairo Branches: Egypt - 8 Branches Head Office: Beirut Branches: Lebanon - 8 Branches 60%

48.97% BLOM BANK EGYPT S.A.E. 99.42% 35% 80% Head Office: Cairo 15% Branches: Egypt - 26 Branches 5%

BLOM BANK QATAR L.L.C 99.50% AROPE LIFE INSURANCE - EGYPT S.A.E. Head Office: Cairo Head Office: Doha Branches: Egypt - 8 Branches

AROPE SYRIA S.A. (Syria International Insurance) 10%

34% Head Office: Damascus Branches: Syria - 5 Branches 5% Representative Offices: 14 11 12 BLOM BANK s.a.l. Annual Report 2010 Board AuditCommittee| Board RiskManagementCommittee|Consulting,Strategy&Corporate BLOM BANKS.A.L.OrganisationalChart Governance Committee|Nomination&Renumeration Governance Recovery &GeneralManagementSecretariat Unit SMES -MarketingofSmall & MediumEnterprises Syndications &Structured Finance StrategicPlanning&Organization International Relations&TreasuryInternational Departments/ Units Board Committees Board ofDirectors Back OfficeOperations Shareholders Hedging AdvisoryUnit Interest Management InformationSystems HumanResources RiskManagement Internal AudiUnit Internal Communications RetailBanking Corporate Unit Trade Finance Administration Procurement Legal Affairs Compliance Accounting Marketing Credit Branch Managers 61 in Lebanon - 1 in Cyprus 1 in Damascus Free Zone - 8 in Jordan 1 Representative office in Abu Dhabi External Auditors Solicitors

Ernst & Young-Semaan, Gholam & Co. Me. Georges ABOU ZAMEL Me. Antoine MERHEB

Management Committees

Executive Committee

Credit Committee 1

Credit Committee 2

Exceptional Credit Committee

Follow-up Credit Risk Committee

Provisions Committee

Retail Credit Committee

Assets & Liabilities Committee

Investment & Treasury Committee

Marketing Committee

Information Technology Committee

Human Resources Committee

Legal Committee

Internal Audit Committee

Compliance Committee

Operations & Internal Procedures Committee

Foreign Branches & Subsidiaries Committee

Purchasing & Maintenance Committee

Information System Security Committee

Succession Planning Committee

13

16 BLOM BANK s.a.l. Annual Report 2010 Bank ofNewYork andAZAHolding). ***The major shareholders of Banorabe S.A, SPF (formerly Banorabe Holding S.A.) are the same as in BLOM Bank (except New Yorkof Bank asDepositary,the becameshareholder ontheBank’sShareholders, register.Bank BLOM by (GDR) Receipts Depositary Global of issuance the after and 1998, **Starting *Total common shares: 215,000,000 Rest ofShareholders Khoury Family Saade Family Jaroudi Family Nada Oueini Chaker Family Azhari Family Actionnaires Unis AZ Holding Banorabe S.ASPF*** Bank ofNewYork ** NAME position bycontinuingtofurtherraiseitsstandardsorganization vis-à-visinternal andservicestoclients. as a matter of even greaterof Corporate Governance importance and necessity in enhancing its competitive Bank’s development the ongoing situation, the financial Directors view current Boardglobal of the of light In rights were made available to the public in compliance with the disclosure requirements of the Code. The be Code was will also enhancements published while on the principles, Bank’s related Website. and Relevant Code information the on the introduce Board communicated toallpersonnel. to charter and order shareholders in planned employees are new and organized werefor Governance Corporate on employees BLOM all for sessions Awareness Corporate of practice possible best the ensuring for atBLOMBANK. Governance responsible ultimately body the is and Committee) the Committee, Management Risk the Consulting Committee Strategy in and addition Corporate to Governance the Nomination and Remuneration Committee, Audit (the Committees Board four and duties through its exercises authorities partly itself Board The 2008. in Code the of implementation proper the all for deployed means management and Board the end, Tothat environment. operational optimal an of creation the for and functioning proper its for Governance Corporate of importance paramount the recognizes Bank The the expectedconductofallpartiesinorder toachievetheobjectivessetforBank. which the Bank is subject, as well as the Basel Committee’s principles on Corporate Governance and outlines general management, employees and external stakeholders. It complies with all local laws and regulations to members, Board the of each of responsibilities and rights the identifies that structureBLOM the at out sets Directors It of BANK. Board the by 2007 of end the at approved was Governance Corporate of Code The 2 1 Corporate Governance BLOM BANKS.A.L. MajorCommonShareholders BLOM BANKS.A.L.CodeofCorporateGovernance Address UnitedStates Luxembourg Lebanon Lebanon Lebanon Lebanon Lebanon Lebanon Lebanon Lebanon Common Shares inCapital* 19.85 13.26 34.37 1.97 2.53 3.61 5.00 5.39 2.86 1.83 9.33 3 BLOM BANK S.A.L. Board of Directors

Dr. Naaman W. AZHARI Chairman of BLOM BANK GROUP Sheikh Salim B. EL-KHOURY Honorary Board Member

3.1 List of Board Members

Background / Number of directorship Position NAME Competencies years with the Bank Director since 1996 Chairman & General Master in Engineering Mr. Saad N. AZHARI Chairman and General Manager & MBA Manager since 2007

H.E. Sheikh Ghassan I. SHAKER Grand Officier de la Légion Director B.A in Finance Director since 1964 d’Honneur

Director since 1997 Director & Secretary Master in Civil Secretary General of Mr. Samer N. AZHARI General of BLOM BANK Engineering & MBA Blom Bank Group Group since 2001

H.E. Me Youssef S. TAKLA Director Diploma in Law Director since 2006

Director since 2008 Director & General B.A. in Accounting Mr. Habib L. RAHAL General Manager since Manager Economics 1992

MBA in Finance & B.A. Mr. Nicolas N. SAADE Director Director since 1990 in Economics

Dr. Fadi T. OSSEIRAN Director Ph.D. in Economics Director since 2008

Mr. Joseph E. KHARRAT Director B.A. in Ecomomics Director since 1984

Mr. Marwan T. JAROUDI Director MBA in Ecomomics Director since 2008

17 18 BLOM BANK s.a.l. Annual Report 2010 3.2 Information About Board of Directors of Board About Information 3.2 Sciences Politiques” in Paris. in Diploma a Political andDiploma“InstitutSciencesin from thedesa and Law (Sorbonne) I Paris of University the from Dr.NaamanA In 2007 he was appointed Chairman of BLOM BANK Group. and General Manager of BLOM Chairman of position the occupied he 2007, until 1971 From In 1962, he was appointed General Manager of BLOM BANK S.A.L. of Finance, Minister Economy ofand Planning position in Syria. the occupied he 1962, to 1961 From Chairman of the Bank. largest the of one established banksSyria,in he“Banque l’Orientde Arabe” and 1950s,wasappointed the of end the At Générale). H A NaamanDr. • • Group BANK BLOM of Chairman Dr. NaamanW

e worked in a French bank in Paris (which became Sociétébecame (which Paris in bankFrench a in worked e BL H Born in 1928 3 ead of the Nomination and Remuneration Committee at OM B ANK BLOM BANKS.A.L.Board ofDirectors ZH ZH S. ARI holds a State Degree Ph.D in EconomicsDegreeStateinPh.D aholds ARI A R satd i bnig xeine n 1951. in experience banking his started ARI .L. . AZHARI

BANK S.A.L. • • S.A.L. BANK BLOM of Member Board Honorary Sheikh SalimB.EL-KHOUR Advanced Management Program at University’s “Ecole de Droit de Beyrouth” and has Josephcompleted – SaintfromLebanese Lawdegree in ana andFrance in H Directors ofBLOMBANKS.A.L.since1987. Sheikh Salim EL KHOURY has been a Member of the Board of

e holds a degree in French law from the University of Lyon of Universitythe from law French in degree a holds e H Born in 1931 onorary Board Member of BLOM BANK S.A.L. H arvard Business School. Y Mr. Saad N. AZHARI H.E. Sheikh Ghassan I. SHAKER Chairman of the Board and General Manager of Grand Officier de la Légion d’Honneur BLOM BANK S.A.L. Non-Executive Director of BLOM BANK S.A.L.

• Born in 1961 • Born in 1937 • Chairman and General Manager of BLOMINVEST BANK S.A.L. • Director of BLOM BANK FRANCE • Chairman of BLOM BANK (SWITZERLAND) • Chairman of BLOM BANK EGYPT • Chairman of BLOM BANK QATAR • Board Member of BLOMINVEST Saudi Arabia • Board Member of BANK OF SYRIA AND OVERSEAS • Board Member of Société Fonçière du Liban et D’Outre-Mer S.A.L.

Mr. Saad AZHARI started his banking career in 1986 in PBZ Businessman, banker, industrialist and diplomat, His Privatbank, an affiliate of the UBS Group, in which he worked Excellency Ghassan Ibrahim SHAKER, is among the most until 1991. During that time he was promoted to run, from highly decorated personalities from the Arab World, including Zurich, the Bank’s operations in the Middle East and Hong being a Grand Officier de la Légion D’Honneur-France. Kong. H.E. Sheikh Ghassan SHAKER has been a Member of BLOM He joined BLOM BANK (Switzerland) in 1991 and was BANK S.A.L. Board since 1964 and is also a Board Member of appointed its General Manager in 1997. In 1998, he was BLOM BANK FRANCE. elected Chairman and General Manager of BLOMINVEST BANK S.A.L.. This was followed by his election to the position He is a Personal Advisor to His Majesty The Sultan of of Chairman of BLOM BANK (SWITZERLAND) in 2001. At the Oman and Omani Ambassador at United Nations Geneva, same time, he was appointed Vice Chairman and General Switzerland. Omani Minister Plenipotentiary at The Court of Manager of BLOM BANK S.A.L. St James United Kingdom, Omani Economic Counsellor in United Arab Republic and Dean of Goodwill Ambassador at In 2005 Mr. AZHARI became Chairman of BLOM BANK Unesco – Paris, France. EGYPT and in 2007 he was elected Chairman & General Manager of BLOM BANK S.A.L. Since 2008, Mr. AZHARI has H.E. Sheikh Ghassan SHAKER is also Chairman and Member been Chairman of BLOM BANK Qatar and a Member of the of Board of Directors of various companies in Asia and Europe: Board and Vice-Chairman of BLOMINVEST SAUDI ARABIA. - Gulf Chinese Trading Corporation, AFZ - Ajman - UAE He is also a Member of the Board of Directors of Bank Of - Tokio Marine Insurance Company - Saudi Arabia Syria & Overseas as well as being a Member of the Board - Orient Telecom F.Z.C. - UAE of BLOM DEVELOPMENT Bank S.A.L. and was its Chairman - Chairman of Gulf Conversion Co. Ltd –United Arab Emirates from 2006 until beginning of 2009. - Member of Group of 50 Investcorp Bank –Bahrain. Mr. Saad AZHARI is also a Member of the Board of Directors He was educated at Victoria College Alexandria, Egypt (1944- of Société Fonçière du Liban et D’Outre-Mer S.A.L. 1956) and at St. John’s College - Cambridge University, England (1956-1959). He is member of the Board of Trustees, Since 2001, he has held the position of Vice-President of the Georgetown University - Washington DC and Law Society - Association of Banks in Lebanon. Mr. Saad AZHARI holds a Masters Degree in Computer Engineering and an MBA from University of Virginia, USA. the University of Michigan-Ann Arbor in the United States.

19 20 BLOM BANK s.a.l. Annual Report 2010 from INSEAD,France MBA an and USA Illinois, of University the from Engineering Civil in degree Science of Master a holds AZHARI Mr.Samer of General since2007. position the Group’sBANK SecretaryBLOM been has Mr.AZHARI Samer occupied he 2001, until Vice–President oftheAssociationBanksinLebanon. 1999 From until 2008. an affiliated insurance company of BLOM BANKH S.A.L. BANQUE from 1998 (formerly FRANCE BANK BANORABE). BLOM of Manager Since 2001, Mr. Samer AZHARI has been Chairman & General BLOM of Manager General as BANK S.A.L.andoccupiedthispositionuntil2001. appointed was he 1997 In Manager in1994. General its became and 1985 in Paris in S.A.L., BANK BLOM Mr. Samer AZHARI joined Banque Banorabe, affiliated bank of • • • • • Director ofBLOMBANKs.al Mr. SamerN.AZHARI

e was Chairman and General Manager of AROPE INSURANCE, Board Member of BANK OF SYRIA AND OVERSEAS Board Member of BLOMINVEST BANK Chairman and General Manager of BLOM BANK FRANCE Secretary General of BLOM BANK GROUP Born in 1958 3 BLOM BANKS.A.L.Board ofDirectors • • Non-Executive Director ofBLOM BANKs.al H.E. Me.Y in Beirut. University Saint-Joseph the from law in diploma a holds He in 2008. Lebanon in State of Minister nominated TAKLAwas Me. H.E. and Modernization since 1993. of Committee the the Coordination of of Banking Laws at the Central Bank of Lebanon of Member Member a a and Justice of 1992 Ministry Lebanese the since in Commission additionally Legislative been has He of Commerce. Chamber since International the of Arbitration of Court International Association Bar Beirut 1983. TAKLAMe. 1999, and 1993 the Between of member also was since Association the Bar Paris the of of Member and member 1961 a was He of Member Board a been BLOM BANKS.A.L.since2006. has TAKLA Youssef Me. H.E.

BLOM Bank ebr f h “oiain n Rmnrto Cmite at Committee” Remuneration and “Nomination the of Member Born in 1937 s oussef S.T .a. l . AKLA Mr. Habib L. RAHAL Mr. Nicolas N. SAADE Director & General Manager of BLOM BANK s.a.l. Non- Executive Director of BLOM BANK s.a.l.

• Born in 1944 • Born in 1950 • Member of the Consulting, Strategy and Corporate Governance • Head of the Board Audit Committee at BLOM BANK S.A.L. Committee at BLOM BANK S.A.L. • Head of the Board Risk Management Committee at BLOM • Chairman & General Manager of AROPE INSURANCE S.A.L. BANK S.A.L. • Board Member of BLOMINVEST BANK S.A.L. • Member of the Consulting, Strategy and Corporate Governance • Board Member of AROPE EGYPT Life Insurance Committee at BLOM BANK S.A.L. • Board Member of AROPE EGYPT Properties Insurance • Board Member of BLOM DEVELOPMENT BANK • Chairman of Société des Services d’Assurances et de Marketing • Board Member of BLOM BANK Qatar

Mr. Habib RAHAL started his banking experience at Société Mr. Nicolas SAADE has been a Board Director of BLOM BANK Centrale de Banques and occupied several managerial S.A.L. since 1990. positions at Moscow Narodny Bank and Royal Bank of Canada before joining Banque du Crédit Populaire where he From April 1985 to July 1987, he was Regional Manager of was appointed General Manager from 1974 to 1990 . BLOM BANK S.A.L. in Dubai, UAE.

In 1990, he joined BLOM BANK S.A.L. as Chairman’s Advisor Between 1980 and 1985 he was Deputy General Manager of and was appointed in 1992 as the Bank’s General Manager. Union de Banques en Cote d’Ivoire (BANAFRIQUE).

Mr. Habib RAHAL has been a Member of the Board of In 1975, he joined the Toronto Dominion Bank in which he Directors of AROPE INSURANCE since 2004 and was elected stayed until July 1980, occupying various managerial positions. its Chairman and General Manager in 2007. Mr. Nicolas SAADE is the owner and Managing Director of the Mr. RAHAL has been a Board Member of BLOM BANK S.A.L. Nicolas SAADE Est. in Dubai, which is a banking, investment since 2008 and a Board Member of BLOMINVEST BANK and financial consulting firm.H e is also the Managing Director S.A.L. since 2001. of Elite Consultants International, Inc. in Delaware, USA, an SEC registered investment advisory firm, and owner of Pioneer He is also the Chairman of Société des Services d’Assurances Auditing in Dubai. Previously, he was Fund Manager at Friends et de Marketing since 2003. Provident International Elite Fund in the Isle of Man.

In 2008 he became Board Member of AROPE EGYPT Mr. Nicolas SAADE is holder of an Honors BA in Economics LIFE INSURANCE and a Board Member of AROPE EGYPT from McMaster University in Canada and has an MBA from PROPERTIES INSURANCE. Wharton School, University of Pennsylvania, USA .

Mr. RAHAL represents BLOM BANK S.A.L. and sits as Director on the following Boards of Directors: Banque de L’Habitat, Société Financière du Liban and IPN.

Mr. Habib RAHAL is holder of a Bachelor Degree in Accounting & Economics from ESEC.

21 22 BLOM BANK s.a.l. Annual Report 2010 • • r OSIA i hle o a hD n cnmc fo New from York Economics University(NYU) intheUnitedStates. in Ph.D a of holder is OSSEIRAN Dr. Management Lebanese the the BankingandEconomicsFields. of in publications many has Member and 1996 to 1992 from Association Board was He the AssociationofBanksinLebanon. Training of the (1994-1996) of Committee Member and 2006) 2004. the has and since Association Economic of Lebanese the of Member 2004 a been since President Beirut in of Brokers Stock position of the Association held has OSSEIRAN Dr. BLOMINVEST BANK Board of BLOM BANK of Directors of BLOM BANK S.A.L. in 2008, and a MemberBL of the BANKS.A.L. BLOMINVESTand Advisor of Managerto Generalthe Chairman been – General has Manager he 1994,of Since AUB from 1988to1993. of Banking and Money of Institute the at Professor Assistant Economics the in became and teach Beirut of University American the to at Department moved he 1987, Services. to Group 1985 From Méditerranée at and Development Planning Resources Corporate of Manager was he 1993, S.A.L. as Assistant Dealer from 1981 to 1982. From 1990 until Dr. Fadi OSSEIRAN started his banking career at BLOM BANK • • • BANK BLOM of Director Dr. FadiT

Board Member of BANK OF SYRIA AND OVERSEAS Board Member of BLOMINVEST SAUDI ARABIA Board Member of BLOM BANK General Manager of BLOMINVEST BANK S.A.L. Born in 1956 OM 3 He was also Member of the Research Committee (1992-

Bank BLOM BANKS.A.L.Board ofDirectors S.A.L. Dr. Osseiran became a Member of the Board . OSSEIRAN S E audi gypt A s in 2005. rabia . a E . l gypt . since 2008. H e has been a Director of Human RA i hle o a ahlr ere in degree Bachelor a of Economics from Reading UniversityintheU.K. holder is KHARRAT Joseph Mr. and KharratImmobilière (Abidjian). (Abidjian) Satexi S.A.L., Kamaco which: of companies estate He is Chairman and General Manager of several textile and real BLOMINVEST BANKS.A.L.since1994untiltodate. BANK S.A.L. since 1984 until to date. BLOM of Director non-Executive a is KHARRAT Joseph Mr. • • • – Non Mr. JosephT • • •

BL Committee” at BLOM BANK S.A.L. ebr f h Nmnto ad eueain omte at Committee Remuneration and Nomination the of Member Board Member of Audit Committee at BLOM BANK S.A.L. Born in 1941 Board Member of BLOMINVEST BANK S.A.L. Member of the “Consulting, Strategy and Corporate Governance Board Risk Management Committee Member at BLOM BANK S.A.L. OM E B xecutive Director of BLOM BANK BANK BLOM of Director xecutive ANK S. A .L. . KHARRA T He is a Board Member of s . a . l . Mr. Marwan T. JAROUDI Non-Executive Director of BLOM BANK s.a.l.

• Head of the Consulting, Strategy and Corporate Governance Committee at BLOM BANK S.A.L. • Nomination and Remuneration Committee Member at BLOM BANK S.A.L. • Board Audit Committee Member at BLOM BANK S.A.L. • Board Audit Committee Member at BLOM BANK FRANCE • Board Risk Management Committee Member at BLOM BANK S.A.L. • Board Member of BLOM BANK FRANCE • Board Member of BLOMINVEST BANK • Board Member of BLOMINVEST SAUDI ARABIA • Board Member of BLOM BANK QATAR • Board Member of AROPE INSURANCE • Board Member of AROPE SYRIA • Board Member of Banorabe S.A., SPF • Board member of BLOM DEVELOPMENT BANK

Mr. Marwan JAROUDI currently sits on the Board of Directors of the following Companies : • Industry Intelligence Inc., Los Angeles - USA • Forestweb, Inc., Los Angeles • BLOMINVEST Saudi Arabia • BLOMINVEST Bank s.a.l. • Arope Insurance s.a.l. • Arope Syria, Syria • United Shareholders • BLOM BANK FRANCE • BLOM BANK S.A.L. He has been a Board Member and Vice Chairman of BLOM BANK QATAR since 2008. He is Co-Founder, Director in Industry Intelligence Inc., Los Angeles – California, since 2007 . Since 1999, he occupies the position of Co-Founder, Director in Forestweb, Inc., Los Angeles From 1996 until 1999 he was Co-Founder, Managing Director in Pulptrade - Choueifat, Lebanon. From 1985 until 1995, Mr. JAROUDI occupied a number of managerial positions at Saudi Hollandi Bank in Jeddah. From 1989 until 1991 he was Co-Founder and Finance Director at Gulf Medical Co ltd. Mr. JAROUDI is holder of a Master of Arts degree in Economics from Syracuse University in New York and has a BA in Economics from the American University of Beirut.

3.3 Number & Date of Board Meetings Held in 2010

The following BLOM BANK s.a.l. board meetings were held during 2010 on:

5/2/2010 | 16/3/2010 | 5/5/2010 | 27/5/2010 | 22/7/2010 | 15/10/2010 | 24/12/2010

23 24 BLOM BANK s.a.l. Annual Report 2010 In 2004, he became Vice-Chairman of of Vice-Chairman became he 2004, In by followed UAE, Manager – of Dubai Banque –Banorabe BanorabePairs – BanqueFrance from of 2001 Manager– 2004. H at Manager General ExecutiveBanque Banorabe – Paris. was he 1999, to 1997 From Assistant Manager – Banque Banorient, Geneva – Switzerland. occupiedpositionhethe1997of Canada,from to1995 and – From 1991 to 1992, he worked at Gestion Pictet & Cie Montreal Banque Banorabe – Paris. A Amr Mr. • • • • • BANK BLOM of Manager General Mr. AmrN.AZHARI Bachelor of Civil Law and Bachelor of Arts, majorUniversity in Economics. - Montreal, A Canada: Amr MasterMr. of Business Administration, Stock Exchange from 2006 to 2009. Damascusthe ofMember Board a asserved andS.A.L., Mer BANK S.A.L., Chairman of Société Fonçière du Liban S.A.L.,et Chairmand’Outre- & General Manager of BLOM DEVELOPMENT In 2008, Mr. A of AROPE Syria International Insurance. In 2006, in addition to the above, Mr. A B and

ANK mvd n o eoe rm 99 o 01 h Finance the 2001 to 1999 from become to on moved e Chairman of AROPE SYRIA International Insurance. Vice Chairman of Born in 1970 Chairman of Société Fonçière du Liban et D’Outre-Mer Chairman and General Manager of BLOM DEVELOPMENT BANK 4 O S. verseas A .L.. ZH Information onKeyMembersofBLOMBANKS.A.L.Management ZH ZH R satd i bnig xeine n 91 at 1991 in experience banking his started ARI R hls h floig ere fo McGill from degrees following the holds ARI ARI became General Manager of BLOM BANK and Assistant General Manager of BLOM BLOM of Manager General Assistant and B ank

of S yria

and ZH O s ARI became Chairman verseas . a B . l ank .

s of .a. l S . yria • • • Banking Retail and Organization Strategy, of charge in S.A.L., BANK BLOM of Manager General Deputy Mr. Elias.ARACTINGI Graduate SchoolofBusiness. University’s Columbia from Finance in MBA an and Beirut of University American the from distinction Business with in Administration Degree Bachelor a holds ARACTINGI Elias Mr. of BL Chairman elected was and EGYPT BANK BLOM of CEO S.A.L.In2009, hewasre-appointed asManaging Director and promotedin2008 toDeputy General Manager ofBLOM BANK BANK EGYPT, a position he held until September 2006. In 2005, he was appointed Managing Director and CEO of BLOM Banking Retail BLOM’sactivities. initiated he 1997, Inreengineering. office head and branch Chairman, focusing on the Advisor to Beirut as in S.A.L BANK joined BLOM he 1995, of end the At Bangkok the office in1994andfinallytoPrincipal1995. of manager to then 1993, to in promoted Associate was Senior and Associate an and as Singapore Booz.Allen in based joined ARACTINGI Mr. 1990, In Private BankingGroup. New York branch in 1988 as Vice President in the International and President Operations. of Vice of title the reached he until times several at promoted was Yorkhe New where 1983 in USA Audi Bank in career banking his started ARACTINGI Elias Mr.

Member of the Board Audit Committee of BLOM BANK EGYPT Member of the Board of BLOM BANK EGYPT Born in 1959 OM

E gypt S e joined BSI (Banca della Svizzera Italiana)’sSvizzera della (Banca BSI joined He ecurities , until March 2010. Hamilton, H e was Head Dr. Pierre G. ABOU-EZZE* Mr. Talal A. BABA* Assistant General Manager Assistant General Manager and and Head of Human Resources at Chief Financial Officer at BLOM BANK s.a.l. BLOM BANK s.a.l.

• Born in 1955 • Born in 1967

Dr. Pierre Abou-Ezze has 16 years of hands-on experience Mr. Talal Baba is the Chief Financial Officer.H e was appointed in Human Resources. as Assistant General Manager on July 2008.

He has been the Head of HR at BLOM BANK S.A.L. since Mr. Baba is committed to maintaining the high level of integrity 1998, and he served as Advisor to the Chairman on training and transparency that BLOM Bank S.A.L. is known for. issues from 1995 to 1998. He joined BLOM Bank S.A.L. in 1991 where he started to Prior to joining BLOM BANK S.A.L., Dr. Abou-Ezze was in excel and climb his career ladder. He has now over 20 years academia. He served as the Director of the Graduate School of banking experience acquired with major banking players of Business and Management at the American University of on the Lebanese market. He also attended various training Beirut from 1993 to 1997, and he was Assistant Professor at programs and workshops in Lebanon and abroad. the same school since 1991. Mr. Baba earned his Bachelor’s degree in Accounting and Before moving back to Lebanon, Dr. Abou-Ezze started his Master in Business Administration from the Lebanese his career as an Assistant Professor of Economics at the American University – Beirut. University of Ottawa, Canada and at the University of Kuwait.

Dr. Abou-Ezze continues to lecture at various Universities in Lebanon, and to lead seminars and workshops in the field of Human Resources. He served as the Chairman of the Human Resources & Social Affairs Committee at the Association of Banks in Lebanon for 2 consecutive terms from 2005 to 2009.

Dr. Abou-Ezze holds a Ph.D in Economics from McMaster University-Hamilton, Canada.

25 26 BLOM BANK s.a.l. Annual Report 2010 * Byalphabetical order No changeofcontrol hasoccurred during2010. the General commerce law, whenapplicable. by Lebanese pre-approved the of 158 is art. to according affiliate affiliates concerned the of its and Bank the of of Shareholders of Assembly any and Bank the between arrangement commercial Any the ICTfieldappliedtofinancialservicesindustry. from “Ecole Superieure des Ingenieurs de Beyrouth (ESIB)”, with over 25 years of experience in Engineering” Systems Information and “Electronics in Degree MSc. an Mr.holds LAWANDOS to addition in S.A.L. being CIO. BANK BLOM of Manager General Assistant appointed was he 2008, In Systems and IT the for Manager Senior BANK S.A.L. appointed was he 1995, Development Department until 2006 when he became Chief Information Officer (CIO) of BLOM in then application banking and core the for Director change, Project as S.A.L. BANK BLOM joined he 1993, In international an of implementation the for manager universal bankingpackage. project as MDSL joined he BML, After Department Manager at BML Engineering (Business Systems Machines of of Lebanon), position IBM the representativesheld also in Lebanon. he 1993, in S.A.L. BANK BLOM joining Before bankingrequirementslocal andinternational andenvironments. differentto subject systems, banking universal critical mission and complex of integration implementation and development, the managing in experience extensive acquired he where and where he became the head of one vendor,of software the leading a Istisharat’sIstisharat, with Banking 1986 Systems in careerDevelopment his units started LAWANDOS(ICBS), Mr. Antoine • BANK BLOM at Officer Information Chief and Manager General Assistant Mr. AntoineN.LA

Born in 1963 5 4 Blom bank s.alCommercial Arrangements Information onKeyMembersofBLOMBANKS.A.L.Management W s . ANDOS* a . l . 6 General Management of BLOM BANK S.A.L.

Mr. Saad AZHARI Chairman & General Manager Mr. Samer AZHARI Group Secretary General General Managers Mr. Habib RAHAL Mr. Amr AZHARI Deputy General Manager Retail Banking Department & Strategic Planning & Mr. Elias ARACTINGI Organization Department Assistant General Managers (*) Dr. Pierre ABOU EZZE Human Resources Department Mr. Talal BABA Accounting Department Mr. Antoine LAWANDOS Information Systems Department Advisors (*) Mr. Michel AZZAM Mr. Mustapha GHALAYINI Sheikh Fahim MO’DAD Formerly, Vice Governor of the Central Bank of Lebanon Mr. Georges SAYEGH

Departments & Units Management (*) Principal Managers Mr. Grégoire AZAR International Affairs & Treasury Department Mrs. Jocelyne CHAHWAN Retail Banking Department Mr. Georges CHEDID Marketing Department / Syrian Desk Mr. Morris KAIROUZ Syndications and Structured Finance Unit Mr. Samir KASSIS Corporate Unit Mr. Mekhael KAZZI Interest Management Department Mr. Naoum RAPHAEL Group Inspection Unit Mr. Jacques SABOUNGI Trade Finance Department Mr. Fouad SAID Marketing Department / Overseas Me. Aimee SAYEGH Legal Affairs Department Mr. Samih ZEIN EL DINE Administration Department Managers (A) Mrs. Ayla DAME Marketing Strategy / Retail Department Mr. Boutros KHOURY Marketing Department / Syrian Desk Mrs. Isabelle Mansour NAOUM** Communication Department Mr. Gerard RIZK Risk Management Department Managers (B) Mrs. Aline ABI RACHED IT Operations Division Mr. Malek COSTA Compliance Department Mr. Gladson DOUGLASS Hedging Advisory Unit Mr. Michel GHANEM Marketing Department Strategic Planning & Organization Department & Mr. Rabih HALABI Procurement Department Mr. Imad KADI Retail Credit Division Mr. Mounir TOUKAN Credit Department Deputy Managers (A) Mr. Marcel ABOU JAOUDE Marketing Department / Overseas Mrs. Fadia Bizri BARRAJ Trade Finance Mrs. Rima El Kaissi HAJJAR (EL) International Affairs Mr. Imad JUNDI Back Office Operations Assistant Managers (A) Mr. Charles HADDAD Marketing of Small & Medium Enterprises (SMEs) Unit Mrs. Rania Derian KAISSI Internal Audit Department

* By alphabetical order ** Joined on July 2011 27 28 BLOM BANK s.a.l. Annual Report 2010 29 30 BLOM BANK s.a.l. Annual Report 2010 Management Discussion & Analysis 2010

Management discussion & analysis 2010 1. OPERATING ENVIRONMENT 32 2. OVERVIEW 34 3. evOLUTION OF TOTAL ASSETS 35 4. SOURCES OF FUNDS 36 4.1 Customers’ Deposits 36 4.2 Capitalization (Tier I & Tier II Capital) 37 4.3 Banks & Financial Institutions 38 5. uSES OF FUNDS 5.1 Cash and Balances with the Central Banks 39 5.2 Lebanese Treasury Bills and Other Governmental Bills and Bonds 39 5.3 Bonds and Financial Instruments with Fixed Income 41 5.4 Banks and Financial Institutions 42 5.5 Loans and Advances to Customers 42 6. LIQUIDITY 46 7. pROFITABILITY 46 7.1 Net Interest Income 47 7.1.1 Interest and Similar Income 47 7.1.2 Interest and Similar Charges 49 7.1.3 Interest Margin (Before Provisions For Doubtful Loans) 50 7.1.4 Net Provisions for Doubtful Loans 51 7.2 Non-Interest Income 51 7.3 Staff and Operating Expenses 52 8. DIVIDEND DISTRIBUTION AND PREFERRED SHARES REVENUE 53 9. CAPITAL ADEQUACY RATIOS 53 10. INTEREST RATE RISK 54 11. RISK MANAGEMENT AND BASEL II PREPARATIONS 55 11.1 Risk Management 55 11.2 Corporate Governance 56 12. uNIVERSAL BANKING SERVICES 57 12.1 Private and Investment Banking 57 12.2 Commercial and Corporate Banking 58 12.3 Retail Banking 58 12.4 Islamic Banking 61 12.5 Insurance Products & Services 62 13. INFORMATION SYSTEMS AND TECHNOLOGY 62 13.1 Customer Relationship Management 62 13.2 Advanced Electronic Payment Systems 63 13.3 Enterprise Application Integration 63 13.4 Basel II & Regulatory Compliance 63 13.5 Systems Security & High Availability 64 13.6 Financial Reporting & Consolidation 64 14. peOPLE DEVELOPMENT 64 14.1 General Overview 64 14.2 Policies and Procedures 65 14.2.1 Recruitment 65 14.2.2 Training 66 14.2.3 Career Development and Promotion 67 15. BANK’S OPERATIONAL EFFICIENCY 67 16. LOCAL REGIONAL EXPANSION 67 31 32 BLOM BANK s.a.l. Annual Report 2010 demand as well as the rise in the cost of land. Delinquency rates on consumer loans and on most types of types most on and loans consumer on rates Delinquency land. of cost the in rise the of as expansion well as the demand mirrored that prices housing in upswing the fueled funding abundant hand, other the On deposits againstseveraltypes ofloanstotheprivatesector. deposits of (CD) certificates and T-bills issuing by deposits and by encouraging their lending in invest all currencies to through ways decreasing reservefind requirementbanks rates help on and liquidity of excess the on pressure absorb to tried Bank interestCentral the differentialsparallel, rate In deposits. and funds of a downward use the between pressureon put inflows reduce capital and large fact, of matter expansion a As economic margins. profitability sustainable sector banking foster sector, real the for financing of cost the lower to meant was policy The rates. interest in ease an allowed which policy monetary accommodative an Since inflation was tamed and capital was pouring at an extremely high level, the Central Bank (BDL) adopted but acceleratedslowlythroughout theyearasenergy pricesrebounded. unchanged at 3.7%. Consumer Price Index (CPI) was low in the first quarter with the appreciation of the dollar broadly rate average yearly a with subdued inflation remained tourism, especially sectors, some of overheat Despite the rapidly growing consumption, the considerable capital inflows, the high growth rate and the mild deposits declinedfrom 64.5%downto63.2%,reflecting ahigherconfidencelevelintheLebanesepound. The of million. dollarization of level $538.2 The assets. total to in upsurge 11.8% 19.2%, an to contributed of loans in increaseincrease considerable year-on-year a recorded Loans billion. $88.9 reach to 9.7% by in their fees income and income from their portfolio bonds. of Totalgovernment private sector deposits grew growth the sector,to private addition the in to portfolios loan bank of expansion the through possible made peers regional and international when time wereeffectthe by up tied still Additionally, crisis. the of a strongthe returns high by enabled was performance at region, Gulf the from inflows capital large by backed was safe haven for Arab investors, paved way to a robust performance of the banking sector in 2010. The growth the of a as rest Lebanon’ssystem of banking image the the and rates, interest domestic with of decline slow differentialsthe despite world rate interest high relatively stability, political relative growth, solid Amidst market, creating jobsandloweringunemploymentrate. the front, investment the dollar.On permitting U.S. environment enabled a in rise in business held investment during the wereyear that value positively which echoed the labor increasedof 72.8% the 20%, by added that echoed checks cleared is of spending consumer strong The income. real household higher through considerably spending consumer boosting to well as contributed sectors other the of performances Strong Lebanon in visit channels, boostinginvestmentsandemployment. per Spending 21%. by grew spending continued their to average a high level The and of $3000. The growth 2010. of 17% the sector impacted in the economy through by differentpace increased brisk a tourists at of expand number to continued it as trends comparable witnessed sector tourism The by rose permits 33.3%. Realestatepricespickedupbuttheriseisbelievedtobefundamental. construction and 40.8% by increased sales property of number The demand. and supply higher both, by driven expand to economy,continued domestic the of driver pillar sector,a estate real The year, the throughout growth primarily duetoconsumerandinvestorconfidenceintheupcomingphase. economic the affect however, not did environment political The government. new a of formation Rafik the least Mr. at until Minister postponed indictment reforms structural ex-Prime and fiscal the with of stalled regardinggovernment assassination Thus, the erupted investigating bickering tribunal political international the as of half process second the in emerged however, pressures year.throughoutgrowththe enabling and relatively environmentstable was political The domestic Moderate that increased by18.1% and importsofpetroleum thatimproved by12.1% . economy performed well in the last quarter propelled by exports that Additionally,rosethe permits. 15.3%, construction claims of impact on lagged the positive private the sector and 19.9% rose that sector private the on claims growth, 25.4% a registered that products petroleum robust of imports the of boost a by by driven year,mainly supported was This 2009. in recorded 8.5% the financial, real estate and tourism sectors. The following bulk of the growth was recorded during the 2010, th 1 Operating Environment Hariri. mortgages remained low. As for businesses, balance sheets were quite liquid, credit quality was good, and most firms enjoyed ready access to funds due to the high liquidity at commercial banks.

On the fiscal front, the budget deficit continued to show some improvement in 2010, declining from 8.5% of GDP in 2009 to 7.5% in 2010. The enhancement is partly the result of the high real GDP growth rate and the improvement in tax collection. The other two important driving forces are the delay in the approval of the budget and the substantial reduction in the budgetary transfers to Electricite du Liban (EDL). Correspondingly, the primary surplus rose by 14.2% reaching $1.2 billion.

Total revenues for the Lebanese Republic retreated by a mere 0.2% to $8 billion in 2010. Tax revenues edged up by 11.3%, almost overshadowing the 33.5% decline in non-tax revenues. The increase in tax revenues reflected a 5.2% increase in international trade tax revenues (customs and excise duties) and a 10.5% increase in VAT revenues. The continuous improvement in tax collection contributed partly to the rise in revenues.

Total government expenditures edged down by 0.8% to $11.4 billion in 2010. Most of the decline was due to a 20.4% drop in subsidies targeting the energy company. The reduction was also partly caused by exogenous factors leading to the decline in crude oil price, and to the switch from the use and purchase of gas oil, mostly imported from Kuwait and Algeria, to natural gas from Egypt which is significantly cheaper. Regarding interest payments, they increased by 1.9% to $3.9 billion.

In this context of positive fiscal developments, gross public debt edged up only moderately in 2010 however its ratio over GDP witnessed a significant decline. The overall level of the public debt grew by a 2.8%, as compared to 2009, to $52.6 billion by the end of 2010. However, the increase was fully created by domestic debt which rose by 2.2%, while foreign exchange denominated debt declined by 3.4% in 2010. Although debt servicing as percentage of total spending increased to 34.6% in 2010, as compared to 33.7% in 2009, total public debt as a percentage of GDP shrank to 135% in 2010, from 148% in 2009 as a result of high economic growth.

Lebanon’s current account deficit is estimated to have widened to $7.3 billion. The widening of the account coincides with the expansion of the surplus in services following the surge in tourism and the increase in remittances. The trade surplus in services is expected to have exceeded its 2009 level of $2.56 billion while remittances registered a 7.6% rise to $8.2 billion or 20.8% of GDP.

The widening of the trade deficit by 7.5% to $13.7 billion, derived from the expansion of the economy and the consequential rise in local demand, coupled with the appreciation of the Real Effective Exchange Rate (NEER) that continued to play a significant role in pushing imports up. The latter registered a 2% rise to 14.8 million tons. The NEER appreciated from 94.01 in 2009 to 94.9 in 2010, whereas the average dollar-euro exchange rate declined from 1.39 to 1.34 over the same period.

The balance of payments narrowed but remained in positive ground in 2010, posting a surplus of $3.3 billion in comparison with the $7.9 billion surplus registered in 2009, backed partially by a 7.6% rise in remittances. Net foreign assets of the Central Bank were $30.6 billion as of December 31, 2010, reflecting an increase of $3.5 billion, compared to 2009. Net foreign assets of the Lebanese commercial banks were also on the up rise, summing to $123 million over the same period.

The conservative management of commercial banks as well as the regulatory practices of the Central Bank few years ago that banned financial institutions from investing in the subprime market, constituted crucial factors that enhanced confidence in the Lebanese financial system during the global financial crisis. Lebanon’s banking system appeared as a safe haven despite its lower rating compared to other regional and international markets. Consequently, capital continued to flow in the market and foreign direct investment (FDI) is estimated to have exceeded its 2009 level and reached $4.7 billion in 2010, the equivalent of 11.3% of GDP.

Correspondingly, local financial markets continued to show resilience in 2010 against the global and regional woes. The Central Bank continued to adopt its policy of pegging the value of the Lebanese Pound to the U.S. Dollar within a band of LBP 1500 - 1515 per USD 1.00. Gross foreign currency reserves grew by 11.5%

33 34 BLOM BANK s.a.l. Annual Report 2010 and business services diversification. Foreign expansion not only spreads the only spreads not expansion Foreign diversification. services business and In terms of strategy, BLOM BANK continued to build on its geographic expansion 19,605.90 USD million bytheendof2010. attained deposits customers’ total and million 22,344.18 profits USD net BANK BLOM country, the in banks increased by largestan annual 12.82 % to the USD 330.60 million while total of assets reached one as 2010, In and S&Pcredit rating“B”. “B1”, of rating currency foreign its maintained Moody’sMoreover, Lebanon. in Middle East-specialized rating agency,a “B”, which is the highest financial strengthIntelligence, rating Capital by rated repeatedly been has Bank the such, As BLOM BANK also continued to maintain the highest financial ratings in Lebanon. - “BestBalancedFundAward for2010”from MENAFM - “No.1 Banking Brand in Lebanon Bank for2010”from - “BestConsumerInternet Global Finance for 2010” from The Banker – - “BestTradeFinancial FinanceBankinLebanonfor2010”from GTRMENA Times Group - “BestBankinSyriafor2010”from EMEAFinance - “BestAssetManager&Broker Bankfor2010”from EMEAFinance - “BestBrokerage Award for2010”from EMEAFinance - “BestLocalInvestmentBankinLebanonfor2010”from EMEAFinance - “BestBankinLebanonfor2010”from EMEAFinance - “CEO of the Year in the Middle East for- “BestMutualFundintheMiddleEastfor2010”from BankerMiddleEast 2010 (Mr. Saad Azhari) from EMEA Finance Middle Banker from 2010” for East Middle the in TradeOffering “Best Finance - - “BestInvestmentBankintheMiddleEastfor2010”from BankerMiddleEast - “BestRetailBankintheMiddleEastfor2010”from BankerMiddleEast was Lebanon in group reflected bymaintainingthestatusofmostawarded bankin2010: banking leading the as position strong BANK’s BLOM position, a diversification of products and services, and a wider regional presence. In 2010, BLOM BANK witnessed another successful year marked by a solid financial a higher demandforbonds. reflecting 2010, year-end at as Eurobonds 4.86% reach on to yield points basis weighted 200 by average declined The end-2010. at 111.2 reach to 2009 the than increasingfromIndex 6.5% Bond of BLOM average the an with by market stock better much fared market bond Lebanon’s side, income fixed the On market capbetween$500Mand$5B. a have that banks MENA for 15.11 to opposed as 8.17 of ratio P/E had average stocks an banking Lebanese The region. Africa North and East Middle the in peers their to compared 2010 in undervalued 2009. be in to appeared 15% stocks Lebanese to compared as 2010, in 11.8% to falling to downturn, the on period also same the over 2% was turnover market stock average The 2010. 31, December of as billion $11.06 by decreased capitalization market and lower, 10.7% year the ending by markets. increase 2009’s33% diluted regional Index Stock BLOM volatile The the and recovery, slowing U.S. the crisis, Sovereign European country,the the in tensions political of the by affected phases 2010, in mixed volatility experienced Exchange Stock Beirut the of performance The declining to2.8%in2010,downfrom 3.4%in2009. rate interest interbank average the with rate, policy its lower to Bank Central the broad year, throughout the by for inflows possible capital it to made due and was liquidity measured supply, Money 2010. in GDP Money M3 grew of by 12.3% to $92 billion, 77% as of December 31, or 2010. The abundant billion $28.6 to 2 East Overview risk of operating in Lebanon, but also diversifies the income base by taking advantage of the economic and business opportunities present in regional economies. In 2010, BLOM BANK Group was operational in 12 countries: Lebanon, Syria, Egypt, Jordan, Qatar, UAE, France, Switzerland, England, Cyprus, Kingdom of Saudi Arabia and Romania. In addition, the Bank has developed further its retail network by opening four new branches in Egypt, Jordan and Syria. In Lebanon, the Bank launched two new branches in the areas of Bab Idriss and Tyr-Abbassieh.

The other component of the strategy is to diversify business activities towards a universal banking model. As a result, the bank has expanded the operations of its investment arm, BLOMINVEST BANK, by enhancing its private and investment banking and capital market activities, in addition to introducing asset and wealth management services. The latter aims at establishing funds and investment vehicles for retail and high net- worth investors diversified in their asset composition and geography. Following the success of the BLOM Cedars and Petra Balanced funds that received numerous awards from leading international agencies, BLOMINVEST launched the BLOM BANK Pyramids Fund, BLOM BANK Money Market Fund, and the BLOM Bond Fund. The aim of the new products is the diversification in the sources of income that gives increasing share for non-interest income.

To conclude, BLOM Bank will continue to pursue its organic growth strategy in the coming years by capitalizing on its existing resources and capabilities.

3 Evolution of Total Assets

BLOM BANK witnessed a 7.93% growth in assets by the end of 2010. This resulted from the bank’s expansionary policy and the perceived confidence of expatriates in BLOM BANK Group as a trustworthy source of placing their deposits. In fact, with global interest yields at historic lows, the flow of capital into local accounts maintained its pace.

Total assets of the bank grew by 7.93% to reach USD 22.3 billion, as compared to USD 20.7 billion recorded in 2009. On the other hand, assets denominated in foreign currencies dropped to 70.07% from 70.85% a year earlier due to high yielding LBP accounts.

Evolution of Total Assets (in USD Millions)

years 0 2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000 18,000 20,000 22,000

2010 22,344

2009 20,702

2008 17,898

2007 16,639

2006 14,212

2005 11,918

2004 10,835

2003 8,786

35 36 BLOM BANK s.a.l. Annual Report 2010 explains the rise in fiduciary depositspartly thatThis 2009. reachedrecorded in70.75% USD with5,976 line million deposits,in intotal 2010, ofincreasing 70.94% at 43.82%2010 year-on-year.of end the stabilizedby they deposits, total of share currencies’ foreign to regards With countries. European and regionalbetween distributed were rest The 74.1%. with share lead the maintained Lebanon country, by deposits of terms In customers’ depositsfrom totalfundingwentupby69basispointsto87.75% compared to87.06%in 2009. deposits Customers’ continued to 2009. attract depositors who opted to for a safe comparedand trustworthy haven for rise their funds. In fact, to the share of continued increased by 8.78%, BANK up from USD 18,024 BLOM million in 2009 to at reach USD 19,606 million deposits in 2010 as BLOM BANK 2010, Throughout Deposits Customers’ 4.1 the share of banks and financial institutions amounted to 1.12% in 2010 and other liabilities comprised 2.67%. with87.75%totaloffunding capitalTier and2010.II inTier Iconstituted 8.46%totaloffunds2010, for while financial institutions and other liabilities. Customers’ deposits constituted the biggest share of sourcesBLOMBANK’s of funds mainsources fundingof include customers’ deposits, capital fundsTier(Tier II),& banksI and 4 Sources ofFunds 2010 Other Liabilities Banks &FinancialInstitutions IICapital I&Tier Tier Customers’ Deposits Sources ofFunds 87.75 2.67 1.12 8.46 % Sources ofFunds 2009 Other Liabilities Banks &FinancialInstitutions IICapital I&Tier Tier Customers’ Deposits 87.06 2.43 2.26 8.25 % Customers’ Deposits (in USD Millions) years 0 5,000 10,000 15,000 20,000

2010 19,606 2009 18,024 2008 15,109 2007 13,737

2006 11,735

2005 10,161 2004 8,992

2003 7,686

On the other hand, BLOM BANK’s market share in terms of customers’ deposits within Alpha Group (banks with deposits over USD 2 billion) accounted for 17.44% in 2010. 4.2 Capitalization (Tier I & Tier II Capital) Tier I and Tier II capital increased 10.68% yearly to USD 1,890.93 million at the end of 2010, bringing its contribution of total funds to 8.46% from 8.25% in 2009. Tier I Capital alone increased by 11.61% to USD 1,817.33 million at the end of 2010 compared to an increase of 12.56% by the end of 2009. Tier I increase can be mainly attributed to retained profits of the year 2010 amounting to USD 221.05 million after dividend distribution. This measure falls in line with the bank’s strategy of growing organically and at a steady pace. Moreover, Tier II capital’s increasing trend was reversed in 2010, falling to USD 73.6 million as a result of the cumulative change in fair values due to the correction in financial assets prices.

Tier I & Tier II Capital (in USD Millions) years 0 200 400 600 800 1,000 1,200 1,400 1,600 1,800 2,000

2010 73.6 1,817.33

2009 80.21 1,628.28

2008 12.36 1,446.56

2007 19.1 1,368.95

2006 24.0 1,247.35

2005 63.6 894.25

2004 94.1 696.51

2003 84.7 553.73

2002 84.5 484.85

Tier I Capital Tier II Capital

37 38 BLOM BANK s.a.l. Annual Report 2010 constituted 23.18% of total assets in 2010. fundbeenhasbank’susetheof strategy expandtoloanitsportfolio. result, a Asloans granted customers to fixed income inched up to 5.82% in 2010, from 5.46%financial instrumentsand bondswith in ofshare 2009. thehand, other Perhaps the On2009. thein 18.87% maincompared2010to version in behind the reshuffling Bank’sThe2009. financialplacements and banksotherinstitutions with assets total 17.91% of amounted to a drop in the share of cash and deposits at the Central Bank to total assets to 30.36% in 2010 from 31.57% in governmentalother securitiesdebt total assetstoasdeclined 2010,19.96% fromdown followedinto2009. 21.93%wasThis in by well asTreasury BillsPound Lebanese of share the funds, of use overall the Within The 2010 return on assets ratio stood at a formidable 1.54%. funds,reflectedis the in return assetson of ratio that has alwaysuses been the at forefrontthe assessing listedof considerationwhile Lebanese Bank’sprimary banks. the been always has whichcomponent, risk The BLOM Bank’s strategy stresses on the maintenance of high asset quality and a strong portfolio of investments. depositor base. 1.12% by the end of 2010 to USD 250.82 million. That said, the decline was more than offsetofBanks byand Financial the increaseInstitutions’ in contribution to BLOM BANK’s funds. This share fell from 2.26% in 2009 to recoverythisperspectivebooks.Consequently,theirclearingfromtheto up of drop reflected the was this in gradualrecoveryrecession,globalstarteditsworldthefrom thefinancial institutions As remained vulnerable and Banks 4.3 5 4 Uses ofFunds 2010 Others Loans toCustomers with fixedIncome Bonds andFinancialInstruments Banks &FinancialInstitutions Cash andCentralbanks bonds government Lebanese Treasury Billsandother Uses ofFunds Sources ofFunds F inancial Institutions inancial 23.18 17.91 30.36 19.96 2.77 5.82 % Uses ofFunds 2009 Others Loans toCustomers with fixedIncome Bonds andFinancialInstruments Banks &FinancialInstitutions Cash andCentralbanks bonds government Lebanese Treasury Billsandother 19.41 18.87 31.57 21.93 2.76 5.46 % 5.1 Cash and Balances with the Central Banks

Overall cash and central banks reserves stood at USD 6,784 million in 2010, up 3.79% from last year. The share of subscription in Certificates of Deposit amounted to 58.46% of total cash and balances with central banks, up from 52.36% in 2009 as the bank sought to diversify its portfolio holding of government debt.

Central Banks reserves in 2010 dropped to 39.73% of total cash and balances with central banks as compared to 45.93% in 2009. This is attributable to the Lebanese Central Bank’s easing of reserve requirements of banks in an attempt to stimulate lending and economic growth. Finally, cash represented the remaining USD 123 million, slightly up from its contribution of USD 112 million in 2009.

The cash and central banks category includes non-interest bearing balances held by the Bank at the Lebanese Central Bank (Banque Du Liban) in compliance with the obligatory reserve requirements for all banks operating in Lebanon on commitments in Lebanese Pounds (calculated on the basis of 25% of sight and 15% of term commitments). The requirement also applies to interest bearing placements at the rate of 15% of total deposits in foreign currencies, as well as the certificates of deposit issued by the Lebanese Central Bank (Banque Du Liban).

Distribution of Cash and balances with the Central Banks

2010 2009

USD Millions % of Total USD Millions % of Total

Cash 123 1.81% 112 1.71% Central Bank 2,695 39.73% 3,002 45.93% CD's 3,966 58.46% 3,422 52.36% Total 6,784 100.00% 6,536 100.00%

5.2 Lebanese Treasury Bills and Other Governmental Bills and Bonds

The Bank’s portfolio of Lebanese Treasury Bills and other governmental debt securities decreased by 1.80% to reach USD 4,459.13 million in 2010 from USD 4,540.82 million in 2009. This came as the bank replaced its holding of Treasury Bills with relatively better yielding instruments. Moreover, the currency composition of the portfolio witnessed a shift from Lebanese pounds denominated treasury bills that edged down to 55.24% of the total portfolio as compared to 57.18% in 2009 due to diversification into higher yielding instruments.H ence, foreign currency-denominated governmental bonds constituted 44.76% of the total in 2010 as compared to 42.82% in 2009.

39 40 BLOM BANK s.a.l. Annual Report 2010 T Unrealized Discounts Unrealized Premiums Accrued interest Treasury BillsandBonds Loans andReceivables: Unrealized Discounts Unrealized Premiums Accrued interest Treasury BillsandBonds Held toMaturity: Unrealized Discounts Unrealized Premiums Accrued interest Treasury BillsandBonds Available forSale: Accrued interest Treasury BillsandBonds Investments HeldForT in USDMillions Treasury Portfolio the of Distribution adopted since January 2005 shows the following: Standards)classificationReporting(InternationalFinancialIFRS new the toaccordingportfolio treasury The otal 5 2010 Distribution of the Treasury Portfolio Foreign Currencies Bondsin Other Governmental Lebanese Treasury Bills Uses ofFunds rading: 44.76 55.24 % Distribution of the Treasury Portfolio 2009 Foreign Currencies Bondsin Other Governmental Lebanese Treasury Bills 4,459.13 1,762.97 1,826.10 2,339.54 2,388.97 230.33 232.77 33.56 34.37 44.97 11.14 11.29 2010 (4.80) (0.67) (0.54) 0.45 2.66 5.00 0.15 4,540.82 1,478.91 1,496.66 2,821.88 2,861.63 42.82 57.18 175.01 177.67 (16.06) (12.05) 30.98 45.83 2009 (0.51) % 2.83 4.78 4.86 0.19 2.98 5.97 0.08 5.3 Bonds and Financial Instruments with Fixed Income

Bonds and financial instruments with fixed income increased by 14.98% in 2010 to USD 1,300.29 million from USD 1,130.91 million a year earlier as the Bank opted for a diversification of its investments into higher yielding instruments as global interest rates hit a rock bottom and the inflow of capital into Lebanon depressed the yields of short term instruments.

This caption includes bonds and certificates of deposit that are classified as follows:

- Held for Trading - Available for Sale - Held to Maturity - Loans and Receivables - Fair Value through Profit & Loss

Distribution of Bonds & Financial Instruments with Fixed Income in USD Millions 2010 2009 Investments Held For Trading: 1.01 0.89 Bonds 1.00 0.89 Accrued interest 0.01 0.00 Available for Sale: 337.18 248.05 Bonds 158.68 122.53 Unrealized Premiums 1.75 0.03 Unrealized Discounts (3.55) (4.88) Accrued interest 2.48 1.86 CD's 173.78 126.96 Unrealized Premiums 0.00 0.02 Unrealized Discounts 0.00 (0.03) Accrued interest 0.54 1.56 Funds 3.50 0.00 Held to Maturity: 372.39 336.43 Bonds 335.61 326.63 Unrealized Premiums 0.12 0.16 Unrealized Discounts (12.27) (11.41) Less: provision for impairment (0.27) 0.00 Accrued interest 1.25 0.91 CD's 47.78 20.00 Accrued interest 0.17 0.14 Loans and Receivables: 480.57 453.07 Bonds 436.30 375.43 Unrealized Premiums 0.45 0.00 Unrealized Discounts (6.88) (8.35) Accrued interest 1.38 0.66 CD's 49.10 83.66 Unrealized Premiums 0.01 0.01 Unrealized Discounts (0.06) (0.11) Accrued interest 0.27 1.77 Fair Value Through Profit & Loss: 109.14 92.47 Convertible Bonds 107.64 92.17 Accrued interest 1.50 0.30 Total 1,300.29 1,130.91

41 42 BLOM BANK s.a.l. Annual Report 2010 years T Bad DebtAccounts Collective Provisions ForCommercial &ConsumerLoans Net DoubtfulAccounts Net Substandard Special AttentionAccounts Regular Accounts in USDMillions Portfolio Loan of Net Total Classification Risk Credit The Credit risk classification of the Bank’s Loans portfolio is as follows: USD 2 billion) reached 14.30% in 2010, up from 13.94% in 2009. BLOM BANK’s market share in terms of total loans and advances within Alpha Group (banks with deposits over loans reached USD 5,178 million at the end of 2010, increasing 28.86% from last year. loan book that was coupled by the easing of local reserve requirements of the Central Bank. Thus, outstandinglevels, increased from 22.30% in 2009 to 26.41% in 2010. This was driven by the bank’s strategy tothe ratioexpand ofnet loans its and advances tototal deposits, quality,which assethas been successfullyhigh maintaineda maintainatrelatively to orderlow in strategyconservativeloan a ofBANK’s adoptionBLOMFollowing Customers to Advances and Loans 5.5 in 2009. To note that 98.35% of the current and time deposits are denominated in foreign currencies.Time deposits constituted 92.48% of total deposits with banks and financial institutions in 2010, up from 90.58%amid historic low global interest rates amidst the abundance of the liquidity at the bank. compared to USD 3,907 million in 2009. This came as the bank BLOMsought BANK’sbetter yieldsdeposits inat banksother andinvestment financial vehicles institutions increased by 2.46% in 2010 to USD 4,003 million as and Banks 5.4 2006 2007 2008 2009 2010 Evolution of Loans and Advances 2003 2004 2005 otal 5 - Uses ofFunds F inancial Institutions inancial 1,000 1,164 1,352 1,670 2,000 1,988 (in USDMillions) 2,772 3,000 3,474 142.50 5,178.46 5,013.42 (29.53) 24.02 28.05 - 4,000 4,019 2010 5,000 5,178 4,018.65 3,898.98 (26.04) 34.05 12.14 99.52 - 6,000 2009 The above loan classification is in accordance with the Lebanese Central Bank‘s (Banque Du Liban) classification under decree N0. 7159 dated November, 10th, 1998 relating to bad debt classification dated December 2001. Below is a briefing about the basis of loan classification defining each category’s characteristics.

- Regular Accounts: A- Unconditional: Covers accounts which display regular movements sufficient to repay the loan in accordance with the repayment schedule. The latest financial statements should be available and adequate collateral should be taken to cover the loan. B- Incomplete file: As in point (A), adequate collateral and repayment on schedule are foreseen. However, the file is considered incomplete because the client is late in submitting his financial statements.

- Special Attention Accounts: Display signs of irregular movements or exceed the credit limit on a continuous basis. Recent financial statements are unavailable and adverse economic conditions may affect the borrower’s ability to repay the debt. Collateral has not been evaluated for the last three years. Such an account may be considered recoverable. However, it should be closely monitored for a year, at the end of which the account is reclassified if the previously mentioned conditions are not regularized.

- Non-performing Accounts: Covers loans which display most or all of the following: - A significant drop in the client’s profitability - A drop in the flow of cash into the account for a period exceeding 2 years, and thus resulting in repetitive delays in repayment exceeding a period of 3 months. - A noticeable depreciation in the value of the collateral provided and repetitive delays in repayment for a period not exceeding three months. - Credit facilities are not used – partially or in whole – for the purpose specified in the loan agreement.

The credit risk committee will review the repayment schedule with the client and will keep the account under close observation. However, interest and commissions will be classified as unrealized until the account is regularized.

- Doubtful Accounts: Represent loans which display all of the conditions of a non-performing account in addition to having a complete lack of credit movement into the account for a period of six months and a delay in payments of the rescheduled loan which exceeds three months from the date of maturity. The Bank will make a partial provision for the loan and consider interest and commission as unrealized.

- Bad Debt Accounts: Includes all “Doubtful Accounts” which are considered unrecoverable due to the lack of a collateral or to the loss of contact with the client. In this case, interest ceases to be accrued and a provision of 100% of the principal amount of the loan is made. The account is under litigation until a ruling by the court is made, after which it is written-off.

The improving quality of the loan portfolio due to the enhanced risk and control measures was further highlighted by a decrease in the Bank’s ratio of gross doubtful debts to gross total loans to 2.69% in 2010 from 3.44% in 2009. The coverage of doubtful accounts (including collective provisions) increased to 103.84% in 2010 from 94.41% in 2009.

Provisions and unrealized interest for doubtful debts and non-performing accounts increased to reach USD 156.73 million at the end of 2010, compared to USD 143.93 million in 2009. The amount includes provisions for commercial loans not classified at the end of 2010 amounting to USD 29.53 million.

43 44 BLOM BANK s.a.l. Annual Report 2010 in 2010. fromup 12.80%2009. inLoans given freelanceto professions havedecreased from 4.77%20094.15%in to witnessedincreasean realin estate activity andaccounted for13.63% theofloanportfolio fortheyear 2010, tothe services sector decreased to 22.42% in 2010 down from 27.09% ayear earlier. The construction sector 2010 with 2.41% of the portfolio granted to retail trade and 15.68% to wholesale trade. continuedMoreover,2009 to recessionin economichave global loan an theportfolio adversehand, othereffect the onOn 2009.commerce, in 10.70%as from trade down loans2010 indecreased 10.17% to from 18.09% in 2009 to 17.04% in manufacturingthegrantedLoans2009. tofrominportfolio0.39% sector2010loandecreasedtotal thein of by the services and trade sectors respectively. Loans to the agriculture sector witnessedfollowedis an This increase2009. in 26.16%from to 2.95%uploans, total of 29.64% millionor1,582 consumerUSDactivities at to granted was loans of sharehighest thesectors, economic byportfolio loan the breakdownof the for As commercial loans, compared to 67.64% in 2009. net totalyear,theone constituted thanof71.07%less maturities of with loans, termwhereas short 2009, in maturities withexceeding yearconstitutedone loans bank’s28.93%the of term outstanding compared 2010as longloans32.36%netin to and medium that shows maturities by portfolio loan the of breakdownThe in 2009. theratioforeign of currency loansforeign to currency deposits increased 32.45%to 2010,infrom up 28.28% The ratio of foreign currency loans with respect to total loans in 2010 decreased from 90.09% to 87.15% while 5 Distribution ofLoansbyEconomicSector 2010 Consumer Loans Freelance Professions Construction Services Trade Manufacturing Agriculture andForestry Uses ofFunds 29.64 13.63 22.42 17.04 10.17 4.15 2.95 % Distribution ofLoansbyEconomicSector 2009 Consumer Loans Freelance Professions Construction Services Trade Manufacturing Agriculture andForestry 26.16 12.80 27.09 18.09 10.70 4.77 0.39 % Additionally, the analysis of the loan portfolio by type of collateral reveals that the retail loans accounted for the largest share of the 2010 portfolio, rising from 26.16% in 2009 to 29.64% in 2010. Moreover, advances against personal guarantees increased, representing 13.29% of the total loans portfolio in 2010, up from 12.86% in 2009. Advances against cash collateral went down to 14.04% in 2010 from 16.18% in 2009. The share of LC financing increased to 1.44% in 2010, up from 1.21% in 2009, whereas syndicated loans were 4.42% in 2010 compared to 4.91% in 2009. Commercial loans secured by mortgages recorded a decrease in 2010, with its share in the total loan portfolio going down to 22.06% in 2010 from 28.91% in 2009. Loans to members of staff slightly decreased to 0.12% while loans to directors and related parties accounted for 0.25%, up from 0.18% in 2009. Overdraft increased in 2010, representing 14.74% of the total loans portfolio up from 9.37% in 2009.

2010 2009

Distribution of Loans by Type of Collateral % Distribution of Loans by Type of Collateral %

Commercial Loans Secured Commercial Loans Secured by Mortgages 22.06 by Mortgages 28.92 Advances Against Personal Advances Against Personal Guarantees 13.29 Guarantees 12.86 LC Financing 1.44 LC Financing 1.21 Advances Against Cash Collateral 14.04 Advances Against Cash Collateral 16.18 Syndicated Loans 4.42 Syndicated Loans 4.91 Retail Loans 29.64 Retail Loans 26.16 Loans to Member of Staff 0.12 Loans to Member of Staff 0.21 Loans to Directors and Related Loans to Directors and Related Parties 0.25 Parties 0.18 Overdraft 14.74 Overdraft 9.37

45 46 BLOM BANK s.a.l. Annual Report 2010 Maturity Gap Cumulative Gap 2010 Liquidity Equity & Shareholder's Total Liabilities On the other hand, earnings per share increased to USD 1.46 in 2010 from USD 1.29 in 2009. assets for the year 2010 reached 1.54%, improving from 1.52% recorded in 2009. earlier.yearslightlydecreasing2010, a21.30% fromReturn-on-averagein 21.15% at stood equitycommon BANK’shighest profitability attainingBLOM reflectedthe performancealso in ratios. Return-on-averagewas deposits over USD 2 billion). portion of the total banking sector profits as it accounted for a share of 20.58% of the Alpha Group (banks withstill constitute the lion’s share with 85.10% of comparedtotal to thenet year 2009income. where net BLOMprofits stoodBank’s at USD 293.02 million.profits BLOM BANK’s contributed Lebanese tooperationsyear2010.banktherecordedThefor profitsnet 330.60aUSD million,of increasing considerable considerablea by 12.82% Lebanon in performing bank best the profitable and most the of one asposition preserveditsBANK BLOM Total Assets USD Millions (2010) Gap Maturity Assets-Liabilities five years. to two of maturities for million 5,435 USD of maximum a reaching positive, turn gaps maturity the months, and from one to three months, amounting to USD 8,737 million and USD 2,362 million respectively. After three noticeable in BLOM BANK accounts. In 2010, the gap was negative in the maturities from zero to one month Maturity mismatch between assets and liabilities, which characterizes the Lebanese banking sector, was also in 2010, decreasing from 56.76% in 2009. the immediate liquidity (cash & banks) in foreign currencies accounted for 52.80% of foreign currency deposits (including Lebanese government Treasury Bills) wasratioliquidity 101.39% PoundLebanese inthe 2010, such, reflecting As 67.16%. highat stoodliquidityliquidityoverall where levels.2010 inliquidityMoreover, ample at the center of liquidity management and core objectives of the Group. The Bank has successfully maintained BLOM BANK’s ability to maintain high liquidity levels, minimize risks and ensure high quality of assets has been 7 6 Profitability Liquidity 1 month Up to (8,737) (8,737) 6,060 14,797 3months from 1to 1,494 (11,099) (2,362) 3,856 6months from 3to 1,146 (9,953) 1,956 810 months to from 6 1 year (8,828) 1,595 1,125 470 from 1to2 years (6,547) 2,508 2,281 227 to 5years from 2 (1,112) 5,622 5,435 187 5 years over 1,112 3,109 1,997 - Total 22,344 22,344 - Evolution of Net Income (in USD Millions) years 0.00 50.00 100.00 150.00 200.00 250.00 300.00 350.00

2010 330.60 2009 293.02 2008 251.60 2007 204.70

2006 180.30

2005 136.85 2004 91.15

2003 88.30

7.1 Net Interest Income

Net interest income registered an 18.21% increase in 2010 to USD 495.22 million. The growth came as a result of a 5.88% increase in interest and similar income to USD 1,203.10 million in 2010, and a 1.32% decrease in interest charges in 2010 to reach USD 707.88 million.

On the other hand, net interest revenue after provisions and doubtful loans, went up by 13.33% to reach USD 478.71 million in 2010 as compared to USD 422.39 million in 2009.

The growth of net interest income will be further elaborated through the breakdown of net interest income into interest and similar income, interest and similar charges, interest margin as well as net provisions for doubtful loans.

7.1.1 Interest and similar income

Interest and similar income witnessed a 5.88% increase in 2010. Average interest earning assets increased by 13.83% to reach USD 19,315 million in 2010, up from USD 16,968 million in 2009.

The below table illustrates the breakdown of average interest earning assets by currency at the end of 2010:

Breakdown of Average Interest Earning Assets (2010)

USD Millions LBP FC Total Lebanese Treasury Bills and 2,673 1,942 4,615 other governmental Bills Deposits with banks and 118 5,046 5,164 Central Banks Bonds& other Financial Inst. with Fixed Income Including 2,484 2,353 4,837 Certificates of Deposits Loans and Advances 538 4,161 4,699 Total 5,813 13,502 19,315

47 48 BLOM BANK s.a.l. Annual Report 2010 due to the increase in retail lending. and advances including related parties represented 29.96% of the deposit)total stoodin at 31.81%2010, in 2010, up fromincreasing 30.12% a year earlier.from 26.11% Finally, in 2009 interest income generated from loansAs a result, the contribution of bonds and other financial instruments with fixed incomeby transferring (including certificatesinto relatively of safer and better yielding bonds and certificates of depositdiversification and by ofextending interest loans. income generating instruments where the bank opted to make bettergenerated use from of deposits resources with banks and central banks dropped to 7.84% from 9.39%. This is attributed to the governmentalbills to30.39% in2010 compared to34.38% in2009. Onthe other hand, theportion ofincome The breakdown of interest and similar income reveals a decrease in the share of Lebanese Treasury Bills and other Income Similar and Interest of Breakdown The breakdown of Interest and Similar Income is detailed in the following table: and advances increased to 24.33% in 2010, compared to 21.74% in 2009. includingcertificates of deposit, accounted for 25.04% up from 22.84%, a year earlier and the weight of loans total in 2010, down from 29.27% in 2009. The share of bonds decreasingand fromother 26.15% 2009.in Thefinancialaverage deposits with banksinstruments andcentral banks stood 26.74%at with theof fixed income, Lebaneseand other governmental bills accounted for 23.89% of total 2009.average yearinterest the ofearning thoseassetsfrom interestchangedsimilargenerating assetsininterest 2010,and of weights the 2010, In Lebanese Treasury Bills Billsandothergovernmental Deposits withbanksandCentralBanks Certificates ofDeposits Bonds& otherFinancialInst.withFixedIncomeIncluding Loans andAdvances(includingrelated parties) T otal 7 Breakdown ofInterest andSimilarIncome 2010 related parties) Loans andAdvances(including with FixedIncomeincludingCD’s Bonds &OtherFinancialInstruments Banks Deposits withBanksandCentral Bills Governmental Lebanese TB’s andOther Profitability 29.96 31.81 30.39 7.84 % USD Millions 1,203.10 Breakdown ofInterest andSimilarIncome 2009 365.58 382.74 360.47 94.31 related parties) Loans andAdvances(including with FixedIncomeincludingCD’s Bonds &OtherFinancialInstruments Banks Deposits withBanksandCentral Bills Governmental Lebanese TB’s andOther 2010 % ofTotal 100.00% 30.39% 31.81% 29.96% 7.84% USD Millions 1,136.27 390.67 106.65 342.23 296.72 2009 % ofTotal 100.00% 34.38% 30.12% 26.11% 26.11 30.12 34.38 9.39% 9.39 % 7.1.2 Interest and Similar Charges

Interest and similar charges declined by 1.32% to USD 707.88 million in 2010 down from USD 717.34 million in 2009, while average interest bearing liabilities went up by 14.44% to USD 19,175 million compared to USD 16,756 million a year earlier.

Deposits from customers including related parties accounted for the largest share of the average interest bearing liabilities, amounting to 99.36% in 2010 while deposits from banks and financial institutions represented the remaining 0.64%.

Breakdown of Average Interest Bearing Liabilities (2010)

USD Millions LBP FC Total Deposits and Similar Accounts from Banks and Financial 2 121 123 Institutions Deposits from Customers Including Related Parties 5,619 13,433 19,052 Total 5,621 13,554 19,175

The breakdown of the interest and similar charges shows a decrease in the portion of deposits and similar accounts from banks and financial institutions to 0.49% in 2010, down from 0.97% in 2009 while the share of interest paid on customers’ deposits slightly increased to 99.51% in 2010 compared to 99.03% in 2009. Finally, charges from notes and fixed income financial instruments remained nil for the third year in a row.

Breakdown of Interest and Similar Charges 2010 USD Millions % of Total Deposits & Similar accounts from Banks and Financial 3.46 0.49% Institutions Deposits from Customers Including Related Parties 704.42 99.51% Total 707.88 100.00%

2010 2009

Breakdown of Interest and Similar Charges % Breakdown of Interest and Similar Charges % Deposits from Customers Deposits from Customers Including Related Parties 99.51 Including Related Parties 99.03 Deposits and Similar Accounts 0.49 Deposits and Similar Accounts 0.97 from Banks and Financial Institutions from Banks and Financial Institutions

49 50 BLOM BANK s.a.l. Annual Report 2010 years years decrease in interest charges and a higher increase in interest income. The ratio of interest charges to interest income decreased to 58.84% down from 63.13% in 2009 due to a slight in 2009. million, while the net interest margin before provisions on495.22 USD doubtful to 2010 in18.21%Bank’sloans InterestThebybefore Incomeprovisions rose Netdoubtful loans stoodfor at 2.29% in 2010, up from 2.18% Loans) Doubtful for Provisions (Before Margin Interest 7.1.3 2006 2007 2008 2009 2010 2006 2007 2008 2009 2010 Net Interest Margin Net Interest Income 2002 2003 2004 2005 2002 2003 2004 2005 7 0.00% 0 Profitability (in USDMillions) 0.50% 100 148 153 157 1.00% 181 200 271 1.50% 299 300 1.77% 1.75% 2.00% 2.18% 2.03% 2.13% 400 2.13% 410 419 2.29% 2.34% 2.42% 2.50% 495 500 Interest Cost / Interest Income Ratio years 0.00% 10.00% 20.00% 30.00% 40.00% 50.00% 60.00% 70.00% 80.00%

2010 58.84%

2009 63.13%

2008 62.10%

2007 69.69%

2006 67.81%

2005 70.66%

2004 71.25%

2003 70.91%

2002 70.40%

7.1.4 Net Provisions for Doubtful Loans

The net provisions for doubtful loans decreased from a positive balance of USD 3.46 million in 2009 to a negative balance of USD 16.51 million in 2010, in the wake of the consequences of the global recession.

7.2 Non Interest Income

Non-interest income increased by 23.76 % year-on-year, amounting to USD 182.87 million in 2010 compared to USD 147.76 million in 2009.

Breakdown of Non-Interest Income

2010 2009 Change USD Millions % of Total USD Millions % of Total % Net Commissions 96.41 52.72% 80.78 54.67% 19.35% Net Trading Income 25.78 14.10% 23.93 16.20% 7.73% Net Gain /Loss on Financial assets & liabilities 0.44 0.24% 4.98 3.37% (91.16)% designated at fair value through profit & loss Net Gain /Loss on Financial Operations 50.63 27.69% 25.58 17.31% 97.93% Other Operating Income 9.61 5.25% 12.49 8.45% (23.06)% Total 182.87 100.00% 147.76 100.00% 23.76%

Net commissions increased from 2009 by 19.35% to USD 96.41 million in 2010, and still maintained the largest share of total non-interest income, accounting for 52.72%, down from 54.67% in 2009. Moreover, net trading income recorded a year- on- year increase of 7.73% to USD 25.78 million, representing 14.10% of the total non- interest income as compared to 16.20% in 2009. Net gain on financial assets and liabilities designated at fair value through Profit & Loss decreased from USD 4.98 million in 2009 to USD 0.44 million in 2010, accounting for 0.24% of the total and decreasing from 3.37% in 2009. Net income from financial operations, which rose 97.93% to USD 50.63 million stood at 27.69% of total non-interest income, increasing sharply from 17.31% in 2009. Finally, other operating income decreased by 23.06% to USD 9.61 million in 2010, representing 5.25% of the total compared to 8.45% in 2009.

51 52 BLOM BANK s.a.l. Annual Report 2010 Staff Expenses Operating Expenses Distribution of Staff and Operating Expenses Operating and Staff of Distribution cost-containment policy. The cost-to-income ratio fell to 35.04 % in 2010 compared tocost-to-income relatively35.58% maintainingBank’sreflectinglowratio,stilla 2009.the efficient is BankBLOM said, That staff and operating expenses with 63.65% of the total while operating expenses stood at 36.35%. expenses went up by 6.19% to reach USD 83.53 million. Thus, staff Staffexpenses expensesaccounted for(salaries the andlargest relatedshare benefits)of increased by 14.79% in 2010 to USD 146.27 million while operating as the bank expanded its operations locally and regionally. Staff and operating expenses reached USD 229.80 million in 2010, registering a year-on-year increase of 11.51%Operating and Staff 7.3 T otal 7 Constituents ofNon-Interest Income 2010 Other OperatingIncome Operations Net Gain/LossonFinancial at FairValue through Profit andLoss Assets andLiabilitiesdesignated Net Gain/LossonFinancial Net Trading Income Net Commissions Profitability E xpenses 27.69 14.10 52.72 USD Millions 5.25 0.24 146.27 % 83.53 229.80 2010 % ofTotal 100.00% Constituents ofNon-Interest Income 2009 63.65% 36.35% Other OperatingIncome Operations Net Gain/LossonFinancial at FairValue through Profit andLoss Assets andLiabilitiesdesignated Net Gain/LossonFinancial Net Trading Income Net Commissions USD Millions 127.42 206.08 78.66 2009 % ofTotal 100.00% 61.83% 38.17% Change 14.79% 11.51% 17.31 16.20 54.67 6.19% % 8.45 3.37 % Cost to Income Ratio

50.00%

48.00%

47.34% 46.00%

44.00%

42.00% 42.56% 40.93% 40.00% 38.58% 38.09% 38.00% 39.77% 36.80% 37.26% 36.00% 38.37% 35.10% 35.04%

34.00% 34.11% 34.63%

35.58% 32.00%

30.00% 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 years

8 Dividend Distribution and Preferred Shares Revenue

During BLOM BANK’s Annual General Assembly, on April 8 2011, the distribution of dividends for the year 2010 was approved. Holders of preferred shares series 2004 and 2005 received a respective of USD 0.85 and USD 0.95 per share. As for holders of common stocks and Global Depositary Receipts (GDR), they received the equivalent of LBP 675 per share. All distributed dividends are subject to a 5% tax. Worth noting that BLOM exercised a share split of 1/10 for a total of 215 million shares in October 2010.

9 Capital Adequacy Ratios (Basel I)

The Bank’s capital adequacy ratio (Basel I) reached 26.39% (after dividend distribution) at the end of 2010, which is almost three folds the international ratio of 8% required by the Basel Commission. For Tier I capital alone, the capital adequacy ratio stood at 25.24% at the end of 2010.

53 54 BLOM BANK s.a.l. Annual Report 2010 15.00% 20.00% 25.00% 30.00% 35.00% 40.00% Sensitivity Gap Interest Rate Cumulative 2010 Sensitivity Gapfor Interest Rate Equity & Shareholder's Total Liabilities Total Assets USD Millions Sensitivity Interest-Rate 2010 is as follows: Thebank’s interest ratesensitivity position basedcontractualon re-pricing arrangements Decemberofas 31, are re-priced after the three months period, interest rate risk continues to remain within this period.pricedwithin the three months interval, while most of the bank’s treasury bills and government bonds portfolio assetsMostliabilitiesand arere-priced withinyear.one majorityGivenbank’sthethattheof depositsare re- assets and liabilities. Interest ratebank’searning interest affectingriskthe thusis rates,interestwell in movements managedadversefrom arisesthrough risk rateInterestthe continuous re-pricing of assets and liabilities. percentage) (In I) (Basel Distribution Dividend after Ratios Adequacy Capital 10 9 2002 26.06% 29.88% Interest RateRisk Capital AdequacyRatios(BaselI) 29.76% 1 month 2003 28.02% (8,841) Up to 13,499 (8,841) 4,658 3months from 1to 28.22% P (11,050) 27.34% 2004 osition (2,209) 1,554 3,763 33.23% 6months from 3to (9,939) 1,894 2005 1,111 30.71% 783 36.10% months to (8,661) from 6 1 year 1,687 1,278 35.33% 2006 409 from 1to 2 years 28.60% (6,565) 2,315 2,096 2007 219 29.05% Tier ICapital to 5years 27.61% from 2 (1,219) 5,516 5,346 27.85% 170 2008 5 years over 1,858 3,095 3,077 24.96% 18 26.33% 2009 Tier I+IICapital to Interest Rate Risk Sensitive Non - (1,858) 1,625 3,483 26.39% 2010 25.24% 22,344 Total 22,344 years -

11 Risk Management and Basel II Preparations

11.1 Risk Management

The consolidated Basel II Capital Adequacy ratio of the group reached 13.81% by the end of 2010 against 13.96% in 2009, which is above the 10.5% Basel III requirement once the capital conservation buffer element is fully implemented. This ratio is calculated in accordance with the Standardized Approach for Credit Risk, the Basic Indicator Approach for Operational Risk and the Standardized Measurement for Market Risk.

BLOM BANK Group (excl. Arope) Capital Adequacy Ratio / Tier I Ratio years 12.00% 12.50% 13.00% 13.50% 14.00%

2010

2009

2008

2007

CAR Tier I Ratio

For regulatory as well as internal purposes, the Bank calculates Basel Capital Adequacy Ratio on a group consolidated basis and by individual legal entity, allowing for close monitoring of the capital position of each banking subsidiary. In the latter case, every single entity achieved a Basel II Capital Adequacy Ratio above the minimum 8% international requirement.

By type of risk, Credit Risk comprises the largest proportion of Risk Weighted Assets, accounting for some 90% of the total. This position is relatively affected by Lebanon’s sovereign rating of B which impacts the Risk Weighting of Foreign Currency government securities holdings of the bank.

BLOM BANK Group (excl. Arope) Risk Weighted Assets by Risk Type

years 5,000,000 10,000,000 15,000,000 20,000,000

2010

2009

2008

2007

Market Risk Operational Risk Credit Risk

55 56 BLOM BANK s.a.l. Annual Report 2010 The Bank in its Corporate Governance Code has established independence criteria for non executive members non- and executive of succession the executive plans directors it and evaluates Also, the committees. performance Board of top management, on individuals including identifying sit Board to members. in directorship Board for qualified the to assistance provides Committee Remuneration and Nomination The governance policies and practices, and advises the Board on overall business development. monitorsandprogress its throughout Group.theapproves It monitorsand large projects, develops corporate The Consulting Strategy and Corporate Governance Committee oversees the development of the strategic plan the Group, and reports and drafts recommendations to the Board. TheBoard RiskManagement Committee periodically reviews andevaluates theRisk Management function of Department, in addition to financial internal Bank’s controls and the compliance with the of Bank’s integrity by-laws and the internal regulations. assessaccounting. and The monitoraudit committee to also is responsibility Committee’sassesses Audit the Boardcompetence The of External Auditors as well as the Internal Audit board committees. Audit,RiskManagement, Consulting Strategy Corporateand Governance Nominationand Remunerationand The Board exercises its oversight function to a large degree through four dedicated Governance Board Corporate 11.2 Committees. These are Business Continuity policies are in conformity with best practices.thatensures and emergencyscenarios potentialcovers that PlancomprehensiveContinuity Businessmore risk business periodic lines and loss through types are highlighted clearly highlighted. are Moreover, which the Operational aspects Risk team prepared risk a new andassessments. relevantTheBankmaintains detailed a LossIncidence allDatabase reflecting Basel accountrequirements whereby into taking procedures and TheOperational Riskteam Groupof RiskManagement ensures thatallactivities arecovered clearby policies Sensitivity Gaps, Earnings at Risk and Interest Rate and Foreign Exchange Rate shock scenarios. throughthe Focus ALM system, tracking ofInterest Rate Risk has been automated with detailed Interest Rate maintainingon highliquiditystrongcoreameetshort baseofdeposits.termneeds,wellasto as addition, In importanceplacesBankregion. The the operating environmentandLebanon the in in changesaccount into take scenariostovariousperforms liquidityandposition Bank’s andfundingthemonitors closely team Risk MarketThe ALCO. requirementsextensivelyby also usedIIarePillar thatmeet Bank helpingthe additionto extensivescenariogeneratingstresshastestingsystemandcapabilities ALM inManager system, thewhich Sungard theFocus underALM implemented system project, was Lebanon in addition BANK to BLOM the launch for of the Funds ALM Transfer dynamic and static Pricing Risk, model. Market Similar toFor the Capital credit portfolio. scenarioand generation capability whichwould allow meetBankthePillarto requirements II relationin theto CapitalBaselIIAdequacy calculation reporting,and continued2010. Thissysteminextensivehas stress test automateswhichsystem, II) (BaselManagerCapital Sungard the Implementationcards.ofcredit and loans for Retail Banking products were implemented in 2010. The retail products covered include car loans,with personalnew specialized scorecards for SMEs introduced in 2010. Application scorecards developed by Fair IsaacUnder Credit Risk, the generation of Internal Ratings for our commercial and corporate credit portfoliosAll areas of riskcontinued coverage by the Group underwent continued development during 2009: Currently, there are eight country Risk Managers.Officer.RiskChief Group the reports tothat ManagerRisk own itspresent has each is Bank whereby thewhich Groupincountry the within Structure Management Risk a implemented has Management Risk Group comply with some of the more advanced approaches under Pillar I of Basel II. developedaplan to implement avariety of systems that cover the three broad areas of risk and help the bank practices and processes are in place throughout the Group. To help achieve this, Group Risklatter Managementdelegatedis thebyBoard hasDirectorsof ensureto sound, comprehensive andeffective RiskManagement Bank’sManagement.GroupGeneralRiskcloselyManagementThemonitoredThe capitaland position byis 11 Risk ManagementandBaselIIPreparations of the Board who must constitute a majority of the Board. The Board Committees are fully functional and meet in accordance with stipulated frequency.

The Bank firmly believes in the basic principles of accountability, reporting and transparency throughout the organizational structure. Senior management exercises the authority delegated to it by the Board through clear and segregated reporting channels, including Management Committees covering all areas of operations. They also ensure that internal risk and control procedures and structures are overseen by respective departments, namely Internal Audit, Risk Management and Compliance.

The Bank makes sure that all employees act professionally, ethically and with the utmost integrity in accordance with an established Code of Ethics and Conduct. Additionally, the Bank recognizes the value of its Human Resources as a prime stakeholder in the institution, endeavoring to treat all employees in the most equitable manner. As such, all employees are required to attend presentations on the Bank’s Code of Conduct and Corporate Governance. The Bank will continue to develop its Corporate Governance practices while seeking to protect and enhance stakeholders’ interests from shareholders to employees.

12 Universal Banking Services

In line with its aim of maximizing customer satisfaction and increasing shareholders’ value, BLOM BANK has adopted the policy of diversification of its products and services. BLOM Bank provides the following universal banking services that suit all customers’ needs:

- Private and investment banking - Commercial banking and corporate banking - Retail banking - Islamic banking - Insurance services

12.1 Private and Investment Banking

BLOM BANK provides private banking services such as investment consulting and wealth management through both its investment-banking arm BLOMINVEST Bank Sal, its Geneva-based affiliate BLOM BANK Switzerland, BLOM BANK Qatar and BLOMINVEST Saudi Arabia. Some of these services include:

• Investment Products: include a variety of investment funds and structured products focusing on Lebanese and foreign instruments. Based on its pioneering success in launching mixed class mutual funds, the Bank successfully rolled the BLOM BANK Pyramids Fund as well as a reset class of the highly demanded BLOM Cedars Balanced Fund in 2010.

• Project Finance: consists of extending medium and long term financing and participating in bank loan syndications.

• Treasury & Capital Market Services: includes brokering on the Beirut Stock Exchange (BSE), advising on trades in international equities, trading in debt securities and dealing in foreign exchange markets.

• Investment Banking: participates in the underwriting and distribution of Lebanese and other debt instruments, provides advice on mergers and acquisitions as well as privatization.

• Asset & Portfolio Management: covers management of portfolios of shares, bonds and term placements in all currencies.

57 58 BLOM BANK s.a.l. Annual Report 2010 • n diin o h aoe BO as hs Wtn, cr luce sll fr h Lbns am, internal army, Lebanese the for solelysecurity launched and card national security a “Watan”, forces. has also BLOM above, the to addition In frequently, andEurope prepaidvisit cardswho “mini”those forfor thosecard wishingEuro to ahave users,a cardInternet without fordedicated openingcardsInternet an account.has Moreover, Bank the Platinum, Black Platinum, and Corporate (Business Platinum, PlatinumAccordingly, Corporate, BLOM andcards Classiccome under CorporateVisa and cards).MasterCard and range from Electronic, Classic, Gold, Titanium, branded and prepaid. takes into consideration the various types of customers and their card needs such as debit, charge, credit, co- of payments and meet different purposes. These cards vary in type and in currency.BLOMBANK offerswideTherangepayment ofa cardssegmentation that target different of customers,cards provide different methods P loans and services. introducedBANKretailBLOM2010,products, new existingdevelopedInportfolio payment anditscards, of Banking Retail 12.3 economies while ensuring a conservative and sound lending policy. brief,InBLOMBANKwillmaintain objective itscontributing of developmenttheto Lebanesethe ofArab and growth during the coming decade with Qatar hosting the 2022 Football itscontinue world to expected cup event.is that economy booming the benefiting from Qatar incorporateclients facilitiesto creditextendingcontributions consolidatedbyQatar, its Qatar,BANKit BLOM subsidiaryin new our for As toprovide services financing and productsin compliance existing with its Islamic developed Shariaa bank through the services,its subsidiary banking conventional BLOM the DEVELOPMENT to BANK. addition In operating in different sectors of the economy, through its entire branch network. parallel,In bankthesustained policyitsincreasingof loanitsportfolio smallmediumtoand sized businesses and other Arab countries throughout its network. Moreover, BLOM BANK mandated and participated in several syndicated loans to finance projects in Lebanon related projects. This was reflected by the increase in our loan tourism portfolio as well by industrialdevelopment, 29%as estate project finance, and inreal of2010.area the corporateinclients to Accordingly, and in line with the conservative credit practices of BLOM BANK, several new loans were extended deposits, and revised BDL incentives related to extendingexcessliquidity, availability creditsof highthe itsagainst ofadvantagedecrease takingportfoliocredit in its reserve expand requirements.tocontinued Bank During 2010, and as the international financial markets started to pick up after the 2008 worldwide crisis, BLOM Banking Corporate and Commercial 12.2

ayment cards 12 Lebanon’s first financial market index that covers all stocks quoted on the BSE, and conducts equity conducts and BSE, research the on on major Lebanese quoted and regional stocks companies. all covers that index market financial Lebanon’s first (BSI), Index Stock BLOM the well aspublishes presence.It a has BANK BLOMwhere thoseespecially analyzes leading Lebanese economic sectors. In addition, it provides country reports on regional economies, eerh Department:Research Universal BankingServices rdcs al, eky n qatry eot o te eaee economy, and Lebanese the on reports quarterly and weekly daily, produces BLOM was the first bank in Lebanon to launch the “Personalize your card” service whereby cardholders can add on the front of their card a personal image of their choice, or an image from BLOM’s unique Image Library, which includes categories like sports, wildlife, romance, pets, holidays and special occasions to name a few. BLOM exclusively offers the possibility of having this service completed online or physically through any branch.

As part of its Corporate Social Responsibility activities, BLOM BANK launched two new programs in 2010 that were considered unique in Lebanon; the BLOM Shabeb and MasterCard Giving card.

The BLOM Shabeb Program targets the Youth who consist of middle and high school students, university students, and future professionals. The program offers the youth an array of banking services, especially catered to their lifestyles and needs. The retail department has introduced three types of cards to suit the needs of the youth: prepaid cards, debit cards, and preapproved credit cards for students of predetermined universities.

On another front, BLOM BANK launched the MasterCard Giving card, first of its kind in the world, in collaboration with the Lebanese Mine Action Center (LMAC), a unit of the Lebanese Army. The program offers a Gold MasterCard or a Titanium MasterCard, which combine the benefits of a credit card, with the ability to donate to the LMAC, which is in charge of demining the Lebanese territory, spreading awareness and caring mine victims. Donations are made whenever BLOM MasterCard Giving Affinity cardholders pay the card’s annual fee and use their cards for purchases or for cash withdrawals.

POS Machines Merchants wishing to install BLOM POS machines have a choice between:

• GPRS machines: wireless that requires no electricity or fixed line. With a SIM card provided by BLOM BANK, our GPRS machines are mobile, allowing merchants to move them anywhere they desire. They accept dual currencies (USD- LBP)

• Hypercom POS machines: require electricity and a fixed telephone line. They are a dual currency machines: USD and LBP.

• Veriphone machines: require electricity and a fixed telephone line. They are a single currency machine: USD or LBP.

The BLOM machines accept payment cards under the brands of Visa, Visa Electron, MasterCard, MasterCard Electronic, and Maestro.

The machines are equipped with the latest EMV technology that allows acceptance of Chip cards. This technology provides ultimate security to both the cardholder and the merchant.

BLOM provides merchants with a next day settlement of the transaction amount, with a one day value date as of the settlement of the amounts. BLOM BANK also dedicates an account manager to handle all inquiries and suggestions concerning POS issues. In addition, BLOM BANK offers a 24 hour merchant call center which is tailored to cater for all needed support.

Reward Programs The BLOM Golden Points Loyalty program enables customers to win a variety of gifts -such as airline tickets, free stays at the finest hotels, electronics and much more- by accumulating Golden points with every $100 of purchases using the card.

The BLOM Gifts Loyalty program allows cardholder to win valuable gifts for purchases at certain merchants over a period of 6 months.

The Shabeb Loyalty program is a recently launched program dedicated to the BLOM Shabeb cardholders that entitles them for discounts and special deals at reputable merchants across Lebanon.

Our co-branded card, Alfa BLOM MasterCard, offers free talk time to cardholders on a monthly basis and on card spending.

59 60 BLOM BANK s.a.l. Annual Report 2010 • • • • BLOM BANK’s customers can take advantage of a number of consumer loans to satisfy their various needs: Consumer loans ATM’s which allow around the clock cash withdrawal. openedRetail5 Branches which offer faster transactions termsinRetail of services. AllBLOMbranches have addition to the traditional branches which are conveniently distributed throughout Lebanon, BLOM has alreadyTheprimary aim of BLOM BANK is to better the serve its customers by to offering the best products related and services. In are that offers exclusive with from benefit along card now memorable day. credit can preapproved clients a Interested cards, Account. debit List personalized Wedding its enriched BANK BLOM Furthermore, with various services for a monthly fee: Account Plus Classic, Account Plus Gold and Account Plus Platinum.currentclientaccountstheoffer bundledaccounts that salarydomiciliationof typesthree alsoaccounts. areThere and accounts bills utility account, savings special a Maksabi, offers bank the accounts, current and BLOM BANK offers a number of special accounts, cateredSpecial Accountsfor special needs. In addition to the traditional savings of Mutual Fund programs. and more profitable way. Accordingly, BLOM BANK, in collaboration with BLOMINVEST Bank, offersBLOMBANKoffers variety aainvestment ofnumber products helpmanagetoindividual’s an finances better, a in safer Investment life insurance. Plus, a retirement plan coupled with life insurance and WALADI Plus, a child’spolicy educationin program,collaboration coupled with with Arope Insurance. New and more flexiblehealth, fire, products car in insurance USD wereand so launched; on. BLOM DAMANATI BANK also offersAROPEInsurance, investment BLOMBANK’s subsidiary,programs offerscoupledinsurance kindsallof services withfrompersonal accident, a to life insurance Bancassurance Services • • • tailored for their needs: mediumSmallandenterprises, employedselfevenbusinessoror owners benefit canvariety loans from of a SM the from 2011 for East Middle the in Loan Banker MiddleEast. Personal Best for award the winning initial in no resulted has with products charge interest 0% the is household Lebanon’s characteristic of Lebanon’sand retailer between bank leading association best This payment. down Another amount. loan outstanding the the covering of policy insurance amount life a includes pricing its and years 4 & 1 between ranges duration loan The solution to purchase the latest electronics, and home appliances. In 2010, BLOM BANK launched a consumer loan in partnership with Khoury •

12 E Award, from The Baker Middle East. Housing loans in Collaboration with the Corporation for Public Housing DARA SA KARDI KA B SMALL B Housing Loan for projects under construction loans U Y F SIN ARA ALA Universal BankingServices T E for personal loans I for housing loans (principal home, or non-principal home) P SS LOAN T T roducts U is a subsidized loan for small business owners I for car loans (new or used vehicles), winner of the Best Car Loan in the Middle East for 2011for MiddleEast the inLoan Car Best vehicles),theused winnerofor (new loans car for SIN E SS LOAN for financing an office, a warehouse, a clinic, etc. for SMEs H ome. This loan offers the optimal (CP H ) Sales Force BLOM has more than one sales channel which range from Direct Sales, to indoor Sales, to telemarketing teams that promote and sell available Retail products and services.

Call Center BLOM customers can enjoy the convenience of a 24-hour call center, ready to cater for all their needs and inquiries. The retail department also has a telemarketing team to make outbound informative calls to existing clients.

The Call Center’s monitoring system has been upgraded to a better examination and control of fraud and scans.

E-Banking BLOM BANK offers to its customers phone banking services such as “Allô BLOM” ( a 24-hour customer service) as well as internet banking services such as e-BLOM. This service allows users to complete many of their routine banking transactions in the comfort of their home/office. The client may even apply for a card, issue a prepaid card, or even perform outgoing transfers.

SMS Alert Service The Bank provides a convenient SMS ALERT service, enabling customers to receive alerts whenever the balance of accounts changes or a transaction is being performed.

Public Website BLOM retail products and services enjoy an independent, user-friendly website where users can make use of simulators and online application through: www.blomretail.com

Workflow BLOM developed internally a workflow system to process car loans, personal loans, credit cards and debit cards electronically, thus benefiting from Electronic Archiving, as well as fast approval and response cycles (e.g.: 1 hour for car loans). In 2010, BLOM BANK enhanced the workflow to includeH ousing Loan applications.

12.4 Islamic Banking

BLOM DEVELOPMENT BANK (BDB) S.A.L. increased its market share in the Lebanese market during 2010. Although the footprint of the Islamic banking sector is still very modest when compared to the conventional sector as a whole, the Islamic financial sector is proving to be a viable alternative to financing and investment in a socially responsible frame of mind.

In fact, BDB assets increased by 21% over 2009, deposits soared by 242% and the facilities extended locally and regionally exhibited a rise of 338% over 2009.

BDB entrenched its presence in the local market and in the regional arena as well. In the Lebanese market, BDB inaugurated successfully its Tripoli branch in the first semester of 2010. The facility is located in a prime area in the center of North Lebanon’s economic hub. It comprises of a modern premise across three floors with state of the art ICT infrastructure. On the other hand, BDB finalized the building plan of its new headquarters in Beirut’s Corniche el Mazraa area that will be operational in 2013.

Internally, BDB expanded its credit department and created an operations department as a result of demand activity in Islamic Finance.

Regionally, BDB widened its presence in neighboring economies through multi-layer financing facilities as well as international trade financing activities. The expansion is substantial both in the clients’ substrate as well as in the volume of operations. The need for a sophisticated and efficient Sharia compliant trade financing services in the region are only matched with the BDB precision and “peace of mind” approach to Islamic financing.

The year 2010 witnessed the initial phase of BDB strategic expansion plan which engulfed the opening of new branches in key areas in Lebanon and the establishment of BDB as a nascent player among the Islamic corporate financial service providers regionally.

61 62 BLOM BANK s.a.l. Annual Report 2010 • • • • • • with the bank is enabled by our eBlom suite of integrated electronic banking delivery channels that consist of:interact with our customers however, wherever and whenever they desire. This 360 ofchannels including IVR, Internet, ATMs, SMS, Call Center, inaddition tothetraditional branches, inorder tovariety a on-line,servicesbankingreal-time,usingenhancingclockouraround the on kept we 2010,During Management Relationship Customer 13.1 and national address security, systems enhance international and compliance risksand regulatory manage requirements technologies, and cardsgain customer insights and and business payments intelligence. in In fact, we have been using state-of-the-art systems infrastructures to diversify our delivery channels, innovate experiences and enrich our products and services portfolio. growand evolve ourbusiness to byproactively seeking constantly using are powerful information we technologies why in reasonorder toenhance thecustomer is That growth. institutional and advantagecompetitive In today’s technology-driven world, the effective use of banking technologies remains the key to differentiation, in themarket. excel them enable to strategies management effective up setting and pillars strong building in investing are the year to develop the human resources and improve dedicated Insurance, Life the AROPE and Liabilities Propertiesand for efficiencyEgypt AROPE subsidiaries, our Egypt, In of the Egyptian operation. Both companies ofSyrian rankings the in reflected turn in was insurance companieswhere AROPESyriagainedthe2ndposition. This 31.50%. of share growth market annual its combined substantially a increased registering by and performance industry’s the of advantage took Syria AROPE Regionally, the Syrian insurance market produced good results in 2010. In both, Life and Non-Life segments, the in Lebanese market. operating firms insurance 52 among market the of 10.54% capturing 9.90%, of growth a registered premiums, life hand, other the On 6.85%. of share market a representing million, 55.34 USD to 15.60% by the all of spite in strong challenges and stood ranked AROPE 5th in profits. total life net and in non-life segments 60.32% of the of market. increaseAROPE’s and yearly Non-Life growtha premiums registergrew steady to its development continued AROPE result. this to positively contributed products bancassurance of 2010. during well performed sector development the insurance and Lebanon in the growth economic The 2009. Lebanon, from 13.10% by increased in premiums Overall sector financial the of rest the with line In Insurance 12.5

13 12 exchange quotes, news feeds, marketing campaigns, new promotions, TV commercials etc.. over large LCD screens deployed at the branches, live and updated information covering stock and foreign CRM application. continuous enhancements based on CTI and IP telephony to achieve seamless integration with the Bank’s phones to inform them instantly about events in relation to their accounts or cards. are being constantly planned and added. continuously expanded, enhanced and adapted to customers’ needs and demands. eBlom– Live Information Broadcasting System – a system that enables the bank to broadcast in real-time eBlom – Contact Center – our contact center is available 24 hours a day all year long and is benefiting from eBlom–SMS Alerts –areal-time alerting system based on delivering messages to our customers’ mobile eBlom are – which Self services Service of – arrayusing widethe bank a Network offers of that ATMs service bankingdeployed online all our over –Lebanon Bankingwhere Internet additional – serviceseBlom eBlom – ALLO BLOM – the Bank’s Interactive Voice Response system. Information SystemsandTechnology Universal BankingServices P roducts & Services & roducts ⁰ view of customers’ activity • eBlom – Targeted Information Passing System – a campaign management and lead referral tool that allows the profiling of customers using a centralized knowledge base that offers over-the-counter customers new products and services tailored to their needs. These custom offerings are presented to customers during their presence at the branch.

In order to provide an integrated banking web site experience, we developed the eBlom Portal project to provide a unified authentication platform for BLOM BANK and its subsidiary companies in order to securely establish the identity of individuals accessing the various electronic services offered through the Internet covering all the universal banking services. The eBlom Portal allows BLOM BANK and its affiliated companies to provide access to their electronic services via a single interface thus paving the way to offering the single sign-on feature to customers.

In addition, this versatile authentication platform aims to provide a verification methodology to protect the customer against identity theft while following the industry’s best practices. In effect, the authentication methodology that was adopted was based on two factors of authentication including the customer’s username and password which are the part of the credential that a customer knows. This was coupled by an SMS-based One-Time-Password (OTP) which is the other part of the credential that the customer would need to retrieve from a personal mobile phone.

13.2 Advanced Electronic Payment Systems

In 2010, we kept on growing our VisaCard and MasterCard offerings and enhancing the reliability and effectiveness of our payment systems. We also kept on delving into the business-to-business (B2B) market by providing Point of Sales to merchants across Lebanon.

Furthermore, we kept on reaping the benefits of our online card fraud monitoring system capable of sending real-time alerts to the bank’s call center agents, thus enabling immediate action and insight as well as reporting and tracking should a fraud pattern be detected. This card fraud monitoring system drastically reduced fraud losses and incidences.

13.3 Enterprise Application Integration (EAI)

During this year, we kept on developing our Service Oriented Architecture (SOA) framework to achieve the highest degree of integration between our different information systems through the use of web-services and of a powerful and flexible workflow engine. This allowed us to manage the complexity and control the quality and cost of business processes throughout their lifecycle involving people and systems.

In addition, this EAI framework was applied to many processes, in particular, our consumer loans processing systems consisting of a loan origination system, a loan assessment system, and a loan granting system. This framework has allowed us to offer an instant loan granting system aimed at instantaneously granting walk-in customers a personal loan specially targeted to their needs. The EAI framework was also applied to many processes, such as the processing of incoming checks from the national clearing house with the objective of de-materializing the clearing process through scanning and electronically sending the check images to the branches instead of sending the physical checks.

13.4 Basel II & Regulatory Compliance This year, we continued to address compliance requirements through the use of state-of-the-art systems for corporate and commercial credit risk rating systems acquired from MOODYS. Other software-based systems related to Assets & Liabilities Management, Funds Transfer Pricing and Capital Management were also acquired from SUNGARD. Some of these project phases were completed in 2010 while others are planned for execution during 2011.

In addition, we kept on building our credit scorecards by integrating to the loan origination workflow a credit scoring system for loans based on Fair Isaac scoring models.

63 64 BLOM BANK s.a.l. Annual Report 2010 n dsrbto o BO BN epoes cos h vros nt o BO Gop ad codn to according and Group, BLOM of units various the various criteria. across employees BANK BLOM of distribution and structure the represents table following The years. 36.2 was employees of age average the higher,while or relative young age. At the end of 2010, the majority of employees (74.9 percent) held a university level degree The mostvisiblecharacteristicofBLOMBANKemployees istheirhighlevelofeducation,inadditionto ethical of standards highest the to adhere to behavior inwhatrelates toconfidentiality, professionalism, transparency,expected conflictofinterestare andintegrity. They conduct. of code general a and security All employees, on the other hand, are required to comply with a set of policies concerning safety, information age anddisability. gender,ethnicity,of religion, basis the on type any of discrimination prohibit and applicants and employees and standards of set A other terms and privileges of employment. BLOM BANK manner.policies in this regard offer equal opportunities to all transparent and ethical fair, a and training, in regardprocedurescompensation, in advancement, treatmentemployees hiring, the of to guide managed are BANK BLOM at People of theBank. functioning effective the for essential as recognized is employees of talent the and resource, valuable most bank on its path to become a major player in the regional financial markets. Staff at BLOM are considered the BLOM BANK Management continues to stress the importance of the role of human resources in keeping the Overview General 14.1 This solution has allowed us to consolidate the financial statements across BLOM BANK Group. intelligence and advanced analytics to provide financial built-in timelyoffers also and accurate consolidation. It comprehensive and informationreporting financial powerful a offersand that improved is solution web-based which decision Controller support. 8 Cognos IBM the of implementation the continued we 2010, During 13.6 advanced preventive implementing and through detective activity systemscontrols monitor pro-actively and online to monitoring. and threats security prevent and address to Proceduresand Policies SecurityInformationdeveloping andawareness employeeraising on kept alsoWe security and performance. full compliance with the ANSI 942 standard, which sets requirementsfeaturesefficient powerfor consumption assuring in accordance thewith greenhighest data centeralso Center Datarequirements levels the thatworthwhilenoting and of wasis designed expansion.continuity,Itbank’s in fordemandsfuturethe meet toservices informationsystems bank’sfrom thelosses protectin case of andavailabilityan unforeseen higherensure disaster. would facilities these It also fact,accelerates Inthe bank’sdevelopment assets. theof newprotect to strategyour of part asrecovery disastersitesfacilitiesand center data our investingin on kept we 2010, In For this purpose, we introduced server virtualization and consolidation and enterprise storage consolidation. very important assets for our business continuity. Therefore,financial a institution Asyears, recognize we around we been 55 systemsareover data has that our for that and kept on improving our IT Infrastructure reliability. Reliability Infrastructure & Security Systems 13.5 14 13 F inancial Reporting & Consolidation & Reporting inancial People Development Information SystemsandTechnology Distribution of BLOM Employees Across the Various Units of the Group by Gender, Age, Level of Education and Function as at 31/12/2010

BLOM (Lebanon, BLOM BLOM BLOM BLOM BLOM Other BSO Arope Total** Cyprus & Invest Dev. FRANCE Switz’d Egypt Units * Jordan) Gender Male 1,041 58 17 136 13 630 33 349 178 2,455 Female 829 34 5 118 7 175 11 220 190 1,589 Total 1,870 92 22 254 20 805 44 569 368 4,044 Age < 25 427 21 8 21 1 142 2 211 87 920 26-35 764 38 6 75 1 365 23 296 176 1,744 36-45 293 24 4 73 3 168 9 47 65 686 46-55 259 8 2 46 9 93 8 11 28 464 56-64 127 1 2 39 6 37 2 4 12 230 Total 1,870 92 22 254 20 805 44 569 368 4,044 Average Age 34.98 33.13 34.86 42.04 49.50 33.00 37.33 28.40 32.33 36.18 Level of Graduate 404 38 4 34 6 19 10 33 25 573 Education Degrees Professional 7 1 0 1 1 7 5 3 2 27 Certificates

Bachelor 946 40 12 131 1 683 24 377 217 2,431 Degrees

Technical 43 1 0 31 12 90 3 78 52 310 Certificates

Others 470 12 6 57 0 6 2 78 72 703 Total 1,870 92 22 254 20 805 44 569 368 4,044 Managers and Functions 134 14 4 19 4 99 19 37 36 366 Above Deputies/ Assistant 148 6 2 46 3 70 3 8 13 299 Managers Supervisors 166 5 1 24 4 87 0 57 31 375 Employees 1,422 67 15 165 9 549 22 467 288 3,004 Total 1,870 92 22 254 20 805 44 569 368 4,044 Number of Branches 68 1 2 9 1 26 3 24 13 147

* Other Units include (Abu Dhabi, BLOMINVEST KSA & Qatar) ** Excluding BLOM Egypt Securities & Syria & Overseas for Financial Services 14.2 Policies and Procedures

BLOM BANK recognizes the importance of a talented labor force in keeping the bank highly competitive. Appropriate policies were implemented so that the creation and development of talent is maintained through attracting, developing and retaining the best and the brightest employees.

14.2.1 Recruitment

Providing the bank with the required human capital to meet its operational and strategic goals is a challenging task that we continuously strive to accomplish. To this end, we adopt a strategic approach for recruiting and selecting the right number of people with the required set of skills at the time they are needed.

65 66 BLOM BANK s.a.l. Annual Report 2010 Recruits New training Hours of Distribution of Training Activities Across the Various Units of BLOM Group in 2010 in Group BLOM of Units Various the Across TrainingActivities of Distribution per employee. hours training 21.4 of average an to amounting 2010 during hours training 86,725 delivered Group BLOM delivered by are seminars skill development soft developed professional trainersfromtrainingfirms. localandinternational while usually BANK, are BLOM seminars from experts in-house Technical field accordingly. by set delivered the and is and year year coming every the of for quarter last plan the training during (TNA) Assessment Needs Training the performs managers, The Languages. Technologyand Information Sales, & Marketing Techniques,Banking are which among Management, topics of range wide a covering trainings external and to able is in–house that of differenttypes in workforceinvests BANK BLOM environment. competent business changing constantly the a to adapt ensure to essential as training continuous considers BANK BLOM 14.2.2 T various the of rates turnover and Recruits New and AROPE(13%) table below). (see The employees majority retiringof to the and new departing employees recruitsreplace wereto new in and BLOM 892 region Lebanon, the (32%), of across BSO bank (29%), total the BLOM Egypt of a (17%), expansion recruited the groupsupport BANK BLOM of units various the 2010, year the During recruitmentand otherexternal partners. interns centers, careerservice university fairs, job recruitmentsystems, on-line database, candidate internal employees, internal including vacancy each for pool candidate the widen to exploited are sourcesDifferent screened bythecompliance departmentforthorough background checking. The final decision is given by the are Applicants recruitment. Manager. General the by positions, level timely high for recruitment and officers, and managers unit by interviewed for allow to enough business early and positions open expansion identify geographical managers our Unit on needs. upon based commences employees It new for all. need for the opportunities of equal evaluation and complete non-discrimination of principles the with line in staff appropriate most and available best the of recruitment the ensures process selection and recruitment The Rate Turnover * NewUnitsinclude(AbuDhabi, BLOMInvestKSA&Qatar) * NewUnitsinclude(AbuDhabi,BLOMInvestKSA&Qatar) 14 raining People Development (Lebanon, (Lebanon, Cyprus & Cyprus & Jordan) Jordan) BLOM BLOM 44,038 286 7.0 BLOM BLOM Invest Invest 1,692 15.0 12 BLOM BLOM HR committee and the accepted applicants are then reference checked and Dev. Dev. 186 20.5 9 FRANCE FRANCE BLOM BLOM 1210 14.6 40 Switz’d Switz’d BLOM BLOM U 27.9 39 nits of BLOM Group in 2010 in Group BLOM of nits 5 BLOM BLOM 12,628 Egypt Egypt 154 11.6 R department, in collaboration with line with collaboration in department, HR Units * Units * New New 320 24.1 15 Arope Arope 6,908 114 13.7 19,704 BSO BSO 257 17.2 86,725 Total Total 892 10.9 14.2.3 Career development and promotion Career development at BLOM is considered a powerful employee motivator and retention tool, and gives the bank a competitive strength in attracting new talent. Career development is emphasized because of its importance in creating large pools of highly competitive and qualified people who have the necessary skills and competencies required for top-level performance. In addition to the individual training programs that are designed for high potential employees, two particular programs, the Management Training Program (MTP), and the Fast Track Program (FTP), were designed to provide the bank with the needed talent for the future. While the MTP gives participants the opportunity to branch out through serving on cross-functional teams and completing short-term assignments, the FTP allows the participants to gain in-depth knowledge in a particular area of expertise. The selection of candidates for these programs follows a very rigorous and transparent process where the immediate supervisors, the line managers and the HR department are all involved to ensure that the best performers with the highest potential are selected from the pool of young, ambitious and motivated employees. Because we strongly believe that the bank’s value lies in its human capital, we try to keep our people on the frontiers of their professions to better serve our customers.

15 Bank’s Operational Efficiency

In 2010, the group’s operational efficiency continued to show improvements. Net profit per branch rose by 5.1% to reach USD 2,264,390 at a time when the number of branches expanded by 7.3%. In addition, average assets per branch showed a slight increase to reach USD 153,042,328 at the end of year 2010, compared to USD 152,223,411 recorded in 2009.

BLOM Group’s Operational Efficiency Indicators 2010 2009 Number of Employees 4044 3,559 Number of Branches 146 136 USD Average Assets per Branch 153,042,328 152,223,411 USD Net Profit per Branch 2,264,390 2,154,564

16 Local and Regional Expansion

BLOM BANK Group will continue its geographical expansion policy in the region by opening new branches locally and abroad. In Lebanon, BLOM BANK opened 2 branches in Tyr-Abbassieh and Bab Idriss during the year 2010 and is planning on opening 2 other branches in Kfar Hbab and Jib Jannine in early 2011. BLOM BANK also plans on adding 5 new branches to its network: Amyoun, Dekerman (Saida), Ghobeiry (in addition to the currently available branch in Ghobeiry), Baabda and Broumana, expected to open in 2011 and 2012, bringing the number of branches to a total of 66. In terms of the regional expansion, BLOM BANK JORDAN opened a branch in Abdoun in 2010 and plans to open another branch in early 2011 in Wadi Saqra. In addition, BLOM BANK JORDAN expects to expand its branch network in 2011 and 2012 by opening in Aqaba, Abdali and Taj Mall (Abdoun), therefore increasing the total number of branches to 12. On the other hand, BSO (Bank of Syria and Overseas) opened 2 new branches in Mouhardeh (Hama) and Al Rawda (Damascus) in 2010 and plans to further expand by introducing 2 new branches in Deir Al Zour and Al Kameshli in 2011. This brings the total of BSO branches to 27. In Egypt, BLOM BANK EGYPT opened a branch in Haram in 2010 bringing the total number of branches to 26.

67

70 BLOM BANK s.a.l. Annual Report 2010 Consolidated Financial Statements at 31 December 2010

BLOM BANK S.A.L. CONSOLIDATED FINANCIAL STATEMENTS 1. Auditors’ report 72 20. Loans and Advances to Customers 120 2. Consolidated income statement year ended 31 21. Bank Acceptances / Engagements By Acceptances 121 December 2010 73 22. Non-Current Assets Held For Sale 122 3. Consolidated statement of comprehensive income 23. Financial Investments 122 year ended 31 December 2010 74 24. Property And Equipment 123 4. Consolidated statement of financial position at 31 25. Intangible Assets 124 December 2010 75 26. Other Assets 125 5. Consolidated statement of cash flows for the year 27. Goodwill 126 ended 31 December 2010 77 28. Due to Banks and Financial Institutions 128 6. Consolidated statement of changes in equity for 29. Customers’ Deposits 128 year ended 31 December 2010 78 30. Current Tax Liabilities 128 31. Other Liabilities 129 NOTES TO THE CONSOLIDATED FINANCIAL 32. Provisions for Risks and Charges 129 STATEMENTS 82 33. Retirement Benefits Obligation 130 1. Corporate Information 82 34. Share Capital and Premiums 131 2. Accounting Policies 82 35. Capital Reserves 132 2.1 Basis of preparation 82 36. Treasury Shares 133 2.2 Basis of consolidation 83 37. Available-For-Sale Reserve 134 2.3 Changes in accounting policies and disclosures 85 38. Cash And Cash Equivalents 135 2.4 Impact of the adoption of IFRS 9 effective 1 39. Dividends Declared and Paid 135 January 2011 on the amounts reported 87 40. Related Party Transactions 136 2.5 Summary of significant accounting policies 88 41. Contingent Liabilities, Commitments and Leasing 2.6 Significant accounting judgments, estimates Arrangements 137 and assumptions 106 42. Fiduciary Assets, Assets Under Management and 3. Acquisition of Additional Interest In Bank of Syria Custody Accounts 138 and Overseas SA 108 43. Fair Value of the Financial Instruments 138 4. Segmental Information 108 44. Maturity Analysis of Assets and Liabilities 144 5. Interest and Similar Income 112 45. Legal Cases and Contingent Liabilities 146 6. Interest and Similar Expenses 112 46. Risk Management 146 7. Net Fee and Commission Income 112 46.1 Credit risk 147 8. Net Trading Income 113 46.2 Liquidity risk and funding management 154 9. Net Gain on Financial Investments 113 46.2.1 Analysis of financial assets and liabilities 10. Credit Loss (Expense) Income 113 by remaining contractual maturities 156 11. Personnel Expenses 114 46.3 Market risk 158 12. Other Operating Expenses 114 46.3.1 Interest rate risk 159 13. Income Tax 114 46.3.2 Currency risk 162 14. Earnings Per Share 115 46.3.3 Prepayment risk 164 15. Cash and Balances with Central Banks 116 46.4 Operational risk 164 16. Due from Banks and Financial Institutions 116 47. Capital Management 164 17. Derivative Financial Instruments 117 48. Notes to the Consolidated Statement of Cash 18. Financial Assets Held-For-Trading 119 Flows 165 19. Financial Assets Designated at Fair Value Through 49. Comparative Information 165 Profit or Loss 119 50. Subsequent Events 166

71 72 BLOM BANK s.a.l. Annual Report 2010 then endedinaccordanceFinancial ReportingStandards. withInternational thefinancial respects, all material in year the for flows cash its and performance fairly, financial its and 2010, December 31 at Groupas the of position present statements financial consolidated the opinion, our In Opinion audit opinion. our for basis a provide to appropriate and sufficient is obtained have we evidence audit the that Webelieve evaluating theoverallpresentation oftheconsolidatedfinancialstatements. of appropriateness the evaluating includes accounting policies used and the reasonableness of accounting estimates made by management, also as well as audit An control. internal entity’s the of effectiveness the on opinion an expressing of purpose the for not but circumstances, the in audit appropriate are design that procedures to order in statements financial consolidated the of the presentation to fair relevant controland preparationinternal entity’s consider auditors the assessments, risk those making In error. or fraud to due whether statements, financial consolidated the of misstatement material of risks the of including assessment the judgment, auditors’ the on depend selected procedures The statements. financial consolidated the in disclosures and amounts the about evidence audit obtain proceduresto performing involves audit An whether thefinancialstatementsare free from materialmisstatement. about assurance reasonable obtain to audit the perform and plan and requirements ethical with comply we that requirestandards Those Auditing. on Standards International with accordance in audit our conducted Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We Auditors’ Responsibility from free are that material misstatement,whetherduetofraudorerror. statements financial consolidated of preparation the enable to necessary is determines in accordance with International Financial Reporting Standards, and for such internal control as management Management is responsible for the preparation and fair presentation of these consolidated Management’sfinancial ResponsibilityfortheConsolidatedFinancialStatements statements then year the for flows cash ended, andasummaryofsignificantaccountingpoliciesotherexplanatoryinformation. of statement consolidated and equity in changes of statement consolidated (theBank) SAL 31 Bank at as December 2010 and the consolidated income statement, consolidated statement of position comprehensive income, financial of of BLOM statement consolidated the comprise which statements Group), (the financial subsidiaries its and consolidated accompanying the audited have We BLOM BANKSAL INDEPENDENT AUDIORS’REPOR T OHESHARHOLDRSF Consolidated Income Statement

For the year ended 31 December 2010

2010 2009 Notes LL million LL million Interest and similar income 5 1,813,668 1,712,928 Interest and similar expense 6 (1,067,129) (1,081,395)

Net interest income 746,539 631,533

Fee and commission income 176,675 144,735 Fee and commission expense (31,333) (22,957)

Net fee and commission income 7 145,342 121,778

Net trading income 8 38,862 36,081 Net gain on financial assets designated at 657 7,507 fair value through profit or loss Net gain on financial investments 9 76,321 38,558 Other operating income 14,373 18,836

Total operating income 1,022,094 854,293

Credit loss (expense) income 10 (24,892) 5,215 Write back of provision on financial 23 - 15,721 investments

Net operating income 997,202 875,229

Personnel expenses 11 (220,503) (192,083) Depreciation of property and equipment 24 (34,690) (33,118) Amortization of intangible assets 25 (2,493) (1,770) Other operating expenses 12 (134,497) (120,676)

Total operating expenses (392,183) (347,647)

Net operating profits 605,019 527,582

Net profit from sale or disposal of other 107 129 assets

Profit before tax 605,126 527,711

Income tax expense 13 (106,745) (85,982)

Profit for the year 498,381 441,729

Attributable to: Equity holders of the parent 483,376 429,558 Non-controlling interests 15,005 12,171 498,381 441,729

LL LL Basic/diluted earnings per share attributable to equity holders of the 14 2,197 1,942 parent for the year

73 74 BLOM BANK s.a.l. Annual Report 2010 T the year Other comprehensive (loss)incomefor Equityholdersoftheparent Attributable to: Non-controlling interests Profit fortheyear foreign operations Exchange differences ontranslationof assets Net (loss)gainonavailable-for-sale financial Other comprehensive (loss)income otal comprehensive incomefortheyear For theyearended31December2010 Consolidated StatementofComprehensive Income LL million (25,914) (15,951) 472,467 458,220 472,467 498,381 (9,963) 14,247 2010 LL million 536,711 522,441 536,711 441,729 104,864 94,982 14,270 (9,882) 2009 Consolidated Statement of Financial Position

At 31 December 2010

2010 2009 Notes LL million LL million Assets Cash and balances with central banks 15 4,248,229 4,693,974 Due from banks and financial institutions 16 5,931,237 5,787,117 Derivative financial instruments 17 46,692 33,544 Financial assets held-for-trading 18 54,816 24,763 Financial assets designated at fair value 19 164,525 139,402 through profit or loss Loans and advances to customers 20 7,797,136 6,046,601 Loans and advances to related parties 40 9,398 11,522 Bank acceptances 21 205,546 197,637 Non-current assets held for sale 22 28,062 29,846 Financial investments – available-for-sale 23 4,116,261 4,694,221 Other financial assets classified as loans and receivables 23 9,559,006 8,200,247 Financial investments – held-to-maturity 23 912,295 774,997 Investment properties 571 618 Property and equipment 24 412,374 374,850 Intangible assets 25 6,281 6,727 Other assets 26 128,278 129,510 Goodwill 27 63,145 63,268 Total assets 33,683,852 31,208,844

Liabilities and equity Liabilities Due to banks and financial institutions 28 378,118 705,438 Derivative financial instruments 17 36,465 23,526 Customers' deposits 29 29,363,177 26,940,185 Related parties’ deposits 40 192,717 230,554 Engagements by acceptances 21 205,546 197,637 Current tax liabilities 30 70,924 48,588 Other liabilities 31 462,420 410,388 Provisions for risks and charges 32 78,828 38,421 Retirement benefits obligation 33 45,075 38,558 Total liabilities 30,833,270 28,633,295

Equity attributable to equity holders of parent Share capital - common shares 34 223,600 223,600 Share capital - preferred shares 34 18,200 18,200 Share premium on common shares 34 374,059 374,059 Share premium on preferred shares 34 246,310 246,310 Capital reserves 35 877,086 714,051 Treasury shares 36 (75,793) (58,723) Reserves for revaluation variance - real estate 24 14,727 14,727 Available-for-sale reserve 37 96,221 106,184 Foreign currency translation reserve 21,976 37,169 Other reserves 235 331 Results of the financial period – profit 483,376 429,558 Retained earnings 444,115 341,061 2,724,112 2,446,527 Non-controlling interests 126,470 129,022 Total equity 2,850,582 2,575,549 Total liabilities and equity 33,683,852 31,208,844

The accompanying notes 1 to 50 form part of these consolidated financial statements. 75 76 BLOM BANK s.a.l. Annual Report 2010 Other commitments instruments Commitments ontermfinancial - Foreign currencies todeliver - Foreign currencies toreceive Foreign currency operations - Guaranteesreceived from customers - Guaranteesissuedtocustomers transferred tooff financialposition Impaired loansfullyprovided forand Financial assetsundermanagement Fiduciary assets - Guaranteesreceived from financial - Guaranteesissuedtofinancialinstitutions Guarantees commitments - Commitmentsissuedtocustomers - Commitmentsreceived from financial - Commitmentsissuedtofinancial Financing commitments Off financialposition institutions institutions institutions At 31December2010 Consolidated StatementofFinancialPosition 46-1 (A) Notes 17 17 41 20 42 42 41 41 41 12,635,982 LL million 1,715,062 1,708,020 8,264,163 378,262 655,112 181,307 744,041 233,972 423,004 45,026 84,935 74,460 2,778 2010 LL million 1,110,062 9,561,921 3,708,139 3,699,075 5,312,368 505,602 173,810 951,344 209,040 330,711 45,050 82,695 33,089 17,805 2009 Consolidated Statement of Cash Flows

For the year ended 31 December 2010

2010 2009 Notes LL million LL million Operating Activities Profit for the financial period before income tax 605,126 527,711 Adjustments for: Other adjustment related to a subsidiary company (7,056) - Depreciation of property and equipment 24 34,690 33,118 Amortization of intangible assets 25 2,493 1,770 Profit from sale of property and equipment (107) (129) Provision (write-back of provision) for loans and advances to customers 10 17,885 (5,215) Write back of provision for impairment of financial assets 23 - (15,721) Provision for placements with other banks 16 4,601 58 Unrealized profit from investment properties - (37) Provision for retirement benefits obligation 33 8,204 6,484 Net provision for risks and charges 32 10,912 1,575 Net provision for outstanding claims and IBNR reserves 32 24,474 7,056 Profit from sale of non-current assets held for sale (1,341) (2,474) Gain from sale of other financial assets classified as loans and receivables 9 (60,888) (23,398) Gain from sale of available-for-sale financial 9 (14,641) (14,265) investments Unrealized gain on financial assets designated at fair (657) (7,507) value through profit or loss Unrealized gain on financial assets held-for-trading (1,934) (7,336) 621,761 501,690 Changes in operating assets and liabilities: Financial assets held-for-trading (28,119) (3,163) Financial assets designated at fair value through profit or loss (24,466) (49,940) Banks and financial institutions – debit 48 (616,889) (142,676) Derivative financial instruments – debit (13,148) 6,323 Loans and advances to customers (1,768,420) (810,939) Loans and advances to related parties 2,124 (4,596) Non-current assets held for sale 1,713 252 Other assets 1,241 36,090 Derivative financial instruments – credit 12,939 (33,253) Banks and financial institutions – credit (8,611) (125,650) Customers' deposits 2,422,992 4,242,740 Related parties’ deposits (37,837) 90,276 Other liabilities 48 66,375 41,527 Cash from operations 631,655 3,748,681 Taxes paid (84,867) (91,055) Settlement of provisions for risks and charges - (1,915) Retirement benefits obligation paid 33 (1,141) (2,551) Net cash from operating activities 545,647 3,653,160 Investing activities Term deposits with central banks (179,825) 70,238 Financial investments – available-for-sale 581,409 101,717 Other financial assets classified as loans and receivables 48 (1,297,871) (2,067,550) Financial assets – held-to-maturity (137,298) (140,041) Purchase of intangible assets 25 (1,872) (3,451) Purchase of property and equipment 24 (80,285) (106,261) Cash proceeds from the sale of property and equipment 1,460 23,406 Net cash used in investing activities (1,114,282) (2,121,942) Financing Activities Purchase of treasury shares, net (17,070) (18,846) Net gain of sale of treasury shares 15,184 1,718 Acquisition of non-controlling interests 3 (38,366) - Non-controlling interests (668) (6,447) Dividends paid 39,36 (149,458) (136,906) Net cash used in financing activities (190,378) (160,481) Effect of exchange rate changes (8,085) (8,908) (Decrease) increase in cash and cash equivalents (767,098) 1,361,829 Cash and cash equivalents at 1 January 6,837,672 5,475,843 Cash and cash equivalents at 31 December 38 6,070,574 6,837,672 Operational cash flows from interest and dividends Interest paid 1,066,306 1,053,850 Interest received 1,787,470 1,693,483 Dividend received 1,455 1,500

77 78 BLOM BANK s.a.l. Annual Report 2010 Balance at1January2010 profit fortheyear2010 Results ofthefinancialperiod– LL million T Other comprehensive income Balance at 31 December 2010 interests (note3) Acquisition ofnon-controlling subsidiary Other adjustmentrelated to a subsidiary companies from dividendsdistribution in Non-controlling interests share 36) Sales oftreasury shares (note (note 36) Purchase oftreasury shares of share capital Transfer toreserve forincrease (note 35) Appropriation of2009profit Dividends distribution (note 39) subsidiary company share incapitalincrease of Non-controlling interests otal comprehensive income For theyearended31December2010 Consolidated StatementofChangesinEquity Attributabletoequityholdersoftheparent 223,600 223,600 common capital- shares Share ------preferred capital- 18,200 18,200 shares Share ------374,059 374,059 common premium shares Share on ------246,310 246,310 preferred premium shares Share on ------714,051 877,086 147,621 reserves Capital 15,184 230 ------(159,092) Treasury (75,793) 142,022 (58,723) shares ------variance-Real Reserves for revaluation 14,727 14,727 estate ------Available- for- sale reserve 106,184 96,221 (9,963) (9,963) ------translation currency Foreign reserve (15,193) (15,193) 37,169 21,976 ------reserves Other (230) 331 134 235 ------Retained Earnings Earnings 341,061 132,345 444,115 (22,235) (7,056) ------period -profit the financial Results of (280,100) (149,458) 429,558 483,376 483,376 483,376 ------2,446,527 2,724,112 (159,092) (149,458) 483,376 157,206 (22,235) (25,156) 458,220 Total (7,056) - - - - controlling interests 129,022 126,470 (16,131) Non- 15,005 14,247 (745) (758) (90) 90 77 - - - - Total equity 2,575,549 2,850,582 (159,182) (149,458) 498,381 157,296 (38,366) (25,914) 472,467 (7,056) (745) 77 - - Attributable to equity holders of the parent

Share Share Share Share Reserves for Foreign Non- capital- capital- premium premium Available- Results of controlling Total equity on on Capital Treasury revaluation for- sale currency Other Retained the financial Total interests common preferred common preferred reserves shares variance-Real reserve translation reserves Earnings period - profit shares shares shares shares estate reserve LL million Balance at 1 January 2010 223,600 18,200 374,059 246,310 714,051 (58,723) 14,727 106,184 37,169 331 341,061 429,558 2,446,527 129,022 2,575,549

Results of the financial period– ------483,376 483,376 15,005 498,381 profit for the year 2010 Other comprehensive income ------(9,963) (15,193) - - - (25,156) (758) (25,914)

Total comprehensive income ------(9,963) (15,193) - - 483,376 458,220 14,247 472,467

Non-controlling interests share in capital increase of ------77 77 subsidiary company Dividends distribution (note 39) ------(149,458) (149,458) - (149,458) Appropriation of 2009 profit - - - - 147,621 - - - - 134 132,345 (280,100) - - - (note 35) Transfer to reserve for increase - - - - 230 - - - - (230) - - - - - of share capital Purchase of treasury shares - - - - - (159,092) ------(159,092) (90) (159,182) (note 36) Sales of treasury shares (note - - - - 15,184 142,022 ------157,206 90 157,296 36) Non-controlling interests share from dividends distribution in ------(745) (745) subsidiary companies Other adjustment related to a ------(7,056) - (7,056) - (7,056) subsidiary Acquisition of non-controlling ------(22,235) - (22,235) (16,131) (38,366) interests (note 3)

Balance at 31 December 2010 223,600 18,200 374,059 246,310 877,086 (75,793) 14,727 96,221 21,976 235 444,115 483,376 2,724,112 126,470 2,850,582

79 80 BLOM BANK s.a.l. Annual Report 2010 Balance at1January2009 profit fortheyear2009 Results ofthefinancialperiod– LL million Total comprehensive income Other comprehensive income Balance at 31 December 2009 (note 36) Dividends ontreasury shares subsidiary companies from dividendsdistribution in Non-controlling interests share 36) Sales oftreasury shares (note (note 36) Purchase oftreasury shares (note 35) Appropriation of2008profits Dividends distribution (note 39) subsidiary company share incapitalincrease of Non-controlling interests For theyearended31December2010 Consolidated StatementofChangesinEquity Attributable toequityholdersoftheparent 223,600 223,600 common capital- shares Share ------preferred capital- 18,200 18,200 shares Share ------374,059 374,059 common premium shares Share on ------246,310 246,310 preferred premium shares Share on ------595,391 714,051 116,942 reserves Capital 1,718 ------Treasury (39,877) (58,723) (78,373) shares 59,527 ------variance-Real Reserves for revaluation 14,727 14,727 estate ------Available- for- sale reserve 102,279 106,184 102,279 3,905 ------translation currency Foreign reserve 46,565 37,169 (9,396) (9,396) ------reserves Other 106 331 225 ------Retained Earnings 229,863 341,061 105,923 5,275 ------period -profit the financial Results of (223,090) (142,181) 365,271 429,558 429,558 429,558 ------2,078,120 2,446,527 (142,181) 429,558 (78,373) 522,441 Total 92,883 61,245 5,275 - - - controlling interests 121,199 129,022 Non- 12,171 (6,522) 14,270 2,099 (13) 13 75 - - - Total equity 2,199,319 2,575,549 (142,181) 441,729 (78,386) 536,711 94,982 61,258 (6,522) 5,275 75 - Attributable to equity holders of the parent

Share Share Share Share Reserves for Foreign Non- capital- capital- premium premium Available- Results of controlling Total equity on on Capital Treasury revaluation for- sale currency Other Retained the financial Total interests common preferred common preferred reserves shares variance-Real reserve translation reserves Earnings period - profit shares shares shares shares estate reserve LL million Balance at 1 January 2009 223,600 18,200 374,059 246,310 595,391 (39,877) 14,727 3,905 46,565 106 229,863 365,271 2,078,120 121,199 2,199,319

Results of the financial period– ------429,558 429,558 12,171 441,729 profit for the year 2009 Other comprehensive income ------102,279 (9,396) - - - 92,883 2,099 94,982

Total comprehensive income ------102,279 (9,396) - - 429,558 522,441 14,270 536,711

Non-controlling interests share in capital increase of ------75 75 subsidiary company Dividends distribution (note 39) ------(142,181) (142,181) - (142,181) Appropriation of 2008 profits - - - - 116,942 - - - - 225 105,923 (223,090) - - - (note 35) Purchase of treasury shares - - - - - (78,373) ------(78,373) (13) (78,386) (note 36) Sales of treasury shares (note - - - - 1,718 59,527 ------61,245 13 61,258 36) Non-controlling interests share from dividends distribution in ------(6,522) (6,522) subsidiary companies Dividends on treasury shares ------5,275 - 5,275 - 5,275 (note 36) Balance at 31 December 2009 223,600 18,200 374,059 246,310 714,051 (58,723) 14,727 106,184 37,169 331 341,061 429,558 2,446,527 129,022 2,575,549

81 82 BLOM BANK s.a.l. Annual Report 2010 BLOM Bank SAL to open a representative office in Abu Dhabi. This license is license This Dhabi. valid forfiveyears. Abu in office representative a licensed open Emirates to Arab SAL United Bank the BLOM of Bank Central the 2008, February 14 On and brokerage services. a wide range of banking (commercial, investment and private) as well as insurance The Bank, together with its affiliated banks and subsidiaries (the Group), provides Lebanon. Beirut, Street, Verdun,Karameh in Rashid located are Bank the of headquarters The Lebanon. of Bank Central the by published list banks’ the on 14 No under and Beirut of registry commercial the at 2464 No under registered and 1951 in BLOM Bank SAL (the “Bank”), a Lebanese joint stock company, was incorporated current) ispresented innote44. and more (current) than date 12 months after the consolidated statement of financial position date (non- position financial of statement consolidated the after months 12 within settlement or regardingrecoveryliquidity. analysis of in orderAn broadly position financial of statement consolidated its presents Group The Presentation oftheconsolidatedfinancialstatements Lebanon andtheBankingControl Commission. International of Bank Central by the of regulations the issued and (IASB), Board Standards Accounting as (IFRS) Standards Reporting Financial International with accordance in prepared been have statements financial consolidated The Statement ofcompliance of inmillion presented denominated inothercurrencies havebeenpresented inthousands. been have statements Lebanese Lira (LL million), which financial is the functional currency of the consolidated Group. Balances The loss andfinancialinvestments–available-for-sale. throughheld-for-trading, value assets profit fair or at designated assets financial and for the measurement at fair value of derivative financial instruments, financial accordingLebanon in provisionsthe to 1993, December 30 dated 282 No law of cost the historical under convention as prepared modified are for the statements restatement financial of certain consolidated tangibleThe real estate properties preparation of Basis 2.1 2 1 31 December2010 Notes totheConsolidatedFinancialStatements Accounting Policies Corporate Information Financial assets and financial liabilities are offset and the net amount reported in the consolidated statement of financial position only when there is a legally enforceable right to offset the recognized amounts and there is an intention to settle on a net basis, or to realize the assets and settle the liability simultaneously. Income and expense will not be offset in the consolidated income statement unless required or permitted by any accounting standard or interpretation, as specifically disclosed in the accounting policies of the Group.

2.2 Basis of consolidation

Basis of consolidation from 1 January 2010 The consolidated financial statements comprise the financial statements of the Group and its subsidiaries as at 31 December each year.

Subsidiaries are fully consolidated from the date of acquisition, being the date on which the Group obtains control, and continue to be consolidated until the date when such control ceases. The financial statements of the subsidiaries are prepared for the same reporting period as the parent company, using consistent accounting policies. All intra-group balances, transactions, unrealised gains and losses resulting from intra-group transactions and dividends are eliminated in full.

Losses within a subsidiary are attributed to the non-controlling interest even if that results in a deficit balance.

A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as an equity transaction. If the Group loses control over a subsidiary, it:

• Derecognises the assets (including goodwill) and liabilities of the subsidiary; • Derecognises the carrying amount of any non-controlling interest; • Derecognises the cumulative translation differences, recorded in equity; • Recognises the fair value of the consideration received; • Recognises the fair value of any investment retained; • Recognises any surplus or deficit in profit or loss; • Reclassifies the parent’s share of components previously recognised in other comprehensive income to profit or loss or retained earnings, as appropriate.

83 84 BLOM BANK s.a.l. Annual Report 2010 Services Syria andOverseasCompanyforFinancial Responsibilities EgyptSAE Arope InsuranceofProperties and Arope LifeInsuranceEgyptSAE BLOM BankQatarLLC BLOM Invest–SaudiArabia BLOM EgyptSecuritiesSAE BLOM BankEgyptSAE Insurance(AropeSyria International Syria)SA Arope InsuranceSAL Bank ofSyriaandOverseasSA BLOM DevelopmentBankSAL BLOM InvestBankSAL BLOM Bank(Switzerland)SA BLOM BankFranceSA Bank SALandthesubsidiarieslistedinfollowingtable: BLOM of statements financial the include statements financial consolidated The its at retained investment the for accounted Group the control, of loss Upon • interest non-controlling the to attributed were Group the by incurred Losses • • Acquisitions of non-controlling interests, prior to 1 January 2010, were accounted from theprevious basisofconsolidation: prospective a on basis. The following applied differences, however, were are carried requirementsforward in certain instances above-mentioned the of Certain Basis ofconsolidationpriorto1January2010 values ofsuchinvestmentsat1January2010havenotbeenrestated. proportionate share of net asset value at the date control was lost. The carrying controlling interest andtheparent shareholders. to cover these. obligation Losses prior to binding 1 January 2010 a were not reallocatedhad between non- interest non-controlling the unless parent, the to wereattributed losses excess further Any nil. reducedto was balance the until were recognised ingoodwill. acquired assets net the of share the of value book the and consideration the whereby,method, extension parententity differencethe the between using for 31 December2010 Notes totheConsolidatedFinancialStatements a and b a andc Notes d e e a e e Saudi Arabia incorporation Switzerland Country of Lebanon Lebanon Lebanon France Egypt Egypt Egypt Egypt Qatar Syria Syria Syria Brokerage activities Brokerage activities Insurance activities Insurance activities Insurance activities Insurance activities Banking activities Banking activities Banking activities Banking activities Banking activities Banking activities Banking activities Islamic banking Activities activities 31 December % effective equityinterest 2010 99.500 59.945 93.137 91.039 48.954 99.626 99.419 49.000 42.687 88.932 99.897 99.890 99.998 99.998 % 31 December 2009 99.000 59.937 93.137 91.039 43.750 99.622 99.419 39.000 42.187 88.932 99.887 99.875 99.998 99.998 % (a) Effective 1 January 2004, the Group obtained control, by virtue of agreement with other investors, over Bank of Syria and Overseas SA, and consequently, the financial statements of Bank of Syria and Overseas SA have been consolidated with those of the Group.

During 2010, the Group acquired additional 10% interest in Bank of Syria and Overseas SA (note 3) which resulted in dilution of non-controlling interests in other related subsidiaries.

(b) Effective 1 January 2006, the Group obtained control, by virtue of agreement with other investors, over Syria International Insurance (Arope Syria) SA, and consequently, the financial statements of Syria International Insurance (Arope Syria) SA have been consolidated with those of the Group.

(c) Syria and Overseas Company for Financial Services is 52% owned by Bank of Syria and Overseas SA. Consequently, the financial statements of Syria and Overseas Company for Financial Services have been consolidated with those of the Group.

(d) The ownership interest of this subsidiary was affected by the share capital increase of the respective subsidiary which resulted in dilution of non- controlling interests.

(e) The ownership interests of these subsidiaries were affected by the insignificant purchase of some non-controlling interests shares.

2.3 Changes in accounting policies and disclosures

New and amended standards and interpretations The accounting policies adopted are consistent with those of the previous financial year.

Amendments resulting from improvements to IFRSs to the following standards did not have any impact on the accounting policies, financial position or performance of the Group:

• IFRS 2 Share-based payment: Group Cash-settled Share-based Payment Transactions effective 1 January 2010

• IFRS 3 Business Combinations (Revised) and IAS 27 Consolidated and Separate Financial Statements (Amended) effective 1 July 2009, including consequential amendments to IFRS 2, IFRS 5, IFRS 7, IAS 7, IAS 21, IAS 28, IAS 31 and IAS 39

• IAS 39 Financial instruments: Recognition and Measurement – Eligible Hedged items effective 1 July 2009

• IFRIC 17 Distributions of Non-cash Assets to Owners effective 1 July 2009

85 86 BLOM BANK s.a.l. Annual Report 2010 IFRS 9. on the Group’s financial statements when implemented in future years except for impact significant a have to standards above the expect not does Management • • • • • • December 2010: 31 ended year the for effective yet not but issued standards of list the is Below Future changesinaccountingpolicies • • • • • • Issued inApril2009 Improvements toIFRSs pershare.impact onearnings material no had and prospectively applied was policy accounting in change The with non-controlling interests. transactions and subsidiaries of control of loss or acquisitions future affect will of control of a subsidiary. The changes by IFRS 3 (Revised) and IAS 27 (Amended) loss the as well as subsidiary to the by incurred losses for accounting the changes rise give longer no will goodwill, nor transactions will it give rise to a such gain or loss. Furthermore, Therefore,the amended standard owners. their as in owners capacity with transaction a as for accounted is control) of loss (without IAS 27 (Amended) requires that a change in the ownership interest of a subsidiary and future reported results. of amount the impact business will goodwill recognised, the reported changes and results in the period that an acquisition occurs These consideration stages. contingent in achieved a combinations of measurement subsequent and recognition initial the non- costs, of transaction for valuation accounting the the interest, affectcontrolling Changes date. this after occurring combinations business for accounting the in changes significant introduces (Revised) 3 IFRS Financial Statements(Amended) Separate and Consolidated 27 IAS and (Revised) Combinations Business 3 IFRS IFRIC 19ExtinguishingFinancialLiabilitieswithEquity Instruments IFRIC 18Transfers ofAssetsfrom Customers IFRIC 14 Prepayments of a Minimum Funding Requirement (Amendment) IFRS 9FinancialInstruments:ClassificationandMeasurement IAS 24RelatedPartyDisclosures (Amendment) IFRIC 9ReassessmentofEmbeddedDerivatives IAS 39FinancialInstruments:RecognitionandMeasurement IAS 38IntangibleAssets IAS 17Leases IAS 1Presentation ofFinancialStatements IFRS 2Share-based Payment IAS 32 Financial Instruments: Presentation – Classification of Right of Classification – Issues (Amendment) Presentation Instruments: Financial 32 IAS 31 December2010 Notes totheConsolidatedFinancialStatements IFRS 9 as issued reflects the first phase of the IASBs work on the replacement of IAS 39 and applies to classification and measurement of financial assets and liabilities as defined in IAS 39. The standard is effective for annual periods beginning on or after 1 January 2013. However, it will be early adopted by the Group beginning 1 January 2011, in accordance with the Banking Control Commission Circular No. 265 issued on 23 September 2010, and this early adoption will have an impact on amounts reported in respect of the Group’s financial statements as summarized under section 2.4 below.

Improvements to IFRSs (issued in May 2010)

The IASB issued Improvements to IFRSs, an omnibus of amendments to its IFRS standards. The amendments have not been adopted as they become effective for annual periods on or after either 1 July 2010 or 1 January 2011. The amendments are listed below:

• IFRS 3 Business Combinations • IFRS 7 Financial instruments: Disclosures • IAS 1 Presentation of Financial Statements • IAS 27 Consolidated and Separate Financial Statements • IFRIC 13 Customer Loyalty Programs

The management of the Group, however, does not expect that the adoption of the above improvements will have a significant impact on the Group’s financial position or performance.

2.4 Impact of the adoption of IFRS 9 effective 1 January 2011 on the amounts reported

As discussed in section 2.3 above, IFRS 9 will be adopted in the Group’s financial statements for the annual period beginning 1 January 2011. Management’s preliminary assessment of the impact of the application of IFRS 9 is summarized as follows:

• In accordance with the provisions of IFRS 9, adoption by the Group in 2011 will be applied retrospectively and comparative amounts will not be restated as permitted by IFRS 9.

• Effective 1 January 2011, the Group’s available-for-sale financial assets under IAS 39 will be classified as financial assets at amortized cost, financial assets designated at fair value through profit or loss and financial assets designated at fair value through other comprehensive income.

As a result, the cumulative change in fair value of available-for-sale reserve is expected to decrease by an amount of LL 117,141 million against a decrease in the opening balance of retained earnings in the amount of LL 1,911 million, a decrease in financial assets at amortized cost in the amount of LL 124,761 million, an increase in financial assets designated at fair value through profit or loss in the amount of LL 5,892 million and an increase in other comprehensive income in the amount of LL 183 million.

87 88 BLOM BANK s.a.l. Annual Report 2010 financial assetsmeasured atamortizedcostintheamountofLL16,543million. in decrease a in decrease a and million 18,029 LL against of earnings retained of balance opening million the 1,486 LL of amount an by increase is to reserve available-for-saleexpected of value fair in change cumulative the result, a As 39willbe IAS classified asfinancialassetsdesignatedatfairvaluethrough profit orloss. under securities) were toavailable-for-sale which years prior securities in held-to-maturity reclassified of at mainly measured (comprising assets financial cost Group’s the amortized of part 2011, January 1 Effective • financial assetsmeasured atamortizedcostintheamountofLL3,752million. in increase an in and million decrease 2,012 LL of a earnings retained against of balance opening million the 5,764 LL of amount an by increase is to reserve available-for-saleexpected of value fair in change cumulative the result, a As crisis) financial under IAS39willremain global measured atamortizedcost. the to due receivables and loans to were 2008 in which reclassified securities available-for-sale at of measured mainly assets (comprising financial cost Group’s the amortized of part 2011, January 1 Effective • of LL13,670million. amount available-for-salethe of in reservevalue fair in change cumulative the in increase an and million 50,523 LL of amount an by earnings retained of balance opening the in to decrease a against areexpected million 36,853 cost LL of amount an atamortized by decrease measured assets financial the result, a As loss. measured be will 39 IAS under through crisis) financial global the to profitdue or available-for-sale securities that were reclassified at in 2008 measured to loans assets and receivables financial Group’s the amortized cost (comprising of a) loans and receivables, b) of held to maturity and c) part 2011, January 1 Effective • of the net investment, at which time they are recognized in the income statement. disposal the until income comprehensive These other entity.to directly foreign taken are differences a in investment net a against hedge effective an provide income the to taken differencesof exception the with statement, foreignon currency borrowings that are activities non-trading on arising differences All date. position financial of statement the at exchange of currencyrate functional the at Monetary assets and liabilities denominated in foreign currencies are retranslated at therateofexchangerulingdatetransaction. Transactions in foreign currencies are initially recorded at the functional currency (i) Transactions andbalances usingthat are measured items entity and of each currency functional currency. statements functional financial own the its in determines included group the in entity Each the Group’s functionalandpresentation currency. is which Lira Lebanese in presented are statements financial consolidated The (1) Foreign currency translation policies accounting significant of Summary 2.5 31 December2010 Notes totheConsolidatedFinancialStatements Tax charges and credits attributable to exchange differences on those borrowings are also recorded in other comprehensive income.

Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates as at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined. Any goodwill arising on the acquisition of a foreign operation and any fair value adjustments to the carrying amounts of assets and liabilities arising on the acquisition are treated as assets and liabilities of the foreign operations and translated at closing rate.

(ii) Group companies As at the reporting date, the assets and liabilities of subsidiaries and overseas branches are translated into the Group’s presentation currency at the rate of exchange as at the statement of financial position date, and their income statements are translated at the weighted average exchange rates for the year. Exchange differences arising on translation are taken directly to a separate component of equity. On disposal of a foreign entity, the deferred cumulative amount recognized in equity relating to that particular foreign operation is recognized in the income statement in ‘Other operating expenses’ or ‘Other operating income’, respectively.

(2) Financial instruments – initial recognition and subsequent measurement

(i) Date of recognition All financial assets and liabilities are initially recognized on the trade date, i.e. the date that the Group becomes a party to the contractual provisions of the instrument. This includes purchases or sales of financial assets that require delivery of assets within the time frame generally established by regulation or convention in the market place.

(ii) Initial measurement of financial instruments The classification of financial instruments at initial recognition depends on the purpose and the management’s intention for which the financial instruments were acquired and their characteristics. All financial instruments are measured initially at their fair value plus transaction costs, except in the case of financial assets and financial liabilities recorded at fair value through profit or loss.

(iii) Derivatives recorded at fair value through profit or loss The Group uses derivatives such as forward foreign exchange contracts and options on foreign currencies. Derivatives are recorded at fair value and carried as assets when their fair value is positive and as liabilities when their fair value is negative. Changes in the fair value of derivatives are included in “Net trading income”.

Derivatives embedded in other financial instruments, such as the conversion option in an acquired convertible bond, are treated as separate derivatives and recorded at fair value if their economic characteristics and risks are not closely related to those of the host contract, and the host contract is not itself held- for-trading or designated at fair value through profit or loss. The embedded derivatives separated from the host are carried at fair value in the trading portfolio with changes in fair value recognized in the consolidated income statement.

89 90 BLOM BANK s.a.l. Annual Report 2010 period of time and which may be sold in response to needs for liquidity or in or liquidity for needs to response tochangesinthemarketconditions. response in sold be may which and Debt time of loss. period or profit through value Equity fair securities in this category are at those which are intended securities. designated to be held for an nor indefinite held-for-trading debt as and equity investments classified as available-for-sale are those which are neither classified include investments Available-for-sale (vi) Available-for-sale financialinvestments the using income” whentherighttopaymenthasbeenestablished. respectively, expense”, “Interest or effective interest rate (EIR), while income” dividend income is recorded in is “Other operating “Interest or incurred in earned Interest accrued loss”. or profit through value fair at liabilities and designated assets financial on loss or gain “Net in recorded are value fair in or lossare profit through recorded value in the consolidated at fair statement of financial position at liabilities fair value. Changes financial and assets Financial which derivatives moreembedded or one contains instrument financial The • financial assets, financial of group a of part are liabilities and assets The • treatment inconsistent the reduces significantly or eliminates designation The • an instrumentbybasis: recognition when the following criteria are met, and designation is determined on initial upon loss or profit through value fair arethose at instrument an designate only may thiscategory Management in recognition. initial on management by designated been classified have that liabilities financial and assets Financial or loss profit through value fair at designated liabilities financial and assets Financial (v) acquired principallyforthe purposeofsellingorrepurchasing inthenearterm. been have which equities and securities debt are classification this in Included has beenestablished. trading income” according “Net to the terms of the contract, or in when the right to recordedthe payment is expense or income dividend and Interest income”. financial position at fair value. Changes in fair value areof recognized instatement “Netconsolidated trading the in recorded are held-for-trading assets Financial (iv) Financialassetsheld-for-trading significantly modify the cash flows that otherwise would be required bythe required would be contract. thatotherwise flows cash the modify significantly strategy. value basis, in accordance with a documented risk management or investment liabilities or both which are managed and their performance evaluated on a fair gains orlossesonthemadifferent basis. that would otherwise arise from measuring the assets or liabilities or recognising 31 December2010 Notes totheConsolidatedFinancialStatements After initial measurement, available-for-sale financial investments are subsequently measured at fair value. Unrealized gains or losses are recognized as other comprehensive income in the available-for-sale reserve. When the investment is disposed of, the cumulative gain or loss previously recognized in other comprehensive income is recognized in the consolidated income statement in “Net gain / loss on financial investments”. Where the Group holds more than one investment in the same security they are deemed to be disposed of on a first-in first-out basis. Interest earned whilst holding available-for-sale financial investments is reported as interest income using the effective interest rate. Dividends earned whilst holding available-for-sale financial investments are recognized in the consolidated income statement as “Net gain on financial investments” when the right of the payment has been established. The losses arising from impairment of such investments are recognized in the consolidated income statement in “Impairment losses on financial investments” and removed from the “Available-for-sale reserve”.

(vii) Held-to-maturity financial investments Held-to-maturity financial investments are non-derivative financial assets with fixed or determinable payments and fixed maturities, which the Group has the intention and ability to hold to maturity. After initial measurement, held-to- maturity financial investments are subsequently measured at amortized cost using the effective interest rate, less impairment. Amortized cost is calculated by taking into account any discount or premium on acquisition and fees that are an integral part of the effective interest rate. The amortization is included in “Interest and similar income” in the consolidated income statement. The losses arising from impairment of such investments are recognized in the consolidated income statement line “Credit loss expense”.

If the Group were to sell or reclassify more than an insignificant amount of held-to- maturity investments before maturity (other than in certain specific circumstances), the entire category would be tainted and would have to be reclassified as available- for-sale. Furthermore, the Group would be prohibited from classifying any financial assets as held-to-maturity during the following two years.

(viii) Other financial assets classified as loans and receivables Other financial assets classified as loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. These financial assets are initially recognized at cost, being the fair value of the consideration paid for the acquisition of the investment. All transaction costs directly attributed to the acquisition are also included in the cost of investment. After initial measurement, loans and receivables are measured at amortised cost, using the effective interest rate method, less impairment. Amortised cost is calculated by taking into account any discount or premium on acquisition and fees that are integral part of the effective interest rate. The amortisation is included in “Interest and similar income” in the consolidated income statement. Gain or losses are recognized in the consolidated income statement when the investments are derecognised or impaired. The losses arising from impairment are recognized in the consolidated income statement in “Credit loss expense”.

91 92 BLOM BANK s.a.l. Annual Report 2010 circumstances, non-derivative financial assets out of the “ the of “Available-for-sale”,the out “ receivables”,intoor and andcategory “Loans certain assets in reclassify, financial to permitted non-derivative was circumstances, Group the 2008, July 1 from Effective (x) Reclassificationoffinancialassets counterparty credit event). a example,to(for lossdue a torise givelikely to onerous is an contractit andis commitmentthe whenrecorded only commitmentis thefuture, near the in sold Group,notretainedthe anddrawdown,beexpected by onloan,to isWhere the derivatives and measured at fairrecordedas valueare through lend profitcommitmentsto orThese loss. term. short the in loans on the sell to loan, the where commitments lending held-for-trading is classified as intent be the because toexpected certaindrawdown,is into enter may Group The expense”. loss“Credit instatement consolidated incomethe recognized inimpairment are and similar income” in the consolidated income statement. The losses arising from effectiveintegraltheofpart interest amortizationrate.The included “Interestisin into account any discount or premium on acquisition and fees and interestcosts rate,that lessare allowance an for impairment. Amortized cost is calculatedeffectivethe by usingtaking costamortized subsequentlyat measured arecustomers” to advances and “Loans and banks” from “Due measurement,amountinitial After initial its of all substantially recover not may Group the which for Those • • Those that the Group, upon initial recognition, designates as available-for-sale. those and term near the in or immediately sell to Groupintends the that Those • active market, an other than: in quoted not are that payments determinable or fixed with assets financial ‘Duefrom banks’ and‘Loans andadvances tocustomers’, include non-derivative (ix) Duefrom banksandloans andadvancestocustomers hn h aon rcre i ohr opeesv icm i rcce t the to recycled is consolidated income comprehensive income statement. other in recorded amount the then effectivethe interest assetrate.subsequentlytheisIf determined impaired,beto using asset the of remaining life the amortized over also is flows cashexpected theeffective interest rate. Any difference between the new amortized cost and the income is amortized to profit or loss over the remaining any life category, “Available-for-sale” of the investment the using previous of gain out or reclassified loss on asset that financial asset that a has beenFor recognized in other comprehensive value at the date of reclassification which becomes the new amortized cost. receivables”fair category.and Reclassifications at recorded “Loans are the into “Available-for-sale” the circumstances, of financial instruments out andcategory maturity”categories. Fromalsopermittedwasthisdate,itreclassify, to certainin investment, otherthanbecauseofcredit deterioration. or loss. that the Group upon initial recognition designates as at fair value through profit 31 December2010 Notes totheConsolidatedFinancialStatements H eld-for-trading” H eld-to- The Group may reclassify a non-derivative trading asset out of the “Held-for- trading” category and into the “Loans and receivables” category if it meets the definition of loans and receivables and the Group has the intention and ability to hold the financial asset for the foreseeable future or until maturity. If a financial asset is reclassified, and if the Group subsequently increases its estimates of future cash receipts as a result of increased recoverability of those cash receipts, the effect of that increase is recognized as an adjustment to the effective interest rate from the date of the change in estimate.

Reclassification is at the election of management, and is determined on an instrument by instrument basis. The Group does not reclassify any financial instrument into the fair value through profit or loss category after initial recognition. An analysis of reclassified assets is disclosed in Note 43.

(3) Derecognition of financial assets and financial liabilities

(i) Financial assets A financial asset (or, where applicable a part of a financial asset or part of a group of similar financial assets) is derecognised when:

• the rights to receive cash flows from the asset have expired. • the Group has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a ‘pass-through’ arrangement; and either: (a) the Group has transferred substantially all the risks and rewards of the asset, or (b) the Group has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.

When the Group has transferred its rights to receive cash flows from an asset or has entered into a pass-through arrangement, and has neither transferred nor retained substantially all the risks and rewards of the asset nor transferred control of the asset, the asset is recognised to the extent of the Group’s continuing involvement in the asset. In that case, the Group also recognizes an associated liability. The transferred asset and the associated liability are measured on a basis that reflects rights and obligations that the Group has retained.

Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the Group could be required to repay.

(ii) Financial liabilities A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. Where an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability. The difference between the carrying value of the original financial liability and the consideration paid is recognized in profit or loss.

93 94 BLOM BANK s.a.l. Annual Report 2010 amount and the present value of estimated future cash flows (excluding future (excluding flows cash future estimated of value present the and amount asset’s carrying the the between difference incurred, the as been measured is has loss the loss of impairmentamount an that evidence objective is there If in a collective assessment of impairment. and for which an impairment loss is, or continues to be, assessesrecognized them arefor notimpairment. included Assets that are individually assessed forin a groupimpairment of financial assets with similar credit risk characteristics and collectively impairment exists for an individually assessed financial asset, it includes the asset individuallyobjective evidencenotGroup determines of no significant. the that If are that financial assets collectivelyindividually for significant,are or thatassets assesses individually first Groupwhether theobjective investments), held-to-maturityevidence asof impairment well exists as receivablesindividually for financial and loans classified as financial assets customers,other toadvances and loans from banks,amounts financial due amortised For as assets (such carried cost at (i) Financialassetscarriedatamortisedcost arrears or economic conditions in that changes correlate as with defaults. such flows, cash futureestimated the in decreasemeasurable a is thereindicatesthat observable datawhere andprincipalpayments interestor in delinquency or reorganization, financial default other or bankruptcy enter will they that probability difficulty, financial significant experiencingthe is borrowers of group a borroweror the indications thatinclude impairmentmay ofEvidence be estimated. reliably can that assets financial of group the or asset financial the of flows event’)and that loss event (or events) has animpact onthe estimated future cash eventsthat hasoccurred after theinitial recognition ofthe asset (anincurred ‘loss if,and only if, there isobjective evidence ofimpairment asresulta ofone ormore impaired. A financial asset is or aassets group financial of financialof group assets isa deemed toor be impaired asset financial a thatevidence objective any is there whether date position financial of statementeach at assessesGroup The (5) Impairment of financial assets are measured are provided in Note 43. An analysis of fair values of financial instruments and further details as to how they other relevant valuation models. marketwhichobservable prices exist,optionspricingmodels, credit modelsand instruments similar for comparison to method, flow discountedcash theinclude techniques Valuation techniques. valuation appropriate using by determined is value fair the market, active an in traded not instruments financial other all For any deduction for transaction costs. quotations pricepositionslongprice(bidshortforpricepositions), forask and dealer without or price market quoted their on based is date position financial of statement the at markets active financial instruments in traded forvalue fair The (4) Determination of fair value 31 December2010 Notes totheConsolidatedFinancialStatements expected credit losses that have not yet been incurred). The carrying amount of the asset is reduced through the use of an allowance account and the amount of the loss is recognized in the consolidated income statement. Loans together with the associated allowance are written off when there is no realistic prospect of future recovery and all collateral has been realized or has been transferred to the Group. If, in a subsequent year, the amount of the estimated impairment loss increases or decreases because of an event occurring after the impairment was recognized, the previously recognized impairment loss is increased or reduced by adjusting the allowance account. If a future write-off is later recovered, the recovery is credited to the “Credit loss expense”.

The present value of the estimated future cash flows is discounted at the financial asset’s original effective interest rate. If a loan has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate. If the Group has reclassified trading assets to loans and advances, the discount rate for measuring any impairment loss is the new effective interest rate (Refer to Note 2.5 (2) (x) above) determined at the reclassification date. The calculation of the present value of the estimated future cash flows of a collateralized financial asset reflects the cash flows that may result from foreclosure less costs for obtaining and selling the collateral, whether or not foreclosure is probable.

For the purpose of a collective evaluation of impairment, financial assets are grouped on the basis of the Group’s internal credit grading system, that considers credit risk characteristics such as asset type, industry, geographical location, collateral type, past-due status and other relevant factors.

Future cash flows on a group of financial assets that are collectively evaluated for impairment are estimated on the basis of historical loss experience for assets with credit risk characteristics similar to those in the Group. Historical loss experience is adjusted on the basis of current observable data to reflect the effects of current conditions that did not affect the years on which the historical loss experience is based and to remove the effects of conditions in the historical period that do not exist currently. Estimates of changes in future cash flows reflect, and are directionally consistent with, changes in related observable data from year to year (such as changes in unemployment rates, property prices, commodity prices, payment status, or other factors that are indicative of incurred losses in the Group and their magnitude). The methodology and assumptions used for estimating future cash flows are reviewed regularly to reduce any differences between loss estimates and actual loss experience.

See Note 23 for details of impairment losses on financial assets carried at amortized cost and Note 20 for an analysis of impairment allowance on loans and advances by class.

(ii) Available-for-sale financial investments For available-for-sale financial investments, the Group assesses at each statement of financial position date whether there is objective evidence that an investment is impaired.

95 96 BLOM BANK s.a.l. Annual Report 2010 to ensure the hedging instrument is expected to be highly effective in offsettingeffectivein highly be to expected isinstrument hedging theensure to Also at the inception of the hedge relationship, a formal assessment is undertaken be used to assess the effectiveness of the hedging relationship. risk, the objective and strategy for undertaking the hedge and the method that will betweenthehedged itemandthe hedging instrument, including thenature theof At inception of the hedge relationship, the Group formally documents the relationship applies hedge accounting for transactions which meet the specified criteria. transactions and firm commitments. In order to manage particular risks, the Group forecastfromexposuresincludingarising risks, credit currencyandforeign rate, derivativeinstrumentsofexposuresmanageinterest useGroupmakestoto The (6) Hedge accounting original effective interest rate. collectiveimpairmentindividualloan’sassessment,or thecalculatedan using to metand that future payments are likely to occur. The loans continue to be subject Management continuously reviews renegotiated loans to ensure due. considered that longer past all no criteria is loan are calculatedthe and terms modification of asthe before rate interest effective original the using measured is impairment the and arrangements renegotiated,been paymentany have terms theconditions. Onceloan new the agreement of extending involve may This collateral. of Where possible, the Group seeks to restructure loans (iii) Renegotiatedloans rather than to take possession other comprehensive income. increases in the fair value after impairment are recognized directly in equityon throughequity investments are not reversed comprehensivethrough other the fromconsolidated incomeand removedrecognized theinconsolidated income is income statement. statement;Impairment losses statement income consolidated the in current fair value, less any impairment loss on thatcumulative lossmeasured differencetheasinvestment between acquisitionthe thecostandpreviously recognized “prolonged” as greater than six and months. 20% as Where “significant” generally treats Groupthere The is cost. evidenceits belowinvestmentof impairment, the the of value fair the in “prolonged” decline “significant” or a include also would In the case of equity investments classified as available-for-sale, objective evidence impairment loss is reversed through the consolidated the statement, income income consolidatedstatement. the in recognized was loss impairment the increases and the increase can be objectively related to credit event occurringandsimilar income”. afterIf, in subsequenta period, the fair value ofdebta instrument measuring the impairment loss. The interest income is recorded as part of “Interestusing the rate of interest used to discount the future cash flows for the purpose of accruedis andreducedcarryingamount the on based interestisFutureincome consolidatedstatement.incometheinvestmentpreviously recognizedthat in on impairmentloss any lessvalue, faircurrent the and amortizedcost thebetween amount recorded for impairment is Group the cumulative cost. amortized loss measured at carried the asassets financial the difference available-for-sale, as criteria same the on as based impairment classified of evidence instruments objective is there debt whether individually assesses of case the In (ii) Available-for-sale financialinvestments(continued) 31 December2010 Notes totheConsolidatedFinancialStatements H owever,the the designated risk in the hedged item. Hedges are formally assessed quarterly. A hedge is expected to be highly effective if the changes in fair value or cash flows attributable to the hedged risk during the period for which the hedge is designated are expected to offset in a range of 80% to 125%. For situations where that hedged item is a forecast transaction, the Group assesses whether the transaction is highly probable and presents an exposure to variations in cash flows that could ultimately affect the consolidated income statement.

(i) Fair value hedges For designated and qualifying fair value hedges, the change in the fair value of a hedging derivative is recognised in the consolidated income statement in ‘Net trading income’. Meanwhile, the change in the fair value of the hedged item attributable to the risk hedged is recorded as part of the carrying value of the hedged item and is also recognised in the consolidated income statement in ‘Net trading income’.

If the hedging instrument expires or is sold, terminated or exercised, or where the hedge no longer meets the criteria for hedge accounting, the hedge relationship is terminated. For hedged items recorded at amortised cost, the difference between the carrying value of the hedged item on termination and the face value is amortised over the remaining term of the original hedge using the effective interest rate. If the hedged item is derecognised, the unamortised fair value adjustment is recognised immediately in the consolidated income statement.

(ii) Cash flow hedges For designated and qualifying cash flow hedges, the effective portion of the gain or loss on the hedging instrument is initially recognised directly in equity in the ‘Cash flow hedge’ reserve. The ineffective portion of the gain or loss on the hedging instrument is recognised immediately in ‘Net trading income’.

When the hedged cash flow affects the consolidated income statement, the gain or loss on the hedging instrument is recorded in the corresponding income or expense line of the consolidated income statement. When a hedging instrument expires, or is sold, terminated, exercised, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss existing in equity at that time remains in equity and is recognised when the hedged forecast transaction is ultimately recognised in the consolidated income statement. When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was reported in equity is immediately transferred to the consolidated income statement.

(iii) Hedge of a net investment Hedge of a net investment in a foreign operation, including a hedge of a monetary item that is accounted for as part of the net investment, are accounted for in a way similar to cash flow hedges. Gains or losses on the hedging instrument relating to the effective portion of the hedge are recognised directly in equity while any gains or losses relating to the ineffective portion are recognised in the consolidated income statement. On disposal of the foreign operation, the cumulative value of any such gains or losses recognised directly in equity is transferred to the consolidated income statement.

97 98 BLOM BANK s.a.l. Annual Report 2010 t rvds o t csoes Fe noe a b dvdd no h floig two categories: following the into divided be can income Fee customers. its to provides it services of range diverse a from incomecommission and fee earns Group The (ii) Feeandcommissionincome purpose of measuring the impairment loss. be recognized to using the continues rate of income interest interest used to loss, discount impairment the future an cash flows for to the due reduced been has recordedOncethe financial group asimilarvalue ofa of asset financialor assets effective interest rate from thethe date ofto adjustmentthe change an in estimate.asrecognized is increasethat of effect thereceipts, cash thoseincreasedrecoverability ofof result a receiptsas cashfuture of estimates financial asset (see Note 2.5 (2) (x)) for which the Group subsequently increases its is calculated based on the original effective interest rate. Group revises the its estimates if adjusted of is payments liability financial or receipts. or asset The financial adjusted the carrying of amount amount carrying The but not future credit losses. attributabletothe instrument andare anintegral part ofthe effective interest rate, directly are that incremental costs or fees any includes and instrument financial financialor liability. The calculation takes into account all contractual terms theof shorter a period, where or instrument appropriate, financial to the the net ofcarrying lifeamount expectedof the thefinancial through receiptsasset or payments effective interest rate, which is the rate that exactly discounts at estimatedvaluefair through designated profit loss, interest or expenseincome futurerecordedor is instruments using the cash financial and available-for-sale as classified assets Forall financial instruments measured at amortized cost, interest bearing financial (i) Interest andsimilarincomeexpenses specific recognition criteria followingmust also The measured. be reliably met before be revenue can revenue is recognized:the and Group the to flow will Revenueisrecognized tothe extent that itisprobable that the economic benefits (9) Recognition of income and expenses in the period in which they are incurred. basis over the lease term. Contingent rental payable are recognized as an expense recognized as an expense in the consolidated income statement on a straight-line ownership of the leased items are operating leases. Operating lease payments are Leases where the lessor retains substantially all the risks and benefits incidental to (8) Leasing – Bank as a lessee position. assets and liabilities are presented gross in the consolidated statement of financial This is not generally the case with master netting agreements, therefore,to settlethe onrelated a net basis, or to realize the asset and settle the liability simultaneously.enforceableoffsetrecognizedlegalrighttothe intention anamountsthere andis currently is there if, only and if, position, financial consolidatedofstatement the amount reported financialin net Financial liabilities andassetsthe offset are and (7) Offsetting financial instruments 31 December2010 Notes totheConsolidatedFinancialStatements H owever, for a reclassified Fee income earned from services that are provided over a certain period of time Fees earned for the provision of services over a period of time are accrued over that period. These fees include commission income and asset management, custody and other management and advisory fees.

Loan commitment fees for loans that are likely to be drawn down and other credit related fees are deferred (together with any incremental costs) and recognized as an adjustment to the effective interest rate on the loan. When it is unlikely that a loan be drawn down, the loan commitment fees are recognized over the commitment period on a straight line basis.

Fee income from providing transaction services Fees arising from negotiating or participating in the negotiation of a transaction for a third party, such as the arrangement of the acquisition of shares or other securities or the purchase or sale of businesses, are recognized on completion of the underlying transaction. Fees or components of fees that are linked to a certain performance are recognized after fulfilling the corresponding criteria.

(iii) Dividend income Dividend income is recognized when the Group’s right to receive the payment is established.

(iv) Net trading income Results arising from trading activities include all gains and losses from changes in fair value and related interest income or expense and dividends for financial assets and financial liabilities H“ eld-for-trading”. This includes any ineffectiveness recorded in hedging transactions.

(10) Cash and cash equivalents Cash and cash equivalents as referred to in the cash flow statement comprise balances with original maturities of a period of three months or less including: cash and balances with central banks, deposits with banks and financial institutions, deposits due to banks and financial institutions, and treasury bills.

(11) Property and equipment Property and equipment are stated at cost less accumulated depreciation and accumulated impairment in value. Certain tangible real estate properties purchased prior to 1 January 1994 were restated for the changes in the general purchasing power of the Lebanese Lira according to the provisions of law No 282 dated 30 December 1993. The net surplus arising on revaluation is credited to the account of “Reserves for revaluation variance – real estate” recognized in shareholders’ equity.

Replacement or major inspection costs are capitalized when incurred and if it is probable that future economic benefits associated with the item will flow to the entity and the cost of the item can be measured reliably.

99 100 BLOM BANK s.a.l. Annual Report 2010 should not be remeasured until it is finally settled within equity. equity, it as classified considerationiscontingent the Ifcomprehensive income. recognised in accordancebe of will liability with value or IAS asset39 faireither an inbe theprofit to deemed or to lossis considerationwhichorcontingent changes as the a Subsequent change date.to other acquisition the at value fair at contingentAny consideration transferredbeto acquirerthe by recognised willbe value at the acquisition date through the profit or loss. acquirer’sthe previouslyacquireeremeasuredequityinterest theheldisfair in to If the business combination is achieved in stages, the acquisition date fair value of contracts by the acquiree. host in derivatives embedded of separation the includes This date. acquisition the at as conditions pertinent and circumstances economic terms, contractual the with accordance in designation and classification appropriate for assumed When the Group acquires a business, it assesses the financial assets and liabilities administrative expenses. in included and expensed are incurred costs Acquisition assets. identifiable net non controlling interest in the acquiree at the proportionate share of the acquiree’s non-controllinginterest anyacquiree. the in eachbusiness For combination, of Groupthemeasures amount the the and value fair date acquisition at measured considerationtransferred,the aggregate of the measuredas acquisitionis an of Businesscombinations areaccounted forusingtheacquisition method. Thecost Business combinations from 1 January 2010 (12) Business combinations and goodwill is derecognised. otherassets” intheconsolidated income statement intheyear inwhich theasset carryingasset)recognizedamounttheisof “Netprofit in disposalfrom sale or of the asset (calculated as the difference between derecognition the of net disposalon arising proceeds loss and or the gain Any use. its from expected are benefits Propertyand equipment is derecognised on disposal or when no future economic income statement as an expense. consolidated the in recognized are losses Impairment recoverable. be not may Impairment reviews are performed when there are indications that the carrying value each financial year end and adjusted prospectively, if appropriate. The assets’ residual values, useful lives and method of depreciation are reviewed at land is not depreciated. The estimated useful lives are as follows: residualtheirestimatedequipmenttheirvaluesoverusefullives.Freeholdandto Depreciation is calculated on a straight line basis to write down the cost of property Furniture, officeinstallationsandcomputerequipment Vehicles Buildings 31 December2010 Notes totheConsolidatedFinancialStatements (2 –16.67)years 6.67 years 50 years Goodwill is initially measured at cost being the excess of the aggregate of the consideration transferred and the amount recognised for non-controlling interest over the net identifiable assets acquired and liabilities assumed. If this consideration is lower than the fair value of the net assets of the subsidiary acquired, the difference is recognised in profit or loss.

After initial recognition, goodwill is measured at cost less any accumulated impairment losses. For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Group’s cash- generating units that are expected to benefit from the combination, irrespective of whether other assets or liabilities of the acquiree are assigned to those units.

Where goodwill forms part of a cash-generating unit and part of the operation within that unit is disposed of, the goodwill associated with the operation disposed of is included in the carrying amount of the operation when determining the gain or loss on disposal of the operation. Goodwill disposed of in this circumstance is measured based on the relative values of the operation disposed of and the portion of the cash-generating unit retained.

Business combinations prior to 1 January 2010 In comparison to the above-mentioned requirements, the following differences applied:

Business combinations were accounted for using the purchase method. Transaction costs directly attributable to the acquisition formed part of the acquisition costs. The non-controlling interest (formerly known as minority interest) was measured at the proportionate share of the acquiree’s identifiable net assets.

Business combinations achieved in stages were accounted for as separate steps. Any additional acquired share of interest did not affect previously recognised goodwill. When the Group acquired a business, embedded derivatives separated from the host contract by the acquiree were not reassessed on acquisition unless the business combination resulted in a change in the terms of the contract that significantly modified the cash flows that otherwise would have been required under the contract.

Contingent consideration was recognised if, and only if, the Group had a present obligation, the economic outflow was more likely than not and a reliable estimate was determinable. Subsequent adjustments to the contingent consideration were recognised as part of goodwill.

(13) Intangible assets The Group’s other intangible assets include the value of computer software and key money. An intangible asset is recognized only when its cost can be measured reliably and it is probable that the expected future economic benefits that are attributable to it will flow to the Group.

Intangible assets acquired separately are measured on initial recognition at cost. The cost of intangible assets acquired in a business combination is their fair value as at the date of acquisition. Following initial recognition, intangible assets are carried at cost less any accumulated amortization and any accumulated impairment losses.

101 102 BLOM BANK s.a.l. Annual Report 2010 consolidated income statement. loss been recognized for the asset in prior years. Such reversal is recognized in amountthe that would have been determined, net ofcarrying depreciation, the exceeds had nonor impairmentrecoverable amount, its exceed not does asset the of last impairment the loss was since recognized. amount recoverable asset’sThe reversal the is determinelimited toso that the usedthe inassumptions carrying change amount a been has there if only reversed is loss impairmentrecognized asset’sestimatescash-generatingthe or unit’s recoverablepreviouslyamount. A Groupindicationsuchexists,thedecreased. have If may orexist longer no may lossesimpairmentrecognizedpreviously that indication any is therewhether to reportingeachassetsexcludingas Foratdate assessmentgoodwill,made anis available fair value indicators. by valuation multiples, quoted share prices for publicly traded subsidiaries or other appropriatesell,an valuation used.Thesecalculationsmodelis corroboratedare to costs less determiningvalue fair In asset. the specific to risksthe andmoney of value time the of assessments market current reflects that rate discount tax theestimated future cash flows are discounted to their present value using pre-a impaired and is written down to its recoverable amount. In assessing value in use, consideredcash-generatingisrecoverableasset orexceedsits amount,the unit value less costs to sell and its value in use. Where the carrying amount of an asset asset’s recoverable amount is the higher of an asset’s or cash-generatingrequired, isassetGroup estimatesunit’santheasset’s forthe recoverable fairamount.An asset may be impaired. If any indication exists, or when annual impairment testing GroupThe assesses eachreportingat datewhether thereindicationan is thatan (15) Impairment of non-financial assets are recognized in the consolidated income statement for the period. of the Regulatory Authorities. Gains or losses on disposal, and revaluation losses, advancesandcurrentthe and such fairassetsvalueinstructionsofthebased on advances. and Such loans real certain estate of is settlement stated in at the estate lower real acquiresof occasionallythe Groupamount ofThe the related loans (14) Non current assets held for sale Software development cost: Key money: intangible assets to their residual values over their estimated useful livesAmortisation as isfollows: calculated using the straight-line method to write down the cost of the ofintangible function asset. the with consistent category expense the in statement income consolidated the in recognized is lives finite with assets intangible on expense amortization The estimates. accounting in changes as treated andappropriate, theinasset are accounted forchangingby theamortization period method,or as life or the expected pattern of consumption of future economic benefits embodied financialexpected usefulyear-end.each the at in Changes leastreviewedare at periodamortizationtheand methodintangibleanfor finite asset withusefula life assets with finite lives are amortized over the useful economic life.The Theuseful amortization lives of intangible assets are assessed to be finite or indefinite. Intangible 31 December2010 Notes totheConsolidatedFinancialStatements

2-5 years lower of lease period or 5 years Impairment losses relating to goodwill cannot be reversed in future periods.

(16) Financial guarantees In the ordinary course of business, the Group gives financial guarantees, consisting of letters of credit, guarantees and acceptances. Financial guarantees are initially recognised in the consolidated financial statements (within “Customers’ deposits”) at fair value, being the premium received. Subsequent to initial recognition, the Group’s liability under each guarantee is measured at the higher of the amount initially recognized less, when appropriate, cumulative amortization recognized in the consolidated income statement and the best estimate of expenditure required to settle any financial obligation arising as a result of the guarantee.

Any increase in the liability relating to financial guarantees is recorded in the consolidated income statement in “Credit loss expense”. The premium received is recognized in the consolidated income statement in “Net fee and commission income” on a straight-line basis over the life of the guarantee.

(17) Customers’ deposits All customers’ deposits are carried at the fair value of the consideration received, less amounts repaid.

(18) Taxation

(i) Current tax Taxation is provided for in accordance with the fiscal regulations of the respective countries in which the Group and its branches and subsidiaries operate.

Current tax assets and liabilities for the current and prior years are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted by the statement of financial position date.

The Group’s profits from operations in Lebanon are subject to a tax rate of 15% after deducting the 5% tax on interest received according to Law no. 497/2003 dated 30 January 2003.

Dividends are subject to a flat 10% tax, reducible to 5% provided that the Bank is listed on a regulated stock exchange.

(ii) Deferred tax Deferred tax is provided on temporary differences at the statement of financial position date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. Deferred tax liabilities are recognized for all taxable temporary differences, except:

103 104 BLOM BANK s.a.l. Annual Report 2010 (19) taxes relate to the same taxable entity and the same taxation authority. deferredtheliabilities andcurrenttax against assets current tax off set to exists Deferred tax assets and deferred tax liabilities are offset if a legally enforceable other right in directly recognizednot in the consolidated income items statement. to relating comprehensiveandother incomerecognized in also taxcomprehensive are income deferred and tax Current statement of financial position date. the atsubstantively enactedor enacted been have that laws) tax (and rates tax settled,liabilityonbased realizedtheis isor asset thewhen year the inapply to Deferredtaxassets andliabilities are measured theattaxrates thatare expected become has it probable that that extent future taxable the profit to will recognized allow are the deferred and tax asset date to position be financial recovered. of to be utilized. Unrecognized deferred tax assets are reassessed at each statement sufficient taxable profit will be available to of allow all statement or part of each the deferred at tax asset reviewedfinancial position date is and reduced the to extent that longerno is it assets probable that tax deferred of amount carrying The deductible temporary differences investments in associated of respect with In • difference temporary deductible the to relating asset tax deferred the Where • be utilized except: differences, and the carry forward of unused tax credits and unused tax losses can probable differences,that taxable temporaryprofit deductiblewill be available all against which for carryforward theunused creditsoftax unused andlosses,tax extentthedeductibleis thattoit recognized temporary are assets tax Deferred in investments with associated differences temporary taxable of respect In • • Where the deferred tax liability arises from the initial recognition of goodwill or of an any reimbursement. relatingtoany provision ispresented inthe consolidated income statement net of and a reliable estimate can be made of the amount of the obligation. of The expense outflow an obligation the that settle probable to required be or is will benefits resourceseconomicembodying it (legal and event, obligation past present a of a result a has as constructive) Group the when recognized are Provision profit will be available against which the temporary temporary thethat differences foreseeable differences the reverse will in taxable future and can be utilized. subsidiaries, deferred tax assets are recognized only to the extent that it is probableaccounting profit nor taxable profit or loss. transaction,theneitheraffects the of time the at combinationbusinessand, a arises from the initial recognition of an asset or liability in a transaction that is not foreseeable future. controlled and it is probable that the temporary differences will not reverse in the subsidiaries, where the timing of the reversal of the temporary differences can be of the transaction, affects neither the accountingasset profit or liability nor taxable in a transaction profit or that loss. is not a business combination and, at the time P rovisions for risks and charges 31 December2010 Notes totheConsolidatedFinancialStatements (20) Retirement benefits obligation The Group provides retirement benefits obligation to its employees. The entitlement of these benefits is based upon the employees’ final salary, length of services and other local regulations where the Group operates. The expected costs of these benefits are accrued over the period of employment.

For the Bank and its branches operating in Lebanon, end-of-service benefit subscriptions paid and due to the National Social Security Fund (NSSF) are calculated on the basis of 8.5% of the staff salaries. The final end-of-service benefits due to employees after completing 20 years of service, at the retirement age, or if the employee permanently leaves employment, are calculated based on the last salary multiplied by the number of years of service. The Bank is liable to pay to the NSSF the difference between the subscriptions paid and the final end-of-service benefits due to employees. The Bank provides for end-of-service benefits on that basis.

(21) Treasury shares Own equity instruments of the Bank which are acquired by it or by any of its subsidiaries (treasury shares) are deducted from equity and accounted for at weighted average cost. Consideration paid or received on the purchase sale, issue or cancellation of the Bank’s own equity instruments is recognized directly in equity. No gain or loss is recognized in the consolidated income statement on the purchase, sale, issue or cancellation of the Bank’s own equity instruments.

When the Bank holds own equity instruments on behalf of its clients, those holdings are not included in the Bank’s statement of financial position.

(22) Fiduciary assets The Group provides trust and other fiduciary services that result in the holding or investing of assets on behalf of its clients. Assets held in a fiduciary capacity are not reported in the consolidated financial statements, as they are not the assets of the Group; and accordingly are recorded as off financial position items.

(23) Dividends on ordinary shares Dividends on ordinary shares are recognised as a liability and deducted from equity when they are approved by the Bank’s shareholders.

Dividends for the year that are approved after the statement of financial position date are disclosed as an event after the statement of financial position date.

(24) Segment reporting The Group’s segmental reporting is based on the following operating segments: Retail banking, corporate banking, treasury, money and capital markets and asset management and private banking.

105 106 BLOM BANK s.a.l. Annual Report 2010 a liability in the consolidated statement of financial position for the same amount. (acceptances).commitmentsThe resulting fromtheseacceptances arestatedas has Group theclientscommittedits behalfagainstsettleof oncommitmentsto those clientsby which credits documentary term represent acceptances Bank (26) Bank acceptances portion of commissions paid relating to the unexpired period of coverage. representtheacquisition Deferredcostsbusiness.marine for commissionspaid of 25% and business non-marine they for method which temporis prorata to the using policies relate the of terms the over expensed are paid Commissions Commissions earned are recognized at the time policies are written. Commissions earned and paid arising on these premiums, a premium deficiency reserve is created. If the unearned premiums reserve is not considered adequate to cover future claims the unexpired period of coverage. premiumsreserve represents the portion of the gross premiums written relating to non-marine business and 25% of gross premiums for marine business. for Unearned methodproratatemporis the usingrelate they which topolicies the of terms the over income to taken are premiums) (gross accessories and premiums Net Premiums earned where the subsidiaries operate. The key accounting policies are as follows: reinsurancecompanies beenandinsurance regulationstorelated therequirements of have companies insurance subsidiary preparedaccordance the inInternational with Financial Reporting Standards the and of statements financial The (25) Accounting policies of subsidiary-insurance companies ahmtcl oes Te nus o hs mdl ae eie fo observable from derived are models these to inputs The models.mathematical they are determined using a variety of valuation techniques that include the use of consolidated statement of financial the on position liabilities recorded financial and cannot assets financial beof derivedvalues fair fromthe Where active markets, Fair value of financial instruments statements continue to be prepared on the going concern basis. Group’s ability to continue as a going concern. the significant upon castdoubt Therefore,materialuncertainties mayany that of aware not the consolidated financial isFurthermore, managementforeseeablefuture.the for business in continue resources to the has Group the that satisfied is to and concern ability going Group’s a the as continue of assessment an made has management Group’s The Going concern estimates are as follows: in recognized amounts judgment and of consolidatedsignificant use most financial thestatements. The the determining in estimates and has judgment management policies,exercised accounting Group’s the applying of process the In assumptions and estimates judgments, accounting Significant 2.6 31 December2010 Notes totheConsolidatedFinancialStatements market data where possible, but where observable market data are not available, judgment is required to establish fair values. The valuation of financial instruments is described in more detail in Note 43.

Impairment losses on loans and advances The Group reviews its individually significant loans and advances at each statement of financial position date to assess whether an impairment loss should be recorded in the consolidated income statement. In particular, management judgment is required in the estimation of the amount and timing of future cash flows when determining the impairment loss. These estimates are based on assumptions about a number of factors and actual results may differ, resulting in future changes to the allowance.

Loans and advances that have been assessed individually and found not to be impaired and all individually insignificant loans and advances are then assessed collectively, in groups of assets with similar risk characteristics, to determine whether provision should be made due to incurred loss events for which there is objective evidence but whose effects are not yet evident.

The collective assessment takes account of data from the loan portfolio (such as levels of arrears, credit utilization, loan to collateral ratios, etc.), and judgments to the effect of concentrations of risks and economic data (including levels of unemployment, real estate prices indices, country risk and the performance of different individual groups).

The impairment loss on loans and advances is disclosed in more detail in notes 10 and 20 to the consolidated financial statements.

Impairment of available-for-sale investments The Group reviews its debt securities classified as available-for-sale investments at each statement of financial position date to assess whether they are impaired. This requires similar judgment as applied to the individual assessment of loans and advances.

The Group also records impairment charges on available-for-sale equity investments when there has been a significant or prolonged decline in the fair value below their cost. The determination of what is “significant” or “prolonged” requires judgment. In making this judgment, the Group evaluates, among other factors, historical share price movements and the duration and extent to which the fair value of an investment is less than its cost.

Deferred tax assets Deferred tax assets are recognized in respect of tax losses to the extent that it is probable that taxable profit will be available against which the losses can be utilized. Judgment is required to determine the amount of deferred tax assets that can be recognized, based upon the likely timing and level of future taxable profits, together with future tax planning strategies.

107 108 BLOM BANK s.a.l. Annual Report 2010 financial statements. Income taxes are managed on a group basis and are not allocatedprofit or loss which to in certain operatingrespects is measured segments. differently from operating profit or loss in the consolidated about resource allocation and performance assessment. Segment performance Managementis monitorsevaluated the basedoperating on resultsoperating of its business units separately for the purpose of making decisions Principally providing investment products and services to institutional investors and intermediaries. Asset Management and Private Banking: financial instruments. risks. This segment also handles the management of the Group’smarket and portfolio risksliquidity theof equities,managementof internationally) and Group’sdebtand operations(locally customers,tradingsecurities the and other for market money the in operations including services investment various handlingPrincipally Treasury, Money and Capital Markets: and corporate for accounts current and depositinstitutional customers. and facilities credit other and loans handling Principally Corporate Banking: facilities and funds transfer facilities. cards credit overdrafts, loans, consumer providing and deposits customers’ individual, handlingPrincipally Retail Banking: and asset management and private banking. businessmajorGroupfoursegments:operatesThe inretail, corporate, treasury, capitalmarkets,andmoney The Group’s segments provide products or services subject to different risks and returns than other segments. of the interest acquired has been recognized in retained earnings within equity. acquiredwas LL16,131 million. The difference ofLL 22,235 between the consideration and the carrying value additionalinterestthe ofcarrying value the161,310million, and LL acquisition wasthedate at OverseasSA was paid to the non-controlling interest shareholders. The carrying value of the net assets of Bank of Syria and ofSyria and Overseas SA, increasing its ownership interest to49%. cashA consideration ofLL38,366 million Accordingly,October25on 2010, theGroup acquired additionalan 10%interest theofvoting shares Bankof the Central Bank of Syria, respectively to acquire IFC shares in Bank of Syria and Overseas SA. On 22 July 2010 and on 4 October 2010, the Bank obtained the approvals of the Central Bank of Lebanon and • The remaining 11% increase to reach 60% will be performed at a later stage. acquiring International by 49% Finance Corporation’s increasestage, to ownershipfirst 39% from the a At • Syria and Overseas SA up to 60% as follows: In its meeting held on 5 May 2010, the Bank’s board of directors approved the increase of ownership in Bank of the Central Bank of Lebanon and the Central Bank of Syria. (IFC) shares (720,000 shares) in Bank of Syria and Overseas SA. The acquisition is subject to the approval of 4 3 31 December2010 Notes totheConsolidatedFinancialStatements Segmental Information Acquisition ofAdditionalInterest InBankofSyriaandOverseasSA

Interest income is reported net since the majority of the segments’ revenues are from interest. Management primarily relies on net interest revenue as performance measure, not the gross revenue and expense amounts.

No revenue from transactions with a single external customer or counterparty amounted to 10% or more of the Group’s total revenues in 2010 or 2009.

Transfer prices between operating segments are on an arm’s length basis in a manner similar to transactions with third parties.

The following table presents income and profit and certain asset and liability information regarding the Group’s operating segments.

2010

Treasury, Asset money and Corporate Retail management Unallocated Total capital banking banking and private LL million markets banking Revenues Net interest income 522,860 127,134 93,189 3,356 - 746,539 Net fee and commission 29,130 48,650 20,260 20,592 26,710 145,342 income Net trading income 7,468 - 31,394 - - 38,862 Net gain on financial assets designated at fair value 657 - - - - 657 through profit or loss Net gain on financial 76,321 - - - - 76,321 investments Other operating income - - 14,373 - - 14,373

Total operating income 636,436 175,784 159,216 23,948 26,710 1,022,094

Credit loss expense (4,544) (24,051) 3,703 - - (24,892)

Net operating income 631,892 151,733 162,919 23,948 26,710 997,202

Unallocated expenses (392,076) Income tax expense (106,745)

Profit for the year 498,381

Segment’s assets 25,033,061 5,536,162 2,351,887 124,031 638,711 33,683,852

Segment’s liabilities 21,001,623 5,303,341 3,736,581 134,478 657,247 30,833,270

109 110 BLOM BANK s.a.l. Annual Report 2010 Segment’s liabilities Segment’s assets Profit fortheyear Income taxexpense Unallocated expenses Net operatingincome financial investments Write-back ofprovision on Credit lossexpense Total operatingincome Other operatingincome investments Net gainonfinancial through profit orloss designated atfairvalue Net gainonfinancialassets Net tradingincome income Net feeandcommission expenditure by geographical segment. capital and assetstotal income,operating Group’snet the external distribution of the shows tablefollowing market represents the Lebanese market and the international market represents markets outside Lebanon. The TheGroup operates in two geographic markets based on the location of its markets and customers. The local Geographic information Net interest income Revenues LL million 31 December2010 Notes totheConsolidatedFinancialStatements 20,536,777 24,348,265 money and Treasury, markets capital 551,242 535,521 466,617 15,721 38,558 11,639 11,200 7,507 - - Corporate 4,799,102 4,459,503 banking 176,937 170,022 102,679 67,343 6,915 - - - - - 2,554,587 1,618,887 banking 115,761 117,461 Retail 18,836 24,442 16,140 58,043 (1,700) - - - 2009 management and private banking 206,874 177,370 Asset 13,731 13,731 9,537 4,194 ------Unallocated 535,955 604,819 17,558 17,558 17,558 ------28,633,295 31,208,844 (347,518) 441,729 875,229 854,293 121,778 631,533 (85,982) Total 15,721 18,836 38,558 36,081 5,215 7,507 Domestic International Total

2010 2009 2010 2009 2010 2009

LL million Revenues Net interest income 622,777 515,015 123,762 116,518 746,539 631,533 Net fee and commission 90,983 71,566 54,359 50,212 145,342 121,778 income Net trading income 21,079 13,419 17,783 22,662 38,862 36,081 Net (loss) gain on financial assets designated at fair (317) 7,507 974 - 657 7,507 value through profit or loss Net gain on financial 64,301 31,619 12,020 6,939 76,321 38,558 investments Other operating income 8,130 7,411 6,243 11,425 14,373 18,836 Credit loss (expense) income (6,439) 8,269 (18,453) (3,054) (24,892) 5,215 Write back of provision on - - - 15,721 - 15,721 financial investments

Total external net operating 800,514 654,806 196,688 220,423 997,202 875,229 income

Total operating expenses (222,076) (188,734) (170,107) (158,913) (392,183) (347,647) Net profit from sale or disposal 144 75 (37) 54 107 129 of other assets

Profit before tax 578,582 466,147 26,544 61,564 605,126 527,711

Non-current assets 227,853 194,464 282,580 280,845 510,433 475,309

Non-current assets consist of property and equipment, intangible assets, goodwill, investment properties and non-current assets held for sale.

The Group’s major business segment is banking. Insurance activities represent 3% (2009: 2%) of profit before income tax and 1% (2009: 1%) of total assets.

111 112 BLOM BANK s.a.l. Annual Report 2010 Net feeandcommission income Correspondents’ accounts Fee andcommissionexpense: Otherservices Insurancepremiums’ commissions Generalbankingincome Electronic banking Assetmanagementandprivatebanking Credit related feesandcommissions Trade finance Fee andcommissionincome LL million Deposits from related parties Deposits from customers andothercredit balances institutions Deposits andsimilaraccountsfrom banksandfinancial LL million Loans andadvancestorelated parties Loans andadvancestocustomers institutions Deposits andsimilaraccountswithbanksfinancial through profit orloss Interest incomeonfinancialassetsdesignatedatfairvalue Financial investments–held-to-maturity Financial investments–loansandreceivables Financial investments–available-for-sale LL million 7 6 5 31 December2010 Notes totheConsolidatedFinancialStatements Net FeeandCommissionIncome Interest andSimilarExpenses Interest andSimilarIncome 1,051,827 1,067,129 1,813,668 (31,333) 145,342 543,061 142,166 731,533 360,388 176,675 28,872 26,710 29,130 14,797 20,592 26,358 30,216 10,079 31,734 5,223 4,434 2010 2010 2010 352 1,064,548 1,081,395 1,712,928 121,778 446,272 160,777 684,444 389,128 144,735 (22,957) 26,840 17,558 29,741 12,258 22,263 26,538 10,534 27,648 1,034 9,537 6,313 3,625 2009 2009 2009 8 Net Trading Income

LL million 2010 2009 Debt securities (146) 1,793 Equities 5,366 6,808 Foreign exchange 33,642 27,480 38,862 36,081

“Equities” income includes the results of buying and selling, and changes in the fair value of equity securities.

“Debt securities” income includes the results of buying and selling and changes in the fair value of trading debt securities as well as the related interest income and expense.

‘Foreign exchange’ income includes gains and losses from spot and forward contracts and other currency derivatives.

9 Net Gain on Financial Investments

LL million 2010 2009 Dividend income from available-for-sale financial investments 759 895 Gain from sale of other financial assets classified as loans and receivables 60,888 23,398 Gain from sale of available-for-sale financial investments 14,641 14,265 Profit from non-trading investments 33 - 76,321 38,558

10 Credit Loss (Expense) Income

LL million 2010 2009 Provision on due from financial institutions Investment in a financial institution (note 16) (4,544) - (4,544) - Provision for loans and advances: Commercial loans (note 20) (29,226) (6,744) Consumer loans (note 20) (8,295) (3,331) Commitment by signature (note 32) (2,463) - (39,984) (10,075) Write-back of provisions for loans and advances: Commercial loans (note 20) 3,027 4,980 Consumer loans (note 20) 11,999 1,631 Unrealized interest (note 20) 3,272 2,412 Recoveries from loans reflected as off-financial position 1,338 5,529 Settled legal suits - 650 Risks and charges - 88 19,636 15,290 (24,892) 5,215

113 114 BLOM BANK s.a.l. Annual Report 2010 Income taxonprofit fortheyear(note30) 5% taxpaidoninterest revenue duringtheyear LL million Others Fiscal stamps Stationary andprintings Marketing andadvertising Insurance Travel expenses Maintenance andrepairs Postage andtelecommunications Professional fees Electricity andfuel Rent andrelated charges Fee forguaranteeofdeposits Taxes andfees Board ofdirectors’ attendancefees LL million Wages andsalaries LL million Bonus paid Additional allowances Provisions forretirement benefitsobligation(note33) Social securitycontributions The components of income tax expense for the years ended 31 December 2010 and 2009 are: 13 12 11 31 December2010 Notes totheConsolidatedFinancialStatements Income Tax Other OperatingExpenses Personnel Expenses 106,745 134,497 111,943 220,503 68,589 38,156 35,221 11,856 11,439 10,250 11,430 10,345 10,729 51,545 28,979 19,832 6,355 6,071 1,257 4,094 4,866 9,215 1,369 8,204 2010 2010 2010 120,676 100,726 192,083 85,982 53,655 32,327 27,218 10,800 13,036 12,346 44,682 22,482 17,709 4,119 5,162 1,791 3,378 4,670 9,117 1,238 9,604 9,972 8,225 6,484 2009 2009 2009 Reconciliation of total tax charge The relationship between taxable profit and accounting profit of BLOM Bank SAL and its foreign branches and subsidiaries is as follow:

LL million 2010 2009 Profit before income tax 605,126 527,711 Less: Results of the subsidiary insurance company located in Lebanon(*) (11,269) (7,702)

Accounting profit before income tax 593,857 520,009

Add: Provisions non tax deductible 23,070 4,761 Other non tax deductible charges 70,755 41,681 Unrealized loss on difference of exchange 62 868

687,744 567,319 Less: Dividends received and previously subject to income tax (7,844) (3,969) Remunerations already taxed (9,337) (8,571) 4% of a subsidiary’s capital eligible to be tax deductible (400) (400) Write-back of provisions previously subject to income tax (7,017) (30,505) Non taxable income (29,129) (6,582) Permanent deductible charges - (13,895) Losses related to prior years - (41,655) Others (132) (172)

Taxable profit 633,885 461,570

Effective income tax rate 17.64% 16.29% Income tax expense in the consolidated income statement 106,745 85,982

(*) The insurance company in Lebanon is subject to income tax at the rate of 15% calculated based on gross insurance premiums weighted differently for each class of business.

14 Earnings Per Share

Basic earnings per share amounts are calculated by dividing the net profit for the year attributable to ordinary equity holders of the Bank by the weighted average number of ordinary shares outstanding during the year. The following table shows the income and share data used in the basic earnings per share calculations:

2010 2009 Net profit for the year LL million 498,381 441,729 Less :Proposed dividends on preferred shares (note 39) LL million (23,931) (23,931) Non-controlling interests LL million (15,005) (12,171) Net profit attributable to ordinary equity LL million 459,445 405,627 holders of the parent Weighted average number of ordinary shares 209,128,680 208,859,970 for basic earnings per share Basic earnings per share LL 2,197 1,942

115 116 BLOM BANK s.a.l. Annual Report 2010 Less:Unrealized interest forplacementswithotherbanks banks Less:Impairmentallowance forplacementswithother Doubtfulaccountswithbanks Timedeposits Time deposits Current accounts Current accounts LL million Deposits withtheCentralBanks Current accountswithCentral Banks Cash onhand LL million the banking rules and regulations of the countries in which they are located. Foreign subsidiaries are also subject to obligatory reserve requirements with varying percentages, according to interest- bearing placements at the rate of 15% of total deposits in foreign currencies regardless of nature. In addition to the above, all banks operating in Lebanon are required to deposit with the Central Bank of Lebanon is calculated on the basis of 25% of sight commitments and 15% of term commitments. on deposits in Lebanese Lira as required by the Lebanese banking rules andCentral regulations. Bank of Lebanonthe inThis coverage at obligatoryGroup of the theobligatory reserveby reserve held requirementsbalances non-interestbearinginclude Banks forCentral all banks the operatingwithbalances in Lebanon and Cash date and the date of approval of these consolidated financial statements. transactionsTherenobeenhave involving ordinary sharespotentialor ordinary sharesbetweenreporting the would have an impact on earnings per share when exercised. No figure for diluted earnings per share has been presented as the Bank has not issued any instruments which to reflect the effect of the 1 to 10 stock split that took place during 2010. The weighted average number of shares outstanding and the earnings per share figures for 2009 were restated 16 15 31 December2010 Notes totheConsolidatedFinancialStatements Due from BanksandFinancialInstitutions Cash andBalanceswithCentralBanks 5,477,958 4,248,229 2,626,186 1,436,706 5,931,237 5,477,958 (17,473) 453,279 185,337 17,588 2010 2010 (115) 5,231,027 4,693,974 2,654,657 1,870,986 5,787,117 5,232,397 554,720 168,331 (3,769) 5,197 2009 2009 (58) Movement of impairment allowance and unrealized interest for doubtful accounts with banks is as follows:

LL million 2010 2009 Balance at 1 January 3,827 3,765 Transfer from “Provision for risks and charges” (note 32) 9,160 - Charge for the year (note 10) 4,544 - Provision for unrealized interest 57 58 Foreign exchange difference - 4

Balance at 31 December 17,588 3,827

- Time deposits include US$ nil (2009: US$ 185 million) being guarantees against short term cash advances in the amount of Euro nil (2009: Euro 105 million). According to the contracts entered into with these banks, the Group can withdraw these term deposits upon the settlement of the short-term cash advances.

- The transfer from “Provision for risks and charges” amounting to LL 9,160 million represents transfer of the provision against probable default of Investment Dar S.A.K. – Kuwait (TID) to settle the fiduciary deposits of BLOM Development Bank SAL’s (a subsidiary) customers during 2010.

In 2010, and due to settlement difficulties witnessed by TID, the Group booked additional provision amounting to LL 4,180 million (USD 2,773,293) based on the approval of the Banking Control Commission on 2 February 2011 to fully provide against this doubtful account. As a result the total provision booked against TID amounted to LL 16,240 million as at 31 December 2010 (2009: LL 2,900 million).

17 Derivative Financial Instruments

The table below shows the fair values of derivative financial instruments, recorded as assets or liabilities, together with their notional amounts. The notional amount, recorded gross, is the amount of a derivative’s underlying asset, reference rate or index and is the basis upon which changes in the value of derivatives are measured. The notional amounts indicate the volume of transactions outstanding at the year end and are indicative of neither the market risk nor the credit risk.

2010 2009 Total Total Assets Liabilities notional Assets Liabilities notional LL million amount amount Derivatives held-for-trading Forward foreign exchange 6,036 9,160 1,383,888 21,632 18,454 3,466,008 contracts Equity swaps and options 6,320 162 42,769 5,072 5,072 1,110,062 Futures on commodities 27,143 27,143 335,493 - - - 39,499 36,465 1,762,150 26,704 23,526 4,576,070 Derivatives used as fair value hedges Currency swaps - - 108,600 - - -

Hedge of net investment in foreign operations Forward foreign exchange contracts 7,193 - 215,532 6,840 - 233,067 46,692 36,465 2,086,282 33,544 23,526 4,809,137

117 118 BLOM BANK s.a.l. Annual Report 2010 amount, which is their fair value. exposedcreditispurchasedto riskon optionsextenttheirthecarryingofonlyto at an agreed-upon value either on or before the expiration of the option. The Grouptheopportunity purchaseto (calloptions) sellor(put options) theunderlying asset over-the-counter markets. Options purchased by the Groupthe providethroughinoptionsregulated sellsexchangespurchasesandGroup and theThe Group with a fixed price, either at a fixed future date or at any time within a specified period. for the purchaser either to buy or sell a specific amount of a financial instrument at obligation,Optionscontractualarethenot agreements right,but conveythe that Options a specified amount in another currency. Currency swaps are mostly gross-settled. In a currency swap, the Group pays a specified amount in one currency and receives equity index. or currency rate foreign interest rate, an as such underlying index specified a in payments over time based on specified notional amounts, in relationexchangestreamsof contractualtopartiesareagreements Swaps twoto between movements Swaps are settled on a net basis. Both types of contracts result in market risk are, exposure. and gross therefore, settled considered are to bear contracts a higher Forward liquidity honoured. risk alwaysthan the futures are contractscontracts which these that ensure help exchange the requirements of margin cash the because forward contracts. The credit risk related to future contracts is considered minimal credit risk and liquidity risk. The Group has credit exposure to the counterpartiesThemain differences of inthe risk associated with forward and futures contracts are daily cash margin requirements. are Forwards are transacted future. in standardised the amounts in on regulated date exchanges and and are customisedsubject price to contracts transacted specific in the a over-the-counter at market. instrument Futures contractsfinancial Forward and futures contracts are contractual agreements to buy or Forwardssell a and futuresspecified the absence of an exchange market on which to close out an open position. associatedwithrisks the Over-the-counter toGroup theexpose derivativesmay significant impact on the profit or loss of the Group. inthe value of the asset, rate or index underlying a derivative contract may have a involve a high degree of leverage and are very volatile.consideration. A relativelyof transfer nosmall movementor little with promises of exchange mutual a only inception their at involve oftenDerivatives 31 December2010 Notes totheConsolidatedFinancialStatements H owever, these instruments frequentlyinstrumentsowever,these Derivative financial instruments held-for-trading purposes Most of the Group’s derivative trading activities relate to deals with customers which are normally offset by transactions with other counterparties. The Group may also take positions with the expectation of profiting from favorable movements in prices, rates or indices. Also included under this heading are any derivatives entered into for hedging purposes which do not meet the IAS 39 hedge accounting criteria.

Derivative financial instruments held for hedging purposes As part of its asset and liability management, the Group uses derivatives for hedging purposes in order to reduce its exposure to currency risk.

The Group uses forward foreign exchange contracts to hedge against specifically identified currency risks.

Hedge of net investment in foreign operations Forward foreign exchange contracts (to sell Euros and buy US Dollars) designated as a hedge of the Group’s net investment in its French subsidiary, and is being used to hedge the Group’s investment exposure to foreign exchange risk on this investment amounting to Euro 107,904 thousand (2009: same). The notional amount of these contracts amounted to Euro 107,904 thousand (LL 215,532 million) as at 31 December 2010 (2009: LL 233,067 million). The forward foreign exchange contracts were revalued as of 31 December 2010 and resulted in unrealized gain of LL 7,193 million (2009: unrealized gain of LL 6,840 million). The contracts mature on 28 February 2011 at latest.

18 Financial Assets Held-For-Trading

LL million 2010 2009 Debt securities 18,538 8,654 Equities 13,880 13,397 Investment funds 22,398 2,712 54,816 24,763

19 Financial Assets Designated at Fair Value Through Profit or Loss

LL million 2010 2009 Convertible bonds 65,989 66,305 Investments related to unit-linked contracts (i) 74,012 73,097 Subordinated convertible notes 24,524 - 164,525 139,402

(i) The unrealized gain on investments related to unit-linked contracts amounted to LL 3,583 million for the year ended 31 December 2010 (2009: unrealized gain of LL 3,497 million).

119 120 BLOM BANK s.a.l. Annual Report 2010 determined to be impaired Gross amountofloansindividually Collective impairment Individual impairment Balance at31December Foreign exchangedifference position Provision transferred tooff financial Write-back ofprovisions Provisions written-off Less: Reclassification Foreign exchangedifference Charge fortheyear Add: A reconciliation of the allowance for impairment losses for loans and advances, by class, is as follows: Breakdown by economic sector Balance at1January Allowanceforunrealized interest onimpaired loans LL million Manufacturing Agriculture andforestry LL million Allowanceforimpairmentlosses Less: Consumer loans Commercial loans LL million Trade retail Freelance professions Construction Services Trade wholesale Consumer loans 20 31 December2010 Notes totheConsolidatedFinancialStatements Loans andAdvancestoCustomers Commercial 156,120 (12,964) (14,262) 174,831 158,120 121,206 158,120 171,084 loans (4,956) (4,390) (3,027) 36,914 29,226 (591) - Consumer (13,117) (11,999) 2010 22,826 loans (1,118) 41,213 32,266 24,665 32,266 45,383 14,262 7,601 8,295 - - - 178,946 (26,081) (15,026) 216,044 190,386 145,871 190,386 216,467 (6,074) (4,390) 44,515 37,521 Total (591) 7,797,136 8,033,408 2,384,153 5,649,255 1,095,970 1,793,110 1,130,602 8,033,408 2,384,153 (190,386) - - (45,886) 818,114 237,607 239,732 334,120 2010 2010 Commercial 161,159 202,828 156,120 134,618 156,120 170,986 (14,866) loans 21,502 (5,144) (4,980) (4,685) 3,083 6,744 (57) - Consumer 2009 21,101 loans 13,225 22,826 17,750 22,826 24,457 (1,631) (1,631) 5,076 3,331 25 - - - - 6,046,601 6,263,579 1,641,713 4,621,866 1,653,459 6,263,579 1,641,713 (178,946) 671,633 151,063 803,133 983,881 334,243 (38,032) 182,260 216,053 178,946 139,694 178,946 195,443 (16,497) 24,454 39,252 10,075 (5,144) (6,611) (4,685) Total 2009 2009 3,108 (57) - A reconciliation of allowance for unrealized interest on impaired loans, by class, as follows:

2010 2009 LL million Commercial loans Commercial loans Balance at 1 January 38,032 35,819 Add: Unrealized interest for the year 26,967 35,118 Foreign exchange difference (1,010) (1,553) 63,989 69,384 Less: Recoveries of unrealized interest (3,272) (2,412) Amounts written-off (14,195) (26,505) Transferred to off-financial position (636) (2,435)

Balance at 31 December 45,886 38,032

Unrealized interest on substandard loans 11,925 13,000 Unrealized interest on doubtful loans 33,961 25,032 45,886 38,032

As required by the Central Bank of Lebanon regulations, impaired loans fulfilling certain conditions have been transferred to off financial position, together with the related allowance for impairment losses provisions and allowance for unrealized interest.

The movement of allowance for impairment losses and allowance for unrealized interest against fully impaired loans included in the off financial position accounts is as follows:

LL million 2010 2009 Balance at 1 January 82,695 83,928 Add: Unrealized interest for the year 7,324 6,747 Provision and unrealized interest transferred from the 5,026 7,579 statement of financial position Foreign exchange difference - 36 95,045 98,290 Less: Recoveries / Provisions written-back (1,338) (5,529) Amounts written-off (8,508) (10,066) Foreign exchange difference (264) - (10,110) (15,595) Balance at 31 December 84,935 82,695

21 Bank Acceptances / Engagements By Acceptances

LL million 2010 2009 Acceptances as of 31 December 205,546 197,637

Acceptances resulted from letters of credit opened for accounts of customers, with deferred payments.

121 122 BLOM BANK s.a.l. Annual Report 2010 Investment fund(iii) Granted financialloans Equities (ii) financial institutions commercial banksand Certificates ofdeposit– Central BankofLebanon Certificates ofdeposit– Other debtsecurities(i) Government debtsecurities Government Unquoted investments Investment funds financial institutions commercial banksand Certificates ofdeposit– Debt securities At 1January Impairment Disposals Additions Investment fund(iii) Equities (ii) Other debtsecurities(i) LL million following: All unquoted available-for-sale financial investments are recorded at fair value as of 31 December except for the Equities Quoted investments LL million At 31December Related todisposals At 31December Translation difference At 1January Cost LL million At 31December Net carryingvalue 23 22 31 December2010 Notes totheConsolidatedFinancialStatements Financial Investments Non-Current AssetsHeldFor Sale investments Available- 4,116,261 3,633,889 3,601,367 for- sale 482,372 247,525 229,573 15,262 10,650 6,441 5,274 169 - - - Other financial receivables asloans& classified 9,559,006 9,559,006 5,978,665 2,752,862 assets 2010 103,020 650,120 74,339 ------investments Held-to- maturity 912,295 912,295 489,102 350,903 72,290 ------investments Available- 4,694,221 4,406,581 4,313,911 for- sale 17,260 10,650 287,640 121,279 166,349 6,441 2010 (2,785) (2,804) (2,785) (1,412) 30,847 32,631 28,062 72,460 13,858 2,432 2010 169 6,201 151 12 - - - - Other financial receivables asloans& classified 8,200,247 8,200,247 5,158,477 2,256,217 assets 2009 102,551 128,637 554,365 ------investments Held-to- maturity (16,608) 774,997 774,997 476,809 267,835 14,411 32,631 34,765 20,210 13,858 29,846 (7,204) (2,785) 30,353 4,419 6,201 2009 2009 151 63 ------All unquoted available-for-sale financial investments listed above are recorded at cost since their fair value cannot be reliably estimated. There is no market for these investments, and the Group intends to hold them for the long term.

Collective impairment allowance for other financial assets classified as loans and receivables and held- to- maturity A reconciliation of the collective impairment allowance for other financial assets classified as loans and receivables and held-to-maturity is as follows:

LL million 2010 2009 At 1 January - 15,725 Write-back during the year - (15,721) Difference on exchange - (4)

At 31 December - -

In 2008 and due to the financial crisis in international markets and the ongoing decrease in the market value of some financial instruments, the Group’s management decided to provide for a collective provision covering any upcoming decrease in the value of its financial assets amounting to USD 10,431 thousand (LL 15,725 million) for the year ended 31 December 2008. This provision was reversed during 2009 taking into consideration the significant increase in the market value of these financial instruments.

24 Property And Equipment

Advances on Furniture, office acquisition Freehold land installations and Vehicles of fixed assets Total and buildings computer and construction equipment LL million in progress Cost At 1 January 2010 269,405 5,107 221,393 50,189 546,094 Additions 17,250 1,622 15,730 45,683 80,285 Disposals (46) (462) (2,605) (1,109) (4,222) Transfers (note 25) 18,899 - 8,259 (27,459) (301) Translation difference (3,524) (107) (4,298) (1,038) (8,967)

At 31 December 2010 301,984 6,160 238,479 66,266 612,889

Depreciation At 1 January 2010 40,546 2,883 127,815 - 171,244 Charge for the year 6,530 1,028 27,132 - 34,690 Relating to disposals (13) (462) (2,394) - (2,869) Translation difference (435) (75) (2,040) - (2,550)

At 31 December 2010 46,628 3,374 150,513 - 200,515

Net carrying value At 31 December 2010 255,356 2,786 87,966 66,266 412,374

123 124 BLOM BANK s.a.l. Annual Report 2010 At31December2010 Net carryingvalue At31December2010 Translation difference Charge fortheyear At1January2010 Amortization At31December2010 Translation difference Transfers (note24) Additions million, which was credited to equity under “reserves for revaluation variancechanges – real estate”.in the general purchasing power of the LebaneseCertain freeholdLira buildings landand giving purchasedJanuary 11999priorwere torestatedrise previous in yearsto thefor a net surplus amounting to LL 14,727 LL million At1January2009 Cost LL million At1January2010 Cost Additions Disposals Transfers (note25) Translation difference At31December2009 At1January2009 Depreciation Charge fortheyear Relatingtodisposals Translation difference At31December2009 At31December2009 Net carryingvalue 25 31 December2010 Notes totheConsolidatedFinancialStatements Intangible Assets Freehold land and buildings development Software 217,575 269,405 228,859 24,587 28,636 34,672 40,546 (2,043) 5,959 650 (85) 13,936 10,140 11,477 3,796 2,344 7,501 1,185 - 295 285 989 Vehicles Key money 4,807 1,110 5,107 2,806 2,883 2,224 (639) (231) (590) (147) 814 60 (2,427) (2,484) installations and 6,665 Furniture, office 2,116 4,549 6,827 9,149 149 equipment computer - - 199,002 221,393 106,741 127,815 22,383 26,345 93,578 (4,013) (2,968) (2,983) (2,288) 6,989 intangibleassets acquisition of Advances on and construction of fixedassets Advances on in progress acquisition (688) 369 (19,721) (35,910) (59) 369 687 429 47,411 58,181 50,189 50,189 - - - - 228 - - - - - Total Total 468,795 106,261 546,094 144,219 171,244 374,850 (26,416) 20,970 (2,132) (2,258) 14,689 14,328 21,055 33,118 (2,321) (3,573) (2,520) 6,281 2,493 1,872 (225) 301 Advances on Software Key money acquisition of Total development LL million intangible assets Cost At 1 January 2009 8,299 9,048 475 17,822 Additions 3,038 - 413 3,451 Disposals (149) - (434) (583) Transfers (note 24) 233 - (8) 225 Translation difference 56 101 (17) 140

At 31 December 2009 11,477 9,149 429 21,055

Amortization At 1 January 2009 5,900 6,615 - 12,515 Charge for the year 1,623 147 - 1,770 Relating to disposals (149) - - (149) Translation difference 127 65 - 192

At 31 December 2009 7,501 6,827 - 14,328

Net carrying value At 31 December 2009 3,976 2,322 429 6,727

26 Other Assets

LL million 2010 2009 Compulsory deposits (i) 16,927 15,094 Precious metals and stamps 670 740 Customers’ transactions between head office and 12,388 13,505 branches Prepaid expenses 23,995 22,275 Transactions pending between consolidated subsidiaries 5,425 6,252 Sundry debtors (ii) 6,144 8,874 Other revenues to be collected 4,015 7,754 Reinsurer’s share of technical reserves 31,787 21,846 Investment in a non-consolidated subsidiary (iii) 50 50 Other assets 26,877 33,120 128,278 129,510

125 126 BLOM BANK s.a.l. Annual Report 2010 ii Te ok au o te usdays qiy hc ws o cnoiae bcue t s maeil o the to immaterial is it because consolidated not consolidated was financial which subsidiary’s statements equity the as at 31 ofDecember valueis detailed book as follows: The (iii) The movement of provision against sundry debtors is summarized as follows: (ii) Sundry debtors Less: Provision againstsundry debtors At 31December Translation difference At1January Cost: LL million Société deServicesd’AssurancesetMarketingSAL LL million Balance at31December Translation difference Balance at1January LL million Sundry debtors LL million BLOM DevelopmentBankSAL Bank ofSyriaandOverseasSA BLOM InvestSAL LL million countries in which the subsidiaries are located, and are detailed as follows:Compulsory(i)depositsrepresentregulations thelocalauthorities amountsdepositedlocal ofon withbased 27 31 December2010 Notes totheConsolidatedFinancialStatements Goodwill Shareholders’ equity 63,145 63,268 2010 (123) (2,730) 16,927 10,927 6,144 2,730 2,739 8,874 4,500 1,500 2010 2010 2010 2010 248 (9) 11,613 15,094 63,268 63,145 (2,739) 8,874 2,739 2,737 4,500 1,500 9,094 2009 2009 2009 2009 2009 123 216 2 Impairment testing of goodwill Goodwill acquired through business combinations has been allocated to group of cash-generating units, which are also reportable segments, for impairment testing as follows:

LL million 2010 2009 Corporate and retail banking (BLOM Bank Egypt SAE) 61,876 61,550 Asset management and private banking (BLOM Bank 1,269 1,718 (Switzerland) SA) 63,145 63,268

Key assumptions used in value in use calculations The recoverable amount of BLOM Bank Egypt SAE has been determined based on a value in use calculation, using cash flow projections based on financial budgets approved by senior management covering a ten-year period. The following rates are used by the Group.

2010 2009 % % Discount rate 15 9.54 Projected growth rate (average during the first 5 years) 5 14.12 Projected growth rate beyond the five year period 0 0

The calculation of value in use for BLOM Bank Egypt SAE is most sensitive to the following assumptions:

• Interest margins; • Discount rates; • Projected growth rates; • Gross domestic product of the country where the subsidiary operates; • Local inflation rates.

Interest margins Interest margins are based on average values achieved in the 13 months proceeding of the budget period. These are increased over the budget period for anticipated market conditions.

Discount rates Discount rates reflect management’s estimate of return on capital employed. Discount rates are calculated by using the cost of equity.

Projected growth rates, GDP and local inflation rates Assumptions are based on management analysis and published industry research.

Sensitivity to changes in assumptions Management believes that no reasonable possible change in any of the above key assumptions would cause the carrying value of the units to exceed their recoverable amount.

127 128 BLOM BANK s.a.l. Annual Report 2010 through profit orloss designated atfairvalue Customers’ deposits At31December Exchangedifference Tax paid duringtheyear Tax expense fortheyear At1January Income taxpayableisdetailedasfollows: Income taxliability LL million SAL Bank Invest BLOM and SAL Bank BLOM amounting toLL73,677millionasof31December2010(2009:82,778million). in accounts deposit coded include deposits Customers’ at fairvaluethrough profit orloss,amountedtoLL6,158million. As at 31 December 2010, the derivatives contracts’ fair value, related to the customers’ deposits designated Margins onlettersofcredit Credit accountsand Savingaccounts Timedeposits Sightdeposits amortized cost: Customers’ depositsat LL million Current accounts LL million Time deposits accounts deposits againstdebit 30 29 28 31 December2010 Notes totheConsolidatedFinancialStatements Current Tax Liabilities Customers’ Deposits Due toBanksandFinancialInstitutions 29,363,177 29,314,250 10,175,083 13,876,302 1,139,580 4,051,993 48,927 71,292 2010 26,940,185 26,909,834 12,600,479 1,022,027 9,539,939 3,666,255 (46,711) 200,623 378,118 177,495 70,924 68,589 48,588 70,924 30,351 81,134 2010 2010 2009 458 At 1January2009 Reclassified 22,697,445 22,697,445 10,532,384 8,696,333 2,632,131 775,247 305,063 705,438 400,375 (58,728) 48,588 53,655 53,159 48,588 61,350 2009 2009 502 - 31 Other Liabilities

At 1 January 2009 2010 2009 LL million Reclassified Deposits related to entities 5,360 1,934 834 under constitution Transactions pending between 14,509 21,322 17,024 consolidated subsidiaries Advances from customers for 27,750 22,119 18,757 acquisition of securities Sundry creditors 35,339 39,799 45,819 Dividends payable 944 439 339 Accrued expenses 55,681 44,887 40,686 Transactions pending between 43,919 56,698 17,351 branches Unearned premiums and liability related to unit linked 248,094 189,352 164,993 insurance contracts Complementary taxes due 11,743 10,136 50,269 related to a subsidiary bank (i) Other taxes due 12,846 17,586 12,789 Other liabilities 6,235 6,116 - 462,420 410,388 368,861

(i) Complementary taxes due related to a subsidiary bank represents mainly accruals for additional complementary taxes in a subsidiary resulting from inspection by tax authorities for the years from 1991 onwards. The subsidiary bank settled an amount of LL 40,133 million in 2009.

32 Provisions for Risks and Charges

LL million 2010 2009 Provision for risks and charges (i) 13,036 4,378 Provision for fiduciary customers’ commitments (note 10) (ii) - 9,160 Provision for outstanding claims and IBNR reserves related to 62,475 24,088 subsidiary- insurance companies (iii) Provision on commitment by signature (note 10) 2,463 - Other provisions 854 795 78,828 38,421

129 130 BLOM BANK s.a.l. Annual Report 2010 (i) Provisions forrisksandcharges Benefits paid Charge fortheyear(note11) Balance at1January LL million Balance at31December Exchange difference unit linkedinsurancecontractstoIBNRreserve Transfer from premiums unearned andliabilityrelated to charged fortheyear Provision foroutstanding claimsandIBNRreserves Balance at1January LL million (iii) Provisions foroutstanding claimsandIBNRreserves related tosubsidiary-insurance companies Balance at31December Exchange difference Provisions written-backduringtheyear Provisions paidduringtheyear Charge fortheyear Balance at1January LL million Balance at31December Exchange difference institutions (note16). financial and banks from due on allowance impairment to 2010 in transferred was provision This customers. subsidiary) against provision a represents SAL’s Bank Development BLOM of million deposits fiduciary the (a settle to Kuwait - 9,160 S.A.K. Dar Investment of probabledefault LL to amounting commitments customers’ fiduciary for provision The (ii) 33 31 December2010 Notes totheConsolidatedFinancialStatements Retirement BenefitsObligation (1,141) 38,558 62,475 14,343 24,474 24,088 45,075 8,204 2010 2010 (430) (546) 13,036 8,622 4,378 2010 (232) 268 - 34,534 24,088 16,855 38,558 (1,915) (2,551) 1,567 4,679 7,056 4,378 6,484 2009 2009 2009 177 47 91 - - 34 Share Capital and Premiums

2010 2009 Share Share Share Share LL million capital premium capital premium Common shares – Authorized, issued and fully paid 215,000,000 shares at LL 1,040 per share as of 31 December 2010 223,600 374,059 223,600 374,059 (31 December 2009: 21,500,000 shares at LL 10,400 per share)

2010 2009

Share Share Share Share LL million capital premium capital premium Preferred shares – Authorized, issued and fully paid 7,500,000 preferred shares (2004 issue) of LL 1,040 per share as of 31 December 2010 (31 December 2009: 750,000 7,800 105,590 7,800 105,590 preferred shares (2004 issue) of LL 10,400 per share)

10,000,000 preferred shares (2005 issue) of LL 1,040 per share as of 31 December 2010 (31 December 2009: 1,000,000 preferred shares (2005 issue) of LL 10,400 per 10,400 140,720 10,400 140,720 share) 18,200 246,310 18,200 246,310

Preferred shares consist of the following:

4 June 2004 issue 17 September 2005 issue 7,500,000 preferred shares (2009: 10,000,000 preferred shares (2009: Number of shares 750,000 preferred shares) 1,000,000 preferred shares) LL 105,590 million (USD 70,043 LL 140,720 million (USD 93,347 Premium (denominated in USD) thousand) thousand) An annual amount for each share 2005 distributions to be based on a equal to USD 8.5 based on the fixed amount of USD 3.75 per share exchange rate on the date of the and thereafter at an annual amount General Assembly Meeting (subject equal to 6% of the net consolidated to the approval of the Shareholders’ profit of the Bank, with a minimum General Assembly Meeting and the of 7.5% and a maximum of 9.5% Non cumulative benefits availability of a non-consolidated of the issue price of LL 151,120 distributable net income for the year). (subject to the approval of the Shareholders’ General Assembly Due to the stock split of 1 to 10 on 5 Meeting and the availability of a October 2010, the annual amount for non-consolidated distributable net each share will be equal to USD 0.85. income for the year).

131 132 BLOM BANK s.a.l. Annual Report 2010 At 31December 2010 of share capital Transfer toreserve forincrease shares Net gainonsaleoftreasury Appropriation of2009profits At 31December2009 Luxembourg StockExchange. the in (GDRs) Receipts Depository Global as listed are shares 73,896,010 shares, common total the of Out All of the Bank’s common and preferred shares are listed in the Beirut Stock Exchange starting 20 June 2008. its to distribution for available Bank the of assets the shareholders onapro ratabasis,before anypaymentshallbemadetocommonshareholders. of out paid be to entitled be shall 2005 shares and preferred 2004 series of holders the Bank, the of winding-up or dissolution liquidation, any of event the In dealing withtheaccountsforyears2009and2010respectively, pursuanttotheexercise ofthatoption. assemblies general annual the after days areredeemable60 issues) 2005 preferredand These shares(2004 The total number of preferred shares is 17,500,000 shares as of 31 December 2010 (2009: 1,750,000 shares). preferred shares andtheGlobalDepositoryReceiptsofBLOMBankSALwere splitinto1to10. the shares, common the 2010, August 9 on Lebanon of Bank Central the of approval the and 2010 June 21 on held meeting Assembly General Extraordinary the of decision the to according and 2010, October 5 On preferredvalue preferred10,000,000 nominal 1,000,000 into a the sharesissuance) shareswith Split (2005 - of value nominal a preferredwith shares7,500,000 into issuance) preferred(2004 shares750,000 the Split - nominal a with shares common 215,000,000 into market the in listed shares common 21,500,000 the Split - agreed toperformastock splitof1to10asfollows: Based on the decision of the Extraordinary General Assembly meeting held on 21 June 2010, the shareholders shares Net gainonsaleoftreasury LL million Appropriation of2008profits At 1January2009 of LL1,040pershare. LL 1,040pershare. be splitto73,896,010shares withanominalvalueofLL1,040pershare. Global Depository Receipts (GDRs) on the Luxembourg Stock Exchange (Euro MTF as market) listed arewill which sharesaccordingly 7,389,601 shares, common 21,500,000 the of Out share. per 1,040 LL of value 35 31 December2010 Notes totheConsolidatedFinancialStatements Capital Reserves banking risks for general Reserve 151,672 59,397 79,576 92,275 12,699 - - - reserve 162,283 Legal 244,737 203,405 41,332 41,122 - - - General reserve 270,286 365,446 326,114 39,332 55,828 - - - share capital Reserve for increase of 26,658 58,643 15,184 35,669 7,560 1,718 7,293 230 distributable reserves Non 56,588 56,588 56,588 - - - - - 147,621 595,391 877,086 714,051 116,942 Total 15,184 1,718 230 Reserves for general banking risks According to the Central Bank of Lebanon regulations, banks in Lebanon are required to appropriate from their annual net profit a minimum of 0.2 percent and a maximum of 0.3 percent of total risk weighted assets and off-financial position accounts based on rates specified by the Central Bank of Lebanon to cover general banking risks. The consolidated ratio should not be less than 1.25 percent of these risks at the end of year ten (2007) and 2 percent at the end of year twenty (2017). This reserve is part of the Group’s equity and cannot be distributed as dividends.

This reserve is based on the denomination (Lebanese Lira and US Dollars) of the risk weighted assets and off-financial position accounts.

Legal reserve According to the Lebanese Code of Commerce and to the Money and Credit Act, banks and companies operating in Lebanon have to transfer 10% of their annual net profit to a legal reserve. This reserve cannot be distributed as dividends.

General reserve The Group appropriated general reserves from its retained earnings to strengthen its equity. This reserve amounting to LL 365,446 million as at 31 December 2010 (2009: LL 326,114 million) is available for dividends distribution.

Reserve for increase of share capital The balance amounting to LL 58,643 million (2009: LL 35,669 million) represents a regulatory reserve pursuant to circular no. 167 issued by the Banking Control Commission. This reserve cannot be distributed as dividends.

Details of the reserve for increase of share capital are as follows:

LL million 2010 2009 Recoveries of provisions for doubtful debts 39,482 31,922 Revaluation reserves for fixed assets sold 668 438 Gain on sale of treasury shares 18,493 3,309 58,643 35,669 Non distributable reserves Non distributable reserves resulted mainly from the increase of share capital of subsidiaries through transfer from the general reserves and retained earnings.

36 Treasury Shares

Movement of treasury shares recognized in the consolidated statement of financial position is as follows:

2010 No. of Amount common shares LL million At 1 January 581,719 58,723 Movement of treasury shares before stock split Purchase of treasury shares 826,492 118,537 Sale of treasury shares (910,783) (117,508)

Balance before stock split 497,428 59,752

Stock split of 1 to 10 on 5 October 2010 4,974,280 59,752 Purchase of treasury shares 2,728,362 40,555 Sale of treasury shares (1,598,431) (24,514)

At 31 December 6,104,211 75,793

133 134 BLOM BANK s.a.l. Annual Report 2010 Movement ofavailable-for-sale reserve isasfollows: The available-for-sale reserve related toavailable-for-sale investmentsare asfollows: “Capital the in capital” share of reserves” (note35). increase for “Reserve under reflected are loss and Gain million). 1,718 LL (2009: treasury2010 of fromyear sharessale million the the 15,184 during LL of Groupgains The generated million resulting from thedistributionofdividendsforallordinary shares in2009. 5,275 LL to amounting shares treasury the on dividends of distribution the refunded Bank the 2009, During (2009: USD89.90). 2010 October 5 of as 10 to 1 of split stock the to due 2010 December 31 of as 10.35 USD was GDR one of value market The Bank. the by purchased (GDR) Receipts Depository Global representshares treasury The Balance at31 December consolidated incomestatement receivables financialinvestments reclassified tothe Net unrealized gainonavailable-for-sale andloans investments Net unrealized gainonavailable-for-sale financial Balance at1January LL million sale denominatedinLL Unrealized gainsonLebanese Treasury Billsavailable-for- LL million At 31December Sale oftreasury shares Purchase oftreasury shares At 1January available-for-sale Unrealized gainsonothersovereign treasury bills Unrealized lossesonshares available-for-sale receivables Unrealized lossesonbonds classifiedasloansand loans andreceivables denominated inforeign currencies Unrealized lossesonLebanese Treasury Billsclassifiedas Unrealized gainsonbonds available-for-sale 37 31 December2010 Notes totheConsolidatedFinancialStatements Available-For-Sale Reserve common shares (586,981) (13,671) 106,184 121,992 581,719 834,968 333,732 (3,083) (6,880) (5,765) (8,238) 96,221 96,221 No. of 1,998 2010 2010 (95) 2009 LL million Amount 126,849 106,184 140,032 106,184 (24,570) (59,527) (15,918) (16,714) 58,723 78,373 39,877 3,905 2009 2009 (277) (939) - 38 Cash And Cash Equivalents

LL million 2010 2009 Cash and balances with central banks 2,210,694 2,836,264 Deposits with banks and financial institutions (whose 4,161,649 4,620,657 original maturities are less than 3 months) Debt securities (whose original maturities are less than - 1,229 three months) 6,372,343 7,458,150 Less: Due to banks and financial institutions (whose original (301,769) (620,478) maturities are less than 3 months) 6,070,574 6,837,672

39 Dividends Declared and Paid

According to the resolution of the General Assembly meeting held on 9 April 2010, the following dividends were declared and paid, from the 2009 profits.

2010 Number of Dividends per shares before the Total share stock split of 1 LL million in LL to 10 Dividends for preferred shares – 2004 issue 750,000 12,813.75 9,610 Dividends for preferred shares – 2005 issue 1,000,000 14,321.25 14,321 Dividends for common shares 20,921,151 6,000 125,527 149,458

The dividends on common shares, declared on 9 April 2010, were paid net of the treasury shares as of that date.

According to the resolution of the General Assembly meeting held on 8 April 2009, the following dividends were declared and paid, from the 2008 profits.

2009 Number of Dividends per shares before the Total share stock split of 1 LL million in LL to 10 Dividends for preferred shares – 2004 issue 750,000 12,813.75 9,610 Dividends for preferred shares – 2005 issue 1,000,000 14,321.25 14,321 Dividends for common shares 21,500,000 5,500 118,250 142,181

135 136 BLOM BANK s.a.l. Annual Report 2010 profits forapproval atAnnualGeneralAssemblyasfollows(not recognized asaliabilityat31December): In the meeting held on 16 March 2011, the board of directors proposed the distribution of dividends from 2010 subsidiary from anon-consolidated Accounting services’revenues Net tradingincome Management services Interest paidondeposits and advances Interest received from loans Indirect facilities available forsale Financial investments– trading Financial assetsheld-for Loans andadvances Deposits LL million The transactionswithrelated partiesare asfollows: related to advances and loans the All rates. parties are performingadvancesandare free ofanyprovision forpossiblecredit losses. commission and interest commercial at related business of their course and management, senior directors, ordinary the in parties such by shareholders, influenced significantly or controlled jointly controlled, entities and concerns, with transactions into enters Group The Preferred shares issue2005(LL1,432/10pershare) Preferred shares issue2004(LL1,281/31pershare) Common shares (LL675pershare) LL million 40 31 December2010 Notes totheConsolidatedFinancialStatements Related PartyTransactions Shareholders 119,766 7,479 1,268 54 ------Board of directors management andsenior 43,088 2,394 1,552 4,078 134 - - - - - related parties Other 29,863 22,398 5,427 5,274 4,052 206 246 212 164 54 2010 192,717 10,079 22,398 1,606 5,427 5,274 9,398 246 212 352 2009 145,125 169,056 230,554 14,321 11,522 9,610 6,313 2,600 1,034 272 77 - - - The board of directors and senior management remunerations are as follows:

LL million 2010 2009 Board of directors and senior management remunerations 32,161 30,960 Long term benefits 3,378 3,035 35,539 33,995

The remunerations paid to board of directors and senior management are short term in nature.

41 Contingent Liabilities, Commitments and Leasing Arrangements

Credit – related commitments To meet the financial needs of customers, the Group enters into various irrevocable commitments and contingent liabilities. These consist of financial guarantees, letters of credit and other undrawn commitments to lend. Even though these obligations may not be recognized on the consolidated statement of financial position, they do contain credit risk and are therefore part of the overall risk of the Group.

Letters of credit and guarantees (including standby letters of credit) commit the Group to make payments on behalf of customers in the event of a specific act, generally related to the import or export of goods. Guarantees and standby letters of credit carry a similar credit risk to loans.

The Group has the following credit related commitments:

LL million 2010 2009 Commitments issued to financial institutions 2,778 17,805 Commitments issued to customers 423,004 330,711 Guarantees issued to financial institutions 233,972 209,040 Guarantees issued to customers 655,112 505,602 Acceptances (note 21) 205,546 197,637

1,520,412 1,260,795 Commitments to lend 2,647,141 2,658,602

4,167,553 3,919,397

Capital and operating lease commitments Capital expenditures and lease payments that were not provided for as of the consolidated statement of financial position date are as follows:

137 138 BLOM BANK s.a.l. Annual Report 2010 based onobservablemarket data. not are that value fair recorded the on effect significant a have which inputs use which techniques 3: Level observable, eitherdirectly orindirectly; are and value fair recorded the on effect significant a have which inputs all which for techniques other 2: Level Level 1:quoted(unadjusted)pricesinactivemarkets foridenticalassetsorliabilities; by valuationtechnique: instruments financial of value fair the disclosing and determining for hierarchy following the uses Group The A. Determinationoffairvalueandhierarchy and documentsforcollectionheldbytheGroup totheorder ofthird parties. shares treasury bills/bonds, policies, checks, notes, include management under assets financial and accounts Fiduciary Financial assetsundermanagement Fiduciary assets LL million financial positiondate T More thanfiveyears More than1yearandlessfiveyears Duringoneyear as at31Decemberare asfollows: Future minimumleasepaymentsunderoperatingleases Operating leasecommitments–Group aslessee Property andequipment Capital commitments LL million financial position date,whichwere notprovided for,of were asfollows: statement the at commitments lease operating and expenditures capital on commitments The Lease arrangements otal operatingleasecommitmentsatthestatementof 43 42 31 December2010 Notes totheConsolidatedFinancialStatements Fair Value oftheFinancialInstruments Fiduciary Assets,AssetsUnderManagementandCustodyAccounts 9,008,204 8,264,163 744,041 17,398 29,786 2010 8,922 6,277 2,199 2010 6,263,712 5,312,368 951,344 17,779 24,731 9,660 6,340 1,779 2009 2009 The following table shows an analysis of financial instruments recorded at fair value by level of the fair value hierarchy: 31 December 2010

Level 1 Level 2 Level 3 Total LL million Financial assets Derivative financial instruments: Forward foreign exchange contracts - 13,229 - 13,229 Equity swaps and options - 6,320 - 6,320 Futures on commodities 27,143 - - 27,143 27,143 19,549 - 46,692 Financial assets held for trading: Debt securities 18,538 - - 18,538 Equities 13,636 244 - 13,880 Investment funds 22,398 - - 22,398 54,572 244 - 54,816 Financial investments designated at fair value through profit or loss: Investments related to unit- - 74,012 - 74,012 linked contracts Convertible bonds 65,989 - - 65,989 Subordinated convertible notes 24,524 - - 24,524 90,513 74,012 - 164,525 Financial investments available-for-sale: Quoted financial assets Debt securities 229,573 - - 229,573 Certificates of deposit commercial banks and 247,525 - - 247,525 financial institutions Investment funds 5,274 - - 5,274 482,372 - - 482,372 Unquoted financial assets: Government debt securities - 3,601,367 - 3,601,367 Certificates of deposit – commercial banks and - 15,262 - 15,262 financial institutions - 3,616,629 - 3,616,629 Financial liabilities Derivative financial instruments: Forward foreign exchange contracts - 9,160 - 9,160 Equity swaps and options - 162 - 162 Futures on commodities 27,143 - - 27,143 27,143 9,322 36,465

139 140 BLOM BANK s.a.l. Annual Report 2010 Equityswapsandoptions Forward foreign exchange Derivative financialinstruments: Financial liabilities Government debtsecurities Government Unquoted financialassets: Quoted financialassets Financial investmentsavailable-for-sale: Convertiblebonds Investmentsrelated tounit- through profit orloss: designated atfairvalue Financial investments Investmentfunds Equities Debtsecurities trading: Financial assetsheldfor Equityswapsandoptions participant wouldmakewhen valuingtheinstruments. market a that assumptions Group’sof the estimate incorporate These techniques. valuation using value fair The following is a description of the determination of fair value for financial instruments which are recorded at Financial instrumentsrecorded atfairvalue Forward foreign exchange Derivative financialinstruments: Financial assets LL million 31 December2009 contracts linked contracts contracts financial institutions commercial banksand Certificates ofdeposit– financial institutions commercial banksand Certificates ofdeposit Equities Debt securities 31 December2010 Notes totheConsolidatedFinancialStatements 287,640 121,279 166,349 Level 1 66,305 66,305 24,519 13,153 2,712 8,654 12 ------4,386,371 4,313,911 Level 2 23,526 18,454 72,460 73,097 73,097 33,544 28,472 5,072 5,072 244 244 ------Level 3 ------4,386,371 4,313,911 287,640 121,279 166,349 139,402 23,526 18,454 72,460 66,305 73,097 24,763 13,397 33,544 28,472 5,072 2,712 8,654 5,072 Total 12 Derivatives Derivative products valued using a valuation technique with market observable inputs are forward foreign exchange contracts, future contracts and equity swaps and options. The most frequently applied valuation technique include forward pricing model and swap models, using present value calculations. The models incorporate various inputs including the credit quality of counterparties, foreign exchange spot and forward rates and interest rate curves.

Financial investments – available-for-sale Available-for-sale financial assets valued using a valuation technique or pricing models primarily consist of unquoted debt securities and certificates of deposit.

These assets are valued using models which sometimes only incorporate data observable in the market.

Set out below is a comparison, by class, of the carrying amounts and fair values of the Group’s financial instruments that are not carried at fair value in the consolidated financial statements. This table does not include the fair value of non-financial assets and non-financial liabilities.

2010 2009

Carrying Carrying Fair value Fair value LL million value value Financial assets Cash and balances with central banks 4,248,229 4,307,399 4,693,974 4,804,854 Due from banks and financial institutions 5,931,237 5,935,596 5,787,117 5,817,238 Loans and advances to customers 7,797,136 7,917,172 6,046,601 6,049,797 Loans and advances to related parties 9,398 9,718 11,522 11,907 Other financial assets classified as loans and receivables 9,559,006 10,092,122 8,200,247 8,831,695 Financial investments held-to-maturity 912,295 868,141 774,997 745,966

Financial liabilities Due to banks and financial institutions 378,118 380,720 705,438 711,011 Customers' deposits 29,363,177 29,428,253 26,940,185 27,011,179 Related parties’ deposits 192,717 193,074 230,554 230,852

Fair value of financial assets and liabilities not carried at fair value The following describes the methodologies and assumptions used to determine fair values for those financial instruments which are not already recorded at fair value in the consolidated financial statements:

(i) Assets for which fair value approximates carrying value For financial assets and financial liabilities that have a short term maturity (less than three months) itis assumed that the carrying amounts approximate to their fair value. This assumption is also applied to demand deposits, and savings accounts without a specific maturity.

141 142 BLOM BANK s.a.l. Annual Report 2010 trading” to the “Loans and receivables” category, as at the date of reclassification and as at the reporting the date. All at transfers occurred as on 1 and July 2008 reclassification and thereafter.of date There werethe no reclassificationsat prioras tocategory, 1 Julyreceivables” 2008. and “Loans the to trading” “Held-for- from reclassified assets financial of value fair and amount carrying the shows table following The date. All transfers occurred on reporting 1 the July 2008 at and thereafter. as and Therereclassification were of no reclassificationsdate priorthe to 1at July 2008. category,as receivables” and “Loans the to for-sale” assets financial reclassified of from value “Available- fair and amount carrying the shows table following The reviewed theinstrumenttodeterminewhetheritwasappropriate toreclassify itto“Loansandreceivables”. have that management trade, to intends Grouplonger the no that and active longer no is asset an determined for market the was it Where appropriate. remains classification this whether determine to order in sale”, “Available-for- “Held-for-trading”and as classified were that assets of review a undertook Group the 2008), July 1 from (effective Assets Financial of Reclassification 7 IFRS and 39 IAS to amendments the Following B. Reclassificationoffinancialassets also madetoreflect the change in required credit spread sincetheinstrumentwasfirst recognized. is adjustment an instruments, rate variable other For spreads. credit and maturity to term remaining the for are not available, a discounted cash flow model is usedprices basedmarket quoted onwhere issued notes athose For currentprices. market interestquoted on based ratedetermined are values yield curve appropriate fair the issued, debt quoted maturity.For and risk credit similar with debts for rates interest money-market The estimated fair value of fixed interest bearing deposits is based on discounted cash flows using prevailing market interest rates when they were first recognised with current market rates for similarThe fair financialvalue of instruments. fixed rate financial assets and liabilities carried at amortised cost are estimated by comparing (ii) Fixedratefinancialinstruments Financial assetsreclassified during2008asatyearend Financial assetsreclassified duringtheyearasatend reclassification Financial assetsreclassified duringtheyearasatdateof LL million Financial assetsreclassified during2008asatyearend LL million 31 December2010 Notes totheConsolidatedFinancialStatements 1,576,873 Carrying Carrying 242,791 263,629 value value 9,142 2010 2010 Fair value 1,619,881 Fair value 244,087 263,629 Available-for-sale Held-for-trading 10,336 2,433,100 Carrying Carrying value value 25,059 - - 2009 2009 2,517,836 Fair value Fair value 28,324 - - The following table shows the total fair value gains and losses recorded on trading and available for sale assets reclassified to the “Loans and receivables” category, up until the date of transfer. It also shows the undiscounted amount of cash flows expected to be recovered from and the expected effective interest rate applied to, reclassified assets, as assessed at the date of reclassification.

Debt securities Debt securities LL million held-for-trading available-for-sale Cost of securities transferred 332,803 2,772,702 Fair value losses recognized in net trading income/equity: Recorded during 2010 2,632 - Recorded during 2008 576 17,493 Recorded during 2007 - (2,214) Recorded prior to 2007 - (16,037)

Carrying amount at date of reclassification 336,011 2,771,944

Expected undiscounted cash recoveries, as assessed at 411,879 3,410,339 the date of reclassification

Anticipated average effective interest rate over the 6.37% 6.81% remaining life of the assets

The following table shows the total fair value gains or losses and the difference in net interest income that would have been recognized during the period subsequent to reclassification if the Group had not reclassified financial assets from the “Held-for-trading” and “Available-for-sale” to the “Loans and receivables” category. This disclosure is provided for information purposes only; it does not reflect what has actually been recorded in the consolidated financial statements of the Group.

Debt securities 2010 2009 Consolidated Consolidated Equity Equity LL million income statement income statement

Fair value gains and losses which would otherwise have been recorded after 2,490 16,557 5,153 210,307 reclassification, during the current period

The following table shows the net profit or loss actually recorded on assets reclassified to loans and receivables subsequent to reclassification:

2010 2009 Debt Debt Debt Debt securities securities- securities securities- held-for- available for held-for- available for LL million trading sale trading sale

Net interest income 7,917 149,358 5,193 185,401

Write-back of provision - - - 15,073

Net profit 7,917 149,358 5,193 200,474

143 144 BLOM BANK s.a.l. Annual Report 2010 NET TO Retirement benefitsobligation Provisions forrisksandcharges Other liabilities Current taxliabilities Engagements byacceptances Related parties`deposits Customers' deposits Derivative financialinstruments Due tobanksandfinancialinstitutions LIABILITIES TO Goodwill Other assets Intangible assets Property andequipment Investment properties Financial investments–held-to-maturity Other financialassetsclassifiedasloansand receivables Financial investments–available-for-sale Non-current assetsheldfor sale Bank acceptances Loans andadvancestorelated parties Loans andadvancestocustomers loss Financial assetsdesignatedatfairvaluethrough profit or Financial assetsheld-for-trading Derivative financialinstruments Due from banksandfinancialinstitutions Cash andbalanceswithcentralbanks ASSETS LL million The maturityprofile ofthe Group’s assetsandliabilitiesasat31December2010isfollows: be recovered orsettled. accordinganalyzed liabilities and assets of areanalysis they an when shows to below table The to expected 44 AL LIABILITIES AL ASSETS 31 December2010 Notes totheConsolidatedFinancialStatements Maturity AnalysisofAssetsandLiabilities oneyear (13,308,169) 30,049,632 28,762,235 16,741,463 Less than 1,794,832 5,539,780 5,526,114 2,576,410 429,203 203,349 192,717 350,983 109,688 878,664 203,349 70,772 36,302 61,910 40,372 2,761 1,310 8,161 1,693 490 - - - - - oneyear 16,158,751 16,942,389 More than 8,680,342 2,321,429 2,257,356 1,671,819 783,638 600,942 412,374 850,385 164,035 405,123 42,314 77,518 33,217 27,135 63,145 18,590 28,062 53,123 2,197 6,281 2,197 1,237 6,320 152 163 571 - 30,833,270 29,363,177 33,683,852 2,850,582 9,559,006 4,116,261 7,797,136 5,931,237 4,248,229 462,420 205,546 192,717 378,118 128,278 412,374 912,295 205,546 164,525 45,075 78,828 70,924 36,465 63,145 28,062 54,816 46,692 6,281 9,398 Total 571 The maturity profile of the Group’s assets and liabilities as at 31 December 2009 is as follows:

Less than More than Total LL million one year one year ASSETS Cash and balances with central banks 2,894,017 1,799,957 4,693,974 Due from banks and financial institutions 5,721,689 65,428 5,787,117 Derivative financial instruments 33,544 - 33,544 Financial assets held-for-trading 5,047 19,716 24,763 Financial assets designated at fair value through profit or 457 138,945 139,402 loss Loans and advances to customers 4,086,173 1,960,428 6,046,601 Loans and advances to related parties 11,522 - 11,522 Bank acceptances 194,475 3,162 197,637 Non-current assets held for sale - 29,846 29,846 Financial investments – available-for-sale 1,149,870 3,544,351 4,694,221 Other financial assets classified as loans and receivables 939,245 7,261,002 8,200,247 Financial investments – held-to-maturity 192,396 582,601 774,997 Investment properties - 618 618 Property and equipment - 374,850 374,850 Intangible assets - 6,727 6,727 Other assets 112,648 16,862 129,510 Goodwill - 63,268 63,268

TOTAL ASSETS 15,341,083 15,867,761 31,208,844

LIABILITIES Due to banks and financial institutions 637,157 68,281 705,438 Derivative financial instruments 23,526 - 23,526 Customers' deposits 26,465,601 474,584 26,940,185 Related parties` deposits 230,554 - 230,554 Engagements by acceptances 194,475 3,162 197,637 Current tax liabilities 48,588 - 48,588 Other liabilities 386,966 23,422 410,388 Provisions for risks and charges - 38,421 38,421 Retirement benefits obligation 3,204 35,354 38,558

TOTAL LIABILITIES 27,990,071 643,224 28,633,295

NET (12,648,988) 15,224,537 2,575,549

145 146 BLOM BANK s.a.l. Annual Report 2010 senior management in a timely manner for appropriateset by action.the Group’s “Risk Managementand compared Policy”. against Any authorized discrepancies, limits, whereas breachesThrough non-quantifiable aor comprehensivedeviations risks are are monitoredrisk escalatedmanagement against topolicyframework, executive guidelines transactions as and outstanding• Limits risk and riskexposures across bankingare quantified activities •are Risk monitored policies andthroughout methodologies the Group. are consistent with the Group’s risk appetite. and mitigating the Group’s overall risk. BLOMThe departmentBank’s mainly Groupensures that:Risk Management aids executive management the Group.in monitoring, controlling andThe Chief Riskactively Officer is responsiblemanaging for establishing the functionalso of Risk Managementacts andas its employeesGroup acrossRisk Management,The Chief overseeingRisk Officer and undertakes monitoring his responsibilities risk management through activitiesthe “Risk Management throughout Department” the in BeirutGroup.review which risk limits and reports and make recommendationsfunctionoftheGroup, (2)review to thetheadequacy Board.oftheGroup’s capital andits allocation The withinBoard’s theGroup, and(3) Risk Management Committee has the mission to Theperiodically Group is mainly(1) exposedreview to creditand risk,assess liquidity the risk, risk market managementrisk and operationalis risk. directly appointed by the Board of Directors,establishment in coordination and monitoring with executive of risk managementmanagementlevels. atprocess TheBLOM BoardBank across SAL.of Directorsthe Group’s delegates groupcultureand through liesBoardwithtoDirectorstheof the establishingdoesthe as itsChief Group’stheRiskof Risk Managementriskappetite Officer, toleranceand Committee who the242. day–to–day In particular, responsibility forit is recognizedand executive thatmanagement ultimate in theresponsibility risk Group’s “Risk management theManagement by for process Policy” setestablishment approved managementas guidelines as set risk activities within businessby out the of Board in its manages theeffective Groupof Directors.Banking The Controlrisk The Group managementCommission recognizes circular thepractices role of the Board of Directors material impact on the consolidated financial position of the Group. bepresently determined. Management considers that the outcome of any review by the NSSF would not have ultimateThe outcomeBank’sreviewtheanyNSSFonofthe by Lebanonbooksinfrom 2010 cannot 1998to The Bank’s books in Lebanon have not been reviewed by the National Social Security Fund (NSSF) since 1998. review by the tax authorities on the Bank’s books in Lebanon for these years cannot be presently determined.Lebanon have not been reviewed by the tax authorities for the 2007.years 2008 to 2010. The ultimate outcome of any During 2009, the Bank’s records in Lebanon were subject to a review by the tax authorities for effectthe on theyears consolidated 2006 financial andposition of the Group. material a have determinationnotadverse wouldany,anresulting fromif loss, aggregate liabilityor the that Management, after discussing with its counselors all such cases and proceedings against the Group, considers which the claims may have on its financial standing. At year end, theand theGroup amount had of severalloss reasonably unresolved estimated, legal claims.the Group makes adjustments to accountGroup hasfor formalany controlsadverse effectsand policies for managing legal claims. Once professional advice hasLitigationcommon occurrencebeena is banking theobtainednature industrybusinessinthe the toof dueundertaken. The 46 45 H owever, the outcome of this review has not been issued as of the audit report date. The Bank’s books in 31 December2010 Notes totheConsolidatedFinancialStatements Risk Management Legal CasesandContingentLiabilities In addition to the Group’s Risk Management in Lebanon, risk managers and / or risk officers were assigned within the Group’s foreign subsidiaries or branches to report to the Group Risk Management and executive senior management in a manner that ensures:

• Standardization of risk management functions and systems developed across the Group. • Regional consistency of conducted business in line with the Board’s approved risk appetite.

The major objective of risk management is the implementation of sound risk management practices and the Basel II framework as well as all related regulatory requirements within the group. Pillar I capital adequacy calculations have been generated since December 2004, while preparations for moving on to the more advanced approaches of pillar I have been initiated. Group Risk Management is progressively complying with the requirements of pillars II and III of the Basel framework.

Excessive risk concentration Concentrations arise when the Group has significant exposure to one borrower or a group of related borrowers or to a number of counter parties engaging in similar business activities or activities in the same geographic region, or have similar economic features that would cause their ability to meet contractual obligations to be similarly affected by changes in economic, political or other conditions. Concentrations indicate the relative sensitivity of the Group’s performance developments affecting a particular industry or geographic location.

In order to avoid excessive concentrations of risk, the Group’s policies and procedures include specific guidelines to focus on maintaining a diversified portfolio. Identified concentrations of credit risks are controlled and managed accordingly. Selective hedging is used within the Group to manage risk concentrations at both the relationship and industry levels.

46-1 Credit risk

Credit risk is the risk that one party to a financial instrument will fail to discharge an obligation and cause the other party to incur a financial loss. The Group attempts to control credit risk by monitoring credit exposures, limiting transactions with specific counter parties, and continuously assessing the creditworthiness of counter parties.

The Group manages credit risk in line with the guidelines set by the Basel Framework and regulatory guidance. The Group has set a credit risk policy which lays down norms for credit risk governance, methodologies and procedures for credit risk management and measurement. It consists of the following:

• The permissible activities, segments, programs and services that the Group intends to deliver and the acceptable limits; • The mechanism of the approval on credit-facilities; • The mechanism for managing and following up credit-facilities; and • The required actions for analyzing and organizing credit files.

The debt securities included in investments are mainly sovereign risk and standard grade securities. Analysis of investments by counterparty is provided in note 23. For details of the composition of the loans and advances refer to note 20. Information on credit risk relating to derivative instruments is provided in note 17 and for commitments and contingencies in note 41. The information on the Group’s net maximum exposure by economic sectors is given in note (A) below.

The Group’s Risk Management is designed to identify and to set appropriate risk limits and to monitor the risk adherence to limits. Actual exposures against limits are monitored daily, monthly and periodically. Group Risk Management is responsible for monitoring the risk profile of the Group’s loan portfolio by producing internal reports highlighting any exposure of concern in corporate, commercial and consumer lending. The Group examines the level of concentration whether by credit quality, client groupings or economic sector and collateral coverage. Further, the Group monitors non-performing loans and takes the required provisions for these loans.

The Group in the ordinary course of lending activities holds collaterals and guarantees as security to mitigate credit risk in the loans and advances. Collaterals and guarantees are continuously monitored and revaluated. These collaterals mostly include cash collateral, quoted shares and debt securities, real estate mortgages, personal guarantees and others. In addition, the Recovery Unit in the Group dynamically manages and takes remedial actions for non-performing loans.

147 148 BLOM BANK s.a.l. Annual Report 2010 T Financial investments–held-to-maturity Other financialassetsclassified asloansand receivables Financial investments–available-for-sale Bank acceptances Loans andadvancestorelated parties Loans andadvancestocustomers Financial assets designated at fair value through profit or loss Financial assetsheld-for-trading Derivative financialinstruments Due from banksandfinancialinstitutions mitigation through the use of master netting and collateral agreements. Where financial instruments risk exposure are thatcouldariseinthefuture asaresult ofchangesinvalues. instruments maximum financial the not but Where exposure risk credit agreements.current the represent shown effectof collateral amounts the value, the and fair at recorded before netting master of ofcounterparty use the bygeography through mitigation derivatives, consolidated the including of position, components the financial for of risk creditstatement to exposure maximum the shows table following The fully covered) netofsuchprotection. LL (2009: million 301,500 LL was 2010 December 31 306,123 million) before taking account of collateral or other credit enhancements and LL of 6,212 million (2009: as counterparty or client any to exposure credit The Group concentrations of risk are managed by client/counterparty, by geographical region. The maximum other credit enhancements A- Risk concentrations: maximum exposure to credit risk without taking account of any collateral and The Group uses its internal grading system and Moody’s for the classification of the financial assets portfolio. are pastdueformore than90daysasbeingnon-performing. that payments Groupconsiders the II, Basel with line In Unit. Recovery dedicated a proactivelyby managed Non-performing loans are closely monitored and well provisioned as required with remedial actions taken and meeting Basel II requirements for theAtthe sameretail time, implementation portfolio of consumeras wellloan applicationas makingand behavioral availablescorecards new qualitywill aid significantly management in resources.and commercial loanportfolios. Thissystemwillbegraduallyextendedtoallgroup entitiesovertime. has provided the Group with an additional tool to market enhance domestic risk the in measurement system ratings and internal assessment and of analysis credit the Analyst Moody’sRisk the corporate of Introduction the on based Group’scalculated historicaldefaultratesforeachrating.Theseriskratings are reviewed onaregularbeen basis. have grade each for norms estimate loss associated The inputs. qualitative as well as financial on based risk evaluates that model rating debt developed internally an on based rated borroweris individual Each days. 90 than more for due payments unsettled have that loans those for except to theseloansare classified as regular astheyare performingandhavetimely repayment withnopastdues; loans (risk ratings “5” and “6”). Credit cards, personal loans, car loans, housing loans and other loans related risk non-performing to relate list: grades two and “4”) watch rating (risk loans substandard – to relates grade one mention “3”), rating special and “2” and “1” ratings risk facilities: credit (regular portfolio performing on based rating a client providesand transaction level. The classification system includes six grades,unit, of which three grades relateindependent to the an by managed is which system, rating risk The customers. market middle and corporate its for ratings risk on based system classification internal an uses Group The Balances withcentralbanks Financial assets LL million otal credit exposure 31 December2010 Notes totheConsolidatedFinancialStatements 20,329,737 Domestic 8,838,090 3,317,916 4,369,992 2,868,070 107,468 140,001 640,911 42,306 4,983 - - International 2010 12,530,067 3,427,144 5,290,326 1,194,822 912,295 720,916 798,345 98,078 24,524 12,510 46,692 4,415 32,859,804 9,559,006 4,116,261 7,797,136 5,931,237 4,062,892 912,295 205,546 164,525 54,816 46,692 9,398 Total 2009 LL million Domestic International Total Financial assets Balances with central banks 2,922,610 1,603,033 4,525,643 Due from banks and financial institutions 585,292 5,201,825 5,787,117 Derivative financial instruments - 33,544 33,544 Financial assets held-for-trading 13,724 11,039 24,763 Financial assets designated at fair value through profit or loss 139,402 - 139,402 Loans and advances to customers 3,074,309 2,972,292 6,046,601 Loans and advances to related parties 3,879 7,643 11,522 Bank acceptances 97,545 100,092 197,637 Financial investments – available-for-sale 3,921,152 773,069 4,694,221 Other financial assets classified as loans and receivables 7,607,132 593,115 8,200,247 Financial investments – held-to-maturity - 774,997 774,997

Total credit exposure 18,365,045 12,070,649 30,435,694

Collateral and other credit enhancements The amount, type and valuation of collateral are based on guidelines specified in the risk management framework. The main types of collateral obtained include real estate, quoted shares, cash collateral and bank guarantees.

The revaluation and custody of collaterals are performed independent of the business units.

Guarantees received from customers are detailed as follows:

LL million 2010 2009 Personal guarantees received from customers 6,284,986 4,565,176 Real estate guarantees received 5,291,482 4,020,476 Cash collateral received 1,059,514 976,269 12,635,982 9,561,921

Management monitors the market value of collateral, requests additional collateral in accordance with the underlying agreement, and monitors the market value of collateral obtained during its review of the adequa- cy of the allowance for impairment losses.

It is the Group’s policy to dispose of repossessed properties in an orderly fashion. The proceeds are used to reduce or repay the outstanding claim. In general, the Group does not occupy repossessed properties for business use.

149 150 BLOM BANK s.a.l. Annual Report 2010 Moody’s equivalent T maturity Financial investments-held-to- receivables classified asloansand Other financialassets Investment fund financial institutions commercial banksand Certificate ofdeposit– Debt securities Unquoted: Investment funds financial institutions commercial banksand Certificate ofdeposit– Debt securities Quoted: Financial investments–available-for-sale parties Loans andadvancestorelated customers Loans andadvancesto trading Financial assetsheld-for- fair valuethrough profit or loss Financial assetsdesignatedat instruments Derivative financial institutions Due from banksandfinancial are gross ofimpairmentallowances. Group’s credit internal ratingsystemandtherelationship credit withexternal rating.Theamountspresented low showsthecredit quality byclassofassetforallfinancialassetsexposedtocredit risk,basedonthe The credit qualityoffinancial assetsismanagedbytheGroupcredit usinginternal ratings.Thetablebe- B- Credit qualityperclass offinancialassets advances tocustomers,loans andadvancestorelated partieswhichare notrated byMoody’s. (*) Theregular andspecialmentiongrades,undernon sovereign, includederivative financialinstruments,loansand Balances withcentralbanks LL million otal 31 December2010 Notes totheConsolidatedFinancialStatements Neither past Sovereign and special 16,746,689 8,731,527 3,601,367 4,062,892 impaired mention due nor Regular Aa2 -B1 350,903 ------Neither past and special 15,652,328 Aa1 -B1* 7,548,336 5,931,237 impaired mention due nor Regular 561,392 827,479 247,525 229,573 164,525 15,262 10,650 54,816 46,692 5,274 9,398 169 - Past duebut not impaired and special Not rated mention Regular 214,818 214,818 Non-Sovereign 2010 ------Sub-standard Not rated Individually impaired 54,210 54,210 ------performing Not rated 233,632 216,044 Non 17,588 ------32,901,677 9,559,006 3,612,017 8,033,408 5,948,825 4,062,892 912,295 247,525 229,573 164,525 Total Total 15,262 46,692 54,816 5,274 9,398 169 2009

Sovereign Non-Sovereign Neither past Neither past Past due but due nor due nor Individually impaired Total not impaired impaired impaired Regular Regular Regular and special and special and special Sub-standard Non Total LL million mention mention mention performing Balances with central banks 4,525,643 - - - - 4,525,643 Due from banks and financial - 5,785,747 - - 5,197 5,790,944 institutions Derivative financial - 33,544 - - - 33,544 instruments Financial assets held-for- - 24,763 - - - 24,763 trading Financial assets designated at - 139,402 - - - 139,402 fair value through profit or loss Loans and advances to - 5,866,194 150,030 31,302 216,053 6,263,579 customers Loans and advances to related - 11,522 - - - 11,522 parties Quoted: Debt securities - 166,349 - - - 166,349 Certificate of deposit – commercial banks and - 121,279 - - - 121,279 financial institutions Unquoted: Debt securities 4,313,911 13,858 - - - 4,327,769 Certificate of deposit – commercial banks and - 72,460 - - - 72,460 financial institutions Investment fund - 151 - - - 151 Other financial assets classified as loans and 7,414,694 785,553 - - - 8,200,247 receivables Financial investments-held-to- 267,835 507,162 - - - 774,997 maturity

Total 16,522,083 13,527,984 150,030 31,302 221,250 30,452,649

Moody’s equivalent Aa3 - B2 Aaa - Baa2* Not rated Not rated Not rated

(*) The regular and special mention grades, under non sovereign, include derivative financial instruments, loans and advances to customers, loans and advances to related parties which are not rated by Moody’s.

151 152 BLOM BANK s.a.l. Annual Report 2010 The tablebelowshowsthecarryingamountofrenegotiated financialassets. position offinancial statement the consolidated in whose termshavebeenrenegotiated: presented assets financial of amount Carrying selling. process of the in Group is the which date, position financial of statement consolidated the at million) 14,411 During the year, the Group took possession of real estates with a carrying value of LL 2,432 million (2009: LL Collateral repossessed the Group holdsexceedthecarryingvalueoftheseloansatstatementfinancialpositiondate. that collateral the of impaired,value be fair areto the that determined loans individually consumer the for As customers corporate to million as advances of 31 and December 2009). loans The 179,329 (LL collateral 2010 to December 31 consists of as relatingof million 329,310 cash, LL to holds amounts securities, impaired be letters to determined Group individually of guarantee the and properties. that collateral of value fair The advances tocustomers. and loans on losses impairment for allowance the of respect with information detailed more for 20 note See C- Aginganalysisofpastduebutnotimpaired financialassets,byclass Loans andadvancestocustomers LL million Consumer loans Commercial loans LL million Consumer loans Commercial loans LL million 31 December2010 Notes totheConsolidatedFinancialStatements Less than30 Less than30 days days 152,721 109,431 45,542 63,889 56,217 96,504 30 to60days 30 to60days 16,334 16,707 31,299 23,832 33,041 7,467 61 to90days 61 to90days 2009 2010 22,252 13,171 2,636 4,922 9,081 7,558 8,971 2010 More than More than 90 days 90 days 8,546 8,546 - - - - Total Total 214,818 121,598 150,030 38,517 93,220 64,512 85,518 2009 Impairment assessment For accounting purposes, the Group uses an incurred loss model for the recognition of losses on impaired financial assets. This means that losses can only be recognized when objective evidence of a specific loss event has been observed. This approach differs from the expected loss model used for regulatory capital purposes in accordance with Basel II.

The main considerations for the loan impairment assessment include whether any payments of principal or interest are overdue by more than 90 days or whether there are any known difficulties in the cash flows of counterparties, credit rating downgrades, or infringement of the original terms of the contract. The Group addresses impairment assessment in two areas: individually assessed allowances and collectively assessed allowances.

Individually assessed allowances The Group determines the allowances appropriate for each individually significant loan or advance on an individual basis, including any overdue payments of interests, credit rating downgrades or infringement of the original terms of the contract. Items considered when determining allowance amounts include the sustainability of the counterparty’s business plan, its ability to improve performance once a financial difficulty has arisen, projected receipts and the expected payout should bankruptcy ensue, the availability of other financial support, the realizable value of collateral, and the timing of the expected cash flows. Impairment allowances are evaluated at each reporting date, unless unforeseen circumstances require more careful attention.

Collectively assessed allowances Allowances are assessed collectively for losses on loans and advances and for held to maturity debt investments that are not individually significant (including credit cards, residential mortgages and unsecured consumer lending) and for individually significant loans and advances that have been assessed individually and found not to be impaired. The Group generally bases its analyses on historical experience. However, when there are significant market developments, regional and/or global, such as the market turmoil in 2007/2008, the Group would include macroeconomic factors within its assessments. These factors include, depending on the characteristics of the individual or collective assessment: unemployment rates, current levels of bad debts, changes in laws, changes in regulations, bankruptcy trends, and other consumer data. The Group may use the aforementioned factors as appropriate to adjust the impairment allowances. Allowances are evaluated separately at each reporting date with each portfolio.

The collective assessment is made for groups of assets with similar risk characteristics, in order to determine whether provision should be made due to incurred loss events for which there is objective evidence but whose effects are not yet evident in the individual loans assessments. The collective assessment takes account of data from the loan portfolio (such as historical losses on the portfolio, levels of arrears, credit utilization, loan to collateral ratios and expected receipts and recoveries once impaired) or economic data (such as current economic conditions, unemployment levels and local or industry-specific problems). This approximate delay between the time a loss is likely to have been incurred and the time it will be identified as requiring an individually assessed impairment allowance is also taken into consideration. Local management is responsible for deciding the length of this period which can extend for as long as one year. The impairment allowance is then reviewed by credit management to ensure alignment with the Group’s overall policy.

Financial guarantees and letters of credit are assessed and provisions are made in a similar manner as for loans.

Commitments and guarantees To meet the financial needs of customers, the Group enters into various irrevocable commitments and contingent liabilities. Even though these obligations may not be recognized on the consolidated statement of financial position, they do contain credit risk and are therefore part of the overall risk of the Group.

153 154 BLOM BANK s.a.l. Annual Report 2010 ol hv t py f h gaate s ald n Te aiu epsr t cei rs rltn t a loan a to relating greater risk thantheamountrecognized asaliabilityintheconsolidatedstatementoffinancialposition. credit to exposure maximum The on. called commitment is the full amount of the commitment. In both is cases, the maximum risk exposure is significantly guarantee the if pay Group the to amount have maximum the could is guarantee financial a to relating risk credit to exposure maximum The The tablebelowshowstheGroup’s maximumcredit riskexposure forcommitmentsandguarantees. which receives regular reports from theGroup RiskManagementaswell Treasury. Committee, Liability Asset the by monitoring and review to subject are issues management liability asset All describe and conditions stress of indicators early identifies that plan liquidity contingency a Promulgate - - Developparametersforthepricingandmaturitydistributionsofdeposits,loansinvestments. - Reviewthecurrent andprospectivefundingsources. liquiditypositionsandmonitoralternative to sources Group’sfunding the on drawing in followed be to sequence the on guidance general Provide - theneeded that assure to ratios statement or income position financial key for ranges and targets Set - main objectivesconverge around thefollowing: The management of liquidity risk is currently governed by the Group’s Asset Liability Management policy. The liquidity inmindandofmonitoringfuture cashflowsandliquidityonadailybasis. arranged has management diversifiedrisk, funding sourcesthis in additionTo tolimit immediately. its core up deposit base, anddry adopted ato policy of managingfunding assets with of sources certain cause may which downgrades credit or disruptions market by caused be can risk Liquidity circumstances. stress and the possibility that the Group might be unable to meet its payment obligations when they fall due under financial liabilitiesnormal that are settled by delivering cash or another financial asset. Liquidity risk arises because of Liquidity risk is defined as the risk that the Group will encounter difficulty in meeting obligations associated with 46-2 Financial guarantees LL million Letters ofcredit Other commitmentsandguarantees Other undrawncommitmentstolend adverse long-termimplicationsfortheGroup’s business. actions to be taken in the event of financial difficulties arising from systemic or other crises, while minimizing meet aliquiditydrain. Group toaddress shorttermfluctuationsinliquiditypressures. the enable to flexibility sufficient providing while times, all at maintained is Group the of capacity liquidity

Liquidity risk and funding management funding and risk Liquidity 31 December2010 Notes totheConsolidatedFinancialStatements 2,647,141 4,143,314 889,084 425,782 181,307 2010 2,658,602 3,895,570 714,642 348,516 173,810 2009 In accordance with Lebanese banking rules and regulations, the Group is required to maintain 40% of its Tier 1 Capital in Lebanese Lira in liquid assets. It is also required to maintain non-interest bearing balances at the Central Bank of Lebanon calculated on the basis of 25% of sight commitments and 15% of term commitments in Lebanese Lira. Regarding foreign currencies, the Group maintains interest-bearing placements at the Central Bank of Lebanon at the rate of 15% of total deposits in foreign currencies regardless of nature. Foreign subsidiaries are also subject to obligatory reserve requirements with varying percentages, according to the banking rules and regulations of the countries in which they are located.

The liquidity position is assessed and managed under a variety of scenarios, giving due consideration to stress factors relating to both the market in general and specifically to the Group. One of these methods is to maintain limits on the ratio of liquid assets to customers’ deposits, to reflect market conditions. Net liquid assets consist of cash, short-term deposits and liquid debt securities available for immediate sale less deposits for banks and financial institutions due to mature within the next month. The ratios during the year were as follows:

Liquidity ratios 2010 2009 % % Advances to deposit ratios Year-end 26.41 22.36 Maximum 26.41 22.36 Minimum 23.45 21.55 Average 25.01 21.94

The Group stresses the importance of current accounts and savings accounts as sources of funds to finance lending to customers. They are monitored using the advances to deposit ratio, which compares loans and advances to customers as a percentage of core customer current and savings accounts, together with term funding with a remaining term to maturity in excess of one year. Loans to customers that are part of reverse repurchase arrangements, and where the Group receives securities which are deemed to be liquid, are excluded from the advances to deposits ratio.

Net liquid assets to customer liabilities ratios 2010 2009 % % At 31 December 21.06 26.76 Average during the year 21.15 24.38 Highest 23.04 26.76 Lowest 19.57 22.30

Net liquid assets are liquid assets less all funds maturing in the next 30 days from wholesale market sources and from customers who are deemed to be professional. The Group defines liquid assets for the purposes of the liquidity ratio as cash balances, short-term interbank deposits and highly rated debt securities available for immediate sale and for which a liquid market exists.

155 156 BLOM BANK s.a.l. Annual Report 2010 assets /(liabilities) Net undiscountedfinancial liabilities Total undiscounted financial Engagements byacceptances Related parties’Deposits Customers’ deposits liabilities Net settledderivatives institutions Due tobanksandfinancial Financial liabilities assets Total undiscountedfinancial to-maturity Financial investments-held- receivables classified asloansand Other financialassets available -forsale Financial investments– Bank acceptances parties Loans andadvancestorelated customers Loans andadvancesto fair valuethrough profit orloss Financial assetsdesignatedat trading Financial assetsheld-for- Net settledderivativeassets institutions Due from banksandfinancial LL million the Group’s depositretention history. date the Group could be required to pay and the table does not reflect the expected cash flows indicated by given being were notice if as immediately.treated are notice to subject are which Repayments obligations. repayment undiscounted contractual their on maturity,based by shown are purposes hedging column. for separate used a derivatives in All value Group’sfinancial offair theat shown are flows December.Tradingderivatives cash 31 at as liabilities undiscounted and the assets of profile maturity the summarizes below table The 46-2-1 central banks Cash andbalanceswith Financial assets

Analysis of financial assets and liabilities by remaining contractual maturities contractual remaining by liabilities and assets financial of Analysis 31 December2010 Notes totheConsolidatedFinancialStatements owever, the Group expects that many customers will not request repayment on the earliest the on repayment request not will customers many that expects Group However,the On demand (2,176,573) 4,251,895 4,051,285 2,075,322 1,622,043 200,610 453,279 ------(13,910,652) 23,513,379 23,012,216 Less than 3 months 9,602,727 3,132,632 4,460,183 142,032 193,051 129,615 361,400 591,066 142,032 841,202 36,465 17,821 46,692 8,044 1,224 431 months 4,391,349 1,901,835 1,818,141 6,293,184 1,252,426 1,430,061 2,689,311 3 to12 31 December2010 642,385 139,720 61,317 22,377 71,142 61,317 4,035 2,428 359 - - - 14,274,273 14,926,060 7,345,685 2,404,660 2,328,783 1,712,617 1 to5 years 651,787 621,228 542,216 146,220 433,993 28,362 2,197 2,197 9,229 460 - - - 4,651,971 4,683,282 3,647,161 Over 5 years 368,932 125,264 464,792 31,311 31,311 24,691 51,022 1,420 ------30,350,207 29,534,181 37,580,575 12,606,672 7,230,368 1,000,111 4,551,051 8,615,518 5,989,840 4,315,582 205,546 193,051 380,964 205,546 176,170 Total 36,465 10,283 63,110 46,692 31 December 2009

Less than 3 to 12 1 to 5 Over 5 On demand Total LL million 3 months months years years Financial assets Cash and balances with 2,039,317 842,328 34,351 1,828,528 - 4,744,524 central banks Due from banks and financial 554,720 4,636,376 553,013 67,226 - 5,811,335 institutions Net settled derivative assets - 33,544 - - - 33,544 Financial assets held-for- - 3,849 1,743 5,735 17,224 28,551 trading Financial assets designated at - 1,015 3,502 146,894 - 151,411 fair value through profit or loss Loans and advances to - 2,263,518 2,049,789 2,014,458 358,212 6,685,977 customers Loans and advances to related - 12,037 147 - - 12,184 parties Bank acceptances - 142,442 52,033 3,162 - 197,637 Financial investments – - 330,796 1,137,038 3,768,588 153,086 5,389,508 available - for - sale Other financial assets classified as loans and - 575,524 1,010,255 6,847,706 2,454,175 10,887,660 receivables Financial investments- held- - 88,491 109,594 282,668 322,285 803,038 to-maturity

Total undiscounted financial 2,594,037 8,929,920 4,951,465 14,964,965 3,304,982 34,745,369 assets

Financial liabilities Due to banks and financial 305,063 332,859 2,963 43,965 32,365 717,215 institutions Net settled derivatives - 23,526 - - - 23,526 liabilities Customers’ deposits 3,665,254 20,949,082 1,985,703 503,053 28,501 27,131,593 Related parties’ Deposits - 230,869 57 - - 230,926 Engagements by acceptances - 142,442 52,033 3,162 - 197,637

Total undiscounted financial 3,970,317 21,678,778 2,040,756 550,180 60,866 28,300,897 liabilities

Net undiscounted financial (1,376,280) (12,748,858) 2,910,709 14,414,785 3,244,116 6,444,472 assets / (liabilities)

157 158 BLOM BANK s.a.l. Annual Report 2010 Total T financial instruments Commitments onterm financial instruments Commitments onterm Commitments tolend Commitments tolend Other commitments Other commitments Foreign currencies toreceive Foreign currencies toreceive customers Guarantees issuedto customers Guarantees issuedto institutions Guarantees issuedtofinancial institutions Guarantees issuedtofinancial customers Commitments issuedto customers Commitments issuedto and liabilities from staticanddynamic perspectives includingstress testingandextensive scenarioanalysis. Management system “Focus ALM” in the processLiability of automating the risk measurement and of the Group’sAsset assets an implementing is Group The to limits. liquidity gap currencysensitivity interest foreign to core limits frommismatch liquidity ranging policy ALM the in set limits all with for responsiblecompliance is monitoring Management Risk Group SAL. / Bank BLOM Asset of the (ALCO) to Committee administration Management and Liability revision formulation, Liability its and for Asset authority Group’s assigns The policy basis. (ALM) annual Management semi- a on level) (Group on consolidated unconsolidated and Commission basis Control monthly Banking a the to and management executive to reported are gaps sensitivity rate Interest parameters. market or / and prices market in changes to securities income fixed of due to extreme movements in interest rates, while daily monitoring Group the Risk Management is sensitivity responsible for of generating internal reportsthe quantifying the Group’sGroup’s earnings trading at risk portfolio of volatilitymarketratesorpricessuchasinterest ratesandforeign exchangerates. equity positions, all of which are to exposed to due general and specific fluctuate market movements and will changes in the instruments level financial of flows cash changes in market prices. Market risks arise from open positions in interestfuture rate and currency rate as well as or value fair the that risk the is risk Market 46-3 commitments. GroupThe beforedrawn be will commitments or liabilities contingent the of all not that expects the of expiry financial institutions Commitments issuedto LL million financial institutions Commitments issuedto LL million The table below shows the contractual expiry by maturity of the Group’s contingent liabilities and commitments: otal

Market risk Market 31 December2010 Notes totheConsolidatedFinancialStatements On demand On demand 3,391,049 3,539,003 2,658,602 2,647,141 505,602 655,112 209,040 233,972 17,805 2,778 ------Less than Less than 3 months 3 months 4,203,596 2,312,331 3,699,075 1,708,020 173,810 181,307 330,711 423,004 ------months months 1,110,062 1,110,062 3 to12 3 to12 378,262 378,262 2009 2010 ------1 to5 1 to5 years years ------Over 5 Over 5 years years ------8,704,707 6,229,596 1,110,062 2,658,602 2,647,141 3,699,075 1,708,020 378,262 173,810 181,307 505,602 655,112 209,040 233,972 330,711 423,004 Total Total 17,805 2,778 46-3-1 Interest rate risk

Interest rate risk arises from the possibility that changes in interest rates will affect future profitability or the fair values of financial instruments. The Group is exposed to interest rate risk as a result of mismatches of interest rate repricing of assets and liabilities and off-financial position items that mature or reprice in a given period. The Group manages this risk by matching the repricing of assets and liabilities through risk management strategies.

Interest rate sensitivity The following table demonstrates the sensitivity to a reasonably possible change in interest rates, with all other variables held constant, of the Group’s income statement or statement of changes in equity. The sensitivity of the consolidated income statement is the effect of the assumed changes in interest rates on the net interest income for one year, based on the floating rate on non-trading financial assets and financial liabilities held at the year end, including the effect of hedging instruments. The sensitivity of equity is calculated by revaluing the available-for-sale investments, based on the assumption that there are parallel shifts in the yield curve. The sensitivity of equity is analyzed by maturity of the assets or cash flow hedge swaps. All the non-trading book exposures are monitored and analyzed in currency concentrations and relevant sensitivities are disclosed in local currency. The sensitivity analysis does not take account of action by the Group that might be taken to mitigate the effect of such changes.

2010 Sensitivity of equity Increase Sensitivity Currency in basis of net 0 to 6 6 months (1 – 5) More than interest months to 1 year years 5 years Total LL million points income Lebanese Lira +0.5% (13,371) (6,804) (4,346) (7,872) - (19,022) United States Dollar +0.5% 6,585 (327) (310) (1,561) (134) (2,332) Euro +0.25% 1,296 (7) - - - (7) Others +0.25% 2,084 (226) (200) (934) (6) (1,366)

2010 Sensitivity of equity Decrease Sensitivity Currency in basis of net 0 to 6 6 months (1 – 5) More than interest months to 1 year years 5 years Total LL million points income Lebanese Lira -0.5% 13,371 6,644 4,407 8,004 - 19,055 United States Dollar -0.5% (6,585) 331 313 1,708 174 2,526 Euro -0.25% (1,296) 7 - - - 7 Others -0.25% (2,084) 279 221 993 6 1,499

2009 Sensitivity of equity Increase Sensitivity in basis of net 0 to 6 6 months (1 – 5) More than Currency interest months to 1 year years 5 years Total LL million points income Lebanese Lira +0.5% (16,234) (7,389) (7,047) (14,864) (6) (29,306) United States Dollar +0.5% 5,485 (572) (436) (1,612) (277) (2,897) Euro +0.25% 1,581 (7) - - - (7) Others +0.25% 1,660 (2,585) (2,585) (10,065) (976) (16,211)

2009 Sensitivity of equity Decrease Sensitivity in basis of net 0 to 6 6 months (1 – 5) More than Currency interest months to 1 year years 5 years Total LL million points income Lebanese Lira -0.50% 16,234 7,037 6,687 13,756 6 27,486 United States Dollar -0.50% (5,485) 660 509 1,988 381 3,538 Euro -0.25% (1,581) 10 - - - 10 Others -0.25% (1,660) 2,637 2,638 10,284 990 16,549

159 160 BLOM BANK s.a.l. Annual Report 2010 sensitivity gap T LIABILITIES TO Other liabilities acceptances Engagements by deposits Related parties` deposits Customers' instruments Derivative financial institutions and financial Due tobanks LIABILITIES TO held-to-maturity investments – Financial receivables as loansand assets classified Other financial available-for-sale investments – Financial Bank acceptances related parties advances to Loans and customers advances to Loans and profit or loss value through designated at fair Financial assets held-for-trading Financial assets instruments Derivative financial institutions and financial Due from banks central banks balances with Cash and ASSETS 2010 of volatilitymarketratesorpricessuchasinterest ratesandforeign exchangerates. equity to positions, all due of which are fluctuate exposed to general will and specific market instruments movements and financial changes in the of level flows cash future changes in market prices. Market risks arise from open positions in interestor rate and currency rate as well as value fair the that risk the is risk Market Interest ratesensitivitygap otal interest rate AL AL ASSETS 31 December2010 Notes totheConsolidatedFinancialStatements (13,328,339) 20,349,537 20,027,015 1 month 7,021,198 2,599,772 3,718,607 Up to 188,472 134,050 228,626 457,380 8,934 7,879 ------(3,329,440) 3months 5,672,727 5,651,119 2,343,287 479,634 672,276 721,948 376,981 1 to 17,382 92,444 4,226 4 ------3 months to 1year 3,602,179 1,796,029 1,774,767 5,398,208 1,249,890 2,696,622 668,732 609,239 120,601 21,262 51,450 1,396 278 ------3,159,916 3,490,460 1,334,566 (1 –2) years 330,544 330,544 132,762 312,943 660,628 137,772 902,993 1,231 7,537 28 ------8,058,349 8,314,984 5,162,470 1,069,330 (2 –5) years 256,635 229,500 274,712 640,305 394,960 768,826 27,135 4,372 9 ------More than 4,638,415 4,666,180 3,204,923 5 years 361,949 104,170 394,989 524,537 27,765 27,765 24,492 33,680 16,240 1,200 ------sensitive 2,205,206 1,322,467 1,810,824 1,096,911 interest (394,382) (296,481) 462,420 205,546 178,289 209,938 205,546 462,706 Non (9,956) 36,465 79,070 14,137 46,692 2,261 19 - 30,638,443 29,363,177 33,045,141 2,406,698 9,559,006 4,116,261 7,797,136 5,931,237 4,248,229 462,420 205,546 192,717 378,118 912,295 205,546 164,525 Total 36,465 54,816 46,692 9,398 Non 2009 Up to 1 to 3 months (1 – 2) (2 – 5) More than interest Total 1 month 3 months to 1 year years years 5 years sensitive ASSETS Cash and balances with 810,099 37,237 11,041 489,938 1,302,481 95,199 1,947,979 4,693,974 central banks Due from banks and financial 4,256,373 359,345 516,698 81,332 - - 573,369 5,787,117 institutions Derivative financial ------33,544 33,544 instruments Financial assets held-for-trading - 662 1,322 869 3,305 2,371 16,234 24,763 Financial assets designated at fair value through - - - 73,097 65,848 - 457 139,402 profit or loss Loans and advances to 1,980,322 399,140 1,760,140 734,126 718,608 255,309 198,956 6,046,601 customers Loans and advances to 11,522 ------11,522 related parties Bank acceptances ------197,637 197,637 Financial investments – available-for- 45,575 200,033 829,055 1,745,176 1,541,075 122,110 211,197 4,694,221 sale Other financial assets classified as loans and 18,938 247,112 490,613 631,558 4,317,752 1,758,176 736,098 8,200,247 receivables Financial investments – 58,425 90,951 113,818 3,845 203,999 269,127 34,832 774,997 held-to-maturity TOTAL ASSETS 7,181,254 1,334,480 3,722,687 3,759,941 8,153,068 2,502,292 3,950,303 30,604,025 LIABILITIES Due to banks and financial 306,644 18,964 - - 36,180 - 343,650 705,438 institutions Derivative financial ------23,526 23,526 instruments Customers' deposits 18,422,323 5,155,646 1,862,967 211,581 227,051 25,387 1,035,230 26,940,185 Related parties` deposits 228,432 - - - - - 2,122 230,554 Engagements by acceptances ------197,637 197,637 Other liabilities ------410,388 410,388 TOTAL LIABILITIES 18,957,399 5,174,610 1,862,967 211,581 263,231 25,387 2,012,553 28,507,728 Total interest rate sensitivity gap (11,776,145) (3,840,130) 1,859,720 3,548,360 7,889,837 2,476,905 1,937,750 2,096,297

161 162 BLOM BANK s.a.l. Annual Report 2010 Net Exposure Total Liabilities Retirement obligation benefits Provisions for risks and charges Other liabilities Current tax liabilities Engagements by acceptances Related parties` deposits Customers' deposits Derivative financial instruments institutions Due tobanksandfinancial Liabilities T Goodwill Other assets Intangible assets Property andequipment Investment properties to-maturity Financial investments–held- receivables classified asloansand Other financialassets available-for-sale Financial investments– sale Non-current assetsheldfor Bank acceptances parties Loans andadvancestorelated customers Loans andadvancesto fair value through profit or loss Financial assets designated at Financial assets held-for-trading instruments Derivative financial institutions Due from banksandfinancial central banks Cash andbalanceswith Assets LL million Lira (LL)andforeign currencies, translatedintoLL. Lebanese in detailed is 2010, December 31 of as position financial of statement consolidated following The The tablebelowindicatestheconsolidatedstatementoffinancialpositiondetailedbycurr with the required solvency rate (Central Bank of Lebanon circular number 32). percent of its net shareholders’ 40equity, time, same the andat exceed, thatnot doesposition foreignthe global relatedthe as shareholders’equity,longbanksnet as its are of abiding in a timely percentand 1 exceedingconsistent not position trading mannernet a hold to allowed also is Group The Lebanon. of Bank foreign Central in changes to the by due requirements specific set toaccording adjustment fluctuate after shareholders’ equity its of representing will 60% instrument financial a of value theexchange rate. The that Group protects risk its capital and the reserves by is holding a foreign risk currency Currencyposition in US Dollars 46-3-2 otal Assets

Currency risk Currency 31 December2010 Notes totheConsolidatedFinancialStatements 10,082,571 LL million 1,215,054 8,867,517 8,510,216 4,726,373 3,312,644 172,406 223,632 999,838 730,137 (2,291) 31,282 23,570 45,101 79,261 57,800 21,789 3,174 2,507 1,373 3,635 7,193 448 ------15,321,102 14,604,293 15,589,667 US Dollar 4,708,303 4,020,513 3,097,434 2,413,008 268,565 228,753 147,777 206,733 463,686 479,952 147,776 140,001 99,472 25,886 28,034 50,077 32,043 2,743 5,543 5,326 2,548 (98) 964 Foreign currencies inLebaneseLira 2 - - 1,793,631 1,673,936 1,960,458 1,393,076 Euro 166,827 124,329 271,519 14,031 34,704 63,089 48,052 19,252 34,704 59,002 2,612 5,043 7,796 1,264 216 385 508 571 ------Other foreign currencies 1,200,136 4,851,020 4,574,732 6,051,156 2,505,266 1,418,938 1,046,082 105,789 187,270 400,557 304,413 10,834 49,715 47,230 23,309 23,065 63,145 34,648 25,027 23,066 24,524 8,941 7,405 4,521 1,951 4,291 7,456 1 - Total foreign currencies 21,965,753 20,852,961 23,601,281 1,635,528 4,832,633 6,797,298 5,909,448 3,518,092 290,014 205,546 113,456 375,611 188,742 912,295 803,617 205,546 164,525 13,793 55,258 25,823 33,291 63,145 70,478 30,353 54,368 39,499 4,908 5,763 ency. 571 30,833,270 29,363,177 33,683,852 2,850,582 9,559,006 4,116,261 7,797,136 5,931,237 4,248,229 Total 462,420 205,546 192,717 378,118 128,278 412,374 912,295 205,546 164,525 45,075 78,828 70,924 36,465 63,145 28,062 54,816 46,692 6,281 9,398 571 The following consolidated statement of financial position as of 31 December 2009, is detailed in Lebanese Lira (LL) and foreign currencies, translated into LL.

Foreign currencies in Lebanese Lira

LL million LL million US Dollars Euro Other foreign Total foreign currencies currencies Total Assets Cash and balances with central banks 902,039 2,222,384 84,959 1,484,592 3,791,935 4,693,974 Due from banks and financial institutions 51,223 2,791,059 1,638,576 1,306,259 5,735,894 5,787,117 Derivative financial instruments 9,909 - - 23,635 23,635 33,544 Financial assets held-for-trading - 20,502 - 4,261 24,763 24,763 Financial assets designated at fair value through profit or loss - 139,402 - - 139,402 139,402 Loans and advances to customers 599,775 3,296,484 234,755 1,915,587 5,446,826 6,046,601 Loans and advances to related parties 350 3,842 2,597 4,733 11,172 11,522 Bank acceptances - 149,400 23,263 24,974 197,637 197,637 Non-current assets held for sale (3,258) 7,523 - 25,581 33,104 29,846 Financial investments – available-for-sale 3,916,778 348,299 13,768 415,376 777,443 4,694,221 Other financial assets classified as loans and 3,385,441 4,687,842 120,861 6,103 4,814,806 8,200,247 receivables Financial investments – held- to-maturity - 444,675 - 330,322 774,997 774,997 Investment properties - - 618 - 618 618 Property and equipment 189,216 1,482 380 183,772 185,634 374,850 Intangible assets 1,170 4 194 5,359 5,557 6,727 Other assets 45,547 28,046 4,745 51,172 83,963 129,510 Goodwill - - - 63,268 63,268 63,268 Total Assets 9,098,190 14,140,944 2,124,716 5,844,994 22,110,654 31,208,844 Liabilities Due to banks and financial institutions 1,525 268,947 274,002 160,964 703,913 705,438 Derivative financial instruments - - - 23,526 23,526 23,526 Customers' deposits 7,811,193 13,047,069 1,632,442 4,449,481 19,128,992 26,940,185 Related parties` deposits 56,559 114,060 3,862 56,073 173,995 230,554 Engagements by acceptances - 149,400 23,263 24,974 197,637 197,637 Current tax liabilities 30,708 - 3,055 14,825 17,880 48,588 Other liabilities 129,415 197,195 14,183 69,595 280,973 410,388 Provisions for risks and charges 15,775 13,554 - 9,092 22,646 38,421 Retirement obligation benefits 26,121 2,305 - 10,132 12,437 38,558 Total Liabilities 8,071,296 13,792,530 1,950,807 4,818,662 20,561,999 28,633,295 Net Exposure 1,026,894 348,414 173,909 1,026,332 1,548,655 2,575,549

163 164 BLOM BANK s.a.l. Annual Report 2010 EUR however, itisunder constant scrutinyoftheBoard. issue or processespreviousfromand years; the policies objectives, the in wereshareholdersmade changes No securities. capital to capital return shareholders, to payment dividend of amount the adjust may Bank economic in changes of light the in it orderIn activities. structure,its capital of the characteristics adjust risk or the maintain and to conditions the to adjustments makes and structure capital its manages Bank The (2009: thesame). requirements capital imposed externally its all with full in complies Bank The assets. weighted risk total the Banks should maintain a required capital adequacy ratio (not less than 8%) based on their capital funds over order tosupportitsbusinessandmaximizeshareholders’ value. in ratios capital healthy and ratings creditstrong maintains Bank the that requirementsand capital imposed The primary objectives of the Bank’s capital management are to ensure that the Bank complies with externally the by established ratios and rules the measures, Central BankofLebanonandtheBankingControl Commission. other among using, monitored is capital Bank’s the of The Bank maintains an actively managed capital base to cover risks, inherent in the business. The adequacy staff educationandassessmentprocesses,audit. includingtheuseofinternal procedures, reconciliation and authorization access, duties, of segregation effective include Controls risks. the manage to able is Group the risks, potential to responding and monitoring by events. and framework control a external or fraud regulatory error, or legal human have reputation, failure, implications, or lead to financial loss. The Group cannot expect toto eliminate all operational risks, but through damage systems cause can from risks operational arising perform, to loss fail controls of When risk the is risk Operational risk Operational 46-4 effect of any prepayment penalties. Groupconsiders the effect of prepayment on net interest income as not material after taking into account the conditionscausing prepayment are not significant in the markets in which the Group operates. Therefore, the Moreover, assets. market total other the to compared significant not are Group the of assets rate fixed The fall. rates interest when loans housing rate fixed as such expected, than earlierrepaymentrequest or repay counterparties and customers its because loss financial a incurs Group the that risk the is riskPrepayment 46-3-3 USD Currency a while equity, or statement income positive consolidated amount reflects in a net potential increase. reduction net potential A a negative reflects table significant. the not is in equity amount on effect The hedges). flow cash as forward usedand contractsswaps currency exchange offoreign value fair in change the to (due equity and liabilities) and assets monetary non-trading sensitivecurrency of value fair the to (due statement income consolidated the on instruments, currencyrate against the Lebanese Lira, with all other variables held constant, including the effect of hedging on its foreign currency positions. The analysis calculates the effects of a reasonably possible movement of the tableThebelowindicates extentthewhichGrouptheto exposedwascurrencyto December31riskat 2010 47

31 December2010 Notes totheConsolidatedFinancialStatements P Capital Management repayment risk repayment currency rate% Change in ± 3% ± 1% 2010 Effect onprofit before tax LL million ± 12,506 ± 1,935 currency rate% Change in ± 3% ± 1% 2009 Effect onprofit before tax LL million ± 14,187 ± 174 Regulatory capital At 31 December 2010 and 2009, the capital consists of the following:

LL million 2010 2009 Tier 1 capital 2,421,525 2,156,828 Tier 2 capital 39,432 43,591 Total capital 2,460,957 2,200,419 Risk weighted assets Credit risk 15,854,502 14,139,893 Market risk 446,751 322,026 Operational risk 1,512,618 1,298,738 Total risk weighted assets 17,813,871 15,760,657

The capital adequacy ratio as of 31 December (including profit for the year less proposed dividends) is as follows:

Tier 1 capital ratio 13.59% 13.68% Total capital ratio 13.81% 13.96%

48 Notes to the Consolidated Statement of Cash Flows

(1) Non cash transactions in the operating activities include a decrease in due from banks and financial institutions in the amount of LL 9,160 million, against a decrease in provisions for risks and charges for the same amount during 2010.

(2) Non cash transactions in the operating activities include a decrease in other liabilities in the amount of LL 14,343 million, against an increase in provision for risks and charges for the same amount during 2010.

(3) Non cash transactions in the investing activities include an increase in other financial assets classified as loans and receivables in the amount of LL 921,530 million, against a decrease in financial investments – available-for-sale for the same amount during 2009.

49 Comparative Information

Margins on letters of credit were reclassified from “Other liabilities” to “Customers’ deposits”. Comparative figures amounting to LL million 81,134 were reclassified accordingly.

This change has been made to improve the quality of information presented (refer to Appendix A) and had no impact on previously reported results.

165 166 BLOM BANK s.a.l. Annual Report 2010 Cash andbalanceswithcentralbanks Assets LL million still evaluating the impact of these events to consider them in future periods. of assets, liabilities and results of business for the year ended 31 December 2010. The Group management is however no indicators came to the attention of the Group management which may change andDuring affect 2011, the itemssubstantial events took place in Egypt that will impact the economic environment of future periods, Due from banksandfinancialinstitutions Derivative financialinstruments Financial assetsheld-for-trading Financial assets designated at fair value through profit or loss Loans andadvancestocustomers Loans andadvancestorelated parties Bank acceptances Non-current assetsheldfor sale Financial investments–available-for-sale Other financialassetsclassifiedasloansand receivables Financial investments–held-to-maturity Property andequipment Investment properties Intangible assets Other assets Goodwill Due tobanksandfinancialinstitutions Liabilities Liabilities andequity T Derivative financialinstruments Customers' deposits Related parties’deposits Engagements byacceptances Current taxliabilities Other liabilities Provisions forrisksandcharges Retirement benefitsobligation Share capital-commonshares Equity attributabletoequityholdersofparent Total liabilities Share capital-preferred shares Share premium oncommonshares Share premium onpreferred shares Capital reserves Treasury shares Reserves forrevaluation variance-real estate Available-for-sale reserve Total liabilitiesandequity T Non-controlling interests Retained earnings Results ofthefinancialperiod –profit Other reserves Foreign currency translationreserve otal assets otal equity 50 31 December2010 Notes totheConsolidatedFinancialStatements Subsequent Events Notes 15 16 17 18 19 40 21 22 23 20 23 23 24 25 26 27 28 17 29 40 21 30 31 32 33 34 34 34 34 35 36 24 37 33,683,852 29,363,177 30,833,270 33,683,852 4,248,229 5,931,237 7,797,136 4,116,261 9,559,006 2,724,112 2,850,582 (75,793) 164,525 205,546 912,295 412,374 128,278 378,118 192,717 205,546 462,420 223,600 374,059 246,310 877,086 126,470 444,115 483,376 46,692 54,816 28,062 63,145 36,465 70,924 78,828 45,075 18,200 14,727 96,221 21,976 9,398 6,281 2010 571 235 31,208,844 26,940,185 28,633,295 31,208,844 4,693,974 5,787,117 6,046,601 4,694,221 8,200,247 2,446,527 2,575,549 139,402 197,637 774,997 374,850 129,510 705,438 230,554 197,637 410,388 223,600 374,059 246,310 714,051 129,022 341,061 429,558 106,184 (58,723) 33,544 24,763 11,522 29,846 63,268 23,526 48,588 38,421 38,558 18,200 14,727 37,169 6,727 2009 618 331 At 1January Reclassified 26,980,813 22,697,445 24,781,494 26,980,813 3,580,467 5,817,382 5,230,447 4,691,986 6,094,232 1,196,746 2,078,120 2,199,319 202,211 634,306 324,576 165,600 140,278 202,211 368,861 223,600 374,059 246,310 595,391 121,199 229,863 365,271 (39,877) 39,867 14,264 81,955 27,561 63,145 56,779 53,159 31,481 34,534 18,200 14,727 46,565 6,926 5,307 2009 3,905 581 106 Correspondant Banks, BLOM BANK Group Management & Directory

BLOM BANK WORLDWIDE CORRESPONDENT BANKS 170 BLOM BANK GROUP MANAGEMENT & DIRECTORy 171 1. BANKS BLOM BANK 172 BLOMINVEST BANK 178 BLOM Development BANK 179 BLOM BANK FRANCE 180 BLOM BANK (Switzerland) 181 Bank of Syria & Overseas 182 Syria & Overseas for Financial Services 184 BLOM BANK Egypt 184 BLOM Egypt Securities 186 BLOMINVEST Saudi Arabia 187 BLOM BANK Qatar 187 2. Insurance COMPANIES Arope Insurance 188 Arope Syria 189 Arope Egypt Insurance 190 Arope Egypt Life Insurance 190

167 168 BLOM BANK s.a.l. Annual Report 2010 169 170 BLOM BANK s.a.l. Annual Report 2010 France, Paris Denmark, Copenhagen Canada, Toronto Bahrain, Manama Australia, Sydney Country Qatar, Doha Norway, Oslo Kuwait, K.S.A., Riyadh K.S.A., Jeddah Japan, Tokyo Japan, Tokyo Italy, Rome Italy, Milan Italy, Milan Germany, FrankfurtamMain Germany Sweden, Stockholm Spain, Madrid T Switzerland, Zurich Switzerland, Zurich Switzerland, Geneva U.A.E., Dubai U.S.A., NewYork U.S.A., NewYork U.K., London U.K., London urkey, Istanbul BLOM BANK Worldwide Correspondent Banks , Frankfurt am Main KWD NOK BHD QAR GBP GBP CAD AUD USD USD DKK EUR EUR EUR EUR EUR EUR EUR EUR EUR CHF EUR SAR SAR AED TRY JPY JPY Banco BilbaoVizcaya Argentaria S.A.(BBVA) Canadian ImperialBankofCommerce (The) NATIONAL WESTMINSTER BANKPLC Commercial BankofQatar (The)(QSC) Skandinaviska EnskildaBankenAB BLOM BANK(Switzerland)A Commonwealth BankofAustralia Banca NazionaleDelLavoro SPA The NationalCommercial Bank Bank ofNewYork Mellon(The) Bank ofTokyo-Mitsubishi Ltd JP Morgan ChaseBankN.A. JP Morgan ChaseBankN.A. Yapi Ve Kredi BankasiA.S. BLOM BANKFranceSA BLOM BANKFranceSA BLOM BANKFranceSA National BankofBahrain Correspondent Bank Intesa SanPaoloSPA Dnb NORBankASA Deutsche BankAG Commerzbank AG Danske BankA/S Credit SuisseAG Gulf BankKSC Unicredit SPA Riyad Bank UBS AG BLOM BANK Group Management and Directory

1 Banks

2 Insurance Companies

171 172 BLOM BANK s.a.l. Annual Report 2010 Branch Manager:Mr. RaoulCHERFAN Fax: (961-1)615825 intersection, Phone: (961-1)615818/19/20/21 –615826 Road Damascus Buick, KhouryBldg. St., Main Badaro Badaro Branch Manager:Dr. GladysYounes KREIKER Fax: (961-1)991670 Phone: (961-1)991671/2-6 Facing Beirut“Souks” Bab Idriss,Weygand St.,Semiramis Bldg., Bab Idriss Branch Manager:Mr. MahmoudMARRACH Fax: (961-1)370237 Phone: (961-1)372780–370830 Ibn SinaSt.,MashkhasBldg. Ain El-Mreisseh Branch Manager:Mr. AraBOGHOSSIAN Fax: (961-1)320949 Phone: (961-1)200147/8 Sassine Square Ashrafieh Senior Manager/Branches:Mr. Walid ARISS Fax: (961-1)738946 Phone: (961-1)738938–743300 Verdun, RachidKaramiSt.,BLOMBANKBldg. Main Branch Mohafazat BeirutBranches Website: www.blom.com.lb E-mail: [email protected] Fax :(961-1)738946 Phone :(961-1)743300–738938 Lebanon P.O.Box: 11-1912 Riad El-Solh Beirut 1107 2807, Verdun –RachidKaramiSt.,BLOMBANKBldg. Headquar Network Branch Refer topage17until27ofthisreport. Board ofDirectors &GeneralManagement 1 BLOM BANK Group Management andDirectory Banks ters (Beirut) LEBANON Branch Manager:Mr. Yehia ORFALI Fax: (961-1)748337 Phone: (961-1)738050/1- 749624 Palace, SalhabBldg. Kettaneh to next Area, El-Druze Karakol St., Istiklal Istiklal Branch Manager:Mr. AbbasTANNIR Fax: (961-1)747749 Phone: (961-1)747752/59/60 Abdel AzizSt.,DaherBldg. Hamra -Retail Senior Manager/Branches:Mr. SamiFARHAT Fax: (961-1)744407 Phone: (961-1)346290/1/2/3–341955-343503 Abdel AzizSt.,DaherBldg. Hamra Branch Manager:Mr. SamerDAYYA Fax: (961-1)310679 Phone: (961-1)310687–310677/8/9-817560 Burj AbiHaidarSt.,SalamTower Burj AbiHaidar Branch Manager:Mr. ZiadSROUGI Fax: (961-1)363732 Phone: (961-1)363732/34/42 Ras Beirut,AlRayessBldg. Bliss St.,oppositeHobeishPoliceStation, Bliss Jnah Sodeco Bir Hassan Area, United Nations St., next to Beirut Sodeco Square, Damascus Road Hospital, Jaber Bldg. Phone: (961-1) 611360/1 Phone: (961-1) 855903/4/5 Fax: (961-1) 611362 Fax: (961-1) 855906 Branch Manager: Mrs. Souraya BSHOUTY Branch Manager: Mr. Abbas KALOT Tabaris Maarad Gebran Tueini Square, Sursock Tower Emir Bechir St., Hibat el Maarad Bldg., Downtown Phone: (961-1) 203142/3/4 Phone: (961-1) 983230/1-4 Fax: (961-1) 203145 Fax: (961-1) 983230 Senior Manager/Branches: Ms. Claire ABOU MRAD Branch Manager: Mr. Amer KAMAL Tariq Al-Jedideh Mar Elias Al Malaab Al Baladi Square, Salim Bldg. Corniche El Mazraa, opposite Helou’s barracks, Phone: (961-1) 818621 – 816985 Zantout Bldg. Fax: (961-1) 818620 Phone: (961-1) 818616/7/8 Branch Manager: Mr. Ziad SHANOUHA Fax: (961-1) 818009 Branch Manager: Mrs. Nahida WEHBE Verdun Verdun St., opposite F.S.I. Barracks, Abdo Bldg. Mazraa Phone: (961-1) 788412/3 – 800081 - 788411 Corniche El Mazraa, Barbir Square Fax: (961-1) 800032 Phone: (961-1) 648020/1/2 - 664337 Branch Manager: Mr. Hani BAWAB Fax: (961-1) 648020 Branch Manager: Mr. Marwan MOHTAR Verdun - Retail Branch Verdun, Rachid Karami St., BLOM BANK Bldg. Mina El Hosn Phone: (961-1) 750160/1/2/3 Beirut Tower Bldg., Adnan El Hakim Str.to the South Branch Manager: Mr. Marwan PHARAON & Fawzi Al Daouk North Phone: (961-1) 365234/5/6/7 Fax: (961-1) 365230 Mohafazat Mount Lebanon Branches Branch Manager: Mr. Samer BOHSALI Ain El-Remaneh Noueiri Chiyah District, Lamaa St., Next to Kasarjian Barracks Al Noueiri Station, Hamada Bldg. Phone: (961-1) 386750/1/2/3 Phone: (961-1) 658610 - 658611 – 664489 Fax: (961-1) 386750 Fax: (961-1) 630319 Branch Manager: Mr. Johnny SALIBI Branch Manager: Mr. Chafik KOUSSA Aley Raouche Al Balakine, Property of Faysal Sultane Wahab Raouche Blvd, Al Rayess & Bou Dagher Bldg. Phone: (961-5) 556612/3 Phone: (961-1) 812603/4-6 Fax: (961-5) 556614 Fax: (961-1) 801634 Branch Manager: Mrs. May BOU ALWAN Branch Manager: Mr. Mohamad MARRACH Antelias Rmeil Next to the Armenian Patriarchate – Kheirallah Bldg. Ashrafieh, Orthodox Hospital St., Medical Center Phone: (961-4) 411472 – 520210 – 410123 – 411418 Phone: (961-1) 565454 – 567140 – 567141 Fax: (961-4) 523666 Fax: (961-1) 565252 Branch Manager: Mr. Laurent CHEBLI Branch Manager: Mrs. Salma Rbeiz ACHKOUTY Aramoun Saifi Choueifat, Al Koba, Aramoun Road, Zaynab Center Al Arz St., Akar Bldg. Phone: (961-5) 808591/2/3/4 Phone: (961-1) 449899 – 586340 – 566794 - 587196 Fax: (961-5) 808594 Fax: (961-1) 581683 Branch Manager: Mrs. Nawal Merhi ABOU DIAB Branch Manager: Dr. Ousama CHAHINE Burj Al-Barajneh Sanayeh Ain El Sekka St., Rahal Bldg. Chamber of Commerce & Industry Bldg. Phone: (961-1) 450381/2/3/4 – 450446 Phone: (961-1) 346042/3 – 748339 Fax: (961-1) 450384 Fax: (961-1) 738404 Branch Manager: Dr. Hassan JABAK Branch Manager: Mr. Khodor MNEIMNEH

173 174 BLOM BANK s.a.l. Annual Report 2010 Branch Manager:Mr. Wassim FAHES Fax: (961-5)461815 Phone: (961-5)461506-461438-461365-461243 Hadath, Sfeirdistrict, Hadath Branch Manager:Mrs.MajidaAlamehMIKATI Fax: (961-1)820153 Phone: (961-1)825509–825870821895 & KalotBldg. Jaber Tohme& – Blvd Chiah Ghobeyri, El Corniche Ghobeyri Branch Manager:Mr. RonaldFARAH Fax: (961-1)293816 Phone: (961-1)293810/3 elChebbak,AbrajCenter,Furn MainStr., Beirut elChebbak–RetailBranch Furn Branch Manager:Mr. JosephFrançoisGHOUSOUB Fax: (961-4)916115 Phone: (961-4)916111/2/3/4 Beit ElKiko,Antelias-BickfayaRoad Elissar Branch Manager:Mr. Georges MAMO Fax: (961-1)256522 Phone: (961-1)256527/28/32/37/38/39 Bawchrieh, Tripoli Road,BankingCenterBldg. Dora Branch Manager:Mr. FaridZOGHBI Fax: (961-1)686095 Phone: (961-1)686072-686035/6-686051 Main street, MohanaCenter, Dekwaneh Branch Manager:Mr. KamalSLIM Fax: (961-5)433208 Phone: (961-5)433203/6 Al Omaraa,MainRoad,Tiro’s Junction Choueifat Senior Manager/Branches:Mr. AbbasTLAIS Fax: (961-1)270064 Phone: (961-1)270172/3/4-275783 Orient CenterBldg. Chiyah Blvd,RoundaboutMarMekhayel, Chiyah Branch Manager:Mr. Youssef HOMSI Fax: (961-1)266339 242792 -243139 Phone: (961-1)262067–266337/8243604/5 Harboyan Center Burj Hammoud BLOM BANK Group Management andDirectory Branch Manager:Mrs.ZeinaK HATTAB Phone: (961-1)489733–489739489750489757 Horsh Tabet, CharlesDeGaulleSt.,Tayar Center Sin ElFil–Retail Branch Manager:Mr. FadiELMIR Fax: (961-1)485273 Phone: (961-1)485270/1/2 Far Vision CenterFouadChehabAvenue Sin ElFil Branch Manager:Mr. Walid LABBAN Fax: (961-4)532854 Phone: (961-4)532856/7/8. Mansourieh El Maten, Dar El Ain Plaza, New Mansourieh Branch Manager:Mrs.RitaNEHME Fax: (961-9)856820 Phone: (961-9)856810/1/2/3/4 Lebanon Kfarhbab, MainSt.,OueissCenter,Keserwan, Kfarhbab Branch Manager:Mr. CharlesNasrallahAOUDE Fax: (961-9)831113 Phone: (961-9)640273–640095636998/9 Kaslik MainSt.,DebsCenter Kaslik Branch Manager:Mr. RachadYAGHI Fax: (961-9)638011 Phone: (961-9)638011/2/3/4 Next toFouadChehabStadium Facing “PalaisdeJustice”, Jounieh Branch Manager:Mr. ZakhiaSARKIS Fax: (961-9)943701 Phone: (961-9)943702/3/4 Voie 13,NearMarCharbelJunction Jbeil Branch Manager:Mr. ZiadKAREH Fax: (961-5)955240 Phone: (961-5)955240/1/2/3/4 Damascus Road,JosephChahineCenter Hazmieh Branch Manager:Mr. AliCHREIF Fax: (961-1)543661 Phone: (961-1)543662–543658543659 Abou Taam &HoteitBldg. Al AbiadArea, SayyedHadiNasrallah Highway, Haret Hreik Highway Zalka Jib Jinnine Zalka St., BLOM BANK Bldg., Interior Road Jib Jinnine, Main road, Near the Court Phone: (961-4) 713074/5/6 – 723074/5 Phone: (961-3) 620802 – 281257 – 281258 – 634070 – Fax: (961-4) 713077 677710 Branch Manager: Mrs. Denise Nasr Abi Raad JALKH Fax: (961-8) 661092 Branch Manager : Mr. Kamel ABDOUNI Zouk Mousbeh Zouk Mousbeh, Main St., Le Paradis Centre, Zahleh Jeita’s cave junction Manara Center, Fakhoury & Kfoury Bldg. Phone: (961-9) 226991/2/3/4/5 Phone: (961-8) 807680/1/2/3/4 Fax: (961-9) 226990 Fax: (961-8) 807680 Branch Manager: Mrs. Marlène Mezraany ABOU NAJM Branch Manager: Mr. Marwan CHAKRA (AL)

Mohafazat North Lebanon Branches Mohafazat Nabatiyeh Branch Tripoli Abi Samra Al-Dinnawi Square, Khaled Darwiche Bldg. Nabatiyeh Phone: (961-6) 423565/6/7/8 Nabatiyeh Tahta, Hassan Kamel Al Sabbah St., Fax: (961-6) 423569 Office 2000 Bldg. Branch Manager: Mrs. Salwa Ajaj MERHI Phone: (961-7) 767854/5/6 Fax: (961-7) 767857 Tripoli – Azmi Branch Manager: Mr. Hani HAMMOUD Azmi St., Fattal Bldg. Phone: (961-6) 433064 – 443550/1/2 Fax: (961-6) 435947 Mohafazat South Lebanon Branches Branch Manager: Mr. Fouad AL HAJJ Saida Tripoli – Al Tell Riad Solh St., Al Zaatari & Fakhoury & Bizri Bldg. Abdel Hamid Karameh Square, Ghandour Bldg. Phone: (961-7) 724866 – 723266 – 722801 – 739276 Phone: (961-6) 430153 – 628200/2 - 431624 Fax: (961-7) 722801 Fax: (961-6) 628200 Branch Manager: Mr. Moufid NAJJAR Branch Manager: Mr. Chaina ASSI Tyr - Abbassieh Tripoli - Zahrieh Tyr, Abbasieh, Jal El Baher, Jabal Amel Hospital’s Al Tall St., Alam Al Din & Bissar Bldg. Junction Phone: (961-6) 430150/2 – 423415 - 423414 Phone: (961-7) 350861/2/3/4 Fax: (961-6) 430151 Fax: (961-7) 350865 Branch Manager: Mr. Wassim BAGHDADI Branch Manager: Mr. Ali SROUR

Tyr Mohafazat Bekaa Branches Main St., Chehade Bldg. Phone: (961-7) 740900 – 741649 - 742903 Chtaura Fax: (961-7) 348487 Main St., Najim El Din Bldg. Branch Manager: Mrs. Maysaa Arab RAHAL Phone: (961-8) 540078 - 544329/30 - 544914 Fax: (961-8) 542504 Branch Manager: Mr. Elie FREIJI

175 176 BLOM BANK s.a.l. Annual Report 2010 Branch Manager:Mr. OmarABOU ASSAF Fax: (962-6)5336657 Phone: (962-6)5336653 20 Yajouz St. Jubeiha Branch Manager:Mr. AhmadDABAAN Fax: (962-2)7240057 Phone: (962-2)7240006 St. second the Abdallah King Irbid Circle, Al-Qubba Irbid Branch Manager:Mr. MarwanSALAH Fax: (962-6)5929662 Phone: (962-6)5929663 Princess SimaiiahSt.,EssamAl-Khateebcomplex Abdoun Website: www.blom.com.lb E-mail: [email protected] Fax: (962-6)5677177 Phone: (962-6)5001200 P.O. Box930321Shmeisani,Amman11193,Jordan 18 AlSharifAbdelHamidSharafSt. Regional Managemnt(Amman) Network Branch Mr. ModerKURDI Mr. AdnanSALLAKH Dr. AdnanALARAJ Management Regional Jordan Ms. MonaKHOUZAI Mr. JehadADI Mr. EyadADI Mr. MaanZOABI Mr. NabilOBALI Mr. Muhannad ABY Mr. SaidOB EIDALLAH Mr. HaniDIRANI Mr. OmarABDULLAH Mr. MohanadBALBISSI(AL) Dr. MohamedAMRO Heads OfDepartmentsAnd Units BLOM BANK Group Management andDirectory AD JORDAN Branch Manager: Mr. RaedJOUDEH Fax: (962-6)5687888 Phone: (962-6)5687333 Wadi SaqraSt.,AlReemComplex W Branch Manager:Mr. IyadGHEIT H Fax :(962-6)4750055 Phone :(962-6)4750050 453 AlAmirHassanSt.,Oumeiran Wihdat Branch Manager:BakerHADDADEEN Fax: (962-6)5865346 Phone: (962-6)5865527 67 AbedAlRahimHajjMohammadSt. Sweifieh Branch Manager::Mr. AbdeljawadALOWAISI Fax: (962-6)5605652 Phone: (962-6)5001200 18 AlSharifAbdelHamidSharafSt. Shmeisani Branch Manager:Mr. MuhannadYOUNIS Fax: (962-6)5521347 Phone: (962-6)5503130 152 MeccaSt.,AlHusseineComplex Mecca Street adi Saqra Consultant forGeneralManagementinLebanon Assistant RegionalManager/Credit Central OperationsManager General Manager-Jordan Trade Finance Manager Internal Audit Manager Compliance Manager Financial Controller Treasury Manager Legal Consultant Retail Manager Risk Manager IT Manager Personnel Cyprus

Cyprus Management

Ziad EL MURR Branch Manager

Branch Network

Victory House 205Z Archbishop Makarios Ave 3030 Limassol P.O.Box: 53243, 3301 Limassol, Cyprus Phone: (357-25) 376433/4/5 Fax: (375-25) 376292 E-mail : [email protected]

Abu Dhabi

Abu Dhabi Representative Office

Mr. Ramzi AKKARI Chief Representative

Branch Network

Representative Office Al Bateen Towers, Tower C 6, Suite C 907-9th floor, Al Bateen – Bainuna Str., Abu Dhabi – U.A.E. P.O. Box: 63040 - Al Bateen – Abu Dhabi – U.A.E. Phone: (971-2) 6676100 Fax: (971-2) 6676200 E-mail: [email protected]

Syria

Syria Free Zone

Mr. Joseph HAYEK Branch Manager

Branch Network

Damascus Free Zone, Al-Baramkeh Phone: (963-11) 2133170/1 Fax: (963-11) 2133173 E-mail: [email protected]

177 178 BLOM BANK s.a.l. Annual Report 2010 Mr. JosephEmileKHARRA Messrs. BLOMBANKS.A.L. Mr. SaadAZHARI Mr. W Mr. Marwan ABOUKHALIL Mr. Stephane ABICHAKER Mr. Georges ABBOUD Mr. ElieCHALHO UB Mr. MichelCHIKHANI Dr. FadiOSS EIRAN Mr. SaadAZHARI Mr. RamziT OHME Mr. Marwan MIKHAEL Mr. Nicholas PHOTIADES Mr. Gladson DOUGLAS Dr. AliBOLBOL Website: www.blominvestbank.com E-mail: [email protected] Fax: (961-1)749148 Phone: (961-1)738938–743300 P.O. Box:11-1540,Riad ElSolh,Beirut11072080Lebanon Verdun, Rachid KaramiSt.BLOMBANKBldg.–2ndFloor He Network Branch Managers & Advisors Heads, Management, Directors, of Board Mr. HabibRAHAL Mr. SamerAZHARI Mr. MarwanJAROUDI Board ofDirectors Head ofDepartments Management Advisors &Managers adq alid KADRI u BLOM BANK Group Management andDirectory ar te rs (Be ir T ut) LEBANON Assistant GeneralManager, HeadofAssetManagement Head ofPlanning&Organization Chairman &GeneralManager Chairman &GeneralManager Head ofInvestmentBanking Head ofCapitalMarkets Head ofPrivateBanking Head ofOperations Head ofResearch General Manager Senior Manager Member Member Member Member Member LEBANON

Board of Directors & Management

Board of Directors Mr. Amr AZHARI Chairman & General Manager Mr. Saad AZHARI Member Mr. Marwan JAROUDI Member Mr. Joseph Emile KHARRAT Member Mr. Nicolas SAADE Member Mr. Habib RAHAL Representing BLOM BANK SAL Dr. Fadi OSSEIRAN Representing BLOMINVEST BANK SAL General Management Mr. Amr AZHARI Chairman & General Manager Mr. Mouataz NATAFGI General Manager Mr. Ghassan CHAMMAS Advisor to the Board of Directors and the Management Managers Mr. Tarek HOUSSAMI Main Branch Manager Mr. Kamil KASSIR Tripoli Branch Manager

Branch Network Headquarters (Beirut) Abdel Aziz St, Daher Bldg. Beirut, Lebanon Phone: (961-1) 751090/1/2/3 Fax: (961-1) 751094 E-mail: [email protected] Website: www.blomdevelopment.com Branch Manager: Mr. Tarek HOUSSAMI

Tripoli Al Mina Road – Al Ahli Bldg. Phone: (961-6) 429101/2/3 Fax: (961-6) 429104 Branch Manager: Mr. Kamil KASSIR

179 180 BLOM BANK s.a.l. Annual Report 2010 Branch Manager:Mr. SamirHOBEIKA Fax: (971-4)2236260 (971-4)2224812(Forex) Phone: (971-4)2284655–2278196(General) Maktoum Bldg. al Rached Ben Ahmad St.Sheikh Maktoum Al Deira, Dubai UNITED ARABEMIRA Branch Manager:IskandarARAMAN Website: www.blomfrance.com E-mail: [email protected] Fax: (33-1)44950600 Phone: (33-1)449506 38-40 avenue des Champs-ElyséesHeadquar 75008 Paris - France Network Branch Dr. NaamanAZHARI Mr. SamerAZHARI Board ofDirectors &Management Mr. Jean-PaulD ESSR Mr. ChristianDELONGEVIALL (Grand OfficierdelaLégiond’Honneur) HE SheikhGhassanIbrahimSHAKER Mr. MichelAD W Mr. SamerAZHARI Mr. Marwan JAROUDI Mr. HanyBAZ Mr. Christian ARLOT Mr. Jean-Pierre BAAKLINI Mr. Bassem ARISS Mr. AmrELTU RK Mr. Iskandar ARAMAN Mr. GilbertMOINE General Management BLOM BANK Group Management andDirectory ters (Paris) AN TINE TES Senior Manager:Mr. AmrTURK Fax: (44-20)78237356 Phone: (44-20)75907777 193-195 Brompton Road London SW3 1LZ – England London UNITED KINGDOM Branch Manager:Mr. RamyMATTA Fax: (971-6)5736080 Phone: (971-6)5736700–5736100 Bin HamadalThaniBldg. al Buhairah Sheikh Nasser Khaled Lagoon, Corniche Sharjah Fax: (971-4)8849388 Phone: (971-4)8849311 Ground Floor, Bldg.4,TheGalleriesJebelAli,Dubai (Electronic Branch) Jebel Ali Honorary President andPermanentRepresentative of Chairman &GeneralManager Chairman &GeneralManager General Manager–Romania Senior Manager–London Regional Manager–UAE Manager HeadOffice BLOM BANKS.A.L. Senior Manager Audit Manager Risk Manager Deputy CEO Member Member Member Member ROMANIA

Headquarters (Bucharest) Constanta Unirii Blvd. No. 66, Bloc K3, mezanin Sector 3, Mamaia Blvd., No. 25 Bis, C.P. 2-89, Constanţa Bucharest Phone: (40-341) 407485/9 P.O. Box: 1-850 Fax: (40-241) 510951 Phone: (40-21) 3027201/06 Agency Manager: Mr. Mihai BUTCARU Fax: (40-21) 3185214/03 Voluntari Unirii - Customer Desk Voluntari Blvd., No. 93-95, Judeţul Ilfov Bucharest Unirii Blvd. No. 66, Bloc K3, mezanin Sector 3, Phone: (40-212) 703298/83 Bucharest Fax: (40-212) 703771 Phone: (40-21) 3027201/6 Agency Manager: Mr. Hesham SALEH Fax: (40-21) 3185214/03 Head of Operations: Mrs. Florentina DELA Brasov Mihail Kogalniceanu St., No. 23, Bloc C7, Brasov Victoria Phone: (40-268) 547640 Buzesti St., No. 72, Sector 1, Bucharest Fax: (40-268) 547641 Phone: (40-21) 3154205/6/7 Agency Manager: Mr. Marius VATAVU Fax: (40-21) 3154208/9 Agency Manager: Mr. Marius VOICULEŢ

Board of Directors & Management Committee

Board of Directors Dr. Naaman AZHARI Honorary Chairman of the Board Mr. Saad AZHARI Chairman Mr. André CATTIN Vice Chairman Dr. Werner FREY Member Me. Peter de la GANDARA Member Mr. Ahmad G. SHAKER Member Management Committee Mr. Antoine MAZLOUM General Manager Mr. Thierry OTT Manager Mrs. Eléonore DAESCHER Manager Mr. Salim DIAB Manager

Branch Network Headquarters (Geneva) 1, Rue de la Rôtisserie P.O. Box: 3040 –1211 Geneva 3 – Switzerland Phone: (41-22) 8177100 Fax: (41-22) 8177190 E-mail: [email protected] Website: www.blombank.ch

181 182 BLOM BANK s.a.l. Annual Report 2010 Mr. MehranKHW BLOM BANKS.A.L.represented byDr. FadiOSSEIRAN BLOM BANKS.A.L.represented byMr. SaadAZHARI Mr. IbrahimSHEIKHDIB Dr. IhsanBAALBAKI Mr. AmrAZHARI Dr. AhmadRatebAL-SHALLAH Branch Manager:Mr. HabibSAYEG H Fax: (963-11) 5431360 Phone: (963-11) 5431350 Al Kassaa,Burj ElRous Al Kassaa Branch Manager:Mr. FadiISTWANI Fax: (963-11)3344021 Phone: (963-11)3344001 Opposite DarElSalamSchool Al NejmehSquare, ParliamentSt., Al Nejmeh Branch Manager:Mr. SameerBASSOUS Fax: (963-11)2260555 Phone: (963-11)2260560 Harika, BabBarid,Lawyers’SyndicateBldg. Al Harika Damascus Website: www.bso.com.sy E-mail: [email protected] Fax: (963-11)2260555 Phone: (963-11)2260560 P.O. Box:3103Damascus–Syria Harika, BabBarid,Lawyers’SyndicateBldg. Headquar Branch Network Board ofDirectors &GeneralManagement Mr. Georges SA Mr. Mohamad AdibJOUD Mr. SamerAZHARI Mr. HabibBETINJANEH Mr. ZiadKAMAL ALDEEN Mr. EliasANZ Mr. SamirASMAR Mr. SalemMAHMO UD Ms. RimaJawadZEIN Mr. MazenALI EH Ms. InayaSOUBRA Mr. Georges ELHADDAD Mr. BachirY Mr. Mohamad KHALED Board ofDirectors &GeneralManagement Management BLOM BANK Group Management andDirectory AKZAN ters (Damascus) YEGH ANDA Branch Manager: Mr. EyadELSATI Fax: (963-11)4430145 Phone: (963-11)4430140 Al MalekAdelSt. Al Mazraa Branch Manager:Ms.HadilDIB Fax: (963-11)2143705 Phone: (963-11)2143701 Kafarsusseh -DamasquinoMall Kafarsusseh Branch Manager:Mr. Tarek SHIAB Fax: (963-11)6132409 Phone: (963-11)6132411 Mezzeh Highway, NexttoAlRaziHospital AL Mezzeh Board Secretary -GeneralManager Financial Control &Accounting Credit &RiskManagement Information Technology Human Resources Trade Services Administration Retail Banking Board Advisor Internal Audit Internal International Compliance Chairman Member Member Member Member Member Member Member CEO Al Midan Lattakia Al Midan Corniche – Al Ghawas, Behind Al Hassan Mosque Al Kamilia, March 8th St. Phone: (963-11) 8838971 Phone: (963-41) 452516 Fax: (963-11) 8838975 Fax: (963-41) 452573 Branch Manager: Mr. Bassem MERHEJ Branch Manager: Mr. Zafer WAZZAN

Adraa Hama Industrial city of Adraa Phone: (963-11) 5851350 Hama Fax: (963-11) 5851360 Al Kouatli St. Branch Manager: Mr. Hussein OBEID Phone: (963-33) 2213834 Fax: (963- 33) 2213833 Rawda Branch Manager: Mr. Morhaf AL SHAKAKI Rawda – Noury Bacha Roundabout – Damascus Phone: (963-11) 3314560 Mharda Fax: (963-11) 3314565 New Church St. Branch Manager : Mr. Rami EL BESHARA Phone: (963-33) 4742070 Fax: (963- 33) 4742075 Aleppo Acting Branch Manager: Mr. Firas BASSEEL Al Azizieh Tartous Al Azizieh- Majd El Dine Al Jabiri St. Phone: (963-21) 2258570 Al Thawra St. Fax: (963-21) 2249800 Phone: (963-43) 227474 Branch Manager: Mr. Eddy BECHARA Fax: (963-43) 226869 Branch Manager: Mr. Chamel EL MAKARI Al Medineh Saba’ Bahrat St. Homs Phone: (963-21) 3335277 Fax: (963-21) 3335377 City Center Branch Manager: Mr. Amr KAYAL City Center Bldg. Phone: (963-31) 2453921 Al Muhafaza Fax: (963-31) 2453936 Cairo St. Branch Manager: Mr. Mohannad AL BAROUDI Phone: (963-21) 2665022 Fax: (963-21) 2665035 Hassia Branch Manager: Mr. Walid SAAD Homs, Industrial city Phone: (963-31) 5360730 Al Sulaimanieh Fax: (963-31) 5360735 Al Sulaimanieh St. Acting Branch Manager: Mr. Khaled ZAHED Phone: (963-21) 4611102 Fax: (963-21) 4611107 Mahata Branch Manager: Mrs. Mouna JARJOUR Homs, Al Mahata area Phone: (963-31) 2131200 Town Mall Fax: (963-31) 2131251 A’zaz St., Town Mall Bldg. Branch Manager: Ms. Anna DIBEH Phone: (963-21)2521020 Fax: (963-21) 2521025 Al Sweida’a Branch SUPERVISOR: Mr. Faten MERJANEH Tishreen St. Al Sheikh Najjar Phone: (963 –16) 233328 Industrial City - Shiekh Najjar Fax: (963-16) 233478 Phone: (963-21) 4716600 Branch Manager: Mr. Toufic BAZ RADWAN Fax: (963-21) 4716605 Branch Manager: Mr. Mohamad Ismail KASSABJI Dara’a

Al Fourkan Al Kouatli St. Express St. Phone: (963-15) 233309 Phone: (963–21) 2645820 Fax: (963-15) 233055 Fax: (963-21) 2645825 Branch Manager: Mr. Assem ABAZEED Acting Branch Manager: Mr. Mohamad Zakwan AL-KHATIB

183 184 BLOM BANK s.a.l. Annual Report 2010 Mr. Y Mr. T Mr. Stephan AbiChaker Mr. MohamedRASHW Mr. ZiadF Mr. HassanTRABOULSI Mr. MaherANW Mr. KhaledYOUSR Mrs. HalaELSA Mr. AhmedKHA Mr. BelalF Mr. MohamedSHA Mr. AbdelAzizALY Mr. T Mrs. MayaELKADY Mr. T Mr. HanyDANA Mr. MohamedOZALP Mr. MostafaEZZA Mr. MichelCHIKHANI Dr.. FadiOSSEIRAN Mr. SaadAZHARI Mr. George SA Mr. AmrAZHARI Mr. EliasARACTINGI Mr. SamirKASSIS Mr. ShakerABD ULLAH Dr. FadiOSS EIRAN Mr. Mohamed OZALP Mr. SaadAZHARI Board of Directors & Management Committee Management & Directors of Board E-mail: [email protected] Fax: (963-11)4432195 Phone: (963-11)4432190 Mazraa, AlMalekElAdelSt.,Damascus,Syria Headquar Branch Network Board ofDirectors &GeneralManagement Management Management Group Heads Board ofDirectors Board ofDirectors alaat ELOMDA arek METW alal IBRAHIM ehia RASHED BLOM BANK Group Management andDirectory ARAH AROUK ters (Damascus) YEGH AR TT W ALL T AF AB WKI Y Y AN IT ManagerforCore Applications&Operations Managing Director &ChiefExecutiveOfficer Managing Director &Chief ExecutiveOfficer Chairman’s Advisor&ChiefCredit Officer Compliance &Technical Office Corporate Banking&SME's AMD –InstitutionalBanking Head ofFinancialAnalysis Head ofAdmin.Group Chief FinancialOfficer Financial Institution Head ofBrokerage Human Resources Risk Management General Manager AMD –Branches AMD –Planning Vice Chairman Retail Banking Internal Audit Internal Legal Affairs Chairman Chairman Member Member Member Member Member Member Member Branch Network Mansoura 35, Saad Zaghloul St., Torail , El Mansoura Headquarters (Cairo) Phone: (2050) 2309121/4 64 Mohie Eldin Aboul Ezz St., Dokki Fax: (2050) 2309122/5 Phone: (202) 33322770/1-9 Branch Manager: Mr. Ehab FARAHAT Fax: (202) 37494508 – 37494168 Website: www.blombankegypt.com Mohandessen 54 Lebanon St., El Mohandseen , Cairo Abbasia Phone: (202) 33006599 /02 109 Abbasia St. Fax: (202) 33039806 Phone: (202) 39322342/3-8/50 Branch Manager: Mr. Amr HASSAN Fax: (202) 29222350 Branch Manager: Mr. Tarek TALAAT Nasr City El Akkad Mall, El Nasr Road, Nasr City, Cairo Heliopolis Phone: (202) 26906801/2 31 El Hegaz St., El Merland, Heliopolis Fax: (202) 26906805 Phone: (202) 24543524 – 24519710 Branch Manager: Mr. Hesham FOUAD Fax: (202) 24519730 Acting Branch Manager: Mr. Gamal DEYA New Cairo 101 sector 1 city center (5th compound) Dokki Phone: (202) 29281193 – 29281200 64 Mohie Eldin Aboul Ezz St. Dokki, Cairo Acting Branch Deputy Manager: Mr. Moataz EL TOHAMY Phone: (202) 37494572 - 37494643 Fax: (202) 37494652 – 37494679 New Maadi Branch Manager: Mrs. Wafaa EZZAT 17/5 El Laselky, El Nasr St. , New Maadi, Cairo Phone: (202) 25175546 – 25175547 Haram Fax: (202) 25173014 - 25173024 410 Haram St., Nasr El Din, Giza Branch Manager: Mrs. Hanem FAHMY Phone: (202) 35681332 - 35681223 Fax: (202) 35681448 Opera Branch Manager: Mr. Ahmed SABRY 17, El Gomhoreya St.- Cairo Phone: (202) 23927885 Zamalek Fax: (202) 22392265 15 Abu El Feda St., Zamalek, Cairo Branch Manager: Mr. Aly KHAFAGY Phone: (202) 27355246 – 27368045 Fax: (202) 27351832 – 27358613 Orouba Branch Manager: Mrs. Hanaa FOUAD 1 Cleopatra St. El Orouba , Heliopolis, Cairo Phone: (202) 24144769 – 24144759 Hurghada Fax: (202) 24144793 7 Elmina St., Sakallah square, Hurghada, Red Sea Branch Manager: Mrs. Nayera LABIB Phone: (2065) 3447835 – 3448516 Fax: (2065) 3447834 Shoubra Branch Manager: Mr. Hussein EL SWEIFY 232 Shoubra St., EL Khalafawy Square, Cairo Phone: (202) 24311416 - 22015236 Ismailia Fax: (202) 24311364 – 24312678 15, St. 144, el Ismalia canal, Branch Manager: Mrs. Heba SAAD facing El Rai Bridge - Ismailia 6th October Phone: (2064) 3921758/9 Central Axis , El Madiena Commercial Center, Area Fax: (2064) 3921767 No.4, 1st District, 6th October city Branch Manager: Mr. Ahmed ABDEL AAL Phone: (202) 38321024 - 38320537 Fax: (202) 38329279 Khalifa El Maamoun Branch Manager: Mr. Mamdoud ZAYED 20 Elkhalifa El Maamoun St., Manshiet El Bakry, beside Metro Market - Heliopolis Montaza Phone: (202) 22575625 – 22575641 414 Gamal Abd El Naser, El Mandara, Alexandria Fax: (202) 22575651 Phone: (203) 5488550 – 5488593 Branch Manager: Mr. Magdy ZAKI Fax: (203) 5488713 Branch Manager: Mr. Magdy SAMAHA Maadi Shatby 4 Road 269 from El Nasr St., New Maadi, Cairo 17 Port Said St., El Shatby, Alexandria Phone: (202) 25198840 - 25198244 Phone: (203) 5934055 Fax: (202) 25199293 – 25197232 Fax: (203) 5934058 Branch Manager: Mr. Sherif MOHASSEB Branch Manager: Mr. Ashraf TAHIO

185 186 BLOM BANK s.a.l. Annual Report 2010 Branch Manager:Mr. SherifOUF Fax: (203)4856120-4856121 Phone: (203)4856088–4856052 9 OrabiSquare, ElManchia, Alexandria Manchia Branch Manager:Mr. Ayman TALAAT Fax: (203)4951635 Phone: (203)4951641/2 Facing stadium,Alexandria 1 SelimanYosry St.(Loumomba), Stadium Branch Manager:Mrs.MagdaFAYED Fax: (203)4200094 Phone: (203)4270211-4200098 273 ElHoriaRoad,Sporting,Alexandria Sporting Mr. T Website: www.blomegyptsecurities.com E-mail: [email protected] Fax: (202)37617680 Phone: (202)37621611–37617683 8 GeziatelArabSt.-Mohandeseen Headquar Branch Network Management General & Directors of Board Mr. Mohammed RASHW Mr. HaniMAHMO UD Mr. MahmoudELGAMMAL Mr. AhmedABDELRAHMAN Mr. T Mrs. OlaELMANDOUH Mr. HaniMAHMO UD Mr. BelalF Mr. MichelCHIKHANI Mr. T Mrs. MayaELKADY Board ofDirectors General Management arek METW awheed ZAHER alal IBRAHIM BLOM BANK Group Management andDirectory AROUK ters (Cairo) ALL Y AN Acting BranchManager:Mr. Wassem GALAL Fax: (2066)3322963 Phone: (2066)3322962–3322964 next toCBE–PortSaid and St. Gabarty El to corner St., Gomhoureya Al 37 Port Said Branch Manager:Mr. MohamedELBERGISY Fax: (2057)2363453 Phone: (2057)363470-363413 Shark insurance–Damietta 1 Cornishe El Nile St., Borg El Shorta, Beside Borg El Damietta Branch Manager:Mr. AlaaMETWALLY Fax: (2069)3664325 Phone: (2069)3664326/7 Viva mall, next to Ghabour – Salam St.,SharmSharm ElSheikh El Sheikh Vice ChairmanandManaging Director Financial andAdministrativeDirector Deputy ManagingDirector Chief OperatingOfficer Managing Director Internal Auditor Internal Chairman Member Member Member Member Member Board of Directors & General Management

Board of Directors Mr. Abdallah Abd Al-Latif Ahmad Al-Fozan Chairman of BLOMINVEST Saudi Arabia Mr. Saad Naaman Azhari Member Mr. Waleed Abdulaziz Saleh Al Saghir Member Mr. Fahim Mohamed Mo’dad Member Dr. Fadi Toufic Osseiran Member Mr. Marwan Mohamed Toufic Al-Jaroudi Member Mr. Issam Abdul Kader AL-MUHAIDIB Member General Management Mr. Khaled Farouk Salhab Chief Executive Officer Mr. Nicolas Photiades Head of Corporate Finance Mr. Michel Chikhani Head of Asset Management Mr. Tarek Abdel Reda Chief Operating Officer Mr. Wael El-Turk Chief Financial Officer Mr. Tony Bou Fayssal Head of Compliance & MLRO Mr. Mohamad THAALABI Head of Internal Audit Mr. Monther Al-Deeb Manager Brokerage

Branch Network Headquarters (Riyadh) Al Oula Bldg., 3rd Floor, King Fahd Road, Riyadh - Kingdom of Saudi Arabia P.O. Box: 8151 Riyadh - 11482. Phone: (966-1) 4949555. Fax: (966-1) 4949551 E-mail: [email protected]. Website: www.blominvestksa.com

Board of Directors & General Management

Board of Directors Mr. Saad AZHARI Chairman Mr. Marwan JAROUDI Vice Chairman Mr. Fahim MO’DAD Member Mr. Nicolas SAADE Member Mr. Fares EL KADI Member General Management Mr. Saad AZHARI Chairman Mr. Fares El Kadi Chief Executive Officer Managers Mr. Abbas Bou Diab Head of Compliance & AML Mrs. Rima EL ETER Risk Manager Mr. Gladson DOUGLAS Head of Private Banking Ms. Carine MHANNA Finance Manager Mr. Dany ABOU JAOUDE Relationship Manager – Corporate Banking External Auditor Ernst & Young Branch Network Headquarters (Doha) NBK (Amwal) Tower, 11th floor, Office 1110 Al Wahda Street, West Bay Area P.O. Box: 27700 – Doha, Qatar. Phone: (974) 44992999. Fax: (974) 44992990 187 188 BLOM BANK s.a.l. Annual Report 2010 Ms. FatenDOUGLAS Mr. FatehBE KDACHE Mr. HabibRAHAL Mr. Marwan JAROUDY Mr. RamiHO URIE Mr. Serge OSOUF SCOR SE(Represented by Mr. PatrickLOISY) Mr. V Mr. SamerAZHARI Mr. FatehBEKDACH Mr. HabibRAHAL Phone: (961–9)643222 Jounieh Highway, DamaaBldg.,1stFloor Jounieh Fax: (961–5)461365 Phone: (961–5)461243 Saint ThérèseStr. BLOMBANKBranch Hadath Phone /Fax:(961–1)262222 Main Road,CebacoCenter Dora Website: www.arope.com E-mail :[email protected] Fax: (961-1)344012 Phone: (961-1)759999 P.O.Box: 113-5686Beirut–Lebanon BLOM BANKBldg. Arope Plaza,Verdun, RachidKaramiSt., Headquar Branch Network Management General & Directors of Board General Management Board ofDirectors 2 ictor PEIGNET BLOM BANK Group Management andDirectory Insurance Companies ters (Beirut) Phone /Fax:(961–8)818640 Zahle’s Entrance, ManaraCenter Zahle Fax: (961–7)741649 Phone: (961–7)740900 Main Road,BLOMBANKBranch T Phone /Fax:(961–6)446877 Al Tall St.,Byssar&AlamuddineBldg. T Phone /Fax:(961–7)725303 Riad elSolhSt.,FakhouryBldg. Saida yr ripoli Vice Chairman&General Manager Vice Chairman&GeneralManager Chairman &GeneralManager Chairman &GeneralManager Deputy GeneralManager Member Member Member Member Member Member Board of Directors & General Management

Board of Directors Mr. Amr AZHARI Chairman Mr. Fateh BEKDACHE Vice Chairman Mr. Marwan JAROUDI Member Mr. Hassan BAALBAKI Member Mr. Samer AZHARI Member Mr. Habib BATENJANI Member Mr. Ibrahim EL SHEIKH DIB Member General Management Mr. Amr AZHARI Chairman Mr. Bachar AL HALABI General Manager

Branch Network

Headquarters (Damascus) Damascus Al Rawda, Zuhair Ben Abi Salma St., Malki Bldg. N18 P.O. Box: 33015 Phone: (963-11) 9279 Fax: (963-11) 3348144 E-mail: [email protected]

Aleppo Latakia Aleppo - Azizieh - Majed Al Deen Al Jabri St. Al Kamiliah - 8 March St. Phone: (963-21) 9279 Above Bank of Syria and Overseas Fax: (963-21) 2118800 Phone: (963-41) 9279 Fax: (963-41) 475223 Hama Al Alamayn St., Al Ashek Bldg. Tartous Phone: (963-33) 9279 Thawra Avenue, BSO Bldg. Fax: (963-33) 33523277 Phone: (963-43) 9279 Fax: (963-43) 230870 Homs 6th District, City Mall, 1st floor Phone: (963-31) 9279

189 190 BLOM BANK s.a.l. Annual Report 2010 Mr. T Mrs. MayaALKADY Mr. HabibRAHAL Mr. FatehBEKDACH Mr. HaniELDANA Mr. T Mrs. MayaALKADY Mrs. FatenDOUGLAS Mr. HabibRAHAL Mr. FatehB EKDACH Mr. HaniELDANA Mr. MichelK ELADA Mr. MichelK ELADA Fax: (202)37494643 Phone: (202) 37494572 64 MohieElDinAbouAzz St.,Dokki–Cairo Dokki Fax: (202)22575651 Phone: (202)22575625–22575647 20 KhalifaElMa’mounSt., Heliopolis-Cairo Khalifa ElMa’moun Fax: (202)23925265 Phone: (202)23927885–23923197 17 GomhoriaSt.,Infront ofAbdeenCourt-Cairo Opera Website: www.aropeegypt.com E-mail: [email protected] Short No.:(202)19243 Fax: (202)33361482–33361483 Phone: (202)33323299(100lines) 8 GeziratElArab,Mohandeseen,Egypt Headquar Branch Network Management General & Directors of Board Management General & Directors of Board Board ofDirectors Board ofDirectors General Management General Management 2 arek METW arek METW BLOM BANK Group Management andDirectory Insurance ters (Cairo) ALL ALL Y Y Phone: (202) 29222342 -29222343 109 AbassiaSt. Abassia Fax: (202)24311364-24312678 Phone: (202)22015236 232 ShoubraSt.,ElKhalafawy Shoubra Fax: (202)24144793 Phone: (202)24144796–24144759 1 KelopatraSt.,Orouba, Heliopolis Orouba Fax: (203)4951635-4951639 Phone: (203)4951641-4951642 1 Soliman Yousry St., Facing the Stadium – Alexandria Stadium Fax: (202)25173014-25173024 Phone: (202)25175547–25175546 5, 17Taksim ElLaselki,NewMaadi–Cairo New Maadi Vice ChairmanandManagingDirector Vice ChairmanandManaging Director AssistantManagingDirector &CEO AssistantManagingDirector &CEO Chairman Chairman Member Member Member Member Member Member Member