You Must Read the Following Before Continuing. The

IMPORTANT NOTICE

IMPORTANT: You must read the following before continuing. The following applies to the Prospectus following this page, and you are therefore advised to read this carefully before reading, accessing or making any other use of the Prospectus. In accessing the Prospectus, you agree to be bound by the following terms and conditions, including any modifications to them any time you receive any information from us as a result of such access.

NOTHING IN THIS ELECTRONIC TRANSMISSION CONSTITUTES AN OFFER OF SECURITIES FOR SALE IN ANY JURISDICTION. THE SECURITIES HAVE NOT BEEN, AND WILL NOT BE, REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933 (THE ‘‘SECURITIES ACT’’), OR THE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR OTHER JURISDICTION, AND THE SECURITIES MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS (AS DEFINED IN REGULATION S UNDER THE SECURITIES ACT), EXCEPT PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND APPLICABLE LAWS OF OTHER JURISDICTIONS.

THIS PROSPECTUS MAY ONLY BE VIEWED BY (1) QUALIFIED INSTITUTIONAL BUYERS (“QIBS”) (WITHIN THE MEANING OF RULE 144A UNDER THE SECURITIES ACT) OR (2) NON- U.S. PERSONS (WITHIN THE MEANING OF REGULATION S UNDER THE SECURITIES ACT) OUTSIDE THE UNITED STATES. THE FOLLOWING PROSPECTUS MAY NOT BE FORWARDED OR DISTRIBUTED TO ANY OTHER PERSON AND MAY NOT BE REPRODUCED IN ANY MANNER WHATSOEVER AND ANY FORWARDING, DISTRIBUTION OR REPRODUCTION OF THIS DOCUMENT IN WHOLE OR IN PART IS UNAUTHORISED. FAILURE TO COMPLY WITH THIS DIRECTIVE MAY RESULT IN A VIOLATION OF THE SECURITIES ACT OR THE APPLICABLE LAWS OF OTHER JURISDICTIONS.

BANQUE DU LIBAN, THE CENTRAL BANK OF LEBANON, HAS NOT PASSED UPON AND TAKES NO RESPONSIBILITY FOR THE INFORMATION CONTAINED IN THIS PROSPECTUS OR FOR THE MERITS OF THE GLOBAL DEPOSITARY RECEIPTS.

Confirmation of Your Representation: In order to be eligible to view the Prospectus, you must be either (1) a QIB (within the meaning of Rule 144A under the Securities Act) or (2) a non-U.S. person (within the meaning of Regulation S under the Securities Act) outside the United States. The Prospectus is being sent at your request and by accepting the e-mail and accessing the Prospectus, you shall be deemed to have represented to us that (1) you are (or, if you are acting for the account of another person, such person is) either (a) a QIB or (b) not a U.S. person and that the electronic mail address that you gave us and to which the Prospectus has been delivered is (or, if you are acting for the account of another person, that such person is) not located in the United States; and (2) that you consent (and, if you are acting for the account of another person, such person consents) to delivery of the Prospectus by electronic transmission.

You are reminded that the Prospectus has been delivered to you on the basis that you are a person into whose possession the Prospectus may be lawfully delivered in accordance with the laws of jurisdiction in which you are located and you may not, nor are you authorised to, deliver the Prospectus to any other person.

The Prospectus does not constitute, and may not be used in connection with, an offer or solicitation of the securities described therein in any jurisdiction.

This Prospectus has been sent to you in an electronic form. You are reminded that documents transmitted via this medium may be altered or changed during the process of electronic transmission and consequently none Bank Audi sal – Audi Saradar Group nor any person who controls it nor any director, officer, employee nor agent of any such person nor affiliate of any such person accepts any liability or responsibility whatsoever in respect of any difference between the Prospectus distributed to you in electronic format and the hard copy version available to you on request from Bank Audi sal – Audi Saradar Group.

This document relating to Bank Audi sal – Audi Saradar Group (the “Bank”) comprises a prospectus (the “Prospectus”) for the purposes of Article 5 of EU Directive 2003/71/EC (the “Prospectus Directive”). This document has been approved as a Prospectus by the Financial Services Authority (the “FSA”) under section 87A of the Financial Services and Markets Act 2000 (the “FSMA”) and relates to all the Global Depositary Receipts (the “GDRs”).

Prospective GDR holders should rely only on the information in this Prospectus. No person has been authorised to give any information or make any representations other than those contained in this Prospectus and, if given or made, such information or representations must not be relied on as having been authorised by the Bank. Without prejudice to any obligation of the Bank to publish a supplementary prospectus pursuant to section 87G of the FSMA or paragraph 3.4 of the Prospectus Rules made under section 73A of the FSMA, the publication of this document does not, under any circumstances, create any implication that there has been no change in the affairs of the Bank since, or that the information contained herein is correct at any time subsequent to, the date of this Prospectus.

(incorporated in the Lebanese Republic with limited liability) List of Banks No. 56. Commercial Registry: Beirut 11347

Admission to Listing on the Official List and to Trading on the London Stock Exchange of up to 344,189,410 Global Depositary Receipts The purpose of this Prospectus is to increase the size of the block listing of the GDRs in connection with a split of the Bank’s outstanding share capital, including the GDRs. This Prospectus relates to an admission to listing (“Admission”) on the official list (the “Official List”) of the UK Listing Authority (“UKLA”), a division of the FSA, in its capacity as competent authority under the FSMA, and to trading on the Regulated Market for listed securities of the London Stock Exchange plc (the “LSE”), a regulated market for the purposes of the Markets in Financial Instruments Directive 2004/39/EC (the “Regulated Market”) of up to an additional 327,329,410 GDRs issuable under the programme (the “Programme”), each representing one Common Share of the Bank. Following Admission, the Bank’s listing will comprise, in aggregate, up to 344,189,410 GDRs, including (x) 16,860,000 GDRs already covered by a block listing and admitted to trading on the Official List of the UKLA, including 10,171,761 GDRs issued and outstanding as of May 10, 2010, (y) 91,545,849 GDRs to be issued on or about May 24, 2010 upon the effectiveness of the Stock Split (as defined below) and (z) up to 242,471,800 additional GDRs to be issued from time to time against the deposit of Common Shares of the Bank with the Depositary. It is expected that the additional GDRs will be admitted to trading and that dealings on the LSE of the additional GDRs will commence on May 14, 2010.

The Bank also intends to make an application to the Beirut Stock Exchange (the “BSE”) to list and admit to trading the additional GDRs, following which the Bank’s listing of GDRs on the BSE will comprise, in aggregate, up to 344,189,410 GDRs in parallel with the listing on the Official List and admission to trading on the London Stock Exchange.

The GDRs will be issued pursuant to an amended and restated deposit agreement dated May 10, 2010 (the “Deposit Agreement”) between the Bank and Deutsche Bank Trust Company Americas, as depositary (the “Depositary”). The Deposit Agreement provides for the issuance of GDRs both outside the United States to certain persons in offshore transaction in reliance on Regulation S (“Regulation S”) under the US Securities Act of 1933, as amended (the “Securities Act”) and in the United States to qualified institutional buyers (“QIBs”) as defined in, and in reliance on, Rule 144A under the Securities Act (“Rule 144A”).

The GDRs involve certain risks. See “Risk Factors” for a discussion of certain factors that should be considered in connection with the GDRs.

GDRs may be delivered through the book-entry facilities of Midclear S.A.L. (“Midclear”), Euroclear Bank S.A./N.V., as operator of the Euroclear System, (“Euroclear”), Clearstream Banking, société anonyme (“Clearstream”), and The Depository Trust Company (“DTC”).

The date of this Prospectus is May 10, 2010.

IMPORTANT NOTICE

This Prospectus contains information provided by the Bank in connection with its applications for a block listing of the GDRs and their admission to trading on the LSE. The Bank accepts responsibility for the information contained in this Prospectus. To the best of the knowledge and belief of the Bank, having taken all reasonable care that such is the case, the information contained in this Prospectus is in accordance with the facts and does not omit anything likely to affect the import of such information.

The information under the heading “The Banking Sector and Banking Regulation in Lebanon” and certain similar information relating to Lebanon and the Lebanese banking sector throughout this Prospectus are given as general information and have been reproduced from publicly-available information. See “Information from Public Sources”. The Bank confirms that such information has been accurately reproduced from publicly- available sources and that, as far as it is aware and is able to ascertain from publicly-available information, no facts have been omitted that would render the reproduced information inaccurate or misleading.

No person may reproduce or distribute this Prospectus, in whole or in part, or disclose any of its contents or use any information herein for any purpose other than the Application.

The distribution of this Prospectus and the transfer of GDRs in certain jurisdictions may be restricted by law. The Bank requires persons into delivery and whose possession this Prospectus comes to inform themselves about and to observe any such restrictions. This Prospectus does not constitute an offer of, or an invitation to purchase, GDRs in any jurisdiction. No one has taken any action that would permit a public offering to occur in any jurisdiction.

The GDRs have not been and will not be registered under the Securities Act, or with any securities regulatory authority of any state or other jurisdiction in the United States, and may not be offered, sold, pledged or otherwise transferred within the United States at any time, other than in accordance with Regulation S, Rule 144A or another available exemption under the Securities Act. Neither the U.S. Securities and Exchange Commission, nor any state securities commission nor any other regulatory authority, has approved or disapproved the securities or passed upon or endorsed the merits of the Programme or the accuracy or adequacy of this Prospectus. Any representation to the contrary is a criminal offence in the United States.

BANQUE DU LIBAN, THE CENTRAL BANK OF LEBANON (“BANQUE DU LIBAN” OR THE “CENTRAL BANK”), HAS NOT PASSED UPON AND TAKES NO RESPONSIBILITY FOR THE INFORMATION CONTAINED IN THIS PROSPECTUS OR FOR THE MERITS OF THE GDRs.

Holding GDRs involves a number of risks. Participation in the Programme is suitable only for, and should be made only by, sophisticated investors who can bear the risks of limited liquidity and who understand and can bear the financial and other risks of participating in the Programme for an indefinite period of time. The contents of this document are not to be construed as legal, business or tax advice. Each prospective GDR holder should consult his, her or its own solicitor, independent financial advisor or tax advisor for legal, financial or tax advice. Holders of GDRs must make their own on-going examination of the Bank and the terms of the GDRs, including the risks involved. See “Risk Factors”.

FORWARD-LOOKING STATEMENTS

Certain statements in this Prospectus constitute “forward-looking statements” within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. These statements appear in a number of places in this Prospectus and include statements regarding the Bank’s intent, belief or current expectations or those of the Bank’s Management (as defined below) with respect to, among other things:

• statements regarding the Bank’s results of operations, financial condition, future economic performance and any plans regarding its business;

• statements regarding the Bank’s competitive position and the effect of such competition on its results of operations;

• statements regarding trends affecting the Bank’s financial condition or results of operations;

• statements of the Bank’s plans, including those related to new products or services and anticipated customer demand for these products or services and potential acquisitions;

• statements regarding the Bank’s growth and investment programs, the relevant anticipated capital expenditure and the success of its investments programs;

• statements regarding the Bank’s intentions to contain costs, increase operating efficiency and promote best practices;

• statements of assumptions;

• statements regarding the impact of the on-going global financial and market crisis;

• statements regarding the potential impact of regulatory actions on the Bank’s business, competitive position, financial condition and results of operations; and

• statements regarding the possible effects of adverse determinations in litigation, investigations, contested regulatory proceedings and other disputes.

These forward-looking statements can be identified by the use of forward-looking terminology such as “believes”, “expects”, “may”, “is expected to”, “will”, “will continue”, “should”, “approximately”, “would be”, “seeks”, or “anticipates” or similar expressions or comparable terminology, or the negatives thereof. Such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, and actual results, performance or achievements of the Bank may differ materially from those expressed or implied in the forward-looking statements as a result of various factors. The information contained in this Prospectus, including, without limitation, the information under “Risk Factors”, “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, “Description of the Bank” and “The Banking Sector and Banking Regulation in Lebanon”, identifies important factors that could cause such differences. In addition, many other factors could affect the Bank’s actual financial results or results of operations and could cause actual results to differ materially from those in the forward-looking statements. The Bank does not undertake to update any forward-looking statements made herein.

PRESENTATION OF INFORMATION

Information in this Prospectus relates to Bank Audi sal – Audi Saradar Group, a bank incorporated in Lebanon with limited liability, and its consolidated subsidiaries as listed in Note 2 to the Bank’s 2009 audited consolidated financial statements. References to the “Group” shall mean, unless otherwise specified, the Bank and its consolidated subsidiaries as of December 31, 2009. References to “Management” are to the Bank’s senior management team, and references to the “Senior Managers” are to senior members of Management. References to the “Government” are to the government of the Lebanese Republic (the “Republic” or “Lebanon”). References to the “Common Shares” are to the common shares, the terms of which are described under “Description of the Share Capital of the Bank—Description of Common Shares”. References to the “Series D Preferred Shares” are to the non-cumulative redeemable preferred shares issued by the Bank on November 17, 2005, the terms of which are described under “Description of the Share Capital of the Bank—Description of the Series D Preferred Shares”; and references to the “Series E Preferred Shares” are to the non-cumulative redeemable preferred shares, which are expected to be issued by the Bank on or around May 31, 2010, the proposed terms of which are described under “Description of the Share Capital of the Bank—Description of the Series E Preferred Shares”. “Preferred Shares” means, as of any time, the Series D Preferred Shares and any additional preferred shares issued from time to time by the Bank, including the Series E Preferred Shares (if and when issued), in each case to the extent outstanding at the relevant time. References to “SMEs” are to small- and medium-sized enterprises.

Financial information included in this Prospectus has, unless otherwise indicated, been derived from the Bank’s audited consolidated financial statements as of and for the years ended December 31, 2009, 2008 and 2007. The Bank’s consolidated financial statements have been prepared in accordance with standards issued or adopted by the International Accounting Standards Board and interpretations issued by the International Financial Reporting Interpretations Committee and the general accounting plan for banks in Lebanon and the regulations of the Central Bank and the Banking Control Commission of Lebanon (the “Banking Control Commission”), and include the results of the Bank and its consolidated subsidiaries as listed in Note 2 to the Bank’s 2009 audited consolidated financial statements. Ernst & Young p.c.c. and Semaan, Gholam & Co. have audited the consolidated financial statements of the Bank as of and for the years ended December 31, 2009, 2008 and 2007. As used in this Prospectus, references to “IFRS” are to International Financial Reporting Standards.

The Bank maintains its accounts in Lebanese Pounds. Accordingly, U.S. Dollar amounts stated in this Prospectus have been translated from Lebanese Pounds at the rate of exchange prevailing at the relevant balance sheet date, in the case of balance sheet data, and at the average rate of exchange for the relevant period, in the case of income statement data, and are provided for convenience only. In each case, the relevant rate for both balance sheet data and income statement data was LL 1,507.5 per U.S. $1.00, as, throughout the periods covered by this Prospectus, the Central Bank has maintained its policy of pegging the value of the Lebanese Pound to the U.S. Dollar at a fixed rate of LL 1,507.5 per U.S. $1.00.

In this Prospectus:

• references to “U.S. $” or “U.S. Dollars” are to the United States Dollar, the lawful currency of the United States;

• references to “EUR” or “Euros” are to the currency established for participating member states of the European Union as of the beginning of stage three of the European Monetary Union on January 1, 1999; and

• references to “LL” or “Lebanese Pounds” are to the Lebanese Pound, the lawful currency of Lebanon.

Certain figures included in this Prospectus have been subject to rounding adjustments and substantially all figures herein are approximations of the actual figures. Accordingly, figures shown as totals in certain tables may not represent an exact arithmetic aggregation of the figures that precede them. Certain currency amounts stated in this Prospectus, other than those in U.S. $ or LL, have been calculated based on a relevant recent exchange rate published in the Financial Times, London.

iii

INFORMATION FROM PUBLIC SOURCES

Certain information included in the sections “Risk Factors—Considerations Relating to Lebanon”, “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, “Description of the Bank” and “The Banking Sector and Banking Regulation in Lebanon” has been extracted from information and data publicly released by official sources and other sources that are believed to be reliable, including Central Bank and Bankdata figures. Throughout this Prospectus, the Bank has also set forth certain statistics, including market shares, from official sources and other sources it believes to be reliable, including its own sources and estimates. Such information, data and statistics may be approximations or estimates or use rounded numbers. The Bank has not independently verified such information, data or statistics, does not guarantee their accuracy and completeness and accepts no responsibility in respect of such information, data and statistics, other than that this information has been accurately reproduced and that, accordingly, as far as the Bank is aware and is able to ascertain from information published, no facts have been omitted that would render the reproduced information inaccurate or misleading.

Certain statistical and other information relating to the Lebanese banking sector generally and to the Bank’s competitive position in its market and the relative positions of its primary competitors in the sector in particular are generally based on information made available from Bankdata Financial Services WLL (“Bankdata”), Central Bank statistics and the Bank’s internal sources. Bankdata numbers may differ in certain respects from the Bank’s own financial statements. Dr. Freddie C. Baz, an executive director of the Bank, is also a Managing Director of Bankdata and the editor of Bilanbanques, which is published by Bankdata.

TABLE OF CONTENTS

IMPORTANT NOTICE ...... i FORWARD-LOOKING STATEMENTS...... ii PRESENTATION OF INFORMATION...... iii INFORMATION FROM PUBLIC SOURCES...... iv SUMMARY ...... 1 RISK FACTORS ...... 6 DIVIDEND POLICY ...... 14 STATEMENT OF CAPITAL RESERVES AND LONG-TERM LIABILITIES OF BANK AUDI SAL – AUDI SARADAR GROUP ...... 16 SELECTED FINANCIAL INFORMATION AND OPERATING DATA...... 17 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS...... 21 OVERVIEW OF BANK AUDI SAL – AUDI SARADAR GROUP...... 31 MANAGEMENT AND EMPLOYEES ...... 55 THE BANKING SECTOR AND BANKING REGULATION IN LEBANON ...... 59 DESCRIPTION OF THE SHARE CAPITAL OF THE BANK...... 67 TERMS AND CONDITIONS OF THE GLOBAL DEPOSITARY RECEIPTS ...... 77 SUMMARY OF PROVISIONS RELATING TO THE GDRs WHILE IN MASTER FORM...... 94 TAXATION ...... 96 TRANSFER RESTRICTIONS ON THE GDRS...... 99 CLEARING AND SETTLEMENT...... 100 ADDITIONAL INFORMATION ...... 103 INDEX TO THE FINANCIAL STATEMENTS ...... F-1

SUMMARY

This summary should be read as an introduction only to this Prospectus and any decision to deposit Common Shares for issuance of GDRs should be based on consideration of this document as a whole by prospective GDR holders. Prospective GDR holders should note that if a claim relating to the information contained in this document is brought by such holders before a court, such holders bringing the claim might, under the national legislation of the EEA States, have to bear the costs of translating the document before legal proceedings are initiated. Civil liability attaches to those persons who are responsible for this summary, including any translation of this summary, but only if the summary is misleading, inaccurate or inconsistent when read together with other parts of this Prospectus.

Overview

The Bank is a universal bank operating principally in Lebanon and the Middle East North Africa (“MENA”) region and offering a full range of commercial and corporate banking, retail banking, private banking and investment banking products and services, in addition to insurance activities through its subsidiary LIA Insurance sal. As of and for the year ended December 31, 2009, according to Bankdata, based on unaudited financial statements of banks operating in Lebanon provided to Bankdata by such banks, the Bank ranked first among Lebanese banks in terms of total assets (LL 39,927 billion), shareholders’ equity (LL 3,306 billion), customers’ deposits (LL 34,651 billion), loans and advances (LL 10,171 billion) and profit (LL 435.6 billion). As of December 31, 2009, the Bank had the largest branch network in Lebanon, with 80 branches as covering the Greater Beirut area and other strategic regions in Lebanon, as well as a network of 70 branches in the MENA region (outside Lebanon), including ten branches in Jordan (with an additional branch expected to commence operations in Jordan in 2010) and a representative office in the United Arab Emirates (Abu Dhabi). The Bank has three principal subsidiaries in Lebanon, two principal subsidiaries in Europe and five principal subsidiaries in the MENA region outside Lebanon. In addition, on January 15, 2010, the Bank entered into an agreement to acquire Dresdner Bank Monaco SAM; the transaction remains subject to final regulatory approval, which is expected to be obtained on or around June 30, 2010.

Founded in 1830, the Bank was incorporated in its present form in 1962 as a private joint stock company with limited liability (société anonyme libanaise) with a duration of 99 years. The Bank is registered on the Beirut Commercial Registry under number 11347 and on the Lebanese List of Banks as number 56. The initial shareholders of the Bank were members of the Audi family, together with Kuwaiti investors. Since 1983, the shareholder base has expanded. In 2006, the Bank completed a U.S. $600 million capital increase in which EFG-Hermes Holding Company SAE and certain of its subsidiaries (collectively, “EFG-Hermes”) acquired a significant stake in the Bank. On January 18, 2010, a group of the Bank’s existing shareholders, as well as a number of other high net worth individuals and entities investing directly or through investment vehicles, purchased the entire stake previously owned by EFG-Hermes. The Bank’s GDRs are listed on both the Beirut Stock Exchange and the London Stock Exchange and its Common Shares are listed on the Beirut Stock Exchange.

As of the date of this Prospectus, the long-term foreign currency deposit obligations of the Bank were rated B1 by Moody’s Investor Services Limited (“Moody’s”), while the Bank’s senior debt was rated B by Standard & Poor’s (“S&P”) and Fitch IBCA Ltd (“Fitch Ratings”). Moody’s and S&P have each assigned the Bank a positive outlook, while Fitch Ratings has assigned a stable outlook. On a national level, the Bank was assigned Aa1.lb, the highest national rating awarded by Moody’s in Lebanon under Moody’s National Scale Ratings introduced in October 2007 to reflect relative ranking of creditworthiness within a country (but not globally). A credit rating is not a recommendation by the rating organisation or any other person to buy, sell or hold securities and may be subject to revisions or withdrawal at any time by the assigning rating organisation and each should be evaluated independently from the other.

As of December 31, 2009, the Bank and its consolidated subsidiaries had 4,388 employees, including 2,129 persons employed in Lebanon.

On March 2, 2010, the shareholders of the Bank authorised (i) a split of the Bank’s outstanding share capital, including the Common Shares and the Series D Preferred Shares, in each case, at a ratio of 10 like shares for each Common Share and Series D Preferred Share outstanding (the “Stock Split”), and (ii) the issuance of the Series E Preferred Shares, in each case subject to Central Bank’s approval. The Stock Split is expected to

become effective as of May 24, 2010, for holders of GDRs of record as of May 21, 2010, as determined by the Chairman of the Board of Directors of the Bank (the “Board of Directors” or the “Board”) pursuant to a delegation duly granted to him by the Board. The Series E Preferred Shares are expected to be issued on or about May 31, 2010.

The Bank’s head office and registered address is Bank Audi Plaza, Omar Daouk Street, Bab Idriss, Beirut 2021 8102, P.O. Box: 11-2560, Beirut, Lebanon.

Competitive Strengths

As a result of the Bank’s restructuring and expansion program, the Bank has significantly reinforced its presence in Lebanon and throughout the MENA region, as well as diversified the range of its products and services to cover all the activities traditionally carried out by a universal bank. The Bank’s Objectives and Strategy

The Bank’s core strategy is to strengthen its domestic franchise and enhance its cross-border activity in high value-added markets. The Bank’s medium-term target is to reach a balanced breakdown of assets and earnings between its Lebanese operations and its foreign operations, with a view to improving the quality of the Bank’s consolidated earnings, strengthening its ability to mitigate risks and permitting improvements in the Bank’s international and regional ratings. Overall, the Bank will focus on continuing to develop one of the widest full- service networks in the region by both business lines and coverage, with a particular focus in countries still lacking full-service banking institutions.

Risk Factors

The Bank’s business, operating results and financial condition could be materially and adversely affected by a number of risks, including (without limitation) considerations relating to Lebanon (such as risks relating to political and military conditions in Lebanon and the region and local, regional and international social and civil unrest, prices and inflation, the status of the Government’s privatisation program, refinancing risk and Lebanon’s budget deficit and macroeconomic instability, debt ratings, foreign exchange risk and monetary policy, as well as general risks relating to emerging markets); considerations relating to the Bank and the Lebanese banking industry (such as risks relating to the recent market turmoil and on-going financial crisis, the Bank’s financial condition, exposure to Lebanese and other sovereign risks, plans for regional and international expansion, acquisitions and divestitures and operations in Sudan and Syria, currency and devaluation considerations, liquidity and maturity mismatching, interest rate sensitivity, international capital adequacy reform, competition, litigation against certain Lebanese banks (not including the Bank) and effecting service of process and enforcing liabilities and foreign judgements); and considerations relating to the GDRs (such as risks relating to price volatility and illiquidity, dilution, voting rights of GDR holders and the ranking of the Common Shares).

Summary of the Programme

GDRs...... Subject to the provisions of the Deposit Agreement, shareholders may deposit their Common Shares for issuance of GDRs, with each GDR representing one Common Shares.

Upon issue, the GDRs will initially be evidenced by a European Master GDR or an American Master GDR, as the case may be, (each, a “Master GDR”), issued in registered form pursuant to the Deposit Agreement. Accordingly, GDRs will be held initially in book-entry form.

Dividends...... The GDRs are entitled to any dividends the Bank may declare or pay on the underlying Common Shares. While dividends on the Common Shares are paid in Lebanese Pounds, persons in whose name GDRs are registered (“Owners”) will receive payments of such dividends in U.S. Dollars (converted by the Depositary as soon as practicable at the then applicable LL/U.S. $ exchange rate), subject to the fees and expenses of the Depositary and any applicable withholding tax.

Distributions subject to Withholding Tax...... As of the date of this Prospectus, dividends paid to the Depositary as holder of the Common Shares underlying the GDRs are subject to withholding tax in Lebanon at the rate of 5.0%, as long as shares of the Bank representing at least one-third of the Bank’s outstanding share capital or GDRs representing at least 20% of the Bank’s outstanding share capital are listed for trading on the BSE.

Voting Rights ...... The Deposit Agreement provides that Owners have the right to instruct the Depositary with regard to the exercise of the voting rights or the solicitation of consents attaching to the Common Shares underlying the GDRs (the “Deposited Shares”) on all matters submitted to any general meeting (including the Ordinary General Meeting and any Extraordinary General Meeting) of shareholders of the Bank (a “General Meeting”).

To the extent permitted by Lebanese law, the Depositary may directly attend the relevant meeting and split its votes as the recordholder of the Deposited Shares so that a portion of the Deposited Shares will be voted for and a portion of the Deposited Shares will be voted against any resolution specified in the agenda for the relevant meeting in accordance with the voting instructions received by the Depositary and the Depository will abstain from voting any Deposited Shares in respect of which it has not received any voting instructions.

If, however, the Depositary elects not to directly attend a meeting or is not permitted by Lebanese law itself to split its votes attaching to the Deposited Shares, unless restricted under Lebanese law, the Depositary will issue three proxies to existing shareholders of the Bank designated by the Chairman of the Bank providing that the Deposited Shares shall be voted for or against, or not voted (abstained), in accordance with instructions received from the holders of GDRs.

Moreover, if the Depositary is not permitted by Lebanese law to split its votes or grant multiple proxies as contemplated above, is advised by the Bank that such voting of the Deposited Shares may be prejudicial to the operations or governance of the Bank or otherwise determines, in its discretion, that it is impracticable so to vote the Deposited Shares, the Depositary will, at the direction of the Board, either (i) vote the Deposited Shares as directed by the Board or (ii) give a proxy to a person designated by the Board to vote the Deposited Shares in his or her discretion.

In addition, the Depositary will not vote any Deposited Shares that it knows are held by or on behalf of any holder (or group of holders) of GDRs whose aggregate percentage holding in the shares and GDRs (combined) of the Bank exceeds 5 per cent. (or such higher percentage as may have been previously authorised by the Central Council of Banque du Liban).

By continuing to hold GDRs, all Owners shall be deemed to have agreed to the above provisions as they may be amended from time to time in order to conform to applicable Lebanese law and regulations.

Information Furnishing Requirements ...... Pursuant to applicable Lebanese law and regulations, a Lebanese bank must take necessary steps to provide the Banking Control Commission at least twice a year with a list identifying any person who owns, directly or indirectly through beneficial ownership (i) GDRs representing 5 per cent. or more of the bank’s outstanding GDRs, (ii) any number of GDRs, if such person also owns 5 per cent. or more of the bank’s outstanding shares and (iii) GDRs, whose GDRs and shares (combined) represent 5 per cent. or more of the Bank’s outstanding share capital. In order to permit the Bank to fulfil this obligation, Owners and persons owning any beneficial interest in the GDRs (“Beneficial Owners”) will be required to provide certain identifying information about themselves and their holdings of shares and GDRs of the Bank to the Bank, which will, in turn, advise the Depositary of all relevant details. In the event that the Bank determines that a holder of GDRs has failed to provide the required information, the Bank shall advise the Depositary that it shall not vote any Deposited Shares evidenced by GDRs of such holder.

Withdrawal Restrictions ...... Common Shares may be withdrawn from the Programme at any time upon production by the owner of a withdrawal certificate in the form and as otherwise provided under the Depositary agreement.

Any such withdrawal, however, will constitute a transfer of shares under Lebanese law and therefore be subject to the prior approval of (i) the Central Bank in the event that (x) such transfer of shares would result in the transferee owning, directly or indirectly, 5.0% or more of the outstanding share capital of the Bank (excluding preferred shares) or voting rights relating thereto, whichever is higher, (y) the transferee owns at the time of the transfer 5.0% or more of the outstanding share capital of the Bank (excluding preferred shares) or voting rights relating thereto, whichever is higher, or (z) either the transferee or the transferor is a current or elected member of the Board, irrespective of the number of transferred shares; and (ii) any other regulatory authority having jurisdiction over the Bank or any of its subsidiaries whose approval shall then be required for the transfer of shares.

Admission and Listing...... This Prospectus relates to the Admission on the Official List of the UKLA, and to trading on the Regulated Market of the LSE, of up to an additional 327,329,410 GDRs. Following Admission, the Bank’s listing will comprise, in aggregate, up to 344,189,410 GDRs, including (x) 16,860,000 GDRs already covered by a block listing and admitted to trading on the Official List of the UKLA, including 10,171,761 GDRs issued and outstanding as of May 10, 2010, (y) 91,545,849 GDRs to be issued on or about May 24, 2010 upon the effectiveness of the Stock Split and (z) up to 242,471,800 additional GDRs to be issued from time to time against the deposit of Common Shares of the Bank with the Depositary. It is expected that the additional GDRs will be admitted to trading and that dealings on the LSE of the additional GDRs will commence on May 14, 2010. The Bank intends to make an application to list the GDRs on the BSE.

Settlement...... Euroclear, Clearstream, DTC and Midclear.

Trading Symbols...... London Stock Exchange (GDRs):...... BQAD Beirut Stock Exchange (Common Shares):...... AUDI Security Numbers for Regulation S ISIN: ...... US0667053021 GDRs...... Common Code: ...... 008064636 CUSIP:...... 0066705302 Security Numbers for 144A GDRs... ISIN: ...... US0066752031 CUSIP:...... 006675203

RISK FACTORS

All of the information set forth in this Prospectus and, in particular, the following principal risks relating to the GDRs should be carefully considered. These principal risk factors, individually or collectively, could have a material adverse effect on the Bank’s business, liquidity, results of operations, financial conditions and prospects and on the market price of the GDRs. There may be additional risks of which the Bank is not currently aware, and any of these risks could also have a negative effect on the Bank’s business, liquidity, results of operations, financial conditions and prospects and on the market price of the GDRs. This Prospectus contains forward-looking statements. Actual results and the timing of certain events could differ materially from those projected in the forward-looking statements due to a number of factors, including those set forth below and elsewhere in this Prospectus. See “Forward-Looking Statements”.

Considerations relating to the Lebanese Republic

The Bank operates in the Lebanese Republic and, accordingly, its financial condition, results of operations and business prospects are closely related to the overall political, social and economic situation in the Lebanese Republic, which, in turn, is tied to the geo-political situation in the region.

Political and Military Considerations

Lebanon’s financial environment is related to the overall political, social and economic situation in Lebanon, which, in turn, is tied to the absence of military conflict in Lebanon and among its neighbors and continued internal stability.

A combination of internal and external factors led to a heavily militarised conflict, which lasted from April 1975 until October 1990. Successive rounds of fighting took place, aggravated by two Israeli military invasions in 1978 and 1982. The conflict resulted in significant human losses, a substantial decline in GDP and reduction of economic activity, a significant reduction of Lebanon’s Government (the “Government”) authority, substantial physical and infrastructure damage, and a large public sector deficit and capital outflows. The post-conflict era has been characterised by large reconstruction and institution-building efforts, which resulted in large public sector deficits and setbacks in the implementation of political and economic reforms due, among other matters, to differences in views between political leaders and disagreements within the executive branch of the Government.

The Lebanese Republic witnessed a series of significant events during the last four years, including the assassination of the former Prime Minister, Rafik Hariri, a campaign of assassinations and attempted assassinations of other political leaders and public figures, the adoption of a series of United Nations Security Council Resolutions, including Resolution 1757, which established the Special Tribunal for Lebanon to prosecute persons responsible for the bombing that killed former Prime Minister Hariri, the withdrawal of Syrian army troops from Lebanon, the military conflict in July and August 2006 (the “July 2006 War”) and its effects on the Lebanese Republic’s population, economy and infrastructure, the resignation of six ministers representing the opposition from the Government, followed by the opposition’s sit-in in downtown Beirut, as well as the failure of Parliament to convene during an 18-month period, the Lebanese Security Forces taking over control of Nahr El-Bared camp after clashes with a terrorist organisation from May to September 2007, the armed clashes that took place in Beirut, Northern Lebanon, the Bekaa Valley and the Chouf Mountains in May 2008, and the six-month vacancy in the office of the President of the Lebanese Republic, which ended with the election of General Michel Sleiman as President on May 25, 2008.

The assassination of former Prime Minister Rafik Hariri and other political figures and journalists, and continuous tensions between supporters of the Future Movement, the Progressive Socialist Party, the Lebanese Forces and members of the former Qornet Shahwan Gathering on the one hand, and supporters of Hizbollah, the Amal Movement, the Free Patriotic Movement and their allies, on the other hand, may have an impact on the political stability and economic outlook of the Lebanese Republic.

Certain material decisions of the Council of Ministers require the approval of two-thirds of the ministers pursuant to Article 65 of the Lebanese Constitution. These decisions include the amendment of the Constitution, the declaration of a state of emergency and its termination, the declaration of war, the general mobilisation of forces, the execution of international agreements and treaties, the adoption of the annual budget, the approval of comprehensive and long-term development projects, the appointment of certain high-level Government

employees, the dissolution of Parliament, the amendment of electoral laws, nationality and personal status laws and the dismissal of ministers. Given the composition of the Government, there can be no assurance that decisions or resolutions requiring this reinforced majority will be adopted.

Regional and International Considerations

The Lebanese Republic is located in a region which has been subject to ongoing political and security concerns, especially in recent years. Political instability in the Middle East has increased since the terrorist attacks of September 11, 2001 and the U.S. intervention in Iraq. Current disputes between the U.S. and Iran and the U.S. and Syria have also an impact on the economic and political situation in the Lebanese Republic.

The impact, if any, on Lebanon and, accordingly, the Bank of the military actions and political uncertainties affecting Iraq, Iran, Syria and the surrounding region cannot be determined at this time.

Prices and Inflation

Depreciation of the Lebanese Pound has created pressure on the domestic price system that generated high rates of inflation reaching 120 per cent. in 1992 prior to the first Hariri Government. Since 2001, estimated inflation has fluctuated, increasing to 1.8 per cent. in 2002 and decreasing to 1.3 per cent. in 2003, before increasing back to 3 per cent. in 2004 and decreasing to (0.7) per cent. in 2005. This marked the first prolonged return to relative price stability. However, inflation in 2006 stood at 5.6 per cent., mainly due to shortages of supply and consequent price increases as a result of the July 2006 War. In 2007, CAS estimated the 2007 inflation figure at 9.3 per cent. on an end-of-period basis. The IMF, based on data from Banque du Liban, estimated inflation at 6.0 per cent. on an end-of-period basis and 4.1 per cent. on a period average basis. In 2007, the increase in inflation was due to, inter alia, the appreciation of the Euro against the Lebanese Pound (the Euro is the currency of the principal trading partners of the Lebanese Republic) and the worldwide increase in oil and other commodity prices. CAS estimated inflation for 2008 at 5.5 per cent. on an end-of-period basis, while IMF’s preliminary inflation estimates are at 6.4 per cent. on an end-of-period basis and at 10.8 per cent. on a period average basis. The increase in inflation in 2008 was due to the same factors as in 2007, but was tempered by the global financial crisis. CAS estimated the 2009 inflation figure at 3.4 per cent., due mainly to the worldwide decrease in energy prices and the domestic decrease in communication costs.

There is no assurance that inflation rates will not rise further in the future. Significant inflation could have a material adverse effect on the Lebanese economy and, in turn, materially adversely affect the Bank’s business, liquidity, results of operations, financial condition and prospects.

Failure to Implement Privatisation Program

As part of the Paris III Conference, the prior Government agreed to an economic reform program of which privatisation is an essential component. Disagreements among political parties and the July 2006 War have contributed to delay the implementation of the program. There is no assurance that some of these obstacles will not persist.

In May 2000, Parliament adopted a privatisation law, which sets the framework for the privatisation of state- owned enterprises. The privatisation law established a Higher Council for Privatisation and provides that the proceeds from privatisation will be applied towards debt repayment. Plans for privatisation included, inter alia, the electricity, water and telecommunications sectors. However, due to political interference and disagreements within the executive branch of the Government, the Republic’s privatisation program has not been successfully implemented.

Budget Deficit and Macroeconomic Instability

The Bank’s performance and the quality and growth of its assets are necessarily dependent on the health of the overall Lebanese economy.

Any continuation or worsening of economic conditions in Lebanon, including any significant increases in the budget deficit, could materially adversely affect the Bank’s borrowers and contractual counterparties. This, in turn, could materially and adversely affect the Bank’s business, liquidity, results of operations, financial condition and prospects.

In recent years, the Government has incurred significant internal and external debt, principally for the purpose of financing the budget deficits. Expenditures during this period, mainly consisting of payments for wages and

salaries, reconstruction and expansion projects, other current expenditures and debt service, have exceeded revenues. Total expenditures increased by approximately 15 per cent. in 2009, as compared to 2008. Net outstanding public debt as a percentage of estimated GDP has increased from approximately 46.0 per cent. in 1992 to approximately 167 per cent. as of December 31, 2006 before decreasing to 156 per cent. as of December 31, 2007, 139 per cent. as of December 31, 2008 and 128 per cent. as of December 31, 2009. As such result, the Lebanese Republic is suffering from a large budget deficit. The debt burden of the Lebanese Government is significant, accounting for the largest part of expenditures in recent years. In 2009, debt service represented approximately 35.5 per cent. of total expenditures and 47.9 per cent. of total revenues.

The Government currently owns Electricité du Liban (“EdL”), which supplies virtually all electricity in the Republic. EdL’s significant continuing losses, which are due in large part to increases in oil prices and collection difficulties, are funded through the Treasury. This has adversely affected the Republic’s expenditures and increased the Lebanese Republic’s budget deficit. Treasury transfers to EdL amounted to approximately U.S. $1,498 million, U.S. $1,612 million and U.S. $981 million in 2009, 2008 and 2007, respectively.

The Government’s ability to maintain macroeconomic stability through traditional economic policy tools may be limited. Lebanon’s economy is substantially dollarised. This dollarisation may limit Banque du Liban’s ability to achieve monetary policy targets, including foreign exchange stability. See “—Foreign Exchange Risk; Monetary Policy”.

Sovereign Debt Ratings

As of the date of this Prospectus, the foreign currency obligations of Lebanon were rated as follows: Rating Agency Tenor Rating Outlook

Standard & Poor’s Rating Services Long-term B Positive Short-term (less than one year) B

Moody’s Investor Services Limited Long-term B1 Stable

Fitch IBCA Ltd Long-term B Stable Short-term (less than one year) B

Rating and Investment Information, Long-term B+ Stable Inc. Short-term b All of the ratings referred to above are non-investment grade and a credit rating is not a recommendation by the rating organisation or any other person to buy, sell or hold securities and may be subject to revisions or withdrawal at any time by the assigning rating organisation and each should be evaluated independently from the other. Any adverse change in an applicable credit rating could adversely affect the trading price for the GDRs.

Foreign Exchange Risk; Monetary Policy

The national currency, the Lebanese Pound, is convertible and its exchange rate is generally determined on the basis of demand and supply conditions in the exchange market. Banque du Liban intervenes when necessary in order to maintain orderly conditions in the foreign exchange market.

Banque du Liban’s exchange rate policy since October 1992 has been to anchor the Lebanese Pound nominal exchange rate to the U.S. Dollar. Banque du Liban has been successful during the past several years in maintaining a stable rate of exchange, through the use of its foreign exchange reserves and its interest rate policy.

The period after the assassination of Mr. Hariri has been marked by significant conversions from Lebanese Pound deposits to foreign currency deposits followed by a decline in foreign currency reserves due to the intervention of Banque du Liban in the foreign exchange markets. Foreign currency reserves (excluding gold reserves) at Banque du Liban were approximately U.S. $8,611 million as of July 31, 2005. Similarly, the period of the July 2006 War saw significant conversions from the Lebanese Pound to foreign currency deposits resulting in a decline in Banque du Liban’s foreign currency reserves from U.S. $11,020 million at the end of June 2006 to U.S. $10,563 million at the end of July 2006 as it intervened in the foreign exchange markets. The decline in Banque du Liban’s foreign currency reserves reversed as hostilities ended, reaching U.S. $10,868 million at end August 2006. Foreign currency reserves were aided by deposits from Saudi Arabia and Kuwait. As of December 31, 2009, gross foreign currency reserves (excluding gold reserves) at Banque du Liban were approximately U.S. $25,660 million.

Although the authorities expect to continue to gear their monetary policy towards maintaining stability in the exchange rate, there can be no assurance that Banque du Liban will continue to be willing or able to maintain a stable currency, through intervention in the exchange markets or otherwise.

The possible depreciation of the Lebanese Pound against the U.S. Dollar, or the decline of the level of foreign reserves as a result of Banque du Liban’s intervention in the currency markets, could materially impair the Lebanese economy and, in turn, materially adversely affect the Bank’s business, liquidity, results of operations, financial condition and prospects.

Lebanon’s economy is highly dollarised. Banque du Liban data indicate that the proportion of foreign currency deposits as a share of total deposits stood at approximately 64 per cent., 70 per cent. and 77 per cent. as of December 31, 2009, 2008 and 2007, respectively. Because a substantial portion of the Bank’s loans are denominated in U.S. Dollars, a devaluation of the Lebanese Pound would increase the debt service burden of borrowers whose income is in Lebanese Pounds and, therefore, would likely increase the level of the Bank’s non-performing loans.

Considerations relating to the Bank and the Lebanese Banking Industry

Global Financial Crisis

The recent global financial crisis has contributed to the failures of a number of financial institutions in the United States and Europe, as well as in certain emerging markets, and unprecedented action by governmental authorities, regulators and central banks around the world. Its effects continue to be felt. In particular, the global disruption in the world financial markets has impacted certain economies and financial markets in the MENA region, where a substantial portion of the assets and investments of the Bank are concentrated. Although the Lebanese economy and financial sector appear to have been less affected by the global credit crisis, there is evidence of significant continued weakness and a number of other concerns impacting consumer and investor confidence in other economies where the Bank has growing operations.

Moreover, since the widespread dislocation in international financial markets began in mid-2007, it has become increasingly difficult to accurately predict likely short to medium-term trends in many of the economies in which the Bank operates. It is also difficult to predict how long the volatility in the financial sector and capital markets will persist or whether related concerns about further failures of financial and other institutions will exacerbate the prevailing difficulties in the global economy and, accordingly, it is not possible to foresee the specific impacts these conditions may have on the Bank. Although the Bank intends to continue its focus on controlled growth and asset quality, any contraction of its key markets will impact the Bank. In particular, if current global market conditions and circumstances deteriorate further, or continue for protracted periods of time, this could lead to a decline in available funding and credit quality and increases in defaults and non- performing debt, which may impact the rating, investments and finances of the Bank.

As a result of all of the foregoing, there is significant price volatility in the secondary market for instruments similar to the GDRs and the systemic risks within the financial system and the related general deterioration in global economic conditions could result in a decline in the market price of the GDRs.

Bank’s Financial Condition

An investment in the GDRs constitutes an investment in the equity of the Bank. Holders will not have creditor rights against the Bank in respect of the GDRs.

Exposure to Lebanese and Other Sovereign Risks

In common with other Lebanese banks, a significant portion of the Bank’s liquidity in both Lebanese Pounds and foreign currency historically has been invested in Lebanese Government obligations or maintained as reserves with Banque du Liban. Although, as a result of Management’s decision in August 2009 to realign the Bank’s assets to reflect its developing regional profile, the Bank’s exposure to Lebanese sovereign risk has decreased as of December 31, 2009, as compared to December 31, 2008 and 2007, respectively, the Bank’s gross exposure to foreign currency denominated Lebanese sovereign bonds as a percentage of foreign currency deposits remained at 8.2 per cent. as of December 31, 2009 (as compared to 10.8 per cent. as of December 31, 2008 and 16.2 per cent. as of December 31, 2007) and the Bank’s net exposure to Lebanese sovereign bonds amounted to U.S. $466 million representing 4.8 per cent. of the Banks’ total securities portfolio and 2.9 per cent. of adjusted foreign currency denominated customers’ deposits (as compared to 5.34 per cent. as of December 31, 2008 and 14.45 per cent. as of December 31, 2007). Such investments are generally considered to be relatively

illiquid to the extent that, in the event that the Bank were to attempt to sell a significant portion of its holdings, it would likely experience a discount on the price, which could be substantial. See “—Liquidity and Maturity Mismatching”. As a result, any default by the Lebanese Government or Banque du Liban on any of its obligations, or any significant reduction in value or liquidity of Government securities the Bank holds, or in the regulatory or accounting treatment thereof, would have a material adverse effect to the Bank’s business, liquidity, results of operations, financial condition and prospects, as well as on other Lebanese banks.

In addition, in line with Management’s policy decision to diversify the Bank’s assets mix, the Bank also holds investments in foreign currencies comprised of placements in highly-rated sovereign bonds , in particular from Abu-Dhabi and Qatar. As of December 31, 2009, the Bank’s exposure to bonds from Abu Dhabi and Qatar reached U.S. $928 million, representing, in the aggregate, 9 per cent. of the total securities portfolio and 5.4 per cent. of foreign currency denominated customers’ deposits. Accordingly, the Bank also bears significant exposure to the sovereign risks of Abu-Dhabi and Qatar.

Regional and International Expansion

Many of the countries in which the Bank has existing operations, or is considering developing operations, have in the past experienced periods of political instability and, in some cases, civil unrest and clashes or are located in regions characterised by instability. Such political and social unrest that may characterise the regions where the Bank has or may commence operations has, at times, adversely affected the banking sectors in these jurisdictions and there can be no assurance that social and civil disturbances will not occur in the future. In fact, in many cases, these conditions are not likely to be resolved quickly and, accordingly, could lead to further political and economic instability as well as loss of confidence in business investment in the regions where the Bank currently operates or may operate in the future. As a result, particularly as the Bank expands its operations geographically, regional political and social instability both generally and in local banking sectors in particular could materially adversely affect the Bank’s business, liquidity, results of operations, financial condition and prospects. In addition, there can be no assurance that the Bank will be able to achieve and effectively manage the growth of its operations in foreign countries. A failure to expand and manage growth as planned or to achieve effective marketing strategies may have a material adverse effect on the Bank’s business, liquidity, results of operations, financial condition and prospects.

Risks relating to Acquisitions and Divestitures

The Bank has historically pursued and intends to continue to implement a strategic plan that envisages selective acquisitions to further its growth. Risks relating to recent and future acquisitions include:

• difficulties in the integration of operations, technologies, products and personnel of acquired entities;

• diversion of management’s attention away from other business concerns;

• expenses relating to undisclosed or unknown potential liabilities of acquired entities; and

• limitations on foreign ownership of banking or corporate institutions.

Moreover, the Bank’s ability to implement its acquisition strategy in certain countries may be hindered due to a scarcity of acquisition targets and/or competition from other potential acquirers in the acquisition process.

In addition, future acquisitions could result in the incurrence of debt and the assumption of liabilities, including contingent liabilities. Any of the foregoing could have a material adverse effect on the Bank’s business, liquidity, results of operations, financial condition and prospects.

U.S. Sanctions on Sudan and Syria

The Bank has banking operations in Sudan and in Syria, which respectively accounted for 4.84 per cent. and 4.64 per cent. of its net earnings for 2009. As the Bank expands its operations in Sudan and Syria, it expects its operations in these countries to constitute an increasing percentage of its consolidated revenues. See “Overview of the Bank—Subsidiaries”.

The U.S. Treasury Department Office of Foreign Assets Control (“OFAC”) administers the Sudanese Sanctions Regulations, which have been in place since 1997, imposing a trade embargo against Sudan and a total asset freeze against the Sudanese Government. In particular, the Sudanese Sanctions Regulations prohibit the import into the United States of goods or services of Sudanese origin as well as the export of goods, technology or

services from the United States to Sudan. Certain individuals or organisations, including those that are owned or controlled by, or act on behalf of, the Government of Sudan anywhere in the world, are designated by the U.S. Treasury Department as “Specially Designated Nationals” of Sudan. U.S. persons are prohibited from transacting business with Specially Designated Nationals. Even though a peace agreement was signed between the Sudanese People’s Liberation Army/Movement and the Government of Sudan in January 2005, the Sudanese Sanctions Regulations remain in place because of continuing U.S. concerns about reported Sudanese support for international terrorism, and the more recent human rights abuses and claimed genocide in western Sudan (Darfur).

Former U.S. President George W. Bush signed the Sudan Accountability and Divestment Act in early 2008, allowing state and local governments to cut investment ties with companies doing business in Sudan. The measure aims to pressure Sudan to end the violence in the Darfur region. The bill, which passed both houses of Congress unanimously, makes it easier for mutual funds and private pension fund managers to sell their investments and allows states to prohibit debt financing for companies that do business in Sudan. It also requires companies seeking contracts with the U.S. federal government to certify that they are not doing business in Sudan. The bill targets specifically companies involved in oil, power production, mining and military equipment, which are considered sectors that provide vital revenue for Sudan’s Government. President Bush’s signature was accompanied by a proviso known as a signing statement, in which he said he was reserving the authority to overrule state and local divestment decisions if they conflicted with foreign policy.

OFAC also administers the Transactions Regulations, which include sanctions imposed on Syria prohibiting U.S. persons from engaging in certain transactions, including investments, with the Syrian Government and certain private parties, as well as other parties, designated by OFAC as Specially Designated Nationals of Syria.

In addition, Syria’s relations with the United States have deteriorated in recent years and, in 2003, the United States enacted the Syria Accountability and Lebanese Sovereignty Restoration Act of 2003, which authorises the potential imposition of a number of sanctions on Syria. Some of these sanctions have already been imposed, including a general prohibition of U.S. exports to Syria, except for food and medicine; a prohibition of flights from Syria to the United States; sanctions against Syria’s largest bank, the Commercial Bank of Syria; and the blacklisting of certain Syrian individuals. Moreover, if relations between Syria and Lebanon deteriorate significantly, it is possible that the Bank’s operations in Syria may be affected.

There can be no assurance regarding OFAC’s enforcement policy with regard to Sudan or Syria or other countries where the Bank may develop operations, and it is possible that OFAC may take a different view regarding the measures the Bank has taken or the status of the Bank’s Sudanese or Syrian operations. The imposition of any OFAC sanctions or designations of individuals or entities within the Group as Specially Designated Nationals may result in U.S. persons or affiliates associated with the Bank being subject to restrictions and penalties. These sanctions could also have a material adverse effect on the Bank’s business, liquidity, results of operations, financial condition and prospects.

Currency Considerations and Devaluation Risks The Central Bank has been successful during the past several years in maintaining a stable rate of exchange. However, there can be no assurance that the Central Bank will continue to be willing or able to maintain a stable currency, through intervention in the exchange markets or otherwise. In the event the Lebanese Pound devalues against the U.S. Dollar, the financial condition or results of operations of Lebanese companies, including the Bank and its customers located or doing business in the Republic, would be affected. Furthermore, because a substantial portion of the loans of banks operating in Lebanon, including the Bank, are denominated in U.S. Dollars, a devaluation of the Lebanese Pound would increase the debt service burden of borrowers whose income is in Lebanese Pounds and, therefore, would likely increase the level of the Bank’s non-performing loans.

Liquidity and Maturity Mismatching

Although the Bank’s balance sheet appears to indicate a high level of liquidity, the Bank, along with other Lebanese financial institutions, has utilised a portion of these liquidity levels to invest in longer-term higher yielding assets, namely Lebanese treasury bills and other financial papers traded in regulated markets. While much of the Bank’s investment portfolio is funded by comparatively shorter-term customers’ deposits, the investments are comprised principally of Lebanese governmental securities, including, in particular, Lebanese treasury bills, which are often, in practice, characterised by limited liquidity. See “—Exposure to Lebanese and Other Sovereign Risk”. As a result, although historically the Bank has been able to roll over the significant

majority of its deposits, and these securities typically may be liquidated in times of crisis according to discount arrangements or repurchase agreements with Banque du Liban, there can be no assurance that the Bank will be able to liquidate all or a portion of its portfolio of Lebanese treasury bills if it became necessary or advisable to do so. As a result, investors should not assume that the Bank’s liquidity, as measured by its balance sheet, will continue to be available, but instead should be aware that the Bank, in common with other banks in Lebanon, may be required to rely on other more expensive funding sources in order to finance growth in its loan portfolio. Any failure to source funding through less expensive deposits, if at all, would have a material adverse effect on the Bank’s business, liquidity, results of operations, financial condition and prospects.

Interest Rate Sensitivity

As a result of the maturity mismatch between deposits and assets, the Bank, in common with most Lebanese banks, is exposed to the risk of any sharp increase in short term interest rates. The Bank realises income from the margin between interest earned on its assets and interest paid on its liabilities. Because many of the Bank’s assets and liabilities reprice at different times, the Bank is vulnerable to fluctuations in market interest rates. Typically, the Bank’s liabilities reprice substantially more frequently than its assets and, as a result, if interest rates rise, the Bank’s interest expense will increase more rapidly than its interest income, which could negatively affect interest margins and result in liquidity problems. The Bank is limited in its ability to reprice assets more frequently and to mitigate this risk since many of the securities held in the Bank’s investment portfolio either have fixed interest rates or longer-term variable interest rates. As a result, volatility in interest rates could have a material adverse effect on the Bank’s business, liquidity, results of operations, financial condition and prospects.

Ordinary Course Banking Risks

In the ordinary course of its business activities, the Bank is exposed, in common with other commercial banks, to a variety of financial, market and operational risks, including credit risk, market risk, currency risk, interest rate risk, prepayment risk, equity price risk, liquidity risk and operational risk. A detailed description of the Bank’s risk management policies and procedures in respect of these risks is included at “Overview of Bank Audi SAL –Audi Saradar Group—Risk Management”. Whilst Management believes that these risk management policies and procedures are appropriate and sufficient to control and mitigate such risks, any failure to adequately control these risks could be greater than anticipated and could result in a material adverse effect on the Bank’s business, liquidity, results of operations, financial condition and prospects.

International Capital Adequacy Reform

In 2001, the Basel Committee issued a proposal for a new capital adequacy framework to replace the previous Basel Accord issued in 1988. In this proposal, the Basel Committee proposes replacing the existing approach with a system that would use both external and internal credit assessments for determining risk weightings to be applied to exposures to sovereign states. It is intended that such an approach will also apply, either directly or indirectly and to varying degrees, to the risk weighting of exposures to banks, securities firms and corporations. Pursuant to Banque du Liban Decision No. 9302 dated April 1, 2006, as amended, adopted with respect to the application of the Basel II International Convention regarding Capital Adequacy (“Decision No. 9302”), all banks operating in Lebanon must apply the Basel II International Convention for the calculation of capital adequacy on a consolidated and non-consolidated basis, where applicable, starting from January 1, 2008 in accordance with the standards set forth in Decision No. 9302 and any subsequent decisions adopted in that regard. In addition, as of December 31, 2006, Lebanese banks must include in their calculation of their capital adequacy ratio, reserves for unspecified banking risk. Pursuant to Article 7 of Decision No. 9302, banks operating in Lebanon were required to appoint an expert in risk management to be in charge of applying the Basel II International Convention and notify the Banking Control Commission of the name of such person and contact details prior to April 30, 2006; the Bank has fulfilled this requirement.

This new framework could cause financial institutions that lend to Lebanese banks, including the Bank, to be subject to higher capital requirements as a result of the credit risk rating assigned to Lebanon and, accordingly, to Lebanese entities constrained by the sovereign ceiling. The framework could also require Lebanese banks to be subject to higher capital requirements based on loans made to, and investments in securities issued by, Lebanese entities (including the Government) of up to 150 per cent. of the respective asset class. As a result, along with other Lebanese banks, the Bank may become subject to higher borrowing costs, which may adversely affect the Bank’s results of operations and financial condition, and the Bank may be required to raise new equity, which may or may not be available to it, in order to meet new, more stringent capital requirements.

Competition

The market for financial and banking services in the Lebanese Republic is competitive. As of the date of this Prospectus, there were 65 active commercial banks (with 902 operational branches in Lebanon), two specialised medium-and long-term credit banks, 48 financial institutions, 11 brokerage institutions, two leasing companies in the financial sector and ten representative offices of foreign banks in the Lebanese Republic, which has a population of approximately 4.0 million people. These banks include large international financial institutions with access to larger and cheaper sources of funding. Competition to attract depositors and quality borrowers and to provide fee-based services to customers has been particularly intense since the end of the civil war in 1990. Due to the intensity of such competition and the increasing number of institutions offering financial and banking services in the Lebanese Republic, in common with other Lebanese banks, the Bank’s lending margins, especially in respect of retail loans, have decreased. Depending on the continuing extent and intensity of the competition, in common with other Lebanese banks, the Bank’s expenses may increase and its revenues may decrease. Considerations relating to the GDRs

Price Volatility and Illiquidity; Dilution

The GDRs may experience significant volatility in their market price and may decline in value. Prior to their listing and admission to trading, there has been no prior public market for the GDRs, although the Common Shares have been listed and traded on the BSE. In addition, an active market may not develop for the GDRs on the LSE or the BSE. In particular, the Lebanese securities markets have from time to time experienced significant price fluctuations, which are heightened by lower overall trading volumes than the volumes that typically characterise larger, more established markets.

Furthermore, sales, or the possibility or perceived possibility of sales, of substantial numbers of Common Shares or GDRs in the public market subsequent to their listing and admission to trading could have an adverse effect on the market prices of the GDRs. Any subsequent equity offerings by the Bank may dilute the percentage ownership of the Bank’s shareholders.

Voting Rights of GDR Owners

Although the terms of the GDRs provide that Owners have the right to direct the Depositary to vote the Deposited Shares represented by their GDRs, such Owners must follow certain procedures in order to exercise these voting rights. While the Central Bank has indicated in its Decision 7431 (as defined below), and, accordingly, the terms of the GDRs provide, that the Depositary must vote in accordance with instructions received from Owners, including by voting both for and against a resolution in accordance with instructions received from Owners, and by abstaining from voting any Deposited Shares for which no voting instructions have been received, there is no legal precedent in Lebanon upholding the exercise by a single shareholder of voting rights on a split basis and some scholars have opined that split voting is not permissible. Accordingly, there can be no assurance that a Lebanese court would enforce the requirement that the Depositary vote in accordance with instructions received from Owners if this means that the Depositary must vote on a split basis. In the event that the voting rights provisions were deemed to violate applicable Lebanese law, some or all of the Owners (and, accordingly, the Beneficial Owners) could be effectively disenfranchised as the Depositary might be required to vote the Deposited Shares as directed by the Board of Directors.

Ranking of the Common Shares

The Preferred Shares rank senior to the Common Shares underlying the GDRs in respect of the right to receive distributions and the Preferred Shares have the right to receive the liquidation preference out of the assets of the Bank in the event of any liquidation, dissolution or winding up of the Bank. Moreover, although the Preferred Shares generally rank pari passu with the Common Shares, holders of Preferred Shares have a right to receive a priority distribution in excess of the Common Share dividend. See “Description of the Share Capital of the Bank”. There are no restrictions on the Bank’s ability to issue additional series of preferred shares.

DIVIDEND POLICY

Dividend Policy

The GDRs will be entitled to any dividends the Bank may declare or pay. While dividends on the Common Shares are paid in Lebanese Pounds, Owners will receive any payments of dividends in U.S. Dollars (converted by the Depositary as soon as practicable at the then applicable LL/U.S. $ exchange rate), subject to the fees and expenses of the Depositary and any applicable withholding tax. See “Terms and Conditions of the Global Depositary Receipts”.

Payments of dividends in respect of the Bank’s Common Shares and of distributions in respect of the Preferred Shares are subject to recommendation by the Bank’s Board of Directors and approval by a General Meeting of the Bank’s shareholders. So long, however, as any Preferred Shares (or newly-issued preferred shares, if any) shall be outstanding, the Bank is restricted from declaring or paying any dividend upon its Common Shares during any fiscal year unless and until full distributions at the time due and payable in respect of all such Preferred Shares (and other preferred shares, if any) shall have been paid or declared and set apart during that fiscal year. The determination to pay any dividends in respect of the Common Shares, and the amounts thereof, will depend upon, among other things, the Bank’s earnings, its financial condition and cash requirements, priority rights for distribution, government regulations and policies and such other factors as may be deemed relevant by the Board of Directors and shareholders from time to time.

Market Price and Dividends Paid

The following tables set forth the high and low sales prices of the Common Shares and the Series D Preferred Shares as reported on the BSE, and the cash dividends paid by the Bank on the Common Shares and the Series D Preferred Shares with respect to the periods indicated.

Common Shares:

Common Share Period High Low Dividend(1) (U.S. $) (LL) (U.S. $)

2001 ...... 20.75 12.00 1,000.00 0.65 2002 ...... 15.00 12.00 1,000.00 0.65 2003 ...... 18.50 15.00 1,000.00 0.65 2004 ...... 23.60 18.50 1,500.00 1.00 2005 ...... 25.50 24.00 1,650.00 1.10 2006 ...... 66.15 59.00 2,261.25 1.50 2007 ...... 70.50 55.00 2,638.125 1.75 2008 ...... 98.00 52.00 3,015.00 2.00 2009 ...... 85.00 38.50 3,400.00 2.26 January 2010...... 91.00 80.00 - - February 2010...... 88.00 86.00 - - March 2010...... 88.50 85.00 - - April 2010...... 90.00 86.00 5,276.25 3.50 May 1 to May 7, 2010...... 84.80 79.50 - - ______Note: (1) Before taxes at a rate of 5.0 per cent.

As of May 7, 2010, the closing price of the Common Shares was U.S. $82.85 per Common Share.

Series D Preferred Shares:

Priority Share Period High Low Dividend(1) (U.S. $) (LL) (U.S. $)

2005 ...... 0 0 0 0 2006 ...... 0 0 3,015 2.00 2007 ...... 101.50 101.40 11,683 7.75 2008 ...... 105.50 100.00 11,683 7.75 2009 ...... 103.00 100.00 11,683 7.75 January 2010...... 107.00 103.00 - - February 2010...... 107.00 107.00 - - March 2010...... 107.00 107.00 - - April 2010...... 107.00 103.50 11,625 7.75 May 1 to May 7, 2010...... 104.00 103.80 - - ______Note: (1) Before taxes at a rate of 5.0 per cent.

As of May 7, 2010, the closing price of the Series D Preferred Shares was U.S. $103.80 per Series D Preferred Share.

At the General Meeting of shareholders held on April 12, 2010, the Bank’s shareholders approved the distribution of dividends out of the Bank’s net income in 2009 (before taxes of 5.0 per cent.) of LL 5,276.25 (U.S. $3.50) per Common Share and U.S. $7.75 per Series D Preferred Share (equivalent to 7.75 per cent. of the issue price of the Series D Preferred Share as provided in the terms of the Series D Preferred Shares). Total dividends paid in respect of 2009 represented 45 per cent. of net income for that year.

STATEMENT OF CAPITAL RESERVES AND LONG-TERM LIABILITIES OF BANK AUDI SAL – AUDI SARADAR GROUP

The following table sets out the consolidated shareholders’ equity and long-term liabilities of the Bank as of December 31, 2009 and December 31, 2008 and 2007, respectively. As of December 31, 2009 2008 2007 U.S. $ LL LL LL Thousand Million Million Million Shareholders’ Equity Group Share Capital – Common Shares(1) ...... 279,690 421,632 376,083 361,925 Capital – Preferred Shares D(1)...... 10,158 15,313 57,750 57,750 Issue premium – Common Shares...... 559,802 843,902 1,017,928 957,938 Issue premium – Preferred Shares D(1) ...... 114,842 173,125 281,438 281,438 Merger premium...... 23,884 36,006 36,006 36,006 Cash contribution to capital... 48,150 72,586 72,586 72,586 Capital reserves ...... 519,186 782,672 518,887 361,112 Treasury shares...... (49,347) (74,390) (58,091) (1,530) Retained earnings ...... 82,499 124,368 50,516 56,305 Revaluation reserve of real estate...... 12,338 18,600 18,600 18,600 Reserve on revaluation of financial instruments ...... 161,706 243,772 98,755 109,241 Reserve for cash flow hedges...... - - 1,258 - Foreign currency translation reserve...... 15,019 22,641 7,131 27,046 Other reserves...... 2,418 3,645 2,277 Result of the year (2)...... 278,244 419,453 351,548 289,684 Total Group Share...... 2,058,589 3,103,325 2,832,672 2,628,101 Minority interest...... 134,285 202,434 131,139 121,157 Total Shareholders’ Equity ...... 2,192,874 3,305,759 2,963,811 2,749,258 ______Notes: (1) As of December 31, 2009, the Bank’s capital consisted of (i) 34,418,941 Common Shares, each with a nominal value of LL 12,250 (which will be reduced to LL 1,225 upon the effectiveness of the Stock Split), of which 10,156,761 were represented by GDRs; and (ii) 1,250,000 Series D Preferred Shares, each with a par value of LL 12,250 (which will be reduced to LL 1,225 upon the effectiveness of the Stock Split) and which were issued at a price of, and may (subject to certain conditions) be redeemed by the Bank at, U.S. $100.00 per Series D Preferred Share. As of December 31, 2009, the Bank owned 719,968 GDRs. Except for the issuance of the Series E Preferred Shares described in this Prospectus, there has been no material change in the Bank’s capital since December 31, 2009. (2) Before distribution of dividend. The Bank’s total contingent liabilities and guarantees, as of December 31, 2009 on a consolidated basis, were LL 3,527 billion (U.S. $2,340 million).

SELECTED FINANCIAL INFORMATION AND OPERATING DATA

The following tables contain summary historical financial information derived from the Bank’s audited consolidated financial statements as of and for the years ended December 31, 2007, 2008 and 2009, which were audited by Ernst & Young p.c.c. and Semaan, Gholam & Co.. The Bank’s financial statements have been prepared in accordance with IFRS. The Bank maintains its accounts in Lebanese Pounds. Accordingly, U.S. Dollar amounts stated in this Prospectus have been translated from Lebanese Pounds at the rate of exchange prevailing at the relevant balance sheet date, in the case of balance sheet data, and at the average rate of exchange for the relevant period, in the case of income statement data, and are provided for convenience only. In each case, the relevant rate for both balance sheet data and income statement data was LL 1,507.5 per U.S. $1.00, as, throughout the periods covered by this Prospectus, the Central Bank has maintained its policy of pegging the value of the Lebanese Pound to the U.S. Dollar at a fixed rate of LL 1,507.5 per U.S. $1.00. Banking sector information has been derived from Central Bank statistics, Bankdata and the Bank’s internal sources.

The following summary financial and other information should be read in conjunction with the information contained in the Bank’s financial statements and related notes thereto appearing elsewhere in this Prospectus and with the information set forth in “Management’s Discussion and Analysis of Financial Condition and Results of Operations”.

Balance Sheet Data

The following table sets out the balance sheet of the Bank as of December 31, 2009, 2008 and 2007, respectively. As of December 31, 2009 2008 2007 Assets U.S. $ LL LL Million Thousand Million Central Banks ...... 4,116,853 6,206,156 4,440,913 4,227,585 Banks and financial institutions...... 5,132,580 7,737,364 5,460,553 4,761,900 Derivative financial instruments...... 25,497 38,436 48,442 25,624 Financial assets held for trading(2) ...... 553,925 835,042 21,142 719,227 Financial assets designated at fair value through profit and loss ...... 0 0 324,105 475,347 Net loans and advances to customers(1)...... 6,587,633 9,930,856 8,982,761 6,828,316 Net loans and advances to related parties ...... 159,087 239,824 256,876 268,278 Debtors by acceptances...... 188,672 284,423 234,396 198,287 Available-for-sale financial instruments(2) ...... 3,982,299 6,003,316 3,809,668 4,221,699 Financial assets classified as loans and receivables(2) (3) ...... 4,841,477 7,298,527 5,910,767 2,943,814 Held-to-maturity financial instruments(2) ...... 243,701 367,379 259,918 512,433 Investments in associates...... 21,026 31,697 33,124 22,630 Property and equipment...... 333,990 503,490 433,407 455,661 Intangible fixed assets...... 17,185 25,906 18,547 13,502 Non-current assets held for sale...... 19,410 29,261 38,534 40,254 Deferred taxes assets...... 1,603 2,417 10,852 2,393 Other assets...... 115,975 174,833 236,741 177,822 Goodwill...... 145,105 218,746 209,675 215,132 Total Assets ...... 26,486,019 39,927,674 30,730,421 26,109,904

Liabilities Central Banks ...... 88,464 133,359 0 0 Banks and financial institutions...... 514,135 775,059 699,150 956,076 Derivative financial instruments...... 18,992 28,631 46,588 3,979 Deposits from customers ...... 22,807,497 34,382,301 25,898,206 21,163,808 Deposits from related parties ...... 177,694 267,874 237,030 392,097 Debt issued and other borrowed funds...... 101,590 153,148 153,148 153,148 Engagements by acceptances...... 188,672 284,423 234,396 198,288 Current tax liabilities ...... 30,329 45,721 33,610 58,349 Deferred tax liabilities ...... 14,105 21,263 2,479 873 Other liabilities ...... 310,148 467,548 408,933 393,823 Provisions for risks and charges...... 16,005 24,127 22,426 14,650 End of service benefits...... 25,513 38,461 30,644 25,555 Total Liabilities...... 24,293,144 36,621,914 27,766,610 23,360,646

Shareholders’ Equity – Group Share...... 2,058,589 3,103,325 2,832,672 2,628,101 Minority Interest...... 134,285 202,434 131,139 121,157 Total Shareholders’ Equity...... 2,192,874 3,305,759 2,963,811 2,749,258 Total Liabilities and Shareholders’ Equity..... 26,486,019 39,927,674 30,730,421 26,109,904 ______Notes: (1) After deduction as of December 31, 2009 of provisions amounting to U.S. $156,701 thousands from loans and advances to customers pursuant to IAS 39, of which U.S. $40,469 thousands represents provisions on general reserves. (2) Includes U.S. $2,684 million of Lebanese Pound-denominated Lebanese treasury bills and U.S. $1,414 million of Dollar- denominated Eurobonds issued by Lebanon, of which U.S. $949 thousand has been ceded to customers pursuant to credit- linked savings products repayable, at the option of the Bank, through the delivery of such Eurobonds out of the Bank’s portfolio. (3) Includes US$ 2,677 million of Lebanese Pound-denominated certificates of deposits issued by the Central Bank.

Per Share Data As of and for the years ended December 31, 2009 2008 2007 U.S. $ LL LL Million Thousand Million NAV per Common Share...... Net Asset Value...... 2,192,874 3,305,759 2,963,811 2,749,258 Minority shares...... 134,285 202,434 131,139 121,157 Net Asset Value (Group share)(1) ...... 2,058,589 3,103,325 2,832,672 2,628,101 Preferred shares including dividends(2)...... 134,688 203,041 366,982 366,982 Common NAV (Group share) ...... 1,923,901 2,900,281 2,465,690 2,261,118 Number of common shares net of treasury stock 33,698,973 33,698,973 33,700,195 32,888,948 NAV per share (in LL) ...... 57.09 86,064.37 73,165.45 68,750.08 Earnings per Common Share ...... Net earnings...... 288,950 435,593 358,892 301,909 - Minority shares ...... 10,706 16,139 7,344 12,225 = Net earnings (Group share)(1) ...... 278,244 419,453 351,548 289,684 - Dividends on Preferred Shares(2) ...... 9,688 14,604 27,795 27,794 = Common earnings (Group share) ...... 268,557 404,849 323,754 261,890 Number of weighted average common shares(3)...... 33,562,377 33,562,377 33,157,325 32,760,007 Common earnings per share (Basic) in LL(4)...... 8.00 12,062.40 9,764.15 7,994.19 Common earnings per share (Diluted) in LL(5)...... 7.80 11,752.00 9,288.00 7,604.00 Price per share (at end-December) ...... 89.00 134,168 80,576 114,947 Price-to-earnings ratio ...... 11.12 11.12 8.25 14.38 Price-to-book ratio...... 1.56 1.56 1.10 1.67 ______Notes: (1) Group share refers to the share of the Group in the equity and net income of consolidated subsidiaries, excluding minority interests of unaffiliated shareholders without voting control. (2) Preferred Shares and related dividends refer to the Series C Preferred Shares and Series D Preferred Shares that were outstanding as of December 31, 2007 and 2008, respectively, and to the Series D Preferred Shares that were outstanding as of December 31, 2009, following the redemption of the Series C Preferred Shares in April 2009. (3) Weighted average Common Shares refers to the weighted average number of Common Shares over the period, excluding GDRs bought back over the same period and held as treasury shares. (4) Basic earnings per Common Share are calculated based on the weighted average number of Common Shares actually issued. (5) Diluted earnings per Common Share are calculated by reference to the weighted average number of Common Shares, including the Common Shares which could be issued under the Employee Stock Option to cover grants not yet exercised as of December 31, 2007, 2008 and 2009, respectively. Income Statement Data As of and for the years ended December 31, 2009 2008 2007 U.S. $ LL LL Million Thousand Million Income before taxation...... 349,230 526,464 428,977 364,934 Net income after taxation ...... 288,950 435,593 358,892 301,909 Net operating income ...... 703,305 1,060,233 975,830 829,228 Net provisions for credit losses ...... (23,226) (35,014) (7,547) (3,957) Impairment of financial instruments...... (7,791) (11,746) (13,148) 1,681 Operating expenses...... (356,858) (537,964) (547,654) (465,341) Off-Balance Sheet Data As of and for the years ended December 31, 2009 2008 2007 U.S. $ LL LL Million Thousand Million Letters of Credit…………...... 516,207 778,181 565,196 468,751 Letters of Guarantees...... 1,823,296 2,748,619 1,706,990 1,189,420 Assets under management ...... 6,066,021 9,144,526 7,061,327 6,206,610 Fiduciary Assets ...... 990,988 1,493,914 2,743,542 3,159,896

Selected Returns and Ratios As of and for the years ended December 31, 2009 2008 2007 (per cent.) (unless otherwise indicated) Profitability...... Return on average assets ...... 1.23 1.26 1.27 Return on average common equity ...... 14.77 13.30 12.25

Liquidity...... Loans to deposits...... 29.35 35.35 32.92 Loans in LL to deposits in LL...... 4.85 5.83 9.79 Loans in foreign currency to deposits in foreign currency...... 37.59 43.51 36.95 Liquid assets to deposits...... 82.20 77.58 82.98 Net liquid assets to deposits ...... 79.51 74.73 78.53 Net liquid assets in foreign currency to deposits in foreign currency ...... 70.23 65.44 72.65 Net liquid assets in LL to deposits in LL...... 107.18 108.36 112.33 Primary liquidity to deposits ...... 55.67 51.37 52.56 Portfolio securities to deposits ...... 41.97 39.69 41.28

Capital Adequacy as per Basle II...... Average equity to average assets...... 8.87 10.05 11.19 Tier I over risk weighted assets...... 11.40 12.67 12.26 Central Bank BIS risk asset ratio (profit included) as per Basle II...... 11.93 12.84 12.68

Asset Quality...... Loan loss provisions to net loans ...... 3.15 2.83 3.70 Gross doubtful loans / gross loans...... 3.36 3.05 4.26 Loan loss provisions to gross doubtful loans...... 89.65 89.17 82.36 Net doubtful loans / gross loans ...... 0.35 0.33 0.75 Net doubtful loans / equity ...... 1.11 1.06 2.01

Management Efficiency ...... Interest paid over interest received...... 66.02 63.13 65.88 Spread over average assets...... 1.81 2.24 2.19 Non interest income to operating income...... 42.48 36.06 37.48 Net commissions over average assets...... 0.63 0.75 0.68 Asset Utilisation ratio...... 3.15 3.51 3.51 Cost to income ratio ...... 48.41 54.91 55.99 Cost to average assets...... 1.53 1.93 1.94 Footings per branch (LL million)...... 353,062 280,468 277,294 Footings per staff (LL million)...... 12,471 10,169 11,281

Network and Staff ...... Branches...... 155 153 136 Staff employed ...... 4,388 4,220 3,343 Exchange rate LL/U.S. $...... 1,507.5 1,507.5 1,507.5

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Basis of Presentation

The following presentation has been prepared by Management using for comparison purposes the audited consolidated financial statements of the Bank as of and for the years ended December 31, 2009, 2008 and 2007, together with the notes thereto, which are included elsewhere in this Prospectus. Such presentation should be read in conjunction with such financial statements and notes and the selected financial information appearing elsewhere herein. See “Selected Financial Information and Operating Data”.

The consolidated financial statements have been prepared in accordance with standards issued or adopted by the International Accounting Standards Board and interpretations issued by the International Financial Reporting Interpretations Committee, the general accounting plan for banks in Lebanon and the regulations of the Central Bank and the Banking Control Commission and include the results of the Bank and its consolidated subsidiaries as listed in Note 2 to the Bank’s 2009 audited consolidated financial statements. The Bank maintains its accounts in Lebanese Pounds. Accordingly, U.S. Dollar amounts stated in this Prospectus have been translated from Lebanese Pounds at the rate of exchange prevailing at the relevant balance sheet date, in the case of balance sheet data, and at the average rate of exchange for the relevant period, in the case of income statement data, and are provided for convenience only. In each case, the relevant rate for both balance sheet data and income statement data was LL 1,507.5 per U.S. $1.00, as, throughout the periods covered by this Prospectus, the Central Bank has maintained its policy of pegging the value of the Lebanese Pound to the U.S. Dollar at a fixed rate of LL 1,507.5 per U.S. $1.00. Banking sector information has been derived from Central Bank statistics, Bankdata and the Bank’s internal sources.

Ernst & Young p.c.c. and Semaan, Gholam & Co. have audited the consolidated financial statements of the Bank for each of the years ended December 31, 2009, 2008 and 2007.

Lebanese Economy and the Banking Sector

The following table sets forth certain key economic indicators for Lebanon as of and for the years ended December 31, 2009, 2008 and 2007, respectively, and related changes between 2008 and 2009:

Percentage As of and for the years ended December 31, Change 2009 2008 2007 (2008-2009) (U.S. $ Million) Estimated GDP growth rate (%) ...... 8.0 9.3 7.5 (13.9) Estimated inflation (%)...... 1.2(1) 5.5(2) 9.3(3) (78.2) Balance of payments (U.S. $ million)...... 7,898.8 3,461.7 2,036.6 128.2 Trade deficit...... 12,758 12,659 9,000 0.8 Budget deficit ...... (4,462) (4,404) (3,838) 1.3 LL/U.S. $...... 1,507.50 1,507.50 1,507.50 - Gross public debt (U.S. $ million) ...... 51,094 47,023 42,023 8.7 Gross foreign currency reserves (excluding gold reserves) (U.S. $ million) ...... 25,660 17,062 9,778 50.4 Banking sector assets (U.S. $ million)...... 115,250 94,255 82,254 22.3 Real GDP growth in 2009 is estimated at 8.0 per cent., as compared to 9.3 per cent. and 7.5 per cent. in 2008 and 2007, respectively. In 2007, CAS estimated inflation at 9.3 per cent. on an end-of-period basis, and, on the basis of Banque du Liban data, the IMF estimated inflation at 6.0 per cent. on an end-of-period basis and at 4.1 per cent. on a period-average basis. CAS estimated inflation for 2008 at 5.5 per cent. on an end-of-period basis, while the IMF’s preliminary estimates for inflation are at 6.4 per cent. on an end-of-period basis and at 10.8 per cent. on a period-average basis. The increase in inflation in 2008, as compared to 2007, was due to, inter alia, the appreciation of the Euro against the Lebanese Pound (the Euro being the currency of the principal trading

partners of the Republic) and the global increase in oil and other commodity prices, but was tempered by the global financial crisis. Inflation slowed in 2009, with CAS estimating inflation at 3.4 per cent. on an end-of- period basis and 1.2 per cent. on a period-average basis, due mainly to the worldwide decrease in energy prices and the domestic decrease in communication costs.

The relatively stable political and security environment following the Doha Agreement has resulted in increased tourism activities in 2008, with a total of 1,332,551 tourists, representing a 31 per cent. increase as compared to 2007, and again in 2009, when a total of 1,851,081 tourists arrived in Lebanon, representing a 39 per cent. increase from 2008.

According to data published by Banque du Liban, the proportion of foreign currency deposits as a share of total deposits stood at approximately 75 per cent., 78 per cent. and 85 per cent. as of December 31, 2009, 2008 and 2007, respectively. Because a substantial portion of the Bank’s loans are denominated in U.S. Dollars, a devaluation of the Lebanese Pound would increase the debt service burden of borrowers whose income is in Lebanese Pounds and, therefore, would likely increase the level of the Bank’s non-performing loans.

The balance of payments surplus registered U.S. $7,898.8 million as of December 31, 2009, more than doubling from the surplus of U.S. $3,461.7 million as of December 31, 2008, which had increased by 70.0 per cent. from the surplus of U.S. $2,036.6 million as of December 31, 2007. These year-on-year increases resulted mainly from increases in the capital and financial accounts, which more than offset the trade deficits recorded in 2008 and 2009.

The trade deficit increased to U.S. $12,758 million in 2009, as compared to U.S. $12,659 million in 2008 (representing an increase of 0.8 per cent.), which, in turn, had increased from U.S. $9,000 million (representing an increase of 40.6 per cent.) in 2007. The slightly larger deficit in 2009, as compared to 2008, was due to a 0.7 per cent. increase in imports to U.S. $16,242 million, which was only partially offset by a 0.2 per cent. increase in exports to U.S. $3,484 million.

Gross foreign currency reserves (excluding gold reserves) at the Central Bank were U.S. $25,660 million as of December 31, 2009, as compared to U.S. $ 17,062 million and U.S. $9,778 as of December 31, 2008 and 2007, respectively. Foreign currency reserves are generally placed by Banque du Liban outside Lebanon with other central banks or with highly-rated international banks; they include a limited amount of highly-rated foreign debt securities.

The performance of the banking sector continued to improve in 2009, as compared to 2008 and 2007. Total banking sector assets in Lebanon increased by 22.3 per cent. in 2009, as compared to 2008, after having increased by 12.9 per cent. in 2008, as compared to 2007, while the total share capital of Lebanese banks increased by 11.0 per cent. in 2009, as compared to 2008, after having increased by 12.4 per cent. in 2008, as compared to 2007. Total loans made by the banking sector increased by 13.3 per cent. in 2009, as compared to 2008, after having increased by 24.9 per cent. in 2008, as compared to 2007. Similarly, customers’ deposits increased by 23.1 per cent. in 2009, as compared to 2008, after having increased by 13.6 per cent. in 2008, as compared to 2007. As of December 31, 2009, 52.36 per cent. of total customers’ deposits were held in U.S. Dollars, as compared to 56 per cent. and 64.05 per cent. as of December 31, 2008 and 2007, respectively.

Market capitalisation of shares listed on the BSE increased in 2009 to U.S. $11,741.4 million as of December 31, 2009, from U.S. $10,482.5 million, after having decreased in 2008 from U.S. $11,532.6 million in 2007. Nevertheless, liquidity in the BSE decreased in 2009, as the value of shares traded for the year fell to U.S. $921.6 million from U.S. $1,608.4 million in 2008, after having risen in 2008 from U.S. $864.2 million in 2007.

At the same time, the market liquidity ratio (representing the total value of traded shares on the BSE divided by the total market capitalisation as of year-end) fell back to 7.9 per cent. for the year ended December 31, 2009, as compared to 15.3 per cent. for the year ended December 31, 2008, after having improved from 7.5 per cent. for the year ended December 31, 2007.

Throughout 2007, 2008 and 2009, the Central Bank continued its policy of pegging the value of the Lebanese Pound to the U.S. Dollar at a fixed rate of LL 1,507.5 per U.S. $1.00.

Consolidated Results of Operation and Financial Condition Reflecting the overall growth in the Lebanese banking sector and as a result of the expansion strategy implemented by the Bank since 2005, and notwithstanding the global financial crisis, the Bank experienced

significant growth in 2009, as compared to 2008, as shown in the following table. Management believes that such growth demonstrates the Bank’s capacity to sustain itself in the face of difficult economic times.

As of December 31, 2009/2008 In U.S. $ Million 2009 2008 2007 Vol. % Assets ...... 26,486 20,385 17,320 6,103 29.9% Deposits...... 22,985 17,337 14,299 5,648 32.6% Loans...... 6,747 6,129 4,708 618 10.1% AUMs and Fiduciary Assets...... 6,966 6,504 6,213 462 7.1% Outstanding Letters of Credit ...... 516 375 311 141 37.7% Outstanding Guarantees...... 1,823 1,132 789 691 61.0% Net Income ...... 289.0 238.1 200.3 50.9 21.4% Branches...... 155 153 136 2 1.3% Employees...... 4,388 4,220 3,343 168 4.0% Customers...... 470,876 421,884 349,626 48,992 11.6% Accounts...... 785,427 697,941 638,589 87,486 12.5% Assets

The Bank’s consolidated assets grew by 29.9 per cent. to LL 39,928 billion (U.S. $26.5 billion) as of December 31, 2009 from LL 30,730 billion (U.S. $20.4 billion) as of December 31, 2008, which in turn had increased by 17.7 per cent. from LL 26,110 billion (U.S. $17.3 billion) as of December 31, 2007.

Management believes that the growth in the Bank’s balance sheet reflects the Bank’s strong business dynamics, including, in particular, its capacity to attract new customers as well as expand the services provided to existing customers. Both the number of the Bank’s customers and the total number of the Bank’s accounts continued to increase in 2009 and 2008, with 48,992 new customers and 87,486 new accounts in 2009 and 72,258 new customers and 59,932 new customers in 2008.

The Bank’s consolidated assets are comprised principally of liquid securities, loans to customers and primary liquidity.

Securities Portfolio, including Exposure to Lebanese Government Risk

The Bank’s portfolio of securities, comprised principally of Lebanese Pound-denominated treasury bills, foreign currency-denominated sovereign bonds, certificates of deposits issued by central banks where the Bank conducts operation, fixed income instruments and marketable securities, increased from LL 8,898 billion (U.S. $5.9 billion) as of December 31, 2007 to LL 10,374 billion (U.S. $6.9 billion) as of December 31 2008 further to LL 14,543 billion (U.S. $9.6 billion) as of December 31, 2009. As a percentage of total assets, the Bank’s securities portfolio represented 36.42 per cent. as of December 31, 2009, as compared to 33.76 per cent. as of December 31, 2008 and 34.08 per cent. as of December 31, 2007.

The following table shows the distribution of the Bank’s securities portfolio, by type of security, as of December 31, 2009, 2008 and 2007, respectively: As of December 31, 2009 2008 2007 (LL Million) Lebanese treasury bills...... 4,046,040 3,109,747 1,047,301 Held-for-trading...... 520,548 - - Financial assets at fair value through profit or loss..... - - - Available-for-sale ...... 3,391,517 3,109,747 1,047,301 Loans and receivables...... - - - Held-to-maturity ...... 133,975 - -

Eurobonds and securities ...... 2,131,189 1,752,924 2,872,946 Held-for-trading...... 248,151 6,040 470,480 Financial assets at fair value through profit or loss..... - - - Available-for-sale ...... 758,035 59,850 2,069,617 Loans and receivables...... 939,553 1,478,490 - Held-to-maturity ...... 185,450 208,544 332,849

Other securities ...... 8,327,034 5,462,928 4,952,275 Held-for-trading...... 66,343 15,102 248,746 Financial assets at fair value through profit or loss..... - 324,105 475,347 Available-for-sale ...... 1,853,764 640,071 1,104,784 Loans and receivables...... 6,358,973 4,432,276 2,943,814 Held-to-maturity ...... 47,954 51,374 179,584 In common with other Lebanese banks, a significant portion of the Bank’s placements in both Lebanese Pounds and foreign currency historically has been invested in Lebanese Government obligations or maintained as reserves with Banque du Liban. Although, as a result of Management’s decision in August 2009 to realign the Bank’s assets to reflect its developing regional profile, the Bank’s outstanding exposure to Lebanese sovereign risk has decreased as of December 31, 2009, as compared to December 31, 2008 and 2007, respectively, the Bank’s gross exposure to foreign currency denominated Lebanese sovereign bonds as a percentage of foreign currency deposits decreased to 8.2 per cent. as of December 31, 2009 (as compared to 8.56 per cent. as of December 31, 2008 and 16.2 per cent. as of December 31, 2007) and the Bank’s net exposure to Lebanese sovereign bonds amounted to LL 702 billion (U.S. $466 million) representing 42 per cent. of the Banks’ total securities portfolio and 24 per cent. of adjusted foreign currency denominated customers’ deposits (as compared to 47 per cent. as of December 31, 2008 and 24 per cent. as of December 31, 2007). As of December 31, 2009, the Bank’s portfolio of Lebanese treasury bills had increased to LL 4,046 billion from LL 3,109 billion and LL 1,047 billion as of December 31, 2008 and 2007, respectively. Such investments are generally considered to be relatively illiquid to the extent that, in the event that the Bank were to attempt to sell a significant portion of its holdings, it would likely experience a discount on the price, which could be substantial. As a result, any default by the Lebanese Government or Banque du Liban on any of its obligations, or any significant reduction in value or liquidity of Government securities the Bank holds, or in the regulatory or accounting treatment thereof, would have a material adverse effect to the Bank’s business, liquidity, results of operations, financial condition and prospects, as well as on other Lebanese banks.

In addition, in line with Management’s policy decision to diversify the Bank’s assets mix in order to mitigate the impact of the negative carry on the Bank’s foreign currency-denominated primary liquidity, the Bank also now holds investments in foreign currencies comprised of placements in highly-rated sovereign bonds , in particular from Abu-Dhabi and Qatar. As of December 31, 2009, the Bank’s exposure to bonds from Abu Dhabi and Qatar reached U.S. $928 million, representing, in the aggregate, 9.6 per cent. of the total securities portfolio and 5.4 per cent. of foreign currency denominated customers’ deposits. Accordingly, the Bank also bears significant exposure to the sovereign risks of Abu-Dhabi and Qatar.

Loan Portfolio

The Bank’s loans to customers grew by LL 931 billion (U.S. $618 million) to LL 10,171.0 billion (U.S. $6.7 billion) as of December 31, 2009, as compared to LL 9,239.6 billion (U.S. $6.1 billion) as of December 31,

2008, after having grown by LL 2,143 billion (U.S. $1.4 billion) in 2008 from LL 7,096.7 billion (U.S. $4.7 billion) as of December 31, 2007, reflecting Management’s conservative lending policy in view of difficult market conditions prevailing in 2009 and 2008. Notwithstanding the economic turmoil, the Bank’s trade finance activities also continued to grow. Outstanding letters of credit increased by 37.7 per cent. in 2009 to LL 778 billion (U.S. $516 million) as of December 31, 2009 from LL 565 billion (U.S. $375 million) as of December 31, 2008, after having increased by 20.47 per cent. in 2008 from LL 469 billion (U.S. $311 million) as of December 31, 2007, while outstanding letters of guarantee grew by 61.04 per cent. in 2009 to LL 2,749 billion (U.S. $1,824 million) as of December 31, 2009 from LL 1,707 billion (U.S. $1,132 million) as of December 31, 2008, and by 43.57 per cent. in 2008 from LL 1,189 billion (U.S. $789 million) as of December 31, 2007.

Primary Liquidity

The Bank’s overall primary liquidity (comprised principally of amounts held at the Central Bank, including Central Bank certificates of deposits and placements with foreign banks) increased to LL 19.3 billion as of December 31, 2009 from LL 13.5 billion as of December 31, 2008 and LL 11.8 billion as of December 31, 2007. Please see “–Liquidity”.

For additional information on the Bank’s loan portfolio, see “Overview of Bank Audi sal – Audi Saradar Group – The Loan Portfolio”.

Profitability The Bank’s consolidated net income increased by 21.4 per cent. to LL 436 billion (U.S. $289 million) in 2009, from LL 359 billion (U.S. $238 million) in 2008, which in turn had increased by 18.9 per cent. from LL 302 billion (U.S. $200 million) in 2007.

Net income is comprised of total income offset by total costs. Total income increased by 11.4 per cent. to LL 1,111 billion (U.S. $737 million) for the year ended December 31, 2009 (offset by an increase in total costs of LL 676 billion (U.S. $449 million)), from LL 997 billion (U.S. $662 million) for the year ended December 31, 2008 (offset by total costs of LL 638 billion (U.S. $423 million)), which in turn reflected a 19.5 per cent. increase from 834 billion (U.S. $553 million) for the year ended December 31, 2007 (offset by total costs of LL 532 billion (U.S. $353 million)). Total income includes net interest margin and non-interest income. Total cost includes operating expenses, loan loss provisions, provisions for impairment of financial fixed assets and taxes.

As a result of the difficult operating conditions persisting in 2008 and 2009, which exerted pressures on interest rates spreads, the growth in the Bank’s total income primarily reflected an increase in non-interest income, as well as a slight increase in net interest income.

Interest income

Interest income slightly increased by 0.2 per cent. in 2009, as compared to 2008, which in turn had increased by 22.5 per cent., as compared to 2007. Average interest earning assets, which represented 96.5 per cent. of total average assets as of December 31, 2009 (as compared to 96.0 per cent. as of December 31, 2008 and 95.6 per cent. as of December 31, 2007), increased from LL 22,395 billion (U.S. $14.9 billion) in December 2007 to LL 27,250 billion (U.S. $18.1 billion) in December 2008 and further to LL 34,086 billion (U.S. $22.6 billion) in December 2009, reflecting year-on-year increases of 21.7 per cent in 2008, as compared to 2007, and 25.1 per cent in 2009, as compared to 2008. The Bank’s interest margin increased from 2.32 per cent. in 2007 to 2.34 per cent. in 2008, largely driven by the growth of average interest earnings. In 2009, however, the slight increase in interest income was largely offset by negative carry on the Bank’s primary liquidity in foreign currency, which resulted in a contraction in interest margin in 2009 by 46 basis points from 2.34 per cent. in 2008 to 1.88 per cent. in 2009. As a result of this negative impact on interest income, Management has initiated several counter- cyclical measures such as reducing rates paid on deposits (by 44 basis points on a year-to-date basis), repricing of non-Libor based loans and adopting other cost-cutting measures.

Non-interest income

Non-interest income increased by 31.1 per cent. to LL 472 billion (U.S. $313 million) in 2009, from LL 360 billion (U.S. $239 million) in 2008, which in turn had increased by 16.1 per cent. from 310 billion (U.S. $206 million) in 2007. The growth in non-interest income was driven primarily by an increase in commissions across

all lines of business, as well as higher net profits on financial operations following active trading for Lebanese and regional bonds. The breakdown of consolidated non-interest income over the different lines of business reflects a more balanced operational structure, as non-interest income in 2009 comprised 42.5 per cent. of total income, as compared to 34.7 per cent. for the peer group average.

Cost of Credit

The Bank’s cost of credit (loan loss provision charges) increased from LL 4.0 billion (U.S. $2.6 million) in 2007 to LL 7.5 billion (U.S. $5 million) in 2008 and LL 35 billion (U.S. $23.2 million) in 2009. The increase in loan loss provisions by LL 27.4 billion (U.S. $18.2 million) in 2009 reflected the creation of loans loss provisions of LL 60 million (U.S. $40 million), which were only partially offset by the write-back of provisions no longer required of LL 25 billion (U.S. $17 million). A further breakdown of the LL 60 billion (U.S. $40 million) of provisions taken in 2009, reveals that, the Bank took, on the backdrop of this year’s tough global environment and in line with IAS 39, LL 33.7 billion (U.S. $22.4 million) of collective provisions which are to be added to a LL 26.3 billion (US$ 17.4 million) of specific provisions on few loans as mentioned earlier.

General operating expenses

The Bank incurred general operating expenses of LL 538 billion (U.S. $357 million) for the year ended December 31, 2009, as compared to LL 548 billion (U.S. $363 million) for the year ended December 31, 2008, reflecting a 1.82 per cent. year-on-year decrease as a result of the cost-cutting policy. Total operating expenses for the year 2008 had increased by 18 per cent. from LL 465 billion (U.S. $308 million) for the year ended December 31, 2007. The decrease in general operating expenses in 2009, within the context of the overall growth in the Bank’s assets and the corollary increase in the Bank’s total income, translated into improved efficiency. The Bank’s cost-to-income ratio dropped by 6.5 per cent. from 54.9 per cent. in 2008 to 48.4 per cent. in 2009. In parallel, the ratio of cost to average assets improved by 40 basis points registering 1.53 per cent. in 2009, as compared to 1.93 per cent. in 2008.

Income taxes increased by 29.7 per cent. to LL 90.9 billion in 2009, from LL 70.1 billion in 2008, which in turn had increased by 11.3 per cent. from LL 63 billion in 2007, mainly due to the increase in the Bank’s profit before tax. Overall Growth

The Bank’s growth has been driven by both the Lebanese operations and its newly-developing regional operations.

The table below sets forth breakdowns of the Bank’s assets, deposits, loans to customers and net earnings, by geographic distribution, as of December 31, 2009, 2008 and 2007, respectively, as well as the compound annual growth rate over the 2007-2009 period:

As of December 31, CAGR 2009 2008 2007 Principal Principal Principal In U.S. $ Million Amount % of Total Amount % of Total Amount % of Total

Assets Lebanon ...... 19,511 73.7% 14,814 72.7% 12,495 72.1% 25.0% Europe...... 1,805 6.8% 1,468 7.2% 1,496 8.6% 9.8% MENA ...... 5,170 19.5% 4,102 20.1% 3,327 19.2% 24.7% Total Assets ...... 26,486 100.0% 20,385 100.0%, 17,318 100.0% 23.7%

Deposits Lebanon ...... 17,709 77.0% 13,353 77.0% 11,091 77.6% 26.4% Europe...... 1,190 5.2% 886 5.1% 802 5.6% 21.8% MENA ...... 4,087 17.8% 3,097 17.9% 2,406 16.8% 30.3% Total Deposits...... 22,985 100.0% 17,337 100.0% 14,299 100.0% 26.8%

Loans to Customers Lebanon ...... 4,110 60.9% 3,875 63.2% 3,453 67.7% 9.1% Europe...... 700 10.4% 585 9.5% 686 13.5% 1.1% MENA ...... 1,936 28.7% 1,669 27.2% 959 18.8% 42.1% Total Loans to Customers...... 6,747 100.0% 6,129 100.0% 5,098 100.0% 15.0%

Net Earnings Lebanon ...... 218.7 75.7% 185.1 77.8% 158.8 79.3% 17.4% Europe...... 15.0 5.2% 23.1 9.7% 19.1 9.5% (12.1)% MENA ...... 55.2 19.1% 29.9 12.5% 22.5 11.2% 56.8% Total Net Earnings...... 289.0 100.0% 238.1 100.0% 200.3 100.0’/,, 20.1% As of December 31, 2009, 73.7 per cent. of consolidated assets were accounted for by Lebanese entities and 19.5% by regional entities, with the remaining 6.8 per cent. held by entities in Europe, as compared to 72.7 per cent., 20.1% and 7.2%, respectively, as of December 31, 2008, and 72.1 per cent., 19.2 per cent. and 8.6 per cent., respectively, as of December 31, 2007. Similarly, for the year ended December 31, 2009, 75.7 per cent. of net earnings were contributed by the Bank’s operation in Lebanon, 19.1 per cent. by the Bank’s operation in the MENA region and 5.2 per cent. by the Bank’s operation in Europe, as compared to 77.8 per cent., 12.5 per cent. and 9.7 per cent., respectively, for the year ended December 31,2008 and 79.3 per cent, 11.2 per cent. and 9.5 per cent., respectively, for the year ended December 31,2007.

Supported by the record performance of the Lebanese banking sector in 2009, the Bank’s Lebanese entities registered strong balance sheet and income statement growth, consistently outperforming the banking sector in Lebanon and gaining domestic market share for the 11th consecutive year. As a result, the Bank’s market share of total sector assets increased to 16.34 per cent. as of December 31, 2009, as compared to 15.05 per cent. and 14.55 per cent. as of December 31, 2008 and 2007, respectively. Similarly, the Bank’s market share of total sector deposits increased to 18.05 per cent. in 2009, from 16.67 per cent. and 16 per cent. in 2008 and 2007, respectively, while the Bank’s market share of Lebanese Pound deposits increased from 13.90 per cent. as of the year ended December 31, 2007 to 14.95 per cent. and 16.28 per cent. as of the years ended December 31, 2008 and 2009, respectively, and its share of the foreign currency deposit market share increased, from 16.6 per cent. to 17.45 per cent. and 19.06 per cent., between the same years.

In addition to its strong performance in Lebanon, the Bank has succeeded to build a regional franchise through a network of 70 newly-launched branches with more than 150,000 customers and 213,000 accounts. As of December 31, 2009, 19 per cent. of consolidated assets and earning were accounted for by regional entities (with LL 7,794 billion (U.S. $5.2 billion) of assets and LL 83.4 billion (U.S. $55.3 million) in net earnings), as compared to 20 per cent. of consolidated assets and 12.5 per cent. of consolidated net earnings as of December 31, 2008 (with LL 6,184 billion (U.S. $4.1 billion) of assets and LL 45.1 billion (U.S. $29.9 million) in net earnings). The contribution of the Bank’s foreign operations to its overall performance was primarily attributable to the Bank’s regional activities in Jordan, Syria and Egypt, where, in each case, the Bank has a comprehensive offering of retail and commercial banking products.

Overall, reflecting the Bank’s steady growth both in Lebanon and in the surrounding region over the past five years, the Bank has realised two-digit growth rates in consolidated assets (24.2 per cent.), footings (23.4 per cent.), shareholders equity (29.3 per cent.) and net earnings (32.3 per cent.). As a result, the Bank has further consolidated its leading position as the largest Bank in Lebanon in terms of assets, deposits, loans and equity and increased its position among the top 20 Arab banking institutions.

Liquidity

The Bank has consistently maintained a highly liquid position, including throughout the recent credit crisis. The Bank’s overall primary liquidity (comprised principally of amounts held at the Central Bank, including Central Bank certificates of deposits and placements with foreign banks) increased to LL 19.3 billion as of December 31, 2009 from LL 13.5 billion as of December 31, 2008 and LL 11.8 billion as of December 31, 2007, and represented 55.7 per cent. of customers’ deposits as of December 31, 2009, as compared to 51.65 per cent. as of December 31, 2008 and 54.7 per cent. as of December 31, 2007.

The Bank’s primary liquid assets in Lebanese Pounds are essentially composed of cash, deposits and certificates of deposit issued by the Central Bank. The ratio of Lebanese Pound-denominated liquid assets to Lebanese Pound-denominated customers’ deposits decreased from 83.79 per cent. as of December 31, 2007 to 53.5 per cent. as of December 31, 2008 and increased to 62.3 per cent. as of December 31, 2009, reflecting the lower level of lending opportunities in Lebanese Pounds available to the Bank, as well as to other Lebanese banks, due to the higher interest rates applied on loans in Lebanese Pounds, as compared to loans in U.S. Dollars.

The Bank’s primary liquid assets denominated in foreign currency consist of cash and short-term deposits placed at the Central Bank, including certificates of deposits and placements in prime banks in OECD countries. Primary liquidity in foreign currencies was LL 13.9 billion as of December 31, 2009, as compared to LL 10.5 billion as of December 31, 2008 and 9.2 billion as of December 31, 2007, and represented 53.7 per cent., 51.7 per cent. and 50.1 per cent., respectively, of consolidated deposits in foreign currencies. As of December 31, 2009, primary liquidity in foreign currencies comprised principally placements with central banks in the countries in which the Bank has operations and accounted for 24.1 per cent. of consolidated deposits in foreign currency, with the remaining 29.6 per cent. of foreign-currency customers’ deposits comprising placements with OECD banks, as compared to 26.6 per cent. and 26.1 per cent. as of December 31, 2008 and 2007, respectively. Since the last quarter of 2008, placements with OECD banks have been redeployed in geographically diverse, large, deposit-rich, including highly-rated international banks, which have been relatively insulated from the recent credit crisis.

The evolution of the liquidity ratio is a direct corollary of the change in the Bank’s loans-to-deposits ratio, which fell to 29.4 per cent. as of December 31, 2009, as compared to 35.4 per cent. as of each of December 31, 2008 and 32.9 per cent. as of December 31, 2007. Including the LL 7,299 billion of corporates and sovereign bonds, which are classified as loans in accordance with IFRS (instead of being included in the Bank’s portfolio of securities under relevant Banking Control Commission requirements), the Bank’s loans-to-deposits ratio would be 29.35 per cent. as of December 31, 2009, a level which remains below the average of 78.2 per cent. for banks in the MENA region as a whole, reflecting the Bank’s traditionally conservative credit and high liquidity policies. The decline in the loans-to-deposits ratio as of December 31, 2009 principally reflects the Bank’s conservative lending policies, particularly at the onset of the global financial crisis in late 2008 and Management’s decision to significantly reduce lending activities across the Group in early 2009 pending an assessment of market conditions. As a result of this policy, the Bank’s gross loan portfolio increased by only 10.4 per cent. to LL 10,491 billion (U.S. $6,959 million) as of December 31, 2009, as compared to LL 9,501 billion (U.S. $6,303 million) as of December 31, 2008, while loans had increased by 19.6 per cent. from LL 7,947 billion (U.S. $5,272 million) as of December 31, 2007. Most of the growth in the Bank’s loan portfolio in 2009 resulted from loans to leading large prime regional corporates from the MENA region following the Bank’s resumption of lending activities when market conditions improved in the second and third quarter of 2009.

Asset Quality

Gross doubtful and substandard loans increased from LL 306 billion (U.S. $203 million) as of December 31, 2008 to LL 369 billion (U.S. $245 million) as of December 31, 2009 mainly due to an increase in loan loss reserves within the context of a contraction in net doubtful and substandard loans. The increase in gross doubtful and substandard loans followed a decrease in 2008 from LL 338 billion (U.S. $224 million) as of December 31, 2007. As a percentage of gross loans, gross doubtful loans increased to 3.36 per cent. as of December 31, 2009, from 3.05 per cent. as of December 31, 2008, after having decreased from 4.26 per cent. as of December 31,

2007; such increase in doubtful loans was partially offset by a decrease in gross substandard loans to 3.7 per cent. as of December 31, 2009, from 35.6 per cent. and 15.1 per cent. as of December 31, 2008 and 2007, respectively. As a result, gross doubtful and substandard loans increased, on an overall basis, to 3.52 per cent. of total gross loans as of December 31, 2009, from 3.22 per cent. as of December 31, 2008, after having decreased from 3.31 per cent. as of December 31, 2007.

Reflecting Management’s continuing policy to improve the quality of the loan portfolio, in 2009, the Bank took LL 35.4 billion (U.S. $23.5 million) of general provisions pursuant to IAS 39, and allocated LL 24.6 billion (U.S. $16.3 million) of specific loan loss provisions principally on a few number of specific files. The Bank also wrote off LL 7.3 billion (U.S. $4.9 million) of doubtful loans. As a result, the ratio of write-offs as a percentage of gross non-performing loans and write-offs was 19.88 per cent. as of December 31, 2009, one of the highest levels among the Bank’s peers.

Within the context of an increase in the ratio of loan loss reserves as a percentage of doubtful loans to 89.65 per cent. as of December 31, 2009, however, as compared to 89.17 per cent. and 82.36 per cent. as of December 31, 2008 and 2007, respectively, net doubtful loans as a percentage of gross loans decreased to 0.35 per cent. as of December 31, 2009, as compared to 0.33 per cent. and 0.75 per cent. as of December 31, 2008 and 2007, respectively. As a percentage of shareholders’ equity, net doubtful loans, while being highly collateralised, represented 1.11 per cent. as of December 31, 2009, as compared to 1.06 per cent. as of December 31, 2008 (2.73 per cent. for the sector) and 2.01 per cent. as of December 31, 2007 (4.54 per cent. for the sector). The ratio of net substandard and doubtful loans to gross loans was 0.47 per cent. as of December 31, 2009, as compared to 0.47 per cent. and 1.00 per cent. as of December 31, 2008 and 2007, respectively. Capital Adequacy

As of December 31, 2009, the Bank’s shareholders’ equity was LL 3,306 billion (U.S. $2,193 million), one of the highest in the sector, as compared to LL 2,964 billion (U.S. $1,966 million) and LL 2,749 billion (U.S. $1,823 million) as of December 31, 2008 and 2007, respectively. As of December 31, 2009, shareholders equity represented 8.3 per cent. of total assets, as compared to 9.6 per cent. as of December 31, 2008 and 10.5 per cent. as of December 31, 2007. The Bank’s capital adequacy ratio (as per Basel II requirement) stood at 11.93 per cent. in 2009, as compared to 12.84 per cent. and 12.68 per cent. in 2008 and 2007, respectively, in each case, above the regulatory minimum of 8 per cent. ratio imposed by the Central Bank.

The increase in the Bank’s shareholders’ equity was mainly due to internal capital generation, which more than offset the redemption of the U.S. $100 million Series C Preferred Shares in April 2009. Risk weighted assets increased in 2009 by 16.2 per cent. to LL 22,251 billion (U.S. $14,760 million) as of December 31, 2009 from LL 19,144 billion (U.S. $12,699 million) as of December 31, 2008, which in turn had grown by 6 per cent. from LL 18,068 billion (U.S. $11,985 million) as of December 21, 2007. In contrast, largely as a result of the redemption of the Series C Preferred Shares, Tier I capital rose in 2009 by only 4.6 per cent. to LL 2,537 billion (U.S. $1,682 million) as of December 31, 2009 (as compared to an increase of 9.5 per cent. in 2008) while total capital rose by 8 per cent. to LL 2,657 billion (U.S. $1,763 million) (as compared to an increase of 7.3 per cent. in 2008).

The table below shows the calculation of the Bank’s capital adequacy ratios as of December 31, 2009, 2008 and 2007, respectively, and related changes over the 2008-2009 period:

As of December 31, Variation 2009 2008 2007 (2008-2009) LL Million, except as indicated Tier 1 Capital...... 2,296 2,210 2,041 3.9% Tier 2 Capital...... 119 34 76 250% Total Capital ...... 2,415 2,244 2,117 7.6% Net income for the year ...... 436 359 302 21.4% Dividends...... 196 145 127 35.2% Risk adjusted assets and contra accounts...... 22,251 19,144 18,068 16.2% (per cent.) Risk asset ratio (excluding net income) Tier 1 Capital...... 10.32 11.55 12.25 (10.6)% Tier 2 Capital...... 0.53 0.17 0.42 211.8% Total Capital ...... 10.85 11.72 11.71 (7.4)%

Risk asset ratio (including net income, but excluding dividends) Tier 1 Capital...... 11.40 12.67 12.26 (10.0)% Tier 2 Capital...... 0.53 0.17 0.42 278.6% Total Capital ...... 11.93 12.84 12.68 (7.1)%

Components of ROAA and ROAE In 2009, the Bank realised a return on average assets (“ROAA”) of 1.23 per cent., as compared to 1.26 per cent. in 2008 and 1.27 per cent. in 2007, which reflected a decrease of 3 basis points and 1 basis point from ROAA for years 2008 and 2007, respectively. The improvement in ROAA was largely the result of an increase in the Bank’s total assets by greater growth than in net earning by 17.7 per cent. in 2008, as compared to 2007, and 29.9 per cent. in 2009, as compared to 2008.

The Bank’s return on average equity (“ROAE”) increased from 11.37 per cent. in 2007 to 12.56 per cent in 2008 and 13.90 per cent. in 2009. The improvement in ROAE in 2009 was primarily attributable to the year-on-year increases in the Bank’s net profits by 18.9 per cent. in 2008, as compared to 2007, and 21.4 per cent. in 2009, as compared to 2008. The return on average common equity rose in parallel from 12.25 per cent. as of December 31, 2007 to 13.30 per cent. as of December 31, 2008 and further to 14.77 per cent. as of December 31, 2009.

As a result of the foregoing, earnings per Common Share increased by 23.5 per cent. to LL 12,062 (U.S. $8) for the year ended December 31, 2009, as compared to LL 9,764 (U.S. $6.48) for the same period in 2008, after having increased by 22.1 per cent. from LL 7,994 (U.S. $5.30) in 2007. Post-dilution earnings per common share amounted to LL 11,752 (U.S. $7.80) in 2009, as compared to LL 9,288 (U.S. $6.17) in 2008 and LL 7,604 (U.S. $5.04) in 2007, reflecting a growth by 26.52 per cent. and 22.15 per cent. in 2009 and 2008, respectively. Basic earnings per share are calculated based on the weighted number of common shares actually issued, while diluted earnings per share are calculated by reference to the weighted average number of common shares including the 1,387,768 common shares which would be issued under the Employee Stock Option to cover grants not yet exercised at end-December 2009. In parallel, net asset value per common share grew by 17.63 per cent. to LL 86,064 (U.S. $57.09). The GDRs were trading at a market price of U.S. $ 89 as of year-end 2009, reflecting a price-to-earnings ratio of 11.12, and a price-to-net asset value ratio of 1.56.

OVERVIEW OF BANK AUDI SAL – AUDI SARADAR GROUP Introduction

The Bank is a universal bank operating principally in Lebanon and the MENA region and offering a full range of commercial and corporate banking, retail banking, private banking and investment banking products and services, in addition to insurance activities through its subsidiary LIA Insurance sal. The Bank’s objects and purposes can be found in Article 2 of its By-laws. As of and for the year ended December 31, 2009, according to Bankdata, based on unaudited financial statements of banks operating in the Lebanese Republic provided to Bankdata by such banks, the Bank ranked first among Lebanese banks in terms of total assets (LL 39,927 billion), shareholders’ equity (LL 3,306 billion), customers’ deposits (LL 34,651 billion), loans and advances (LL 10,171 billion) and profit (LL 435.6 billion). As of December 31, 2009, the Bank had the largest branch network in Lebanon, with 80 branches covering the Greater Beirut area and other strategic regions in Lebanon, as well as a network of 70 branches in the MENA region (outside Lebanon), including ten branches in Jordan (with an additional branch expected to commence operations in Jordan in 2010) and a representative office in the United Arab Emirates (Abu Dhabi). The Bank has three principal subsidiaries in Lebanon, two principal subsidiaries in Europe and five principal subsidiaries in the MENA region outside Lebanon. In addition, on January 15, 2010, the Bank entered into an agreement to acquire Dresdner Bank Monaco SAM; the transaction remains subject to final regulatory approval, which is expected to be obtained on or around June 30, 2010.

Founded in 1830, the Bank was incorporated in its present form in 1962 as a private joint stock company with limited liability (société anonyme libanaise) with a duration of 99 years. The Bank is registered on the Beirut Commercial Registry under number 11347 and on the Lebanese List of Banks as number 56. The initial shareholders of the Bank were members of the Audi family, together with Kuwaiti investors. Since 1983, the shareholder base has expanded. In 2006, the Bank completed a U.S. $600 million capital increase in which EFG-Hermes acquired a significant stake in the Bank. On January 18, 2010, a group of the Bank’s existing shareholders, as well as a number of other high net worth individuals and entities investing directly or through investment vehicles, purchased the entire stake previously owned by EFG-Hermes. The Bank’s GDRs are listed on both the Beirut Stock Exchange and the London Stock Exchange and its Common Shares are listed on the Beirut Stock Exchange.

Since 2005, the Bank has undertaken significant regional expansion and, as of the date of this Prospectus, ranks third in the MENA region in terms of regional coverage with operations in ten countries through a network of branches and subsidiaries developed mainly through green-field operations. As a result of this regional expansion, an increasing percentage of the Bank’s income and profits, as well as its total costs, are contributed by its operations outside Lebanon. Management intends to continue to pursue opportunities in new and existing high value-added markets, both in the MENA region and globally.

As of the date of this Prospectus, the long-term foreign currency deposit obligations of the Bank were rated B1 by Moody’s, while the Bank’s senior debt was rated B by S&P and Fitch Ratings. Moody’s and S&P have each assigned the Bank a positive outlook, while Fitch Ratings has assigned a stable outlook. On a national level, the Bank was assigned Aa1.lb, the highest national rating awarded by Moody’s in Lebanon under Moody’s National Scale Ratings introduced in October 2007 to reflect the relative ranking of creditworthiness within a country (but not globally). A credit rating is not a recommendation by the rating organisation or any other person to buy, sell or hold securities and may be subject to revisions or withdrawal at any time by the assigning rating organisation and each should be evaluated independently from the other.

As of December 31, 2009, the Bank and its consolidated subsidiaries had 4,388 employees, including 2,129 persons employed in Lebanon. The Bank’s head office and registered address is Bank Audi Plaza, Omar Daouk Street, Bab Idriss, Beirut 2021 8102, P.O. Box: 11-2560, Beirut, Lebanon.

Principal Business Activities

Commercial & Corporate Banking

The Bank retains a strong commercial and corporate banking franchise in Lebanon, while continuing to build a significant corporate banking franchise in the MENA region. The Bank offers a wide range of traditional banking products and services to small and medium-sized entities (SMEs), as well as to larger corporates. These products and services generate both interest and fee-based income, with a focus on granting working capital and other loan products, providing services in areas such as collection, trade finance, performance bonds,

guarantees, letters of credit and cash management, advising on international trade, providing correspondent banking and financial consulting services and preparing feasibility studies across a broad spectrum of industry sectors.

Retail Banking

The Bank offers a full range of retail products and services, including conventional checking and savings accounts, fixed-term deposits, loans and residential mortgages, credit cards, bancassurance products and internet banking, as well as a host of innovative retail products and services developed in association with leading partners. The Bank offers 116 retail products and services to more than 500,000 retail accounts inside and outside of Lebanon. Supported by its branch network (which is the largest in Lebanon), as well as its wide spectrum of products and services, the Bank provided retail products and services to 29% of Lebanese households and 22.5% of customers as of December 31, 2009. The Bank’s dynamic customer-focus approach, which aims at enhancing the customer penetration rate with existing products in addition to enlarging the core product offering with the launch of new products, translated into improved results from the Bank’s cross-selling activities to a total of 3.9 products per customer as of December 31, 2009, as compared to 3.4 products per customer as of December 31, 2008 and 2.9 products per customer as of December 31, 2007.

Private Banking

Audi Saradar Private Bank sal, Bank Audi LLC (Qatar), Audi Capital (KSA) and Banque Audi (Suisse) sa collectively represent the Bank’s private banking arm. In Lebanon, the Bank provides private banking services, comprised primarily of wealth management products and services, through Audi Saradar Private Bank s.a.l., the only banking subsidiary in Lebanon entirely dedicated to private banking. Furthermore, since 1976, the Bank has developed an important private banking franchise in Switzerland through Banque Audi (Suisse) sa, the second largest Arab private bank in Switzerland. In parallel, the Bank has wide coverage of the private banking market in the broader MENA region through its subsidiaries in Saudi Arabia and Qatar, and its representative office in the United Arab Emirates, offering its clients trading capabilities, advisory services and traditional discretionary portfolio, as well as asset management services. On January 15, 2010, the Bank entered into an agreement to acquire Dresdner Bank Monaco SAM; the transaction remains subject to final regulatory approval, which is expected to be obtained on or around June 30, 2010. Such acquisition, once finalised, is expected to allow the Bank to expand its offering of private wealth management services to Monaco, Southern France and Northern Italy. As of December 31, 2009, (on a consolidated basis) the Bank had assets under management, custody accounts and fiduciary deposits aggregating U.S. $7 billion, while individual deposits having balances in excess of U.S. $1 million comprised more than one third of the Bank’s deposit base.

Investment Banking

The Bank has developed a substantial capital markets and investment banking franchise in Lebanon and, as of the date of this Prospectus, is a leader in Lebanon in both primary and secondary market activities and economic research. Investment banking mandates (relating to both debt and equity offerings) awarded to the Bank over the past six years involved a cumulative amount in excess of U.S. $6 billion and included several high profile deals out of the MENA region.

Capital Markets

Since 1996, the Bank has developed a substantial capital markets franchise, covering all Lebanese securities (fixed income and equity) and, more recently, securities out of Gulf Cooperation Council (“GCC”) region. The Bank, which is active in the fixed-income market in both primary and secondary market activities, is considered an important market-maker for all Lebanese and most Eurobonds and international sukuks issued by sovereigns, quasi-sovereign institutions and corporates out of the GCC region. In 2009, the Bank’s fixed-income trading activities included annual turnover of U.S. $5.3 billion on Lebanese treasury bills and sovereign Eurobonds and in excess of U.S. $7.4 billion on regional sovereign and corporate bonds, with the Bank accounting for the largest share of equity trading on the Beirut Stock Exchange (30% market share). The Bank’s principal activity in Saudi Arabia and Egypt is in fixed-income trading with a limited activity in equity trading.

Competitive Strengths

As a result of the Bank’s restructuring and expansion program, which has been ongoing since 2005, the Bank has significantly reinforced its presence in Lebanon and throughout the MENA region, as well as diversified the

range of its products and services to cover all the activities traditionally carried out by a universal bank. In particular, the Bank believes that it benefits from:

• a strong franchise in commercial banking activities, with a diversified loan portfolio, including borrowers comprising leading enterprises in Lebanon, as well as a number of leading corporates in the MENA region;

• a strong franchise in retail banking, with a full range of retail products and services offered in all countries where the Bank operates;

• a leading position in private banking, servicing the needs of high net-worth individuals through its subsidiaries; and

• a leading position in domestic and regional capital markets activities, with strong trading operations in Lebanon, Saudi Arabia and Egypt, as well as a growing operation in Jordan.

Strategy

The Bank’s core strategy is to strengthen its domestic franchise and enhance its cross-border activity in high value-added markets. Since 2005, the Bank has engaged in a dynamic regional expansion strategy focused on diversifying its market presence. In pursuing this regional expansion, the Bank has grown rapidly in a number of markets in the region, developing a network of branches and subsidiaries (mainly through the establishment of “green-field” operations) in each country where the Bank has begun or expanded operations. As a result, in addition to its historic presence in Lebanon and Europe (France and Switzerland), the Group is now present in Egypt, Gibraltar, Jordan, Qatar, Saudi Arabia, Sudan and Syria, as well as in the United Arab Emirates through a representative office, with initial favorable results. In addition, on January 15, 2010, the Bank entered into an agreement to acquire Dresdner Bank Monaco SAM; the transaction remains subject to final regulatory approval, which is expected to be obtained on or around June 30, 2010. The Bank’s newly-built regional franchise of U.S. $5.1 billion in assets as of December 31, 2009 (mainly in Egypt, Jordan and Syria) is contributing an increasing percentage of the Bank’s consolidated assets and earnings, positioning the Bank as the fourth largest bank, among the top 15 largest Arab banking groups, in terms of regional coverage (measured by number of offices through subsidiaries or branch networks in countries in the MENA region).

Management believes that, following the Bank’s successful transformation from a domestic commercial bank into a full-service regional universal bank, the newly-built franchise can take advantage of further growth opportunities, particularly as the region’s largest banks appear to be mainly focused on their own domestic markets. The Bank’s medium-term target is to reach a balanced breakdown of assets and earnings between its Lebanese operations and its foreign operations, with a view to improving the quality of the Bank’s consolidated earnings, strengthening its ability to mitigate risks and permitting improvements in the Bank’s international and regional ratings.

To this end, the Bank intends to pursue opportunities in new high value-added markets, particularly in North Africa where Management believes there are attractive prospects for new business. At the same time, the Bank will aim to continue to strengthen its three main business lines (retail banking, corporate and commercial banking and private banking) in markets where it is already present. In particular, the Bank plans to further consolidate its retail franchise in Lebanon and throughout the MENA region by continuing to build a strong regional network of branches to support an expanding customer base. The Bank aims to rank among the top three to five regional private sector banks in every country where it is present.

The Bank will seek to further strengthen its corporate business relationships based on a three-fold plan aimed at (i) developing the Bank’s corporate offerings in all markets where it conducts operations; (ii) becoming a privileged partner of large regional corporate customers; and (iii) growing its syndication activities. The Bank also intends to grow its private banking activities through the creation of an Executive Committee for Private Banking designed to develop and implement an umbrella structure coordinating the Bank’s various private banking operations and promoting synergies across the Bank’s existing private banking platforms in France, Lebanon, Qatar, Saudi Arabia, Switzerland and the United Arab Emirates and its newly-acquired private banking operations in Monaco (subject to final regulatory approval), while also permitting the Bank to expand private banking activities to the United Kingdom.

Overall, the Bank will focus on continuing to develop one of the widest full-service networks in the region by both business lines and coverage, with a particular focus in countries still lacking full-service banking institutions. Management believes that the Bank will be able to benefit from significant cross-selling opportunities available to it as a result of its full offering of products and services and its integrated regional customer base. In this respect, the Bank will particularly seek to access the 328 million Arab citizens and diaspora residing in the MENA region and to take advantage of the region’s fast-growing intra-regional trade.

Subsidiaries

The following table sets forth certain information about the Bank’s principal subsidiaries:

Establishment (1) Activity Country Date Supervisory Authority Lebanon Audi Saradar Private Bank sal.. Private banking Lebanon 1948 Central Bank of Lebanon Audi Saradar Investment Bank sal...... Investment banking Lebanon 1974 Central Bank of Lebanon Ministries of Economy & LIA Insurance sal ...... Insurance company Lebanon 1974 Trade Europe Bank Audi Saradar France sa ... Commercial banking France 1979 Central Bank of France Swiss Federal Banking Banque Audi Suisse SA...... Private banking Switzerland 1976 Commission Middle East Bank Audi Syria sa...... Commercial banking Syria 2005 Central Bank of Syria Bank Audi sae ...... Commercial banking Egypt 2006 Central Bank of Egypt Bank Audi sal – Jordan branch network...... Commercial banking Jordan 2004 Central Bank of Jordan National Bank of Sudan...... Islamic banking Sudan 2006 Central Bank of Sudan Saudi Capital Market Audi Capital – KSA ...... Investment company Saudi Arabia 2006 Authority Syrian Arab Insurance...... Insurance company Syria 2006 Ministry of Economy Corporate and Bank Audi LLC...... private banking Qatar 2007 Qatar Financial Center

______Note: (1) The Central Bank of Lebanon is responsible for the Bank’s supervision on a consolidated basis. Information regarding all of The Bank’s subsidiaries and strategic and non-strategic investments is set forth in Note 2 to the Bank’s Audited Consolidated Financial Statements as of and for the year ended December 31, 2008 included elsewhere in this Prospectus. Similar information will be included in the Bank’s Audited Consolidated Financial Statements as of and for the year ended December 31, 2009. Audi Saradar Investment Bank sal (“Audi Saradar Investment Bank”)

The Bank owns 99.99 per cent. of the issued share capital of Audi Saradar Investment Bank. Audi Saradar Investment Bank was established in 1974 under the name of “Investment and Finance Bank sal” (INFI) as a “specialised bank” under Decree Law No. 22/67 (as amended by Decree Law No. 50 of July 15, 1983 and by Decree Law No. 85 of September 16, 1983); it changed its name to “Audi Saradar Investment Bank sal” in October 2004 following the merger of Banque Audi S.A.L. with Banque Saradar S.A.L. As a “specialised bank”, Audi Saradar Investment Bank is subject to certain restrictions on its funding and lending activities, but benefits from exemptions from reserve requirements in Lebanese Pounds otherwise applicable to commercial banks and from other regulatory advantages. Since March 31, 1997, specialised banks, including Audi Saradar Investment Bank, have been exempted from Central Bank reserve requirements, provided that they maintain a ratio of at least 1:1 between loans to the private sector and loans to the public sector (including investments in Lebanese treasury bills). Specialised banks can invest up to 50.0 per cent. of their aggregate deposits with a maturity of at least five years in equity and other similar securities without being subject to limits on such investments applicable to commercial banks. As a “specialised bank”, Audi Saradar Investment Bank is not permitted to take short-term deposits or make short-term loans, all deposits being required to have a minimum maturity of six months and all loans being required to have a minimum tenor of two years.

Audi Saradar Investment Bank had shareholders’ equity of LL 184.3 billion (U.S. $122.3 million) as of December 31, 2009, as compared to LL 181.1 billion (U.S. $120.1 million) as of December 31, 2008, and net

income after tax of LL 15 billion (U.S. $9.9 million) for the year ended December 31, 2009, as compared to LL 9.4 billion (U.S. $6.2 million) for the year ended December 31, 2008. As of December 31, 2009, Audi Saradar Investment Bank had total assets of LL 1,176.7 billion (U.S. $780.6 million) and total liabilities of LL 992.2 billion (U.S. $658.2 million), as compared to LL 1,459 billion (U.S. $968 million) and LL 1,278 billion (U.S. $847.9 million), respectively, as of December 31, 2008. Audi Saradar Investment Bank’s total liabilities consisted principally of deposits from the Bank and its foreign sister banks totaling LL 166.8 billion (U.S. $110.6 million), deposits from customers of LL 657 billion (U.S. $435.8 million) and certificates of deposit totaling LL 153.1 billion (U.S. $ 101.6 million) as of December 31, 2009, as compared to LL 114 billion (U.S. $75 million), LL 992.5 billion (U.S. $658.4 million) and LL 153.1 billion (U.S. $101.6 million), respectively, as of December 31, 2008.

Audi Saradar Investment Bank currently serves a dual purpose within the Group: it has a medium and long- term lending mission and it serves as the main entity through which traditional investment banking activities are undertaken by the Bank.

Audi Saradar Investment Bank is an active member of the Beirut Stock Exchange, accounting for trades in equity representing approximately 30 per cent. by value of all trades made on this Exchange during 2009. In addition, because of regulatory advantages, which Audi Saradar Investment Bank enjoys as a “specialised bank”, Audi Saradar Investment Bank acts as the booking entity for some of the Bank’s long-term credit facilities.

In accordance with the Bank’s strategic objective to expand its retail banking activities, Audi Saradar Investment Bank assists the Bank in developing and marketing new retail products and provides certain of the Bank’s retail banking services.

Through Audi Saradar Investment Bank, the Bank holds a substantial portfolio of Lebanese Pound-denominated treasury bills and foreign currency-denominated obligations issued by non-governmental institutions. As of December 31, 2009, the aggregate principal amount of Lebanese Pound-denominated treasury bills held by Audi Saradar Investment Bank, including accrued interest, was LL 520.5 billion (U.S. $ 345.3 million), as compared to LL 820.4 billion (U.S. $544.2 million) as of December 31, 2008; this portfolio had a remaining average life of 522 days as of December 31, 2009, as compared to 789 days as of December 31, 2008. As of December 31, 2009, Audi Saradar Investment Bank also held in its investment portfolio U.S. Dollar-denominated bonds and certificates of deposits issued by local and regional banks or corporates having an aggregate principal amount of U.S. $187.8 million (as compared to U.S. $140 million as of December 31, 2008) and a remaining average life of 1,027 days (as compared to 1,342 days as of December 31, 2008), as well as a portfolio of exchange and over-the-counter traded equity securities, which was valued at U.S. $2.3 million as of December 31, 2009, as compared to U.S. $3.2 as of December 31, 2008. In addition, Audi Saradar Investment Bank acts as the booking entity through which some of the Bank’s strategic equity investments are held and Audi Saradar Investment Bank, through its subsidiary, Infi Gamma Holding sal, acts as the booking entity through which all of the Bank’s non-strategic equity investments are held.

The registered office of Audi Saradar Investment Bank is at Bank Audi Plaza, Omar Daouk Street, Bab Idriss, Beirut 2021 8102, P.O. Box: 16-5110, Beirut, Lebanon.

Audi Saradar Private Bank sal (“Audi Saradar Private Bank”)

The Bank owns 99.99 per cent. of the issued share capital of Audi Saradar Private Bank . Audi Saradar Private Bank was established in 1956 under the name of “Banque Saradar sal”. Audi Saradar Private Bank changed its name to “Audi Saradar Private Bank sal” in October 2004.

Audi Saradar Private Bank acts as the local private banking arm of the Group.

Audi Saradar Private Bank offers its customers tailor-made products to complement their portfolios and investment strategies, as well as access to a number of leading world-class multi-manager funds and hedge funds, structured products, fiduciary services and local and international investments that provide attractive wealth preservation, asset management and asset diversification opportunities. In particular, in 2004, Audi Saradar Private Bank entered into an agreement with “Russell Investment Group” (a global leader in multi- manager investing) to give its clients access to quality institutional investments benefiting from the expertise of some of the best fund managers in the world. Audi Saradar Private Bank also provides its customers with real estate investment opportunities in Lebanon and Europe.

Audi Saradar Private Bank had shareholders’ equity of LL 148.5 billion (U.S. $98.5 million) as of December 31, 2009, as compared to LL 139.3 billion (U.S. $92.4 million) as of December 31, 2008, and net income after tax of LL 23.04 billion (U.S. $15.3 million) for the year ended December 31, 2009, as compared to LL 17.2 billion (U.S. $11.4 million) for the year ended December 31, 2008. As of December 31, 2009, Audi Saradar Private Bank had total assets of LL 2,938 billion (U.S. $1,949 million) and total liabilities of LL 2,790 billion (U.S. $1,851 million), as compared to LL 1,961 billion (U.S. $1,301 million) and LL 1,822 billion (U.S. $1,208 million), respectively, as of December 31, 2008. Audi Saradar Private Bank’s total liabilities as of December 31, 2009 consisted principally of deposits from the Bank and other Group entities totaling 26.5 billion (U.S. $17 million) and deposits from customers totaling LL 2,736 billion (U.S. $1,815 million), as compared to LL 23.8 billion (U.S. $16 million) and LL 1,775 billion (U.S. $1,177 million), respectively, as of December 31, 2008.

The registered office of Audi Saradar Private Bank is at Clover Building., Charles Malek Avenue, 1107 2805 Beirut – Lebanon, P.O. Box: 11-1121 & 11-3312 Riad El-Solh, Beirut, Lebanon.

LIA Insurance sal (“LIA Insurance”)

The Bank owns 91.42 per cent. of the issued share capital of LIA Insurance. LIA Insurance was established in 1974 under the name of “Libano-Arabe sal”, under the supervision and regulation of the Ministry of Trade and Economy and is registered under Decree No. 8224 of June 26, 1974. LIA Insurance changed its name to “LIA Insurance sal” on May 2, 2009. In 1975, LIA Insurance commenced its insurance activities in Lebanon.

LIA Insurance is one of the leading insurance companies in Lebanon and benefits from international relationships with many of the world’s largest reinsurance companies. Through its branches located throughout Lebanon, LIA Insurance offers individual, corporate and institutional customers easy access to a wide range of financial and insurance services, including engineering, liability, marine, medical, property, vehicle, life and personal accident insurance.

LIA Insurance began its expansion outside Lebanon by acquiring (directly and indirectly) a significant stake in an insurance company in Syria, Syrian Arab Insurance S.A. As of December 31, 2009, the Bank owned 45.9% of the outstanding share capital of Syrian Arab Insurance S.A, including 13.5% owned by LIA Insurance.

For the year ended December 31, 2009, LIA Insurance generated insurance premiums totaling LL 87.14 billion (U.S. $ 57.83 million), as compared to LL 86.21 billion (U.S. $57.21 million) for the year ended December 31, 2008. As of December 31, 2009, it had shareholders’ equity of LL 91.50 billion (U.S. $61 million), total assets of LL 319.9 billion (U.S. $ 212.12 million) and total liabilities of LL 228.37 billion (U.S. $ 151.48 million), as compared to LL 82.17 billion (U.S. $55.0 million), LL 261.92 billion (U.S. $173.74 million) and LL 179.74 billion (U.S. $119.23 million), respectively, as of December 31, 2008.

The registered office of LIA Insurance is at P.O. Box 11-1439, Beirut, Lebanon.

Bank Audi Saradar (France) SA (“Audi Saradar France”)

The Bank owns 99.99 per cent. of the issued share capital of Audi Saradar France. Audi Saradar France was established on May 7, 1979, under the name “Banque Audi (France) SA”, as a French joint stock company with the objective of performing general banking operations, including operations and undertakings relating to commercial banking, real estate, merchant banking and investment banking. Audi Saradar France changed its name to Bank Audi Saradar (France) SA on February 21, 2005.

Audi Saradar France is principally a commercial bank, taking deposits mainly from non-French residents and lending to Middle-Eastern entrepreneurs. In accordance with its policy to maintain a high liquidity ratio at all times, the majority of loans extended by Audi Saradar France are short-term and for trade finance purposes, often in the form of letters of credit and letters of guarantee. Since 2003, Audi Saradar France has also developed significant treasury and foreign exchange operations and provided value-added services, such as structured finance products and financial advisory services.

Audi Saradar France had shareholders’ equity of Euro 69.97 million (U.S. $100.19 million) as of December 31, 2009, as compared to Euro 64.6 million (U.S. $91.6 million) as of December 31, 2008 and net income after tax of Euro 5.3 million (U.S. $7.4 million) for the year ended December 31, 2009, as compared to Euro 8.1 million (U.S. $11.7 million) for the year ended December 31, 2008. As of December 31, 2009, Audi

Saradar France had total assets of Euro 623.9 million (U.S. $893.7 million) and total liabilities of Euro 553.91 million (U.S. $793.1 million), as compared to Euro 651.3 million (U.S. $923.2 million) and Euro 586.6 million (U.S. $831.6 million), respectively, as of December 31, 2008.

The registered office of Audi Saradar France is at 73, Champs Elysees Ave., 75008 Paris, France.

Banque Audi (Suisse) SA (“Audi Suisse”)

The Bank owns 99.99 per cent. of the issued share capital of Audi Suisse. Audi Suisse, which has been established in Switzerland since 1976, is dedicated to international private banking. It serves the asset management needs of wealthy individuals through a broad spectrum of investment products. The services offered to clients include discretionary investment management, transaction executions, foreign exchange, current accounts and Lombard lending facilities. Audi Suisse provides customers with access to the international equity and bond markets whilst offering personalised investment advisory services.

Audi Suisse is a fully licensed bank in Switzerland. As such, it is subject to Swiss banking regulations and is regulated by the Swiss Financial Market Supervisory Authority (FINMA). It is also subject to capital adequacy ratios in compliance with the Basel Accords, as well as country specific liquidity and interest rate exposure requirements.

As of December 31, 2009, Audi Suisse had customers’ deposits of CHF 590.7 million (U.S. $568.7 million) and shareholders’ equity totaling CHF 111.9 million (U.S. $107.7 million), as compared to CHF 238.6 million (U.S. $ 226 million) and CHF 104.7 million (U.S. $99.1 million), respectively, as of December 31, 2008, and net profit after tax of CHF 8.2 million (U.S. $7.7 million) for the year ended December 31, 2009, as compared to CHF 11.8 million (U.S. $11.1 million) for the year ended December 31, 2008 . During 2009, Audi Suisse conducted asset-under-management and fiduciary operations in respect of securities valued at CHF 3.0 billion (U.S. $2.8 billion) (as compared to CHF 3.1 billion (U.S. $2.9 billion) in 2008). Audi Suisse employed a total of 80 people as of December 31, 2009.

The registered office of Audi Suisse is at 18 Cours des Bastions, 1205, Geneva, Switzerland.

Bank Audi Syria s.a. (“Audi Syria”)

The Bank owns 41% per cent of the issued share capital of Audi Syria, while each of Lebanon Invest and Audi Saradar Investment Bank owns an additional 3%. Audi Syria, which has been established in the Syrian Arab Republic as a joint stock Company on August 30, 2005, is licensed as a conventional bank engaged in corporate, retail and treasury activities with a network of 21 branches.

Audi Syria’s shares were listed on the Damascus Security Exchange on March 10, 2009. As a listed joint stock company, Audi Syria is subject to all rules and regulations of the Syrian Commission of Financial Markets and Securities, as well as those of the Damascus Securities Exchange. The Bank is also regulated by the Central Bank of Syria.

As of December 31, 2009 Audi Syria had customers’ deposits of SYP 68.0 billion (U.S. $1.5 billion) and shareholders equity of SYP 6.1 billion (U.S. $134 million) as compared to SYP 52.9 billion (U.S. $1.1 billion) and SYP 3.1 billion (U.S. $66.1 million) respectively as of December 31, 2008 and net profit after tax SYP 626.2 million (U.S. $13.4 million) for the year ended December 31, 2009.

Audi Syria employed 470 employees, 27 trainees and 4 consultants as of December 31, 2009.

The registered office of Audi Syria is at Kafarsouseh, Cham City Center, Plaza 86 Bldg., Street No.2, Tanzeem Kafarsouseh, Damascus, P.O. Box 6228 Damascus, Syria.

Bank Audi S.A.E. (“Audi Egypt”)

The Bank owns 99.99 per cent. of the issued share capital of Audi Egypt. Audi Egypt was established in 2006 in the Arab Republic of Egypt as a commercial bank engaged in corporate, retail and treasury activities. As of December 31, 2009, Audi Egypt had a network of 29 branches offering a wide array of asset and liability products and services to 46,203 account holders.

Audi Egypt is subject to Egyptian banking regulations and is regulated by the Central Bank of Egypt. It is also subject to capital adequacy ratios in compliance with the Basel Accords, as well as country specific liquidity and interest rate exposure requirements.

As of December 31 2009, Audi Egypt had customers’ deposits of EGP 9.5 billion (U.S. $1.7 billion) and shareholders’ equity of EGP 1.3 billion (U.S. $239 million), as compared to EGP 6.8 billion (U.S. $1.2 billion) and EGP 1.2 billion (U.S. $214 million), respectively, as of December 31, 2008, and net profit after tax of U.S. $22.1 million for the year ended December 31, 2009, as compared to U.S. $13.7 million for the year ended December 31, 2008.

Audi Egypt employed 710 persons as of December 31, 2009.

The registered office of Audi Egypt is at Pyramids Heights Office Park, Cairo- Alexandria Desert Road, Km 22, Sixth of October City.

National Bank of Sudan

The Bank owns 76.56 per cent. of the issued share capital of National Bank of Sudan since December 2008. The National Bank of Sudan was established in Sudan in 1981 by various prominent Sudanese businessmen and families. In September 2006, the Bank acquired its shareholding in National Bank of Sudan through a capital injection of SDG 112.5 million (U.S. $53.6 million), which increased the bank’s capital to SDG 150 million (U.S. $71.4 million).

The National Bank of Sudan is the first Islamic bank within the Group dedicated to offering Sharia-compliant products and services to both corporate and retail customers. A Sharia supervisory board has been established to ensure that all operations, products and services are Sharia-compliant.

As of December 31, 2009, National Bank of Sudan had shareholders’ equity of SDG 190.9 million (U.S. $82.2 million) and total assets of SDG 530.5 million (U.S. $228.7 million), as compared to SDG 180.0 million (U.S. $82.2 million) and SDG 558.9 million (U.S. $255.2 million), respectively, as of December 31, 2008.

The registered office of National Bank of Sudan is at Kasr Avenue, PO Box 1183 Khartoum Sudan.

Audi Capital-KSA (“Audi Capital”)

The Bank owns 99.9933 per cent. of the issued share capital of Audi Capital. Audi Capital was established in the Kingdom of Saudi Arabia on January 8, 2007 under the name of “Audi Saudi Arabia” and changed its name to Audi Capital KSA on July 20, 2009.

Audi Capital offers Saudi corporate and individual clients premium investment banking, wealth management, asset management and brokerage services in accordance with best international practices with a regional perspective.

Audi Capital’s strategy is to take advantage of the expected growth in the Saudi economy, as well as the fast- paced economic and regulatory changes affecting the MENA region in general and the GCC region in particular.

Audi Capital had shareholders’ equity of SAR 280.6 million (U.S. $74.5 million) as of December 31, 2009, as compared to SAR 279.7 million (U .S. $74.5 million) as of December 31, 2008, and net losses before income taxes of SAR (13.3 million) (U.S. $ (3.5 million)) for the year ended December 31, 2009, as compared to net losses before income taxes of SAR (28.5 million) (U.S. $(7.6 million)) for the year ended December 31, 2008. As of December 31, 2009, Audi Capital had total assets of SAR 470.1 million (U.S. $125.32 million) and total liabilities of SAR 189.4 million (U.S. $50.5 million), as compared to SAR 484.5 million (U.S. $129.1 million) and SAR 204.8 million (U.S. $54.2 million), respectively, as of December 31, 2008. As of December 31, 2009, Audi Capital had assets under management of SAR 1.29 billion (U.S. $343.93 million), as compared to SAR 759.5 million (U.S. $202.4 million) as of December 31, 2008.

The registered office of Audi Capital is Centria Bldg, 3rd Floor, Olaya Road, Riyadh, Kingdom of Saudi Arabia.

Bank Audi LLC (“Audi Qatar”)

The Bank owns 98 per cent. of the issued share capital of Audi Qatar (with the remaining two per cent. equally owned by Audi Saradar Investment Bank and Audi Saradar Private Bank). Audi Qatar, which began operations on November 11, 2007, is a fully licensed bank incorporated and registered as a limited company in the Qatar Financial Centre (the “QFC”) under license number 00027. As such, the Bank is subject to QFC and Qatar Financial Centre Regulatory Authority (the “QFCRA”) rules and regulations and is regulated by the QFCRA.

QFC regulations require that each individual customer have at least U.S. $1 million in liquid assets and each corporate customer have at least U.S. $5 million in net assets in order to be eligible to open a bank account with a bank. Audi Qatar, which has a customer-base comprised of both resident and non-resident customers, performs both on-shore and off-shore banking activities.

Audi Qatar provides its customers with diversified banking services, mainly focused on corporate banking, trade finance and private banking. By its charter, Audi Capital’s authorised activities comprise deposit taking, arranging and providing credit facilities, advising on, dealing in and arranging deals in investments and arranging for and providing custody services.

Audi Qatar had a loan portfolio of U.S. $96 million, outstanding letter of guarantees totaling U.S. $185 million and assets under management of U.S. $68 million as of December 31, 2009, as compared to U.S. $108.7 million, U.S. $17 million and U.S. $0 million, respectively, as of December 31, 2008, and net profit of U.S. $3.4 million for the year ended December 31, 2009, as compared to U.S. $1.5 million for the year ended December 31, 2008.

The registered office of Audi Qatar is Qatar Financial Centre, Office 1801, 18th Floor, Qatar Financial Centre Tower, Diplomatic Area, Doha, P.O. Box: 23270 Doha, Qatar.

Investments

The Bank holds a portfolio of trading and investment securities, consisting of both debt and equity securities and characterised by a large exposure to the Lebanese Government.

Exposure to the Lebanese Government

The Bank’s portfolio of Lebanese treasury bills has increased from LL 1,047 billion as of December 31, 2007, to LL 3,109 billion and LL 4,046 billion as of December 31, 2008 and 2009, respectively. In addition, as of December 31, 2009, the Bank held LL 702 billion in aggregate principal amount of net sovereign bonds issued by Lebanon and LL 5,346 billion in certificates of deposit issued by the Central Bank, as compared to LL 585 billion and LL 3,523 billion, respectively, as of December 31, 2008 and LL 2,565 billion and LL 2,472 billion, respectively, as of December 31, 2007. See “Management’s Discussion and Analysis of Financial Conditions and Results of Operations—Consolidated Results of Operation and Financial Condition—Securities Portfolio, including Exposure to Lebanese Government Risk” for further information relating to the distribution of the Bank’s securities portfolio, by type of security, as of December 31, 2009, 2008 and 2007, respectively.

Branch Network The Bank’s head office is currently located at Bank Audi Plaza, Omar Daouk Street, Bab Idriss, Beirut, Lebanon. As of December 31, 2009, the Bank had 80 branches operating in its local network covering the Greater Beirut area and other strategic regions in Lebanon, as well as a network of 70 branches in the MENA region (outside Lebanon), including ten branches in Jordan (with an additional branch expected to commence operations in Jordan in 2010) and a representative office in the United Arab Emirates (Abu Dhabi).

As of the date of this Prospectus, the Bank operates a network of 279 ATMs, including 153 ATMs in Lebanon (of which 111 are installed in branches and 42 are installed at off-site locations). Twenty additional new ATMs are expected to be installed in Lebanon by the end of 2010.

Property

The Bank uses its real estate portfolio to house its branch network and head office operations. Of the 80 branch offices of the Bank, which are operational, as of the date of this Prospectus, 56 are owned by the Bank, 17 are located on premises, which are leased from other companies, and seven are temporarily non-operational.

The Bank owns its head office building, which is located in the Beirut Centre District with floor space of approximately 20,256 square meters and was opened in July 2001. The Loan Portfolio

The following is a discussion of the Bank’s loan portfolio and lending activities on a consolidated basis as of December 31, 2009, 2008 and 2007, respectively.

The majority of the Bank’s lending consists of financing working capital or providing trade finance to small and medium-sized businesses in Lebanon and abroad. Working capital financing is provided by way of credit lines, overdraft facilities and short-term loans (with terms of less than one year). The Bank’s concentration on short- term financing stems from the fact that the Bank’s funding sources have historically consisted to a large extent of short-term deposits. The Bank also offers structured medium and long-term loans, as well as medium and long-term receivables discounting, to corporate clients and medium and long-term project loans on a full recourse basis. Over the three year-period ended December 31, 2009, the size of the loan portfolio has grown, largely as a result of an increase in structured loans with fixed-maturities participations in syndicated loans and consumer loans.

Analysis of Loans by Class of Borrower

The following table shows the distribution of the Bank’s loan portfolio by class of borrower, as of December 31, 2009, 2008 and 2007, respectively: As of December 31, 2009 2008 2007 (LL (per cent.) (LL (per cent.) (LL (per cent.) Million) Million) Million)

Corporate clients(1) ...... 5,884,551 57.9 5,980,328 64.7 4,470,149 63.0 Small and medium-sized 1,743,820 17.1 1,540,149 16.7 905,431 12.8 institutions...... Retail and personal banking ...... 2,373,143 23.3 1,642,279 17.8 1,665,436 23.5 Public sector ...... 169,166 1.7 76,881 0.8 55,578 0.8 Total...... 10,170,680 100.0 9,239,637 100.0 7,096,594 100.0 ______Note: (1) Corporate clients are established companies with turnover exceeding U.S. $5 million. Loans to corporate clients decreased by 1.6 per cent. and constituted 57.9 per cent. of the Bank’s loan portfolio as of December 31, 2009, as compared to 64.7 per cent. per cent. as of December 31, 2008. In comparison, loans to small and medium-sized institutions increased by 13.2 per cent., increasing as a percentage of total loans to 17.1 per cent. of the Bank’s loan portfolio as of December 31, 2009 from 16.7 per cent. as of December 31, 2008. This distribution reflects the Bank’s strategy to target well-established corporate clients with sound financial standing, although, subject to its strict credit policy, the Bank also intends to maintain and further increase its small and medium-sized client base as these customers continue to constitute a potential profitable market and offer a greater diversification of risk.

Analysis of Loans by Principal Amount The following table shows the distribution of the Bank’s loan portfolio by principal amount, as of December 31, 2009, 2008 and 2007, respectively:

As of December 31, 2009 2008 2007 In LL Million (LL Million) (per cent.) (LL Million) (per cent.) (LL Million) (per cent.)

Less than 40...... 872,585 8.6 620,120 6.7 262,260 3.7 Between 40 and 300...... 535,505 5.3 520,627 5.6 361,885 5.1 Between 300 and 750...... 360,947 3.5 310,593 3.4 292,382 4.1 Between 750 and 1,500...... 355,911 3.5 346,198 3.7 317,713 4.5 Between 1,500 and 7,500...... 1,931,128 19.0 1,701,111 18.4 1,453,391 20.5 Between 7,500 and 15,000...... 1,472,249 14.5 1,279,374 13.8 1,035,490 14.6 Greater than 15,000 ...... 4,642,355 45.6 4,461,614 48.3 3,373,473 47.5 Total...... 10,170,680 100.0 9,239,637 100.0 7,096,594 100.0

The distribution of the Bank’s loans by amount reflects a concentration of loans in amounts greater than LL 15,000 million, with such loans constituting 45.6 per cent. of the loan portfolio as of December 31, 2009, as compared to 48.3 per cent. as of December 31, 2008 and 47.5% as of December 31, 2007.

Although the composition of the Bank’s loan portfolio by principal amount remained relatively stable, loans of less than LL 40 million increased, as a percentage of the loan portfolio to 8.6 per cent. as of December 31, 2009, as compared to 6.7 per cent. as of December 31, 2008 and 3.7 per cent. as of December 31, 2007, in parallel with the overall increase in the size of the Bank’s portfolio of retail loans.

Analysis of Loans by Number of Borrowers The following table shows the distribution of the Bank’s loan portfolio by number of borrowers, as of December 31, 2009, 2008 and 2007, respectively:

As of December 31, 2009 2008 2007 In LL Million (Number of (per cent.) (Number of (per cent.) (Number of (per cent.) borrowers) borrowers) borrowers)

Less than 40...... 152,670 94.0 112,107 91.4 86,116 93.3 Between 40 and 300...... 7,254 4.5 7,892 6.4 4,351 4.7 Between 300 and 750...... 954 0.6 1,023 0.8 721 0.8 Between 750 and 1,500...... 463 0.3 512 0.4 362 0.4 Between 1,500 and 7,500...... 723 0.4 749 0.6 523 0.6 Between 7,500 and 15,000..... 177 0.1 173 0.1 120 0.1 Greater than 15,000 ...... 164 0.1 176 0.1 94 0.1 Total...... 162,405 100.0 122,632 100.0 92,287 100.0 The average loan per borrower decreased from LL 76.9 million as of December 31, 2007, to LL 75.3 million as of December 31, 2008 and further to LL 62.6 million as of December 31, 2009, as a result of the Bank’s strategy to increase its portfolio. Analysis of Loans by Type of Loan

The following table shows the distribution of the Bank’s loan portfolio by type of loan, as of December 31, 2009, 2008 and 2007, respectively:

As of December 31, 2009 2008 2007 (LL Million) (per cent.) (LL Million) (per cent.) (LL Million) (per cent.) Overdrafts...... 2,747,808 27.0 2,798,812 30.3 2,341,447 33.0 Terms loans(1) ...... 7,422,872 73.0 6,440,825 69.7 4,755,147 67.0 Total...... 10,170,680 100.0 9,239,637 100.0 7,096,594 100.0 ______Note: (1) Term loans include medium and long-term debt (including government subsidised loans and housing loans), as well as long-term portions of retail installment facilities. The Bank’s current strategy focuses on granting structured products with overdraft facilities constituting 27.0 per cent. of the loan portfolio as of December 31, 2009, as compared to 30.3 per cent. as of December 31, 2008, representing a decrease of 3.3 per cent.

Analysis of Loans by Economic Sector

The following table shows the distribution of the Bank’s loan portfolio by economic sector, as of December 31, 2009, 2008 and 2007, respectively:

As of December 31, 2009 2008 2007 (LL Million) (per cent.) (LL Million) (per cent.) (LL Million) (per cent.) Agriculture ...... 45,086 0.4 56,828 0.6 24,590 0.3 Extractive industry ...... 1,374 0.0 5,184 0.1 - Manufacturing industries...... 1,761,183 17.3 1,729,597 18.7 1,066,727 15.0 Electricity, gas, water and 150,729 1.5 91,917 1.0 135,951 1.9 telecommunication ...... Construction ...... 731,280 7.2 779,208 8.4 764,245 10.8 Wholesale and retail trade ...... 1,925,682 18.9 1,812,204 19.6 1,431,836 20.2 Hotels and restaurants ...... 116,934 1.1 135,522 1.5 152,812 2.2 Transportation and 1,005,686 9.9 926,618 10.0 980,972 13.8 warehousing ...... Financial services and 1,019,379 10.0 771,332 8.3 795,825 11.2 brokerage...... Real estate services...... 616,403 6.1 612,783 6.6 359,645 5.1 Public administration...... 2,267 0.0 7,483 0.1 - Professional services ...... 281,034 2.8 229,754 2.5 161,641 2.3 Regional and international 114,733 1.1 29,119 0.3 - organizations ...... Individuals (excluding 1,667,189 16.4 1,093,885 11.8 623,724 8.8 housing)(1)...... Individuals – housing ...... 630,045 6.2 444,600 4.8 307,153 4.3 Others...... 101,677 1.0 513,603 5.6 291,473 4.1 Total...... 10,170,680 100.0 9,239,637 100.0 7,096,594 100.0 ______Note: (1) Includes retail products and private banking clients.

The Bank’s loan portfolio is fairly diversified and stable by economic sector. Loans to manufacturing, consumer loans and wholesale trading loans comprise the largest components. Analysis of Loans by Maturity

The following table shows the maturity profile of the Bank’s loan portfolio as of December 31, 2009, 2008 and 2007, respectively:

As of December 31, 2009 2008 2007 (LL Million) (per cent.) (LL Million) (per cent.) (LL Million) (per cent.) Less than 1 year ...... 6,657,716 65.5 6,692,466 72.4 4,217,703 59.4 1 to 5 years...... 3,142,108 30.9 1,792,171 19.4 1,980,477 27.9 Over 5 years...... 370,856 3.6 755,000 8.2 898,414 12.7 Total...... 10,170,680 100.0 9,239,637 100.0 7,096,594 100.0 Loans with maturities less than 1 year constituted 65.5 per cent. of total loans as of December 31, 2009, as compared to 72.4 per cent. as of December 31, 2008 and 59.4 per cent. as of December 31, 2007, while loans with maturities between 1 and 5 years increased, as a percentage of total loans, to 30.9 per cent. as of December 31, 2009, as compared to 19.4 per cent. and 27.9 per cent. as of December 31, 2008 and 2007, respectively. Loans with maturities over 5 years decreased, as a percentage of total loans, to 3.6 per cent as of December 31, 2009, as compared to from 8.2 per cent. and 12.7 per cent. as of December 31, 2008 and 2007, respectively.

Analysis of Loans by Currency

The following table shows the distribution of the Bank’s loan portfolio by currency, as of December 31, 2009, 2008 and 2007, respectively:

As of December 31, 2009 2008 2007 (per cent.) Lebanese Pound...... 4.6 3.6 4.3 Foreign currencies of which...... 95.4 96.4 95.7 U.S. $...... 63.5 65.5 66.10 Euro ...... 8.3 8.0 10.5 Other...... 23.6 22.9 19.1 The Bank’s foreign currency lending in U.S. Dollars and Euros decreased to 71.8 per cent. of the Bank’s loan portfolio as of December 31, 2009, as compared to 73.5 per cent. as of December 31, 2008 and 76.65 per cent. as of December 31, 2007, respectively. The decrease in U. S. Dollar and Euro-denominated loans resulted primarily from the diversification of the loan portfolio in other currencies due to the Bank’s presence in Egypt, Syria and other MENA regions. Analysis of Loans by Type of Collateral

The following table shows the distribution of the Bank’s loan portfolio by type of collateral, as of December 31, 2009, 2008 and 2007, respectively:

As of December 31, 2009 2008 2007 (per cent.)

Secured ...... 41.0 40.1 43.2 of which: Covered by cash collateral and bank guarantee...... 20.6 21.1 23.2 Covered by real estate mortgage...... 10.1 8.9 10.0 Covered by securities (equity and bonds)...... 10.2 10.0 10.0 Personal guarantee...... 19.8 21.1 17.5 Unsecured ...... 39.2 38.8 39.3 Total...... 100.0 100.0 100.0

The Bank’s loan portfolio is highly secured, with loans having the benefit of some type of collateral (other than personal guarantees) comprising 41.0 per cent. of total loans as of December 31, 2009, 40.1 per cent. as of December 31, 2008 and 43.2 per cent. as of December 31, 2007. The principal forms of collateral securing the Bank’s loans comprise cash collateral and bank guarantees.

Analysis of Loans to Related Parties

The following table shows the distribution of the Bank’s loans to related parties (as defined by Article 152 of the Code of Money and Credit) as of December 31, 2009, 2008 and 2007, respectively:

As of December 31, 2009 2008 2007 (LL Million) Related parties Direct facilities...... 239,824 256,876 268,277 Indirect facilities ...... 2,089 159 3,809 Total(3)...... 241,913 257,036 272,086 of which: Covered by cash collateral...... 52,541 35,952 156,343 Covered by other security...... 59,576 58,703 69,540 ______Notes: (1) Loans to related parties are recorded in the financial statements of the Bank as advances to related parties, related party commercial loans and off-balance sheet items. (2) Total loans to related parties include off-balance sheet items. (3) Excess of facilities over cash collateral are within the threshold limit authorised by applicable law and regulations. In addition, Article 152 of the Code of Money and Credit and Central Bank Basic Decision No. 7776 dated February 21, 2001, as amended from time to time, provide that advances and credit facilities to directors or managers of banks or to companies having common directors with a bank (i) must be authorised by the shareholders of the bank, (ii) must not exceed in aggregate 5 per cent. of the bank’s shareholders’ equity and (iii) must be made on arms-length commercial terms. Management believes that the Bank is in compliance with all applicable regulations as of the date of this Prospectus.

Lending Rates The large majority of the Bank’s lending in both foreign currencies and Lebanese Pounds is at floating rates of interest, which are recalculated monthly or quarterly. Base rates utilised for the calculation of interest on U.S. Dollar facilities are the relevant London Interbank Offered Rate (“LIBOR”) or New York Prime Rate, in each case, plus an appropriate margin and subject to a floor. The rate used for the calculation of interest on Lebanese Pound credit facilities is the Beirut Lebanese Pound Prime Rate (which is fixed by the Association of Banks in Lebanon) plus a margin. In all cases, the Bank takes into account local market conditions and reserves the right to adjust its rates by reference to changes in market conditions and rates charged by its competitors.

The interest charged on housing loans is calculated monthly under the formula provided by the Housing Loan Authority. Under such formula, the rate is based on the two-year treasury note rate at a coefficient factor of 40 per cent. plus a 3.5 per cent. margin.

Funding Sources The following shows the distribution of the Bank’s sources of funding as of December 31, 2009, 2008 and 2007, respectively:

As of December 31, 2009 2008 2007 (LL Million) Banks’ deposits ...... 908,418 699,150 956,076 Sight deposits...... 201,728 310,048 534,002 Time deposits...... 706,690 389,102 422,074

Customers and related parties deposits... 34,650,175 26,135,236 21,555,905 Sight deposits...... 5,109,829 3,602,398 2,972,680 Time deposits and saving accounts...... 27,129,947 20,841,169 17,666,223 Collaterals and margins ...... 2,410,399 1,691,669 917,002

Debt issued and other borrowed funds ...... 153,148 153,148 153,148 Provisions for risks, charges and end of service indemnities...... 62,588 53,070 40,205 Engagement by acceptances and other liabilities...... 847,586 726,006 655,313 Shareholders’ equity...... 3,305,759 2,963,811 2,749,258

Total...... 39,927,674 30,730,421 26,109,905

The primary source of funds for the banking sector in Lebanon, including the Bank, is customers’ deposits. The Bank also regularly resorts to the Beirut Lebanese Pound interbank market in order to borrow or place excess liquidity in local currency.

Analysis of Funding Sources by Maturity The following table shows the maturity profile of the Bank’s funding as of December 31, 2009, 2008 and 2007, respectively:

As of December 31, 2009 2008 2007 (LL Million) (per cent.) (LL Million) (per cent.) (LL Million) (per cent.)

Short-term(1) ...... 6,159,143 15.43 4,638,452 15.09 4,161,995 15.96 Medium-term(2)...... 30,400,184 76.14 23,075,088 75.09 19,158,447 73.36 Long-term(3)...... 3,368,347 8.43 3,016,881 9.82 2,789,463 10.68 Total...... 39,927,674 100.0 30,730,421 100.0 26,109,905 100.0 ______Notes: (1) Short-term means demand deposits and miscellaneous credits, engagements by acceptances and regularisation accounts. (2) Medium-term means deposits maturing between one month and one year and short-term borrowings. (3) Long-term means shareholders’ equity and provisions for losses and contingencies. The Bank maintained a relative stability in the maturities of its loan portfolio, with short-term funding continuing to comprise around 15 per cent. of total funding in 2007, 2008 and 2009, and medium-term funding increasing slightly from 73.36 per cent of total funding as of December 31, 2007, to 75.09 per cent. and 76.14 per cent. as of December 31, 2008 and 2009, respectively.

Analysis of Funding Sources by Currency The following table shows the distribution of the Bank’s funding, by currency, as of December 31, 2009, 2008 and 2007, respectively:

As of December 31, 2009 2008 2007 Million Lebanese Pounds ...... 10,223,999 7,100,734 4,552,863 Foreign currencies ...... 29,703,675 23,629,687 21,557,042 of which: U.S. Dollars ...... 21,082,002 17,191,326 16,141,090 Euro ...... 3,245,854 2,451,946 1,848,165 Other ...... 5,375,819 3,986,415 3,567,787

The Bank’s funding in Lebanese Pounds increased from LL 4,553 billion as of December 31, 2007 to LL 7,101 billion as of December 31, 2008 and LL 10,224 billion as of December 31, 2009, while the Bank’s funding in U.S. Dollars increased over the same period from LL 16,141 billion as of December 31, 2007 to LL 17,191 billion as of December 31, 2008 and LL 21,082 billion as of December 31, 2009. The increasing trend in the Bank’s funding in both Lebanese Pounds and foreign currencies is principally due to the increase in the Bank’s customers’ deposits, which was, in turn, largely driven by the overall increase in customers’ deposits in the Lebanese banking sector, of which (according to Bankdata) the Bank accounted for the largest share (29.9 per cent.). Customers’ deposits at the Bank’s newly-launched regional affiliates also contributed to the increase in the Bank’s customers’ deposits and funding sources.

The dollarisation rate of the Bank’s total customers’ deposits (percentage of foreign currency deposits divided by total deposits) has decreased from 85.2 per cent. as of December 31, 2007 to 78.2 per cent. as of December 31, 2008 and further to 74.9 per cent. as of December 31, 2009, as Lebanese Pound-denominated deposits grew by 77.0 per cent. in 2008 (from LL 3,195 billion as of December 31, 2007 to LL 5,656 billion as of December 31, 2008) and by a further 53.9 per cent. in 2009 (to LL 8,705 billion as of December 31, 2009), while foreign currency-denominated deposits grew by only 11.5 per cent. in 2008 (from LL 18,361 billion as of December 31, 2007 to LL 20,480 billion as of December 2008) and 26.7 per cent. in 2009 to LL 25,946 billion as of December 31, 2009.

Capital Expenditure

Following the acquisition phase of its regional expansion program, the Bank has not incurred material capital expenditures since 2007 and does not expect to do so in the near future. Any capital expenditures that are incurred are expected to be funded out of the Bank’s internal sources.

Lending Policies

Lending Limits

Lebanese regulatory authorities impose no special lending limits on banks relating to economic or geographic sectors or countries. Banque du Liban Decision No. 7055 dated August 13, 1998, as amended by Intermediary Decision No. 9456 dated November 9, 2006 (“Decision 9456”), however, sets limits on loans to a single borrower or group of related borrowers. Pursuant to Decision 9456, the maximum allowable weighted credit limit for loans to a single borrower (or a group of related borrowers) is (i) 20.0% of a bank’s shareholders’ equity with respect to loans extended to borrowers (or a group of related borrowers) resident in Lebanon, the proceeds of which are to be used in Lebanon; (ii) 20.0% of a bank’s shareholders’ equity with respect to loans extended to resident borrowers or non-resident borrowers (or a group of related borrowers), the proceeds of which are to be used in countries with sovereign ratings of A+ and above; and (iii) 10.0% of a bank’s shareholders’ equity with respect to loans extended to resident borrowers or non-resident borrowers (or a group of related borrowers), the proceeds of which are to be used in countries with sovereign ratings below A+, provided that (x) the aggregate exposure for countries rated from A to BBB- is not to exceed 200.0% of the bank’s shareholders’ equity and the aggregate exposure to each of these countries is not to exceed 50.0% of the bank’s shareholders’ equity or (y) the aggregate exposure for countries rated below BBB- is not to exceed 100.0% of the bank’s shareholders’ equity and the aggregate exposure to each of these countries is not to exceed 25.0% of the bank’s shareholders’ equity. Management believes that the Bank is in compliance with the requirements of Decision 9456 as of the date of this Prospectus.

In view of its regional expansion, the Bank has established additional, more stringent internal lending limits defining maximum limits by group of related borrowers, by credit rating, by industry or economic sector, by country and by tenor.

Loan Approval Procedures

The Bank has clearly established processes related to loan origination, documentation and maintenance of credits files. The ongoing review and accounting for loans are the responsibility of the credit department of the relevant branch or regional manager (as more fully described below), which undertook the initial evaluation. Renewal of facilities is subject to the same approval procedures as the initial granting of facilities. The Credit Risk Review Department oversees the review and follow-up procedures performed at the branch and regional levels.

The Bank’s loan approval process begins at the branch level where credit applications are usually received. Applications are submitted to different credit committees for approval, depending on the size and nature of the applicant’s total borrowings with the Bank. Applications are required to be submitted in a prescribed form showing details of the purpose of the requested facility, the proposed source and method of repayment, the proposed schedule for repayment and the proposed collateral. Depending on the nature and size of the requested facility, the file is then transferred, together with an evaluation report approved by the branch manager, either to a sub-regional credit committee or a regional credit committee and then to the Central Credit Department at the Bank’s head office.

The credit analysis report follows a specific methodology aimed at identifying all the risks involved in the proposed transaction as well as its advantages. In preparing the report, the loan officer examines qualitative, as well as quantitative, risks, including the history of the borrower, the purpose of the facility, the proposed method of repayment, the borrower’s cash flow, any proposed collateral and an estimate of the value of the total assets and liabilities, and of the overall business and financial risk, of the borrower and any guarantor, and undertakes a thorough SWOT analysis.

The Bank has various levels of credit approval authorities, depending on the nature and limit of the requested facilities, namely: the Board of Directors, the Executive Committee and other credit committees, with authorities defined by limit and region; the following table sets forth credit amounts that can be approved at the various decision-making levels:

Committee Lending Limit

Board of Directors...... Greater than U.S. $50,000,000(1) Executive Committee ...... Up to .U.S. $50,000,000(2) (3) Central Credit Committee...... Up to U.S. $25,000,000(3) Regional Credit Committees ...... Up to U.S. $1,000,000(3) (4) Sub-Regional Credit Committees...... Up to U.S. $25,000(5) ______Notes: (1) Weighted according to Banque du Liban Circular No. 48 dated August 13, 1998. (2) The Executive Committee is required to send notice to the Board of Directors of any credit approval of a weighted facility in an amount greater than U.S. $25,000,000. Furthermore, Banque du Liban Circular No. 81 as amended in June 2005, stipulates that all weighted facilities in amounts of U.S. $1 million or more or exceeding 1% of a bank’s net capital, whichever is smaller; which are granted to a single borrower or group of borrowers (as defined in applicable Central Bank regulations) should be presented to the Board of Directors for its information. (3) Weighted according to the Bank’s internal ratios. (4) The lending limit for approval by the Regional Credit Committee ranges between U.S. $200,000 and U.S. $1,000,000 depending on authorities granted to the relevant commercial or corporate branch. (5) Some branch managers have the authority to grant loans within a credit limit set at U.S. $5,000, U.S. $10,000 or U.S. $25,000, depending on the branch size and profile. Credit committees are responsible for the approval of facilities, up to the limit assigned to them. Once approved by the relevant credit committee, a facility is disbursed when all requirements set by the respective committee are met and documents intended as security are reviewed and verified by the credit administration function. Collateral

The amount and type of collateral required depends on an assessment of the credit risk of the counterparty. Guidelines are implemented regarding the acceptability of types of collateral and valuation parameters. The

main types of collateral obtained from customers are real estate mortgages, securities, commercial entity pledges, vehicles and bank accounts.

Management monitors the market value of collateral and requests additional collateral in accordance with the terms of the credit facility being secured.

Loan Classification

On November 10, 1998, the Central Bank issued Circular No. 1682, which requires all banks and financial institutions in Lebanon to classify loans according to five categories of risk: (i) ordinary/regular accounts (subdivided into (a) unconditional and (b) incomplete documentation); (ii) accounts to be followed-up and regularised; (iii) sub-standard accounts; (iv) doubtful accounts; and (v) bad or ailing accounts. The Bank undertakes continual monitoring of its loan portfolios and believes that, as of the date of this Prospectus, it is in compliance with all applicable requirements.

In line with Management’s decision to adopt an internal ratings-based approach (the “IRB Approach”) to capital requirements for credit risk, in May 2007, the Bank acquired an internal rating model from Moody’s KMV Risk Advisor. This rating model formalises the risk rating process, combining and analysing financial and non- financial data in a flexible, objective and structured framework. The model is currently applied across all the Bank’s entities to provide a homogenous internal rating assessment across the Group.

The Bank is also developing additional models to address specific types of borrowers, including SMEs, project finance borrowers and others.

The Bank benefits from managing its financial portfolio through classifications, records and techniques aiming to consider all risk aspects. Financial assets bearing minimum exposure to credit risk (including credit facilities granted to entities with an excellent risk profile) are classified as “High” grade assets. Financial assets in respect of which all contractual commitments have been met and which did not suffer a permanent decrease in value are classified as “Standard” quality.

Credit Monitoring The Group maintains continuous monitoring of its portfolio to assess credit quality. Reports are sent to the Executive Committee and to the Board of Directors detailing credit risk profiles, including follow-up accounts, large exposures, risk ratings and concentration by industry, geography and related obligors.

Individually assessed impaired loans are determined by evaluating the exposure to loss on a case-by-case basis, compared to defined limits and parameters. Impaired loans are directly managed by the Recovery and Restructuring Department, which is responsible for formulating a workout strategy in coordination with the Legal and Compliance Department. Credit Committees are responsible for approving workout strategies.

Provisioning and Write-Off Policies

An evaluation of loan loss provisions is made on a quarterly basis in order to sustain the quality of the Bank’s loan portfolio. As such, all classified accounts are reviewed on a quarterly basis (or more frequently if needed) and the Recovery and Restructuring Department makes recommendations for specific provisions against these accounts. These recommendations are submitted to the Remedial Committee for approval. Specific provisions in excess of U.S. $1 million for a classified obligor require the approval of the Executive Committee. Impairment is also assessed on a collective basis to cover expected losses for loans not subject to individual assessment and for groups of similar loans, which may not be considered significant individually.

The following table shows the level of the Bank’s doubtful loans, and the provisions taken by the Bank in respect thereof, in each case, as of December 31, 2009, 2008 and 2007:

As of December 31, 2009 2008 2007 (LL Million) Doubtful loans...... 352,786 290,077 313,159 Unrealised interest...... 80,058 68,667 83,242 Provisions...... 175,220 164,418 170,190 Net doubtful loans ...... 97,508 56,992 59,727

Gross sub-standard loans...... 15,398 15,985 24,830 of which interest...... 3,795 3,211 4,872

Collective provisions ...... 61,008 25,576 4,482 Loans deemed unrecoverable are required to be partially or fully written-off after taking into consideration the following guidelines: • All efforts to recover the bad debt have failed.

• The borrower’s bankruptcy or inability to repay has been established beyond any doubt.

• Legal remedies have proved to be futile or cost prohibitive.

Requests for write-offs are submitted to the Remedial Committee for approval. Approved write-offs are notified to the Executive Committee and the Board of Directors.

Loan Restructurings

The Bank attempts to restructure problem loans, with a view to managing customer relationships, maximising collection opportunities and, if possible, avoiding foreclosure or repossession. Restructuring activities include, inter alia, modified or extended payment arrangements pending a change in circumstances and deferred foreclosure or enforcement action. Restructuring policies and practices are based on indicators or criteria which, in the judgment of management, indicate that repayment will probably continue but not on agreed terms. The application of these policies varies according to the nature of the market and the type of the facility.

Risk Management

As a growing financial institution with operations across three continents, the Bank faces a constantly changing array of business risks, including (but not limited to) credit risk, market risk, currency risk, interest rate risk, prepayment risk, equity price risk, liquidity risk and operational risk. In addition, the Bank is exposed to legal and reputational risks and, to a limited extent, insurance risk.

The Bank recognises risk management as a core building block for its continuous profitability and solvency and each employee is tasked with the prudent management of risks within his or her responsibilities. The primary parameters behind monitoring and controlling risks are the procedural controls and limits established by the Board of Directors reflecting the business strategy and market environment of the Bank as well as the level of risks that the Bank is willing to tolerate. Significant limits include credit limits, which are set by country, industry and instrument type, minimum liquidity requirements, interest rate and exchange rate risk limits and operational risk tolerances.

Information independently compiled from all business lines and risk-taking units is examined and processed in order to identify and measure risk exposures. The results are reported and presented monthly or more frequently to Management and at least bi-annually to the Board of Directors.

Credit Risk

Credit risk is the risk of default or deterioration in the ability of a borrower to repay a loan.

The Bank controls credit risk (both for loans and for bank guarantees) by setting limits on the amount of risk it is willing to accept for individual counterparties and for geographical and industry concentrations, and by monitoring exposures in relation to such limits.

The Bank has established limits for the below classes of assets as follows:

• Loans and advances to customers: Limits are set by country, economic sector and tenor of the loan, in order to avoid significant risk concentrations, and with reference to specific types of borrowers or groups of obligors.

• Financial institutions: Percentage floors and absolute limits are set on (i) the Bank’s foreign currency deposits placed with high investment grade banks in OECD countries, especially deposit-rich banks, and (ii) deposits held with financial institutions rated at least A– by Standard and Poor’s.

• Sovereign exposure and other financial instruments: Limits are placed on sovereign exposures and other financial instruments according to the sovereign issuer and the denominated currency as determined by the Board of Directors (mainly for foreign currency-denominated issues).

• Derivative Financial Instruments: Credit risk arising from derivative financial instruments is, at any time, limited to those with positive fair values, as recorded in the balance sheet. In the case of credit derivatives, the Bank is also exposed to or protected from the risk of default of the underlying entity referenced by the derivative.

Management of Risk Concentration

Credit concentrations arise when a number of counterparties are engaged in similar business 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 and other conditions. Concentrations indicate the relative sensitivity of the Bank’s performance to developments affecting a particular industry or geographical location. Similarly for liquidity, concentration is measured with respect to the source and type of funding.

In order to avoid excessive concentrations of risk, the Bank’s policies and procedures include specific guidelines and limits to maintain diversified funding and a diversified loan portfolio, including measures to comply with Banque du Liban Basic Decision No. 9957 (“Decision 9957”) dated July 21, 2008, relating to the assessment of the capital adequacy of Lebanese banks. Market Risk

Market risk is the risk that a change in market rates or prices will have a deleterious impact on the Bank’s income and economic net worth. The market risk unit identifies, measures, reports and monitors actual and potential market risks to which the Bank is exposed, using consistent and comprehensive risk measurements, aggregation, management and analysis. Policies are set and limits monitored in an effort to avoid large, unexpected losses.

Tools developed in-house by a centralised unit of specialists offer a wholistic view of risk exposures and are customised to meet the requirements of different business divisions and risk management teams. Stress scenarios include various manifestations of the recent credit crisis, such as increased volatilities and correlations and widening of credit spreads.

Currency Risk

Currency risk is the risk that the value of a portfolio will fall as a result of changes in foreign exchange rates. The major sources of this type of risk are imperfect correlations in the movements of currency prices and fluctuations in interest rates. The Bank is subject to currency risk on financial assets and liabilities that are listed in currencies other than the Lebanese Pounds. Most of these financial assets and liabilities are listed in U.S. Dollars or Euros.

The Central Bank allows the Bank to maintain a currency exchange position, receivable or payable, not exceeding at any time 1% of total net equity, provided that the global currency exchange position does not exceed 40% of total net equity.

In addition to regulatory limits, the Board of Directors has set limits on positions by currency, which are monitored constantly.

Interest Rate Risk

Interest rate risk is the risk that changes in interest rates will affect the future profitability or fair value of financial instruments. The Bank is exposed to interest rate risk as a result of mismatches of interest rate repricing of assets and liabilities. Positions are monitored on a daily basis by management and, whenever possible, hedging strategies are used to ensure positions are maintained within established limits.

The change in interest income and the economic value of equity is calculated on a weekly basis.

The sensitivity of equity is calculated by revaluing available for sale financial assets at the assumed interest rates. Available for sale debt instruments are revalued using modified duration.

Prepayment Risk

Prepayment risk is the risk that the Bank will incur a financial loss due to early unscheduled repayment or repayment requests from counterparties. The Bank’s assets subject to prepayment predominantly bear interest at floating rates, and, accordingly, Management believes that the Bank’s prepayment risk is not material.

Equity Price Risk

Equity price risk is the risk that the value of a portfolio will fall as a result of a change in stock prices. Risk factors underlying this type of risk include a range of equity and index pricing factors corresponding to different markets, currencies and maturities.

The Bank sets limits on equity exposures and the types of equity instruments in which traders are allowed to take positions. Equity risk is measured in cash terms, such as the market value of a stock or index position, and also against price sensitivity constraints, such as the sensitivity of the value of a portfolio to changes in the underlying asset price. These measures may be applied to an individual position or to a portfolio of equities.

Liquidity Risk

Liquidity risk is the risk that the Bank will be unable to meet its payment obligations when they fall due under normal and stress circumstances. The Bank’s liquidity position is assessed and managed by reference to a number of stress factors relating to both the market in general and the Bank in particular. The Bank maintains a portfolio of highly marketable and diverse assets that can be easily liquidated in the event of an unforeseen interruption of cash flow. In addition, the Bank maintains statutory deposits with central banks in the countries where it has operations. Under applicable Lebanese banking regulations, the Bank must maintain non-interest bearing balances with the Central Bank equivalent to 25% of sight deposits and 15% of term-deposits denominated in Lebanese Pounds. In addition, the Bank must maintain interest bearing statutory investments with the Central Bank equivalent to 15% of all foreign currencies deposits, regardless of their nature. In addition, in accordance with the Central Bank circulars, the ratio of net liquid assets to deposits and commitments in foreign currencies and Lebanese Pounds should not be less than 10% and 40%, respectively. See “The Banking Sector and Banking Regulation in Lebanon—Reserve Requirements”.

In 2008, the Bank established its Financial Institution Committee, which is comprised of the Chief Executive Officer and members from the Group Risk Management Department and the Financial Institutions Department, to oversee the management of the Bank’s portfolio of securities issued by financial institutions. A number of measures were taken to minimise the potential liquidity risk from such exposures, including:

• limiting exposures to any one bank or group;

• selecting banks which are large, retail-funded or government-owned;

• favoring banks with high credit ratings while relying on the Bank’s internal ratings; and

• limiting exposures to very short durations (typically not more than one week) depending on market conditions.

Operational Risk

Operational risk is the risk of loss arising from system failure, human error, fraud or external events. When controls fail to perform, operational risks can cause damage to reputation, have legal or regulatory implications or lead to financial loss.

The Bank’s operational risk management framework is implemented by an independent Operational Risk Management Team, in coordination with other essential units of the Bank’s control framework, including Internal Audit, Corporate Information Security and Business Continuity. To minimise operational risks, the Bank has implemented redundancies in critical systems, divided transaction approval and review responsibilities across independent business divisions and management teams and imposed strict authorisation procedures and daily reconciliation requirements.

Insurance coverage is also used as an external mitigant.

Capital Management

By maintaining an actively managed capital base, the Bank’s objectives are to cover risks inherent to the business, to retain sufficient financial strength and flexibility to support new business growth and to meet national and international regulatory capital requirements at all times. The adequacy of the Bank’s capital is monitored using, among other measures, the rules and ratios established by the Central Bank. These ratios measure capital adequacy by comparing the Bank’s eligible capital with its balance sheet assets and off-balance sheet commitments at a weighted amount to reflect their relative risk. To satisfy the Pillar 1 capital requirements of the Basel II Accord, the Central Bank requires maintaining a ratio of total regulatory capital to risk-weighted assets at or above 8.0%. See “The Banking Sector and Banking Regulation in Lebanon—Banking Sector”.

Capital adequacy requirements applicable to each of the Bank’s banking subsidiaries are set and monitored by its local banking supervisor.

Risk Management Structure

The Board of Directors is ultimately responsible for identifying and establishing the level of tolerable risks to which the Bank is exposed and defining the Bank’s risk appetite. In addition, the Board of Directors approves policies and procedures related to all types of risks. A number of management committees and departments are also responsible for various levels of risk management and for submitting regular reports on existing and emerging risks to the Board of Directors as set out below.

Executive Committee

The Executive Committee’s mandate is to support the Board of Directors in the implementation of its strategy, to support the Chief Executive Officer in the day-to-day management of the Bank, to develop and implement business policies for the Bank and to issue guidance for the Bank in line with the strategy approved by the Board of Directors. The Executive Committee is involved in drafting and submitting to the Board of Directors risk policies and limits. The Executive Committee reviews all risk reports and is responsible for approving loans and provisions above a certain threshold.

Risk Committee

The Risk Committee meets at least quarterly and is responsible for making recommendations to the Executive Committee and to the Board of Directors as to the Bank’s exposures in all classes of risks, the pertinence of methodologies and the accuracy of calculations performed by the Risk Management Department. The Risk Committee is also responsible for the determination of the appropriate governance, organisational structure and infrastructure for the risk management functions.

Asset-Liability Committee

The Asset-Liability Committee (ALCO) has primary responsibility for defining strategies for managing the Bank’s risks and overseeing the Treasury Department’s implementation of those strategies to manage risks in a manner consistent with the risk policies and limits approved by the Board of Directors.

Internal Audit Department

All risk management processes are independently audited by the Internal Audit Department at least annually. This includes the examination of both the adequacy and effectiveness of risk control procedures. The Internal Audit Department discusses the results of its assessments with senior management and reports its findings and recommendations to the Audit Committee of the Board of Directors.

Risk Management Department

The Risk Management Department, headed by the Chief Risk Officer, is responsible for ensuring that risks are properly identified, measured, monitored and reported to heads of business lines, senior management, the ALCO, the Risk Committee and the Board of Directors. In addition, the Risk Management Department (i) works closely with and assists senior management in ensuring that proper controls are in place to mitigate various operational risks; (ii) defines the policies and procedures to be adopted; (iii) is in charge of monitoring risks across the Group and aggregating such risks; and (iv) provides, from time to time, technical support to the various entities within the Group in their effort to develop local risk functions within the parameters set at the Group level.

Local Risk Management Functions

Local risk management functions vary in size and scope. Local risk managers are responsible for (i) complying with Group Risk Management Department’s policies; (ii) assessing risks using a blend of methodologies developed at the Group level and others adapted to local circumstances; and (iii) providing their respective senior management and board of directors with an independent opinion on risks.

Compliance and Anti-Money Laundering

The Bank has established a Group Compliance Department entrusted with overseeing all banking activities in Lebanon and abroad with the primary objective of ensuring consistency of policies and practices across all operations in line with applicable laws and regulations. In addition, the Bank has designated a compliance officer with a supporting team in each country where it operates in order to oversee the proper implementation of applicable laws and regulations and of the Bank’s policies and procedures (including anti-money laundering policies and procedures). The Compliance Department is supported by separate anti-money laundering committees in certain jurisdictions as required by applicable laws and regulations.

In partnership with the Bank’s Human Resources Department, the Compliance Department conducts compliance training programs and awareness sessions on a regular basis for all staff. Training covers a variety of topics, including “know your customer” requirements and monitoring, detecting and reporting of unusual or suspicious transactions, and promotes the principles and tools of combating money laundering and counter terrorist financing.

Corporate Governance

As of the date of this Prospectus, the Bank is in compliance with applicable corporate governance rules of Lebanon.

Competition

In Lebanon, the Bank considers the other 11 banking institutions in the Alpha Bank Group, which are ranked by Bankdata, to constitute its main competitors. According to Bankdata’s 2009 ranking, which are based on unaudited results as reported by the constituent banks, the Bank ranked first among all Lebanese banks in terms of total assets, shareholders’ equity, customers’ deposits, loans and advances and net profit. According to its Research Department, the Bank also ranked among the top 25 banking groups in the MENA region by assets, deposits and shareholders’ equity. See “The Banking Sector and Banking Regulation in Lebanon—Banking Sector”.

Legal Proceedings

The Bank is a party, as a plaintiff and as a defendant, to a number of litigation proceedings in the ordinary course of the Bank’s businesses. However, neither the Bank, nor any of its consolidated subsidiaries, are, or were during the last twelve months, involved in any governmental, legal or arbitration proceedings (including any such proceedings which are pending or threatened of which the Bank is aware) that may have, or have had in the recent past, a significant effect on the financial position or profitability of the Bank and its consolidated subsidiaries taken as a whole.

MANAGEMENT AND EMPLOYEES

Board of Directors

The Bank is governed by its Board of Directors. The By-laws of the Bank provide that the number of Directors constituting the Bank’s Board of Directors shall not be less than three nor more than 12, that all Directors must be shareholders of the Bank and that a majority of the Directors must be of Lebanese nationality. The Board of Directors currently consists of twelve members, nine of whom are Lebanese citizens.

The members of the Board of Directors are elected by the General Meeting of Shareholders for a period of three years, renewable at the end of the term of office. Under certain conditions, the General Meeting of Shareholders is empowered to relieve members of the Board of Directors of their functions. Members of the Board of Directors are not permitted to carry out similar functions in another bank without the authorisation of the General Meeting of Shareholders, such authorisation to be renewed annually.

Members of the Board of Directors elect a Chairman from among themselves. The Chairman of the Board of Directors in his capacity as General Manager has extensive powers to execute resolutions adopted by the General Meeting of Shareholders, undertake operations necessary for the daily functioning of the Bank and generally represent the Bank in its commercial activities. In the event that he is temporarily unable to perform his functions, the Chairman may delegate some or all of his authority to a member of the Board of Directors for a stated period of time, provided that the delegation is published in Lebanon’s Register of Commerce. Additionally, the Chairman may, under certain circumstances, delegate some of his managerial responsibility to another General Manager or managers, under his personal responsibility and subject to the approval of the full Board of Directors.

The table below sets forth certain information regarding the members of the Board of Directors of the Bank as of the date of this Prospectus:

Title Name Chairman...... H.E. Mr. Raymond W. Audi (Chairman since December 2009) Members...... Dr. Marwan M. Ghandour (Vice-Chairman since December 2009) Dr. Georges A. Achi (Chairman until December 2009) Mr. Samir N. Hanna Mr. Marc J. Audi Dr. Freddie C. Baz Dr. Imad I. Itani Mr. Mario J. Saradar Sheikha Suad H. Al-Homaizi Sheikha Mariam N. Al-Sabbah Sheikh Abdallah I. Al-Hobayb Dr. Khalil M. Bitar Secretary of the Board...... Mr. Farid F. Lahoud On January 21, 2010, in connection with the sale of EFG-Hermes’s entire stake in the Bank, EFG Hermes Holding Co. sae and EFG Hermes Advisory Inc., which had held seats on the Board of Directors, since EFG- Hermes became a significant shareholder of the Bank in 2006, resigned from the Board of Directors. Mr. Georges W. Audi acts as Honorary Chairman of the Board of Directors.

The business address for each member of the Board of Directors, the Honorary Chairman and the Secretary of the Board is c/o Bank Audi sal – Audi Saradar Group, Bank Audi Plaza, Omar Daouk Street, Bab Idriss, Beirut 2021 8102, P.O. Box 11-2560, Beirut, Lebanon.

As of the date of this Prospectus, the members of the Board of Directors, elected at the meeting of the General Assembly of shareholders held on April 12, 2010, for a term expiring upon the meeting of the General Assembly of shareholders that will convene to approve the Bank’s audited financial statements for the year ended December 31, 2012 (expected to be held in April 2013), are as follows:

H.E. Mr. Raymond W. Audi

Raymond Audi acts as Chairman and General Manager of the Board of Directors since December 2009. He had also served as Chairman of the Board of Directors from 1998 through 2008, resigning from this position when

he was appointed as Minister of the Displaced in the Lebanese Government. Mr. Audi resumed his position as Chairman of the Board of Directors effective December 22, 2009.

He started his banking career in 1962, when, together with his brothers and with prominent Kuwaiti businessmen, he founded Banque Audi sal (now Bank Audi sal - Audi Saradar Group), building on a successful long-standing family business. Raymond Audi has played an active role in leading the Bank through both prosperous and challenging times to its current status as a widely recognised leading Lebanese and regional bank. He served as President of the Association of Banks in Lebanon in 1994.

Raymond Audi is the recipient of several honors and awards, the most recent being, in July 2007, an Honorary Doctorate in Humane Letters from the Lebanese American University.

Dr. Marwan M. Ghandour

Marwan Ghandour is a member of the Board of Directors since March 2000 and the Vice-Chairman of the Board of Directors since December 2009. He is a previous Vice-Governor of the Central Bank of Lebanon. He held this position between January 1990 and August 1993, with primary responsibilities in the area of monetary policy. During this period, he was also a member of the Higher Banking Commission and various other government committees involved in economic policy. In this capacity, he liaised with various international institutions such as the International Monetary Fund (IMF), the World Bank and the Bank for International Settlements (BIS). Since 1995, Marwan Ghandour has been Chairman and General Manager of Lebanon Invest sal, a leading financial services group in the region whose holding company merged with the Bank in 2000. He was elected member of the Board of Directors in 2000, and Chairman of the Board of Directors of Audi Saradar Investment Bank sal, a fully owned subsidiary of the Bank in 2005. In December 2009, he was elected Vice- Chairman of the Board of Directors.

Marwan Ghandour holds a PhD in Economics (Econometrics) from the University of Illinois (Post-Doctorate research at Stanford University).

Dr. Georges A. Gedeon Achi

Georges Achi is a former Chairman of the Board of Directors. He was elected member and Chairman of the Board of Directors in August 2008 following the resignation of Mr. Raymond Audi as Chairman and General Manager of the Bank during his appointment as a minister in the Lebanese Government from August 2008 through December 2009. Georges Achi is a member of the Board of Directors and serves as Chairman of the Board of Directors of Bank Audi Syria sa (a 47% subsidiary of the Bank) since 2005. He started his career as a Professor at the Damascus University and as Director of the Exchange Office in Syria. In 1954, he moved to the private sector and held managerial positions in commercial banks in Syria and Lebanon, notably the position of Chairman of the Board and General Manager of Crédit Commercial du Moyen-Orient sal (“CCMO”) from 1988 until the merger of CCMO with the Bank. Following the said merger, he was appointed in 1998 member of the Board of Directors and held this position until 2004. He was reappointed member of the Board of Directors in 2008 and chairman of the Board of Directors from August 2008 until he resigned as Chairman of the Board in December 2009. He also served two mandates as Chairman of the Association of Banks in Lebanon between 1989 and 1993.

Georges Achi holds a PhD in Economics from the University of Geneva and a PhD in Law from the University of Paris, and is the author of three books.

Mr. Samir N. Hanna

Samir Hanna started his banking career at Banque Audi sal (now Bank Audi sal – Audi Saradar Group) in January 1963. He held positions across several departments of the Bank in Lebanon, before moving to the United Arab Emirates in 1975, where he was appointed General Manager of a joint venture bank in which the Bank participated. He relocated to Lebanon in 1982 and was appointed General Manager of the Bank in 1986. In the early 1990s, he initiated and managed the restructuring and expansion strategy of the Bank, transforming it into a local banking powerhouse that offers universal banking products and services.

He currently serves as the Chief Executive Officer of the Group and, as such, is leading the development of the Group to become a leading regional financial institution.

Mr. Marc J. Audi

Marc Audi started his banking career at Banque Audi (France) sa in 1981. He then moved to Banque Audi California where he was appointed Director and Executive Vice-President. He later came back to Lebanon to

join Banque Audi sal (now Bank Audi sal – Audi Saradar Group) in 1993, and was appointed member of its Board of Directors in 1996. He held executive responsibilities successively in Commercial Lending and capital Markets Divisions. Marc Audi served as General Manager of Banque Audi (Suisse), the Private Banking arm of the Audi Group of Banks until 2005, and has been General Manager of the Bank since 2004, where he currently acts as the Lebanon Country Manager.

Marc Audi holds a Masters of Business Administration from the University of Paris IX – Dauphine.

Dr. Freddie C. Baz

Freddie Baz joined the Bank in 1991 as Advisor to the Chairman and founded the Secretariat for Planning and Development at the Bank. As the Group Chief Financial Officer and Strategy Director of the Bank, he now has overall authority over the finance and accounting, MIS and budgeting functions throughout the Group, and is responsible for the development of the Group strategy. Freddie Baz is also the Managing Director of Bankdata, which publishes Bilanbanques, the only reference in Lebanon that provides an extensive structural analysis of all banks located in Lebanon.

Freddie Baz holds a State PhD Degree in Economics from the University of Paris I (Panthéon – Sorbonne).

Dr. Imad I. Itani

Prior to joining the Bank, Imad Itani held several key positions in corporate finance for major energy companies in Canada. In parallel, he taught Economics and Finance to graduate students at the American University of Beirut. He joined the Bank in 1997 and headed the team that successfully launched the Bank’s retail business line, today a major pillar of the Bank’s innovative and leading position. In 2002, Imad Itani was appointed Deputy General Manager and Member of the Board of Directors. He was later appointed General Manager. Imad Itani is also the Chairman of the Bank’s new Sudanese Islamic Banking subsidiary acquired within the context of the Bank’s regional expansion, in addition to his responsibilities as Group Head of Retail and Islamic Banking.

Imad Itani holds a PhD in economics from the University of Chicago.

Mr. Mario J. Saradar

Mario Saradar is the Chairman and General Manager of Audi Saradar Private Bank sal and Banque Audi (Suisse) sa, and other affiliated companies of the Group. He is also the Chairman and General Manager of Capital Outsourcing, a 75% subsidiary of the Bank, established in the Dubai International Financial Center and specialising in IT and business processing outsourcing. Mario Saradar is a General Manager of the Bank and heads the Group’s Private Banking Division. He was elected several times member of the Board of the Association of Banks in Lebanon, and is currently member of The International Chamber of Commerce, the RDCL (Rassemblement des Dirigeants et des Chefs d’entreprises Libanais) and the YPO (Young Presidents’ Organisation).

Mario Saradar holds a DESS (“Diplôme d’Etudes Supérieures Spécialisées”) in Financial Instruments from the Institut des Techniques de Marché de Paris and a BSc in Economics from the University College of London.

Sheikha Suad H. Al-Homaizi

Sheikha Suad Al-Homaizi is the widow of late Sheikh Jaber Al-Sabbah, a prominent figure of the ruling family of Kuwait. She is one of the founders of the Bank. Sheikha Suad Al-Homaizi serves as Chairman of the Commercial Kuwaiti Company Hamad Saleh Al-Homaizi, which owns international licenses for pharmaceutical products, and is a member of the board of directors of several other Kuwaiti companies.

She is a member of the Board of Directors since February 1962.

Sheikha Mariam N. Al-Sabbah

Sheikha Mariam Al-Sabbah is the daughter of late Sheikh Nasser Sabah Al-Nasser Al-Sabbah and the widow of the late Sheikh Ali Sabah Al-Salem Al-Sabbah, who was the son of the former Prince of Kuwait and who held several ministerial positions in Kuwait, notably the Ministry of Interior. Sheikh Nasser Al-Sabbah was one of the founders of the Bank.

Sheikha Mariam Al-Sabbah is a member of the board of directors of several Kuwaiti companies. She is a member of the Board of Directors since March 2001.

Abdullah I. Al-Hobayb

Abdullah AI-Hobayb is the Chairman of Audi Capital and a member of the Board of Directors of Audi Egypt. He is also Chairman of several leading companies in Saudi Arabia, including ABB Saudi Arabia (a leader in power and automation technologies), General Lighting Company Ltd (one of the largest manufacturers of lighting luminaries in the Middle-East), Ink Products Company Ltd (manufacturer of industrial ink) and United Industrial Investments Company Ltd (a leading Paint manufacturing company).

Abdullah AI-Hobayb holds a Master’s Degree in Electrical Engineering from Karlsruhe University in Germany.

Khalil M. Bitar

Khalil Bitar is a Professor of Physics and a former Dean of the Faculty of Arts and Sciences at the American University of Beirut (AUB). He held this position from 1997 until 2009, playing an instrumental role in advocating AUB’s strengths and regional position as the premier center for higher education, and in re- establishing its PhD programs.

Throughout his career, he held several academic and administrative positions, including Associate Director of the Supercomputer Computations Research Institute – Florida State University (from 1994 until 1997) and visiting professor at leading Academic Institutes in Europe and North America (including the European Organisation for Nuclear Research in Geneva, the International Centre for Theoretical Physics in Italy, The Institute for Advanced Study in New Jersey, the Fermi National Accelerator Laboratory (Fermilab) in Illinois, the University of Illinois, Brookhaven National Lab. in New York, the Max Planck Institute in Munich and the Rockefeller University in New York).

He also served two mandates as member of The Institute for Advanced Study in Princeton, New Jersey from 1968 until 1972.

Dr. Bitar holds a Bachelor of Science degree in Physics from the American University of Beirut and a Master’s of Science degree in Physics and a Ph.D. in Theoretical Physics from Yale University in the United States.

Employees

The Bank and its consolidated subsidiaries employed 4,388 persons as of December 31, 2009.

The aggregate compensation (including bonuses) of employees ranked senior manager and above, who were directly employed by the Bank, on a standalone basis, was LL 33.17 billion (U.S. $22 million) for the year ended December 31, 2009, and constituted 29.81 per cent. of the Bank’s total employee compensation for that year, as compared to LL 31.5 billion (U.S. $20.9 million) and 31.81 per cent. of total employee compensation for year ended December 31, 2008. Upon retirement, all employees are entitled to a payment equal to their last monthly salary times the number of years of their service at the Bank. The collective bargaining agreement that governs working conditions of all Bank employees (other than general managers) is a contract between the Federation of Bank Employee Syndicate and the Lebanese Banks Association. The stipulations of this agreement must conform to minimum requirements of the Labor Code, although greater benefits may be provided to employees than those available under the Labor Code. Some of the major provisions covered by the collective bargaining agreement include employee hierarchy and minimum salary scale, allowances and other benefits, base salary increases, vacation and leave entitlement, health care, maximum work week, general discipline and end-of-service payment. To date, the Bank’s experience with the Federation of Bank Employee Syndicate has always been one of favorable co-operation.

THE BANKING SECTOR AND BANKING REGULATION IN LEBANON

Role of Banque du Liban

Banque du Liban was created by the Law implemented by Decree No. 13513 dated August 1, 1963. Banque du Liban is a legal public entity with administrative and financial autonomy. It is considered a commercial institution in its relations with third parties. It is headquartered in Beirut and has branches in Tripoli, Jounieh, Saida, Zahle, Bikfaya, Aley, Tyre, Nabatiye and Baalbek. Banque du Liban is managed by a Governor assisted by four Vice-Governors, collectively constituting the Governorship of Banque du Liban. The Board of Banque du Liban is chaired by the Governor and composed of the Vice-Governors, the Director-General of the Ministry of Finance and the Director-General of the Ministry of Economy and Trade.

The Governor is appointed for six calendar years by decree from the Council of Ministers, acting on the proposal of the Minister of Finance. The Vice-Governors are appointed for five calendar years by decree from the Council of Ministers on the proposal of the Minister of Finance, after consultation with the Governor.

Banque du Liban’s primary role is to safeguard the currency and promote monetary stability, thereby creating a sound environment for economic and social progress. Banque du Liban also advises the Government on various economic and financial matters. In conducting its monetary management function, Banque du Liban utilises a wide range of instruments, including reserve requirements on Lebanese Pound deposits with commercial banks, liquidity requirements on U.S. Dollar deposits with commercial banks and treasury bill repurchase and swap agreements with commercial banks, as well as Lebanese Pound and U.S. Dollar-denominated certificates of deposit issued by Banque du Liban.

As a result of high inflation prior to 1992, the Lebanese economy became substantially dollarised. Despite the decline in the rate of inflation, the proportion of foreign currency deposits (primarily in U.S. Dollars) remains high as a share of total deposits, at 64.5% as of December 31, 2009.

Banking Sector

As of the date of this Prospectus, there were 65 active commercial banks (with 902 operational branches in Lebanon), two specialised medium-and long-term credit banks, 48 financial institutions, 11 brokerage institutions, two leasing companies in the financial sector and ten representative offices of foreign banks in the Lebanese Republic. Foreign banks have traditionally established themselves in Lebanon, with either receiving a banking license or operating through a representative office or acquiring participations in the capital of Lebanese banks.

Unlike the banking sector in some other emerging market countries, the banking sector in Lebanon is generally acknowledged to be stable and financially strong, and plays a critical role in the economy as a whole.

The banking sector currently offers services related to short-term and, increasingly, medium-term financing. As medium-term funds become available to Lebanese banks (by way of loans from international organisations, such as the International Finance Corporation, the EIB and Proparco / Agence Française de Développement, or the issuance of debt securities on the international capital markets), commercial banks have begun to offer a variety of medium-term loans, such as residential mortgage loans, other consumer loans and several types of loans to corporate investors.

From March 1995, commercial banks were required to meet a minimum capital adequacy ratio of 8.0% in line with the Basel II Accord. In September 1999, Banque du Liban required banks to raise their capital adequacy ratios to 10.0% by December 31, 2000 and 12.0% by December 31, 2001. Law No. 192 dated January 4, 1993 facilitated bank mergers by, among other things, making banks eligible for soft loans from Banque du Liban. Such law was renewed until the year 2003. Pursuant to Law No. 675 dated February 14, 2005 published in the Official Gazette No. 8 dated February 24, 2005, the law facilitating bank mergers was reinstated for an indefinite period. The mechanism and criteria for granting soft loans to banks in accordance with Article 6 of Law No. 192 were set out by Decree No. 1423 dated February 26, 2009. During the past years, the capital of commercial banks in Lebanon has increased substantially. The capital adequacy ratio of the Lebanese banking sector reached 12.39% as of June 30, 2009, 50% greater than the target capital ratio required by the Basel II Accord.

In addition, Parliament passed legislation to revitalise specialised banks (for housing, agriculture and industry). The Lebanese Republic’s participation in the shareholding of these banks has been reduced to a minority stake. In addition, Parliament passed laws relating to the listing of bank shares on stock exchanges and several banks currently list their eligible shares on the BSE.

The following tables set forth the rankings for selected criteria of the Alpha Group banks in Lebanon as of December 31, 2008 and 2009, respectively:

Ranking by Customers’ Deposits December 31, 2008 December 31, 2009 (LL Million) (%) (Rank) (LL Million) (%) (Rank)

Bank Audi sal – Audi Saradar Group(1) ...... 26,135,236 21.8 1 34,650,840 23.4 1 BLOM Ban k S.A.L...... 22,776,373 19.0 2 27,087,104 18.3 2 Byblos Bank S.A.L...... 12,606,880 10.5 3 15,505,302 10.5 3 Fransabank S.A.L...... 10,778,087 9.0 5 13,587,819 9.2 4 BankMed S.A.L...... 11,208,895 9.4 4 12,335,562 8.3 5 Banque Libano-Française S.A.L...... 8,081,695 6.8 6 9,560,753 6.5 6 Bank of Beirut S.A.L...... 5,955,673 5.0 7 7,400,148 5.0 7 Credit Libanais S.A.L...... 5,819,845 4.9 8 7,269,205 4.9 8 Lebanese Canadian Bank S.A.L...... 5,296,703 4.4 9 6,684,861 4.5 9 Société Générale de Banque au Liban (SGBL) S.A.L...... 3,887,694 3.2 11 5,499,733 3.7 10 BBAC S.A.L...... 4,239,241 3.5 10 4,955,889 3.3 11 IBL Bank S.A.L...... 2,856,030 2.4 12 3,579,638 2.4 12 Total...... 119,642,352 100.00 148,116,854 100.00

Source: Bankdata. ______Notes: (1) Certain figures provided in this table may differ slightly from the Bank’s audited financial information set forth elsewhere in this Prospectus because the figures used by Bankdata are unaudited. Ranking by Net Profits December 31, 2008 December 31, 2009 (LL Million) (%) (Rank) (LL Million) (%) (Rank)

BLOM Bank S.A.L...... 379,254 23.3 1 441,986 22.7 1 Bank Audi sal – Audi Saradar Group(1) ...... 358,892 22.0 2 435,593 22.4 2 Byblos Bank S.A.L...... 183,915 11.3 3 220,285 11.3 3 Fransabank S.A.L...... 133,161 8.2 4 157,122 8.1 4 BankMed S.A.L...... 105,751 6.5 6 136,700 7.0 5 Bank of Beirut S.A.L...... 100,037 6.1 7 115,057 5.9 6 Société Générale de Banque au Liban (SGBL) S.A.L...... 66,299 4.1 9 105,848 5.4 7 Banque Libano-Française S.A.L...... 107,501 6.6 5 101,623 5.2 8 Credit Libanais S.A.L...... 77,754 4.8 8 78,621 4.0 9 BBAC S.A.L...... 38,112 2.3 11 55,966 2.9 10 Lebanese Canadian Bank S.A.L...... 41,171 2.5 10 52,775 2.7 11 IBL Bank S.A.L...... 37,691 2.3 12 42,345 2.2 12 Total...... 1,629,538 100.00 1,943,921 100.00

Ranking by Total Assets December 31, 2008 December 31, 2009 (LL Million) (%) (Rank) (LL Million) (%) (Rank)

Bank Audi sal – Audi Saradar Group(1) ...... 30,730,421 21.0 1 39,932,410 22.4 1 BLOM Bank S.A.L...... 26,980,811 18.4 2 31,234,316 17.5 2 Byblos Bank S.A.L...... 16,929,444 11.6 3 20,467,532 11.5 3 Fransabank S.A.L...... 12,745,195 8.7 5 16,279,094 9.1 4 BankMed S.A.L...... 14,391,006 9.8 4 15,956,289 8.9 5 Banque Libano- Française S.A.L...... 9,813,309 6.7 6 11,386,045 6.4 6 Bank of Beirut S.A.L...... 8,648,022 5.9 7 10,506,207 5.9 7 Credit Libanais S.A.L...... 6,714,788 4.6 8 8,270,658 4.6 8 Lebanese Canadian Bank S.A.L...... 6,229,508 4.3 9 7,842,417 4.4 9 Société Générale de Banque au Liban (SGBL) S.A.L...... 5,081,983 3.5 10 7,181,718 4.0 10 BBAC S.A.L...... 4,898,138 3.3 11 5,642,372 3.2 11 IBL Bank S.A.L...... 3,173,527 2.2 12 3,955,295 2.2 12 Total ...... 146,336,152 100.00 178,654,353 100.00

Source: Bankdata. ______Note: (1) Certain figures provided in this table may differ slightly from the Bank’s audited financial information set forth elsewhere in this Prospectus because the figures used by Bankdata are unaudited. Ranking by Shareholders’ Equity(1) December 31, 2008 December 31, 2009 (LL Million) (%) (Rank) (LL Million) (%) (Rank)

Bank Audi sal – Audi Saradar Group(1)(2)...... 2,963,810 23.5 1 3,293,707 21.0 1 BLOM Bank S.A.L...... 2,213,301 17.6 2 2,572,819 16.4 2 Byblos Bank S.A.L...... 1,626,630 12.9 3 1,963,146 12.5 3 BankMed S.A.L...... 1,087,701 8.6 5 1,722,173 11.0 4 Fransabank S.A.L...... 1,140,499 9.0 4 1,593,669 10.2 5 Bank of Beirut S.A.L...... 769,829 6.1 6 1,186,431 7.6 6 Banque Libano-Française S.A.L...... 729,823 5.8 7 895,452 5.7 7 Credit Libanais S.A.L...... 581,947 4.6 8 637,920 4.1 8 Société Générale de Banque au Liban (SGBL) S.A.L...... 467,387 3.7 9 544,293 3.5 9 Lebanese Canadian Bank S.A.L...... 430,953 3.4 10 538,496 3.4 10 BBAC S.A.L...... 354,087 2.8 11 432,613 2.8 11 IBL Bank S.A.L...... 236,611 1.9 12 291,120 1.9 12 Total ...... 12,602,578 100.00 15,671,839 100.00

Source: Bankdata. ______Notes: (1) Based on the calculation of Bankdata, revaluation variance of other fixed assets and subordinated loans are not included in shareholders’ equity for purposes of these rankings. (2) Certain figures provided in this table may differ slightly from the Bank’s audited financial information set forth elsewhere in this Prospectus because the figures used by Bankdata are unaudited.

Ranking by Loans and Advances December 31, 2008 December 31, 2009 (LL Million) (%) (Rank) (LL Million) (%) (Rank)

Bank Audi sal – Audi Saradar Group(1) ...... 9,239,637 25.0 1 10,171,043 23.8 1 BLOM Bank S.A.L...... 5,237,374 14.2 2 6,061,212 14.2 2 Byblos Bank S.A.L...... 4,206,664 11.4 4 4,817,478 11.3 3 BankMed S.A.L...... 4,707,793 12.7 3 4,724,085 11.1 4 Fransabank S.A.L ...... 2,586,188 7.0 6 3,480,301 8.1 5 Banque Libano-Française S.A.L...... 2,973,421 8.0 5 3,408,020 8.0 6 Bank of Beirut S.A.L...... 2,158,793 5.8 7 2,708,803 6.3 7 Société Générale de Banque au Liban (SGBL) S.A.L...... 1,465,570 4.0 10 2,035,446 4.8 8 Credit Libanais S.A.L...... 1,498,676 4.1 8 1,944,352 4.6 9 Lebanese Canadian Bank S.A.L...... 1,474,057 4.0 9 1,912,503 4.5 10 BBAC S.A.L...... 916,865 2.5 11 1,024,749 2.4 11 IBL Bank S.A.L...... 475,145 1.3 12 423,349 1.0 12 Total ...... 36,940,183 100.00 42,711,341 100.00

Banking activities in Lebanon are governed by the Lebanese Code of Commerce, the Code of Money and Credit and Banque du Liban Decisions. Regulations are set out by Banque du Liban and the Banking Control Commission, which was established in 1967 and has the responsibility of supervising banking activities and ensuring compliance with regulations and legislation.

The Banking Control Commission undertakes both off-site reviews and on-site examinations of Lebanese banks to assess, inter alia, compliance with banking laws and regulations, reliability of bank reporting, levels of liquidity and capital adequacy and loan-to-deposit ratios.

Banks regularly submit reports to Banque du Liban, including daily lists of foreign exchange transactions undertaken, weekly reports on the portfolio of treasury bills held, periodic financial information on customers and interbank deposits and audited financial statements. Banks also submit regular reports to the Banking Control Commission mainly on their lending portfolio and on some details of their financial statements. Furthermore, banks, like all joint stock companies registered in Lebanon, must have their by-laws and minutes of certain shareholders’ meetings, as well as minutes of board of directors meetings whose objects relate to, or otherwise affect, third parties, registered with the Register of Commerce.

Related Party Transactions

Transactions with related parties are governed by the Lebanese Code of Commerce, the Code of Money and Credit and Banque du Liban Decision No. 7776 dated February 21, 2001, as amended (“Decision 7776”), which collectively provide that a transaction with a related party must be formally authorised by a general meeting of the bank’s shareholders and approved by the bank’s board of directors. As amended effective November 13, 2003, Decision 7776 provides that advances and credit facilities to directors, managers and companies having common directors with a bank may not exceed 5.0% of shareholders equity; however, Banque du Liban has provided a phase-in compliance for banks exceeding such limit during which such advances and credit facilities should be reduced to 10.0% as of December 31, 2004 and 5.0% as of December 31, 2005, 2.0% of which may be granted without having to meet the conditions specified in the Code of Money and Credit, including, among other things, the formal prior approval of the general meeting of the bank’s shareholders. As amended effective March 8, 2010, Decision 7776 prohibits credit operations between specialised and commercial banks that are part of the same economic group. Decision 7776 provides for a phase-in compliance period ending on December 31, 2010.

Banque du Liban Decision No. 7156, dated November 10, 1998, provides that inter-bank deposits among banks and foreign affiliated companies (whether or not financial institutions) may not exceed 25.0% of Tier I Capital.

Reserve Requirements

Pursuant to Decision No. 7835, dated June 2, 2001, as amended, all banks operating in Lebanon, except investment banks and commercial banks making medium and long term loans, must maintain a compulsory reserve in cash with Banque du Liban equal to (i) 25.0% of the weekly average of the sum of Lebanese Pound- denominated demand deposits and (ii) 15.0% of the weekly average of the sum of Lebanese Pound-denominated term deposits.

On September 27, 2001, Banque du Liban issued Decision No. 7935, as amended, implementing Decision No. 7926, dated September 20, 2001, pursuant to which all banks operating in Lebanon must maintain in cash with Banque du Liban an interest-bearing deposit to the extent of 15.0% of all foreign currency-denominated deposits, notes, certificates of deposit, banks’ certificates and other debt instruments and loans granted by the financial sector with a remaining time to maturity of one year or less, against payment of interest at the rate applied by Banque du Liban on foreign currency-denominated deposits.

On December 16, 2002, Banque du Liban amended Decision No. 7926, dated September 20, 2001, pursuant to which all banks operating in Lebanon must subscribe to Lebanese treasury bills or eurobonds issued by the Lebanese Republic, which do not bear interest and have a maturity of two years. The aggregate amount of such Lebanese treasury bills or eurobonds subscribed to by each bank must equal 10.0% of the relevant bank’s deposits in all currencies as of October 31, 2002. Subscription was effected in five equal instalments on each of January 17, 2003, February 18, 2003, March 18, 2003, April 18, 2003 and May 16, 2003; all such securities subscribed to fulfil these mandatory obligations have now matured without any obligation to reinvest. Under this Decision, subscriptions were permitted to be made in either cash (in Lebanese Pounds or U.S. Dollars) or in Lebanese treasury bills or eurobonds. Thereafter, Banque du Liban issued certificates of deposit, which the banks were permitted to purchase in satisfaction of their subscription obligations.

Pursuant to Banque du Liban Decision No. 6101 dated February 8, 1996, as amended, the Central Council of Banque du Liban may grant, on a case-by-case basis, to commercial banks making medium- and long-term loans the same reserve requirement concessions and exemptions as those granted to “specialised banks” governed by Decree Law No. 50 dated July 15, 1983.

Pursuant to Banque du Liban Decision No. 7129 dated October 15, 1998, as amended (“Decision 7129”), the accumulated reserve for unspecified banking risks must be equivalent to 1.25% of risk-weighted assets within 10 years from Decision 7129’s issuance and 2.0% of risk-weighted assets within 20 years from Decision 7129’s issuance. In addition, Banque du Liban Decision No. 7740, dated December 21, 2000, as amended, provides that banks are required to establish a special reserve for properties acquired in satisfaction of debts and not liquidated within the required delays. The Banking Control Commission Circular No. 4/2008 provides that banks must establish such special reserve at the end of the fiscal year during which the acquired property should have been liquidated. This special reserve shall be withheld from the annual profits and shall not be accounted for as an expense in the profit and loss account in accordance with IFRS.

Banque du Liban Decision No. 7693 dated October 18, 2000, as amended, provides that all banks operating in Lebanon must maintain a minimum of 10.0% of all foreign currency-denominated deposits, debt securities, certificates of deposits, banks’ certificates and other debt instruments and loans granted by the financial sector with a remaining time-to-maturity of one year or less, in liquid assets consisting of (i) cash in a bank’s vaults, (ii) cash deposited with Banque du Liban and (iii) cash deposited with other banks with a remaining time-to- maturity less than or equal to one year.

Banque du Liban Decision No. 7694 dated October 18, 2000, as amended, provides that all banks operating in Lebanon must also maintain at all times a minimum of 40.0% of their Tier I Capital denominated in Lebanese Pounds, in particular after provisions and distribution of profits, in liquid assets, consisting of (i) cash in the bank’s vaults, (ii) cash deposited with Banque du Liban, (iii) cash deposited with other banks with a remaining time-to-maturity equal to or less than one year and (iv) Lebanese treasury bills with a remaining time-to- maturity of one year or less.

Capital Adequacy

Pursuant to Banque du Liban Decision No. 6939, dated March 25, 1998, all banks operating in Lebanon are required to maintain a minimum capital adequacy ratio of 12.0% as from December 31, 2001.

During the past years, the capital of commercial banks in Lebanon has increased substantially. As of December 31, 2007 (the most recent available), the average capital adequacy ratio was approximately 22% according to statistics compiled by Banque du Liban.

Banque du Liban Decision No. 6938, dated March 25, 1998, was amended on September 8, 2005 to provide that the aggregate amount of preferred shares (convertible and non-convertible into ordinary shares) and financial instruments that are deemed part of a bank’s Tier I Capital according to the applicable regulations cannot exceed 49.0% of the bank’s Tier I Capital; that the aggregate amount of preferred shares (non-convertible into ordinary shares) and financial instruments that are deemed part of a bank’s Tier I Capital according to the applicable regulations cannot exceed the sub-limit of 35.0% of the bank’s Tier I Capital; and that the aggregate amount of financial instruments that are deemed part of a bank’s Tier I Capital according to the applicable regulations cannot exceed the sub-limit of 15.0% of the bank’s Tier I Capital. The excess above these limits of preferred shares (convertible and non-convertible) and financial instruments, which would otherwise form part of the bank’s Tier I Capital, will be included in the bank’s Tier II Capital.

Banque du Liban Decision No. 9302, dated April 1, 2006 (“Decision 9302”), provides that Lebanese banks are required to phase in application of the Basel II Accord starting from January 1, 2008 in accordance with the standards set forth in Decision 9302 and any subsequent decisions or implementing regulations. Banque du Liban is in the process of issuing regulations for the implementation of the Basel II Accord and the related provisions of Decision 9302. Furthermore, Banque du Liban and the Banking Control Commission are currently conducting a follow-up review on the full implementation of the Basel II Accord requirements by all banks operating in Lebanon.

While the follow-up review progresses and until further implementing regulations are issued, Lebanese banks are required to continue to calculate their capital adequacy ratios according to current applicable regulations under the Basel I Accord, as well as to start to calculate their capital adequacy ratios according to the Basel II Accord.

On September 24, 2007, Banque du Liban Decision No. 6938 dated March 25, 1998 was amended to introduce an additional category of capital, called Tier III Capital, that consists of subordinated debt issued initially for a minimum of two years. Tier III Capital can only be used to support market risk in the trading book of the bank; this means that any capital requirement arising in respect of credit, operational and counterparty risk, including the credit counterparty risk in both trading and banking books, needs to be met by the existing definition of capital base (i.e., Tier I and Tier II). The use of Tier III Capital to support market risk is limited to 250.0% of the amount of residual Tier I Capital. This means a minimum of 28.5% of market risk must be covered by residual Tier I Capital to maintain this ratio. Tier II Capital may be substituted for Tier III Capital up to the limit of 250.0% in so far as the overall limits for Tier II with regard to Tier I are not breached.

Pursuant to Decision 9957, relating to the assessment of the capital adequacy of Lebanese banks, the senior executive management of Lebanese banks is required, in addition to meeting the Pillar I (i.e., minimum capital requirements under the Basel II Accord) requirements, to establish a documented mechanism for the assessment of the bank’s capital adequacy. The assessment of such capital adequacy shall be carried out in accordance with certain guidelines, including, inter alia, (i) the risks to which the bank is exposed, such as credit risk, market risk, operational risk, interest rate risk, credit concentration risk, liquidity risk and strategic risk; (ii) the future capital needs of the bank; and (iii) the periodic monitoring of the sufficiency of the bank’s capital to cover the minimum requirements to counter any risks or potential negative changes.

The Banking Control Commission shall periodically ensure that the assessment of a bank’s capital adequacy is carried out in accordance with Decision 9957 by reviewing and evaluating all the qualitative (i.e., corporate governance, risk management and internal control regulations) and quantitative (i.e., the calculation of the capital requirements in accordance with Pillar I and Pillar II) elements adopted by a bank in its capital adequacy assessment process. The Banking Control Commission shall have the right to instruct the bank to increase its shareholders’ equity should it deem the foregoing qualitative and quantitative elements to be weak or inadequate, although any such increase of shareholders’ equity shall not exempt the bank from rectifying such weaknesses or inadequacies.

Corporate Governance

Banque du Liban Decision No. 9382 dated July 26, 2006, adopted in implementation of the Basel II Accord regarding the banks’ corporate governance, has outlined the general guidelines for the banks’ corporate governance, regarding, inter alia, (i) the directors’ competence to hold their positions, (ii) the board of directors’ role in specifying the strategic goals and corporate values of the bank and to ensure implementation thereof, (iii) the board of directors’ duty to clearly provide for responsibilities and accountability and to ensure that such responsibility and accountability are thoroughly applied and (iv) the transparent management of the bank.

Pursuant to Banque du Liban Basic Decision No. 9956 dated July 21, 2008, the board of directors of each Lebanese bank is required to establish an audit committee comprised of at least three non-executive directors,

one of whom shall have experience in accounting, financial management or auditing. This audit committee shall, inter alia, assist the board of directors in the performance of its duties, in particular with respect to: (i) assessing the qualifications and independence of each of the auditors and the internal audit unit; (ii) monitoring the accuracy of the bank’s financial statements and reviewing the disclosure criteria adopted by the bank; (iii) reviewing the sufficiency and effectiveness of the bank’s internal control regulations and procedures; (iv) following up on the implementation of the proposed corrections included in any reports issued by the internal audit unit and the auditors; and (v) monitoring the bank’s compliance with applicable Banque du Liban and Banking Control Commission regulations.

In addition, the audit committee shall, separate from its duty to assist the board of directors, independently supervise the internal audit activities, assess the performance, independence and objectivity of the auditors and review the internal control regulations and procedures, including the anti-money laundering procedures and the prevention of terrorism financing procedures, in order to ensure their sufficiency and effectiveness.

Lebanese banks are required to establish an audit committee before June 30, 2009 and to inform the Banking Control Commission of the names of its members. The Bank established its Audit Committee on February 15, 2007, being the first among the Lebanese banks to do so.

Banque du Liban Decision No. 10224 dated August 13, 2009 requires each Lebanese bank to appoint two separate external auditors to jointly audit the bank’s accounts beginning with fiscal year 2010.

Pursuant to Banque du Liban Basic Decision No. 10227 dated August 21, 2009 (“Decision 10227”), Lebanese banks are required to adopt a business continuity plan for purposes of ensuring the continuity of their operations in the event of the occurrence of any disaster or other event that may affect the continuity of their operations. Decision 10227 provides for a one year phase-in compliance period.

Credit Limits

Banque du Liban Decision No. 7055 dated August 13, 1998, as amended by Intermediary Decision No. 9456 dated November 9, 2006 (“Decision 9456”), sets the maximum allowable weighted credit limit for loans to a single borrower (or a group of related borrowers) at (i) 20.0% of a bank’s shareholders’ equity with respect to loans extended to borrowers (or a group of related borrowers) resident in Lebanon the proceeds of which are to be used in Lebanon, (ii) 20.0% of a bank’s shareholders’ equity with respect to loans extended to resident borrowers or non-resident borrowers (or a group of related borrowers) the proceeds of which are to be used in countries with sovereign ratings of A+ and above and (iii) 10.0% of a bank’s shareholders’ equity with respect to loans extended to resident borrowers or non-resident borrowers (or a group of related borrowers) the proceeds of which are to be used in countries with sovereign ratings below A+, provided that (x) the aggregate exposure for countries rated from A to BBB- is not to exceed 200.0% of the bank’s shareholders’ equity and the aggregate exposure to each of these countries is not to exceed 50.0% of the bank’s shareholders’ equity or (y) the aggregate exposure for countries rated below BBB- is not to exceed 100.0% of the bank’s shareholders’ equity and the aggregate exposure to each of these countries is not to exceed 25.0% of the bank’s shareholders’ equity. Intermediary Decision 9456 gave non-compliant banks until December 31, 2007 to comply with its provisions

Foreign Exchange Trading

Banque du Liban Decision No. 6568, dated April 24, 1997, as amended (“Decision 6568”), prohibits Lebanese banks from maintaining at any time (i) net trading positions against Lebanese Pounds in an amount greater than 1.0% of Tier I Capital and (ii) global positions greater than 40.0% of Tier I Capital.

Lebanese banks, however, are allowed, under Decision 6568, to hold a structural foreign exchange position up to 60.0% of Tier I Capital denominated in Lebanese Pounds after making certain adjustments.

Loan Classification

Banque du Liban Decision No. 7159, dated November 10, 1998, as amended, introduces specific rules relating to loan classification and provisioning in accordance with the Basel Committee regulations. Specifically, it divides loan facilities into five categories: ordinary/regular loans, loans to be followed-up and regularised, substandard loans, doubtful loans and bad or ailing loans. See “Overview of the Bank—Loan Classifications”.

Provision for Bad Debt and Doubtful Loans

The Banking Control Commission requires specific provisions to be established for identified credit losses. Full or partial provisions must be made in respect of non-performing loans in accordance with applicable Banque du Liban regulations. Furthermore, non-performing loans must be put on a non-accrual basis and any interest

subsequently received booked on a cash basis, as and when received. Non-performing loans are those as to which the relevant Central Credit Department has determined that the borrower may be unable to meet principal and/or interest repayment obligations, or performance is otherwise unsatisfactory, unless the loans are adequately secured and/or are in the process of liquidation. See “Overview of the Bank—Provisioning and Write-Off Policies”.

Reserves for General Banking Risk

Pursuant to Banque du Liban Decision 7129, banks operating in Lebanon are required to allocate on a yearly basis a general reserve (to be included in Tier I Capital) for unspecified banking risks out of net profits in an amount equal to a minimum of 0.2% and a maximum of 0.3% of risk-weighted assets. The accumulated reserve for unspecified banking risks must be equivalent to 1.25% of risk-weighted assets within 10 years from the Decision’s issuance and 2.0% of risk-weighted assets within 20 years from the Decision’s issuance, in each case, from 2008, as calculated in accordance with Basel II ratios.

Accounting Standards

Effective in 1997, all Lebanese banks are required to prepare their financial statements in accordance with International Financial Reporting Standards (IFRS). The Banking Control Commission has issued instructions which correspond to International Financial Reporting Standards; for instance, the recognition of interest on classified loans only on a cash basis, guidelines for the effects of hyper-inflation, the recording of exchange gains and losses arising from revaluation of foreign exchange positions and a statement of non-monetary assets acquired in settlement of debts at current price.

There are also certain restrictions on lending to shareholders and directors and on investments in subsidiaries and affiliates.

Banque du Liban Decision No. 6576 dated April 24, 1997, requires Lebanese banks to prepare consolidated financial statements effective July 1, 1997. Consolidated financial statements must include all companies (financial and non-financial) under a bank’s exclusive control (evidenced by ownership of 50% and/or exclusive control over management). Companies in which the bank has joint control (evidenced by direct or indirect ownership ranging from 20.0% up to 50.0%) should be presented using the “equity method”.

DESCRIPTION OF THE SHARE CAPITAL OF THE BANK

General

Shares in issue

As of December 31, 2009, the Bank’s share capital consisted of (i) 34,418,941 Common Shares, each with a par value of LL 12,250; and (ii) 1,250,000 Series D Preferred Shares, each with a par value of LL 12,250, which were issued at a price of, and may (subject to certain conditions) be redeemed by the Bank at, U.S. $100.00 per Series D Preferred Share. All of the Common Shares and Series D Preferred Shares are issued and fully paid-up.

On March 2, 2010, the shareholders of the Bank authorised (i) the Stock Split, and (ii) the issuance of the Series E Preferred Shares, in each case subject to Banque du Liban approval. The Stock Split is expected to become effective as of May 24, 2010, for holders of GDRs of record as of May 21, 2010, as determined by the Chairman of the Board of Directors pursuant to a delegation duly granted to him by the Board. The Series E Preferred Shares are expected to be issued on or about May 31, 2010.

After giving effect to the Stock Split, the Bank’s share capital will consist of (i) 344,189,410 Common Shares, each with a par value of LL 1,225; and (ii) 12,500,000 Series D Preferred Shares, each with a par value of LL 1,225, which were issued at a price of, and may (subject to certain conditions) be redeemed by the Bank at, U.S. $100.00 per Series D Preferred Share, all of which will be issued and fully paid-up upon the effectiveness of the Stock Split. The Bank plans to issue 1,250,000 Series E Preferred Shares, each with a par value of LL 1,225, on or about May 31, 2010, at a price of U.S. $100.00 per Series E Preferred Share, which may (subject to certain conditions) be redeemed by the Bank at the same price.

Except for the Stock Split and the issuance of the Series E Preferred Shares described in this Prospectus, there has been no material change in the Bank’s capital since December 31, 2009.

In June 2002, the Bank issued 2,400,000 Non-Cumulative Redeemable Series A Preferred Shares with a par value of LL 2,000 each, which carried annual distribution rights of U.S. $3.00 per Series A Preferred Share and which were issued at a price of U.S. $25 per Series A Preferred Share, all of which have been redeemed and cancelled in June 2007 in accordance with their terms.

In June 2002, the Bank issued 1,600,000 Non-Cumulative Redeemable Series B Preferred Shares with a par value of LL 2,000 each, which carried annual distribution rights of U.S. $1.50 per Series B Preferred Share and which were issued at a price of U.S. $25 per Series B Preferred Share, all of which have been fully converted into Common Shares in June 2004 in accordance with their terms.

In June 2004, the Bank issued 4,000,000 Non-Cumulative Redeemable Series C Preferred Shares with a par value of LL 2,000 each, which carried annual distribution rights of U.S. $2.1875 per Series C Preferred Share and which were issued at a price of U.S. $25 per Series C Preferred Share, all of which have been redeemed and cancelled in May 2009 in accordance with their terms.

In November 2005, the Bank issued its Series D Preferred Shares, all of which remain issued and outstanding. See “—Description of the Series D Preferred Shares”.

Changes in Share Capital

The share capital of the Bank may be increased only with the approval of the Bank’s shareholders at an Extraordinary General Meeting and the authorisation of the Central Bank, following a recommendation of the Board of Directors. The Bank’s shareholders at the relevant Extraordinary General Meeting shall also determine the conditions of issue of the new shares. Increases in share capital may be effected either by the issue of new shares, by incorporation of free reserves or by any legally authorised means. New shares may be issued for cash or for assets contributed in kind. Under Lebanese law, the share capital of the Bank may not be reduced in any circumstances; however, in common with other Lebanese banks, the Bank is authorised to buy-back its own shares (which are listed on a stock exchange) and cancel them subject to certain conditions.

Over the last five years, the following changes have occurred in respect of the Bank’s share capital:

• On September 5, 2005, the shareholders of the Bank adopted resolutions at an Extraordinary General Meeting authorising the increase in the share capital of the Bank through the issuance of 1,250,000 Series D Preferred Shares, each with a par value of LL 10,000, pursuant to Law 308.

• On February 2, 2006, the shareholders of the Bank adopted resolutions at an Extraordinary General Meeting authorising (i) the increase in the share capital of the Bank through the issuance of 10,000,000 Common shares at an issue price of U.S. $60 per Common Share, as follows: (x) subscription to 2,446,752 newly issued shares were reserved to the then-existing shareholders, and (y) subscription to 7,553,248 newly issued shares were reserved to a new shareholder; and (ii) the establishment of a stock option plan and the issuance thereunder of options (the “Stock Options”) relating to up to 5,000,000 Common Shares, at a price equal to or in excess of par value, to be awarded to executives and other employees of the Bank. The shareholders also delegated to the Board of Directors the authority to select the beneficiaries (or “optionees”), and to set additional terms, for each grant of Stock Options. On April 26, 2006, the Board of Directors granted 3,200,000 Stock Options at an exercise price of U.S. $27.19 per Common Share. On May 10, 2007, the Board of Directors granted 170,112 additional Stock Options at an exercise price of U.S. $40.33 per Common Share. In each case, the difference between the respective exercise price per Common Share and the nominal value of each Common Share is accounted for as issue premium.

• On July 13, 2007, the shareholders of the Bank adopted resolutions at an Extraordinary General Meeting authorising (i) the cancellation of the 2,400,000 Series A Preferred Shares, and (ii) the increase in the Bank’s capital by LL 14,016,240,000 through the incorporation of free reserves in order to round the nominal value of each remaining share then constituting the Bank’s capital up to LL 11,000.

• On September 3, 2007, the shareholders of the Bank adopted resolutions at an Extraordinary General Meeting authorising the increase in the share capital of the Bank through the issuance of 136,069 Common Shares reserved for the optionees who had exercised their rights at a price of U.S. $27.19 per Common Share.

• On July 8, 2008, the shareholders of the Bank adopted resolutions at an Extraordinary General Meeting authorising the increase in the share capital of the Bank through the issuance of 1,287,080 Common Shares reserved for the optionees who had exercised their rights as follows: (i) 1,230,442 Common Shares at a price of U.S. $27.19 per Common Share and (ii) 56,638 Common Shares at a price of U.S. $40.33 per Common Share.

• On May 7, 2009, the shareholders of the Bank adopted resolutions at an Extraordinary General Meeting authorising (i) the cancellation of the 4,000,000 Series C Preferred Shares, and (ii) the increase in the Bank’s capital by LL 299,236,250 through the incorporation of free reserves in order to round the nominal value of each remaining share then constituting the Bank’s capital up to LL 12,250.

• On July 27, 2009, the shareholders of the Bank adopted resolutions at an Extraordinary General Meeting authorising the increase in the share capital of the Bank through the issuance of 229,552 Common Shares reserved for the optionees who had exercised their rights as follows: (i) 220,848 Common Shares at a price of U.S. $27.19 per Common Share and (ii) 8,704 Common Shares at a price of U.S. $40.33 per Share.

• On March 2, 2010, the shareholders of the Bank adopted resolutions at an Extraordinary General Meeting authorising (i) the Stock Split, and (ii) the issuance of the Series E Preferred Shares pursuant to Law 308, in each case subject to Banque du Liban approval.

On January 18, 2010, a group of the Bank’s existing shareholders, as well as a number of other high net worth individuals and entities investing directly or through investment vehicles, purchased the entire stake previously owned by EFG-Hermes comprised of 7,554,148 Common Shares and 2,483,034 GDRs. In connection with this transaction, two newly-formed special purpose companies issued notes exchangeable into Common Shares to finance their purchase of a total of 3,396,783 Common Shares from EFG-Hermes. The Bank has agreed that, if so requested at any time, by or on behalf of either such special purpose company, it will pay to the relevant company an amount sufficient to permit such company to make payment of its obligations in respect of the notes issued by it to the extent then due. The Bank has also agreed, subject to certain conditions and to obtaining all necessary approvals and authorisations (including the prior approval of Banque du Liban), if so requested, to purchase or procure the purchase from the relevant company, immediately prior to the maturity date of its notes, of all Common Shares at the time held by such company. In addition, the Bank has entered into a separate call option agreement with each such special purpose company, respectively, pursuant to which the Bank has the right (but not the obligation), subject to certain conditions and to obtaining all necessary approvals and authorisations (including the prior approval of Banque du Liban), to purchase or cause to be purchased, in its discretion, all or any part of the Common Shares of the Bank held by the relevant company.

Dividends

At the General Meeting of Shareholders held on April 12, 2010, the Bank’s shareholders approved the distribution of dividends out of the Bank’s net income in 2009 (before taxes of 5%) of LL 5,276.25 (U.S. $3.50) per Common Share and U.S. $7.75 per Series D Preferred Share. Total dividends paid in respect of Common Shares for 2009 represented 41.69% of net income for that year.

Directors’ Interests

The interests of the directors of the Bank in the Common Shares and GDRs of the Bank held directly and indirectly as of April 9, 2010 are set out in the table below: Director Percentage Ownership(1) Raymond Wadih Audi (Chairman and General Manager)(2) ...... 2.7% Marwan Moukhtar Ghandour (Vice-Chairman) ...... 0.1% Samir Nicolas Hanna (Group Chief Executive Officer)...... 0.5% Souad Hamad Al-Saleh Al-Homaizi(2)...... 7.6% Mariam Nasser Sabbah Al-Nasser Al-Sabbah(2)...... 0.9% Marc Jean Audi(2) ...... 3.2% Freddie Charles Baz ...... 0.4% Georges Antoine Gedeon-Achi ...... 0.1% Imad Ibrahim Itani...... 0.2% Mario Joseph Saradar(2) ...... 6.8% Abdallah Ibrahim Al-Hobayb...... 5.3% Khalil Michel Bitar(3)...... 0.0% Total ...... 27.8% ______Notes: (1) Excluding unexercised Stock Options. See “—Changes in Share Capital”. (2) See “—Shareholders”. (3) Excluding directors’ qualifying shares, the ownership of which is legally required for membership on the Board of Directors. Six of the directors of the Bank, Raymond Audi, Samir Hanna, Marc Audi, Mario Saradar, Freddie Baz and Imad Itani have service contracts with the Bank. Mr Raymond Audi had resigned as Chairman and General Manager of the Bank during his appointment as a minister in the Lebanese Government from August 2008 through December 2009. Effective December 22, 2009, Mr. Audi has resumed his position as Chairman of the Board of Directors and currently acts as Chairman and General Manager of the Bank.

In addition, Freddie Baz serves as Chairman of the Board of Directors of Audi Saradar France, which is a subsidiary of the Bank; Mario Saradar serves as Chairman of the Board of Directors of each of Audi Saradar Private Bank and Audi Suisse, which are subsidiaries of the Bank; Georges Achi serves as Chairman of the Board of Directors of Audi Syria, which is a subsidiary of the Bank; Imad Itani serves as Chairman of the Board of Directors of National Bank of Sudan, which is a subsidiary of the Bank; Raymond Audi serves as Chairman of the Board of Directors of Audi Qatar, which is a subsidiary of the Bank; and Marwan Ghandour serves as Chairman of the Board of Directors of each of (i) Audi Saradar Investment Bank, which is a subsidiary of the Bank, and (ii) Lebanon Invest s.a.l., which is a subsidiary of the Bank. No other director of the Bank has a service contract with the Bank or any of its affiliates.

Conflicts of Interest There are no potential conflicts of interest between any duties owed to the Bank by members of the Board of Directors, the Secretary of the Board and the Honorary Chairman and their private interests and other duties.

Management Incentive Scheme

On April 12, 2010, the General Meeting of Shareholders approved a resolution pursuant to which the Chairman of the Board of Directors (Mr. Raymond Audi) and the executive members of the Board of Directors (Messrs. Samir Hanna, Marc Audi, Freddie Baz, Imad Itani and Mario Saradar) are entitled to receive an aggregate of 3.35% of the annual pre-tax profits of the Bank for each of the years ended December 31, 2010 through December 31, 2013, inclusive (as compared to the previous performance-related cash remuneration granted in June 2006 by the General Meeting of Shareholders to the Chairman, the executive members of the Board of Directors and some members of the Executive Committee in the aggregate amount equivalent to 4.25% of the Bank’s consolidated net profits before taxes (which was increased to 4.4286% in 2007, after adding a beneficiary) for each of the years ended December 31, 2006 through December 31, 2009, inclusive).

Other Related Party Transactions

Unless as provided under “–Directors’ Interests”, no director of the Bank has an interest in any contract, arrangement or transaction entered into by the Bank or its subsidiaries, which is or was unusual in its nature or conditions or significant in relation to the business of the Bank and which was effected during the current or immediately preceding financial year, or was effected during an earlier financial year and remains in any respect outstanding or unperformed.

Shareholders

The following table sets out the composition of the holders of the Common Shares and GDRs as of April 9, 2010: Country (ultimate economic Shareholders/Groups of Shareholders ownership) Percentage Ownership(1) Al-Homaizi Family(2) Kuwait 8.08% Audi Family(2) Lebanon 8.07% Saradar Family(2) Lebanon 6.84% Sheikh Dhiab Bin Zayed Al-Nehayan United Arab Emirates 6.72% Abdallah Ibrahim Al-Hobayb Kingdom of Saudi Arabia 5.25% Middle East Opportunities For Structured Finance Ltd. Lebanon 4.94% Investment Finance Opportunities Ltd. Lebanon 4.94% Investment and Business Holding s.a.l.(3) Lebanon 4.91% Al-Sabbah Family(2) Kuwait 4.90% MAL Investment One Holding s.a.l.(3) Lebanon 4.83% M1 Investments Ltd. and M1 Capital Ltd.(3) Lebanon 4.68% Phoenicia Enterprises S.A Lebanon 2.91% El-Khoury Family Lebanon 2.60% Others(4) 30.33% Total Shareholding 100.00% ______Notes: (1) Percentage ownership figures represent both Common Shares and GDRs owned by the named Shareholders and are expressed as a percentage of the total number of Common Shares issued and outstanding, including the Common Shares represented by GDRs. Ownership of GDRs is based on self-declarations as the Bank does not have direct access to the registry of GDRs holders. As of April 9, 2010, Deutsche Bank Trust Company Americas, in its capacity as depositary under the Bank’s GDR Programme, owned 10,171,761 Common Shares represented by GDRs, including the GDRs owned by the Shareholders named in the table above and 992,203 GDRs owned by the Bank (as compared to 719,968 GDRs owned by the Bank as of December 31, 2009). (2) The Al-Homaizi Family, Audi Family, Saradar Family and Al-Sabbah Family include the following members of the Board: (i) Souad Hamad Al-Saleh Al-Homaizi, (ii) Raymond Wadih Audi and Marc Jean Audi, (iii) Mario Joseph Saradar, and (iv) Mariam Nasser Sabbah Al-Nasser Al-Sabbah, respectively, each of whom owns Common Shares or GDRs. See “—Directors’ Interests”. (3) The ultimate beneficial owners of Investment and Business Holding s.a.l., MAL Investment One Holding s.a.l., M1 Investments Ltd. and M1 Capital Ltd. are members of the Mikati Family. Includes Common Shares and GDRs owned directly or indirectly by these companies. (4) Including certain executives and employees of the Bank. Each with less than one per cent. The Bank is not aware of any person, other than as listed in the table above, who has an interest in 3.0% or more of its issued share capital, or any other person who, directly or indirectly, jointly or severally, exercises or could exercise control over the Bank.

To the Bank’s knowledge, there are no arrangements in place, the operation of which may at a subsequent date result in a change in control of the Bank. None of the Bank’s shareholders has voting rights different from any other holders of its shares.

Description of the Common Shares

The following description of the Bank’s Common Shares and the rights relating thereto does not purport to be complete and is qualified in its entirety by reference to Lebanese law and the By-laws (which have been filed with and are presently available from the Register of Commerce of Beirut or at the offices of the Bank and the Placement Agent currently located at the respective addresses indicated on the back cover of this Prospectus).

General

As of the date of this Prospectus, the Bank’s share capital includes 34,418,941 Common Shares, each with a par value of LL 12,250, all of which are issued and fully paid. Upon the effectiveness of the Stock Split, the Bank’s share capital will include 344,189,410 Common Shares, each with a par value of LL 1,225.

Payment of Dividends

Since 1996, the Board of Directors of the Bank has recommended the distribution to holders of Common Shares of a dividend payment of at least 30% of after-tax profits in each year.

Pursuant to the Bank’s By-laws, subject to the requirements of Lebanese law, the Bank’s net income in each financial year shall be allocated in the following order of priority:

• to the allocation of 10% of net income to the legal reserve;

• to the allocation of amounts required for the establishment of legal regulatory reserves;

• to the payment of Series E Distributions and distributions in respect of the Series D Preferred Shares, as and when approved by the shareholders of the Bank pursuant to a resolution adopted at the Ordinary General Meeting (or any other shareholders’ meeting) at which the most recent annual audited financial statements of the Bank are approved;

• to the establishment of additional special or general reserves and/or to the allocation of amounts to be carried forward to the following year in accordance with a decision of the Bank’s shareholders pursuant to a resolution adopted at a General Meeting; and

• to the distribution of the balance to holders of Common Shares.

The Bank is legally required to establish and maintain a legal reserve to which an amount equal to 10.0% of the annual net profits after taxation must be transferred each year until such reserve reaches one-third of the Bank’s share capital. The legal reserve is distributable only upon the liquidation of the Bank. The Bank is also legally required to set aside a minimum of 0.2% and a maximum of 0.3% of the Bank’s risks-weighted assets as a reserve for unspecified banking risks, which forms an integral part of the Bank’s Tier I Capital. Pursuant to Banque du Liban Decision 7129, the accumulated reserve for unspecified banking risks must be equivalent to 1.25% of risk-weighted assets within 10 years from Decision 7129’s issuance and 2.0% of risk-weighted assets within 20 years from Decision 7129’s issuance. In addition, Banque du Liban Decision No. 7740, dated December 21, 2000, as amended, provides that banks are required to establish a special reserve for properties acquired in satisfaction of debts and not liquidated within the required delays. The Banking Control Commission Circular No. 4/2008 provides that banks must establish such special reserve at the end of the fiscal year during which the acquired property should have been liquidated. This special reserve shall be withheld from the annual profits and shall not be accounted for as an expense in the profit and loss account in accordance with IFRS.

No dividends or other distributions in respect of the Common Shares may be made unless and until the full amount of Series E Distributions and of distributions in respect of the Series D Preferred Shares, in each case, then due and payable shall have been paid or declared and set aside.

Payment of dividends to holders of Common Shares must be made annually on the dates specified by the General Meeting (or any other shareholders’ meeting) at which the relevant annual audited financial statements of the Bank are approved. Under Lebanese law, dividends not claimed within five years of the date of payment become barred by statute of limitations; half of these unclaimed dividends revert to the Bank, while the balance is paid over to the Lebanese Government.

Liquidation Rights

If the Bank is liquidated, the assets of the Bank remaining after payment of its debts, liquidation expenses and all of its remaining obligations will be distributed first to pay the Series E Liquidation Preference and the liquidation preference in respect of the Series D Preferred Shares, on a pro rata basis by reference to the par value of such shares. Thereafter, such assets will be applied to repay in full the par value of the Common Shares, with the surplus, if any, being distributed pro rata among holders of the Common Shares based on the number of Common Shares they hold.

Restrictions on Transfer of Common Shares

In accordance with Law 308, any transfer of Common Shares requires the approval of the Central Bank in the event that (i) such transfer of shares would result in the transferee owning, directly or indirectly, 5.0% or more of the outstanding share capital of the bank (excluding preference shares) or voting rights relating thereto, whichever is higher; (ii) the transferee owns at the time of the transfer 5.0% or more of the outstanding share capital of the bank (excluding preference shares) or voting rights relating thereto, whichever is higher; or (iii)

either the transferee or the transferor is a current or elected member of the bank’s board of directors irrespective of the number of transferred shares.

Attendance and Voting at Shareholders’ Meetings

In accordance with Lebanese law, there are three types of General Meetings of shareholders: constituent, ordinary and extraordinary.

The constituent General Meeting takes place only once, at the call of the founders, and takes all resolutions concerning the constitution of the Bank.

Ordinary General Meetings are required for matters such as the election and remuneration of directors, the appointment and remuneration of statutory auditors, the approval or modification of the annual accounts the declaration of dividends, the creation of reserves and the issue of debentures and bonds.

Extraordinary General Meetings are required for approval of matters such as amendments to the By-laws, mergers (including the transfer of the Bank’s assets and liabilities to the resulting company of such a merger), modifications of the form or object of the Bank, increases in share capital (including pursuant to a waiver of preferential subscription rights), the creation of a new class of shares, the issue of bonds convertible into or exchangeable for shares, the extension or reduction of the duration of the Bank and the liquidation of the Bank prior to the end of its statutory term. Resolutions proposing a modification of the Bank’s form or object require a quorum of at least three-quarters of the Bank’s voting capital. Resolutions put forward at an Extraordinary General Meeting proposing other changes require a quorum of at least two-thirds of the Bank’s voting capital. If the requisite quorum is not satisfied at the first General Meetings, holders of at least one-half of the Bank’s voting capital must be present or represented at the second General Meeting, and at least one-third of the Bank’s voting capital must be present or represented at any subsequent General Meetings.

Resolutions proposed at Extraordinary General Meetings are passed by an affirmative vote of at least two-thirds majority vote of the Bank’s voting capital present or represented at a duly constituted Extraordinary General Meeting. Any amendment to the By-laws is subject to the approval of the Central Bank.

The Board of Directors is required to convene an annual Ordinary General Meeting, which must be held within six months of the end of the Bank’s financial year, for approval of the annual accounts and reports of the Board of Directors. The quorum required for the annual Ordinary General Meeting is one-third of the capital (pursuant to Article 198-1 of the Lebanese Code of Commerce). If the quorum is not present, the Ordinary General Meeting is adjourned. Upon recommencement of the adjourned General Meeting, there is no quorum requirement and the resolutions of that General Meeting will be valid regardless of the portion of capital represented (pursuant to Article 198-2 of the Lebanese Code of Commerce). Resolutions are adopted by an affirmative vote of the absolute majority of the Bank’s voting capital present or represented at a duly constituted Ordinary General Meeting. Other Ordinary or Extraordinary General Meetings may be convened at any time during the year. General Meetings may be convened by the Board of Directors, or, if the Board of Directors fails to call such a meeting, by the Bank’s statutory auditors or by a court-appointed agent.

At least 16 days before the date set for any General Meeting, a notice must be published in two local daily newspapers. This period may be reduced to eight days for General Meetings convened for the second or third time following a previous inquorate General Meeting. Where only eight days’ notice is given, the notice must be published twice, with an interval of one week, in the Official Gazette and in an economic newspaper and a daily local newspaper. Such a notice must state the agenda of the previous inquorate Meeting and the results of that Meeting.

The notice of any General Meeting must state the date, time, venue and agenda for such General Meeting. The agenda for a General Meeting must be drawn up by the Board of Directors or the person that has convened the General Meeting (auditor, special director or liquidator). No action may be taken at any General Meeting on any matter not listed on the agenda for that General Meeting. However, the Board of Directors or the person convening a General Meeting may add to the agenda a proposal made by shareholders representing one-fifth of the share capital, provided that the proposal is made in writing and has been submitted ten days before the Meeting.

At the request of shareholders representing at least one-fifth of the Bank’s share capital, the Board of Directors of the Bank must, within two months following the date of the request, convene a General Meeting. The agenda of such a General Meeting must state the items that the requesting shareholders wish to discuss. If needed, the auditors may also convene a General Meeting.

If the annual Ordinary General Meeting is not called, any shareholder has the right to petition the President of the Tribunal of Commerce in the city of the head office of the Bank to appoint a special director. The reasons for not convening the annual Ordinary General Meeting, and the consequences of the failure to convene, will be discussed with the special director.

Attendance and exercise of voting rights at Ordinary General Meetings and Extraordinary General Meetings are subject to certain conditions. Each holder of Common Shares has the right to vote at General Meetings. Voting occurs by a show of hands or by any other method agreed by shareholders at a General Meeting. Each Common Share confers on the holder thereof the right to one vote; any fully paid Common Share that has been registered in the name of the same shareholder for at least two years prior to any General Meeting shall carry two votes.

A shareholder may appoint a proxy to vote on his behalf. With the exception of legal representatives of incapacitated shareholders, such proxies must themselves be holders of Common Shares.

A shareholder may not vote in person, or by proxy, on any matter in which it has a vested interest, or in respect of a dispute between itself and the Bank.

A request by any shareholder for a secret ballot must be granted where resolutions concern personal matters such as the dismissal of Board members or the determination of potential liability of directors.

A General Meeting held in accordance with Lebanese law represents all holders of Common Shares, whether present or not, and its resolutions shall be binding on all such shareholders, including absent or dissenting shareholders.

Resolutions of General Meetings must be signed by the Chairman of the Board of Directors, the Secretary and two scrutineers and are recorded in a special register. This register is kept at the head office of the Bank and every holder of Common Shares has the right to consult it.

Preferential Subscription Rights

In the event of an increase in the share capital of the Bank, the Lebanese Code of Commerce and the By-laws confer on existing holders of Common Shares a priority right for allocation, upon subscription, to be allocated newly -issued Common Shares (but not preference shares), for cash on a pro rata basis.

Existing holders of Common Shares may decide at an Extraordinary General Meeting to waive such preferential allocation rights for new Common Shares in whole or in part, or that new Common Shares shall not be offered for subscription in proportion to Common Shares already held. Any allotment of newly -issued Common Shares following such a waiver, whether to persons who are not existing shareholders or preferentially to a particular class of existing shareholders, is subject to a process of verification by an expert appointed by the court. In the case of an issue to persons who are not existing shareholders, this verification process applies to all of the newly -issued Common Shares. In the case of an issue to existing shareholders, only the portion of newly -issued Common Shares not offered to existing holders of Common Shares is subject to the verification process (pursuant to Article 113 of the Lebanese Code of Commerce and Article 7-2 of the By-laws). Failure to comply with this verification process will render a capital increase null and void (pursuant to Article 113 of the Lebanese Code of Commerce).

Where preferential allocation rights have not been waived at the relevant Extraordinary General Meeting, holders of Common Shares may nevertheless individually elect to refrain from exercising their preferential right, may assign their preferential right to a third party or may expressly waive their preferential right. In the event of a waiver, the newly -issued Common Shares may be offered for subscription to third parties.

Repurchase of Common Shares

Pursuant to Lebanese law and Central Bank regulations, Lebanese banks may acquire up to 10.0% of their own shares listed on any stock exchange, with the approval of the Central Bank and subject to certain conditions.

Form of Common Shares

The Common Shares are in registered form. Interests in the Common Shares are shown only on, and transfers thereof may be effected (subject as provided herein) only through, the book-entry system maintained by Midclear and its participants, including the Bank.

Description of the Series E Preferred Shares

General

The shareholders of the Bank have authorised the issuance of 1,250,000 Series E Preferred Shares, each with a par value of LL 1,225. It is expected that the Series E Preferred Shares will be issued on or about May 31, 2010 on the terms and subject to the conditions described below.

Series E Distributions

Preference shares, such as the Series E Preferred Shares, are a form of equity, which offer investors a higher level of periodic distributions than common or ordinary shares, but which typically do not participate in the net profits of the issuer over and above a fixed distribution level or liquidation preference. Holders of Series E Preferred Shares have the right to receive Series E Distributions, on a non-cumulative basis, if (i) the Bank has sufficient Distributable Net Income for the Year available for the payment of such Series E Distributions as well as all distributions at the time due and payable in respect of any other preference shares of the Issuer at the time outstanding and ranking pari passu with the Series E Preferred Shares in respect of distribution, including the outstanding Series D Preferred Shares; (ii) the Bank is in full compliance with applicable regulations and financial ratios at the time imposed by the Central Bank and the Banking Control Commission in respect of the payment of dividends or other distributions; and (iii) such Distributions have been recommended by the Board of Directors and approved by the shareholders of the Bank pursuant to a resolution adopted at the Ordinary General Meeting (or any other shareholders’ meeting) at which the most recent annual audited financial statements of the Bank are approved.

It is the intention of the Board of Directors to declare annual Distributions in respect of the Series E Preferred Shares out of Distributable Net Income for the Year, to the extent available, and to recommend to the shareholders of the Bank the approval of such Distributions. It is expected that Series E Distributions, when declared, will be payable within 21 days following the date of the Ordinary General Meeting (or any other shareholders’ meeting) at which the most recent annual audited financial statements of the Bank are approved.

Under Lebanese law, Series E Distributions not claimed within five years of the date of payment become barred by statute of limitations; half of these unclaimed Distributions revert to the Bank, while the balance is paid over to the Lebanese government.

Ranking

The Series E Preferred Shares shall rank pari passu (on a pro rata basis) with the Series D Preferred Shares and any future series of preference shares that may be issued by the Issuer and granted a similar ranking in respect of:

• the right to receive distributions in respect of the Issuer’s share capital (other than as to the amounts thereof);

• the right to receive payments out of the assets of the Issuer upon any voluntary or involuntary liquidation, dissolution or winding-up of the Issuer (other than as to the amounts thereof); and

• the right to subscribe to newly issued preference shares of the Issuer, if any (other than as to the numbers of newly issued shares).

Preference shares rank senior to ordinary shares, and the Series E Preferred Shares will rank senior to the Common Shares, in respect of the right to receive Series E Distributions and the right to receive the Series E Liquidation Preference out of the assets of the Bank in the event of any voluntary or involuntary liquidation, dissolution or winding-up of the Bank.

The Series E Preferred Shares, however, will rank junior to debt and other obligations of the Bank such that, in the event of the voluntary or involuntary liquidation, dissolution or winding-up of the Bank, the holders of debt instruments and other similar obligations would be entitled to be repaid prior to the payment of any amounts to holders of Series E Preferred Shares.

The Series E Preferred Shares are not secured or covered by any guarantee from the Bank or any related party, and do not benefit from any other arrangement that legally or economically enhances the preference or seniority of their claims.

Series E Liquidation Preference

In the event of any voluntary or involuntary liquidation, dissolution or winding-up of the Bank, the holders of Series E Preferred Shares shall be entitled, on a pro rata basis with holders of Series D Preferred Shares, and the holders of any other preference shares of the Issuer, determined on the basis of the respective issue prices for such shares to be paid out of the assets of the Bank available for distribution to its shareholders, before any payment shall be made on the Common Shares (but after repayment of all debts and other similar obligations of the Bank), an amount per share equal to the Series E Liquidation Preference.

The Series E Liquidation Preference shall be subject to adjustment to reflect the occurrence of an Adjustment Event (but not upon any other event, including the issuance of any new shares below market value, stock dividends or a recapitalisation of the Issuer’s share capital).

Voting Rights of Series E Preferred Shares

In addition, holders of preference shares generally do not have the right to vote and holders of Series E Preferred Shares will be entitled to vote (on a pro rata basis with all other holders of shares of the Bank, irrespective of the class thereof, including the outstanding Series D Preferred Shares and Common Shares, determined on the basis of the nominal values of the respective classes of shares (provided that, in compliance with article 117 of the Lebanese Code of Commerce, holders shall have the right to two votes per share in respect of any Common Shares owned by them for two years or longer) in respect of matters put before the shareholders of the Bank only on any proposed amendments to the object or legal form of the Bank, any capital increase by way of a contribution in kind of assets or any dissolution, liquidation or winding-up of the Bank or a merger scheme in which the Bank is a party or in the event that the Bank shall default in the provision of any of the rights or benefits attached to the Series E Preferred Shares. The by-laws of the association of the holders of Series E Preferred Shares will likely include regulations governing (among other things) the exercise of voting rights of the holders of Series E Preferred Shares, including, in particular, that any priority subscription rights to which holders of Series E Preferred Shares may otherwise be entitled will be waiveable by an extraordinary resolution adopted by the association (i.e., by holders of Series E Preferred Shares representing two-thirds of the Series E Preferred Shares represented at the relevant meeting of the association, provided there is a quorum comprised of a minimum of 75% of all Series E Preferred Shares at the time outstanding).

Call Option

Preference shares are typically subject to redemption upon the occurrence of certain events or subject to the passage of time, whereas ordinary shares are usually not redeemable. The Series E Preferred Shares are of perpetual existence, provided that, subject to compliance with applicable regulations and financial ratios of the Central Bank and the Banking Control Commission, including the availability of sufficient free reserves for the purpose, and to verification of such compliance by the Banking Control Commission, the Bank may, at its option, redeem and cancel all or any part (but not less than the smaller of (i) 20% of the aggregate original issue size, or (ii) the aggregate then outstanding size) of the Series E Preferred Shares:

• at any time after the Issue Date if a Regulatory Event shall occur; and

• within 60 days following the later of (x) the date of the Ordinary General Meeting (or any other shareholders’ meeting) at which the annual audited financial statements of the Bank for the year ended December 31, 2014 are approved (which is expected to be in April 2015) or (y) the fifth anniversary of the date of the Confirmation EGM, and annually thereafter within 60 days following each such subsequent Ordinary General Meeting (or any other shareholders’ meeting) at which the annual audited financial statements of the Bank for the immediately preceding fiscal year are approved; in each case, at a redemption price equal to U.S. $100.00 per share (subject to adjustment to reflect the occurrence of an Adjustment Event (but not upon any other event, including the issuance of any new shares below market value, stock dividends or a recapitalisation of the Bank’s share capital)) plus any declared but unpaid Series E Distributions; provided that no Series E Distributions shall be payable in respect of the year in which Series E Preferred Shares are redeemed and cancelled.

Upon any redemption of Series E Preferred Shares, such Series E Preferred Shares shall be cancelled and the par value of each of the remaining shares then constituting the outstanding share capital of the Bank, irrespective of the class thereof, shall be adjusted to reflect such cancellation, while the Issuer’s total capital remains unchanged.

In the case of redemption and cancellation of a part only of the Series E Preferred Shares at the time outstanding, the redemption and cancellation will be on a pro rata basis.

Transfers of Series E Preferred Shares

There are no restrictions imposed by the Central Bank on the transfer of Series E Preferred Shares and, accordingly, the Series E Preferred Shares shall be freely transferable.

Description of the Series D Preferred Shares

As of the date of this Prospectus, the Bank’s preferred share capital includes 1,250,000 Series D Preferred Shares, each with a par value of LL 12,250, which were issued in November 2005 at a price of, and may (subject to certain conditions) be redeemed by the Bank at, U.S. $100.00 per Series D Preferred Share, all of which are issued and fully paid. Upon the effectiveness of the Stock Split, the Bank’s share capital will include 12,500,000 Series D Preferred Shares, each with a par value of LL 1,225.

The principal terms of the Series D Preferred Shares are identical to the principal terms of the Series E Preferred Shares, except that, subject to the same conditions applicable to the payment of Distributions in respect of the Series E Preferred Shares, distributions in respect of the Series D Preferred Shares shall be payable on account of each fiscal year, in the amount of U.S. $7.75 per Series D Preferred Share. Upon the effectiveness of the Stock Split, distributions in respect of the Series D Preferred Shares payable on account of each fiscal year will be U.S. $0.775 per Series D Preferred Share.

TERMS AND CONDITIONS OF THE GLOBAL DEPOSITARY RECEIPTS

On May 10, 2010, the Bank entered into the Deposit Agreement with Deutsche Bank Trust Company Americas (acting as depositary), pursuant to which holders of Common Shares were given the option to deposit their Common Shares for the issuance of GDRs.

GDRs, representing 29.51% of the Common Shares, have been issued under the GDR Program and are admitted to trading on the LSE’s Main Market and the BSE.

The following terms and conditions (subject to completion and amendment and excepting sentences in italics) will apply to the Global Depositary Receipts, will constitute a contract between the Holders (as defined therein) and the Depositary to which the Bank is not a party and will be endorsed on each Global Depositary Receipt certificate:

The Global Depositary Receipts (the “GDRs”) evidenced by this certificate are each issued in respect of one common share (the “Shares”) in Bank Audi sal – Audi Saradar Group (the “Company”) pursuant to and subject to an amended and restated deposit agreement (such agreement, as amended from time to time, being hereinafter referred to as the “Deposit Agreement”) dated May 10, 2010, and made between the Company and Deutsche Bank Trust Company Americas as depositary (the “Depositary”). Pursuant to the provisions of ‘the Deposit Agreement, the Depositary has appointed Bank Audi sal – Audi Saradar Group as custodian (the “Custodian”) to receive and hold on its behalf the share certificates in respect of certain Shares (the “Deposited Shares”) and all rights, securities, property and cash deposited with the Custodian which are attributable to the Deposited Shares (together with the Deposited Shares, the “Deposited Property”). The Depositary shall hold the Deposited Shares for the benefit of the Holders (as defined below) in proportion to the number of Shares in respect of which the GDRs held by them are issued. In these terms and conditions (the “Conditions”), references to the “Depositary” are to Deutsche Bank Trust Company Americas and/or any other depositary which may from time to time be appointed under the Deposit Agreement, references to the “Custodian” are to Bank Audi sal – Audi Saradar Group or any other custodian which may from time to time be appointed under the Deposit Agreement and references to the “Office” mean, in relation to the Custodian, its office in Beirut or such other office as from time to time may be designated by the Custodian with the approval of the Depositary. GDRs may take the form of either (i) GDRs evidenced by a European Master GDR (the “European Master GDR”) registered in the name of a common nominee for, and held by a common depositary (the “Common Depositary”) for, Euroclear Bank S.A./N.V., as operator of the Euroclear System, (“Euroclear”) and Clearstream Banking, société anonyme (“Clearstream”), and held for the account of accountholders in Euroclear or Clearstream, as the case may be, exchangeable in certain circumstances at the option of the Holder (as defined below) of the European Master GDR and at the expense of any person shown in the records of Euroclear or Clearstream as the owner of a GDR and upon delivery to the Depositary of a certificate substantially in the form of Schedule 3, Part A of the Deposit Agreement, for a certificate in definitive registered form in respect of GDRs evidencing all or part of the interest of such person in the European Master GDR; or (ii) GDRs evidenced by interests in an American Master GDR (the “American Master GDR”) registered in the name of The Depository Trust Company (“DTC”) (or its nominee) and held for the account of participants therein, exchangeable as set out therein in certain circumstances, at the option of the Holder of the American Master GDR and at the expense of any person shown in the records of DTC as the owner of a GDR and upon delivery to the Depositary of a certificate substantially in the form of Schedule 3, Part A of the Deposit Agreement for a certificate in definitive registered form in respect of GDRs evidencing all or part of the beneficial interest of such person in the American Master GDR. A GDR evidenced by an individual definitive certificate will not be eligible for clearing and settlement through Euroclear, Clearstream or DTC. The European Master GDR and the American Master GDR are together referred to as the “Master GDRs”.

Subject to the provisions and upon compliance with the conditions of the Deposit Agreement, interests in the European Master GDR may be exchanged by the Holder thereof for interests in the corresponding number of GDRs evidenced by the American Master GDR, and vice versa. Interests in GDRs evidenced by the American Master GDR may be transferred to a person whose interest in such GDRs is subsequently evidenced by the European Master GDR at any time only if such transfer is being made in accordance with Regulation S under the Securities Act. In such case, entries in the books of the Depositary against the European Master GDR and the American Master GDR will be made accordingly to show the relative increase or decrease, as the case may be, in the number of Deposited Shares represented thereby.

The European Master GDR and the American Master GDR will only be exchanged for definitive GDRs in registered form in the circumstances described in (i), (ii), (iii), (iv) or (v) below, in whole but not (except in the

case of (iv) or (v) below) in part. The Depositary shall deliver, within 60 days of the occurrence of the relevant event described in (i), (ii), (iii), (iv) or (v) below, GDRs in definitive form, in exchange for either the European Master GDR or the American Master GDR, to holders in the event that:

(i) the Holder of the European Master GDR or the American Master GDR is unwilling or unable to continue as common depositary or depositary (or as nominee thereof), as the case may be, and a successor common depositary or successor depositary (or successor nominee therefor), as the case may be, is not appointed within 90 calendar days; or

(ii) DTC or any successor ceases to be a “clearing agency” registered under the United States Securities Exchange Act of 1934, as amended; or

(iii) either Euroclear or Clearstream (in the case of the European Master GDR) or DTC (in the case of the American Master GDR) is closed for business for a continuous period of 14 days (other than by reason of holiday, statutory or otherwise) or announces an intention permanently to cease business or does, in fact, do so and no alternative clearing system satisfactory to the Depositary is available within 45 days; or

(iv) the Depositary has determined that, on the occasion of the next payment in respect of the GDRs, the Company, the Depositary or its Agent would be required to make any deduction or withholding from any payment in respect of the GDRs which would not be required were the GDRs in definitive form, or

(v) the Holder gives notice to the Depositary of its desire to exchange a part or the whole of the European Master GDR or the American Master GDR for certificates evidencing GDRs in definitive registered form.

The settlement of cross-market trades between participants in either Euroclear or Clearstream and participants in DTC will take longer than settlement of trades either solely within one clearing system or between Euroclear and Clearstream and, consequently, investors will not enjoy the same ability to use securities for transactions such as lending and repurchase agreements. Settlement on a delivery versus payment basis will not be available. Investors will have to make their own payment arrangements for such cross-market trades outside the clearing systems. Investors should consult the relevant clearing system if they are in any doubt.

References in these Conditions to the “Holder” of any GDRs shall mean the person registered as holder for the time being of any GDR on the books of the Depositary maintained for such purpose. These Conditions include summaries of, and are subject to, the detailed provisions of the Deposit Agreement, which includes the form of the certificates in respect of the GDRs. Copies of the Deposit Agreement are available for inspection at the specified office of the Depositary and each Agent (as defined in Condition 17) and at the Office of the Custodian. Holders are deemed to have notice of and be bound by all of the provisions of the Deposit Agreement. Terms used in these Conditions and not defined herein but which are defined in the Deposit Agreement have the meanings ascribed to them in the Deposit Agreement.

1 Deposit of Shares and other securities

(A) After the initial deposit of Shares in connection with any offering of GDRs, unless otherwise agreed by the Depositary and the Company and permitted by applicable law, only the following may be deposited under the Deposit Agreement:

(i) Shares issued as a dividend, free distribution or bonus issue on Deposited Shares pursuant to Condition 5;

(ii) Shares subscribed or acquired by Holders from the Company through the exercise of rights distributed by the Company to such persons in respect of Deposited Shares pursuant to Condition 7;

(iii) securities issued by the Company to the Holders in respect of Deposited Shares as a result of any change in the par value, sub-division, consolidation or other reclassification of Deposited Shares or otherwise pursuant to Condition 10; and

(iv) any other Shares in issue.

References in these Conditions to “Deposited Shares” or “Shares” shall include any such securities, where the context permits.

(B) The Depositary will issue GDRs in respect of Shares accepted for deposit under this Condition. Under the Deposit Agreement the Company must inform the Depositary if any Shares issued by it which may be deposited under this Condition do not, by reason of the date of issue or otherwise, rank pari passu in all respects with the other Deposited Shares. Subject to the provisions of Conditions 5, 7 and 10, if the Depositary accepts such Shares for deposit it will arrange for the issue of temporary GDRs in respect of such Shares which will form a different class of GDRs from the other GDRs until such time as the Shares which they represent become fully fungible with the other Deposited Shares.

Subject to the terms and conditions of the Deposit Agreement, upon (i) physical delivery to the Custodian of Shares, (ii) delivery to the Depositary of a certificate substantially in the form of Schedule 3, Part B of the Deposit Agreement and available from the Depositary or the Custodian, and (iii) payment of necessary taxes, governmental charges (including transfer taxes) and other fees, expenses and charges as set forth in Condition 16 and the Deposit Agreement, the Depositary will adjust its records for the number of GDRs issued in respect of the Shares so deposited and will notify the Common Depositary or DTC, as the case may be, as to the increase in the number of GDRs evidenced by the European Master GDR, or the American Master GDR respectively. Each person receiving a GDR or interest therein will be deemed to make the representations, covenants and acknowledgements set forth under “Transfer Restrictions on the GDRs”. There are currently no facilities available for electronic transfer of the Shares.

(C) The Depositary will refuse to accept Shares for deposit whenever it is notified in writing that the Company has restricted the transfer of such Shares to comply with ownership restrictions under applicable Lebanese law or that such deposit would result in any violation of applicable Lebanese laws or other applicable governmental or stock exchange regulations. The Depositary will also refuse to accept certain Shares for deposit when notified in writing by the Company that the Deposited Shares or GDRs or any depositary receipts representing Shares are listed on a U.S. securities exchange registered under Section 6 of the United States Securities Exchange Act of 1934 or quoted on a U.S. automated interdealer quotation system (within the meaning of Rule 144A(d)(3) under the United States Securities Act of 1933, as amended (the “Securities Act”)), unless the Company has notified the Depositary that it has received evidence satisfactory to the Depositary that any Shares presented for deposit are eligible for resale pursuant to Rule 144A under the Securities Act. The Depositary may also refuse to accept Shares for deposit if such action is deemed necessary or desirable by the Depositary, in good faith, at any time or from time to time because of any requirements of law or of any government or governmental authority, body or commission or stock exchange or under any provision of the Deposit Agreement or for any other reason.

(D) Subject to the limitations set forth in the Deposit Agreement, the Depositary may (but is not required to) issue GDRs prior to the delivery to it of Shares in respect of which such GDRs are to be issued and/or deliver Deposited Property prior to the receipt and cancellation by it of GDRs issued in respect thereof.

2 Withdrawal of Deposited Property

(A) Subject to Condition 2(B) below, any Holder may request withdrawal of and the Depositary shall thereupon relinquish, the Deposited Property attributable to any GDR upon production of such evidence that such person is the Holder of and entitled to the relative GDR and such other evidence as the Depositary may reasonably require at the specified office of the Depositary or any Agent accompanied by:

(i) a duly executed order (in a form approved by the Depositary) requesting the Depositary to cause the Deposited Property being withdrawn to be delivered at the Office of the Custodian, or (at the request, risk and expense of the Holder) at the specified office from time to time of the Depositary or any Agent (located in the Lebanese Republic or such other place as permitted under applicable law from time to time) to, or to the order in writing of the person or persons designated in such order;

(ii) a certificate substantially in the form set out in Schedule 3, Part C to the Deposit Agreement and available from the Depositary or the Custodian;

(iii) the payment of such fees, duties, charges and expenses as may be required under these Conditions or the Deposit Agreement; and

(iv) the surrender (if appropriate) of the GDR certificates in definitive registered form to which the Deposited Property being withdrawn is attributable.

(B) Certificates for withdrawn Deposited Shares will contain such legends, and withdrawals of Deposited Shares will be subject to the grant of such approvals as may be required by applicable laws or the By-laws of the Company and to such transfer restrictions or certifications, as the Company or the Depositary may from time to time determine to be necessary for compliance with applicable laws and the By-laws of the Company.

The Board of Directors of the Company may in certain circumstances refuse to register the transfer of Deposited Shares from the name of the Depositary or its nominee. See “Description of the Share Capital of the Bank—Description of the Common Shares—Restrictions on Transfer of Common Shares”.

Under Lebanese Law as of the date of issue of the GDRs, no stamp duty will be payable in respect of any transfer of Shares. See “Taxation—Lebanese Taxation Considerations”.

(C) Upon production of such documentation and the making of such payment as aforesaid in accordance with paragraph (A) of this Condition, the Depositary will direct the Custodian, with a copy of such direction being simultaneously sent to the Company for information, within a reasonable time after receiving such direction from such Holder, to deliver at its Office to, or to the order in writing of the person or persons designated in the accompanying order:

(i) a certificate for, or other appropriate instrument of title to, the relevant Deposited Shares, registered in the name of the Depositary or its nominee and accompanied by such instruments of transfer in blank or to the person or persons specified in the order for withdrawal and such other documents, if any, as are required by law for the transfer thereof; and

(ii) all other property forming part of the Deposited Property attributable to such GDR, accompanied, if required by law, by one or more duly executed endorsements or instruments of transfer in respect thereof as aforesaid;

Provided that the Depositary (at the request, risk and expense of any Holder so surrendering a GDR):

(a) will direct the Custodian to deliver the certificate for, or other instruments of title to, the relevant Deposited Shares and any document relative thereto and any other documents referred to in sub- paragraph (C)(i) of this Condition (together with any other property forming part of the Deposited Property which may be held by the Custodian or its agent and is attributable to such Deposited Shares); and/or

(b) will deliver any other property forming part of the Deposited Property which may be held by the Depositary and is attributable to such GDR (accompanied by such instruments of transfer in blank or to the person or persons specified in such order and such other documents, if any, as are required by law for the transfer thereto), in each case to the specified office from time to time of the Depositary, if any, or any Agent (located in the Lebanese Republic or such other place as is permitted under applicable law from time to time) as designated by the surrendering Holder in such accompanying order as aforesaid.

(D) Delivery by the Depositary, any Agent and the Custodian of all certificates, instruments, dividends or other property forming part of Deposited Property as specified in this Condition will be made subject to any laws or regulations applicable thereto.

(E) The Depositary may suspend the withdrawal of all or any category of Deposited Property during any period when the register of shareholders or other relevant holders of the Company is closed, generally or in one or more localities, or in order to comply with any applicable Lebanese law or governmental or stock exchange regulations. The Depositary shall restrict the withdrawal of Deposited Shares whenever it is notified in writing that such withdrawal would result in a breach of ownership restrictions under applicable Lebanese law.

(F) In the event that, pursuant to any change in Lebanese law and/or the By-laws of the Company, any portion of the Deposited Shares becomes transferable without requirement for the prior approval of any body in the Lebanese Republic (such Deposited Shares being referred to for the purposes of these Conditions as “Unrestricted Shares” and the balance of the Deposited Shares being referred to as “Restricted Shares”), the Depositary will endeavour to the extent practicable to allocate Unrestricted Shares and Restricted Shares to any Holder requesting withdrawal of Deposited Shares in accordance with paragraph (A) of this Condition in the same proportion as the total number of Unrestricted Shares bears to the total number of Restricted Shares by reference to the number of GDRs held by the Holder representing the Deposited Shares which the Holder has

requested to withdraw, provided that the Depositary, in its absolute discretion may vary such allocation of Unrestricted Shares and Restricted Shares, having regard to the interests of the Holders as a class. The Depositary will not, however, permit the withdrawal by such a Holder of such Unrestricted Shares until such time as the Holder has obtained such approvals as may be required by applicable laws or the By-laws of the Company for the withdrawal of the Restricted Shares allocated to the Holder.

3 Transfer and ownership

GDRs are in registered form, each issued in respect of one Share. Title to the GDRs passes by registration in the register of the Holders maintained by the Depositary. The Holder of any GDR will (except as otherwise required by law) be treated as its absolute owner for all purposes (whether or not any payment or other distribution in respect of such GDR is overdue and regardless of any notice of ownership, trust or any interest in or any writing on it, or the theft or loss of any certificate issued in respect of it) and no person will be liable for so treating the Holder.

The Deposit Agreement defines the “Owner” or the “Owner of GDRs” as, in respect of any GDR evidenced by the European Master GDR, such person whose name appears in the records of Euroclear or Clearstream, or, in respect of any GDRs evidenced by the American Master GDR, such person whose name appears in the records of DTC, in each case, as the owner of a particular amount of GDRs, and, in respect of any other GDR, the Holder thereof. The Deposit Agreement defines the “Holder” as the person recorded in the Register as the holder for the time being of a GDR. Holders and owners of GDRs are not parties to the Deposit Agreement and thus, under English law, have no contractual rights against, or obligations to, the Company. The Depositary is under no duty to enforce any of the provisions of the Deposit Agreement on behalf of any Holder or owner of GDRs.

There are restrictions on the offer and sale of the GDRs and the Shares in the United States. See “Transfer Restrictions on the GDRs”.

4 Cash distributions

Whenever the Depositary shall receive from the Company any cash dividend or other cash distribution on or in respect of the Deposited Shares (including any liquidation surplus or other amounts received in the liquidation of the Company) or otherwise in connection with the Deposited Property, the Depositary, its Agent or Custodian shall as soon as practicable convert the same into United States dollars in accordance with Condition 8. The Depositary shall, if practicable in the opinion of the Depositary, give notice to the Holders of its receipt of such payment in accordance with Condition 23, specifying the amount per GDR payable in respect of such dividend or distribution and the date, determined by the Depositary, for such payment and shall as soon as practicable and in any event within 10 business days of receipt thereof by the Depositary distribute any such amounts to the Holders in proportion to the number of Deposited Shares represented by the GDRs so held by them respectively, subject to and in accordance with the provisions of Conditions 9 and 11; provided that:

(a) in the event that any Deposited Shares shall not be entitled, by reason of the date of issue or transfer or otherwise, to such full proportionate amount, the amount so distributed to the relative Holders shall be adjusted accordingly; and

(b) the Depositary will distribute only such amounts of cash dividends and other distributions as may be distributed without attributing to any GDR a fraction of the lowest integral unit of currency in which the distribution is made by the Depositary, and any balance remaining shall be retained by the Depositary beneficially as an additional fee under Condition 16(A)(iv).

5 Distribution of Shares

Whenever the Depositary shall receive from the Company any distribution in respect of Deposited Shares which consists of a dividend in, or free distribution or bonus issue of, Shares or shall subscribe or acquire Shares pursuant to Condition 7(B) below, the Depositary shall cause to be distributed to the Holders entitled thereto, in proportion to the number of Deposited Shares represented by the GDRs held by them respectively, additional GDRs representing an aggregate number of Shares received pursuant to such dividend, distribution, subscription or acquisition by an increase in the number of GDRs evidenced by the Master GDRs or an issue of certificates in definitive registered form in respect of GDRs, according to the manner in which the Holders hold their GDRs; provided that, if and in so far as the Depositary deems any such distribution to all or any Holders not to be reasonably practicable (including, without limitation, owing to the fractions which would otherwise result or to any requirement that the Company, the Custodian or the Depositary withhold an amount on account of taxes or

other governmental charges) or to be unlawful, the Depositary shall sell such Shares so received (either by public or private sale and otherwise at its discretion, subject to Lebanese laws and regulations) and distribute the net proceeds of such sale as a cash distribution pursuant to Condition 4 to the Holders entitled thereto.

6 Distributions other than in cash or Shares

Whenever the Depositary shall receive from the Company any dividend or distribution in securities (other than Shares) or in other property (other than cash) on or in respect of the Deposited Property, the Depositary shall distribute or cause to be distributed such securities or other property to the Holders entitled thereto, in proportion to the number of Deposited Shares represented by the GDRs held by them respectively, in any manner that the Depositary may deem equitable and practicable for effecting such distribution; provided that, if and in so far as the Depositary deems any such distribution to all or any Holders not to be reasonably practicable (including, without limitation, due to the fractions which would otherwise result or to any requirement that the Company, the Custodian or the Depositary withhold an amount on account of taxes or other governmental charges) or to be unlawful, the Depositary shall sell the securities or property so received, or any part thereof (either by public or private sale and otherwise at its discretion, subject to Lebanese laws and regulations) and distribute the net proceeds of such sale as a cash distribution pursuant to Condition 4 to the Holders entitled thereto.

7 Rights issues

(A) Subject to Condition 7(B) below, if and whenever the Company announces its intention to make any offer or invitation to the holders of Shares to subscribe for or to acquire Shares, securities or other assets by way of rights, the Depositary shall as soon as practicable give notice to the Holders in accordance with Condition 23 of such offer or invitation, specifying, if applicable, the earliest date established for acceptance thereof, the last date established for acceptance thereof and the manner by which and time during which Holders may request the Depositary to exercise such rights as provided below or, if such be the case, give details of how the Depositary proposes to distribute the rights or the proceeds of sale. The Depositary will deal with such rights in the manner described below:

(i) if, at its discretion, the Depositary shall be satisfied that it is lawful and reasonably practicable and to the extent that it is so satisfied, the Depositary shall make arrangements whereby the Holders may, upon payment of the subscription price in Lebanese Pounds or other currency (where appropriate) together with such fees, taxes, duties, charges, costs and expenses as may be required under the Deposit Agreement and completion of such undertakings, declarations, certifications and other documents as the Depositary may reasonably require, request the Depositary to exercise such rights on their behalf with respect to the Shares and to distribute the Shares so subscribed or acquired to the Holders entitled thereto by an increase in the numbers of GDRs evidenced by the Master GDRs or an issue of certificates in definitive form in respect of GDRs, according to the manner in which the Holders hold their GDRs. The Depositary will not offer such rights to Holders whose address appears in the records of the Depositary as being in the United States, unless the Company furnishes to the Depositary at the Company’s expense (i) evidence that a registration statement under the Securities Act covering such offering is in effect, (ii) an opinion of counsel for the Depositary in the United States satisfactory to the Depositary to the effect that such offering does not require registration under the Securities Act or (iii) other evidence satisfactory to the Depositary that such offering does not violate the Securities Act; or

(ii) if, at its discretion, the Depositary shall be satisfied that it is lawful and reasonably practicable and to the extent that it is so satisfied, the Depositary shall distribute such rights to the Holders entitled thereto in such manner as the Depositary may at its discretion determine; or

(iii) if and in so far as the Depositary is not satisfied that any such arrangement and distribution to all or any Holders is lawful and reasonably practicable (including, without limitation, owing to the fractions which would otherwise result or to any requirement that the Company, the Custodian or the Depositary withhold an amount on account of taxes or other governmental charges) or is satisfied that it is unlawful, the Depositary will, provided that Holders have not taken up rights through the Depositary as provided in (i) above, sell such rights (either by public or private sale and otherwise at its discretion, subject to Lebanese laws and regulations) and distribute the net proceeds of such sale as a cash distribution pursuant to Condition 4 to the Holders entitled thereto except to the extent prohibited by applicable law.

If at the time of the offering of any rights, at its discretion, the Depositary shall be satisfied that it is not lawful or practicable (for reasons outside its control) to dispose of the rights in any manner provided in (i), (ii) or (iii) above the Depositary shall permit the rights to lapse. In the absence of its own wilful default, negligence or bad faith, the Depositary will not be responsible for any failure to determine that it may be lawful or practicable to make rights available to Holders in general or to any Holder in particular.

The Company has agreed in the Deposit Agreement that it will, unless prohibited by applicable law, give its consent to, and, if requested, use all reasonable endeavours (subject to the next paragraph) to facilitate any such distribution, sale or subscription by the Depositary or the Holders, as the case may be, pursuant to Conditions 4, 5, 6, 7 or 10.

If under any applicable laws of the United States or Lebanon or, to the Company’s best knowledge, under any applicable law of any other jurisdiction, the rights, securities or other property to be distributed under Conditions 4, 5, 6, 7 or 10 or the securities to which any such rights relate are required to be registered in order for the Depositary to (i) offer or otherwise distribute such rights, securities or other property to the Holders, Owners or Beneficial Owners entitled thereto or (ii) sell any such rights, securities or other property, the Company shall so notify the Depositary and the Depositary will not offer or distribute any such rights, securities or other property to Holders, Owners or Beneficial Owners and will not sell any such rights, securities or other property (to the extent such sale is also subject to registration) unless and until the Company provides the Depositary with sufficient proof and legal comfort to the effect that any necessary registration(s) has (have) been effected. Neither the Company nor the Depositary shall be obligated to register such rights, securities or other property or the securities to which any such rights relate and neither of them shall be liable for any losses, damages or expenses resulting from any failure to do so.

(B) If and whenever the Company announces its intention to make any offer or invitation to the holders of Shares to subscribe for or acquire Shares by way of rights or otherwise where the holders of Shares have resolved at an extraordinary general meeting that the subscription price of such Shares is to be settled by application of the whole or any part of the amount standing to the credit of the foreign currency premium account of the Company (as designated in the Company’s annual audited financial statements) at that time, the Depositary shall, as soon as practicable after receipt of such information from the Company, give notice to the Holders in accordance with Condition 23 of such offer or invitation, specifying that, pursuant to a resolution of the holders of Shares, the subscription price of the Shares to be issued pursuant to such offer or invitation is to be settled by application of amounts standing to the credit of the foreign currency premium account of the Company, the aggregate subscription price of the Shares thus to be subscribed or acquired by the Depositary and the date on which such Shares are expected to be issued. The Depositary shall then instruct the Company to apply its pro rata entitlement to such amount of the foreign currency premium account as is equal to the aggregate subscription price of such Shares in settlement of the subscription price of the Shares to be issued to it pursuant to such offer or invitation.

8 Conversion of foreign currency

Whenever the Depositary shall receive any currency other than United States dollars by way of dividend or other distribution or as the net proceeds from the sale of securities, other property or rights, and if at the time of the receipt thereof the currency so received can in the judgment of the Depositary be converted on a reasonable basis into United States dollars and distributed to the Holders entitled thereto, the Depositary shall as soon as practicable itself convert or cause to be converted by another bank, by sale or in any other manner that it may determine, the currency so received into United States dollars. If such conversion or distribution can be effected only with the approval or licence of any government or agency thereof, the Depositary, with the assistance of the Company, shall make reasonable efforts to apply, or procure that an application be made, for such approval or licence, if any, as it may consider desirable. If at any time the Depositary shall determine that in its judgment any currency other than United States dollars is not convertible on a reasonable basis into United States dollars and distributable to the Holders entitled thereto, or if any approval or licence of any government or agency thereof which is required for such conversion is denied or, in the opinion of the Depositary, is not obtainable, or if any such approval or licence is not obtained within a reasonable period as determined by the Depositary, the Depositary may distribute such other currency received by it (or an appropriate document evidencing the right to receive such other currency) to the Holders entitled thereto to the extent permitted under applicable law, or the Depositary may in its discretion hold such other currency (without liability for interest thereon) for the benefit of the Holders entitled thereto. If any conversion of any such currency can be effected in whole or in part for distribution to some (but not all) Holders entitled thereto pro rata to such Holders’ respective entitlements, the Depositary may in its absolute discretion make such conversion and distribution in United States dollars to the extent possible to the Holders entitled thereto and may distribute the balance of such other currency received by

the Depositary to, or hold such balance on non-interest bearing accounts for the account of, the Holders entitled thereto and notify the Holders accordingly.

9 Distribution of any payments

(A) Any distribution of cash under Conditions 4, 5, 6, 7 or 10 will be made by the Depositary to those Holders who are Holders of record on the record date established by the Depositary for that purpose (which shall be the same date as the corresponding record date set by the Company, or if different from the record date set by the Company, shall be set after consultation with the Company and shall be as near as practicable to any record date set by the Company) and, if practicable in the opinion of the Depositary, notice shall be given promptly to Holders in accordance with Condition 23, in each case subject to any laws or regulations applicable thereto and (subject to the provisions of Condition 8) distributions will be made in any event within 10 business days of receipt thereof by the Depositary in United States dollars by cheque drawn upon a bank in New York City. In the case of the Master GDRs, distributions will be made according to usual practice between the Depositary and Euroclear, Clearstream or DTC, as the case may be. The Depositary or any Agent, as the case may be, may deduct and retain from all moneys due in respect of such GDR all fees, taxes, duties, charges, costs and expenses which may become or have become payable under the Conditions, the Deposit Agreement or under applicable law in respect of such GDR or the relative Deposited Property.

(B) Delivery of any securities or other property or rights other than cash shall be made as soon as practicable to the entitled Holder, subject to any laws or regulations applicable thereto. If any distribution made by the Company with respect to the Deposited Property and received by the Depositary shall remain unclaimed at the end of 12 years from the first date upon which such distribution is made available to Holders in accordance with these Conditions and subject to any applicable laws (including, without limitation, U.S. federal laws and the escheat laws of the States of the United States), all rights of the Holders to such distribution or the proceeds of the sale thereof shall be extinguished and the Depositary shall (except for any distribution upon the liquidation of the Company when the Depositary shall retain the same) return the same to the Company for its own use and benefit and the Depositary shall have no obligation therefor or liability with respect thereto.

10 Capital reorganisation

Upon any change in the par value, sub-division, consolidation or other reclassification of Deposited Shares or any other part of the Deposited Property or upon any reduction of capital, or upon any reorganisation, merger or consolidation of the Company or to which it is a party (except where the Company is the continuing corporation), the Depositary shall as soon as practicable give notice of such event to the Holders in accordance with Condition 23 and, in its discretion, may treat such event as a distribution and comply with the relevant provisions of Conditions 4, 5, 6 and 9 with respect thereto, or may execute and deliver additional GDRs in respect of Shares or may call for the surrender of outstanding GDRs to be exchanged for new GDRs which reflect the effect of such change or to be stamped in the appropriate manner so as to indicate the new number of Shares and/or the new securities evidenced by such outstanding GDRs or may adopt more than one of these courses of action.

11 Withholding taxes and applicable laws

For a description of current Lebanese withholding taxes with respect to dividends on Deposited Shares and capital gains realised on sales of Deposited Shares, see “Taxation—Lebanese Taxation Considerations”.

(A) Payments to Holders of dividends or other distributions made to Holders on or in respect of the Deposited Shares will be subject to deduction of Lebanese and other withholding taxes, if any, at the applicable rates. If under any tax treaty or other arrangement between the Lebanese Republic and the country within which the Owner is resident, such Owner is entitled to receive the benefit of the application of a reduced rate of withholding tax in relation to the payment of dividends or other distributions in respect of any Deposited Shares prior to the payment of dividends or other distributions by the Company, the Depositary, as required in the Deposit Agreement in such circumstances, will upon request send to each Holder entitled to receive such dividend or other distribution in accordance with Condition 23 a form of certification provided by the Company to be furnished by each Holder with respect to the tax residence of each Owner and other evidence to be provided by such Owner, and shall specify the latest time by which such completed certification provided by the Company must be completed and returned to the Depositary. The Depositary will forward any such certification or any such evidence received by it prior to the specified time to the Company in order to establish the applicability, if any, of any tax treaty existing between the Lebanese Republic and the country of tax residence of each Owner. For the purposes of such certification, the Company has agreed in the Deposit Agreement in such circumstances, from time to time, to send to the Depositary the form of certification considered sufficient

in its reasonable judgment to establish the tax residence of each such Owner, and to apply, in each case with the approval of the relevant Lebanese tax authorities, such rates of withholding as are prescribed by the relevant tax treaty. The Depositary and the Company shall have no liability whatsoever in respect of any determination made hereunder by any tax authority in relation to the appropriate rate of withholding applicable to any Holder or Owner. In so relying on the evidence provided by such Owner in respect of his residency, the Company and the Depositary shall be indemnified by such Owner from any and all losses, damages or expenses it incurs as a consequence of such reliance. In particular, if the Company is required by the tax authorities of the Lebanese Republic in respect of such Owner to deduct or withhold tax at the normal rate, such Owner shall indemnify the Company and the Depositary against such difference in the relevant tax rates and expenses incurred.

(B) If any governmental or administrative authorisation, consent, registration or permit or any report to any governmental or administrative authority is required under any applicable law in the Lebanese Republic in order for the Depositary to receive from the Company Shares to be deposited under these Conditions, or in order for Shares, other securities or other property to be distributed under Conditions 4, 5, 6 or 10, or to be subscribed under Condition 7, the Company shall apply for such authorisation, consent, registration or permit or shall file such report on behalf of the Holders within the time period required under such law. In this connection, the Company has undertaken in the Deposit Agreement to the extent reasonably practicable and provided that it does not involve unreasonable expense on behalf of the Company, to take such action as may be required in obtaining or filing the same. The Depositary shall not distribute GDRs, Shares, other securities or other property with respect to which such authorisation, consent or permit or such report has not been obtained or filed, as the case may be, and shall have no duties to obtain any such authorisation, consent or permit, or to file any such report except in circumstances where the same may only be obtained or filed by the Depositary without, in the opinion of the Depositary, unreasonable burden or expense.

12 Voting rights

12.1 Subject to the other provisions of this Clause 12, Holders will have the right to instruct the Depositary with regard to the exercise of voting rights with respect to the Deposited Shares. The Company will notify the Depositary of any resolution to be proposed at any general meeting of the Company and the Depositary will vote or cause to be voted the Deposited Shares in the manner set out in this Condition 12.

The Company agrees with the Depositary that it will promptly provide to the Depositary sufficient copies, as the Depositary may reasonably request, of notices of meetings of the shareholders of the Company and the agenda therefor. As soon as practicable after receipt of any such notice and agenda of meeting, the Depositary shall, in accordance with Condition 23, send to any person who is a Holder on the record date established by the Depositary for that purpose (which shall be the same as the corresponding record date set by the Company or as near as practicable thereto) a copy of such notice and agenda, together with written requests containing voting instructions by which each Holder may give instructions to the Depositary to vote for or against each and any resolution specified in such agenda. The Company also agrees to provide to the Depositary appropriate proxy forms to enable the Depositary to procure appointment of one or more representatives (as necessary to comply with the applicable voting provisions of this Condition 12) to attend the relevant meeting and vote on behalf of the registered owner of the Deposited Shares.

12.2 In order for each voting instruction to be valid, the voting instructions form must be completed and duly signed by the respective Holder (or in the case of instructions received from the clearing systems should be received by authenticated SWIFT message or market standard authenticated message format) in accordance with the written request containing voting instructions and returned to the Depositary by such record date as the Depositary may specify.

12.3 To the extent permitted by Lebanese law, the Depositary may directly attend the meeting and exercise or cause to be exercised the voting rights in respect of the Deposited Shares so that a portion of the Deposited Shares will be voted directly by the Depositary for and a portion of the Deposited Shares will be voted directly by the Depositary against any resolution specified in the agenda for the relevant meeting in accordance with the voting instructions it has received and the Depository will abstain from voting any Deposited Shares in respect of which no voting instructions have been received.

12.4 If the Depositary elects not to directly attend the meeting or if the Depositary is not permitted by Lebanese law itself to exercise voting rights in respect of the Deposited Shares differently (so that a portion of the Deposited Shares may be voted directly by the Depositary for a resolution and a portion of the Deposited Shares may be voted directly by the Depositary against a resolution as contemplated

by Condition 12.3), the Depositary will, unless restricted under Lebanese law, issue three proxies to existing shareholders of the Company designated by the Chairman of the Company for the purpose, as follows:

(i) a proxy covering the number of Deposited Shares for which instructions have been received to vote for a resolution and instructing the proxy to vote such Deposited Shares for the resolution;

(ii) a proxy covering the number of Deposited Shares for which instructions have been received to vote against a resolution instructing the proxy to vote such Deposited Shares against the resolution; and

(iii) a proxy covering the number of Deposited Shares for which no voting instructions have been received and instructing the proxy to abstain from voting such Deposited Shares in respect of the resolution.

In the event that the Depositary issues any such proxies, the Depositary will not itself attend the relevant meeting.

12.5 If the Depositary is not permitted by Lebanese law to exercise voting rights in respect of the Deposited Shares as contemplated by either Clause 12.3 or Clause 12.4, or if the Depositary is advised by the Company that the Depositary’s voting of the Deposited Shares as contemplated by either Clause 12.3 or Clause 12.4 may be prejudicial to the operations or governance of the Company, or if the Depositary otherwise determines, in its discretion, that it is impracticable for it to vote the Deposited Shares as contemplated by either Clause 12.3 or Clause 12.4, the Depositary will, at the direction of the Board of Directors of the Company, either (i) exercise the voting rights in respect of the Deposited Shares as directed by the Board of Directors or (ii) give a proxy to a person designated by the Board of Directors to vote in respect of the Deposited Shares in his or her discretion.

12.6 By continuing to hold GDRs, all Holders shall be deemed to have agreed to the provisions of this Condition as it may be amended from time to time in order to conform to the principles of applicable Lebanese laws.

12.7 The Depositary has agreed that it will not vote or cause to be voted any Deposited Shares that it knows to be held by or on behalf of any Beneficial Owner (or a group of Beneficial Owners acting in concert) whose aggregate percentage holding in the Shares and GDRs (combined) of the Company exceeds 5 per cent. or, if higher, such other percentage of ownership as previously authorised by the Central Council of Banque du Liban (the Central Bank of Lebanon).

12.8 In order to permit the Depositary to fulfill its agreement under Clause 12.7: (i) each Owner will inform the Company of the identity of any Beneficial Owners on whose behalf it owns GDRs;

(ii) upon request by the Company, so long as any GDRs are outstanding, the Depositary shall, at the expense of the Company, furnish to the Company for itself and for the benefit of (among others) the Banking Control Commission, a list, as of the most recent date available, of the names, addresses and holdings of GDRs by all persons in whose names GDRs are registered on the books of the Depositary; additionally, upon request by the Company, so long as any GDRs are outstanding, the Depositary shall forward on behalf of the Company a notice (to be prepared by the Company at its expense and provided to the Depositary reasonably in advance of the applicable delivery date) to each of DTC and Clearstream and Euroclear (together with a request by the Company for each of DTC and Clearstream and Euroclear to deliver such notice to the Owners appearing on their respective books) and to any other Holder, which notice shall state that the Company requires each Owner and Beneficial Owner to provide, whereupon each Owner and Beneficial Owner shall be obliged to provide, to the Company, in accordance with the terms of such notice, certain identifying information with respect to direct or indirect (including through such Owner's or such Beneficial Owner's spouse or minor children or any persons acting in concert with such Owner or Beneficial Owner) ownership of any Shares or GDRs by such Owner or Beneficial Owner;

(iii) each Beneficial Owner who, after acquiring directly or indirectly (including any acquisition by persons acting in concert) the beneficial ownership of any Share or GDR, is directly or

indirectly the beneficial owner of 5 per cent. or more of the Shares, the GDRs or the Shares and the GDRs (combined), will provide to the Company, within seven days following such acquisition, (x) details of the identity, residence and citizenship of, the nature of the beneficial interest held by, and the transaction in which such beneficial interest was acquired by, such Beneficial Owner and all other persons by whom or on whose behalf such Shares and/or GDRs have been acquired or are to be acquired and who are acting in concert with such Beneficial Owner; and (y) the number of Shares and/or GDRs which are beneficially owned by such Beneficial Owner (or any other person acting in concert with such Beneficial Owner), as well as the number of additional Shares and/or GDRs which such Beneficial Owner (or any other person acting in concert with such Beneficial Owner) has a right to acquire directly or indirectly, together with the identity, residence and citizenship of each such other person (if any) and the relationship of each such other person (if any) to such Beneficial Owner; and

(iv) if any change occurs in the facts set forth in the statements made by any Owner or Beneficial Owner to the Company pursuant to this Clause 12.8 (such as an increase or a decrease in the number of Shares and/or GDRs owned), such Owner or such Beneficial Owner, as the case may be, shall immediately (but not later than seven days following the date of each such change) provide to the Company written information describing such change.

12.9 In the event that the Company shall determine that an Owner or a Beneficial Owner has failed to comply with the requirements set out in Clause 12.8, the Company shall advise the Depositary in writing that the Depositary shall not, until further notice is received from the Company, vote any Deposited Shares represented by GDRs owned by such Owner or Beneficial Owner. The determinations by the Company regarding all beneficial ownership and compliance with this Clause 12 shall be final and binding on all persons, including Owners, Beneficial Owners and the Depositary.

Shares which have been withdrawn from the depositary facility and transferred on the Company’s register of members to a person other than the Depositary or its nominee may be voted by the holders thereof. However, Holders may not receive sufficient advance notice of shareholder meetings to enable them to withdraw the Shares and vote at such meetings.

The directors of the Company may decline to register the transfer of Shares to non-shareholders on certain grounds. See “Description of the Share Capital of the Bank—Description of the Common Shares—Restrictions on Transfer of Common Shares”.

13 Recovery of taxes, duties and other charges

The Depositary shall not be liable for any taxes, duties, charges, costs or expenses which may become payable in respect of the Deposited Shares or other Deposited Property or the GDRs, whether under any present or future fiscal or other laws or regulations, and such part thereof as is proportionate or referable to a GDR shall be payable by the Holder thereof to the Depositary at any time on request or may be deducted from any amount due or becoming due on such GDR in respect of any dividend or other distribution. In default thereof, the Depositary may for the account of the Holder discharge the same out of the proceeds of sale on the Beirut Stock Exchange or, otherwise on the over-the-counter market in Lebanon, and subject to Lebanese law and regulation, of an appropriate number of Deposited Shares (being an integral multiple of the number of Shares in respect of which a single GDR is issued) or other Deposited Property and subsequently pay any surplus to the Holder. Any such request shall be made by giving notice pursuant to Condition 23.

14 Liability

(A) In acting hereunder the Depositary shall have only those duties, obligations and responsibilities expressly specified in the Deposit Agreement and these Conditions, and, other than holding the Deposited Property for the benefit of Holders as bare trustee, does not assume any relationship of trust for or with the Holders except that any funds received by the Depositary for the payment of any amount due, in accordance with these Conditions, on the GDRs shall be held by it in trust for the relevant Holder until duly paid thereto.

(B) Neither the Depositary, the Custodian, the Company nor any of their respective agents, officers, directors or employees nor any Agent shall incur any liability to any other of them or to any Holder, Owner or Beneficial Owner or person with an interest in a GDR if by reason of any provision of any present or future law or regulation of the Lebanese Republic or any other country or of any relevant governmental authority, or by reason of the interpretation or application of any such present or future law or regulation or any change therein, or by reason of any other circumstances beyond their control, or in the case of the Depositary or the Custodian,

any of their respective agents, officers, directors or employees or any Agent, by reason of any provision, present or future, of the Articles of Association of the Company, any of them shall be prevented, delayed or forbidden from doing or performing any act or thing which the terms of the Deposit Agreement or these Conditions provide shall or may be done or performed; nor shall any of them incur any liability to any Holder, Owner or Beneficial Owner or person with an interest in a GDR by reason of any non-performance or delay, caused as aforesaid, in performance of any act or thing which the terms of the Deposit Agreement or these Conditions provide shall or may be done or performed, or by reason of any exercise of, or failure to exercise, caused as aforesaid, any voting rights attached to the Deposited Shares or any of them or any other discretion or power provided for in the Deposit Agreement. Any such party may rely on, and shall be protected in acting upon, any written notice, request, direction or other document believed by it to be genuine and to have been duly signed or presented (including a translation which is made by a translator believed by it to be competent or which appears to be authentic).

(C) Neither the Depositary, the Custodian nor any Agent shall be liable (except for its own wilful default, negligence or bad faith or that of its officers, directors or employees) to the Company or any Holder, Owner or Beneficial Owner, by reason of having accepted as valid or not having rejected any certificate for Shares or GDRs purporting to be such and subsequently found to be forged or not authentic.

(D) The Depositary and any Agent may engage or be interested in any financial or other business transactions with the Company or any of its subsidiaries or affiliates, or in relation to the Deposited Property (including, without prejudice to the generality of the foregoing, the conversion of any part of the Deposited Property from one currency to another), may at any time hold GDRs for its own account, and shall be entitled to charge and be paid all usual fees, commissions and other charges for business transacted and acts done by it as a bank, and not in the capacity of Depositary, or Agent, as the case may be, in relation to matters arising under the Deposit Agreement (including, without prejudice to the generality of the foregoing, charges on the conversion of any part of the Deposited Property from one currency to another and any sales of property) without accounting to Holders or any other person for any profit arising therefrom.

(E) The Depositary shall endeavour to effect any such sale as is referred to or contemplated in Conditions 5, 6, 7, 10, 13 or 21 or any such conversion as is referred to in Condition 8 on the best terms reasonably available to it, but shall have no liability (in the absence of its own wilful default, negligence or bad faith or that of its agents, officers, directors or employees) with respect to the terms of such sale nor conversion or if such sale or conversion shall not be possible.

(F) The Depositary shall not be required or obliged to monitor, supervise or enforce the observance and performance by the Company of its obligations under or in connection with the Deposit Agreement.

(G) The Depositary shall, subject to all applicable laws, have no responsibility whatsoever to the Company or any Holder, Owner or Beneficial Owner as regards any deficiency which might arise because the Depositary is subject to any tax in respect of the Deposited Property or any part thereof or any income therefrom or any proceeds thereof.

(H) In connection with any proposed modification, waiver, authorisation or determination permitted by the terms of the Deposit Agreement, the Depositary shall not, except as otherwise expressly provided in Condition 2 or Condition 22, be obliged to have regard to the consequence thereof for the Holders.

(I) Notwithstanding anything else contained in the Deposit Agreement or these Conditions, the Depositary may refrain from doing anything which could or might, in its reasonable opinion, be contrary to any law of any jurisdiction or any directive or regulation of any agency or state or which would or might otherwise render it liable to any person and the Depositary may do anything which is, in its reasonable opinion, necessary to comply with any such law, directive or regulation.

(J) Notwithstanding anything to the contrary contained in the Deposit Agreement, the Depositary shall not be liable in respect of any loss or damage which arises out of or in connection with the exercise or attempted exercise of, or the failure to exercise any of, its powers or discretions under the Deposit Agreement in the absence of its own wilful default, negligence or bad faith or that of its agents, officers, directors and employees.

(K) No provision of the Deposit Agreement or these Conditions shall require the Depositary to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties or in the exercise of any of its rights or powers, if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity and security against such risk of liability is not assured.

In the Deposit Agreement, the Company has agreed to indemnify the Depositary against any liability that may arise as a result of or in connection with its appointment or the exercise of its powers and duties under the Deposit Agreement, except such as may result from the Depositary’s own wilful default, negligence or bad faith.

15 Issue and delivery of replacement GDRs and exchange of GDRs

Subject to the payment of the relevant fees, taxes, duties, charges, costs and expenses and such terms as to evidence and indemnity as the Depositary may require, replacement GDRs will be issued by the Depositary and will be delivered in exchange for or replacement of outstanding lost, stolen, mutilated, defaced or destroyed GDRs upon surrender thereof (except in the case of destruction, loss or theft) at the specified offices of the Depositary or (at the request, risk and expense of the Holder) at the specified office of any Agent.

16 Depositary’s fees, costs and expenses

(A) The Depositary shall be entitled to receive the following remuneration and reimbursement from the Holders in respect of its services under the Deposit Agreement:

(i) for the issue of GDRs (other than upon the issue of GDRs pursuant to the initial offering of GDRs the subject of the Deposit Agreement) or the cancellation of GDRs upon the withdrawal of Deposited Property: up to U.S.$0.05 per GDR issued or cancelled, together with all expenses, transfer and registration fees, taxes, duties and charges payable by the Depositary, any Agent or the Custodian in connection with such issue or withdrawal;

(ii) for issuing GDR certificates in definitive registered form in replacement for mutilated, defaced, lost, stolen or destroyed GDR certificates: a sum per GDR certificate which is determined by the Depositary to be a reasonable charge to reflect the work, costs and expenses involved;

(iii) for issuing GDR certificates in definitive registered form (other than pursuant to (ii) above): U.S.$1.50 per GDR certificate (plus printing costs) or such other sum per GDR certificate which is determined by the Depositary to be a reasonable charge to reflect the work, costs (including, but not limited to, printing costs) and expenses involved;

(iv) for receiving and paying any cash dividend or other cash distribution on or in respect of the Deposited Shares: a fee of up to U.S.$0.02 per GDR for each such dividend or distribution;

(v) for the operation and maintenance costs in administering the GDRs an annual fee of U.S. $0.02 per GDR; provided, however, that if the Depositary imposes a fee under this clause (v), then the total of fees assessed under this clause (v), combined with the total of fees assessed under clause (iv) above, shall not exceed U.S. $ 0.02 per GDR in any calendar year;

(vi) in respect of any issue of rights or distribution of Shares (whether or not represented by GDRs) or other securities or other property (other than cash) upon exercise of any rights, any free distribution, stock dividend or other distribution: up to U.S.$0.05 per outstanding GDR for each such issue of rights, dividend or distribution; and

(vii) for transferring interests from and between the European Master GDR and the American Master GDR: a fee of up to U.S.$0.05 per GDR.

(B) The Depositary is entitled to receive from the Company the fees, taxes, duties, charges, costs and expenses set out in the Deposit Agreement.

17 Agents

(A) The Depositary shall be entitled, with the approval of the Company, to appoint one or more agents (the “Agents”) for the purpose, inter alia, of making distributions to the Holders. If definitive GDR certificates are issued, the Depositary will appoint its London branch at Winchester House, 1 Great Winchester Street, London EC2N 2DB as paying agent.

(B) Notice of appointment or removal of any Agent or of any change in the specified office of the Depositary or any Agent will be duly given by the Depositary to the Holders in accordance with Condition 23.

18 Listing

The Company has undertaken in the Deposit Agreement to use all reasonable endeavours to maintain, so long as any GDR is outstanding, a listing for the GDRs on the London Stock Exchange so long as the requirements for such listing are not unduly onerous or burdensome and the cost of such listing is not unreasonable in each case when compared to other official stock exchanges based in Europe. For that purpose the Company will pay all fees and sign and deliver all undertakings required by the London Stock Exchange in connection therewith. In the event that such listing is not maintained, the Company has undertaken in the Deposit Agreement to use its best endeavours with the assistance of the Depositary to obtain and maintain a listing of the GDRs on another internationally recognised stock exchange in Europe.

19 The Custodian

The Depositary has, pursuant to the Deposit Agreement, agreed with the Custodian that the Custodian will receive and hold (or appoint agents approved by the Depositary to receive and hold) all Deposited Property for the account and to the order of the Depositary in accordance with the applicable terms of the Deposit Agreement, which include a requirement to segregate the Deposited Property from the other property of, or held by, the Custodian. The Custodian shall be responsible solely to the Depositary; provided that, if at any time the Depositary and the Custodian are the same legal entity, references to them separately in these Conditions and the Deposit Agreement are for convenience only and that legal entity shall be responsible for discharging both functions directly to the Holders and the Company. Upon receiving notice of the resignation of the Custodian, the Depositary shall promptly appoint a successor Custodian (approved by the Company, such approval not to be unreasonably withheld), which shall, upon acceptance of such appointment, become the Custodian under the Deposit Agreement. Whenever the Depositary in its discretion determines that it is in the best interests of the Holders to do so, it may terminate the appointment of the Custodian and, in the event of the termination of the appointment of the Custodian, which shall, upon acceptance of such appointment, become the Custodian under the Deposit Agreement on the effective date of such termination. The Depositary shall notify Holders of such change as soon as practically possible following such change taking effect in accordance with Condition 23. Notwithstanding the foregoing, the Depositary may temporarily deposit the Deposited Property in a manner or a place other than as herein specified; provided that, in the case of such temporary deposit in another place, the Company shall have consented to such deposit, and such consent of the Company shall have been delivered to the Custodian. In case of transportation of the Deposited Property under this Condition, the Depositary shall obtain appropriate insurance at the expense of the Company if, and to the extent that, the obtaining of such insurance is reasonably practicable and the premiums payable are in the opinion of the Depositary of a reasonable amount.

20 Resignation and termination of appointment of the Depositary

(A) The Company may terminate the appointment of the Depositary under the Deposit Agreement by giving at least 90 days’ notice in writing to the Depositary and the Custodian, and the Depositary may resign as Depositary by giving at least 90 days’ notice in writing to the Company and the Custodian. Within 30 days after the giving of such notice, notice thereof shall be duly given by the Depositary to the Holders.

The termination of the appointment or the resignation of the Depositary shall take effect on the date specified in such notice, provided that no such termination of appointment or resignation shall take effect until the appointment by the Company of a successor depositary under the Deposit Agreement, the grant of such approvals as may be necessary to comply with applicable laws and with the By-laws of the Company for the transfer of the Deposited Property to such successor depositary and the acceptance of such appointment to act in accordance with the terms hereof by the successor depositary. The Company has undertaken in the Deposit Agreement to use its best endeavours to procure the appointment of a successor Depositary with effect from the date of termination specified in such notice as soon as reasonably possible following notice of such termination or resignation. Upon any such appointment and acceptance, notice thereof shall be duly given by the Depositary to the Holders in accordance with Condition 23.

(B) Upon the termination of appointment or resignation of the Depositary, the Depositary shall upon payment of all fees and charges owing to it deliver to its successor as Depositary sufficient information and records to enable such successor efficiently to perform its obligations under the Deposit Agreement and shall deliver and pay to such successor Depositary all property and cash held by it under the Deposit Agreement. Upon the date when such termination of appointment or resignation takes effect, the Deposit Agreement provides that the Custodian shall be deemed to be the Custodian thereunder for such successor depositary and shall hold the Deposited Property for such successor depositary and the Depositary shall thereafter have no obligation thereunder.

21 Termination of the Deposit Agreement

(A) Either the Company or the Depositary but, in the case of the Depositary, only if the Company has failed to appoint a replacement Depositary within 90 days of the date on which the Depositary has given notice pursuant to Condition 20 that it wishes to resign, may terminate the Deposit Agreement by giving 90 days’ notice to the other and to the Custodian. Within 30 days after the giving of such notice, notice of such termination shall be duly given by the Depositary to Holders of all GDRs then outstanding.

(B) During the period beginning on the date of the giving of such notice by the Depositary to the Holders and ending on the date on which such termination takes effect, each Holder shall be entitled to obtain delivery of the Deposited Property relating to each GDR held by it, subject to the provisions of and upon compliance with Condition 2, free of the charge specified in Condition 16(A)(i) but upon payment by the Holder of any sums payable by the Depositary to the Custodian in connection therewith for such delivery and surrender but otherwise in accordance with the Deposit Agreement.

(C) If any GDRs remain outstanding after the date of termination, the Depositary shall forthwith sell the Deposited Property then held by it under the Deposit Agreement and as soon as reasonably practicable thereafter deliver the net proceeds of any such sale, together with any other cash then held by it under the Deposit Agreement, pro rata to Holders of GDRs which have not previously been so surrendered. After making such sale, the Depositary shall be discharged from all obligations under the Deposit Agreement and these Conditions, except its obligations to account to Holders for such net proceeds of sale and other cash.

22 Amendment of Deposit Agreement and Conditions

All and any of the provisions of the Deposit Agreement and these Conditions (other than this Condition 22) may at any time and from time to time be amended by agreement between the Company and the Depositary in any respect which they may deem necessary or desirable. Notice of any amendment of these Conditions (except to correct a manifest error) shall be duly given to the Holders by the Depositary, and any amendment (except as aforesaid) which shall increase or impose fees or charges payable by Holders or which shall otherwise, in the opinion of the Depositary, be materially prejudicial to the interests of the Holders (as a class) shall not become effective so as to impose any obligation on the Holders of the outstanding GDRs until the expiry of three months after such notice shall have been given. During such period of three months, each Holder shall be entitled to obtain, subject to and upon compliance with Condition 2, delivery of the Deposited Property relative to each GDR held by it upon surrender thereof, free of the charge specified in Condition 16(A)(i), but otherwise in accordance with the Deposit Agreement. Each Holder at the time when any such amendment so becomes effective shall be deemed, by continuing to hold a GDR, to approve such amendment and to be bound by the terms thereof in so far as they affect the rights of the Holders. In no event shall any amendment impair the right of any Holder to receive, subject to and upon compliance with Condition 2, the Deposited Property attributable to the relevant GDR.

23 Notices

(A) Any and all notices to be given to any Holder shall be duly given if personally delivered, or sent by mail (if domestic, first class, if overseas, first class airmail) or air courier, or by telex or facsimile transmission confirmed by letter sent by mail or air courier, addressed to such Holder at the address of such Holder as it appears on the transfer books of the GDRs of the Depositary, or, if such Holder shall have filed with the Depositary a written request that notices intended for such Holder be mailed to some other address, at the address specified in such request.

(B) Delivery of a notice sent by mail or air courier shall be effective three days (in the case of domestic mail or air courier) or seven days (in the case of overseas mail) after receipt, and any notice sent by telex transmission, as provided in this Condition, shall be effective when the sender receives the answerback from the addressee at the end of the telex and any notice sent by facsimile transmission, as provided in this Condition, shall be effective when sent. The Depositary or the Company may, however, act upon any telex or facsimile transmission received by it from the other or from any Holder, notwithstanding that such telex or facsimile shall not subsequently be confirmed as aforesaid.

24 Reports and information on the Company

(A) The Company has undertaken in the Deposit Agreement (so long as any GDR is outstanding) to furnish the Depositary with six copies in the English language (and to make available to the Depositary, the Custodian and each Agent as many further copies as they may reasonably require to satisfy requests from Holders) of:

(i) in respect of the financial year ended on December 31, 2010 and in respect of each financial year thereafter, the non-consolidated (and, if published for holders of Shares, consolidated) balance sheets as of the end of such financial year and the non-consolidated (and, if published for holders of Shares, consolidated) statements of income for such financial year in respect of the Company, prepared in conformity with International Financial Reporting Standards and reported upon by independent public accountants appointed by the Shareholders, as soon as practicable after the same are published (and in any event within 180 days) after the end of such year; and

(ii) semi-annual non-consolidated and consolidated financial statements for holders of Shares, as soon as practicable after the same are published.

(B) The Depositary shall upon receipt thereof give due notice to the Holders in accordance with Condition 23 that such copies are available upon request at its specified office and the specified office of any Agent.

(C) The Company has undertaken in a deed poll issued by it pursuant to and in the form set out in Exhibit 1 to the Deposit Agreement that, for as long as the GDRs are restricted securities as defined in Rule 144(a)(3) under the Securities Act and unless the Company becomes subject to and complies with the reporting requirements of Section 13 or 15(d) of the United States Securities Exchange Act of 1934, as amended, or the information reporting requirements of Rule 12g3-2(b) thereunder, to make available to any Holder, Owner or prospective purchaser, upon the request of such Holder, Owner or prospective purchaser, at the specified office of the Depositary, all such information from time to time required to be delivered pursuant to Rule 144A(d)(4).

25 Copies of the Company’s notices

On or before the day when the Company first gives notice, by mail, publication or otherwise, to holders of any Shares or other Deposited Property, whether in relation to the taking of any action in respect thereof or in respect of any dividend or other distribution thereon or of any meeting or adjourned meeting of such holders or otherwise, the Company has undertaken in the Deposit Agreement to transmit to the Custodian and the Depositary such number of copies of such notice and any other material (which in the opinion of the Company contains information having a material bearing on the interests of the Holders) furnished to such holders by the Company in connection therewith as the Depositary may reasonably request. Except as provided below, the Depositary shall, as soon as practicable after receiving notice of such transmission, give due notice to the Holders which notice may be given together with a notice pursuant to paragraph (A) of Condition 9, and shall make the same available to Holders in such manner as it may determine.

26 Moneys held by the Depositary

The Depositary shall be entitled to deal with moneys paid to it by the Company for the purposes of the Deposit Agreement in the same manner as other moneys paid to it as a banker by its customers and shall not be liable to account to the Company or any Holder, Owner or Beneficial Owner or any other person, for any interest thereon, except as otherwise agreed.

27 Severability

If any one or more of the provisions contained in the Deposit Agreement or these Conditions shall be or become invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained therein or herein shall in no way be affected, prejudiced or otherwise disturbed thereby.

28 Disclosure, Other Information and Ownership Restrictions

Further to the specific information furnishing requirements set forth in Condition 12.8, the Depositary may from time to time, if required by applicable laws, request Holders of GDRs in definitive form or former Holders of GDRs in definitive form to provide information as to the capacity in which they hold or held GDRs and regarding the identity of any other persons then or previously interested in such GDRs and the nature of such interest and various other matters. Each such Holder of GDRs in definitive form agrees to provide any such information reasonably requested by the Depositary pursuant to the Deposit Agreement whether or not still a Holder at the time of such request.

29 Governing Law

(A) The Deposit Agreement and the GDRs are governed by and shall be construed in accordance with English law. The rights and obligations attaching to the Deposited Shares will be governed by Lebanese law. The Company has submitted in respect of the Deposit Agreement to the jurisdiction of the English courts.

(B) The courts of England are to have jurisdiction to settle any disputes which may arise out of or in connection with the GDRs and accordingly any legal action or proceedings arising out of or in connection with the GDRs (“Proceedings”) may be brought in such courts. The Depositary irrevocably submits to the jurisdiction of such courts and waives any objection to Proceedings in such courts whether on the ground of venue or on the ground that the Proceedings have been brought in an inconvenient forum. This submission is made for the benefit of each of the Holders and shall not limit the right of any of them to take Proceedings in any other court of competent jurisdiction nor shall the taking of Proceedings in one or more jurisdictions preclude the taking of Proceedings in any other jurisdiction (whether concurrently or not).

(C) The Depositary has irrevocably agreed that the process by which any Proceedings in England are begun may be served on it by being delivered to the office of the Depositary at Winchester House, 1 Great Winchester Street, London EC2N 2DB or at any other address at which process may from time to time be served on it in accordance with Part XXIII of the Companies Act of 1985 (as modified or re-enacted from time to time). If for any reason the Depositary does not have an agent for service of process in England, it will promptly appoint such an agent, with an address in London, and notify the Company and the Holders of such appointment. Nothing herein shall affect the right to serve process in any other manner permitted by law.

SUMMARY OF PROVISIONS RELATING TO THE GDRS WHILE IN MASTER FORM

The GDRs will be initially evidenced by (i) a single European Master GDR in registered form and (ii) a single American Master GDR in registered form. The European Master GDR will be delivered to, and registered in the name of a common nominee for, and held by the Common Depositary for, Euroclear and Clearstream and the American Master GDR will be delivered to, and registered in the name of, DTC or its nominee on or about the Closing Date. The European Master GDR and the American Master GDR contain provisions which apply to the GDRs while they are in master form, some of which modify the effect of the Conditions of the GDRs set out in this document. The following is a summary of certain of those provisions. Unless otherwise defined herein, terms defined in the Conditions shall have the same meaning herein.

Exchange

The European Master GDR and the American Master GDR will only be exchanged for certificates in definitive registered form evidencing GDRs in the circumstances described in (i), (ii), (iii) or (iv) below, in whole but not, except in the case of (iii) or (iv) below, in part. The Depositary will irrevocably undertake in the European Master GDR and the American Master GDR to deliver certificates evidencing GDRs in definitive registered form in exchange for either the European Master GDR or the American Master GDR to Holders within 60 days in the event that:

(i) the holder of the American Master GDR notifies the Depositary that it is unwilling or unable to continue as common depositary and a successor depositary is not appointed within 90 calendar days; or

(ii) either Euroclear or Clearstream (in the case of the European Master GDR) or DTC (in the case of the American Master GDR) is closed for business for a continuous period of 14 days (other than by reason of holiday, statutory or otherwise), or (in the case of Euroclear or Clearstream) announces an intention permanently to cease business or does in fact do so or (in the case of DTC) announces an intention permanently to cease to make its book entry system available or does in fact do so and no alternative clearing system satisfactory to the Depositary is available; or

(iii) the Depositary has determined that, on the occasion of the next payment in respect of the GDRs, the Depositary or its agent would be required to make any deduction or withholding (in respect of any tax or governmental charges) from any payment in respect of the GDRs which would not be required were the GDRs evidenced by certificates in definitive registered form; or

(iv) the Holder gives notice to the Depositary of its desire to exchange a part or the whole of the European Master GDR or the American Master GDR for certificates evidencing GDRs in definitive registered form.

Within 60 days of the occurrence of any event in (i), (ii), (iii) or (iv) above, any affected person appearing in the records maintained by Euroclear and Clearstream as entitled to any interest in the European Master GDR and any affected person appearing in the records maintained by DTC as entitled to any interest in the American Master GDR shall be entitled to require the Holder to procure the exchange of an appropriate part of the European Master GDR or the American Master GDR, as the case may be, for a certificate evidencing a GDR in definitive registered form for an interest held by such person in the European Master GDR or the American Master GDR in the above circumstances upon written notice to the Holder. Any such exchange shall be at the expense (including printing costs) of such person in the case of such appropriate part or at the expense of all such persons in case of an exchange of the whole of the European Master GDR or the American Master GDR for the definitive GDRs.

A GDR evidenced by an individual definitive certificate will not be eligible for clearing and settlement through Euroclear, Clearstream or DTC.

Upon any exchange of a part of the European Master GDR or the American Master GDR for certificates evidencing GDRs in definitive registered form, any distribution of GDRs pursuant to Condition 5, 6, 7 or 10 or any reduction in the number of GDRs evidenced by the European Master GDR or the American Master GDR following any withdrawal of Deposited Property pursuant to Condition 2, the relevant details shall be entered by the Depositary on the register maintained by the Depositary, whereupon the number of Shares evidenced by the European Master GDR or the American Master GDR shall be reduced or increased (as the case may be) accordingly.

Payments and distributions

Payments of cash dividends and other amounts (including cash distributions) in respect of the GDRs evidenced by the European Master GDR or the American Master GDR will be made by the Depositary through Euroclear and Clearstream, in respect of the European Master GDR, and through DTC, in respect of the American Master GDR, on behalf of persons entitled thereto upon receipt of funds therefor from the Company. A free distribution or rights issue of Shares to the Depositary on behalf of Holders will result in the records of the Depositary being adjusted to reflect the enlarged number of GDRs evidenced by the European Master GDR and/or American Master GDR.

Surrender of GDRs

Any requirement in the Conditions relating to the surrender of a GDR to the Depositary shall be satisfied by the production by the Common Depositary, in respect of the European Master GDR, and DTC, in respect of the American Master GDR, on behalf of a person entitled to an interest therein, of such evidence of entitlement of such person as the Depositary may reasonably require. The delivery or production of any such evidence shall be sufficient evidence, in favour of the Depositary, any Agent and the Custodian, of the title of such person to receive (or to issue instructions for the receipt of) all moneys or other property payable or distributable and to issue voting instructions in respect of the Deposited Property evidenced by such GDRs.

Notices

For so long as the European Master GDR is registered in the name of the Common Depositary or its nominee on behalf of Euroclear and Clearstream and for so long as the American Master GDR is registered in the name of DTC or its nominee, notices to Holders may be given by the Depositary by delivery of the relevant notice to the Common Depositary, in respect of the European Master GDR, and DTC or its nominee, in respect of the American Master GDR, for communication to Holders in substitution for publication required by Condition 23.

TAXATION

Lebanese Taxation Considerations

The following is a summary of the principal Lebanese tax consequences with respect to the issuance and delivery, ownership and sale of the GDRs. This summary does not purport to be a comprehensive description of all relevant tax considerations, and each potential purchaser should consult its own tax advisor before making a decision to deposit their Shares in exchange for GDRs under the Programme. The following is based on the tax laws of Lebanon as in effect on the date of this Prospectus. For advice relating to the tax consequences to holders of GDRs in countries outside Lebanon, including countries in which they may be resident or domiciled and any tax treaty between Lebanon and such countries of residence or domicile, potential purchasers are urged to consult their own tax advisors.

Withholding Tax on Distributions

Under current Lebanese law, the Bank is required to withhold a tax of 10% on any payment of dividends or other distributions to holders of its share capital, subject to reduction to 5% if the payor is a company whose shares representing at least one-third of the company’s outstanding share capital or GDRs representing at least 20% of the company’s outstanding share capital are listed for trading on the BSE, such as the Bank. Accordingly, the Bank believes that the withholding tax rate applicable to distributions to holders of its shares, including the Shares represented by GDRs is 5%.

In principle, this tax is due irrespective of the nationality or domicile of the beneficiary of the dividends; however, the application of tax treaties aimed at avoiding double taxation between Lebanon and other countries, when applicable, may reduce this tax.

Distributions to holders of GDRs are not subject to withholding tax in Lebanon provided the Depositary performs its activity under the Depositary Agreement outside Lebanon.

Taxation of Capital Gains

Capital gains made in connection with the sale of shares of Lebanese joint stock companies, such as the Bank, are subject to the following:

• gains on a sale of shares held by individuals (resident and non-resident) and foreign non-resident companies are not subject to capital gains tax;

• gains on a sale of shares held by Lebanese holding companies are tax exempt if held for a minimum period of two years; otherwise, they are subject to capital gains tax at a rate of 10%;

• gains on a sale of shares held by Lebanese companies, whose object includes the trading of shares and securities, are subject to corporate tax at a rate of 15%; and

• gains on a sale of shares held by Lebanese companies outside the normal course of their business are subject to capital gains tax at the rate of 10%.

Gains made in connection with the sale of GDRs between two non-resident investors in a transaction outside Lebanon are not subject to capital gains tax in Lebanon.

Stamp Duties

The Law promulgated by Decree No. 5439 dated September 20, 1982 granted an exemption to all contracts for the transfer of shares, bonds or treasury bills from the stamp duty imposed by the Law promulgated by Decree No. 67 dated August 5, 1967. However, such exemption may not apply to the transfer of GDRs when such transfer is made between Lebanese residents.

United Kingdom Taxation Considerations

The following is a general description of certain tax considerations, under the existing laws of the United Kingdom, relating to a holding of GDRs that represent them. It does not purport to be a complete analysis of all

tax considerations relating to the GDRs. Prospective GDR holders should consult their tax advisors as to the consequences under the tax laws of the country of which they are resident for tax purposes and the tax laws of any other applicable jurisdiction of acquiring, holding, redeeming and disposing of GDRs and receiving dividends, or liquidation proceeds and/or other amounts under the Shares underlying the GDRs. This summary is based upon the law as in effect on the date hereof and is subject to any change in law that may take effect after such date, and may be retroactively applicable.

The comments below are of a general nature and are based on current United Kingdom law and published HM Revenue and Customs practice at the date of this Prospectus, both of which are subject to change, possibly with retrospective effect. The summary only covers the principal United Kingdom tax consequences of holding GDRs for absolute beneficial holders who are resident (and, in the case of individuals only, ordinarily resident and domiciled) in the United Kingdom for tax purposes (“UK Holders”). In addition, the summary: (i) only addresses the tax consequences for UK Holders who hold GDRs as capital assets, and does not address the tax consequences which may be relevant to certain other categories of UK Holders, for example, dealers; (ii) does not address the tax consequences for UK Holders that are insurance companies, collective investment schemes or persons connected with the company; (iii) only addresses the tax consequences of dividends for a UK Holder where the dividends paid are regarded for UK tax purposes as that UK Holder’s own income (and not the income of some other person); (iv) assumes that the UK Holder is not interested in or deemed to be interested in, either alone or together with one or more associated or connected persons, directly or indirectly, 10% or more of the share capital or the voting power or the profits of the company; (v) assumes that there will be no register in the United Kingdom in respect of GDRs or the Shares; (vi) assumes that Shares will not be held by, and that GDRs will not be issued by, a depositary incorporated in the United Kingdom and (vii) assumes that neither Shares nor GDRs will be paired with Shares issued by a company incorporated in the United Kingdom.

Dividends

Dividends paid by the Bank will be assessable to UK income tax under section 402 of the Income Tax (Trading and Other Income) Act 2005 or corporation tax under section 18 of the Income and Corporation Taxes Act 1988 (Schedule D Case V) on the full amount of the dividend arising in the tax year.

On the basis that the Bank is not resident for tax purposes in the UK, individual holders of GDRs will be entitled to a tax credit equal to one-ninth of the dividend receivable from the Bank. Such an individual will be taxable on the total of the dividend (including any amounts of Lebanese withholding tax deducted at source) and the related tax credit (the `gross dividend’), which will be regarded as the top slice of the individual’s income. The tax credit will be treated as discharging the individual’s liability to UK income tax in respect of the gross dividend, unless and to the extent that the gross dividend falls above the threshold for the higher rate of income tax, in which case (under current law) the individual will, to that extent, pay UK income tax at 32.5 per cent. on the gross dividend, less the related tax credit (equating to an effective rate of tax at 25 per cent. of the gross dividend received). The UK Government has announced that, from April 6, 2011, there will be three rates of income tax for dividends – individual shareholders whose annual taxable income exceeds £150,000 will, under these proposals, be subject to UK income tax at 37.5 per cent. on the gross dividend, less the related tax credit (equating to 30.56 per cent. of the dividend received).

On the basis that the Company is not resident for tax purposes in the UK, any dividends received by a corporate holder of GDRs will not constitute franked investment income but will be liable to corporation tax at the rate applicable to the company in question, the standard rate of corporation tax being 28 percent.

The UK Government has announced proposed changes to the taxation of the foreign profits of companies, to be included in the Finance Bill 2009 and to take effect from a date to be appointed. These include the introduction of an exemption for certain dividends received from non-UK resident companies by large and medium-sized groups on non-redeemable ordinary shareholdings or on portfolio shareholdings where the recipient, together with all connected companies, has no more than a 10 per cent. interest in the issued share capital, income and assets of the distributing company.

In addition, while there is no double tax treaty between the United Kingdom and Lebanon, both individual and corporate holders of GDRs may be entitled to double tax relief under domestic United Kingdom law for any Lebanese withholding tax suffered on dividends paid by the Bank. Under the rules contained in Part XVIII of the Income and Corporation Taxes Act 1988 any such Lebanese withholding tax suffered may, subject to limitations, be claimed as a credit against the United Kingdom income or corporation tax liability arising on the dividend.

Capital gains

A disposal or deemed disposal of GDRs by a UK Holder may give rise to a chargeable gain or allowable loss for the purposes of UK taxation of capital gains depending on the individual circumstances of the holder and subject to any available exemption or relief. In addition, individual holders who dispose of their GDRs while they are temporarily resident may outside the United Kingdom be treated, for the purposes of UK capital gains tax, as disposing of them in the year in which they return to the United Kingdom.

Indexation allowance may be available to corporate holders to reduce or eliminate a chargeable gain but not to create or increase an allowable loss.

Stamp duty and stamp duty reserve tax

No UK stamp duty reserve tax will be payable on the issue of GDRs or on any agreement to transfer GDRs. No UK stamp duty will be payable on the issue of GDRs; nor will stamp duty be payable on the acquisition or transfer of GDRs provided that the instrument of transfer is executed outside the United Kingdom and does not relate to any property situated in the United Kingdom or to any matter or thing done or to be done in the United Kingdom.

TRANSFER RESTRICTIONS ON THE GDRS

Sales of GDRs in the United States are being made in accordance with Rule 144A under the Securities Act. Neither the GDRs nor the Shares represented by the GDRs have been or will be registered under the Securities Act or with any securities regulatory authority of any state or other jurisdiction, and they may not be offered or sold in the United States, except pursuant to an exemption from the registration requirements of the Securities Act. Accordingly, the GDRs will be offered and re-sold in the United States only to QIBs in reliance on the exemption from the registration requirements of the Securities Act provided by Rule 144A and outside the United States in reliance on Regulation S.

Each person acquiring a beneficial interest in the American Master GDR will be deemed to have represented and agreed as follows;

1 It understands that the GDRs and the Shares represented by the GDRs have not been registered under the Securities Act, and that they may be offered, sold, pledged or otherwise transferred only (i) to a person whom the seller or any person acting on its behalf reasonably believes is a QIB purchasing for its own account or for the account of a QIB in a transaction meeting the requirements of Rule 144A; (ii) pursuant to and in accordance with Rule 903 or 904 of Regulation S under the Securities Act; (iii) pursuant to an exemption from registration provided by Rule 144 under the Securities Act (if available); or (iv) pursuant to an effective registration statement under the Securities Act, in each case in accordance with any applicable securities laws of any state of the United States. Notwithstanding anything to the contrary in the foregoing, the Shares underlying the GDRs may not be. deposited into any unrestricted depositary receipt facility in respect of shares established or maintained by a depositary bank, unless and until such time as such shares are no longer restricted securities within the meaning of Rule 144 under the Securities Act.

2 It understands that the GDRs purchased pursuant to Rule 144A will bear a legend to the following effect unless otherwise agreed by the Company and the Holder thereof:

THE GLOBAL DEPOSITARY RECEIPTS (THE “GDRS”) EVIDENCED BY THIS CERTIFICATE AND THE SHARES REPRESENTED THEREBY HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933 (THE “SECURITIES ACT”) AND MAY BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY (1) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A UNDER THE SECURITIES ACT PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A; (2) PURSUANT TO AND IN ACCORDANCE WITH RULE 903 OR 904 OF REGULATION S UNDER THE SECURITIES ACT; (3) PURSUANT TO AN EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE); OR (4) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN EACH CASE IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES. NOTWITHSTANDING ANYTHING TO THE CONTRARY IN THE FOREGOING, THE SHARES UNDERLYING THE GDRS MAY NOT BE DEPOSITED INTO ANY UNRESTRICTED DEPOSITARY RECEIPT FACILITY IN RESPECT OF SHARES ESTABLISHED OR MAINTAINED BY A DEPOSITARY BANK, UNLESS AND UNTIL SUCH TIME AS SUCH SHARES ARE NO LONGER RESTRICTED SECURITIES WITHIN THE MEANING OF RULE 144 UNDER THE SECURITIES ACT.

3 If it is a purchaser of GDRs pursuant to Rule 144A, it is a QIB or a broker-dealer acting for a QIB, is aware that the sale to it is being made in reliance on Rule 144A and is acquiring the GDRs for its own account or, if it is a broker-dealer, for the account of one or more QIBs.

Any resale or other transfer, or attempted resale or other transfer made other than in compliance with the above- stated restrictions may not be recognised by the Company or the Depositary in respect of the GDRs and the Shares.

Holders and beneficial owners of GDRs may withdraw the Shares represented by the GDRs from the depositary facility at any time after the Closing Date, subject to the terms of the Deposit Agreement and subject to compliance with applicable provisions of Lebanese law and the By-laws of the Bank. See “Terms and Conditions of the Global Depositary Receipts - 2. Withdrawal of Deposited Property” and “Description of the Share Capital of the Bank—Description of the Common Shares—Restrictions on Transfer of Common Shares”.

CLEARING AND SETTLEMENT

Ownership of interests in GDRs evidenced by a Master GDR will be limited to (i) Euroclear or Clearstream participants or persons who hold interests through Euroclear or Clearstream participants, (ii) DTC participants or persons who hold interests through DTC participants, and to (iii) Midclear participants or persons who hold interests through Midclear participants.

Custodian and depositary links have been established among Euroclear, Clearstream and DTC to facilitate the initial issue of the GDRs and cross-market transfers of the GDRs associated with secondary market trading

Interests held through Euroclear or Clearstream

Ownership of interests in GDRs through Euroclear or Clearstream will be shown on, and the transfer of that ownership will be effected only through, records maintained by Euroclear or Clearstream and the records of Euroclear or Clearstream participants, as the case may be (with respect to interests of persons other than Euroclear or Clearstream participants). Transfers of GDRs will settle in same day funds.

So long as the GDRs clear through Euroclear or Clearstream, the GDRs will be evidenced by a European Master GDR registered in the name of a common depositary for Euroclear or Clearstream and no Owner or Beneficial Owner of an interest in the GDRs evidenced by a European Master GDR will be entitled to receive a GDR or be able to transfer that interest except in accordance with applicable procedures of Euroclear and/or Clearstream.

So long as the GDRs are evidenced by a European Master GDR registered in the name of Euroclear and Clearstream or their nominee, secondary market trading activity in the GDRs will be required by Euroclear and Clearstream to settle in immediately available funds. Transfers between account-holders in Euroclear and Clearstream will be effected in the ordinary way in accordance with their respective rules and operating procedures.

Euroclear and Clearstream hold securities for participating organisations and facilitate the clearance and settlement of securities transactions between their respective participants through electronic book entry changes in accounts of such participants. Euroclear and Clearstream provide to their participants among other things, services for safekeeping, administration, clearance and settlement of internationally traded securities and securities lending and borrowing. Euroclear and Clearstream interface with domestic securities markets. Euroclear and Clearstream participants are financial institutions such as underwriters, securities brokers and dealers, banks’ trust companies and certain other organisations including the Bank. Indirect access to Euroclear or Clearstream is also available to others such as banks, brokers, dealers and trust companies that clear through or maintain a custodial relationship with a Euroclear or Clearstream participant, either directly or indirectly.

Although Clearstream and Euroclear have agreed to the foregoing procedures in order to facilitate the transfer of interests in a European Master GDR among participants of Clearstream and Euroclear, they are under no obligation to perform or continue to perform such procedures and such procedures may be discontinued at any time. None of the Bank, the Depositary, the Custodian or any of their agents will have any responsibility for the performance by Clearstream or Euroclear or their respective participants of their respective obligations under the rules and procedures governing their operations.

Interests held through DTC

DTC is a limited purpose trust company organised under the laws of the State of New York, a member of the U.S. Federal Reserve System, a “clearing corporation” within the meaning of the New York Uniform Commercial Code and a “clearing agency” registered pursuant to Section 17A of the Exchange Act. DTC was created to hold securities among its participants and to facilitate the clearance and settlement of securities transactions among participants in such securities through electronic book-entry changes in accounts of the participants, thereby eliminating the need for physical movement of security certificates. Participants include securities brokers and dealers, banks, trust companies and certain other organisations. DTC is owned by a number of its participants and by the New York Stock Exchange, Inc., the American Stock Exchange, Inc. and the National Association of Securities Dealers, Inc. Indirect access to DTC is available to others, such as banks, brokers, dealers and trust companies that clear through or maintain a custodial relationship with a DTC participant either directly or indirectly (“Indirect DTC Participants”). Book-entry interests in the GDRs held through DTC will be evidenced by the American Master GDR registered in the name of Cede & Co., as nominee for DTC, which will be held by Morgan Guaranty Trust Company of New York as custodian for DTC. As necessary, Morgan Guaranty Trust Company of New York will adjust the

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amounts of GDRs on the relevant register for the accounts of Euroclear, Clearstream and DTC to reflect the amounts of GDRs held through Euroclear, Clearstream and DTC, respectively. Beneficial ownership in the GDRs will be held through financial institutions as direct and indirect participants in Euroclear, Clearstream and DTC.

Holders of book-entry interests in the GDRs holding through DTC will receive, to the extent received by the Depositary, all distributions of dividends and other payments with respect to book-entry interests in the GDRs from the Depositary through DTC and DTC participants. Distributions in the United States will be subject to relevant U.S. tax laws and regulations.

As DTC can act on behalf of DTC participants only, who in turn act on behalf of Indirect DTC Participants, the activity of beneficial owners who are Indirect DTC Participants to pledge book-entry interests in the GDRs to persons or entities that do not participate in DTC, or otherwise take actions with respect to such book-entry interests in the GDRs may be limited.

The Bank has received the assurance of DTC that it will take any action permitted to be taken by a holder of GDRs only at the discretion of one or more DTC participants to whose account or accounts with DTC interests in GDRs represented by the American Master GDRs are credited and only in respect of such portion of the number of GDRs, as to which such DTC participant or DTC participants has or have given such discretion. However, in the limited circumstances described above, DTC will exchange the American Master GDRs for individual definitive GDRs, which will be distributed to its participants. Holders of indirect interests in securities evidenced by American Master GDRs through DTC participants have no direct rights to enforce such interests while the securities are in global form.

Interests held through Midclear

Shares or GDRs settling through Midclear will be in registered form, registered in the respective names of the beneficial owners thereof in the share registry maintained by Midclear. Such interests will be shown on, and transfers thereof may be effected, subject as provided herein, through, the book-entry system maintained by Midclear and its participants. The Bank shall not have any responsibility or liability for any aspect of the records relating to or payments made on account of interests in Shares or GDRs settling through Midclear or for maintaining, supervising or reviewing any records relating to ownership of Shares or GDRs settling through Midclear. Global Clearance and Settlement Procedures

(a) Initial Settlement

The GDRs will be in global form evidenced by two Master GDRs. Interests in the GDRs will be in uncertified book-entry form. Purchasers electing to hold book-entry interests in the GDRs through Euroclear and Clearstream accounts will follow the settlement procedures applicable to depositary receipts. Book-entry interests in the GDRs will be credited to Euroclear participant securities clearance accounts on the business day following the Closing Date against payment (value Closing Date), and to Clearstream participant securities custody accounts on the Closing Date against payment in same-day funds. DTC participants acting on behalf of purchasers electing to hold interests in the book-entry GDRs through DTC will follow the delivery practices applicable to securities eligible for DTC’s deferred funds system. DTC participant securities accounts will be credited with book-entry interests in the GDRs following confirmation of receipt of payment to the Bank on the Closing Date.

(b) Secondary Market Trading

Transfer restrictions: Secondary market sales of book-entry interests in the American Master GDR can be made only (i) to a person that the holder reasonably believes is a QIB purchasing for its own account or for the account of a QIB in a transaction meeting the requirements of Rule 144A or (ii) in an offshore transaction in accordance with Regulation S under the Securities Act.

Trading between Euroclear and Clearstream participants: Secondary market sales of book-entry interests in the GDRs held through Euroclear or Clearstream or purchasers of book-entry interests in the GDRs through Euroclear or Clearstream will be conducted in accordance with the normal rules and operating procedures of Euroclear and Clearstream and will be settled using the normal procedures applicable to depositary receipts.

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Trading between DTC participants: Secondary market sales of book-entry interests in the GDRs held through DTC will occur in the ordinary way in accordance with DTC rules and will be settled using the procedures applicable to depositary receipts in DTC’s system in deferred funds, if payment is effected in U.S. dollars, or free of payment, if payment is not effected in U.S. dollars. Where payment is not effected in U.S. dollars, separate payment arrangements outside DTC are required to be made between the DTC participants.

Trading between DTC seller and Euroclear or Clearstream purchaser: When book-entry interests in the GDRs are to be transferred from the account of a DTC participant to the account of a Euroclear or Clearstream participant, the DTC participant must send to DTC a free of payment instruction at least two business days prior to the settlement date. Separate payment arrangements are required to be made between the DTC participant and the relevant Euroclear or Clearstream participant. On the settlement date, DTC will debit the account of its participant and will instruct the Depositary to instruct Euroclear and Clearstream and their common depositary to credit the relevant account of the Euroclear or Clearstream participant, as the case may be. In addition, on the settlement date, DTC will instruct the Depositary to (i) decrease the amount of book-entry interests in the GDRs registered in the name of Cede & Co. and evidenced by the American Master GDR and (ii) increase the amount of book-entry interests in the GDRs registered in the name of the common nominee for Euroclear and Clearstream and evidenced by the European Master GDR.

Trading between Euroclear or Clearstream seller and DTC purchaser: When book-entry interests in the GDRs are to be transferred from the account of a Euroclear or Clearstream participant to the account of a DTC participant, the Euroclear or Clearstream participant must send to Euroclear or Clearstream a free payment instruction at least one business day prior to the settlement date not later than 10.00 a.m. Brussels time for instructions sent by telex or not later than 11.00 a.m. Brussels time for instructions by Euclid (Euroclear Information Distribution). On the settlement date, Euroclear or Clearstream, as the case may be, will in turn transmit such instructions to their common depositary, who will then pass the instructions on to the Depositary. Separate payment arrangements are required to be made between the DTC participant and the relevant Euroclear or Clearstream participant, as the case may be. On the settlement date, Euroclear or Clearstream, as the case may be, will debit the account of its participant and will instruct the Depositary to instruct DTC to credit the relevant account of the DTC participant. In addition, Euroclear or Clearstream, as the case may be, shall, on the settlement date instruct the Depositary to (i) decrease the amount of the book-entry interests in the GDRs registered in the name of the common nominee for Euroclear and Clearstream and evidenced by the European Master GDR and (ii) increase the amount of the book-entry interests in the GDRs registered in the name of Cede & Co. and evidenced by the American Master GDR.

General

Although the foregoing sets out the procedures of Euroclear, Clearstream and DTC in order to facilitate the transfers of interests in the GDRs among participants of Euroclear, Clearstream and DTC, none of Euroclear, Clearstream or DTC is under any obligation to perform or continue to perform such procedures, and such procedures may be discontinued at any time.

None of the Bank, the Depositary or any of their agents will have responsibility for the performance of Euroclear, Clearstream or DTC or their respective participants of their respective obligations under the rules and procedures governing their operations.

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ADDITIONAL INFORMATION

1. The Bank is incorporated under the name “Bank Audi sal – Audi Saradar Group” as a limited liability company in and under the laws of Lebanon under commercial registration number 1134. The business address of its headquarters is Bank Audi Plaza, Omar Daouk Street, Bab Idriss, Beirut 2021 8102, P.O. Box 11-2560, Beirut, Lebanon and its telephone number is +961 1 994 000.

2. The GDRs were initially issued in 1995. The holding by the Depositary of up to 10,171,761 Common Shares of the Bank, representing an interest of up to 29.51 per cent. in the Bank’s share capital, has been authorised by the Central Bank on March 3, 2010. The Stock Split and the increase in the size of the block listing were authorised by a resolution adopted by the Extraordinary Meeting of Shareholders of the Bank on March 2, 2010, as well as by the Central Bank on April 21, 2010. Accordingly, all consents, approvals, registrations, authorisations, notifications and other orders of regulatory authorities required under the laws and regulations of Lebanon in connection with the issue and listing of the GDRs have been or, prior to the issue date, will be obtained.

3. The GDRs are in registered, book-entry form. The GDRs evidenced by the European Master GDR have been accepted for settlement and clearance by Euroclear, Clearstream and DTC and have been assigned ISIN US0667053021, Common Code 008064636 and CUSIP 0066705302, respectively. The GDRs evidenced by the American Master GDR have been accepted for settlement and clearance by Clearstream and DTC and have been assigned ISIN US0066752031 and CUSIP 006675203, respectively.

4. Ernst & Young p.c.c. and Semaan, Gholam & Co. have audited the consolidated financial statements of the Bank as of and for the years ended December 31, 2009, 2008 and 2007.

5. Except as mentioned in “Dividend Policy” on page 14 and in “Description of the Share Capital of the Bank – General – Shares in Issue” on page 67, there has been no material change in the share capital of the Bank and its consolidated subsidiaries taken as a whole since December 31, 2009 and no significant change in the financial or trading position of the Bank and its consolidated subsidiaries taken as a whole since December 31, 2009.

6. Copies (together with English translations where appropriate) of the following documents may be inspected at the offices of the Bank during customary business hours on any weekday (public holidays excepted) following the date of this Prospectus:

(a) the Bank’s By-laws (comprising a direct certified English translation of the official Arabic version; GDR holders should note that, in the event of any discrepancy between the English translation and the official Arabic version, the Arabic version will prevail);

(b) the audited consolidated financial statements of the Bank as of and for each of the years ended December 31, 2009, December 31, 2008 and December 31, 2007, respectively, together with the audit report of Ernst & Young p.c.c. and Semaan, Gholam & Co. in respect of such consolidated financial statements;

(d) this Prospectus.

7. There has not been an official conviction for fraudulent offences for the last five years, or any bankruptcy, receivership or liquidation, and there is no official public incrimination of and/or sanctions on any of (a) the members of the Board of Directors of the Bank; or (b) any Senior Manager who is relevant to establishing that the Bank has the appropriate expertise and experience for the management of the Bank’s business by statutory or regulatory authorities (including designated professional bodies) and no such person has ever been disqualified by a court from acting as a member of the Board of Directors or a Senior Manager of the Bank or from acting in the management or conduct of the affairs of the Bank for at least the previous five years.

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INDEX TO THE FINANCIAL STATEMENTS

Page Audited Consolidated Financial Statements of the Bank as of and for the years ended December 31, 2009 and 2008 Independent Auditors’ Reports to the Shareholders of the Bank dated March 23, 2010 issued by Ernst & Young p.c.c. and Semaan, Gholam & Co. with respect to the consolidated financial statements of the Bank as of and in 2009 ...... F-3 Consolidated Income Statement for each of the Years ended December 31, 2009 and 2008 ...... F-4 Consolidated Statement of Financial Position as of December 31, 2009 and 2008 ...... F-6 Consolidated Cash Flow Statement for each of the Years ended December 31, 2009 and 2008 ...... F-8 Consolidated Statement of Changes in Shareholders’ Equity for the Years ended December 31, 2009 and 2008...... F-9 Notes to the Consolidated Financial Statements...... F-10 Audited Consolidated Financial Statements of the Bank as of and for the years ended December 31, 2008 and 2007 Independent Auditors’ Report to the Shareholders of the Bank dated April 2, 2009 issued by Ernst & Young p.c.c. and Semaan, Gholam & Co. with respect to the Consolidated Financial Statements of the Bank as of and in 2008...... F-98 Consolidated Balance Sheet as of December 31, 2008 and 2007 ...... F-99 Consolidated Income Statement for each of the years ended December 31, 2008 and 2007 ...... F-101 Consolidated Cash Flow Statement for each of the years ended December 31, 2008 and 2007 ...... F-102 Consolidated Statement of Changes in Shareholders’ Equity for the years ended December 31, 2008 and 2007...... F-103 Notes to the Consolidated Financial Statements...... F-104 Audited Consolidated Financial Statements of the Bank as of and for the years ended December 31, 2007 and 2006 Independent Auditors’ Report to the Shareholders of the Bank dated April 3, 2008 issued by Ernst & Young p.c.c. and Semaan, Gholam & Co. with respect to the Consolidated Financial Statements of the Bank as of and in 2007...... F-186 Consolidated Balance Sheet as of December 31, 2007 and 2006 ...... F-187 Consolidated Income Statement for each of the years ended December 31, 2007 and 2006 ...... F-189 Consolidated Cash Flow Statement for each of the years ended December 31, 2007 and 2006 ...... F-190 Consolidated Statement of Changes in Shareholders’ Equity for the years ended December 31, 2007 and 2006...... F-191 Notes to the Consolidated Financial Statements...... F-192

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REGISTERED OFFICE OF THE BANK

BANK AUDI SAL – AUDI SARADAR GROUP Bank Audi Plaza Omar Daouk Street, Bab Idriss Beirut 2021 8102, P.O. Box 11-2560 Beirut Lebanon

LEGAL ADVISORS

As to English law: As to Lebanese law: DEWEY & LEBOEUF RAMZI JOREIGE AND PARTNERS No.1 Minster Court Centre Sofil Mincing Lane Achrafieh London EC3R 7YL Beirut United Kingdom Lebanon

STATUTORY AUDITORS OF THE BANK

ERNST & YOUNG P.C.C. SEMAAN, GHOLAM & CO. Commerce and Finance Building Gholam Building First Floor Sioufi Street Riad El Solh Riad El Solh Beirut Beirut Lebanon Lebanon

DEPOSITARY BANK

DEUTSCHE BANK TRUST COMPANY AMERICAS 60 Wall Street Mincing Lane New York, NY 10005 United States