Annual Report 2006 Arab Banking Corporation - Contents 2 Board of Directors 4 Committees 5 Organization Chart of ABC Algeria 6 Chairman’s statement 8 Chief Executive Officer’s report 9 ABC Algeria Board of Directors 10 External Auditors Report 2006 11 Trading commentary 15 Financial Review 16 Financial Statements as at 31/12/2006 20 Financial Indicators 21 Notes to Financial Statements 23 ABC - Algeria Directory 24 Group Directory and contact

Annual Report 2006 ABC Algeria 1

Our goals : • To leverage ABC’s international network for the benefit of our customers • To provide high quality, personalised banking services to both our public and private sector customers • To develop innovative services for our customers, such as ‘Perlon’, our customised personal loan service ; the Savings Passbook ; and ATM services as well as reviving and upgrading popular service products, such as safe hiring and AFS cards • To advise and assist customers in building their investment portfolios and provide financing, where necessary • To offer comprehensive support for our customers’ foreign tradeoperations • To help nurture Algeria’s burgeoning small and medium-sized enterprises (SMES), helping both employment and wealth creation • To build ABC Bank into the country’s leading financial institution

Annual Report 2006 ABC Algeria 2 Board of Directors

ABC Bank’s Board of Directors comprises seven members, elected by the bank’s shareholders.

In 2006, the composition of the Board changed. Mr. Souheil BADRO took over the role of President of the Board, replacing Mr. Nour François NAHAWI who resigned in November 2006. Mr. BADRO represents the bank’s main shareholder, ABC (BSC).

Mr. Badro has over 30 years experience in the banking sector. He began his professional career at Crédit Libanais. He later became Vice President of Manufacturers Hanover Trust, working in New York, Paris and Bahrain. Mr. Badro then joined Chemical Bank in Bahrain and two years later became vice President and Head of Financial Institutions at Chase Manhattan Bank in Manama. In September 1998, he joined Société Générale, as Chief Executive Officer, where he built up the bank’s Middle East and North African franchise out of its Dubai office. He joined ABC in September 2006. Mr. Badro holds an MBA in finance from the American University in Washington DC, and an MSc in economics from the University Saint-Joseph, Beirut. M.Souheil BADRO President : SVP Head of Arab World Division - Arab Banking Corporation (BSC) - Bahrain

Mr. Saddek Omar El-Kaber has held several executive positions in a number of institutions, including Arab Financial Services, Bahrain, UMMA Bank, Lebanon, and the Union of Western Arab , Tunisia. He joined ABC Group in 2003, as Resident Country Manager & General Manager at ABC Tunis. He also holds an MSc in Public Accounting from the University of Hartford, Connecticut, USA. M.Saddek Omar EL KABER Vice President : Resident Country Manager & General Manager ABC-Tunis

Mr. Zenaty has over 17 years of broad ranging experience as an international banker, having worked in diverse fields such as correspondent banking, corporate banking, loan syndications, swaps, risk management and credit analysis. He holds a BA, majoring in Business Administration and International Finance, awarded by the United States International University. M.Usama ZENATY Member : Representative & Head of Iberian Marketing ABC International Bank plc -Madrid

Annual Report 2006 ABC Algeria 3

Mr. Bengharsa has worked for the ABC Group for more than 20 years. He joined ABC N.Y. in 1985. He was a Credit Analyst and then moved to the Correspondent Banking/Financial Institutions Department covering North Africa. In 1989, he was appointed to head ABC International Bank’s Paris branch Correspondent Banking/F.I.s Department. In February 1998, he moved to Milan as Deputy General Manager and is now also Head of Financial Institutions & Corporates North Africa & Levant. Mr. Bengharsa studied at the University of California, and also graduated in Business Administration Sciences at the University of Pepperdine, in Malibu. M.Sami BENGHARSA Member : Assistant Director General - ABC International Bank plc - Milan

Holder of a Masters degree in Banking and Finance in addition to a diploma awarded by the Arab Academy for Banking and Financial Sciences, Jordan, Mr. Didi joined The Arab Investment Company (TAIC) in 1988, where he holds the position of Director in charge of projects. M.Mohamed El Amine DIDI Member : Director of projects TAIC (The Arab Investment Company) Riyadh, Kingdom of Saudi Arabia.

Mr. Hannachi holds a diploma in International Relations, awarded by the University of Rome La-Sapienza and a Masters in International Business, awarded by the University of Paris I Pantheon- Sorbonne. He joined ABC International Bank plc, Paris, in 2000, and is currently Head of Financial Institutions & Country Coordination Manager. M.Fehmi HANNACHI Member : Manager, Financial Institutions ABC International Bank plc – Paris.

A graduate in Financial Sciences by the University of Algiers, Mr. Kassali holds a diploma awarded by the International Institute for Public Administration (Paris) and a diploma awarded by the Institute of International Financial Services (Montreal). He has been the Chairman of the Algerian Company of Insurance (CAAR) since 2005. M.Brahim KASSALI Member : President General Manager CAAR (Algerian Company of Insurance and Reinsurance), Algeria.

Annual Report 2006 ABC Algeria 4 The Bank’s key committees

Subsidiairy Board Risk Committee ( S B R C)

This committee oversees the Bank’s credit activities and any ad-hoc risk assessments required by the Board of Directors. President : M. Souheil BADRO Chairman of the Board of Directors Members : M. Riyad AL DUGHAITHER Chief Credit and Risk Officer ABC (BSC) M. Sami BENGHARSA Member of the Board of Directors M. Brahim Djamel KASSALI Member of the Board of Directors

The Audit Committee

The Audit Committee is directly responsible to the Board of Directors. Its main role is to oversee and assess all the bank’s day to day activities. President : M. Usama ZENATY Member of the Board of Directors Members : M. Mohamed El Amine DIDI Member of the Board of Directors M. Fehmi HANNACHI Member of the Board of Directors

The Committee of Compensation

The Compensation Committee reports directly to the Board of Directors. It is responsible for setting and analysing employee remuneration and/or compensation, to ensure compliance with market norms and to oversee staff efficiency and productivity, as well as setting the bank’s corporate culture.

President : M. Saddek Omar EL KABER Member of the Board of Directors Members : M. Usama ZENATY Member of the Board of Directors M. Fehmi HANNACHI Member of the Board of Directors M. Brahim Djamel KASSALI Member of the Board of Directors

The Corporate Governance Committee

This committee’s main task is to monitor and ensure that both the Board of Directors and the General Management of the Bank, comply with accepted international standards of corporate governance and good practice across all the bank’s business activities, and to protect and interests of both depositors and shareholders in the Bank. President : M. Sami BENGHERSA Member of the Board of Directors Members : M. Usama ZENATY Member of the Board of Directors M. Fehmi HANNACHI Member of the Board of Directors

The General Management

M. Reidha SLIMANE TALEB Chief Executive Officer M. Ghassan Wadih HAIKAL Deputy Chief Executive Officer

Annual Report 2006 ABC Algeria 5

Organization Chart of Arab Banking Corporation Algeria

Board of Directors

SBRC Committee

Committee Corporate Governance

Compensation Committee

Audit Committee Internal Audit

Chief Executive Central Credit Committee Officer Remedial Committee

Technology Committee

Deputy Chief Executive Officer Assets & Liabilities Committee Organization & Procedures Human Resources Committee

Internal Control Organization & Procedures Committee Legal

Support H.R & Administration

Financial

Operations

Technology

Banking Treasury

Retail Banking

Commercial Banking

Correspondent Banking

Credit Credit Analysis

Credit Administration

Remedial

Annual Report 2006 ABC Algeria 6 Chairman’s Statement

M.Souheil BADRO Chairman of the Board, ABC Bank

I am delighted to announce that the Bank realised an operating profit of 861 Million DZD in 2006, reflecting an increase of4 6% over the Bank’s profit of5 88 Million DZD in 2005.

I am delighted to announce that the Bank realised an the average price of a barrel was about 65.85 US$. operating profit of 12 Million US$(861 Million DZD) in Revenues from oil and hydrocarbons increased from 2006, reflecting an increase of4 6% on the Bank’s profit 45.59 Billion US$ in 2005, to 53.51 Billion US$ in 2006 ; of 588 Million DZD in 2005. an increase of over 17%. However, the net profit for the year was affected This positive trend has allowed the Algerian economy by a legal case in an amount of 1.490 Million DZD. and mainly its banking sector to thrive during this This amount was fully provisioned in the Bank’s 2006 financial year. The banking sector which has already Financial Statements, which resulted in a loss of 630 been opened to private investors, is the most sought Million DZD for the year. after amongst foreign banks wishing to establish branches or acquiring existing banks in Algeria. Currently, Economic Review more than 11 private banks operate in the country (ABC Algeria being the first private bank to open in 1998), The Algerian economy continues to record impressive with a network of 90 branches. In addition, 10 other macro economic performance in 2006 whereby all new regional international banks are reported to have economic indicators are showing positive trends. The presented their applications for a banking license in the GDP grew by 5% ; inflation has been brought down to country. 2.5% ; foreign currency reserves rose from 56.18 Billion Furthermore, this situation has resulted in many new US$ to more than 77.78 Billion US$; external debt stands reforms being enacted to open up and deregulate the at 5 Billion US$ down from 16.4 Billion US$ at the end banking sector. A new payment system which has of 2005. reduced, among other things the time lag in processing The value of the Dinar remained stable as compared of payments and improved control of cash flows has to the Euro and Dollar, with a slight appreciation during also been implemented. the second semester of 2006. Deposits at banks increased more than 16.9% in 2006. Business Review Private Banks increased their market share from 5% to 7.2%. Loans rose by 9.1% in 2006. Private Banks’ The Algerian economy recorded an impressive macro market share increased from 5% to 9%. economic performance throughout 2006 and all the It is worth mentioning that loans granted to the country’s key economic indicators continue to show positive private sector represent 52.8%, whereas the public trends. Gross Domestic Product (GDP) grew by 6% during sector received 47.2%. This is the first time that private the year ; while inflation was brought down to2 .5%. sector borrowing was higher than the public sector. Foreign currency reserves meanwhile rose from 56.18 Main factors contributing to this impressive Billion US$ to more than 77.78 Billion US$ and the performance were oil and hydrocarbons revenue which country’s external debt now stands at US$ 5 Billion, well recorded exceptional prices during the year, noting that down on the 16.4 Billion US$ owed at the end of 2005.

Annual Report 2006 ABC Algeria 7

The value of the , as a result, remained very closely and contained at 2005 levels in spite of stable compared with both the Euro and the US Dollar, even the introduction of a range of new businesses, branches appreciating slightly during the second half of the year. and operations. Deposits at banks increased more than 16.9% during After a strategic redeployment in the 2003–2004 2006. Private banks increased their market share from periods, the Bank has maintained continuous growth in 5% to 7.2% and loans rose by 9.1% through the year. developing its branch network and products and services It is worth mentioning that loans granted to the for its customers. Three new retail branches opened in private sector represent 52.8% whereas the public 2006 and a new car loan product was introduced which sector received 47.2% of total loans granted by the achieved its targeted budget for the whole year in just banking sector (both public and private). This is the first eight months. time that private sector borrowing outstripped public ABC Bank has always been concerned about improving sector borrowing in the country. the quality of service offered to its customers. In this The main reason for this impressive economic regard, the Bank has introduced a state-of-the-art IT performance was a notable uptick in oil and hydrocarbons system and intends to offer additional innovative products revenue, which recorded exceptional prices during the to its growing customer base on an ongoing basis. year (the average price of a barrel was about 65.85 The Bank’s total assets, as of December 31st 2006, US$): Revenues from oil and hydrocarbons increased were slightly down on 2005’s figure, standing at 29.75 fromUS$45.59 Billion in 2005 to reach 53.51 Billion US$ Billion DZD, compared with 31.5 Billion DZD the previous in 2006; an increase of over 17%. year. Loans and advances to customers were 7.34 Billion This positive trend has allowed the Algerian economy DZD, compared with 6.4 Billion DZD in 2005. and, in particular, the banking sector to thrive during The quality of our credit portfolio has substantially the 2006 financial year. Algeria’s banking sector, which improved and our operating income has increased. has now been opened up to private investors, is today As of December 31st 2006, shareholders’ equity eagerly sought after by foreign banks wanting either exceeded 2.7 Billion DZD after having made a 100% to establish new branches in the country, or to directly provision for 1.490 Billion DZD referred to above. Capital acquire an Algerian banks. These days, more than 11 adequacy ratio is well above the minimum required by private banks operate in the country with a network the “Banque Centrale d’Algérie” (8%), at 27.5%. Liquidity of 90 branches. In addition, 10 other new regional remains strong at 51%, compared with 53% in 2005. international banks are reported to have presented We are proud to report that, the combination of a their applications for a banking licence. It should be supportive principal shareholder, the application of a noted that ABC Bank was the first private bank to open well-honed and focused business strategy, the effective for business in the country, back in 1998. mobilisation of the Bank’s various businesses and a Against this favourable operating environment, the dedicated team of employees, means that ABC Bank government has been keen to enact reforms that have is well placed to achieve further success and continued opened up and continue to deregulate the banking growth. ABC Bank is now well positioned to take full sector. Among the latest initiatives is the introduction advantage of the opportunities and challenges that lie of a new payments system that has reduced (among ahead. other things) the time-lag in payments processing. The Board of Directors would like to thank the Additionally, improved controls over cash flow also have Regulatory and Monetary Authorities of Algeria for its been implemented. continued guidance and support. ABC Bank will soon have a total of 10 branches We also wish to thank our customers for their throughout the country. Of these, four will be entirely continued confidence and patronage. We also extend dedicated to providing corporate banking and financing our gratitude to our shareholders for their trust and support for foreign trade. The other branches will specialise confidence, and especially to ABC (BSC) for its strong in a broadening range of retail banking services, including support and continued commitment to ABC Bank. the provision of a range of consumer loans. Finally, on behalf of the Board of Directors, we wish Despite increased competition for business, ABC to thank the Bank’s management and staff for their Bank recorded an excellent operating profit in the dedication and hard work. Their efforts in growing the 2006 financial year. A review of the detailed Financial business and drive for excellence has helped build a Statements shows an increase of more than 30% in dynamic and successful franchise in Algeria for the ABC operating profit, from 1.455 Billion DZD to 1.905 Billion Group. DZD (27 Million US$). This increase was mainly due to the Bank’s burgeoning trade finance business and significant money market revenues. We are pleased to announce that all business lines of the Bank made a significant contribution to the M.Souheil BADRO overall profit of the Bank. Expenses were monitored Chairman of the Board, ABC Bank

Annual Report 2006 ABC Algeria 8 Letter of the Chief Executive Officer

Reidha SLIMANE TALEB Chief Executive Officer

Quality has been important watchword for ABC Bank. Algeria’s banking sector is reviving and becoming more effective and competitive after a period in which the sector languished in the doldrums.

There are strong signs today that Algeria’s banking our strong financial standing and the financial strength sector is reviving and becoming more effective and offered by the wider ABC Group, the bank was able to competitive. For many years, quality and focus have provision the entire amount of 1.490 Million DZD, which been important watchwords for ABC Bank. Indeed, the it had to pay out to a complainant. Inevitably, the court’s Bank has adhered to a high quality, customer centric decision has had an adverse impact on our annual business strategy. It has borne fruit: a fact reflected not results for 2006. However, the Bank remains confident only in the recent profit performance of the Bank, but in the Algerian justice system and trusts that it will be also in the fact that confidence appears to be gradually able to effectively overturn the ruling on appeal. returning to the banking sector. ABC Bank is proud of I would like to express particular gratitude to all our the consistent quality of service offered to its customers staff who has worked hard and diligently to help make and of the dedication and ability of its staff. the Bank so successful. On behalf of the Bank, I would ABC Bank’s strict adherence to good corporate also like to express our gratitude to our longstanding governance and international standards of good practice and loyal clients who have kept faith with the Bank for has ensured high levels of customer satisfaction. ABC all these years. Bank is renowned in the country for the quality of its I address personal thanks to the members of the staff and the bank’s focus on providing quality services Board of Directors and the various committees which for its retail and corporate customers, both in the private stem from it, for their valuable contribution, guidance and public sectors. and support. I would also like to thank the Head Office of Quality is not a destination, or an end in itself. It is ABC (BSC) Bahrain and the various ABC units throughout a journey. We have kept that simple fact in mind as the world, for enabling us to enjoy their hard work and we have undertaken a comprehensive improvement product synergies that combine with our own businesses programme that encompasses both our staff and so well, in the interests of our customers. My gratitude our product offering. Improved staff training and the also extends to our various business partners, which introduction of a raft of innovative products have have helped to contribute to our continued success and overhauled and improved our overall service offering finally, to our External Auditors for their contribution, to our customers. vigilance and rigour. The results are gratifying. Our profits and standing in the banking sector have improved as a result. In 2006, for instance, the Bank recorded an appreciable net operational profit of about 12 Million US$ (861 Million DZD), an increase of some 46% compared with 2005. Not everything has been plain sailing however. ABC Bank was severely tested in 2006 by an adverse Reidha SLIMANE TALEB decision by the Algerian courts. Fortunately, thanks to Chief Executive Officer

Annual Report 2006 ABC Algeria 9 Board of Directors

Annual Report 2006 ABC Algeria 10 External Auditors Report 2006

Dear Shareholders, Opinion about financial statements The conclusions of our work enable us to state, with the We are pleased to present the conclusions of the audit reservations developed in our detailed report but without mission relating to the financial year 2006, which you kindly significant impact on the accounts, that financial statements entrusted to us. issued as of December 31st, 2006, which are presented to The tasks we completed, consisted in checking the you, are fair and regular and give a faithful image of the operations and accounts established by your institution with financial standing of ABC Algeria. a total balance sheet amounting to 29 758 473.300,97 DZD and a loss amounting to 630 003 699,55 DZD. Specific verification It is worth noting that the purpose of our mission is to fine We also carried out the checking of the information given our opinion on the regularity and sincerity of the financial in the annual report of the Board of directors. We do not statements (Balance sheet and Off Balance sheet) as of have any observations to make on their compliance with the December 31st 2006 ; your institution being responsible for accounts which are submitted to you for approval. establishing its accounts. To conduct our mission, we performed the audit in due The Auditors care and applied the generally accepted audit standards use in the profession mainly by using the sampling and other Mohamed Ouandelous methods which appear to us best adapted to the carried out Mohamed Zaatri control, namely the control of documents and the information cross-checking. Algiers, April 26th, 2007

Annual Report 2006 ABC Algeria 11 Trading Commentary ABC ALGERIA ABC Bank is a subsidiary of Arab Banking Corporation (BSC) Bahrain. The bank was the first international private bank to be authorised to operate under Algerian legislation, by an official decision of the ‘’Conseil de la Monnaie et du Crédit de la Banque d’Algérie” (the Council of Currency and Credit of of Algeria) on 24th September 1998. ABC Bank began trading on 2nd December 1998, opening its main branch in Bir Mourad Rais, Algiers. Paid-in capital The Bank’s initial capital of 1.183 Million DZD was increased during an Extraordinary General Meeting held on June 6th 2000 to 2.670 Million DZD in order to improve shareholder equity, to enable the Bank increase its commitments and financial capabilities and to meet customer’s requirements.

Annual Report 2006 ABC Algeria 12 General trading conditions

The Shareholders Pourcentage

Arab Banking Corporation (BSC) Bahrain 70,37% The Arab Investment Company TAIC Riadh 10% The International Finance Corporation IFC Washington 4,43% La Compagnie Algérienne d’Assurance et de Réassurance CAAR 5% Six Algerian privated companies 10,20%

70,37% 10% 4,43% 5% 10,20%

ABC - BSC TAIC IFC CAAR Others Bahrain Riadh Washington Algeria

In 2006, Algeria’s GDP increased by 6%. A rise in caught up in a court hearing, which forced the Bank oil and gas prices has favourably impacted the level to make provisions against a possible future payout of of foreign exchange reserves, which increased from some 20 Million US$ (1.490 Million DZD). 56 Billion US$ in 2005 to 77 Billion US$ by the end ABC Bank underwent a reorganisation through 2006 of 2006. As a result, Algeria was able to amortise its that involved upgrading the skills of its banking staff, external debt commitments, which decreased from 20 introducing improvements into its IT systems and Billion US$ in 2003 to 8 Billion US$ in 2005 and to 5 overhauling its service offerings. The Bank’s export Billion US$ in 2006. finance activities, its small and medium enterprises Economic reforms are beginning to accelerate, and (SME) lending business, its institutional and corporate the government is pushing ahead with the privatisation finance businesses and its retail banking business were of public funds’ banks and state-owned companies, among the areas of the Bank which benefited from the significantly improving government revenues. As a reorganisation. The Commercial Banking Division, for result, the Government has launched a number of instance, which was established in 2005, has achieved development projects, worth more than 20 Billion US$ a total loans portfolio of 249 Million US$. that will be implemented over the next three years. In support of the bank’s retail business, three new The improving domestic economy is encouraging retail outlets were opened in Algiers throughout 2006. foreign investment in the country’s private banks and The Bank now has seven commercial branches in the competition for both retail and institutional business is capital. The Bank also launched its new ‘auto loan’ growing, putting pressure on fees and margins. facilities in the first half of the year, which proved very Nonetheless, 2006 was a good year for ABC Bank. successful. Over 1,000 customers had taken auto loans The Bank’s operating income increased by 30% to 27.7 by the end of the year. Million US$ as commission and interest income both The Bank’s Treasury operations also contributed increased at a substantial rate. The Bank’s running significantly to ABC Bank’s overall performance, either costs meanwhile amounted to 10.3 Million US$ and through its investment in other Banks or through contained at 2005 levels. foreign exchange (FX) activities. The financial year was marked by a substantial The Treasury Department’s business volume grew increase in activity in all sectors of the bank and in by more than 55% through the year, generating 8.7 many cases the bank’s official targets were exceeded. Million US$ of which 5.7 Million US$ represented In general terms, 2006 was a good year generally for foreign exchange trades related to the bank’s export the banking community in Algeria and for ABC Bank in and import financing operations. particular. On-sight deposits were relatively stable and at the After provision for any losses, the Bank would have end of 2006, they reached 111 Million US$, that is to made a very good annual profit, however, it was say 27.7 Million US$ more than by the end of 2005.

Annual Report 2006 ABC Algeria 13

Assets & Liabilities evolution Loans & Commitments evolution Thousand USD Thousand USD

500,000 500,000

450,000 450,000

400,000 400,000

350,000 350,000

300,000 300,000

250,000 250,000

200,000 200,000

150,000 150,000

100,000 100,000

50,000 2005 50,000 0 2006 0

Total loans & Customers Shareholder’s 2005 2006 Balance- Advances Deposits Funds sheet

Term deposits recorded a decrease, from 97 Million US$ supervised the recovery of a large portion of the at the beginning of January 2006 to 27.7 Million US$ Bank’s outstanding loans utilising key legal channels, by the end of the year. These fluctuations are in large overhauling the Bank’s various administration forms part due to the number of large short term deposits on and documents, including guarantees, contracts and either a three or six month term. credit conventions; followed up outstanding potentially The deposits are usually held as anonymous cash litigious files and helped in managing the legalities of vouchers and the maturity of the deposit tends to vary the Bank’s varied business interests. Meanwhile, the between 12 to 18 months. Internal Control Department, in addition to its day to ABC Bank intends to open more branches in 2007 day work, undertook a massive project that involved in strategic sites around the country. By the end of reconciling all the Bank’s accounts, the reorganisation 2008, the bank plans to have 15 full branches in of customer files, and participated in developing new operation, offering a broad range of personal loans internal procedures – governing areas such as money and savings products. The Bank is also installing a new laundering. ATM network in 2007, encompassing all its branches The Commercial Department had a particularly and has installed a new payments system that has demanding year, holding a large number of client significantly improved transaction treatment times, meetings: either face to face or though Bank events and substantially reducing cashier queues and improving receptions. Indeed, more than one hundred separate customer service. meetings with customers were recorded, which Additionally, the Bank undertook its usual internal resulted in substantial numbers of new accounts. audit of its various activities, so as to ensure all its The Bank’s various credit operations were also businesses met with compliance requirements and working hard, as credit commitments were up 8% on ensuring that all its departments were operating at 2005 volumes, increasing from $236 Million to 257 optimum efficiency. The Bank has been involved in a Million US$. comprehensive overhaul of its operations, operating The Information Technology operations worked methods and procedures - even its structure. hard throughout the year on a substantive upgrading Important milestones achieved in the year were the of the bank’s internal and external facing reporting upgrading of its databases, the finalising of the Bank’s systems. In a process that began in early 2005 and organisational infrastructure and the establishment which continued through 2006, the Bank’s technology of new procedures governing operational meetings, specialists upgraded existing information systems minutes and follow-ups, which was supervised by the and installed new RTGS payment systems, purchased Bank’s specialist Studies and Procedures Committee. and installed a Tekline solution, implemented new Also during 2006, the Legal Division regularised anti-money laundering technology and automated the Bank’s legal and administrative structure; and adapted a range of internal reporting procedures.

Annual Report 2006 ABC Algeria 14 General trading conditions

The Bank reorganised its Operations Department, internal reporting procedures. The automation of a which supervised the installation of a new payment number of reportings functions have made it possible system. The volume of documentary credits rose by for the department to provide more comprehensive, 64% in volume compared to 2005. timely and accurate reports, a move that is particularly In line with the reorganisation and upgrading of important in dealing with the Bank of Algeria, internal systems, the Bank embarked on a focused ABC’s Head Office and General Management. staff training programme, aimed at lifting the standard of knowledge and product expertise among its staff. The Human Resources Department was mainly focused on ensuring the implementation of a comprehensive training structure and support system that encompassed the majority of the Bank’s staff. Some 417 short training courses were provided to employees, of which 179 were specifically aimed at financing of terrorist activity and money laundering. These were vital aspects of training, as many Banks have now introduced comprehensive measures to combat money laundering and terrorist financing. The Financial Department meanwhile strove to improve the timeliness and reliability of the Bank’s

Annual Report 2006 ABC Algeria 15 Financial Review

Financial Statements as at 31/12/2006 Major Indicators Financial data

Annual Report 2006 ABC Algeria 16 Business Review Financial statements as at 31/12/2006

2006 2005 Variance Thousand Thousand % Assets DZD DZD

Liquid Funds : Cash, Central Bank, Post Office Center 2 898 050 7 007 784 -59%

Public securities and similar values 0 0 0%

Loans and advances -Financial Institutions 12 263 937 9 812 271 25% -Customers 7 342 759 6 449 112 14%

Bonds and other fixed yield securities 1 000 208 515 208 94%

Participation and portfolio activities 273 395 273 395 0%

Shares in related companies 0 0 0%

Leasing and similar transactions 0 0 0%

Straight leasing 0 0 0%

Non tangible assets 15 218 13 075 16%

Tangible fixed assets 382 770 595 205 -36%

Other shares 0 0 0%

Subscribed shares of unpaid capital 0 0 -

Other assets 156 040 19 358 706%

Reconciliation accounts 5 426 096 6 823 657 -20%

Total Assets 29 758 473 31 509 065 6%

Annual Report 2006 ABC Algeria 17 Business Review Financial statements as at 31/12/2006

2006 2005 Variance Thousand Thousand % Liabilities DZD DZD

Deposits -From Central Bank, Post Office Center 0 0 0% -From Financial Institutions 1 458 447 808 638 80% -From customers 15 774 205 17 154 046 -8%

Security deposits 1 663 208 2 043 478 -19%

Other liabilities 126 681 115 388 10%

Reconciliation accounts 6 144 177 7 739 020 -21%

Provisions For risks and charges 1 523 369 26 855 5573%

Regulatory Provisions 0 0 -

General risks Provisions 363 950 287 197 27%

Investment subsidiaries 0 0 0%

Subordinated liabilities 0 0 0%

Subscribed share capital 2 670 000 2 670 000 0%

Capital preminums 0 0 0%

Reserves 664 439 202 094 229%

Revaluation differential 0 0 0%

Carried forwards (+/-) 0 -125 218 -100%

Profit and loss (+/-) -630 004 587 563 -207%

Total Liabilities 29 758 473 31 509 065 6%

Annual Report 2006 ABC Algeria 18 Business Review Financial statements as at 31/12/2006

2006 2005 Variance Thousand Thousand % Commitments DZD DZD

Total Commitments 13 948 336 12 337 671 13%

Financing commitments in favour of Financial Institutions 893 558 251 128 256%

Financing commitments in favour of customers 8 308 967 8 476 086 -2%

Guarantee commitments by order of Financial Institutions 2 970 147 2 451 329 21%

Guarantee commitments by order of customers 1 771 547 1 156 613 53%

Other commitments 4 117 2 515 100%

Total Contingent Liabilities 8 665 700 10 801 568 -20%

Financing liabilities in favour of Financial Institutions 0 0 0%

Guarantee liabilities in favour of Financial Institutions 6 197 889 8 519 653 -27%

Other liabilities 2 467 811 2 281 915 8%

Total Off - Balance Sheet 22 614 036 23 139 238 -2%

Annual Report 2006 ABC Algeria 19 Business Review Financial statements as at 31/12/2006

2006 2005 Variance Thousand Thousand % DZD DZD

Interest and similar Charges 120 562 58 580 106%

Fees and Commissions 71 288 49 129 45%

Other Banking operating Expenses 7 022 1 568 348%

Total A = Banking Operating Expenses 198 872 109 277 82%

Overhead operating expenses 603 054 512 795 18%

Appropriation to Provisions and Loss on Bad Loans 2 043 470 177 854 1049%

Appropriation to Amortization and Provision on Intangible 81 256 100 670 -19%

Unusual Expenses 54 880 28 088 95%

Taxation on Profit 0 202 195 -

Total B = Other Expenses 2 782 660 1 021 602 172%

A+B = Total Charges 2 981 532 1 130 879 164%

Interests and Similar 1 078 271 808 988 33%

Commissions 793 903 615 500 29%

Other Banking operating Incomes 8 173 7 091 15%

Incomes from leasing and similar operations 1 686 1 560 8%

Participations and other variable yield securities 23 659 21 906 8%

Total C = Banking Operating Incomes 1 905 693 1 455 046 31%

D = Other Incomes 445 835 263 396 69%

C+D = Total Incomes 2 351 528 1 718 442 37%

Net Result Of The Year -630 004 587 563 -207%

Annual Report 2006 ABC Algeria 20 Financial Indicators As at 31/12/2006

2006 2005 Variance Thousand Thousand % DZD DZD

1. Incomes

Interest and similar Incomes (a) 1 078 271 808 988 33% Commissions (b) 827 421 646 057 28% Banking Operating Incomes ( c ) c = a + b 1 905 693 1 455 046 31% Commissions portion in % 57 56 2% Interests Portions in % 43 44 -2% Banking operating Expenses (d) 198 872 109 277 82% Banking profit Margin (e) e = c - d 1 706 821 1 345 769 27% Other incomes (f) 445 835 263 396 69% General Expenses (g) 739 190 641 553 15%

Profit before Tax and Provisions e + f - g 1 413 467 967 613 46%

Risks Provisions 2 043 470 177 854 1049%

Profit before Tax - 630 004 789 759 -180%

Taxation on Profit 0 202 195

Net Profit - 630 004 587 563 -207%

Net Profit onshares paid Rés Net / N.Act lib - 24% 22% Return on Capital Rés Net / Capi libé - 24% 22% Return on Equity RN / FP - 2 0,63% 19% Return on Assets RN / TA - 2,12% 2% Return per Employee RN / EFF - 3 058 2 852

2- Risks Covering

Equity = FP 3 053 608 3 034 073 Net Equity = FPN 2 780 213 2 747 604 Prudential ratio (Balance risk hedging) 14,18% 17% Prudential ratio (Balance risk hedging and off Balance) 8% 11%

3. Other Indicators

Liquid Assets % 51% 53% Resources Stability % 17% 32% Customers Resources Stability 17% 32%

Annual Report 2006 ABC Algeria 21 Notes toProfit Financial and LossStatements Account As at 31/12/2006

1. Items Of The Assets a) Cash, Bank Of Algeria, Postal Cheques : • Shareholding in the capital of the Arab Leasing This item represents the liquid position of the Bank. It Corporation (ALC) established in Algeria, to the recorded a reduction compared to the previous financial amount of 34%, that is 257.720.000 DZD ; year, that is to say 2.898 Million DZD in 2006 compared • Shareholding in the capital of the “Société de to 7.008 Million DZD in 2005. The most important Garantie des Dépôts Bancaires (SGDB)“, for an amount variation is observed in the account BanK of Algeria of 10 Million DZD ; “Dinars”, that is to say an amount of 1.908 Million DZD • Shareholding of the Bank in the capital of the “Centre in 2006 compared to 6.817 Million DZD in 2005. de Précompensation Interbancaire“, with 5.7 Million DZD. b) Debts On Financial Institutions : This item increased from 9.812 Million DZD in 2005 to f) Intangible Fixed Assets : 12.264 DZD in 2006, that is an increase of 25%. Its main The variation of about 16% in 2006 compared to sub-items are : 2005 is explained by the depreciation applied in 2006. • The loans to the Money Market or to Financial Institutions, which increased from 8.239 Million DZD g) Tangible Fixed Assets : in 2005 to 11.584 Million DZD in 2006 ; Hassi-Messaoud’s building transfer operation, property • The balances of the Bank’s collecting accounts among of the Bank, constitutes the outstanding event having Fellow-members, recorded a decrease compared to affected this item which knew a reduction of about 2005, that is to say 1.522 Million DZD in 2005 and 36% compared to 2005, and to the depreciation 655 Million DZD in 2006. applied during 2006. • The Ordinary debts on the banks and the Public The main sub-items are : Treasury which amount to 3 Million DZD. • The commercial and administrative buildings, for a net amount of 186 Million DZD ; c) Debts On Customers : • The Office equipments and other equipments for a For 2006, this item “Credits to Customers” witnessed net amount of 93 Million DZD ; an increase of 14% compared to 2005. Indeed, it • Installations for a net amount of 47 Million DZD ; increased from 6.449 Million DZD in 2005 to 7.343 • Fitting for 29 Million DZD. Million DZD in 2006. This increase may be explained by : h) Other Assets : • The rebate on bills for an amount of 137 Million DZD ; Amounting to 156 Million DZD, this item is primarily • Advances and short-term credits for an amount of made up by : 1.165 Million DZD ; • The instalment on IBS for an amount of 121 Million DZD • The medium and long term investments credits with • The expenses not yet assigned of 17 Million DZD. about 4.495 Million DZD ; • The credits to private individuals, for this first year of 2. Items Of The Liabilities launching, reached 646 Million DZD ; • The bank overdraft amounts to 900 Million DZD. a) Debts Towards Financial Institutions : It should also be noted that doubtful accounts In increase of 80% compared to 2005, this item increased, from 1.666 Million DZD in 2005 to recorded an amount of 1.458 Million DZD, made up, on 1.975 Million DZD in 2006. the one hand, and for a total value of 94%, of Bank Cheques issued by our branches, and on the other d) Bonds And Other Titles With A Fixed Income : hand, of the collecting accounts credit balances of our Following the subscription of Treasury Bonds in 2006, fellow-members on our books with an amount of 84 this item recorded an increase of 94%, from 515 Million Million DZD. DZD in 2005 to 1000 Million in 2006 ; it is made of : • SONELGAZ Bonds for an amount of 500 Million DZD ; b) Credit Accounts Of The Customers : • Treasury Bonds of 500 Million DZD. If the total variation of this item is negative of about 8% in 2006 compared to 2005, the following distinction e) Shareholding And Portfolio Activities : should however be made : In 2006, this item remained unchanged ; it breaks up • At-sight Accounts : an amount of 14.132 Million DZD, that as follows : is an increase of almost 10% in comparison with 2005 ;

Annual Report 2006 ABC Algeria 22 The Balance Sheet As at 31/12/2006

• Term Accounts : in reduction of 62% compared to e) Capital : 2005. This sub-item recorded an amount of This item did not change in 2006, and represents the 1.642 Million DZD. authorized capital of the Bank for an amount of 2.670 Million DZD, which is completely released. c) Debts Represented By Titles : This item, which includes the Cash vouchers f) Reserves : subscribed by the customers, has witnessed a 19% This item records an increase of 229% compared to reduction, decreasing from 2.043 Million DZD in 2005 to 2005, as a consequence of the assignment of the profit 1.663 Million DZD in 2005. result of 2005 for an amount of 462 Million DZD.

d) Funds For General Banking Risks : Following the increase in 2006 of the current debts of the Bank, this item witnessed an increase of about 27%, from 287 Million DZD in 2005 to 364 Million DZD in 2006 ;

The Off Balance Sheet items As at 31/12/2006

1.Commitments given :

With a total amount of 13.948 Million DZD, this item is • Commitment of guarantee received from Financial in progression of 13% compared to 2005, it includes the Institutions: 6.197 Million DZD in decrease of 27% following sub-items : compared to 2005 ; • Other received Commitments: 2.468 Million DZD in • Commitments of financing in favour of Financial 2006 against 2.282 Million DZD in 2005, that is an Institutions: 894 Million DZD in increase of 256% increase of 8%. compared to 2005 ; • Commitments of financing in favour of customers : 8.309 Million DZD in slight decrease i.e. 2% compared to the previous year ; • Commitments of guarantee order of the Financial Institutions : 2.970 Million DZD in 2006, is an increase of 21% compared to the year 2005 ; • Commitments of guarantee order of the customers : 1.772 Million DZD in progression of 53% compared to 2005 ; • Other Commitments given: 4.1 Million DZD in 2006 in progression of 100% compared to 2005 ;

2. Received Commitments :

In reduction of 20% compared to the previous year, this item recorded an amount of 8.666 Million DZD against 10.802 Million DZD in 2005, it includes the following sub-items :

Annual Report 2006 ABC Algeria 23

Annual Report 2006 ABC Algeria 24 Arab Banking Corporation Algeria Directory

Arab Banking Corporation - Algeria Siege Social General Management 54, Avenue des Trois Frères Bouadou, Alger, Algérie Tel. : 021 54 15 34 / Fax : 021 54 16 04

Corporate Banking Branches

Bir Mourad Rais - Alger 54, Avenue des Trois Frères BOUADOU, Alger, Algérie Dely Brahim Tel. : 213 (0) 21 54 15 15 / 54 16 00 / 44 90 00 Chemin Ahmed OUAKED, Alger Fax : 213 (0) 21 54 11 22 B.P: 74 Dely Brahim Tel. : 213 (0) 21 91 04 45 / 91 05 03 / 91 06 66 Dely Brahim - Alger Fax : 213 (0) 21 91 04 40 Chemin Ahmed OUAKED, Alger B.P: 74 Dely Brahim Tel. : 213 (0) 21 91 04 45 / 91 05 03 / 91 06 66 Amirouche Fax : 213 (0) 21 91 04 40 31, Boulevard colonel Amirouche -Alger Tel : 213 (0) 021 63 18 78 021 /6 3 18 41 / 021 63 21 49 Oran Fax : 213 (0) 021 64 25 50 3, Boulevard Périphérique USTO Oran Tel. : 213 (0) 41 42 98 73 / 42 98 58 / 42 98 59 / 42 98 60 / 42 98 71 Kouba Fax : 213 (0) 41 42 98 68 / 42 98 69 28, Boulevard Mohamed Fellah Kouba ALGER Tel. : 213 (0) 021 28 35 22 / 021 28 34 97 / 021 28 34 59 Hassi Messaoud Fax : 213 (0) 021 28 76 76 Route Nationale N°3 Hassi Messaoud W. Ouargla Tel. : 213 (0) 29 73 45 85 / 73 46 06 / 73 43 36 / 73 42 86 / 73 44 53 / 73 46 06 Fax : 213 (0) 29 73 45 05

Retail Banking Branches

Chaabani Val D’Hydra 8D/1 Résidence Chaabani Val d’Hydra ALGER Tel. : 213 (0) 021 48 05 10 / 021 48 05 16 / 021 48 04 96 Fax : 213 (0) 021 48 04 01

Annual Report 2006 ABC Algeria Group Directory and Contact Head Office

ABC Tower, Diplomatic Area PO Box 5698, Manama, Kingdom of Bahrain Tel. : (973) 17 543 000 / Fax : (973) 17 533 163 / 17 533 062 Internet: www.arabbanking.com Email: [email protected]

Branches ABC Securities (Egypt) S.A.E. 1, El Saleh Ayoub St. Zamalek, Cairo, Egypt Tunis (OBU) Tel.: (202) 736 2684 (10 lines) / (202) 736 3629 / Fax: (202) 736 3643 / 14 ABC Building, Rue du Lac d’Annecy, Les Berges du Lac, 1053 Tunis, Tunisia Tel.: (216) (71) 861 861 / Fax: (216) (71) 860 921 Arab Banking Corporation (Jordan) Email: [email protected] PO Box 926691, Amman 11190, Jordan Tel.: (962) (6) 566 4183-5 (General) / Fax: (962) (6) 568 6291 (General) Baghdad Emai: [email protected] Al Saadon St., Al Firdaws Square National Bank of Iraq Building Baghdad, Iraq Tel.: (964) (1) 717 3774 / 717 3776/ 717 3779 ABC Tunisie Fax: (964) (1) 717 3364 ABC Building, Rue du Lac d’Annecy, Les Berges du Lac, 1053 Tunis, Tunisia Tel.: (216) (71) 861 861 / Fax: (216) (71) 960 427 / 960 406 New York Email: [email protected] 600 Third Avenue New York, NY 10016, USA Tel.: (1) (212) 583 4720 / Fax: (1) (212) 583 0921 ABC International Bank plc - Head Office and London Branch Arab Banking Corporation House 1-5 Moorgate, London EC2R 6AB, UK Grand Cayman Tel.: (44) (20) 7776 4000 / Fax: (44) (20) 7606 9987 c/o ABC New York Branch ABC International Bank plc (Paris Branch) Representative Offices 4 rue Auber, 75009 Paris, France Tel.: (33) (1) 49525400 / Fax: (33) (1) 47207469 Abu Dhabi 10th Floor, East Tower of the Trade Centre 2nd Street, Abu Dhabi Mall, ABC International Bank plc (Frankfurt Branch) PO Box 6689, Abu Dhabi, UAE Neue Mainzer Strasse 7560311 Frankfurt am Main, Germany Tel.: (971) (2) 644 7666 / Fax: (971) (2) 644 4429 Tel.: (49) (69) 71403-0 / Fax: (49) (69) 71403-240 [email protected] Email: [email protected]

Beirut ABC International Bank plc (Milan Branch) Berytus Parks Block B, 2nd Floor Minet El Hosn, Solidere PO Box 11-5225 Via Turati 16/18, 20121 Milan, Italy Beirut, Lebanon Tel.: (39) (02) 863331 / Fax: (39) (02) 86450117 Tel.: (961) (1) 970770 / 970432 / Fax: (961) (1) 985809 ABC International Bank plc - Marketing Offices Tehran 4th Floor West No. 34/1 Haghani Expressway Tehran 15188, Iran UK & Ireland Tel.: (98) (21) 8879 1105 / 8879 1106 / Fax: (98) (21) 8888 2198 Station House, Station Court, Rawtenstall Rossendale BB4 6AJ, UK Emai: [email protected] Tel.: (44) (1706) 237900 / Fax: (44) (1706) 237909

Tripoli Iberia – Representative Office That Emad Administrative Centre Tower 5, 16th Floor, PO Box 3578, Tripoli, Libya Paseo de la Castellana 163 2° Dcha, Madrid 28046, Spain Tel.: (218) (21) 335 0226 / 335 0227 / 335 0228 / Fax: (218) (21) 335 0229 Tel.: (34) (91) 5672822 /Fax: (34) (91) 5672829 Email: [email protected] Nordic Region Singapore Stortorget 18-20, SE-111 29 StockholmSweden 9 Raffles Place, #60-03 Republic Plaza Singapore 048619 Tel.: (46) 823 0450 / Fax: (46) 823 0523 Tel.: (65) 653 59339 Fax:(65) 653 26288 Turkey – Representative Office Eski Büyükdere Cad. Ayazaga Yolu Sok Iz Plaza No:9 Kat:19 D:69 34398 Subsidiaries Maslak - Istanbul, Turkey Tel.: (90) (212) 329 8000 / Fax: (90) (212) 290 6891 ABC Islamic Bank (E.C.) ABC Tower, Diplomatic Area, PO Box 2808, Manama, Kingdom of Bahrain ABC (IT) Services Ltd. Tel.: (973) 17 543 342 / Fax: (973) 17 536 379 / 533 972 Arab Banking Corporation House 1-5 Moorgate, London EC2R 6AB, UK Tel.: (44) (20) 7776 4050 / Fax: (44) (20) 7606 2708 ABC Securities (BSC) (c) Email: [email protected] ABC Tower, Diplomatic Area PO Box 5698, Manama, Kingdom of Bahrain Tel.: (973) 17 543 149 / Fax: (973) 17 543 758 Banco ABC Brasil S.A. Av. Pres. Juscelino Kubitschek, 1400 04543-000 Itaim Bibi São Paulo – SP, Arab Banking Corporation - Algeria Brazil PO Box 367, 54 Avenue des Trois Freres Bouaddou, Bir Mourad Rais, Tel.: (55) (11) 317 02000 / Fax: (55) (11) 317 02001 Algiers, Algeria Tel.: (213) (21) 541 515 / 541 534 / Fax: (213) (21) 541 604 / 541 122 Affiliate [email protected] Arab Financial Services Company B.S.C. (c) Arab Banking Corporation - Egypt (S.A.E.) PO Box 2152, Manama, Kingdom of Bahrain (ABC Bank, Egypt) 1, El Saleh Ayoub St., Zamalek, Cairo, Egypt Tel.: (973) (17) 290 333 / Fax: (973) (17) 291 323 / 290 050 Tel.: (202) 736 2684 (10 lines) / (202) 736 3629 / Fax: (202) 736 3643 / 14 Email: [email protected] Réalisation