Finance, Banking and Development Presented by Mr. Saad Azhari Vice Chairman & General Manager BLOM Bank July 21, 2004

BLOM Bank S.A.L. Finance, Banking and Development I-Economic Activity 1. Domestic Transactions 2. International Trade and Position 3. Real Sector II-Financial Markets 1. Banking Sector 2. Fixed Income Market 3. Beirut Stock Exchange III-Fiscal Situation 1. Public Finance 1. Public Finance 2. Public Debt 2. Public Debt

BLOM Bank S.A.L. I-1 Domestic Transactions Banks’ clearing activity increased by 6.4% in the first- five months of 2004 to reach $12.7bn, compared to a 4.3% growth in 2003 (reaching $29.6bn). Banks’ clearing activity increased by 6.4% in the first- five months of 2004 to reach $12.7bn, compared to a 4.3% growth in 2003 (reaching $29.6bn). The value of returned checks dropped 11.1% year-on- year to reach $800m in The value of returned checks dropped 11.1% year-on- year to reach $800m in The rate of cleared checks in US dollars, the most relevant estimate of economic dollarisation, stood at 70.3% at end-2003 and first-five months of The rate of cleared checks in US dollars, the most relevant estimate of economic dollarisation, stood at 70.3% at end-2003 and first-five months of 2004.

BLOM Bank S.A.L. I-2 International Trade & Position International Trade: Exports accumulated to $842m in the first-five months of 2004, increasing by 43.4% from that of 2003, while imports up to May 2004 rose by 29.4% to $3,499m. Year-on-year, exports rose by 50% in 2003 to reach $1,524m, while imports ended up 20% at $7,168m in Balance of Payment: For the first-five months of 2004, the country’s BoP accumulated to a surplus of $197.1m compared to a surplus of $2.3bn in the same period last year due to Paris II inflows. At end-2003, the BoP reached a staggering surplus of $3.39bn, up 117% year-on-year.

BLOM Bank S.A.L. I-3 Real Sector Construction Sector: For the first-four months of 2004, construction permits grew by 27.7% year-on-year to 2.71 million m 2, after registering an 11.5% annual growth in 2003 with a total permits’ area of 8.81 million m 2 Transport Sector: The total number of passengers at Beirut International Airport rose by 29% in the first-half of this year to reach 1.44 million, following a registered 9% growth for the whole of The number of tourists visiting Lebanon surged by 45% in the first-half of 2004 to reach almost half a million, compared to nearly 1 million tourists at end-2003, the highest since 1974.

BLOM Bank S.A.L. II-1 Banking Sector Commercial banks' consolidated balance sheet amounted to $62bn at the end of May 2004, up 11.5% year-on-year. In turn, total deposits rose by a 13.1% year-on-year, reaching $50.5bn up to May 2004, coupled by a 4.8% rise in capital funds to $3.8bn in the same period. Commercial banks' consolidated balance sheet amounted to $62bn at the end of May 2004, up 11.5% year-on-year. In turn, total deposits rose by a 13.1% year-on-year, reaching $50.5bn up to May 2004, coupled by a 4.8% rise in capital funds to $3.8bn in the same period. For the whole of 2003, banks’ assets grew by 14.1%, while banking deposits and capital funds posted a yearly increase of 13.7% and 9.4% respectively. For the whole of 2003, banks’ assets grew by 14.1%, while banking deposits and capital funds posted a yearly increase of 13.7% and 9.4% respectively.

BLOM Bank S.A.L. II-1 Banking Sector (Cont’d)

BLOM Bank S.A.L. II-2 Fixed Income Market The face value of the portfolio of outstanding LP treasury bills reached LP27,576bn at the end of May 2004, up 15% from May At the end of 2003, the TBs portfolio stood at LP26,013bn, posting a 9.7% yearly growth rate. The face value of the portfolio of outstanding LP treasury bills reached LP27,576bn at the end of May 2004, up 15% from May At the end of 2003, the TBs portfolio stood at LP26,013bn, posting a 9.7% yearly growth rate. The outstanding value of local currency Certificates of Deposits (CDs) issued by the Central Bank reached LP10,378bn at the end of May 2004, almost doubling from LP5,270bn a year earlier. The outstanding value of local currency Certificates of Deposits (CDs) issued by the Central Bank reached LP10,378bn at the end of May 2004, almost doubling from LP5,270bn a year earlier. The outstanding value of FC sovereign Eurobonds stood at $13.5bn at end-May 2004, slightly up from $13.1bn in May 2003 and $12.8bn in The outstanding value of FC sovereign Eurobonds stood at $13.5bn at end-May 2004, slightly up from $13.1bn in May 2003 and $12.8bn in 2003.

BLOM Bank S.A.L. II-3 Beirut Stock Exchange Total turnover on the Beirut Stock Exchange dropped year- on-year by 7.4% in the first-half of 2004 to reach $76.17m. In 2003, total traded value increased by 10.17% to $131m. Trading activity up to June 2004 was divided between economic sectors as follows: Development and reconstruction (63.3%), banking (24.4%), trading (0.7%), industrial sector (7.4%) and Junior market (4.2%). The BLOM Stock Index (Lebanon’s broad market index) rose by 26.7% year-on-year in the first-half of 2004 to , following an almost stable yearly performance in 2003.

BLOM Bank S.A.L. II-3 Beirut Stock Exchange (Cont’d) Historical Background Up to Jun Market Cap. (in billions of USD) Traded Value (in millions of USD) 3.7%9%9%4%7%5%13%24%12% Market Turnover ----8%8%7%10%12%15%17%13% Market Cap/GDP No. of listed companies , BLOM Stock Index* Jan 22, 1996 = 1,000 *Jan 22, 1996 = 1,000 Source: Beirut Stock Exchange Bulletins

BLOM Bank S.A.L. III-1 Public Finance The country’s budget deficit posted a 39% yearly drop in the first-half of 2004: The year-on-year drop in the deficit-to- spending ratio resulted from an 11% growth in revenues coupled with a 22% drop in expenditures, with the budget registering a primary surplus of $485m in the first-six months of The deficit ratio amounted to 37.2% of expenditures in 2003, down from 42.5% in This resulted from a significant 14.2% rise in revenues coupled with an increase of 4.5% in expenditures, while the budget registered a primary surplus of $622m in 2003, almost tripling year-on-year.

BLOM Bank S.A.L. III-2 Public Debt Lebanon’s gross public debt reached $35.2bn in May 2004, up 7.8% year-on-year. In turn, net domestic debt (after deducting public sector deposits) increased by 18.03% to $16.7bn in May 2004, while external debt edged upwards by 3.1% to $16.3bn in the same period. This compares to a gross public debt of $33.3bn at end-2003.

BLOM Bank S.A.L. Key Indicators Growth (May 04-May 03) Growth ( ) Growth ( ) 6.4%4.3% Cleared Checks 43.4%49.9%Exports 29.4%20.0%Imports -91.6%116.6% Balance of Payments 15.0%9.7% Outstanding TBs in Lebanese Pound 2 times 20 times CDs in Lebanese Pound 3.2%2.5% Sovereign Eurobonds 11.5%14.1% Banks’ Assets 13.1%13.7% Banks’ Deposits 4.8%9.4% Banks’ Capital Funds 27.7%11.6% Construction Permits* *Figures are up to April 2004

BLOM Bank S.A.L. Key Indicators (Cont’d) Growth June 04-June 03 June 04-June 03 Growth Growth %8.9% Airport Passengers 45.3%6.2% Number of Tourists -7.4%10.2% BSE Market Turnover 26.7%0.9% BLOM Stock Index -39.2%-8.3% Budget Deficit 7.8%6.3% Gross Public Debt* *Figures are up to May 2004