annual report 2009 - fransabank...consolidated financial highlights 20052006 2007 2008 2009 19.34%...

Annual Report 2009

Statement of the Deputy Chairman and the Chief Executive Officer

Corporate Governance

Historical Milestones

Management Report

Financial Statements

Group Network

6

10

26

30

60

148

1FransabankAnnual Report 2009

Contents

Consolidated Financial Highlights

In Million USD

Customers’ creditor accounts

Loans and advances to customers (Net)

Net profit for the financial year

Shareholders' equity

Total assets

Solvency ratio as per Basel I requirements(net profit included after distribution of dividends)

Solvency ratio as per Basel II requirements(net profit excluded)

Number of local branches

Staff number

Exchange rate USD/LBP

31.12.05

4,125.17

797.76

46.30

408.15

4,979.16

24.96%

60

1,169

1,507.5

prog.06/05 31.12.06

4,312.34

856.34

54.51

449.25

5,228.39

25.57%

61

1,214

1,507.5

+43%

+67%

+12%

+15%

+38%

prog.07/06 31.12.07

6,173.21

1,430.32

60.83

517.75

7,228.98

17.89%

103

1,777

1,507.5

+16%

+20%

+45%

+46%

+17%

prog.08/07 31.12.08

7,149.64

1,715.55

88.33

756.55

8,454.52

27.93%

10.22%

103

1,957

1,507.5

+26%

+35%

+18%

+42%

+28%

prog.09/08

+5%

+7%

+18%

+10%

+5%

(c/v Millions USD) Total Assets

20060

2,000

4,000

6,000

8,000

10,000

12,000

2007 2008 20092005

4,97

9.16

5,22

8.39

7,22

8.98

8,45

4.52

10,8

12.6

2

(c/v Millions USD) Customers’ Creditor Accounts

2006 2007 2008 20092005

4,12

5.17

4,31

2.34

6,17

3.21 7,14

9.64

9,01

3.02

0

2,000

4,000

6,000

8,000

10,000

(c/v Millions USD) Loans & Advances to Customers (Net)

2006 2007 2008 20092005

797.

76

856.

34

1,43

0.32 1,

715.

55

2,30

8.95

0

500

1,000

1,500

2,000

2,500

31.12.09

9,013.02

2,308.95

104.22

1,074.27

10,812.62

29.98%

11.85%

104

2,475

1,507.5

FransabankAnnual Report 2009

2

Consolidated Financial Highlights

2006 2007 2008 20092005

19.3

4%

19.8

6% 23.1

7% 24%

25.6

2%

(c/v Millions USD) Shareholders’ Equity

2006 2007 2008 20092005

408.

15

449.

25

517.

75

756.

55

1,07

4.27

0

200

400

600

800

1000

1200

0

5

10

15

20

25

30

(c/v Millions USD) Net Profit to the Financial Year

2006 2007 2008 20092005

46.3

0

54.5

1

60.8

3

88.3

3 104.

22

0

20

40

60

80

100

120

(c/v Millions USD) Net Interest Income

2006 2007 2008 20092005

104.

36

117.

81

128.

03

192.

50

209.

61

0

50

100

150

200

250

(c/v Millions USD) Net Fee & Commission Income

2006 2007 2008 20092005

13.4

3 16.5

3

20.9

0

28.0

2

34.2

8

0

5

10

15

20

25

30

35

Loans & Advances to Customersto Customers’ Creditor Accounts


Over the past few years, Fransabank Group hasexperienced an unprecedented level of growth anddevelopment across the universal entities of the Group.The Group progress has been enabled from the efficientunfolding of the Group’s strategic plans which startedback in the eighties and evolved hence forth as neededto cater for the growing business dynamics and asaligned with the emerging business environment.

Fransabank Group reported an outstanding performancein 2009. It was the only Lebanese bank to advance itsrank within the Alpha Group of banks, thus moving fromthe fifth rank to the fourth rank in terms of total assetsand customers’ deposits and maintained its fourth rankin terms of net profits. It also ranked fifth in terms ofloans and advances to customers and shareholders'equity, while asserting once again the first rank in termsof local branches network. The audited consolidatedactivity for the year 2009 show USD 10.81 billion intotal assets, rising by 27.9% relative to end of 2008;USD 9.01 billion in total customers’ deposits, rising by26.0%; USD 2.31 billion in total loans and advances tocustomers, rising by 34.6%. Our shareholders’ equitygrew by 42.0% to USD 1.07 billion during this period. Inaddition, our net profitability has expanded by 18% toUSD 104.22 million in 2009.

Our business expansion strategy at Fransabank Group inthe year 2009 revolved around maintaining ourinternational expansion strategy and consolidating ourpresence in the regional and international markets inwhich we are present. Fransabank Group, in addition toLebanon, is currently present in eight countries: Syria,Algeria, Libya and Sudan in the MENA region, Franceand Belarus in Europe and Cuba in the Americas. Themajor developments registered through the year 2009involved the increase of the capital of FransabankEl Djazaïr from USD 41.4 million to USD 138 million inorder to meet the new requirements of the Central Bankof Algeria; as well as the inauguration of a new branch inOran in Algeria. In addition, Fransabank Syria launchedits operations in January 2009, and operates now

through five branches, two branches in Damascus, twobranches in Aleppo and another one in Homs.Fransabank expansion strategy in Syria envisions a rapidlocal geographic growth in major cities such as Lattakia,Tartus and Hama in addition to other districts in Syria. Asfor the local expansion strategy, it revolved arounddeveloping and increasing our organic growth either byenriching our overall geographic expansion in theLebanese territories and by expanding our businessactivities.

The dynamism of our Group’s growth is supported bythe continuous development and implementation of thelatest information technology to foster exceptionalservice delivery to our clients and timely productdevelopment to pro-act to our clients increasingbusiness wants and needs. This is coupled by ouraccentuated commitment to embracing strict corporategovernance techniques and practices and accurateimplementation and monitoring of advanced andcomprehensive risk management standards from bothperceptive, policies and procedures that we have.

We as well continued to allocate significant investment inour people’s development by providing them withquality and well targeted training to advance theirknowledge and sharpen their skills. In addition, wecontinuously upgraded their aptitude and consolidatedtheir attitude to exceed the expectations of our clientsand achieved our business objectives in an ascendingand an efficient manner.

However and in today's world of banking, we believe thattrue success is not only defined by operationalachievement, but by the elevation and progression ofthe society in which our Bank operates as well. Throughour years of operations, we established our ideals andour goals on a promise that our efforts would have apositive and far reaching impact on our clients, our com-munities and our country. We are very proud of what wehave contributed to date. We would like to reaffirmour dedication to our community at large, every day, via

Statement of the Deputy Chairman and the Chief Executive Officer


6

• Adnan Kassar (Appointed Minister of State as of November 2009)Chairman

• Adel KassarDeputy Chairman

an even more proactive continuation of our corporatesocial responsibility agenda.

For the year 2010, we will continue to be alert to anyinitiative and important opportunity that falls within ourbusiness strategy and achieves our business objectives.We will continue to target promising regional andinternational markets namely in Africa and the Arabworld - where we can bring added value where weoperate and build up on the synergies linking ourdifferent entities, the Lebanese business communitiesestablished in these countries, as well as the localoperators and international investors operating in thesecountries.

Our achievements are our best testimonial for a Groupwith drive and momentum. Thanks for our shareholdersfor their support to our Group’s mission and our growthstrategy. Thanks to our staff for their commitment toexcellence, their loyalty and their diligence. Together weare confident of our ability and capability to continue togrow, to further advance our leading position in Lebanonand to further increase our development role in theeconomy of Lebanon and the economies of the othercountries which we are thankful and appreciative forhosting our subsidiaries and associate.

Adel Kassar


The Corporate Governance framework at Fransabankensures a fair treatment of shareholders and guarantees theavailability of timely and precise information in allmaterial issues, as well as it assures the accountability of theBoard of Directors to its shareholders.

Fransabank has always been committed to the highest levelof transparency, integrity and ethics, which became thecornerstone of its culture and how it conducts its business. It has also developed a Corporate GovernanceStructure through the creation of the CorporateGovernance Committee, Risk Management Committee andAudit Committee.

Currently, Fransabank is complying with CorporateGovernance best practices.

Governance StructureFransabank’s Governance Structure is comprised of theShareholders’ General Assembly, the Board of Directors,the Chairman, Deputy Chairman, Senior Management, theCorporate Governance Committee, the Risk ManagementCommittee, the Audit Committee, the External Auditor andthe support functions.

Governance FrameworkFransabank is governed by a Board of Directors consistingof ten members elected by the General Assembly ofShareholders for a term of three years. The responsibility ofthe Board is to ensure the right direction towards thedefined strategy, supervision of senior management, andadequate control of the Bank, with an ultimate goal ofincreasing long-term value.

Composition and Election of the Board ofDirectorsThe board members are elected by the Shareholders’General Assembly whereby every shareholder has the rightto vote. Moreover, shareholders who hold their shares formore than two years shall have the right of double voting right according to Article 117 of the LebaneseCode of Commerce.

The Shareholders’ General Assembly elected Dr. WalidNaja, who was nominated by the Board of Directors, as anindependent board member starting May 2009. Moreover, Dr. Naja was appointed the chairman of the CorporateGovernance and Risk Management Committees as well asa member of the Audit Committee.

Fransabank Board of Directors is composed of thefollowing 10 members:

Chairman • H.E. Mr. Adnan Kassar

Deputy Chairman • Mr. Adel Kassar

Members • Sheikh Fahd Mazyad Al-Rajaan Representing the Public Institution for Social Security - Kuwait

• Sheikh Mohamad Abdel Kader Al-Fadl

• H.E. Mr. Nehmé Tohmé

• Mr. Henri Guillemin

• Mr. Rafic Charafeddine

• Mrs. Magda Rizk

• Attorney Walid Daouk

• Dr. Walid Naja

Board MeetingsDuring 2009, the Board of Directors has met on fouroccasions. Some of the major issues discussed duringthese meetings were:

• Specifying the budget and identifying objectives of year 2009

• Appointing a Chief Risk Officer

• Reconsidering the formation of specialised committees

• Increasing the capital of Fransabank OJSC and Fransabank El Djazaïr

• Approving the issuance of preferred shares

• Approving a subordinated loan from PROPARCO

• Discussing Chief Risk Officer’s risk report

Corporate GovernanceCorporate Governance Framework


10

Board CommitteesIn carrying out its duties, the Board is supported by theCorporate Governance Committee, the Risk ManagementCommittee, and the Audit Committee.

Corporate Governance Committee

The Corporate Governance Committee is chaired by anindependent non-executive director and composed of threeother members. The committee members meet at leastquarterly.

The responsibility of the Corporate Governance Committeeis to shape the Corporate Governance practices in line withbest practices and Fransabank Corporate GovernanceGuidelines as well as to assist the Board in maintaining aneffective governance framework, an optimal Boardcomposition and an effective Board structure.

During 2009, the Corporate Governance Committeeheld four meetings whereby it discussed mainly theorganisational chart of Fransabank, the projectscompleted in Corporate Governance and those to becompleted in the upcoming year.

Risk Management Committee

The Risk Management Committee is chaired by anindependent non-executive director, and comprises twoother members. The committee meets at least quarterly.

The committee’s responsibilities are to assist the Board ofDirectors in fulfilling its oversight responsibilities,identifying all aspects of the risk profile of the Bank vis-à-visits risk appetite and risk tolerance, monitoring all aspects ofthe risks inherent in the Bank’s activities and assessingthe Bank’s risk management and control practices.

During 2009, the Risk Management Committee held fivemeetings whereby it discussed many issues related to theprocess of monitoring the activities of Fransabanksubsidiaries, the roles and responsibilities of the Board ofDirectors, Risk Management Committee, SeniorManagement and Internal Audit in risk management as wellas the Loss Incident Report on operational risk.

Audit Committee

The Audit Committee is composed of four members; threeof them are non-executive members of the Board ofDirectors.

The Audit Committee is established to assist the Board ofDirectors in its oversight responsibilities with respect toaudit and compliance with Central Bank of Lebanon andBanking Control Commission and the implementation ofaccounting standards related to financial reporting. Thecommittee meets at least quarterly and when necessary.

Moreover, the Committee assists the Board of Directors infulfilling its tasks and supervisory role, particularly in regardto internal control regulations and procedures, supervisionof the Internal Audit’s activities, appointment of externalauditors and follow up on their activities along with otherresponsibilities.

During 2009, the Audit Committee held four meetings.

Corporate GovernanceCorporate Governance Framework



Main Holders of Common Shares

(1) Percent of total share capital consisting of 21,000,000 Common Shares as at May 31, 2010

(2) Crédit Agricole SA also owned, through its specialized subsidiary, Prédica SA, 20% of the share capital of Bancassurance SAL, a subsidiary of the Bank.

(3) Deutsche Investitions Und Entwicklungsgesellschaft mbh DEG is one of Germany’s top development and investment banks. DEG is owned by Kreditanstaltfür Wiederaufbau KfW, which, in turn, is owned by the German Government. As at May 31, 2010, DEG also owned 12.50% of the share capital of the Bank’ssubsidiary, Lebanese Leasing Company SAL.

(4) Each with less than 2%

Main Holders of Common Shares as at May 31, 2010 Percent (1)

Adnan Kassar

Adel Kassar

Crédit Agricole SA (2)

Deutsche Investitions Und Entwicklungsgesellschaft mbh (DEG) (3)

AL-FADL Holdings Limited

The Public Institution for Social Security – Kuwait

Others (4)

TOTAL SHAREHOLDING

36.25

36.23

6.00

5.00

2.70

2.00

11.82

100.00


12

H.E. Mr. Adnan KassarChairman General Manager

Mr. Adnan Kassar is the Chairman of the Board of Directors and General Manager of FransabankSAL and a member of the Board of Directors of BLC Bank SAL and Fransabank (France) SA as well.He is a Lebanese national, born in 1930. He has a degree in law from Université Saint-Joseph,Beirut and has thirty years of experience in banking. He is former Minister of Economy and Tradein Lebanon, former Chairman of the International Chamber of Commerce and former President ofBeirut Chamber of Commerce, Industry and Agriculture and Head of the Lebanese EconomicOrganizations. He is also the actual President of the General Union of Chambers of Commerce,Industry and Agriculture of the Arab Countries. He was appointed Minister of State asof November 2009.

Mr. Adel Kassar is the Deputy Chairman of the Board of Directors of Fransabank SAL and theChairman of the Board of Directors of Fransabank Syria SA. He is also the Chairman of the Boardof Directors of Fransabank (France) SA and the Chairman of the Board of Directors and GeneralManager of Bancassurance SAL and Lebanese Leasing Company SAL, which are Fransabanksubsidiaries and a member of the Board of Directors of BLC Bank SAL. Mr. Kassar is a Lebanesenational, born in 1932. He has a degree in Lebanese and French law from Université Saint-Joseph,Beirut and has thirty years of experience in banking. He is a former Chairman of the Association ofBanks in Lebanon and is the Honorary Consul General of the Republic of Hungary in Lebanon.


Biographies of Board Members

Mr. Adel KassarDeputy ChairmanGeneral Manager

Sheikh Fahd Mazyad Al-Rajaan is a Kuwaiti national, born in 1948. He is the General Manager ofthe Public Institution for Social Security - Kuwait. Sheikh Al-Rajaan is also Chairman and/or amember of the Boards of Directors of various financial institutions, including banks, mainly inKuwait, Bahrain, London and New York.

Sheikh Fahd Mazyad Al-Rajaan DirectorRepresenting The Public Institution for Social Security - Kuwait


Mr. Rafic CharafeddineDirector

Mr. Rafic Charafeddine is a Lebanese national, born in 1939. He is a businessman, and hasparticipations in various companies. He deals into construction projects and real estateinvestments.



Sheikh Mohamad Abdel Kader Al-Fadl Director

Sheikh Mohamad Abdel Kader Al-Fadl is a Saudi national businessman, born in 1954. He hasa degree in economic sciences and marketing. He is a member of Jeddah Chamber ofCommerce and Industry since 1996 and a Board member of public companies in SaudiArabia. He is the Chairman of Gulf One Bank, Bahrain and the Honorary Consul of Cyprus inKingdom of Saudi Arabia.

Mr. Nehmé Tohmé is a Lebanese national born in 1939. He is an engineer, member of the LebaneseParliament and ex-Minister. He is also Chairman and member of the Board of Directors of variouscompanies, and a well–known businessman. He has significant ownership interests in variouscompanies operating in numerous business sectors in Lebanon and abroad.

H.E. Mr. Nehmé Tohmé Director

Mr. Henri Guillemin is a French national born in 1947. He has a degree in economic sciences andpolitical studies. Mr. Guillemin is the Managing Director of Crédit Agricole Egypt SAE, Cairo, and amember of the Board of Directors of Crédit Agricole, Egypt.

Mr. Henri Guillemin Director


14

Mrs. Magda Rizk Director

Mrs. Magda Rizk is a Lebanese national, born in 1957. She has a law degree fromUniversité Saint-Joseph, Beirut and is a substantial property owner in Lebanon. She is alsomember of the Audit Committee.

Attorney Walid Daouk Director

Attorney Walid Daouk is a Lebanese national, born in 1958. He has a degree in Lebanese andFrench law and is a member of the Board of Directors of various companies, banks and financialinstitutions in Lebanon and abroad including Fransabank (France), Fransabank El Djazaïr, BLC Bankand the Lebanese Leasing Company SAL. He is the Government Commissioner at the Beirut StockExchange and the Chairman of the Audit Committee and member of the Corporate Governanceand Risk Management Committees.

Dr. Walid NajaDirector

Dr. Walid Naja is a Lebanese national, born in 1941. Educated at AUB and YALE University. He holdsgraduate degrees in Economics and International Relations. He is a former Chairman of BDL'sBanking Control Commission, served as Economic Counselor at the Lebanese Embassy inWashington D.C., and as General Manager of the Beirut Chamber of Commerce, Industry andAgriculture. He is the Chairman of the Risk Management and Corporate Governance Committeesand member of the Audit Committee.




Corporate GovernanceCommittee

Executive Committee

AML Compliance

Support FunctionsSupport Functions S&DLines of Business

Control Functions

• Regional Managers

• Retail Products & Services

• Local & Overseas Credit Cards

• Retail Risk

• E-Banking

• • IT Project Mgt.IT Project Mgt. & & QualityQuality Assurance Assurance

• • SoftwareSoftware DevelopmentDevelopment

• • EnterpriseEnterprise Systems Mgt.Systems Mgt.

• • NetworkNetwork ServicesServices

• • Servers/Servers/ Desktops &Desktops & Data Mgt.Data Mgt.

• • Internet &Internet & E-BankingE-Banking Services Services

• • GeneralGeneral ServicesServices

• • EngineeringEngineering

• • MaintenanceMaintenance Infrastructure & Infrastructure & Security Security

• • ProcurementProcurement

• • FinanceFinance

• • Trade FinanceTrade Finance

• • Transfers &Transfers & PaymentsPayments

• • Treasury B.O.Treasury B.O.

• • CollectionCollection Cleaning &Cleaning & DomiciliationDomiciliation

• • LegalLegal AdvisoryAdvisory

• • JudicialJudicial

• • Relations withRelations with AuthoritiesAuthorities & Auditors& Auditors

• • SecretariatSecretariat of BODs &of BODs & Shareholders’Shareholders’ MeetingsMeetings

• • OrganizationalOrganizational ProjectsProjects

• • DocumentationDocumentation

• • OperationalOperational SupportSupport

• • ProductsProducts QualityQuality AssuranceAssurance

• • Advertising &Advertising & CommunicationCommunication

• • MarketingMarketing ResearchResearch

• • FinancialFinancial ControlControl

• • AccountingAccounting

• • CreditCredit InformationInformation

• • CreditCredit Reporting &Reporting & DocumentationDocumentation

• • CreditCredit Monitoring &Monitoring & ClassificationClassification

• • Compensation &Compensation & Benefits Benefits

• • Planning,Planning, Staffing &Staffing & EmployeeEmployee RelationsRelations

• • Training &Training & DevelopmentDevelopment

• Correspondent Banking Relations

• Relations with Foreign Partners & Non-Banks International Fls

• Overseas Private Clientele

• Overseas Affiliations & Representative Offices

• Corporate Banking

• SMEs

• Special Credits

• Treasury

• Capital Markets

Information Information &CommunicationCommunication

TechnologyTechnologyAdministrationAdministration Branch

Management Retail Banking International CorporateBanking & SMEs

Treasury &Capital Markets Loan Recovery Real EstateCentralCentral

OperationsOperations LegalLegal OrganizationOrganizationCreditCredit

Administration &Administration &InformationInformation

HumanHumanResourcesResources

Marketing &Marketing &CorporateCorporate

CommunicationsCommunications

FinancialFinancialControl &Control &

AccountingAccounting

Policies &Policies &ProceduresProcedures

CreditAppraisal

InformationSecurity

Boardof Directors

Chairman &Deputy Chairman

GeneralManagement

Strategy &Development

Inspection

• Branch Audit

Internal Audit

• Financial Audit

• International Audit

• Internal Control Audit

• IT Audit

Risk Management

• Credit Risk

• Operational Risk

• Market Risk

• Basel II Implementation


Organization Chart - Fransabank SAL


16

AMLCommittee

Advisors

AML ComplianceAML Compliance

Support Functions S&DS&DLines of BusinessLines of Business

Control FunctionsControl Functions

• Regional• Regional ManagersManagers

• • Retail Products &Retail Products & ServicesServices

• Local & Overseas• Local & Overseas Credit CardsCredit Cards

• Retail Risk• Retail Risk

• E-Banking• E-Banking

• IT Project Mgt. & Quality Assurance

• Software Development

• Enterprise Systems Mgt.

• Network Services

• Servers/ Desktops & Data Mgt.

• Internet & E-Banking Services

• General Services

• Engineering

• Maintenance Infrastructure & Security

• Procurement

• Finance

• Trade Finance

• Transfers & Payments

• Treasury B.O.

• Collection Cleaning & Domiciliation

• Legal Advisory

• Judicial

• Relations with Authorities & Auditors

• Secretariat of BODs & Shareholders’ Meetings

• Organizational Projects

• Documentation

• Operational Support

• Products Quality Assurance

• Advertising & Communication

• Marketing Research

• Financial Control

• Accounting

• Credit Information

• Credit Reporting & Documentation

• Credit Monitoring & Classification

• Compensation & Benefits

• Planning, Staffing & Employee Relations

• Training & Development

• Correspondent• Correspondent Banking RelationsBanking Relations

• Relations with• Relations with Foreign PartnersForeign Partners & Non-Banks& Non-Banks International FlsInternational Fls

• Overseas Private• Overseas Private ClienteleClientele

• Overseas• Overseas Affiliations &Affiliations & RepresentativeRepresentative OfficesOffices

• Corporate• Corporate BankingBanking

• SMEs• SMEs

• Special Credits• Special Credits

• Treasury• Treasury

• Capital Markets• Capital Markets

Information &Communication

TechnologyAdministration BranchBranch

ManagementManagement Retail BankingRetail Banking InternationalInternational CorporateCorporateBanking & SMEsBanking & SMEs

Treasury &Treasury &Capital MarketsCapital Markets Loan RecoveryLoan Recovery Real EstateReal EstateCentral

Operations Legal OrganizationCredit

Administration &Information

HumanResources

Marketing &Corporate

Communications

FinancialControl &

Accounting

Policies &Procedures

CreditCreditAppraisalAppraisal

InformationInformationSecuritySecurity

Strategy &Strategy &DevelopmentDevelopment

AuditCommittee

InspectionInspection

• Branch • Branch AuditAudit

Internal AuditInternal Audit

• Financial • Financial AuditAudit

• • InternationalInternational AuditAudit

• • Internal ControlInternal Control AuditAudit

• IT • IT AuditAudit

Risk ManagementRisk Management

Risk ManagementCommittee

• • Credit RiskCredit Risk

• Operational Risk• Operational Risk

• • Market RiskMarket Risk

• • Basel II ImplementationBasel II Implementation


Organization Chart - Fransabank SAL


Banks in Lebanon

Companies in Lebanon

68,576%

BLC Bank SALFransaInvest Bank SAL

Bank of Beirut andArab Countries SAL

40%

Bancassurance SAL

• Crédit Agricole Assurances (Groupe Crédit Agricole-France) France

29%

• Banque Libano-Française SAL Lebanon

31%

87.5%

• DEG Germany

12.5%

99.88%

Lebanese LeasingCompany SAL

Sogefon SAL

100%

6.25%

37.054%

99.7%

Fransabank InsuranceServices Co SAL

Switch & ElectronicServices SAL

Express SARL

99.7% 96.70%

Fransabank SAL


Group Chart


18

Banks Abroad

Representative Offices

68% 48% 60% 20% 80%

Fransabank El-DjazaïrSPA Algiers

• Group CMA-CGM (Franco-Lebanese)

25%

• Maghreb Truck Cie SPA Algeria

7%

• Other Private Investors

52%

• Financière Océor (Groupe Caisse d’Epargne) France

40%

• Aref Investment Group & 3 of its affiliates & associates - Kuwait

49.24%

• Al Wazzan Group Kuwait

12.50%

• Al Alami Group Egypt

6.25%

• Boubian Group Kuwait

11.67%

• Fransa Holding SAL Lebanon

19.93%

Fransabank Syria SADamascus

Fransabank (France) SAParis

United Capital BankKhartoum

Fransabank OJSCBelarus

Cuba

Libya


Group Chart



Committees

• Executive Committee

• Corporate Governance Committee

• Audit Committee

• Risk Management Committee

• Management Committee

• Credit Committees

• Assets & Liabilities Committee

• Banking Technology & IT Security Committee

• Anti-Money Laundering Committee

• Human Resources Committee

• Organization Committee

• Marketing & Communications Committee

Mr. Adnan KassarChairman & General Manager

& / or

Mr. Adel KassarDeputy Chairman & General Manager

Mr. Nadim KassarGeneral Manager

Mr. Mansour BteishGeneral Manager

Mr. Nabil KassarGeneral Secretary

Dr. Joe SarrouhExecutive Advisor to the Chairman


20

General Management

• Mr. Nadim Kassar General Manager

• Mr. Mansour Bteish General Manager

• Mr. Nabil Kassar Secretary General

Advisor to the Chairman

• Dr. Joe Sarrouh Executive Advisor to the Chairman

Senior Management

• Dr. Nicolas Khairallah Deputy General Manager, Director of Human Resources Division

• Mr. Philippe El Hajj Deputy General Manager, Head of Retail Banking Division

• Mr. Nadim Moujaes Deputy General Manager, Head of Strategy & Development Department

• Mr. Ahmad El Radi Chief Risk Officer, Head of Risk Management Division

Advisors

• Mr. Wajdi Abi Chacra Advisor, Legal Department

• Mr. Fawzi Moussa Advisor, Corporate Banking


Management


Management

• Mr. Charbel Aouad Central Manager, Head of Central Operations Division

• Dr. Mohamad Daher Central Manager, Head of Credit Administration & Information Division

• Miss. Mona Khoury Central Manager, Head of International Division

• Mr. Nabih Saddy Central Manager, Head of Financial Control & Accounting Department

• Mr. Nabil Tannous Central Manager, Head of Treasury & Capital Markets Department

• Mr. Antoine Younes Central Manager, Head of Credit Appraisal Department

• Mr. Antoine Asmar Central Manager, Business Development Consultant, Corporate Banking

• Mr. Zouheir Chouraiki Principal Manager, Director of Internal Audit Division

• Mr. Gerard Malhame Principal Manager, Head of Corporate Banking Department

• Mrs. Samia Abou Ezze Manager, Head of Information Technology & Communication Department

• Mr. Khalil Assaf Manager, Head of LGs & Special Credits Department

• Mr. Zakaria El Khatib Manager, Head of Inspection Department

• Mrs. Dania Kassar Manager, Head of Marketing & Corporate Communications Department

• Mr. Pierre Posbic Manager, Head of Organization Department

• Mr. Antoine Zarifeh Manager, Head of SMEs Department

• Mrs. Magida Kasbani Deputy Manager, Head of Administration Department


Management


22

• Mr. Joseph Akiki Manager, Head of Branch Management Department

• Mr. Francis Abi Nakhoul Regional Manager, Mount Lebanon

• Mr. Amine Abou Mhaya Regional Manager, Bekaa

• Mr. Ajwad Halabi Regional Manager, Aley & Chouf

• Mr. Talal Hamadi Regional Manager, South

• Dr. Khodr Heloui Regional Manager, North

• Mrs. Najwa Sandid Regional Manager, Beirut & Suburbs

• Mr. Farouk Chreif Deputy Regional Manager, Bekaa A

• Mr. Mounir Daoud Deputy Regional Manager, Bekaa B


Management


Fransabank was first established in Beirut as a full branch of one of the major French banksthen, “Crédit Foncier d’Algérie et de Tunisie (C.F.A.T)”.

Fransabank is registered n° 1 on the list of banks operating in Lebanon indicating that it is theoldest bank in the country.

C.F.A.T. changed its name to become “Société Centrale de Banque”.

“Société Centrale de Banque” in Beirut was acquired by “Banque Française pour le Moyen-Orient SAL” (B.F.M.O.), a Lebanese company whose shares were predominantly owned byBanque Indosuez Group.

Banque Indosuez (now Crédit Agricole SA, one of the Bank’s continuing principal share-holders) was also the major shareholders of Banque Sabbag SAL, a local bank established in1950 by a Lebanese family engaged in banking since 1881. Banque Indosuez merged thesetwo banks under the name of “Banque Sabbag et Française pour le Moyen-Orient SAL”.

Banque Indosuez sold its shares in Fransabank to a financial group headed by Messrs Adnan& Adel Kassar.

The Bank’s denomination was changed to Fransabank SAL.

Fransabank SAL concluded a cooperation agreement with “Crédit Agricole – France SA”aiming at establishing closer business relations between the two banks. It led at first to thejoint creation in Paris of “Fransabank (France) SA”, and to the participation of “Crédit Agricole- France” in the shareholding of Fransabank SAL.

Fransabank acquired the Assets & Liabilities of Chase Manhattan Bank’s branches in Beirut,which had ceased its activities in Lebanon in view of the situation prevailing at that time.

Fransabank SAL acquired ‘‘Banque Tohmé SAL’’.

Deutsche Investitions Und Entwicklungsgesellschaft mbh “D.E.G” (German Investment andDevelopment Company), an organization that is part of the development cooperationorganization of the Federal Republic of Germany, acquired of 5% of the Bank’s share capital.

A private placement of shares took place, pursuant to which 5% of the Bank’s shares weresold to Lebanese, Arab and foreign investors.

“The Public Institution for Social Security – Kuwait” acquired 2% of the Bank’s share capital.

Fransabank acquired ‘‘Universal Bank SAL’’.

1921


1963

1971

1978

1980

1984

1985

1993

1995

1997

1998


26

Fransabank opened its branch in the Damascus free zone in Syria.

Fransa Invest Bank (FIB), investment banking subsidiary of Fransabank SAL, started itsoperations.

Fransabank acquired ‘‘United Bank of Saudi & Lebanon SAL’’.

Fransabank acquired all the shares of ‘‘Banque de la Békaa SAL’’.The Bank subsequently sold Banque de la Békaa SAL in 2007.

Fransabank became one of the major shareholders (37.054%) of Bank of Beirut & the ArabCountries SAL (BBAC).

Fransabank was the first Lebanese bank to enter the Algerian market with the opening of itsnew subsidiary Fransabank El Djazaïr SPA.

Fransabank launched its operations in Sudan through an associate bank, United Capital Bank.

Fransabank acquired BLC Bank SAL along with its two subsidiaries, BLC Bank Services SALand BLC Finance SAL.

Fransabank concurrently purchased 34% of the share capital of Fransabank (France) SA heldby Crédit Agricole SA (bringing its participation in the share capital to 100%), and sold 40%of the share capital of Fransabank (France) SA to Financière Océor, a subsidiary of GroupeCaisse d’Epargne (France), following which the Bank’s participation in the share capital ofFransabank (France) SA became 60%.

Fransabank entered the Libyan market by establishing a representative office in Tripoli.

With a view to accommodate the Group’s growth and expansion; the Bank issued Tier 1, noncumulative, convertible, callable preferred shares for USD 100 million. The issue wasoversubscribed as the target amount was initially set at USD 60 to USD 80 million, while totalsubscriptions exceeded USD 100 million.

Fransabank acquired Fransabank OJSC, formerly known as Golden Taler Bank.

Fransabank El Djazaïr capital was increased to c/v of USD 138 million.

Fransabank became operational in Syria through its subsidiary, Fransabank Syria SA.


2001

2002

2003

2005

2006

2007

2008

2009


Management ReportLebanon’s Economic Performance in 2009

The Lebanese economy achieved impressive growth forthe past three years whereas real GDP reached a growthof 7.6% in the year 2007, 9.3% in the year 2008, 9% inthe year 2009 and with an expected growth between 7%to 8% in the year 2010 as per IMF estimates. Thisgrowth was accentuated by the country resilience in theface of the economic, financial and political shockswhich have resulted by the still persisting global financialcrisis. The real sector's performance was better, asindicated by enhanced indicators of the leading sectors.The public finances have improved with lower deficitratio, higher primary surplus, and slowing public debtgrowth. The monetary situation has continued its stability,accompanied by a growing banking sector andincreased liquidity. The balance of payments achieved alarge surplus supported by surging capital inflows. Themacro economy is posed to continue its growth in 2010as political conditions remain favorable, and economicconditions continue to be good.

The real sector activity has improved in 2009 as comparedto 2008, which is clearly reflected in the evolution of itsmajor indicators. The growth in industrial exports value(+26%), property sales (+8.2%), Cement deliveries(+19.2%), tourists (+38.9%), passengers at the HIA(+22%), ships at the Beirut Port (+16.5%), clearedchecks (+7.4%) and Customs receipt (+65.1%).

The public finances improved year-on-year, with a lowerfiscal deficit ratio, slowdown in public debt growth, andhigher primary surplus. The fiscal deficit has increasedby 1.3% from 2008, to reach an amount of USD 2.96 billionin 2009, whereas the overall government revenues haveincreased by 20.8%, to reach USD 8.43 billion, after theimprovement in tax revenues that increased by 24.9%from 2008. Total government expenditures increased by14.8% from 2008, to reach an amount of USD 11.39 billionin 2009 and the gross public debt increased by 8.7%from 2008, to reach an amount of USD 51.1 billion in

(USD, Billion)

Public Finance's Indicators

Public revenues

Public expenditures

Deficit

Gross public indebtedness

Net public debt

Monetary Situation Indicators

USD/LBP exchange rate

CB gross foreign assets

Money supply M3

Price index (Inflation rate)

Banking Sector's Indicators

Total assets

Total deposits

Total capital

Total credits to private sector

Foreign Sector's Indicators

Exports

Imports

Trade deficit

Capital inflows

Balance of payments

Lebanon’s Major Economic Indicators

2009

8.43

11.39

2.96

51.1

44.1

1,507.5

28.3

81.04

3.4%

115.12

95.8

19.32

28.4

3.5

16.3

12.8

20.66

7.9

2008

6.98

9.93

2.92

47

41.49

1,507.5

19.7

67.08

10.74%

94.13

77.8

16.33

25.1

3.49

16.09

12.6

16.37

3.46

Variation

20.8%

14.7%

1.3%

8.7%

6.3%

0.0%

43.7%

20.81%

-7.3%

22.3%

23.1%

18.3%

13.1%

0.29%

1.3%

1.6%

26.21%

128.4%

Sources: Ministry of Finance, Central Bank of Lebanon, Association of Banks of Lebanon & Higher Customs Council


30

Management ReportLebanon’s Economic Performance in 2009

2009. Local currency gross debt reached USD 29.84 billionin 2009, up by 15.3% from 2008, while foreign debtreached an amount of USD 21.26 billion in 2009, anincrease by 0.5% from 2008. Net public debt (afterexcluding the public sector deposits at commercialbanks and the central bank from gross public debt)reached an amount of USD 44.1 billion in 2009, with anincrease of 6.3% from 2008.

The monetary situation has continued its stability owingto better economic conditions and the prevailingmonetary stabilization policy of the Central Bank. TheUSD/LBP exchange rate showed a firm stability with anunchanged rate of USD/LBP at 1,507.5 and the LebaneseCentral Bank gross foreign assets increased by 43.7%,strengthening the prevailing monetary stabilizationpolicy. The growth in Money Supply M3, fromUSD 67.08 billion in 2008 to USD 81.04 billion in 2009,demonstrated a higher liquidity. The Consumer PriceIndex (CPI) reached 3.4% in 2009, a significant dropcompared to 10.74% in 2008. This decrease in CPI wasmainly due to the decline in commodity pricesworldwide, and a better local economic stability. TheCentral Bank's gold reserves increased to USD 10.79 billionin 2009, an increase of 25% from 2008, the deposits ofthe financial sector rose by 34% from 2008, reaching avalue of USD 37.78 billion.

The banking sector has continued its impressive growthin 2009 relative to the previous year, and the activity ofthe BSE has improved. The Lebanese banking sectorhas continued its outstanding performance in 2009, witha high rate of growth in all of its components. Totalassets grew by 22.3% in 2009 from a year earlier;reaching USD 115.12 billion, compared to USD 94.13 billionin 2008, the total deposits grew by 23.1%, to reachUSD 95.8 billion, with an average monthly increase ofbetween USD 1.5 to USD 2 billion. Total credits to theprivate sector grew by 13.1% in 2009 to reachUSD 28.4 billion, compared to USD 25.1 billion in2008 and total capital, on the other hand, and reachedUSD 19.32 billion, an increase of 18.3% over 2008.

The balance of payments recorded a substantial surplusdue to growing capital inflows, while trade conditionswere little changed from 2008. Exports and Importscontinue to show a solid activity in 2009 with a totalamount of USD 19.8 billion. Exports increased toUSD 3.5 billion in 2009, from USD 3.49 billion in 2008and imports also increased to USD 16.3 billion from

USD 16.09 billion in 2008. As a result, the trade deficitwas at USD 12.8 billion as compared to USD 12.6 billionin 2008. Capital inflows to Lebanon amounted toUSD 20.66 billion in 2009, an increase of 26.21% from2008 and this is due to non-residents deposits inflow aswell as foreign direct investment and cash transfers totourists visiting Lebanon. The balance of paymentsregistered a surplus of USD 7.9 billion in 2009, ascompared to USD 3.46 billion in 2008, a 128.4%increase over the year, due to the rise in foreign assetsinto the country's banking system. The cumulativesurplus in the balance of payments in 2009 was drivenby the increase in the Central Bank’s net foreign assets,a result it indicates a heavy inflow of capital into thecountry from the recovering tourism activity and thereturn of Lebanese expatriates to their home country forthe Summer season.


Overview Despite the global financial and economic crisis trends thatcontinued to persist in 2009, Fransabank Group hasachieved in this year a significant growth. The Group’s netincome amounted to LBP 157.12 billion (USD 104.22 million)in 2009 compared to LBP 133.16 billion (USD 88.33 million)in 2008, an increase of 17.99%. The Return on AverageAssets stood at 1.08% and the Return on Average CommonEquity at 12.03%.

Resolutions of Fransabank SAL Ordinary GeneralAssembly The Ordinary General Assembly of Fransabank SALshareholders held on 30 April 2010:

• Approved the accounts and the Balance Sheet ofFransabank SAL as at end December 2009

• Acquitted Fransabank SAL Board of Directors for theirmanagement of the business activities of the fiscalyear 2009

• Decided to allocate out of Fransabank SAL net profit(LBP 94,922,840 thousands) as follows:

• 10% to legal reserve (LBP 9,492,284 thousands),

• LBP 12,900,000 thousands to reserve for general bankingrisks

• LBP 4,790,465 thousands to reserve for assets acquiredin settlement of bad loans,

• LBP 1,443,000 thousands to special reserve for nonproductive loans,

• Decided to distribute dividends on common shares forLBP 21 billion (LBP 1,000/share) and dividends onpreferred shares for the c/v LBP 12,813,750 thousands,representing respectively 31.67% and 19.33% of theBank’s 2009 distributable profits.

• Decided to allocate the remaining balance, i.e.LBP 32,483,341 thousands to the Free Reserves.

1. NET INCOMEFransabank’s net income, in 2009, amounted toLBP 94.92 billion (USD 62.97 million) compared toLBP 90.91 billion (USD 60.30 million) in 2008, an increase of4.42%. This has translated in 2009 in a Return on AverageAssets of 0.90% and a Return on Average Equity of 9.41%.

The Group’s net income in 2009 amounted toLBP 157.12 billion (USD 104.22 million) compared toLBP 133.16 billion (USD 88.33 million) in 2008, an increaseof 17.99%. This has translated in 2009 in a Return onAverage Assets of 1.08%. In 2009, the Group has booked inline with IFRS unrealized profits on available for sale securitiesfor LBP 304,396,470 thousands (USD 201,921 thousands)against LBP 36,968,563 thousands (USD 24,523 thousands)in 2008. This has placed the ROACE at 12.03%. Excludingthis booking the ROACE would have stand at 14.03% .

1.1 Net Interest IncomeIn 2009, the Group’s net interest income amounted toLBP 315.99 billion (USD 209.61 million) compared toLBP 290.20 billion (USD 192.50 million) in 2008, anincrease of 8.89%.

In 2009, interest received amounted to LBP 887.94 billion(USD 589.02 million) compared to LBP 805.09 billion(USD 534.05 million) in 2008, an increase of 10.29%.Interest received from investment securities, loans andadvances to customers and from loans to banks &placements with banks, represents 67.17%, 26.52% and6.31% respectively, compared to 59.27%, 24.68% and16.05% respectively in 2008.

LBP’000 2009 2008

From loans and advances to customers 235,451,607

From investment securities 596,472,567

From loans to banks and placements with banks 56,017,527

TOTAL 887,941,701

198,706,538

477,185,432

129,193,959

805,085,929

Breakdown of Interest Received

In 2009, the monthly average Interest Earning Assetsreached LBP 12,066.99 billion (USD 8,004.64 million)compared to LBP 9,937.92 billion (USD 6,592.32 million)in 2008 (+ 21.42%). This growth is due to the increaseof investment securities (+ LBP 1,334.33 billion or c/v

USD 885.13 million), of loans and advances to customers(+ LBP 526.59 billion or c/v USD 349.31 million) and ofthe loans to Banks and financial institutions andplacements with Banks and financial institutions(+ LBP 268.15 billion or c/v USD 177.88 million).

Management Report

Results of Operations


32

In 2009, the interest paid amounted to LBP 571.95 billion(USD 379.41 million) compared to LBP 514.88 billion(USD 341.55 million) in 2008 (+11.08%). In 2009,

the largest single component of interest paid belongs tocustomers’ deposits, which represented 95.33% of thetotal compared to 94.06% in 2008.

The monthly average Interest Bearing Liabilities reachedLBP 12,119.64 billion (USD 8,039.56 million) in 2009against LBP 10,306.73 billion (USD 6,836.97 million) in 2008

(+ 17.59%). This growth can largely be attributed to the18.53% increase in the customers creditor accounts whichamounted to LBP 1,798.44 billion (USD 1,193.00 million).

1.2 Net Fees and Commissions IncomeIn 2009, net fees and commissions income reachedLBP 51.68 billion (USD 34.28 million), compared toLBP 42.23 billion (USD 28.02 million) in 2008 (+22.37%).

In 2009, fees and commissions received reachedLBP 74.75 billion (USD 49.59 million), compared toLBP 62.51 billion (USD 41.46 million) in 2008 (+19.59%).

In 2009, fees and commissions received comprise mainlycommissions on documentary LCs and LGs, fees oncustomers’ transactions as well as Asset management

fees, which represented 22.95%, 73.39% and 3.59%respectively compared to 23.96%, 73.76% and 2.13% in2008.

In 2009, fees and commissions paid reached LBP 23.07 billion(USD 15.31 million), compared to 20.27 billion(USD 13.45 million) in 2008 (+13.81%).

In 2009, fees and commissions paid comprise fees oncustomers’ transactions and commissions on transactionswith banks, which represented 88.77% and 11.23%respectively compared to 88.73% and 11.27% in 2008.

LBP’000 2009 2008

Investment securities 6,467,260,419

Banks and financial institutions 2,778,152,699

Loans and advances to customers 2,821,574,347

TOTAL 12,066,987,465

5,132,936,842

2,510,003,648

2,294,982,137

9,937,922,627

Average Interest Earning Assets

LBP’000 2009 2008

On deposits and loans from banks (25,540,138)

On deposits from customers at amortized cost (545,216,479)

On cash contributions to Share Capital and on subordinated loans (1,197,972)

TOTAL (571,954,589)

(29,365,556)

(484,321,398)

(1,197,972)

(514,884,926)

Breakdown of Interest Paid

LBP’000 2009 2008

Soft loans 318,811,712

Banks and financial institutions 278,092,112

Customers’ deposits at amortized cost 11,505,618,991

Cash contributions to Share Capital 17,113,885

TOTAL 12,119,636,700

399,580,943

182,859,463

9,707,177,166

17,113,885

10,306,731,457

Average Interest Bearing Liabilities

Management Report



1.3 Income from Trading PortfolioIn 2009, income from trading portfolio reachedLBP 17.26 billion (USD 11.45 million) compared toLBP 1.45 billion (USD 0.96 million) in 2008.

In 2009, income from trading portfolio comprises interestreceived, dividends received, change in fair value andgain on sale of trading securities, which represented30.81%, 6.09%, 63.07% and 0.03% compared to 372.55%,70.85%, (362.78%) and 19.38% in 2008 respectively.

1.4 Net Interest on Financial InstrumentsDesignated at Fair ValueThe net interest on financial instruments designated atfair value represents the interest paid on the structuredproducts issued by Fransabank, namely 3x3 GEM I, 3x3GEM II, I & I, Winners 9 and Easy Times. In 2009, theinterest expense (coupons) paid on those instrumentsamounted to LBP 9.86 billion (USD 6.54 million), comparedto LBP 9.19 billion (USD 6.10 million) in 2008 (+7.22%).

1.5 Foreign Exchange GainIn 2009, foreign exchange gain reached LBP 10.40 billion(USD 6.90 million) compared to LBP 9.02 billion(USD 5.98 million) in 2008 (+15.28%).

1.6 Net Other Operating IncomeIn 2009, other operating income reached LBP 36.19 billion(USD 24.00 million) compared to LBP 53.07 billion(USD 35.21 million) in 2008.

Other operating income comprises profit on sale ofavailable for sale securities, dividends received oninvestment securities, gain on sale of subsidiaries anddivesting part of equity interest in an associate, share inprofit of associates , gain on sale of assets acquired insatisfaction of loans and on disposal of properties &equipments and other income, which represented9.47%, 15.78%, 0.04%, 20.94%, 37.45% and 16.32% in2009 compared to 1.91%, 10.92%, 51.57%, 11.81%,12.52% and 11.27% in 2008 respectively.

LBP’000 2009 2008

Fee and commission received 74,751,952

Commissions on documentary LCs and LGs 17,152,758

Service fees on customers’ transactions 54,863,946

Commissions on transactions with banks 53,919

Asset management fees 2,681,329

Fee and commission paid (23,072,609)

Commissions on transactions with banks (2,592,168)

Other commissions paid (including those on customers’ transactions) (20,480,441)

NET FEE AND COMMISSION INCOME 51,679,343

62,505,489

14,976,558

46,101,100

94,967

1,332,864

(20,272,251)

(2,284,720)

(17,987,531)

42,233,238

Breakdown of Net Fee and Commission Income

LBP’000 2009 2008

Interest income on trading securities 5,318,688

Dividends received on trading securities 1,050,973

Change in fair value of trading portfolio (net) 10,889,336

Gain on sale of trading assets 5,691

INCOME FROM TRADING PORTFOLIO 17,264,688

5,394,092

1,025,871

(5,252,641)

280,560

1,447,882

Breakdown of Income from Trading Portfolio

Management Report



34

1.7 Net Allocation to Provisions for Loans &Advances to CustomersIn 2009, the Group’s net allocation to provisions for loansand advances to customers resulted in a recovery ofprovisions for LBP 6.86 billion (USD 4.55 million) comparedto net allocation to provisions for LBP 7.39 billion(USD 4.90 million) in 2008: (i) the allowance forimpairment of customers’ loans and advances amountedto LBP 5.03 billion (USD 3.34 million) compared

to LBP 29.17 billion (USD 19.35 million) in 2008, (ii) the baddebts expense amounted to LBP 1.22 billion (USD 0.81 million)in 2009, compared to LBP 3.27 billion (USD 2.17 million) in2008, (iii) write-back of impairment loss on loans andadvances reached LBP 12.36 billion (USD 8.20 million) in2009, against LBP 18.80 billion (USD 12.47 million) in 2008,(iv) write-back of discount on loan portfolio purchasedreached LBP 0.75 billion (USD 0.50 million) in 2009 againstLBP 6.25 billion (USD 4.15 million) in 2008.

1.8 General ExpensesIn 2009, the Group’s general expenses comprising staffcosts, administrative expenses, depreciation, provisionsfor impairment of assets and amortization of deferredcharges, reached LBP 236.93 billion (USD 157.17 million)compared to LBP 214.05 billion (USD 141.99 million)in 2008, an increase of 10.69%. This is due to the increasein (i) salaries and related charges which amountedto LBP 136.80 billion (USD 90.75 million) in 2009 comparedto LBP 117.29 billion (USD 77.80 million) in 2008(+ 16.64%), (ii) administrative expenses which amountedto LBP 70.04 billion (USD 46.46 million) in 2009 comparedto LBP 67.41 billion (USD 44.72 million) in 2008 (+ 3.90%),(iii) depreciation and amortization of assets whichamounted to LBP 16.60 billion (USD 11.01 million) in 2009

compared to LBP 14.27 billion (USD 9.47 million) in 2008(+ 16.34%), (iv) the decrease in the provisions for chargeswhich amounted to LBP 0.34 billion (USD 0.23 million) in2009 compared to LBP 1.93 billion (USD 1.28 million) in 2008(- 82.23%) and (v) the amortization of deferred chargeswhich amounted to LBP 13.15 billion (USD 8.72 million)in 2009 same as in 2008. The amortization of deferredcharges is related to the impairment of the lossesresulting from the Bank’s acquisition of Universal BankSAL in 1999 and United Bank of Saudia & Lebanon SAL in2002. This amortization is covered by the net incomederived from interest on Treasury bills acquired throughthe Soft loans granted to the Bank by the Central Bankof Lebanon after the acquisition of those Banks.

LBP’000 2009 2008

Gain on sale of available for sale 3,425,253

Dividends received on sale of available for sale and held to maturity securities 5,710,871

Gain from sale of subsidiaries -

Gain from disposal of part of equity interest in an associate 14,100

Share in profit of associates 7,579,190

Gain on sale of assets acquired in satisfaction of loans and 13,550,134on disposal of properties & equipments

Other 5,906,016

OTHER OPERATING INCOME 36,185,564

1,015,442

5,795,642

27,370,728

-

6,268,558

6,642,871

5,981,153

53,074,394

Breakdown of Other Operating Income

LBP’000 2009 2008

Allowance for impairment of loans and advances (5,034,456)

Write-back of impairment loss on loans and advances 12,360,892

Bad debts expense (1,214,349)

Write-back of discount on loan portfolio purchased 751,765

TOTAL 6,863,852

(29,168,841)

18,796,626

(3,264,825)

6,248,077

(7,388,963)

Net Allocation to Provisions for Loans & Advances to Customers

Management Report



1.9 Income Tax and Deferred TaxesThe Group’s income tax for the financial year 2009 amountedto LBP 28.69 billion (USD 19.03 million), comparedto LBP 26.67 billion (USD 17.69 million) for the financial year2008. Deferred tax on associates and subsidiaries’ profits forthe financial year 2009 amounted to LBP 5.79 billion(USD 3.84 million), compared to LBP 5.52 billion(USD 3.66 million) for the financial year 2008.

2. TOTAL BALANCE SHEETAs at 31 December 2009, the Group’s Total Balance Sheetamounted to LBP 16,300.03 billion (USD 10,812.62 million)compared to LBP 12,745.20 billion (USD 8,454.52 million) asat year-end 2008, an increase of 27.89%. At year-end 2009,the Group advanced its ranking within the Lebanese bankingsector rankings in terms of Total Balance Sheet to the 4th

rank from 5th as at end 2008, with a market share of 8.47%.

2.1 Funding SourcesAs at December 31, 2009, funding sources amounted toLBP 14,330.49 billion (USD 9,506.13 million) comparedto LBP 11,319.53 billion (USD 7,508.81 million) as at yearend 2008, reflecting a year-on-year increase of 26.60%.

Like all other Lebanese commercial banks, the Bank relieson customers’ creditor accounts as its principal source offunding. Customers’ creditor accounts constituted 83.36%of total assets and 94.81% of funding sources as atDecember 31, 2009, as compared to 84.57% and 95.22%,respectively, as at December 31, 2008. Other fundingsources include, long-term credit lines provided byinternational banks and financial institutions, deposits ofbanks and financial institutions and soft loans from Banquedu Liban related to banks acquisitions eligible under themerger and acquisition Lebanese laws.

LBP’000 2009 2008

Staff costs (136,801,983)

Administrative expenses (70,040,742)

Provisions for charges (342,929)

Depreciation and amortization of assets (16,602,965)

Amortization of deferred charges (13,145,885)

GENERAL EXPENSES (236,934,504)

(117,289,142)

(67,411,353)

(1,929,960)

(14,271,414)

(13,146,836)

(214,048,705)

Breakdown of General Expenses

2009 2008LBP’000

Soft loans from Banque du Liban

Long-term borrowings

Banks and financial institutions

Customers’ creditor accounts

TOTAL

Amount

319,203,094

65,436,611

156,805,260

10,778,087,239

11,319,532,204

%

2.82%

0.58%

1.38%

95.22%

100%

Amount

319,209,718

93,610,373

330,547,147

13,587,124,218

14,330,491,456

%

2.23%

0.65%

2.31%

94.81%

100%

2009 2008LBP’000

Lebanese Pounds

U.S. Dollars

Euros

Other foreign currencies

TOTAL

Amount

4,319,974,202

6,173,504,494

650,065,376

175,988,132

11,319,532,204

%

38.17%

54.54%

5.74%

1.55%

100%

Funding Sources by Currency as at December 31,

Amount

5,698,474,964

7,114,522,393

984,763,340

532,730,759

14,330,491,456

%

39.76%

49.65%

6.87%

3.72%

100%

Management Report


Breakdown of Funding Sources as at December 31,


36

As at December 31, 2009, 60.24% of the Bank’smajor funding sources were denominated in foreign

currencies, as compared to 61.83% as at December 31,2008.

Customers’ Creditor AccountsAs at year end 2009, the Group’s customers’ creditoraccounts amounted to LBP 13,587.12 bi l l ion(USD 9,013.02 mil l ion). An increase of 26.06% overthe 31 December 2008 level of LBP 10,778.09 billion(USD 7,149.64 million).

This increase was mainly due to the growth in termdeposits (+ LBP 1,350.53 billion or c/v USD 895.87 million)and in time saving accounts (+ LBP 1,063.41 billion orc/v USD 705.41 million).

As at 31.12.09, the customers’ creditor accounts represent83.36% of the Group’s Total Assets.

At year end 2009, the Group advanced its rankingwithin the Lebanese banking sector in terms of customers’creditor accounts to the 4th rank from 5th rank as at end2008, with a market share of 8.63%.

2009 2008

LBP’000

Short-term funding (less than 1 year)

Medium-term funding (between 1 & 3 years)

Long-term funding (more than 3 years)

TOTAL

Amount

10,800,967,647

426,564,637

91,999,920

11,319,532,204

%

95.42%

3.77%

0.81%

100%

Funding Sources by Maturity as at December 31,

Amount

14,067,376,940

185,826,779

77,287,737

14,330,491,456

%

98.16%

1.30%

0.54%

100%

LBP’000 2009 2008

Customers' creditor accounts at amortized cost 13,349,904,125

Demand and sight saving accounts 1,203,465,550

Time saving accounts 8,126,420,412

Term deposits 3,198,314,285

Blocked accounts 33,412,853

Margins and collateral accounts 561,833,047

Related parties accounts 226,457,978

Customers' creditor accounts designated at fair value through profit or loss 160,192,439

Accrued interest 77,027,654

TOTAL CUSTOMERS CREDITOR ACCOUNTS 13,587,124,218

Lebanese Pound

Foreign currencies

10,557,438,548

979,404,689

7,063,012,620

1,847,786,457

21,678,479

436,930,991

208,625,312

161,652,174

58,996,517

10,778,087,239

36.85%

63.15%

Breakdown of Customers Creditor Accounts by Type as at December, 31

Management Report


39.26%

60.74%


LBP’000

TOTAL

Breakdown of Customers Creditor Accounts by Amount as at December 31, 2009

Amount

1,084,596,386

676,886,148

796,891,007

843,200,533

733,010,059

504,859,987

694,355,267

5,333,799,387

%

20.33%

12.69%

14.94%

15.81%

13.74%

9.47%

13.02%

% cum.

20.33%

33.02%

47.96%

63.77%

77.51%

86.98%

100%

LBP

100%

Amount

960,754,871

587,314,221

713,123,885

1,062,031,469

1,087,946,776

1,097,092,121

2,745,061,488

8,253,324,831

%

11.64%

7.12%

8.64%

12.87%

13.18%

13.29%

33.26%

% cum.

11.64%

18.76%

27.40%

40.27%

53.45%

66.74%

100%

FCs

100%

Amount

2,045,351,257

1,264,200,369

1,510,014,892

1,905,232,002

1,820,956,835

1,601,952,108

3,439,416,755

13,587,124,218

%

15.05%

9.31%

11.11%

14.02%

13.40%

11.79%

25.32%

% cum.

15.05%

24.36%

35.47%

49.49%

62.89%

74.68%

100%

Total

100%

LBP’000

TOTAL

Number of accounts

Average per account

Weighted average period

Breakdown of Customers Creditor Accounts by Initial Maturity as at December 31, 2009

Amount

1,854,497,276

2,490,103,862

826,340,035

89,451,056

21,759,159

10,847,004

40,800,995

5,333,799,387

%

34.77%

46.69%

15.49%

1.68%

0.41%

0.20%

0.76%

% cum.

34.77%

81.46%

96.95%

98.63%

99.04%

99.24%

100%

LBP

100%

Amount

2,811,343,365

3,502,923,245

1,668,845,773

125,386,029

42,640,388

65,959,372

36,226,659

8,253,324,831

%

34.06%

42.44%

20.22%

1.52%

0.52%

0.80%

0.44%

% cum.

34.06%

76.50%

96.72%

98.24%

98.76%

99.56%

100%

FCs

100%

Amount

4,665,840,641

5,993,027,107

2,495,185,808

214,837,085

64,399,547

76,806,376

77,027,654

13,587,124,218

%

34.34%

44.11%

18.36%

1.58%

0.47%

0.57%

0.57%

% cum.

34.34%

78.45%

96.81%

98.39%

98.86%

99.43%

100%

Total

100%

Shareholders’ EquityShareholders’ equity as at December 31, 2009 stood atLBP 1,619.47 billion (USD 1,074.27 million) compared toLBP 1,140.50 billion (USD 756.55 million) as at December31, 2008, reflecting a year-on-year increase of 42.00%.This year-on-year increase resulted mainly from the2009 net income, and the increase of the positivecumulative change in fair value of investment securitiesfrom LBP 36.97 billion (USD 24.52 million) as at 2008to LBP 304.40 billion (USD 201.92 million) as at 2009.

2.2 Uses of FundsThe Bank uses of its funds to comply with CentralBanks regulatory reserve requirements, liquid shortterm placements with international banks and financialinstitutions, loans and advances to customers andinvestment in securities portfolio.

192,139

27,760

90 days

197,186

41,856

110 days

389,325

34.899

102 days

P ≤ 1 month

1 month < P ≤ 3 months

3 months < P ≤ 12 months

1 year < P ≤ 3 years

3 years < P ≤ 5 years

P > 5 years

Accrued interest

Management Report



38

A < 50 million

50 million ≤ A < 100 million



500 million ≤ A < 1.5 billion

1.5 billion ≤ A < 5 billion

A ≥ 5 billion

2009 2008

LBP’000

Cash

Compulsory reserves and Central Banks

Banks and financial institutions

Securities portfolio

Loans and advances to customers

TOTAL

Amount

80,781,336

2,586,369,483

984,160,404

5,853,393,026

2,586,188,278

12,090,892,527

%

0.67%

21.39%

8.14%

48.41%

21.39%

100%

Amount

81,336,245

2,571,560,823

1,557,969,522

7,866,941,515

3,480,742,204

15,558,550,309

%

0.52%

16.53%

10.02%

50.56%

22.37%

100%

As at 31 December 2009, 50.56% of the funds wereinvested in securities compared to 48.41% as at 31December 2008. Cash, placements with Central Banksand banks & financial institutions constituted 27.07% of

the funds as at 31 December 2009, against 30.20% as at31 December 2008. Loans and advances represented22.37% of the funds as at 31 December 2009 comingfrom 21.39% as at 31 December 2008.

2009 2008

LBP’000

Lebanese Pounds

U.S. Dollars

Euros

Other foreign currencies

TOTAL

Amount

4,751,850,221

6,356,680,066

693,051,729

289,310,511

12,090,892,527

%

39.30%

52.58%

5.73%

2.39%

100%

Uses of Funds by Currency as at December 31,

Amount

6,705,038,855

6,994,057,178

1,051,219,724

808,234,552

15,558,550,309

%

43.10%

44.95%

6.76%

5.19%

100%

2009 2008

LBP’000

Short-term (less than 1 year)

Medium-term (between 1 and 3 years)

Long-term (more than 3 years)

TOTAL

Amount

5,842,527,223

2,394,919,017

3,853,446,287

12,090,892,527

%

48.32%

19.81%

31.87%

100%

Uses of Funds by Maturity as at December 31,

Amount

7,361,620,126

3,204,392,816

4,992,537,367

15,558,550,309

%

47.31%

20.60%

32.09%

100%

Cash, Central Banks, Banks and Financial InstitutionsAs at 31 December 2009, Cash, Central Banks and banks& financial institutions amounted to LBP 4,210.87 billion(USD 2,793.28 million) and constituted 25.83% of total assets

compared to LBP 3,651.31 billion (USD 2,422.10 million) and28.65% as at year end 2008, reflecting a year-on-yearincrease of 15.32%.

Management Report


Breakdown of Uses of Funds as at December 31,


2009 2008

LBP’000Cash on hand Compulsory reserves and Central BanksCompulsory reserves with Central BanksObligatory placements Current accounts with Central Banks Free placements with Central Banks Accrued interest Banks and financial institutionsCurrent accounts with banks Term placements with banks Pledged deposits Purchased checks for collection Loans to banksAccrued interest

TOTAL

Amount80,781,336

2,586,369,483419,578,246966,151,40082,531,006

895,165,440222,943,391984,160,40461,873,301

836,407,1054,045,837

10,545,21868,754,9692,533,974

3,651,311,223

%2.21%

70.84%11.49%26.46%2.26%

24.52%6.11%

26.95%1.69%

22.91%0.11%0.29%1.88%0.07%

100%

As at December 31,

Amount81,336,245

2,571,560,823563,381,680

1,121,457,005187,390,239697,151,180

2,180,7191,557,969,522

113,249,9661,370,492,670

-12,458,02158,492,4443,276,421

4,210,866,590

%1.93%

61.07%13.38%26.63%4.45%

16.56%0.05%

37.00%2.69%

32.55%-

0.29%1.39%0.08%

100%

Securities PortfolioAs at 31 December 2009, the Group’s securities portfolio,which consists of both fixed and variable income securities,amounted to LBP 7,866.94 billion (USD 5,218.54 million)

compared to LBP 5,853.39 billion (USD 3,882.85 million) asat year end 2008, an increase of 34.40%. Securities portfolioconstituted 48.26% of total assets as at December 31, 2009against 45.93% as at December 31, 2008.

2009 2008

LBP’000Held for trading securities Available for sale investment securitiesHeld to maturity investment securities

TOTAL

Amount85,539,871

4,005,987,2961,761,865,859

5,853,393,026

%1.46%

68.44%30.10%

100%

Breakdown of Securities Portfolio by Classification as at December 31,

Amount95,821,389

6,359,346,3121,411,773,814

7,866,941,515

%1.22%

80.84%17.94%

100%

2009 2008

LBP’000Equities with variable incomeLebanese Treasury billsLebanese Government bondsBanks EurobondsCertificates of deposit issued by Central Bank of LebanonCertificates of deposit issued by commercial banksMutual fundsBanks and corporate bondsAsset-backed securitiesAccrued interest

TOTAL

Lebanese PoundForeign currencies

Amount174,046,983

1,780,851,3301,649,095,096

-2,055,197,949

62,508,352-

358,785-

131,334,531

5,853,393,026

%2.97%

30.43%28.17%

-35.11%1.07%

-0.01%

-2.24%

100%

Breakdown of Securities Portfolio by Type as at December 31,

Amount193,403,925

1,732,277,2511,808,623,056

26,826,1603,853,989,209

76,167,980365,579

30,564,3132,224,392

142,499,650

7,866,941,515

%2.46%

22.02%22.99%0.34%

48.99%0.97%

-0.39%0.03%1.81%

100%

64.03%35.97%

56.45%43.55%

Management Report



40

Loans and Advances to CustomersAs at 31.12.09, the Group’s loans and advances tocustomers, net of provisions and unrealized interest fornon-performing loans and discount on loan book,amounted to LBP 3,480.74 billion (USD 2,308.95 million)against LBP 2,586.19 billion (USD 1,715.55 million) as at31.12.08. An increase of 34.59%.

At year end 2009, the Group advanced its ranking withinthe Lebanese banking sector in terms of net loans andadvances to customers to the 5th rank from 6th rank as atend 2008, with a market share of 6.83%.

LBP’000 2009 2008

Short termCommercial loans & other current debtor accounts 1,949,191,171Medium & long termOther loans to customers 1,216,382,314Consumer loans

Housing loans

IFC housing loans

EPH housing loans

Housing loans to army personnel

Education loans

Loans subsidized by the Government

KAFALAT guaranteed loans

Car loan

Loans to enterprises

Other loans

Loans and advances to related parties 170,111,276Sub-standard debts 42,099,182Doubtful debts 984,935,097Accrued interest 7,519,379

TOTAL 4,370,238,419

LessUnrealized interest for sub-standard debts (14,668,362)Provisions and unrealized interest for doubtful and bad debts (859,567,394)Discount on loan book (10,035,093)Collective provisions (5,225,366)

NET LOANS AND ADVANCES TO CUSTOMERS 3,480,742,204

Lebanese PoundForeign currencies

1,516,478,759

763,151,475166,708,890

45,335,785

860,171

129,086,104

29,497,981

-

67,777,072

53,074,231

144,501,669

80,587,403

45,722,169

154,402,12835,070,851

1,001,274,0764,955,411

3,475,332,700

(14,663,161)(863,825,302)(10,655,959)

-

2,586,188,278

15.74%84.26%

Breakdown of Customers Creditor Accounts by Type as at December 31,

240,891,170

87,177,275

426,478

189,306,332

37,924,821

1,502,970

77,222,349

67,284,651

245,186,488

204,234,091

65,225,689

Management Report


19.06%80.94%


LBP’000 2009 2008

Regular, watch and unclassified accounts

Restructured

Un-restructured

Doubtful & bad debts

Restructured

Un-restructured

Sub-standard accounts

Restructured

Un-restructured

Purchased loan book

Accrued interest

TOTAL LOANS AND ADVANCES TO CUSTOMERS

Less provisions, discount and unrealized interest for non performing debts

Provisions for doubtful and bad debts

Provisions for restructured doubtful and bad debts

Provisions for un-restructured doubtful and bad debts

Discount on loan book

Discount on restructured loan book

Discount on un-restructured loan book

Collective provisions

Collective provisions for doubtful and bad debts

Collective provisions for un-classified debts

Unrealized interest for doubtful and bad debts

Unrealized interest for restructured doubtful and bad debts

Unrealized interest for un-restructured doubtful and bad debts

Unrealized interest for sub-standard accounts

Unrealized interest for restructured sub-standard accounts

Unrealized interest for un-restructured sub-standard

NET LOANS AND ADVANCES TO CUSTOMERS

2,434,032,362

25,200,812

2,408,831,550

996,712,051

19,694,013

977,018,038

35,070,851

6,301,588

28,769,263

4,562,025

4,955,411

3,475,332,700

(889,144,422)

(251,774,234)

(6,113,275)

(245,660,959)

(10,655,959)

(664,160)

(9,991,799)

(9,887,949)

(9,887,949)

-

(602,163,119)

(5,321,021)

(596,842,098)

(14,663,161)

(696,839)

(13,966,322)

2,586,188,278

Asset Quality as at December 31,

3,335,684,761

23,013,389

3,312,671,372

981,257,223

15,471,433

965,785,790

42,099,182

8,803,779

33,295,403

3,677,874

7,519,379

4,370,238,419

(889,496,215)

(223,944,541)

(6,472,987)

(217,471,554)

(10,035,093)

(433,807)

(9,601,286)

(10,585,992)

(5,360,626)

(5,225,366)

(630,262,227)

(4,158,503)

(626,103,724)

(14,668,362)

(1,140,534)

(13,527,828)

3,480,742,204

LBP’000 2009 2008

Doubtful debts and purchased loans (net) to Total loans and advances to customers (net)

Doubtful debts and purchased loans (net) to Shareholders’ equity

Sub-standard accounts (net) to Total loans and advances to customers (net)

Provisions, discount and unrealized interest to Doubtful debts and purchased loans

Unrealized interest for sub-standard accounts to Sub-standard accounts

4.90%

11.12%

0.79%

87.34%

41.81%

3.31%

7.12%

0.79%

88.29%

34.84%

Asset Quality Ratios as at December 31,

Management Report



42

As at end December 2009, the Group’s doubtfuldebts, net of provisions, discount and unrealizedinterest, amounted to LBP 115.33 billion (USD 76.51 million)compared to LBP 126.79 billion (USD 84.11 million)as at 31.12.08, thus a decrease of 9.04%.

As at end December 2009, the provisions, discountand unrealized interest for doubtful debts amountedto LBP 869.60 billion (USD 576.85 million) against

LBP 874.48 billion (USD 580.09 million) at end 2008.This places the coverage ratio in 2009 at 88.29%compared to 87.34% in 2008.

As at end December 2009, the Group’s sub-standardaccounts, net of unrealized interest, amounted toLBP 27.43 billion (USD 18.20 million) compared toLBP 20.41 billion (USD 13.54 million) at end 2008.

LBP’000

TOTAL

Breakdown of Gross Loans and Advances to Customers by Amount as at December 31, 2009

Amount

287,639,770

132,504,642

106,615,236

68,699,615

60,337,372

107,719,901

324,794,638

1,088,311,174

%

26.43%

12.18%

9.80%

6.31%

5.54%

9.90%

29.84%

% cum.

26.43%

38.61%

48.41%

54.72%

60.26%

70.16%

100%

LBP

100%

Amount

385,551,718

101,524,169

128,345,446

237,540,524

460,705,861

796,995,911

1,171,263,616

3,281,927,245

%

11.75%

3.09%

3.91%

7.24%

14.04%

24.28%

35.69%

% cum.

11.75%

14.84%

18.75%

25.99%

40.03%

64.31%

100%

FCs

100%

Amount

673,191,488

234,028,811

234,960,682

306,240,139

521,043,233

904,715,812

1,496,058,254

4,370,238,419

%

15.40%

5.36%

5.38%

7.01%

11.92%

20.70%

34.23%

% cum.

15.40%

20.76%

26.14%

33.15%

45.07%

65.77%

100%

Total

100%

3. CAPITAL ADEQUACY RATIOThe Group’s capital adequacy ratio is 11.85% as atDecember 31, 2009, as compared to 10.22% as atDecember 31, 2008. The capital adequacy ratio iscalculated according to Banque du Liban guidelines,which are in line with the recommendations of theCommittee on Banking Regulations and Supervisory

Practices of the Bank for International Settlements (the BaselII Accord). On a stand alone basis, Fransabank’s capitaladequacy ratio was 13.50% as at December 31, 2009, ascompared to 11.45% as at December 31, 2008. Thestatutory minimum capital adequacy ratio required byBanque du Liban is 8%.

Management Report


Agriculture

Trade & Services

Retail Miscellaneous

Industry Construction

47%

8%

18%

3%

5%

19%

31.12.2008

Agriculture

Trade & Services

Retail Miscellaneous

Industry Construction

46%

16%

9%

2%

21%

6%

31.12.2009

Breakdown of Loans and Advances to Customers by Economic Sector


A < 50 million




500 million ≤ A < 1.5 billion

1.5 billion ≤ A < 5 billion

A ≥ 5 billion

Management Report

Bank’s Description

Risk ManagementFransabank is pursuing an ambitious corporate strategyto achieve its objectives in an effective and efficientmanner, which involves growth in local and selectiveregional and international promising markets, and buildingnew business activities. In this regard, it has set a riskstrategy commensurate with Fransabank’s risk appetiteand risk tolerance.

The diversity of Fransabank business operations in variousgeographical locations requires identification,measurement, aggregation, and effective managementof risks and efficient allocation of capital to derive anoptimal risk / return ratio.

Fransabank risks are managed in a structured, systematic,and transparent manner through the risk policy thatincludes comprehensive risk management, riskmeasurement and monitoring processes.

Fransabank Board of Directors is ultimately responsiblefor providing overall risk management direction andoversight, for approving the overall risk tolerance, andoverseeing that the Group is adequately and effectivelycontrolled and managed. The risk management functionis organised by risk categories, mainly, credit,operational, and market risks, which are managed in acoordinated manner within the organisation. Moreover,the risk management function is independent of thebusiness line divisions.

The Board of Directors, the Risk ManagementCommittee, the Senior Management, and the InternalAudit Department are key members in the riskmanagement process. The Risk ManagementCommittee, the Audit Committee, and the Group ChiefRisk Officer, support the Board of Directors in managingthe Group’s risks.

Fransabank’s Group Chief Risk Officer monitors andcontrols all the major risk exposures and concentrationsacross the bank. He has the responsibility to assist theBoard of Directors and Senior Management in developingFransabank Group’s risk strategy; to provide the Boardof Directors, the Chairman, and Risk ManagementCommittee with periodic reports highlighting the risksfaced by the Group; to conduct stress test on differentrisks modules for various scenarios in a systematic andcontinuous manner; and to review and evaluate riskmanagement reports developed by Fransabank’s subsidiaries.

Fransabank has established an appropriate structure forrisk management functions evidenced by its RiskManagement Division, which includes four departments:Basel II Implementation, Credit Risk, Market Risk andOperational Risk Departments, and defined a sound riskmanagement process to identify, measure, monitor, andreport credit, market and operational risks that it faces.The Risk Management Division assumes its responsibilityin reporting to the Board Risk Management Committeethrough periodic reports about Fransabank Group riskprofile.

In this context, it has developed an action plan toimplement Basel II in line with Fransabank’s strategyand risk profile, the Central Bank of Lebanon, theBanking Control Commission and Basel II requirements.

Currently, the Bank complies with Basel II Pillar Irequirements which are related to the calculation of theCapital Adequacy Ratio in conformity with the BankingControl Commission memos. Pillars II and III of Basel II,are related to the qualitative requirements such as RiskManagement Policy and Procedures, CorporateGovernance Guidelines, Internal Capital AdequacyAssessment Process (ICAAP) and Market Discipline, andare in the implementation process. The RiskManagement Division has initiated several projects inthat regard, aimed at establishing the structures andbusiness practices essential for Fransabank’s compliancewith the three pillars of Basel II:

The Credit Risk Management Department (CRMD)followed-up on the credit granting process through anin-depth review of all files to be submitted to the Bank’scredit committee. Additionally, it developed stress-testreports measuring the probable impact of hypotheticalscenarios; said stress-tests were intended to informabout the potential changes on the Bank’s capitaladequacy ratio should these scenarios materialize.Further to that, the CRMD provided periodic reports, tothe Board Risk Management Committee, on significantexposures arising from risk concentrations (i.e. byregion, geographic area, country, bank, collateral type,classification, product, facility type, currency, economicsector…). Finally and with the intention of reportingeconomic sector concentration, sub-economic sectorswere regrouped to other co-related sub-sectors in orderto accurately assess Fransabank’s resilience to anycrisis that may hit a specific co-related industry orsector.


44

Management Report


The Market Risk Management Department (MRMD)promoted a risk management culture among the relateddepartments and divisions at Fransabank throughreports addressed to ALCO and Senior Managementconcerning analysis of interest rate risk in the bankingbook and trading book at the portfolio level, in additionto investment reports which tackled interest rate andliquidity risks on individual investment opportunities,carried out by the bank and assessed their impact oncapital adequacy ratio. Furthermore, the MRMDdisclosed its main findings in a comprehensive reportpresented to the Board Risk Management Committeeand issued on a quarterly basis.

The Operational Risk Management Department (ORMD)is promoting a risk culture on a group-wide basis,starting by the Risk and Control Self-Assessment projectimplemented in several processes. In parallel, theORMD is actively participating in Fransabank’s systemsimplementation process through the gaps andrecommendations it provides. In addition, and throughits review of the policies and procedures, the ORMDpromotes the soundness of the bank’s internal controlenvironment. Enhancements were made to the riskidentification process of the operational risk frameworkthroughout 2009, particularly the issuing of an updatedRisk and Control Self Assessment (RCSA) Frameworkenforcing accountability of business owners. With afocus on proactive identification and mitigation ofoperational risks and incidents, the ORMD has also beenworking on the identification of Key Risk Indicators(KRIs) in order to track risk exposures in the newbanking systems currently implemented at the bank.

The Basel II Implementation Department is monitoringthe Basel II Action Plan and assisting in its implementation.Periodic reports related to Fransabank SAL and itssubsidiaries, including the capital management process,the allocation of capital charge to each risk category, andthe stress tests conducted for various scenarios andtheir effect on the capital adequacy ratio, were providedto the Board Risk Management Committee. Moreover,assessment visits were undertaken to Fransabanksubsidiaries in order to follow up on their risk managementprocess and Basel II implementation.

AML Compliance In order to prevent Fransabank and its subsidiaries andassociated companies from being exposed to criminal

activities that could lead to money laundering operations orbeing used for terrorist financing, senior managementstressed that Fransabank entities and structures, mustbe in compliance with all AML / CFT relevant local andinternational laws and regulations.

AML Compliance Departments were established in allFransabank Group entities with a primary goal to designand structure an effective AML program. The AMLprogram adopted by Fransabank different entities isencompassing the following four key elements:

1- Development of internal procedures and controls2- Establishing of AML Compliance Departments3- An ongoing training programs4- An independent audit function to test programs

During 2009, Fransabank implemented an automatedflexible and effective filtering system which allows theAML department's staff members to carry out theirscreening procedure activities on all the Bank'scustomers and all concerned parties reflected on swiftmessages. The AML compliance departments in allentities start the development of the best AML / CFTcontrol strategy by adopting the risk-based methodologywhich leads to an effective risk assessment of high riskareas, products, and services. In addition, internaltraining sessions were designed, structured anddelivered to branches employees and concerneddepartments to assist and support them in exploringrecent trends and requirements. The AML department'sstaff members and the Branch AML Officers, in turn,attended training sessions locally and abroad to discoverthe latest trends in the AML / CFT field and to interactpersonally with experts to garner their knowledge infighting financial crimes.

International Presence Fransabank Group, in addition to Lebanon, is currentlypresent in eight countries: France, Algeria, Syria andBelarus as subsidiary banks, Sudan as an associatebank, as well as in Libya and Cuba as representativeoffices.

Fransabank Group’s business expansion strategy in theyear 2009 revolved around maintaining its internationalexpansion strategy and consolidating its presence in theregional and international markets in which it is present.This network of subsidiaries and associate banks, as


Management Report


well as representative offices has broaden the Bank’sactivity ground and the synergies which are being createdbetween the various entities. The existing Lebanesebusiness communities in each of those countries next tothe local operators no doubt constitute a prime sourceof business to the Group.

A glimpse on the present characteristics of each of theunits abroad reveals the following:

The Syrian subsidiary, Fransabank Syria launched itsoperations in January 2009 and has quickly moved toopen two branches in Damascus and two branches inAleppo and one in Homs and it is expected that threemore branches to be added during 2010. As for theAlgerian subsidiary, Fransabank El Djazaïr, the Bank’sshareholders’ equity was increased from USD 44 millionto USD 142.25 million. A new branch was inaugurated inOran and another branch in Constantine is underway.

Our French subsidiary, Fransabank (France) has continuedto play the role of a platform vis-à-vis the other Group’sentities and has benefited from its internationalexpansion to increase its level of activity in newcountries. This has translated into healthy results forthe year which have almost doubled compared to theprevious year thus enabling this subsidiary to furtherstrengthen its shareholders’ equity.

Fransabank SAL, the mother company of ourBelarussian subsidiary, Fransabank OJSC (Belarus), hastotally subscribed in the increase in the Bank’s capital byapproximately USD 13 million during this first full year ofoperation, and has totally subscribed a USD 12 millionsubordinated loan. Shareholders’ equity now stands atUSD 29.2 million. Fransabank OJSC (Belarus) operatesthrough its headquarters and 21 exchange offices inMinsk and one branch in Gomel.

Our associate bank in Sudan, United Capital Bank totalassets has increased by 47.2% during 2009 and its netprofits were maintained roughly at the same level as inthe previous year even though the economy haswitnessed a slowdown due to the slump in oil prices

The end result of the exercise described above was thatit allowed the subsidiaries and associate abroad tocontribute to the Group’s total assets at a level ofapproximately 8.2% in a relatively short period of time,bearing in mind that our strategy is to bring this figure

up to 20% by the end of 2010 and 30% by 2012.

• Fransabank (France) SA

The year 2009 witnessed a significant decline in theinternational business environment and a slowdown inthe commercial transactions, in addition to a considerablefall in the prices of raw materials. All this combined hadimpacted the clients’ business activity of Fransabank(France).

However, the distinguished relationship of Fransabank(France) with its customers and the constant support ofits two shareholders jointly made Fransabank (France)achieve excellent results, thus registering a net profitafter tax of Euro 1.27 million, an increase of 94% ascompared to the previous year and in line with theforecasts of the business plan.

In the year 2009, Groupe Caisse d’Epargne and BanqueFédérale des Banques Populaires merged to formGroupe BPCE, the second largest banking group inFrance. Financière Océor, a subsidiary of Groupe BPCE,acquired 40% of the share capital of Fransabank(France). The affiliation to a renowned shareholderallowed Fransabank (France) to have access to potentialcustomers which were otherwise inaccessible, and topursue the bank’s policy of diversification in line with itslongtime strategy.

In this respect, and based on its ambitious internationalexpansion strategy, Fransabank Group aims at growingthe business activities of its French subsidiary and topenetrate new markets. This was the case when theGroup strongly established and developed itself in theAlgerian market through Fransabank El Djazaïr, andbrought many business opportunities to the Paris basedentity of the Group.

At the end of the year 2009, Fransabank (France)benefited from its excellent financial achievements tostrengthen its own shareholders’ equity by 6.7%reaching a total of Euro 23.97 million.

• Fransabank El Djazaïr SPA

After three full fiscal years of activities, Fransabank El Djazaïrcontinued to register a steady and harmonious growthin 2009, despite the turmoil on the international financiallevel affecting, within limits, the overall environmentof business and investment in Algeria.


46

Management Report


Fransabank El Djazaïr achieved good results for the yearunder review whereby total assets registered a 108.7%growth as compared to 2008, reaching USD 277.6 millionat end of December 2009. The credit portfolio increasedby 43%, reaching USD 53.7 million and clients’ depositsincreased by 51.4% reaching USD 123.9 million at theend of 2009. Shareholders’ equity was increased toUSD 142.2 million at the end of year 2009 as per theCentral Bank of Algeria new regulation, thus registeringan increase of 214.4% compared end of 2008.

In line with its ambitious geographic expansion strategy,Fransabank El Djazaïr inaugurated a new branch in Oran,West of the country.

By the end of the 2012, Fransabank El Djazaïr is planningto open several branches, to cover major cities of thecountry and to diversify its range of banking productsand services to anticipate and satisfy the needs of theircustomers.

• Fransabank Syria SA

Fransabank Syria launched its activities in January 2009with the strategy of becoming a universal bankundertaking all types of banking activities. The Banklaunched during its initial stages both its corporate andretail products and services, relying on a still smallbranch network, in Damascus and Aleppo.

Fransabank Syria achieved good results as compared toits direct competitors who launched their activitiesaround the same time, thus reaching a balance sheetlevel of approximately USD 300 million during its firstyear of operation. This has also favorably comparedwith some other banks which were already establishedin the Syrian market.

The year 2009 witnessed the introduction of major controland governance regulations by the local authorities in acondensed manner. Fransabank Syria, although in itslaunch phase, has actively coped and promptlyresponded to the application of the circulars. Moreover,Fransabank Syria was one of the first banks to positivelyrespond to the capital increase requirements of theSyrian authorities and shall increase its capital during2010 to SYP 5.25 billion (around USD 115 million), thusallowing the bank to further grow its activities in theSyrian market.

Fransabank Syria proposes to its customers a wide

range of retail products (personal, car & housing loans)and credit cards systems (cards & ATMs) as well as a fullrange of services targeted to companies, large, mediumand small, offering them traditional financing, tradefinance, project finance and other means of corporatefinance. The bank also began to participate in social andcultural events as part of its image building process.

As at May 2010, and in addition to its headquarters inDamascus, the branch network of Fransabank Syria iscomposed of 5 branches, two in Damascus, two inAleppo and one in Homs, with a plan to cover Lattakia,Tartus and Hama during the Summer of 2010.

• Fransabank OJSC (Belarus)

During the 4th quarter of 2008, Fransabank SAL andFransa Holding SAL, acquired Golden Taler, a small bankin Belarus with a capital of the equivalent of USD 7.3 millionand renamed it Fransabank OJSC. The Bank operatesthrough its headquarters and 21 exchange offices inMinsk, and one branch in Gomel. It focuses mainly oncorporate and medium size loans.

In 2009, in order to conform to the minimumrequirements of the National Bank of the Republic ofBelarus (NBRB), Fransabank OJSC increased its capitalto c/v of USD 23.67 million through a cash injection fromshareholders, and the issuance of a subordinated loanfor USD 12 million totally subscribed by Fransabank SALthus increasing the stake of this latter from 18% to62.21% as at 31 December 2009.

During 2009, Fransabank OJSC was able to achievegrowth despite the economic crisis in Belarus and thesharp devaluation of the ruble against the USD by around30%. The 2009 net profits increased to USD 3.6 million, fromUSD 1.1 million in 2008. As at 31 December 2009, totalassets reached USD 52.8 million against USD 26.3 millionas at 31 December 2008, net loans to customersamounted to USD 16 million up from USD 12.7 millionat end 2008, and customers’ deposits increased toUSD 9.2 million up from USD 8.6 million at end 2008.Shareholders’ equity reached USD 29.2 million as at31.12.09 up from USD 16.6 million as at end 2008.

During the 1st quarter of 2010, Fransabank SALincreased its stake in Fransabank OJSC to 80% througha purchase of shares from Fransa Holding SAL, whosepercentage of ownership will become 19.93%.


Management Report


Fransabank OJSC is expected to grow its loan portfolio,expand its network through opening 4 to 5 branches indifferent regions of Belarus, and develop its bankingproducts and services especially retail loans (car loans,housing loans, personal loans, etc) and credit cards.

• United Capital Bank

United Capital Bank was established in Sudan in 2006 asan associate of Fransabank SAL alongside reputableKuwaiti and Egyptian partners. It is an Islamic investmentand corporate bank offering various Sharia-compliantmodes of financing such as Mudaraba, Mucharaka,Murabaha, Ijarah and Istisnaa.

The Sudanese economy has witnessed a slowdown dueto the slump in oil prices in the second half of 2008 andthe political conjuncture prevailing in Sudan, which hasput pressure on the State revenues and foreign currencyreserves. This situation has led to a shortage in foreigncurrency and a restrictiveness of the policy of theCentral Bank of Sudan in matters of import financing.Matters have nonetheless gradually improved towardsthe end of the year with the increase in oil prices.

As at 31 December 2009, United Capital Bank’s totalassets reached USD 329.8 million thus registering a47.2% growth over the previous year. Total depositsincreased by 97.9% to USD 196.8 million, and its finance tocustomers (net) grew by 22.5% to stand at USD 140.8 million.Net profits for the year amounted to USD 8.8 milliontherefore staying roughly at the same level of those of2008. Shareholders’ equity reached USD 120.7 million,ranking United Capital Bank as one of the largestSudanese bank in terms of equity.

In addition, United Capital Bank inaugurated in 2009 twobranches located in Khartoum Bahri and Niala City.

Investment and Private Banking

Since 2001, Fransa Invest Bank (FIB) SAL has proventhat it has the expertise and vision to remain a leader inan extremely competitive and volatile marketplace. Asone of the leading investment and private bankinginstitutions in Lebanon, FIB has forged ahead, makingdeals, investing wisely and forming successful partnershipsalong the way. This continued progress is due to thestrong foundations FIB was built upon, almost 10 years

ago. At FIB, teamwork and open communication are toppriorities, which are further supported by an organizationalstructure that serves the purposes of meritocracy andlong-term partnerships.

FIB Activities

Within this advantageous framework, FIB excels in thefollowing four main activities: corporate finance advisory,equity & debt financing, wealth management and capitalmarkets.

Corporate finance advisory encompasses mergers andacquisitions, equity capital markets, private equityadvisory and debt advisory.

FIB also provides equity and debt financing opportunitiesfor corporate and project finance.

FIB’s wealth management department offers clientsadvice, expertise and solutions on a non-discretionarybasis to optimize returns on their investments throughthe Private Banking and Asset Management units.

Capital markets activities include full brokerage services,available for a wide range of financial products includingcurrencies, bonds, stocks, commodities, futures, andoptions with access to local, regional (GCC, Jordan andEgypt) and international markets (North America,Europe and Asia).

FIB also provides in-house economic, market and countryresearch and analysis, supported by international banksand asset managers.

2009 Achievements

In 2009, FIB was involved in several important activities,including the arrangement of the syndicated financing ofAl-Abadiyeh Hills Project.

FIB with its parent company, Fransabank SAL, co-signedwith IFA Hotels and Resorts SAL Holding- a subsidiary ofIFA Hotels & Resorts KSCC, a prominent Kuwaiti Group -a joint agreement through which FIB and Fransabankwill finance the “Al Abadieh Hills Project” over twophases and for a total amount of USD 30 million. Thetransaction was successfully arranged and financedamidst the prevailing international financial crisis, riskavert environment and bearish credit market, anddespite some internal political hurdles.


48

Management Report


FIB also grasped the opportunity to be one of the firstLebanese banks to promote more aggressively lendingin the Lebanese Pounds. In this regards, the Banksuccessfully negotiated placing 40% of the abovementioned loan in the local currency, a percentagewhich exceeds the prevailing industry average of 15%.FIB pushed the opportunity further to be a pioneer inpricing both the Lebanese Pound and the US dollarportions of the loan based on a local new benchmark theBeirut Reference Rate – recently developed, calculatedand recommended by the Lebanese Banks Association(LBA) – as an alternative to Libor which, due to theinternational financial turmoil, became non-indicative ofthe cost of credit in general and far from being reflectiveof the Lebanese country and credit risks.

In order to ensure diversity, FIB has also been active inthe provision of medium term corporate loans in orderto promote growth of the Lebanese economy via itsfinancial sector and in a direct investment in a new carreceivables securitization transaction, Cylinder II, whichclosed in October 2009. Additionally, FIB has acted asthe manager of Fransabank investments in two localfunds, Berytech Fund and Building Block Equity Fund,with an active role in the funds’ board meetings andspecial purpose committees elected to conduct duediligence with other local and international shareholders.

Throughout 2009, FIB succeeded in growing its pipeline,which currently includes potential direct investment innew financial companies, syndicated and corporatefinance deals, and mandates for financial advisory servicesfor equity raising in the real estate / tourism sector.

Fransa Invest Bank is constantly coming up with innovativeproducts and services for its clients as well asFransabank’s clients. In 2009, FIB issued another highlysuccessful retail structured product called Easy Times.Easy Times is a 3 year structured product that wasissued at a time of great market volatility, on May 19,2009. It was issued in USD and for a minimum investmentof USD 5,000. It also featured 100% capital guarantee atmaturity by Fransabank and pays guaranteed annualcoupons of 3.75%, 4%, and 4.25%, in the first, secondand third years respectively, payable semi-annually. Inaddition, investors receive the performance of a welldiversified equally-weighted basket of stocks over the3 year period, individually capped at 15%. This productraised a total of USD 26,305,000.

FIB also launched a deposit program for 2 and 3 yearterms in both USD and LBP. As a result, FIB increased itsclient base substantially.

2009 Financial Highlights

Fransa Invest Bank reported an outstanding performance in2009, whereby customers’ deposits in LBP increasedby 67.7% as at end 2009 to reach LBP 250.49 billionfrom LBP 149.32 billion as at end 2008. Deposits alsoincreased in foreign currency by 36.6% to USD 76.33 millionas at end 2009 compared to USD 55.88 million as at end2008. Profitability rose significantly, with net incomereaching USD 9.15 million in 2009 versus USD 4.93 millionin 2008, an increase of 85.6%. Return on Average Equity(ROAE) was 19.05% in 2009 compared to 12.32% in 2008,while Return on Average Assets (ROAA) reached 3.28%in 2009, as compared to 2.25% in 2008. Total assetsreached the equivalent of USD 336.69 million as at end2009, compared to USD 219.80 million as at end 2008,an increase of 53.18%.These financial results were atestament to the in-house expertise and the hard workand dedication of its staff.

FIB, with hard work and clear vision, has developed theinvestment and private banking expertise and knowledgeto benefit from Fransabank's expansion strategy to growits business accordingly at home and abroad.

Corporate Banking

In 2009, the Corporate Banking Division continued tosupport its clients in Lebanon and abroad while selectivelydevelop and diversify its customer base and loanportfolio. This is supported by an active corporate teamand by the Bank’s extended network of branches andsubsidiaries; coupled with a vibrant local economy.

Next to its broad spectrum of commercial bankingservices offered at competitive rates, the Bank continuedto treat its clients as partners offering them expertiseand advice in areas as diversified as:

- The Arab Trade Finance Program, to support theirexport and import activities;

- European Investment Bank loans, to finance new projectsor extensions of existing ones;

- Agence Française de Développement loans, to helpclients directly or indirectly affected by the events of2006 restructure;


Management Report


- The structuring of letters of credit and negotiating ofletters of guarantee with correspondents;

- Project finance;

- Aircraft and ship finance;

- Subsidized loans to industry, agriculture, tourism andnew technologies, the four sectors covered by theLebanese Government Loan Subsidy Program.

In 2009, Fransabank also aggressively marketed theBanque du Liban Circular 185 program designed, inparticular, to encourage borrowings in Lebanese Poundsand drastically reduce the cost of doing so to sectors ofthe Lebanese economy which did not currently benefitfrom the Loan Subsidy Program, like education andcommerce.

Fransabank’s corporate loan portfolio as at 31.12.2009expanded by USD 161.57 million (21.3%) in directbalance sheet utilizations (loans, overdrafts...) compared to31.12.2008, reaching a total of USD 918.48 million.

As at 31.12.2009, corporate loans represented 63% ofFransabank’s total loan portfolio.

The distribution of the Bank’s loan portfolio as at end of2009, over the main sectors of the Lebanese economy,was as such:

• Wholesale Trade 33.05%

• Manufacturing Industries 18.28%

• Contracting & Construction 8.59%

• Retail Trade 5.53%

• Transport, Warehouses & Communications 4.82%

• Agriculture, Forestry & Fishing 3.21%

• Electricity, Gas, Water & Oil 3.10%

• Hotels, Furnished Apartments & Restaurants 2.28%

• Health & Social Services 1.17%

In order to meet the added challenges imposed by thebanking industry new regulations and Fransabank’sdrive to further expand, the Corporate Banking Divisionrecruited additional staff and reorganized them in teams,headed by seasoned professionals with diversifiedbackgrounds, in charge of clusters of relationship andassistant relationship managers. Their main objective isto provide an efficient and a more personalized serviceto Bank’s customers.

Among the other salient developments of 2009, thegreater integration between the actions of the CorporateBanking Division and Lebanese Leasing Company (LLC)SAL, Fransabank’s Group leasing arm, both now reportingto the head of corporate banking. This coordination hasinjected new life in LLC which had yet another successfulyear in terms of business development and results, alsoallowing corporate banking to expand its offer with newsolutions.

As for the Small and Medium Enterprise (SME)Department, it has as always dedicated its efforts to helpin the development of companies with annual salesturnover not exceeding USD 5 million and/or with totalexposure within USD 2 million. This represents thewidest chunk of the Lebanese market. Fransabank considersit a duty to ensure its contribution in the growth of thesecompanies by offering them multiple products thatcover all their needs and granting them personalfinancial guidance and continuous risk assessment.

In 2009, the SME Department has contributed to theoverall profitability of the Bank through balanced lendingin Lebanese Pounds to new and existing customers.This was materialized in reaching a growth volume of25% in 2009. Thanks to the efforts of an organized teamworkbetween the SME department and the branch network.

The increase in Kafalat files is segregated either byregion or by sector as follows:

Kafalat by Region

North

Beirut & Suburbs

Bekaa South

Metn, Keserwan & Jbeil Chouf

25%

28%

13% 11%

9% 14%


50

Management Report


The SME Department has been financing new projectsand assisting new and existing clients expand theirbusiness under the new incentives provided by the BDLin 2009; whereby sectors which were not eligible tosubsidy can benefit and until June 2011 from a reducedinterest rate on their loans.

Since the Lebanese professional body required relevantfinancial support in order to acquire or expand its premises,the SME department granted all over the year thecommercial property loan that covered this importantneed in a very professional and organized manner.

During 2009, many workshops were held in severalregions in Lebanon in order to market Fransabank SMEproducts. The targeted categories of clients includedcooperatives, associations, businessmen, farmers...These workshops were held to attract many potentialclients and increasing thus the SME portfolio especiallyin Kafalat and subsidized loans.

Retail Banking Divisionand Branch Management Department

The Retail Banking Division at Fransabank hasmaintained its ever-expanding strategy along with itsconstant growth approach by focusing on the client’sspecific needs and relentlessly ensuring their ultimatesatisfaction. This strategy has unfolded positively, andoutstanding overall results were recorded. This provedthat the retail team succeeded in creating value to

Fransabank’s clients by anticipating their bankingfinancial needs while delivering to them the highestlevel of professionalism and expertise.

This approach has also positively impacted the internalstructure as well as the endowed responsibilities andduties of the division within the Bank. Consequently, bylate May 2009, the Branch Management Department -formerly known as the Branch Network Division - wasintegrated and attached into the Retail Banking Division.

In view of that, the Retail Banking Division currentlyincorporates five different sections:

• The “Regional Managers” are to fulfill their respectiveRegion’s quantitative and qualitative objectives insales, risk, human resources and customer service.

• The “Branch Management Department” monitorsbranches operational activities and follow-up on theirbusiness achievements with the aim of increasingefficiency, productivity and profitability.

• The “Retail Products and Services Department”monitors the products management including retaillending as well as insurance products throughout thevarious channels of the Bank.

• The “Plastic Cards Center” develops and enhance thecards business - whether in issuing or in acquiring -while managing, overseeing and controlling all thecards related functions.

• The “Retail Risk Department” handles the analysisand general administration of all retail loans receivedfrom the branches while ensuring proper coordinationwith all parties concerned.

The last couple of years were marked by a quantum leapin Fransabank local expansion strategy. This comes inline with the Bank’s overall business strategy whichpartially aims, and at the local level, at developing andincreasing its organic growth either by expanding theBank’s business activities or by enriching its overallgeographic expansion in the Lebanese territories.Accordingly, in line with this ambitious geographicexpansion strategy, the opening of several new brancheswithin the different regions is being prepared andscheduled. In a matter of fact, the logistic preparations,administrative details and human resources selections

Kafalat by Sector

Tourism

Industry

Other

Agriculture

45%

41%

2% 12%


Management Report


are almost completed for the perceived opening of anew branch at Moussaitbeh area, Salim Slam within theBeirut region. In addition to the Saifi Branch, that joinedthe list of branches with a whole new revamped lookafter it was relocated on one of the most prominentstreet of Saifi/Gemmayzeh area.

In 2009, the newly formed Retail Banking Divisioncontinued to deliver the Bank clients easy, secure, andwell-suitable solutions for their growing financial needs,yielding into a noticeable increase in the number ofapplications received, positively affecting the overalllending portfolio.

The remarkable results of 2009 were coupled with adiversification of the retail products range; be it throughthe introduction of new products or via the conditionamendment of already existing ones, thus adapting tothe ever changing needs and demands of Fransabank’sclients.

Accordingly, several products and services were devel-oped and planned to be introduced in order to maintainthe bank’s image and position while enhancing itsdynamic role and social well-being.

Thus, the year 2009 marked the launch of new productsas being a part of Fransabank’s commitment to fulfillingthe needs of its client base.

• A new improved housing loan was introduced inassociation with the BDL, in a way to keep-up with themarket’s changes while focusing on two main concerns:setting appropriate interest rates and offering largeramounts. This new loan aims at attracting a newsegment of clients, what will positively impact theglobal economical growth of the country.

• An educational loan was newly introduced, also inassociation with the BDL, following the sense for sucha need in the market. This new customer-tailoredproduct will offer a chance for all qualified students topursue their education and fulfill their career dreamswithout worrying of paying back the loan until aftergraduation.

• A special personal loan was also introduced enablingthe public sector employees to benefit from apre-imbursement of the retroactive on grades andsalaries increases.

In parallel, Fransabank launched in several promotionalcampaigns that had a remarkable impact in theLebanese market, most notably:

• Credit cards promotional campaigns focusing onencouraging cardholder’s spending, whether withVISA or MasterCard, with various rewards and benefits.

• Housing loans campaigns promoting competitivetools such as lower interest rate, longer grace period,lower or exempted down payment and others appealingaspects.

• New educational loan campaign promoting theprogram’s special characteristics with additional andexclusive benefits from the bank to applying students.

As part of the bank’s commitment to the developmentand growth of the economy through support to low-income individuals, and with the aim of improving thewelfare of communities and alleviate poverty,Fransabank’s launched two distinctive micro businesscredits: Ameen and Maan loans. While specifically targetingareas outside the capital – such as the Bekaa, the South,the North, Mount Lebanon and Jbeil – the Ameen andMaan loans offer flexible conditions that enableindividuals to further develop their own small-scalebusiness or improve and even expand their existingone. Accordingly, the customer service representativesin branches were encouraged to rigorously promote themicro-credit programs.

The overall branch network achieved satisfying resultsby relentlessly working on further improving the providedclients’ service standards and persistently maintaining asteady business development. Thus, branches continuedbeing the main distribution channel by effectivelyproviding the excellent customer support and service,as well as promoting and selling the bank assorted products.Hence, as at the end of 2009; an encouraging growthwas observed within the retail business line.

Clients’ Deposits

For the past two years, the clients’ deposits portfoliogrowth rate has been steadily increasing. In fact,between December 2007 and December 2008, thegrowth rate was 13%, whereas throughout the year2009, the clients’ deposits growth rate improved to19%.


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Management Report


Retail Loans

Likewise, between 2007 and 2009, the total retail loansportfolio has actually doubled. In fact, throughout theyear 2009, retail loans significantly increased by almost40%. Accordingly, total consumer loans portfolioincreased by 44%, total housing loans portfolio has alsoincreased by almost 30%, while car loans portfolioreached an outstanding growth rate of +67%.

Plastic Cards

As at the end of December 2009, the total plastic cardsportfolio had increased by almost 11%. On the otherhand, the total cards portfolio was constituted by almost40% of credit cards and 60% of debit cards.

Bancassurance Products

By the end of December 2009, the overallBancassurance products portfolio had increased byalmost 21%.

On the other hand, FransaFuture – the retirement savingand investment plan – was introduced during the year.As well, the all new FransaPlus – a life insurance planwith accidental coverage – was being prepared, incollaboration with Bancassurance SAL, to be launchedas at the beginning of the upcoming year.

Over the past few years, the Retail Banking Division hassuccessfully shown a notable growth in terms of clients’deposits, retail loans, plastic cards and insurance products.

Thus, empowered with a solid steady growth andconstant development, it is considered as a key playerand one of the major business lines within the Bank.

Human Resources

In 2009, Fransabank’s Human Resources Divisionpersisted with the implementation of successful policiesand procedures as well as enhancing existing ones,both locally and in our overseas operations. Only byeffectively using our human capital assets and bydeveloping its potential can our Bank remain on thecutting edge of success.

Code of Conduct and Corporate Ethics

As part of its corporate governance commitment, HRDconstantly improves and controls the implementation ofFransabank’s code of conduct. This document wasdesigned to offer guidelines and rules for all to follow,stressing the need to conduct business in an ethically,socially, environmentally, and professionally responsiblemanner, while building upon and maintaining the Bank’scorporate management philosophy. The code definesfive main areas, namely employee behavior, clientsrelations, employees relations, dealing with other banks,and reporting unacceptable behavior.

Training and Development (T&D)

Improving the skill-set of our staff is one of HRD’s toppriorities, as it fosters a positive atmosphere and developsemployees’ productivity. During 2009, 84% of executives,64% of middle managers, and 81% of employeesattended both internal and external seminars, totaling15,736 training hours and averaging 15.6 hours peremployee: executives benefited from an average of 7training hours, middle managers received an average of15 training hours, and regular staff members participatedin an average of 14 training hours per employee.

The number of participants increased by 6.5% in 2009(from 942 to 1,003), which means that 77% ofFransabank employees received training and attendedseminars. As a result of proper, focused training, wewere able to discover that 26 individuals could holdhigher functions and effectively be promoted as follows:4 Heads of Departments, 2 Deputy Heads, 2 BranchManagers, 5 Deputy Branch Managers, 8 CommercialControllers, and 5 Operational Controllers.

Segregation of Retail Loans

Car Loans

ConsumerLoans

Micro-Credit Loans

HousingLoans

Revolving &Staff Loans

31%

41%

23%

4% 1%


Management Report


In addition to offering seminars to Fransabank employees,T&D provided Summer internship training to 206students from various universities, a 35% increase ininterns compared to 2008’s 153 undergraduates.

Talents

Talent Management is a practice of selecting mainly newrecruits or recently hired employees (with a totalexperience with Fransabank ranging from 1 to 5 years)whose career path is yet to be determined or ascertained.

Talents are high profile individuals, selected based on acombination of personal skills, educational background,and banking knowledge. Training & DevelopmentDepartment seeks to retain them and enhance theirexisting capabilities, constantly monitoring their

potential career development purposes. In 2009,140 talents were uncovered, divided as follows

This regional sub-division allows HRD to determinetalent distribution across the country, helping T&D inidentifying potentials with a solid understanding of eachbranch’s strengths and limitations, building up theirskills, and eventually promoting them.

Potentials

Potentials are existing employees that have exhibited ahigh level of competence in their functions, and werethus identified by Training & Development Departmentas ready to hold higher positions in the short and mediumterm. The constant observation of this population willcontinue in 2010, allowing T&D to ascertain the potential ofeach of the 123 individuals prior to furthering their training.

Training hours distribution

Internal Training External Training

Year 2008

8,14

0

6,75

5

16.1

65

8.98

1

Year 2009

27%

24%

9%14%

12%

14%

NorthMetn, Kesrwan & Jbeil

BekaaBeirut & Suburbs

SouthAley & Chouf

Talents Situation by Region - 2009

34%

16%

12%

15%7%

16%


BekaaBeirut & Suburbs

SouthAley & Chouf

Potentials Development Program by Region - 2009

57%

15%

6%

13%

7%

2%

Management& Behavioral Skills

Banking &Financial Techniques

Foreign Languages

InformationTechnology

Economic &Financial Education

Marketing &Selling Skills

Training Distribution Per Topic


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Management Report


Polyvalence

Polyvalence is an advanced concept based on the ideathat an employee can assume multiple functions in timeof need, both for contingency purposes and productivityimprovement. In 2009, there were 148 polyvalentemployees, distributed as per the here below graph. Weexpect to have 89 new polyvalent employees in 2010,and achieve significant progress with the remaining 114currently receiving training.

Continuous Education as a Principle

As part of Fransabank’s vision in encouraging employeesto further develop their professional skills, the HumanResources Division has, for many years, committeditself in offering financial support to all employeesinterested in pursuing a professional certification (suchas CPA, FRM, CIA, CISA, CFA, among others) as well asgraduate studies (MBA, MS, MA, PHD, etc.) in any fieldrelevant to banking and directly related to the jobcurrently held by the staff member, or related to his/hercareer path. Therefore, HRD provides eligibleemployees financial facilities equivalent to 40 salariesreimbursed over 10 years with zero interest.

Continuous education loans amounting to LBP 86.3 millionwere offered since the program was launched, andincludes, in 2009, 4 new files in addition to supplementaryloans for 13 previous profiles.

Moreover, in accordance with BDL Circular 103 thatstates that employees holding specific positions need tobe categorized into exempted or non-exempted, withthe latter organized into five main groups (A, B, C, D andE), Fransabank’s Training & Development Departmentassessed that there was a grand total of 256 employeesrequiring certifications, with 181 staff members comingfrom branches, and the remaining 75 hailing fromdepartments.

Continuous TrainingFransabank Subsidiaries and Associate

The HRD is dedicated to continuously assist, improve,and enhance the HR processes and activities of oursubsidiaries and associate banks. During 2009, theHuman Resources Division trained 21 new hires forFransabank Syria, 4 employees from our Belarussiansubsidiary, Fransabank OJSC, and offered rotationaltraining for the Head of Iraq’s Al Rafidein BankCommercial Management Department.

Moreover, we conducted comprehensive and customizedtraining for each new Syrian hire and employee,

Population Growth1400

981

1031

1049 11

56 1220 12

97

2004

200

0

400

600

800

1000

1200

2005 2006 2007 2008 2009

8

Turnover Rate

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

4

4.54.39

5.79

4.71

5.24

5.71

5.67

7.50

4.844.69

6.50

5

5.5

6

6.5

7

7.5

26%

23%15%

15%

17%

4%


BekaaBeirut &Suburbs

SouthAley & Chouf

Training for Polyvalence by Region - 2009


Management Report


permitting each staff member to accomplish his dutiesas per function and position. Numerous FransabankSyria staff members came to receive training inLebanon, and trainers from Fransabank SAL visitedSyria and taught seminars there as well. Also, manyFransabank Al Djazaïr employees benefitted from thesame type of instruction as well as special orientation,both locally and in our Beirut premises.

Information & Communication Technology

The ICT department is continuing the path to supportthe business to stay at the forefront by using latesttechnology to advance its systems and provide adiversified portfolio of banking products and high qualityservices to its customers. Improving employee’sproductivity and efficiency is a non-stop mission thatstarted a couple of years ago and still one of the maingoals of 2010. Advanced communication, and collaborationtools and applications to automate more businessprocesses are being implemented. Improving overallsystems security and availability has the highest priorityas well as expanding our branch network and upgradingour major business applications and systems to cater forexcellent customer services and wider geographicaloutreach.

A new and advanced Call center / CRM solution wasimplemented during 2009 and was officially launched onMarch 8, 2010. The new solution allows us to betterunderstand our customer’s needs by having a 360 degreesview of our customers to identify and target potentialmarket segments and improve customer value, satisfaction,profitability and retention.

An advanced credit cards management system to caterfor new and improved credit card products and servicesis also under implementation. EMV support for bothVisa and MasterCard has been added to our core ATMswitch and ATM machines. Issuance of chip cards for allour products will start soon.

The ICT department is in the process of implementing acomprehensive and integrated Enterprise ResourcePlanning application which is based around financial,human resource, procurement, order management,fixed asset life cycle management, maintenance and

project management. The new system allows the HRdepartment to attain well-managed human resources bydevoting their time and energy to attracting, training,deploying, assessing and rewarding the organization’sstaff more effectively; The ERP solution will also assistthe administration department to fully automate andbetter manage the full life cycle of fixed assets,procurement process, maintenance, and the completefinancial aspect from purchase orders, contracts handling,to payable and receivable. Our E-banking servicescontinued to improve in terms of additional functionalityand compliance with latest international regulations.Extending the Internet banking services to support FIB isreaching its final phase, also providing this services toFransabank Syria is under implementation. SMS servicesis under constant improvement to support moreapplications and additional types of alerts to ourcustomers and improving the availability and resiliencyof our servers.

Improving information sharing and collaborationamongst Fransabank employees was one of the keyinitiatives started during 2009. A new unified messagingand communication infrastructure, including SharePoint,Exchange and Unified messaging is in its final stage ofimplementation and deployment. This service will beoffered to all Fransabank employees in headquartersand branches by the end of 2010. It is worth noting thatFransabank, the leader in adopting Windows 2008 R2technology in the ME region (testimony of Microsoft).

During 2009-2010 we continue our Information technologystrategy to adopt the latest innovation in IT architecture,to consolidate our services and information and itsmanagement in order to improve its security, availabilityto our customers. A study for a comprehensive disasterrecovery and business continuity solution has beenconcluded. The study provided a range of options forbusiness continuity and disaster recovery whichencompassed local and remote replication capabilitiesto help respond quickly to virtually any type of outages,disaster, emergency, or disruption, while making thecomputing environment more productive.

ICT Division is playing a major role in the implementationof new systems and infrastructure improvement ofFransabank subsidiaries in Syria, Algeria and Belarus.


56

Management Report


Beginning 2009 an important decision was made toacquire a new banking solution. The ICT in collaborationwith other departments is in the process of implementingthe new solution which is expected to have tremendousimpact on providing diversified products and improvedcustomers services.

At the organizational level, the ICT department hascontinued with the improvement of our IT work force byproviding extensive training for our staff to strengthentheir capabilities and skills. In addition, more highlyskilled individuals were recruited to enrich the skill setand overall capability of the ICT division to fully supportand serve the business strategy and users community ofthe Bank.


To the ShareholdersFransabank SALBeirut, Lebanon

Report on the Financial Statements

We have audited the accompanying consolidated statement offinancial position of Fransabank SAL, and its subsidiaries (The“Group”) which comprise the consolidated statement of financialposition as at December 31, 2009, and the consolidated incomestatement, the consolidated statement of comprehensive income,consolidated statement of changes in equity and the consolidatedstatement of cash flows for the year then ended, and a summary ofsignificant accounting policies and other explanatory notes.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentationof these consolidated financial statements in accordance withInternational Financial Reporting Standards. This responsibilityincludes: designing, implementing and maintaining internal controlrelevant to the preparation and fair presentation of financialstatements that are free from material misstatement, whether due tofraud or error; selecting and applying appropriate accounting policies;and making accounting estimates that are reasonable in thecircumstances.

Auditor’s Responsibility

Our responsibility is to express an opinion on these consolidatedfinancial statements based on our audit. We conducted our audit inaccordance with International Standards on Auditing. Those standardsrequire that we comply with ethical requirements and plan andperform the audit to obtain reasonable assurance whether thefinancial statements are free from material misstatement.

Independant Auditors’ Report


60

An audit involves performing procedures to obtain audit evidenceabout the amounts and disclosures in the financial statements, withinthe framework of local banking laws. The procedures selected dependon the auditor’s judgment, including the assessment of the risks ofmaterial misstatement of the financial statements, whether due tofraud or error. In making those risk assessments, the auditor considersinternal control relevant to the entity’s preparation and fair presentationof the financial statements in order to design audit procedures that areappropriate in the circumstances, but not for the purpose of expressingan opinion on the effectiveness of the entity’s internal control. Anaudit also includes evaluating the appropriateness of accountingpolicies used and the reasonableness of accounting estimates madeby management, as well as evaluating the overall presentation of thefinancial statements.

We believe that the audit evidence we have obtained is sufficient andappropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the consolidated financial statements present fairly, inall material respects, the consolidated financial position of FransabankSAL as of December 31, 2009, and of its financial performance and itsconsolidated cash flows for the year then ended in accordance withInternational Financial Reporting Standards.

Beirut, LebanonMarch 31, 2010

Independant Auditors’ Report

B. D. O. Deloitte & Touche


ASSETS

LBP’000 Notes 2009

Cash and Central Banks 5 2,652,897,068

Deposits with banks and financial institutions 6 1,499,152,008

Trading assets 7 95,821,389

Loans to banks 8 58,817,514

Loans and advances to customers 9 3,480,742,204

Available for sale investments 10 6,359,346,312

Held to maturity investments 10 1,411,773,814

Customers' liability under acceptances 11 113,482,239

Investments in associates 12 47,039,352

Assets acquired in satisfaction of loans 13 189,101,540

Property and equipment 14 192,333,734

Intangible assets 15 55,651,275

Other assets 16 143,872,028

TOTAL ASSETS 16,300,030,477

FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK

Documentary and commercial letters of credit 39 401,435,169

Guarantees and standby letters of credit 39 366,326,284

Forward contracts 375,876,728

2008

2,667,150,819

914,570,668

85,539,871

69,589,736

2,586,188,278

4,005,987,296

1,761,865,859

99,264,760

48,674,046

205,317,590

156,000,627

55,170,426

89,875,224

12,745,195,200

240,413,584

259,439,924

85,431,302

Financial StatementsConsolidated Statement of Financial Positionas at December 31,


62

LIABILITIES


Deposits and borrowings from banks 17 330,547,147

Liabilities designated at fair value through profit or loss 18 162,712,400

Customers' accounts at amortized cost 19 13,424,411,818

Customers' acceptance liability 11 113,482,239

Other borrowings 20 412,820,091

Other liabilities 21 198,618,966

Provisions 22 37,972,227

TOTAL LIABILITIES 14,680,564,888

EQUITYShare capital 23 420,000,000

Shareholders’ cash contribution to capital 24 17,113,885

Preference shares 25 150,750,000

Reserves 26 123,814,947

Special reserve 27 2,547,675

Cumulative change in fair value of investment securities 28 304,396,470

Retained earnings 242,390,633

Profit for the year 30 144,760,203

Equity attributable to the owners of the Bank 1,405,773,813

Non-controlling interests 29 213,691,776

TOTAL EQUITY 1,619,465,589

TOTAL LIABILITIES AND EQUITY 16,300,030,477

2008

156,805,260

163,587,785

10,614,499,454

99,264,760

384,639,705

148,522,448

37,376,770

11,604,696,182

420,000,000

17,113,885

150,750,000

96,185,040

-

36,968,563

169,449,293

124,892,599

1,015,359,380

125,139,638

1,140,499,018

12,745,195,200

Financial StatementsConsolidated Statement of Financial Positionas at December 31,



Interest income 32 887,941,701

Interest expense 33 (571,954,589)

Net interest income 315,987,112

Fee and commission income 34 74,751,952

Fee and commission expense 35 (23,072,609)

Net fee and commission income 51,679,343

Net interest and other gain / (loss) on trading portfolio 36 17,264,688

Net interest and other gain / (loss) on financial

instruments designated at fair value through profit or loss 37 (9,855,561)

Other operating income 38 46,581,360

Net financial revenues 421,656,942

Allowance for impairment of loans and advances 9 (5,020,459)

Write-back of impairment loss on loans and advances 9 11,747,971

Bad debts expense (1,214,349)

Write-back of discount on loan portfolio purchased 9 751,765

Write-back of impairment loss on loans off financial position 598,924

Net financial revenues after impairment of loans and advances 428,520,794

Staff costs (136,801,983)

Administrative expenses (70,040,742)

Depreciation and amortization 14, 15, 16 (29,748,850)

Provisions for charges (net) 22 (342,929)

Profit before income tax 191,586,290

Income tax expense 21 (28,686,061)

Deferred tax on associates and subsidiaries' profits (5,785,026)

PROFIT FOR THE YEAR 30 157,115,203

Attributable to:

Owners of the Bank 30 144,760,203

Non-controlling interests 30 12,355,000

2008

805,085,929

(514,884,926)

290,201,003

62,505,489

(20,272,251)

42,233,238

1,447,882

(9,191,961)

62,092,338

386,782,500

(29,033,711)

16,836,727

(3,264,825)

6,248,077

1,824,769

379,393,537

(117,289,142)

(67,411,353)

(27,418,250)

(1,929,960)

165,344,832

(26,666,129)

(5,517,534)

133,161,169

124,892,599

8,268,570


Consolidated Income Statementfor the Financial Year ended December 31,


64


Profit for the year 157,115,203

Other comprehensive income:

Net change in fair value of available for saleinvestment securities 336,822,110

Change in fair value recycled to profit and loss 38 (3,425,253)

Net change in currency translation adjustment 2,624,526

Unrealized gain / (losses) of associates reported directly 12 1,800,062

Deferred tax (48,414,570)

289,406,875

TOTAL COMPREHENSIVE INCOME 446,522,078

Attributable to:

Owners of the Bank 416,612,698

Non-controlling interest 29,909,380

2008

133,161,169

42,064,912

(1,015,442)

(6,955,373)

(1,773,391)

(5,916,544)

26,404,162

159,565,331

148,302,607

11,262,724


Consolidated Statement of Comprehensive Incomefor the Financial Year ended December 31,


CashContribution Preference

LBP’000 Capital to Capital Shares Reserves

Balance as at January 1, 2008 420,000,000 17,113,885 - 84,419,998

Dividends paid - - - -

Issuance of preference shares - - 150,750,000 -

Effect of partial disposal of equity tonon-controlling interests - - - -

Cash invested by non-controlling interestsin Fransabank Syria - - - -

Prior year adjustment of associates (Note 12) - - - (144,306)

Other movement - - - ( 51,869)

Allocation of 2007 profit - - - 23,498,842

Reallocation between reserves and retained earnings - - - (4,582,252)

Comprehensive income for the year 2008 - - - (6,955,373)

Balance as at December 31, 2008 420,000,000 17,113,885 150,750,000 96,185,040

Dividends paid – Ordinary shares - - - -

Dividends paid – Preference shares - - - -

Effect of acquisition of additional equity interest - - - 391,033

Deferred liabilities - - - -

Other movement - - - 3,134

Allocation of 2008 profit - - - 26,025,901

Reallocation between reserves and retained earnings - - - (1,414,687)

Comprehensive income for the year 2009 - - - 2,624,526

BALANCE AS AT DECEMBER 31, 2009 420,000,000 17,113,885 150,750,000 123,814,947

Equity Attributable to


Consolidated Statement of Changes in Equityfor the Financial Year ended December 31, 2009


66

CumulativeChange in

Fair Value of Non-Special Retained Profit Investment Total Controlling TotalReserve Earnings (Group) Securities Group Equity Interests Equity

- 120,238,602 90,900,672 4,829,791 737,502,948 43,004,926 780,507,874

- - ( 21,000,000) - ( 21,000,000) - (21,000,000)

- - - - 150,750,000 - 150,750,000

- - - - - 42,456,631 42,456,631

- - - - - 28,490,654 28,490,654

- - - - (144,306) - (144,306)

- - - - (51,869) (75,297) (127,166)

- 46,401,830 (69,900,672) - - - -

- 4,582,252 - - - - -

- (1,773,391) 124,892,599 32,138,772 148,302,607 11,262,724 159,565,331

- 169,449,293 124,892,599 36,968,563 1,015,359,380 125,139,638 1,140,499,018

- - (21,000,000) - (21,000,000) (3,687,105) (24,687,105)

- - (7,537,500) - (7,537,500) - (7,537,500)

- (248,257) - - 142,776 61,278,990 61,421,766

- 2,275,411 - - 2,275,411 911,874 3,187,285

- (82,086) - - (78,952) 138,999 60,047

2,547,675 67,781,523 (96,355,099) - - - -

- 1,414,687 - - - - -

- 1,800,062 144,760,203 267,427,907 416,612,698 29,909,380 446,522,078

2,547,675 242,390,633 144,760,203 304,396,470 1,405,773,813 213,691,776 1,619,465,589

the Owners of the Parent


Consolidated Statement of Changes in Equityfor the Financial Year ended December 31, 2009


2008

165,344,832

5,252,641(6,268,558)27,419,8367,388,963

--

68,127-

(6,710,998)--

8,000,539(27,370,728)524,144,640

(810,480,021)(6,821,513)

(120,032,240)(921,988)

(42,792,087)(456,741,367)

(5,361)(7,041,413)

(106,933,911)(16,289,561)

18,409,7681,448,984,521

(203,359)20,018,71721,489,347(1,809,605)

756,131,461(516,552,926)

753,836,9138,435,754

(17,470,525)984,380,677

69,708--

(547,359,394)(58,653,961)(5,440,387)

(48,479,517)(5,257,063)83,462,394

(581,658,220)

150,750,000(91,813,088)

28,490,654(21,000,000)

66,427,566

469,150,02326,299,065(2,563,403)

-1,227,068,9141,719,954,599


CASH FLOWS FROM OPERATING ACTIVITIESProfit for the year before tax 191,586,291Adjustments for:

Unrealized (gain) / loss on trading assets 36 (10,889,336)Share in profits of associates 12 (7,579,190)Depreciation, amortization and write-off 14,15,16 29,748,850Impairment allowance of loans and advances to customers 9 (7,479,277)Impairment allowance of banks 6 131,375Impairment allowance of investment in securities 10 126,269Gain / (loss) on disposal of property and equipment (95,832)Loss on disposal of intangible assets 22,975Gain on disposal of assets acquired in satisfaction of loans (13,477,277)Gain on disposal of part of equity interest in an associate (14,100)Gain on increase of equity interest in subsidiary (2,002,191)Provisions 22 3,208,779Gain on disposal of shares in subsidiaries 15 -Interest expense 581,841,712Interest income (893,260,389)Dividend income 36,38 (6,761,844)

(134,893,185)Net decrease / (increase) in trading assets 7 496,188Change decrease / (increase) in loans to banks 8 24,145,268Net increase in loans and advances to customers 9 (861,086,762)Expenses paid on assets acquired in satisfaction of loans 13 -Net increase in other assets 16 (36,239,632)Net increase in compulsory deposits with Central Banks 5 (139,618,102)Net increase / (decrease) in deposits and borrowings from banks 17 48,570,807Net increase in deposits at FVTPL 18 267,757Net increase in deposits at amortized cost 19 2,694,763,431Net decrease / (increase) in pledged deposits 6 4,045,837Net (decrease) / increase in other liabilities 21 (1,441,222)Proceeds from disposal of foreclosed assets 33,519,424Settlement of provisions 22 (2,896,670)

1,629,633,139Interest paid (563,163,116)Interest received 1,100,896,246Dividends received 9,711,098Income tax paid 21 (32,888,207)Net cash provided from operating activities 2,144,189,160

CASH FLOWS FROM INVESTING ACTIVITIESProceeds from disposal of property and equipment 1,306,728Proceeds from disposal of part of equity interest in associate 250,598Paid-up share in subsidiaries 3A (54,453,342)Net increase in investment securities 10 (1,606,106,657)Net increase in placements with banks (76,785,037)Increase in associates 12 -Acquisition of property, plant and equipment 14 (40,903,104)Acquisition of intangible assets 15 (2,214,510)Proceeds from partial sale of interest in subsidiary 15 -Net cash used in investing activities (1,778,905,324)

CASH FLOWS FROM FINANCING ACTIVITIESIssuance of preferred shares 25 -Net increase / (decrease) in other borrowings 20 28,282,793Cash invested by non-controlling interests in subsidiaries 46,409,342Dividends paid 31 (32,224,605)Net cash provided from financing activities 42,467,530

Net increase in cash and cash equivalents 407,751,366Initial cash invested in 2007 in consolidated subsidiary 3A -Unrealized translation adjustment in foreign subsidiaries 4,381,232Cash received from acquiring of subsidiaries 33,441,529Cash and cash equivalents beginning of year 1,719,954,599CASH AND CASH EQUIVALENTS END OF YEAR 41 2,165,528,726


Consolidated Statement of Cash Flowsfor the Financial Year ended December 31,


68

1. GENERAL INFORMATIONFransabank SAL (the “Bank”) is a Lebanese joint-stockcompany registered in the Trade Register under Number25699 and in the Central Bank of Lebanon list of banks undernumber 1. The consolidated financial statements of the Bankcomprise the Bank and its subsidiaries (the “Group”). TheGroup is primarily involved in investment, corporate andretail banking.

The Bank’s registered address is Fransabank Center, Hamra,P.O. Box 11-0393 Beirut, Lebanon.

2. ADOPTION OF NEW AND REVISEDINTERNATIONAL FINANCIAL REPORTINGSTANDARDS (IFRS)

2.1 Standards affecting presentation and disclosure

The following new and revised Standards have been adopted in the current period in these financial statements.Details of other Standards and Interpretations adopted butthat have had no effect on the financial statements are setout in section 2.2:

• IAS 1 (as revised in 2007) Presentation of FinancialStatementsIAS 1 (2007) has introduced terminology changes (includ-ing revised titles for the financial statements) and changesin the format and content of the financial statements.

• Improving disclosures about Financial Instruments(Amendments to IFRS 7 Financial Instruments:Disclosures)The amendments to IFRS 7 expand the disclosuresrequired in respect of fair value measurements and liquidity risk. The Bank has elected not to provide comparative information for these expanded disclosuresin the current year in accordance with the transitionalreliefs offered in these amendments.

2.2 Standards and Interpretations adopted with no effecton the financial statements

The following new and revised Standards andInterpretations have also been adopted in these financialstatements. Their adoption has not had any significantimpact on the amounts reported in these financial statementsbut may affect the accounting for future transactions orarrangements.

• Amendments to IFRS 2 Share-based Payment - VestingConditions and Cancellations The amendments clarify the definition of vestingconditions for the purposes of IFRS 2, introduce theconcept of ‘non-vesting’ conditions, and clarify theaccounting treatment for cancellations.

• Amendments to IAS 32 Financial Instruments:Presentation and IAS 1 Presentation of FinancialStatements - Puttable Financial Instruments andObligations Arising on LiquidationThe revisions to IAS 32 amend the criteria for debt/equityclassification by permitting certain puttable financialinstruments and instruments (or components of instru-ments) that impose on an entity an obligation to deliver toanother party a pro-rata share of the net assets of theentity only on liquidation, to be classified as equity, subjectto specified criteria being met.

• IFRIC 13 Customer Loyalty ProgrammesThe Interpretation provides guidance on how entitiesshould account for customer loyalty programmes byallocating revenue on sale to possible future awardattached to the sale.

• IFRIC 15 Agreements for the Construction of Real Estate The Interpretation addresses how entities should deter-mine whether an agreement for the construction of realestate is within the scope of IAS 11 Construction Contractsor IAS 18 Revenue and when revenue from theconstruction of real estate should be recognized.

•IFRIC 16 Hedges of a Net Investment in a ForeignOperation The Interpretation provides guidance on the detailedrequirements for net investment hedging for certain hedgeaccounting designations.

•Improvements to IFRSs (2008)Amendments to IFRS 5, IAS 1, IAS 16, IAS 19, IAS 20, IAS23, IAS 27, IAS 28, IAS 29, IAS 31, IAS 36, IAS 38, IAS 39,IAS 40 and IAS 41 resulting from the May and October2008 Annual Improvements to IFRSs majority of which areeffective for annual periods beginning on or after 1January 2009.

Notes to the Consolidated Financial Statementsfor the Year ended December 31, 2009


2.3 Standards and Interpretations in issue not yet effective

New Standards and amendments to Standards:

• IFRS 1 (revised) First time Adoption of IFRS and IAS 27(revised) Consolidated and Separate Financial Statements– Amendment relating to Cost of an Investment in aSubsidiary, Jointly Controlled Entity or AssociateEffective for annual periods beginning on or after 1st July 2009

• IFRS 3 (revised) Business Combinations – Comprehensiverevision on applying the acquisition method andconsequential amendments to IAS 27 (revised)Consolidated and Separate Financial Statements, IAS 28(revised) Investments in Associates and IAS 31 (revised)Interests in Joint VenturesEffective for annual periods beginning on or after 1st July 2009

• IAS 39 (revised) Financial Instruments: Recognition andMeasurement – Amendments relating to Eligible HedgedItems (such as hedging inflation risk and hedging withoptions)Effective for annual periods beginning on or after 1st July 2009

• IFRS 2 (revised) Share-based payment – Amendmentrelating to Bank cash-settled Share-based paymentsEffective for annual periods beginning on or after 1st January 2010

• IAS 32 (revised) Financial Instruments: Presentation –Amendments relating to classification of Rights IssueEffective for annual periods beginning on or after 1st February 2010

• IAS 24 Related Party Disclosures – Amendment on disclo-sure requirements for entities that are controlled, jointlycontrolled or significantly influenced by a GovernmentEffective for annual periods beginning on or after 1st January 2011

• IFRS 9 Financial Instruments: Classification andMeasurement (intended as complete replacement for IAS39 and IFRS 7)Effective for annual periods beginning on or after 1st January 2013

• Amendments to IFRS 2, IFRS 5, IFRS 8, IAS 1, IAS 7, IAS17, IAS 18, IAS 36, IAS 38 and IAS 39 resulting from April2009 Annual Improvements to IFRSs.Majority effective for annual periods beginning on or after1st January 2010

The directors anticipate that the adoption of all of the aboveStandards and Interpretations will have no material impacton the financial statements of the Group in the period ofinitial application, except for IFRS 9 Financial instruments:“Classification and Measurement” for which directors havenot yet had an opportunity to consider the potential impactof the adoption/early adoption of this standard.

3. SIGNIFICANT ACCOUNTING POLICIES

Statement of Compliance

The consolidated financial statements have been preparedin accordance with International Financial ReportingStandards (IFRSs).

Basis of Measurement

The consolidated financial statements have been preparedon the historical cost basis except for the following:

- Land and buildings acquired in years prior to 1993 aremeasured at their revalued amounts based on marketprices prevailing during 1995.

- Financial assets and liabilities designated at fair valuethrough profit and loss.

- Available for sale financial assets are measured at fair value.

- Derivative financial instruments are measured at fair value.

The principal accounting policies are set out below:

A. Basis of Consolidation:

The consolidated financial statements of Fransabank SALincorporate the financial statements of the Bank andenterprises controlled by the Bank (its subsidiaries). Controlis achieved when, among other things, the Bank has thepower to govern the financial and operating policies of anentity so as to obtain benefits from its activities.

The results of subsidiaries acquired or disposed of duringthe year are included in the consolidated income statementfrom the effective date of acquisition or up to the effectivedate of disposal, as appropriate.

Notes to the Consolidated Financial Statements

for the Year ended December 31, 2009


70

• During 2009, the Bank acquired an additional equityinterest of 0.77% in its subsidiary BLC Bank SAL.

• During 2009, the Bank increased its share in the equitystake of Lebanese Leasing Company SAL, Sogefon SAL,Express SARL and Fransabank OJSC by 2.49%, 7.38%,31.35% and 44.20% respectively through additionalinvestment of capital.

Where necessary, adjustments are made to the financialstatements of the subsidiaries to bring their accountingpolicies into line with those used by other entities of theGroup.

All intra-group transactions balances, income and expensesare eliminated in full on consolidation.

Non-controlling interests in the net assets (excluding good-will) of consolidated subsidiaries are identified separatelyfrom the Group’s equity therein. Non-controlling interestsconsist of the amount of those interests at the date of theoriginal business combination and their share of changes inequity since the date of the combination. Losses applicableto the non-controlling interests in excess of their interest inthe subsidiary’s equity are allocated against the interests ofthe Group except to the extent that the non-controllinginterests have a binding obligation and are able to make anadditional investment to cover the losses.

B. Business Combinations:

Acquisitions of subsidiaries are accounted for using theacquisition method. The cost of the business combination ismeasured as the aggregate of the fair values (at the date ofexchange) of assets given, liabilities incurred or assumed,and equity instruments issued by the Group in exchange forcontrol of the acquiree, plus any costs directly attributable tothe business combination. The acquiree’s identifiable assets,liabilities and contingent liabilities that meet the conditionsfor recognition under IFRS 3 Business Combinations arerecognized at their fair values at the acquisition date, exceptfor non-current assets (or disposal groups) that are classifiedas held for sale in accordance with IFRS 5 Non-currentAssets Held for Sale and Discontinued Operations, which arerecognized and measured at fair value less costs to sell.

Goodwill arising on acquisition is recognized as an asset andinitially measured at cost, being the excess of the cost of thebusiness combination over the Group’s interest in the net fairvalue of the identifiable assets, liabilities and contingentliabilities recognized. If, after reassessment, the Group’s interest in the net fair value of the acquiree’s identifiableassets, liabilities and contingent liabilities exceeds the cost ofthe business combination, the excess is recognized immediately in profit or loss.

The interest of non-controlling shareholders in the acquireeis initially measured at the non-controlling interest’s proportion of the net fair value of the assets, liabilities andcontingent liabilities recognized.

C. Foreign Currencies:

The consolidated financial statements are presented inLebanese Pound which is the Group’s reporting currency.However, the primary currency of the economic environmentin which the Group operates (functional currency) is the U.S.Dollar.

In preparing the financial statements of the individual entities,transactions in currencies other than the Group’s reportingcurrency (foreign currencies) are recorded at the rates ofexchange prevailing at the dates of the transactions. At eachstatement of financial position date, monetary items denominated in foreign currencies are retranslated at therates prevailing at that date. Non-monetary items carried atfair value that are denominated in foreign currencies areretranslated at the rates prevailing at the date when the fairvalue was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency arenot retranslated.

Exchange differences are recognized in profit or loss in theperiod in which they arise except for exchange differenceson transactions entered into in order to hedge certain foreign

Fransa Invest Bank SAL Lebanon 99.99 99.99 SpecializedBank

Fransabank France SA France 59.98 59.98 Banking

Lebanese Leasing Lebanon 87.47 84.98 Financial Company SAL Leasing

Switch and Electronics Lebanon 99.60 99.60 Financial Services SAL Services

Sogefon SAL Lebanon 99.88 92.50 Real Estate Company

Fransabank Insurance Lebanon 99.70 99.70 InsuranceServices Co. SAL

Fransabank El-Djazaïr SPA Algeria 67.99 67.96 Banking

BLC Bank SAL & its Lebanon 74.81 74.04 BankingSubsidiaries (BLC Services SAL, BLC Finance SAL & Lati Bank SAL)

Express SARL Lebanon 98.35 67.00 Restaurant

Fransabank Syria Syria 48.00 48.00 Banking

Fransabank OJSC Belarus 62.21 - Banking

Percentage ofCountry of Ownership Business

Company Incorporation 2009 2008 Activity% %

The consolidated subsidiaries consist of:




currency risks, and exchange differences on monetary itemsreceivable from or payable to a foreign operation for whichsettlement is neither planned nor likely to occur, which formpart of the net investment in a foreign operation, and whichare recognized in the foreign currency translation reserveand recognized in profit or loss on disposal of the netinvestment.

For the purpose of presenting consolidated financialstatements, the assets and liabilities of the Group’s foreignoperations are expressed in Lebanese Pound usingexchange rates prevailing at the statement of financialposition date. Income and expense items are translated atthe average exchange rates for the period. Exchangedifferences arising, if any, are classified as equity andrecognized in the Group’s foreign currency translationreserve. Such exchange differences are recognized in profitor loss in the period in which the foreign operation isdisposed of.

D. Financial Assets and Liabilities:

Recognition and Derecognition:The Group initially recognizes loans and advances, deposits,debt securities issued and subordinated liabilities on the datethat they are originated. All other financial assets andliabilities are initially recognized on the trade date at whichthe Group becomes a party to the contractual provisions ofthe instrument.

The Group derecognizes a financial asset when thecontractual rights to the cash flows from the asset expire, orit transfers the rights to receive the contractual cash flows onthe financial asset in a transaction in which all the risks andrewards of ownership of the financial asset are transferred.

Debt securities exchanged against securities with longermaturities with similar risks, and issued by the same issuer,are not derecognized because they do not meet theconditions for derecognition. Premiums and discountsderived from the exchange of said securities are deferred tobe amortized as a yield enhancement on a time proportionatebasis, over the period of the extended maturities.

When the Group enters into transactions whereby it transfersassets recognized on its statement of financial position andretains all risks and rewards of the transferred assets, thenthe transferred assets are not derecognized, for example,securities lending and repurchase transactions.

The Group derecognizes a financial liability when itscontractual obligations are discharged, cancelled or expired.

Offsetting:Financial assets and liabilities are set-off and the net amountis presented in the statement of financial position when, andonly when, the Group has a legal right to set-off the amountsor intends either to settle on a net basis or to realize the assetand settle the liability simultaneously.

Fair Value Measurement:Fair value is the amount agreed to exchange an asset or tosettle a liability between a willing buyer and a willing seller inan arm’s length transaction.

When published price quotations exist, the Group measuresthe fair value of a financial instrument that is traded in anactive market using quoted prices for that instrument. A financial instrument is regarded as quoted in active marketif quoted prices are readily and regularly available and thoseprices represent actual and regularly occurring markettransactions on an arm’s length basis.

If the market for a financial instrument is not active, the Groupestablishes fair value by using valuation techniques.Valuation techniques include observable market data aboutthe market conditions and other factors that are likely toaffect the instrument’s fair value. The fair value of a financialinstrument is based on one or more factors such as the timevalue of money and the credit risk of the instrument andadjusted for any other factors such as liquidity risk.

Impairment of Financial Assets:Financial assets, other than those at fair value through profitor loss, are assessed for indicators of impairment at the endof each reporting period. Financial assets are impairedwhere there is objective evidence that, as a result of one ormore events that occurred after the initial recognition of theasset, a loss event has occurred which has an impact on theestimated future cash flows of the asset.

Objective evidence that an impairment loss related tofinancial assets has been incurred can include informationabout the debtors’ or issuers’ liquidity, solvency andbusiness and financial risk exposures and levels of andtrends in delinquencies for similar financial assets, taking intoaccount the fair value of collateral and guarantees.

For investments in equity securities, a significant orprolonged decline in fair value below cost is objectiveevidence of impairment.

Impairment losses on assets carried at amortized cost aremeasured as the difference between the carrying amount of




72

the financial assets and the present value of estimated futurecash flows discounted at the original effective interest rate.Losses are recognized in profit or loss and reduce thecarrying amount of the asset to its estimated recoverableamount. If, in a subsequent period, the amount of theimpairment loss decreases, the previously recognizedimpairment loss is reversed through profit or loss to theextent that the carrying amount of the investment at the datethe impairment is reversed does not exceed what the amortized cost would have been had the impairment notbeen recognized.

In respect of available for sale investment securities, thepreviously accumulated losses recorded under equity arerecognized in profit or loss in case of objective evidenceof impairment. Any increase in fair value subsequent toan impairment loss is not recognized in profit or loss foravailable for sale equity securities. Any increase in fairvalue subsequent to an impairment loss is recognized inprofit or loss for available for sale debt securities.

Designation at Fair Value Through Profit or Loss:The Group has designated financial assets and liabilities atfair value through profit or loss when either:

• The assets or liabilities are managed, evaluated andreported internally on a fair value basis;

• The designation eliminates or significantly reduces anaccounting mismatch which would otherwise arise; or

• The asset or liability contains an embedded derivative thatsignificantly modifies the cash flows that would otherwisebe required under the contract.

Financial assets and liabilities designated at fair value throughprofit or loss are initially recognized and subsequentlymeasured at fair value.

A description of the basis for each designation at fair valuethrough profit or loss is set out in the note for the relevantasset or liability class.

E. Investment Securities:

Investment securities are initially measured at fair value plusincremental direct transaction costs, and subsequentlyaccounted for depending on their classification as either heldto maturity or available for sale.

Held to Maturity Investment Securities:Held to maturity investments are non-derivative assets withfixed or determinable payments and fixed maturity that the

Group has the positive intent and ability to hold to maturity,and which are not designated at fair value through profit orloss or available for sale.

Held to maturity investments are carried at amortizedcost using the effective interest method. Any sale orreclassification of a significant amount of held to maturityinvestments not close to their maturity would result in thereclassification of all held to maturity investments as available for sale, and prevent the Group from classifyinginvestment securities as held to maturity for the current andthe following two financial years, unless the amount of held-of held to maturity is insignificant, or close to maturity,or in case of significant deterioration in the issuer credit worthiness, or change in statutory or regulatory requirementor in major business combination.

Available for Sale Investment Securities:Available for sale investments are non derivativeinvestments that are not designated as another categoryof financial assets. Unquoted equity securities whose fairvalue cannot be reliably measured are carried at cost. Allother available for sale investments are carried at fairvalue and unrealized gains or losses are included in othercomprehensive income and accumulated under equity.

F. Trading Assets and Liabilities:

Trading assets and liabilities are initially recognized andsubsequently measured at fair value. Transaction costs areincluded in the income statement. Subsequent changes infair value of these securities are recognized immediately inprofit or loss.

G. Loans and Advances:

Loans and advances are non-derivative financial assets withfixed or determinable payments that are not quoted in anactive market. Loans and advances are disclosed at amortized cost net of unrealized interest and after provisionfor credit losses where applicable. Bad and doubtful debtsare carried on a cash basis because of doubts and the probability of non-collection of principal and/or interest.

H. Derivative Financial Instruments:

Derivatives are initially recognized at fair value at the date aderivative contract is entered into and are subsequentlyremeasured to their fair value at each statement of financialposition date. The resulting gain or loss is recognized inprofit or loss immediately unless the derivative is designatedand effective as a hedging instrument, in which event thetiming of the recognition in profit or loss depends on thenature of the hedge relationship. The Group designates




certain derivatives as either hedges of the fair value ofrecognized assets or liabilities or firm commitments (fairvalue hedges), hedges of highly probable forecasttransactions or hedges of foreign currency risk of firmcommitments (cash flow hedges), or hedges of netinvestments in foreign operations.

Embedded Derivatives:Derivatives embedded in other financial instruments or otherhost contracts are treated as separate derivatives when theirrisks and characteristics are not closely related to those of thehost contracts and the host contracts are not measured at fairvalue with changes in fair value recognized in profit or loss.

Hedge Accounting:The Group designates certain hedging instruments,which include derivatives, embedded derivatives andnon-derivatives in respect of foreign currency risk, aseither fair value hedges, cash flow hedges, or hedges ofnet investments in foreign operations. Hedges of foreignexchange risk on firm commitments are accounted for ascash flow hedges.

At the inception of the hedge relationship, the entitydocuments the relationship between the hedginginstrument and the hedged item, along with its riskmanagement objectives and its strategy for undertakingvarious hedge transactions. Furthermore, at the inceptionof the hedge and on an ongoing basis, the Groupdocuments whether the hedging instrument that is usedin a hedging relationship is highly effective in offsettingchanges in fair values or cash flows of the hedged item.

Fair Value Hedge:Changes in the fair value of derivatives that are designatedand qualify as fair value hedges are recorded in profit or lossimmediately, together with any changes in the fair value ofthe hedged item that are attributable to the hedged risk. Thechange in the fair value of the hedging instrument and thechange in the hedged item attributable to the hedged risk arerecognized in the line of the income statement relating to thehedged item.

Hedge accounting is discontinued when the Group revokesthe hedging relationship, the hedging instrument expires oris sold, terminated, or exercised, or no longer qualifies forhedge accounting. The adjustment to the carrying amount ofthe hedged item arising from the hedged risk is amortised toprofit or loss from that date.

Cash Flow Hedge:The effective portion of changes in the fair value ofderivatives that are designated and qualify as cash flowhedges are included in other comprehensive income andaccumulated under equity. The gain or loss relating to theineffective portion is recognized immediately in profit or loss,and is included in the “other gains and losses” line of theincome statement.

Amounts previously accumulated in equity are recycled inprofit or loss in the periods when the hedged item isrecognized in profit or loss, in the same line of the incomestatement as the recognized hedged item. However, whenthe forecast transaction that is hedged results in therecognition of a non-financial asset or a non-financial liability,the gains and losses previously deferred in equity aretransferred from equity and included in the initialmeasurement of the cost of the asset or liability.

Hedge accounting is discontinued when the Group revokesthe hedging relationship, the hedging instrument expires oris sold, terminated, or exercised, or no longer qualifies forhedge accounting. Any cumulative gain or loss deferred inequity at that time remains in equity and is recognized whenthe forecast transaction is ultimately recognized in profit orloss. When a forecast transaction is no longer expected tooccur, the cumulative gain or loss that was deferred in equity is recognized immediately in profit or loss.

I. Investments in Associates:

An associate is an entity over which the Group has significantinfluence and that is neither a subsidiary nor an interest in ajoint venture. Significant influence is the power to participatein the financial and operating policy decisions of the investeebut is not control or joint control over those policies.

Investments in associates over which the Group hassignificant influence are accounted for at cost and reflectedon the basis of the equity method of accounting in theconsolidated financial statements.

J. Financial Guarantees:

Financial guarantees contracts are contracts that require theGroup to make specified payments to reimburse the holderfor a loss it incurs because a specified debtor fails to makepayment when due in accordance with the terms of a debtinstrument. These contracts can have various judicial forms(guarantees, letters of credit, credit-insurance contracts).




74

Financial guarantee liabilities are initially measured at theirfair value, and subsequently carried at the higher of thisamortized amount and the present value of any expectedpayment (when a payment under the guarantee has becomeprobable). Financial guarantees are included within other lia-bilities.

K. Property and Equipment:

Property and equipment except for buildings acquired priorto 1993 are stated at historical cost, less accumulated depreciation and impairment loss, if any. Buildings acquiredprior to 1993 are stated at their revalued amounts, based onmarket prices prevailing during 1995 less accumulateddepreciation and impairment loss, if any. Resultingrevaluation surplus is reflected under “Reserves” in equity.

Depreciation is recognized so as to write off the cost orvaluation of property and equipment, other than land andadvance payments on capital expenditures less their residualvalues, if any, over the estimated useful lives of the relatedassets using the straight-line method as follows:

YearsBuildings 50Office improvements and installations 5 - 17Furniture, equipment and machines 5 - 12Computer equipment 3 - 5Vehicles 5 - 10

The estimate useful life, residual values and depreciationmethod is reviewed at each year end, with the effect of anychanges in estimate accounted for on a prospective basis.

The gain or loss arising on the disposal or retirement of anitem of property and equipment is determined as thedifference between the sales proceed and the carryingamount of the asset and is recognized in profit or loss.

L. Intangible Assets:

Computer Software:Intangible assets consisting of computer software areamortized over a period of 3 to 5 years and are subject toimpairment testing. Subsequent expenditure on softwareassets is capitalized only when it increases the futureeconomic benefits embodied in the specific asset to which itrelates. All other expenditure is expensed as incurred.

Goodwill: Goodwill represents the excess of the cost of acquisitionover the Group’s interest in the net fair value of theidentifiable assets, liabilities and contingent liabilities of theacquiree. When the excess is negative, it is recognizedimmediately in profit or loss.

Goodwill is measured at cost less accumulated impairmentlosses.

M. Assets Acquired in Satisfaction of Loans:

Real estate property acquired through the enforcement ofsecurity over loans and advances to customers is measuredat cost less any accumulated impairment losses.The acquisition of such assets is regulated by the local bankingauthorities which require the liquidation of these assets within 2 years from acquisition. In case of default ofliquidation the Group’s lead regulator requires an appro-priation from the yearly net income to a special reservethat is reflected under equity.

N. Impairment of Tangible and Intangible Assets (ExceptGoodwill):

At each statement of financial position date, the Groupreviews the carrying amounts of its tangible and intangibleassets to determine whether there is any indication thatthose assets have suffered an impairment loss. If any suchindication exists, the recoverable amount of the asset isestimated in order to determine the extent of the impairmentloss (if any).

Recoverable amount is the higher of fair value less costs tosell and value in use. In assessing value in use, the estimatedfuture cash flows are discounted to their present valueusing a pre-tax discount rate that reflects current marketassessments of the time value of money and the risksspecific to the asset for which the estimates of future cashflows have not been adjusted.

If the recoverable amount of an asset is estimated to be lessthan its carrying amount, the carrying amount of the asset isreduced to its recoverable amount. An impairment loss isrecognized immediately in profit or loss, unless the relevantasset is carried at a revalued amount, in which case theimpairment loss is treated as a revaluation decrease.

Where an impairment loss subsequently reverses, thecarrying amount of the asset (cash-generating unit) isincreased to the revised estimate of its recoverable amount,but so that the increased carrying amount does not exceedthe carrying amount that would have been determined had




no impairment loss been recognized for the asset (cash-generating unit) in prior years. A reversal of an impairmentloss is recognized immediately in profit or loss, unless therelevant asset is carried at a revalued amount, in which casethe reversal of the impairment loss is treated as a revaluationincrease.

O. Impairment of Goodwill:

The Group determines whether goodwill is impaired at leaston an annual basis.

P. Employees' Benefits:

Obligations for contributions to defined employees’ benefitsare recognized as an expense on a current basis.

Employees' End-of-Service Indemnities: (Under the LebaneseJurisdiction)The provision for staff termination indemnities is basedon the liability that would arise if the employment of allthe staff were terminated consensually at the statementof financial position date. This provision is calculated inaccordance with the directives of the Lebanese SocialSecurity Fund and Labor laws based on the number ofyears of service multiplied by the monthly average of thelast 12 months remunerations and less contributions paidto the Lebanese Social Security National Fund andinterest accrued by the Fund.

Defined Benefit Plans: (Under other Jurisdictions)Obligations in respect of defined benefit pension plans iscalculated separately for each plan by estimating the amountof future benefit that employees have earned in return fortheir service in the current and prior periods; that benefit isdiscounted to determine its present value, and anyunrecognized past service costs and the fair value of any planassets are deducted.

Q. Provisions:

Provision is recognized if, as a result of a past event, theGroup has a present legal or constructive obligation that canbe estimated reliably, and it is probable that an outflow ofeconomic benefits will be required to settle the obligation.

R. Revenue and Expense Recognition:

Interest income and expense are recognized on an accrualbasis, taking account of the principal outstanding and the rateapplicable, except for non-performing loans and advancesfor which interest income is only recognized upon realization.Interest income and expense include the amortizationdiscount or premium.

• Interest income and expense presented in the incomestatement include:- Interest on financial assets and liabilities at amortized cost.- Interest on available for sale investment securities.- Fair value changes in qualifying derivatives and related

hedged items when interest rate risk is the hedged risk.

• Net trading income presented in the income statementincludes:

- Interest income and expense on the trading portfolio.- Dividend income on the trading equities. - Realized and unrealized gains and losses on the trading

portfolio.

• Interest income and expense on financial portfoliodesignated at fair value through profit or loss upon initialrecognition is recognized under net income from otherfinancial instruments carried at fair value

• Fees and commission income and expense that areintegral to the effective interest rate on a financial asset orliability (i.e. commissions and fees earned on the loanbook) are included under interest income and expense.

• Other fees and commission income are recognized as therelated services are performed.

• Dividend income is recognized when the right to receivepayment is established.

S. Income Tax:

Income tax expense represents the sum of the tax currentlypayable and deferred tax. Income tax is recognized in theincome statement except to the extent that it relates to itemsrecognized directly in other comprehensive income, in whichcase it is recognized in other comprehensive income.

The tax currently payable is based on taxable profit for theyear. Taxable profit differs from profit as reported in theconsolidated income statement because of items that arenever taxable or deductible. The Group’s liability for currenttax is calculated using tax rates and has been enacted issubstantively enacted by the end of the reporting period.

Income tax payable is reflected in the consolidated statementof financial position net of taxes previously settled in the formof withholding tax.

Deferred tax is recognized on differences between thecarrying amounts of assets and liabilities in the financialstatements and the corresponding tax base used in the




76

computation of taxable profit, and are accounted for usingthe statement of financial position liability method. Deferredtax liabilities are generally recognized for all taxabletemporary differences and deferred tax assets arerecognized to the extent that it is probable that taxable profits will be available against which deductible temporarydifferences can be utilized.

4. CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY

In the application of the Group’s accounting policies,which are described in note 3, the directors are requiredto make judgements, estimates and assumptions aboutthe carrying amounts of assets and liabilities that are notreadily apparent from other sources. The estimates andassociated assumptions are based on historicalexperience and other factors that are considered to berelevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed onan ongoing basis. Revisions to accounting estimates arerecognized in the period in which the estimate is revised ifthe revision affects only that period or in the period of therevision and future periods if the revision affects both currentand future periods.

A. Critical Accounting Judgments in Applying the Group’sAccounting Policies:

Classification of Financial Assets:The Group’s accounting policies provide scope forinvestment securities to be designated on inception intodifferent categories in certain circumstances based onspecific conditions. In classifying investment securitiesas held to maturity, the Group has determined that it hasboth the positive intent and ability to hold these assets untiltheir maturity as required by in accounting policy under note3E. The carrying amount of the held to maturity financialassets is LBP 1,377 billion (exclusive of accrued interest) at2009 year end. If the Group fails to keep these investmentsuntil maturity other than for the specific circumstances, it willrequire reclassifying the entire category as available for salethat will be measured at fair value with the correspondingcumulative positive change in fair value of LBP 45.7 billion atDecember 31, 2009 booked in equity.

In designating financial assets or liabilities at fair valuethrough profit or loss, the Group has determined that it hasmet one of the criteria for this designation set out inaccounting policy 3D.

B. Key Sources of Estimation Uncertainty:

The following are the key assumptions concerning the future,and other key sources of estimation uncertainty at thestatement of financial position date, that have a significantrisk of causing a material adjustment to the carrying amountsof assets and liabilities within the next financial year.

Allowances for Credit Losses:Specific impairment for credit losses is determined byassessing each case individually. This method applies toclassified loans and advances and the factors taken intoconsideration when estimating the allowance for creditlosses include the counterparty’s credit limit, thecounterparty’s ability to generate cash flows sufficient tosettle his advances and the value of collateral andpotential repossession. Loans collectively assessed forimpairment are determined based on losses incurred byloans portfolios with similar characteristics.

Determining Fair Values:The determination of fair value for financial assets forwhich there is no observable market price requires theuse of valuation techniques as described in Note 3D. Forfinancial instruments that trade infrequently and havelittle price transparency, fair value is less objective, andrequires varying degrees of judgment depending onliquidity, concentration, uncertainty of market factors,pricing assumptions and other risks affecting the specificinstrument.

Where available, management has used market indicators inits mark to model approach for the valuation of the Lebanesegovernment debt securities and Central Bank Certificates ofDeposits at fair value. The IFRS fair value hierarchy allocatesthe highest priority to quoted prices (unadjusted) in activemarkets for identical assets or liabilities, and the lowestpriority to unobservable inputs. The fair value hierarchy usedin the determination of fair value consists of three levels ofinput data for determining the fair value of an asset or liability.

Level 1quoted prices for identical items in active, liquid and visiblemarkets such as stock exchanges,

Level 2observable information for similar items in active or inactivemarkets,

Level 3 unobservable inputs used in situations where markets eitherdo not exist or are illiquid.




Unobservable inputs are used to measure fair value to theextent that observable inputs are not available, therebyallowing for situations in which there is little, if any, marketactivity for the asset or liability at the measurement date.However, the fair value measurement objective shouldremain the same; that is, an exit price from the perspectiveof a market participant that holds the asset or owes the liability. Unobservable inputs are developed based on thebest information available in the circumstances, which mayinclude the reporting entity's own data. Where practical, thediscount rate used in the mark to model approach includedobservable data collected from market participants, includ-ing risk free interest rates and credit default swap rates for pricing of credit risk (both own and counter party), and a

liquidity risk factor which is added to the applied discountrate. Changes in assumptions about any of these factorscould affect the reported fair value of the LebaneseGovernment debt Securities and Central Bank Certificates ofDeposits.

Impairment of Available for Sale Equity Investments:The Group determines that available for sale equity investments are impaired when there has been a significantor prolonged decline in the fair value below its cost. Thisdetermination requires judgment. In making this judgmentthe Group evaluates among other factors, the history of theLebanese government default with respect to governmentbonds and the normal volatility in share price.

Compulsory deposits with Central Bank of Lebanon are notavailable for use in the Group’s day-to-day operations.

Compulsory deposits under current accounts with CentralBank of Lebanon are in Lebanese Pounds and non-interestearning. These deposits are computed on the basis of 25%and 15% of the average weekly sight and term customers’deposits in Lebanese Pounds in accordance with the localbanking regulations.

Regulatory deposits under term placements with CentralBank of Lebanon are in foreign currencies and made inaccordance with local banking regulations which requirebanks to maintain interest earning placements in foreign currency to the extent of 15% of customers’ deposits in foreign currencies, certificates of deposits and loansacquired from non-resident financial institutions.

5. CASH AND CENTRAL BANKS

December 31, 2009

of whichCompulsory /

RegulatoryTotal Deposits

December 31, 2008

of whichCompulsory /

RegulatoryTotal Deposits

Cash on hand 81,336,245 -

Current accounts with Central Bank of Lebanon 655,879,155 521,924,856

Current accounts with Central Bank of France 3,858,887 3,476,759

Current accounts with Central Bank of Algeria 26,512,156 15,254,492

Current accounts with Central Bank of Syria 58,359,284 22,393,217

Current accounts with Central Bank of Belarus 6,162,437 332,356

Term placements with Central Bank of Lebanon 1,558,420,225 1,121,457,005

Term placements with Central Bank of Algeria 260,187,960 -

Accrued interest receivable 2,180,719 -

TOTAL 2,652,897,068 1,684,838,685

80,781,336 -

467,048,115 404,699,971

6,113,812 5,998,222

13,328,976 8,880,053

15,618,349 -

- -

1,788,968,750 966,151,400

72,348,090 -

222,943,391 -

2,667,150,819 1,385,729,646

LBP’000




78

December 31, 2009

LBP Base Accounts F/Cy Base Accounts

Average AverageMaturity Amount Interest Rate % Amount Interest Rate % Total

2010 368,200,000 3.02 558,200,850 0.79 926,400,850

2011 3,391,875 1.17 - - 3,391,875

2012 753,750 1.16 472,601,250 1.17 473,355,000

2013 - - 149,242,500 1.17 149,242,500

2014 6,030,000 1.67 - - 6,030,000

TOTAL 378,375,625 1,180,044,600 1,558,420,225

December 31, 2008

Term placement with Central Bank of Algeria mature within one year or less.

Interest rates on term placements with Central Bank of Lebanon reprice at each coupon date.

Term placements with Central Bank of Lebanon bear the following maturities:



2009 238,000,000 14.85 699,480,000 2.25 937,480,000

2010 100,000,000 17.17 130,398,750 4.20 230,398,750

2012 - - 471,847,500 3.25 471,847,500

2013 - - 149,242,500 3.15 149,242,500

TOTAL 338,000,000 1,450,968,750 1,788,968,750

6. DEPOSITS WITH BANKS AND FINANCIAL INSTITUTIONS

LBP’000 2009 2008

Checks in course of collection 12,458,021

Current accounts with banks and financial institutions 113,389,251

Term placements with banks and financial institutions 1,345,653,245

Term placements with related banks and financial institutions 24,839,425

Pledged deposits with banks and financial institutions -

Accrued interest receivable 2,947,817

Accrued interest receivable - related parties 3,534

Regulatory allowance for country risk (139,285)

TOTAL 1,499,152,008

10,545,218

61,873,301

790,464,185

45,942,920

4,045,837

1,682,766

16,441

-

914,570,668

LBP’000

LBP’000

Pledged deposits are blocked against letters of guarantee in the amount of LBP 3.4 billion at 2008 year end (See Note 42).






2010 33,700,000 3.96 1,324,943,652 1.13 1,358,643,652

2012 - - 11,849,018 5.50 11,849,018

TOTAL 33,700,000 1,336,792,670 1,370,492,670



2009 19,000,000 3.75 796,878,822 1.83 815,878,822

2010 - - 24,574,120 4.02 24,574,120

TOTAL 19,000,000 821,452,942 840,452,942

7. TRADING ASSETS

LBP’000 2009 2008

Lebanese Treasury bills 2,875,790

Lebanese Government bonds 63,584,155

Certificates of deposit issued by Central Bank of Lebanon 2,344,139

Equities – Quoted 25,465,674

Equities – Unquoted 361,800

Accrued interest receivable 1,189,831

TOTAL 95,821,389

2,777,968

58,815,316

2,387,725

19,940,826

316,575

1,301,461

85,539,871

The unrealized gain on trading securities during 2009 amounted to LBP 10.9 billion and is reflected under “NetInterest and Gain and Loss on Trading Portfolio” in the accompanying consolidated income statement (unrealizedloss of LBP 5.2 billion during 2008) – Note 36.

December 31, 2009

LBP’000

LBP’000

Term placements and pledged deposits bear the following maturities:

December 31, 2008




80

Accrued interest receivable on trading assets consists of the following:

Loans to banks are reflected at amortized cost and consist of the following as at December 31:

8. LOANS TO BANKS

LBP’000 2009 2008

Regular performing accounts 56,060,848

Regular performing accounts - Related parties 2,431,596

TOTAL 58,492,444

Accrued interest receivable 249,555

Accrued interest receivable - Related parties 75,515

TOTAL 58,817,514

43,399,222

25,355,747

68,754,969

261,397

573,370

69,589,736

LBP’000 2009 2008

Lebanese Treasury bills 83,995


Certificates of deposit issued by the Central Bank of Lebanon 9,264

TOTAL 1,189,831

83,242

1,151,844

66,375

1,301,461

LBP Interest Rate % CV/ of F/Cy Interest Rate %

Up to 1 year 208,719 - 16,430,690 12.35

1 to 3 years - - - -

3 years to 5 years - - 16,748,105 13.44

Beyond 5 years 25,430,000 5.45 - -

TOTAL 25,638,719 33,178,795

Loans to banks mature as follows:

December 31, 2009

LBP’000

LBP Interest Rate % CV/ of F/Cy Interest Rate %

Up to 1 year 210,396 - 21,359,943 5.26

1 to 3 years - - 4,620,175 10.75

3 years to 5 years - - 16,569,222 7.92

Beyond 5 years 26,830,000 5.46 - -

TOTAL 27,040,396 42,549,340

December 31, 2008

LBP’000




The movement of loans to banks was as follows during 2009 and 2008:

LBP’000 2009 2008

Balance January 1 68,754,969

Additions 2,366,067

Additions due to acquisition of subsidiary 13,882,743

Settlements (26,690,218)

Effect of exchange rate changes 178,883

BALANCE DECEMBER 31 58,492,444

25,962,882

56,336,245

-

(15,019,766)

1,475,608

68,754,969

9. LOANS AND ADVANCES TO CUSTOMERS

Gross Unrealized Discount on Impairment Carrying Gross Unrealized Discount on Impairment CarryingAmount Interest Loan Book Allowance Amount Amount Interest Loan Bank Allowance Amount

Loans and advances to customers are reflected at amortized cost and consist of the following:

December 31, 2009 December 31, 2008

LBP’000

Regular and Watch ListRetail Customers:Mortgage loans 313,290,461 - - - 313,290,461 204,287,970 - - - 204,287,970 Personal loans 240,891,170 - - - 240,891,170 166,706,764 - - - 166,706,764 Car loans 245,186,488 - - - 245,186,488 144,501,669 - - - 144,501,669 Credit cards 31,379,884 - - - 31,379,884 28,138,336 - - - 28,138,336 Educational loans 1,502,459 - - - 1,502,459 - - - - -Overdrafts 1,242,970 - - - 1,242,970 1,486,050 - - - 1,486,050 Other 25,308,332 - - - 25,308,332 9,428,500 - - - 9,428,500 Loans to staff 8,531,142 - - - 8,531,142 7,534,301 - - - 7,534,301

Regular and Watch ListCorporate Customers:Corporate 1,647,965,654 - - - 1,647,965,654 1,218,734,922 - - - 1,218,734,922 Small and medium enterprises 797,372,812 - - - 797,372,812 628,013,038 - - - 628,013,038

Low and Non-PerformingLoans and Advances:Purchased loan book 3,677,874 - - - 3,677,874 4,562,025 - - - 4,562,025 Sub-standard 33,295,403 (13,527,828) - - 19,767,575 28,769,263 (13,966,322) - - 14,802,941 Doubtful 811,603,939 (518,017,892) (8,059,495) (172,917,326) 112,609,226 795,656,600 (465,960,151) (8,345,651) (196,827,616) 124,523,182 Bad 154,181,851 (108,085,832) (1,541,791) (44,554,228) - 181,361,438 (130,881,947) (1,646,148) (48,833,343) -

Restructured Loansand Advances:Regular 23,013,389 - - - 23,013,389 25,200,812 - - - 25,200,812 Sub-standard 8,803,779 (1,140,534) - - 7,663,245 6,301,588 (696,839) - - 5,604,749 Doubtful and bad 15,471,433 (4,158,503) (433,807) (6,472,987) 4,406,136 19,694,013 (5,321,021) (664,160) (6,113,275) 7,595,557

Allowance for CollectivelyImpaired Loans:Un-Classified loans - - - (5,225,366) (5,225,366) - - - - -Doubtful and bad - - - (5,360,626) (5,360,626) - - - (9,887,949) (9,887,949) Accrued Interest Receivable 7,519,379 - - - 7,519,379 4,955,411 - - - 4,955,411

TOTAL 4,370,238,419 (644,930,589) (10,035,093) (234,530,533) 3,480,742,204 3,475,332,700 (616,826,280) (10,655,959) (261,662,183) 2,586,188,278




82

The carrying value of loans and advances to customersinclude accidentally temporary debtors with carryingvalue amounting to LBP 39.1 billion as at December 31,2009 (LBP 39.1 billion as at December 31, 2008).

The carrying value of loans and advances to customersinclude loans to related parties in the aggregate ofLBP 170.89 billion as at December 31, 2009 (LBP 154.55billion in 2008) (See Note 40).

Restructured loans represent loans with renegotiated termsand are categorized within the same loan classification priorto restructuring.

The movement of unrealized interest during 2009 and 2008is summarized as follows:

The movement of allowance for impairment of doubtful and bad loans during 2009 and 2008 is summarized as follows:

LBP’000 2009 2008


Additions 126,031,169

Additions from acquired subsidiaries 1,846,391

Recoveries (8,406,228)

Write-off (51,805,659)

Transfer to off-financial position (38,365,501)

Reclassification from unrealized interest to

allowance for impairment (56,461)

Transfer (to) / from allowance for collectively impaired loans 1,223

Change in expected contractual write-off (1,103,318)

Effect of exchange rates changes (37,307)


592,539,959

109,476,879

-

(8,803,471)

(75,180,626)

(18,266,009)

(276,509)

(42,030)

16,975,619

402,468

616,826,280

LBP’000 2009 2008


Additions 5,020,459


Recoveries (11,112,717)

Write-off (20,756,130)

Transfer to off-financial position (5,469,903)

Reclassification to allowance for impairment

from unrealized interest 56,461

Transfer from allowance for collectively impaired loans 36,650

Change in expected contractual write-off 1,781,382

Effect of exchange rates changes (315,894)


260,911,254

25,968,380

-

(16,664,890)

(24,559,731)

(8,327,398)

276,509

414,563

12,751,171

1,004,376

251,774,234




The movement of the discount on loan book purchased during 2009 and 2008 is summarized as follows:

LBP’000 2009 2008


Additions -

Recoveries (751,765)

Write-off (653,710)

Change in expected contractual write-off 784,609


26,836,282

152,123

(6,248,077)

(9,436,910)

(647,459)

10,655,959

The movement of the allowance for collectively impaired loans during 2009 and 2008 is as follows:

LBP’000 2009 2008


Additions -


Recoveries (635,254)

Transfer to specific allowance for impairment (36,650)

Transfer to provision for contingencies -

Write-off (40,792)

Transfer to / (from) unrealized interest (1,223)


13,622,550

3,065,331

-

(171,837)

(414,563)

(6,234,251)

(21,311)

42,030

9,887,949




84

December 31, 2009

Available for Sale Held to MaturityLBP’000 LBP C/V of F/Cy Total LBP C/V of F/Cy Total

Equities and preferred shares 119,618,195 46,450,756 166,068,951 - 1,507,500 1,507,500

Lebanese Treasury bills 1,376,741,737 - 1,376,741,737 352,659,724 - 352,659,724

Lebanese Government bonds - 1,042,048,268 1,042,048,268 - 702,990,633 702,990,633

Banks Eurobonds - 26,577,372 26,577,372 - 248,788 248,788

Certificates of deposit issuedby Central Bank of Lebanon 3,094,793,820 447,270,665 3,542,064,485 - 309,580,585 309,580,585

Certificates of deposit issued by banks - 68,733,790 68,733,790 - 7,434,190 7,434,190

Mutual funds - 365,579 365,579 - - -

Banks and corporate bonds - 27,701,737 27,701,737 - 2,862,576 2,862,576

Asset-backed securities - 2,224,392 2,224,392 - - -

Accrued interest receivable 74,520,672 32,299,329 106,820,001 13,705,056 20,784,762 34,489,818

TOTAL 4,665,674,424 1,693,671,888 6,359,346,312 366,364,780 1,045,409,034 1,411,773,814

December 31, 2008

Available for Sale Held to MaturityLBP’000 LBP C/V of F/Cy Total LBP C/V of F/Cy Total

Equities and preferred shares 109,728,444 42,553,638 152,282,082 - 1,507,500 1,507,500

Lebanese Treasury bills 1,176,475,461 - 1,176,475,461 601,597,901 - 601,597,901

Lebanese Government bonds - 876,173,605 876,173,605 - 714,106,175 714,106,175

Certificates of deposit issuedby Central Bank of Lebanon 1,235,573,234 422,261,080 1,657,834,314 94,382,179 300,593,731 394,975,910

Certificates of deposit issuedby Banks - 55,103,913 55,103,913 - 7,404,439 7,404,439

Corporate bonds - - - - 358,785 358,785

Accrued interest receivable 58,193,916 29,924,005 88,117,921 23,281,321 18,633,828 41,915,149

TOTAL 2,579,971,055 1,426,016,241 4,005,987,296 719,261,401 1,042,604,458 1,761,865,859

10. INVESTMENT SECURITIES




A. Available for Sale Investments:

December 31, 2009

Balances in LBP Balances in F/CyAllowance Carrying Cumulative Allowance Carrying Cumulative

Amortized for Fair Change in Amortized for Fair Change inLBP’000 Cost Impairment Value Fair Value Cost Impairment Value Fair Value

Quoted equities - - - - 20,674,017 - 24,705,188 4,031,171

Unquoted equities 87,987,868 ( 170,000) 119,618,195 31,800,327 30,500,434 (8,813,418) 21,745,568 58,552

Lebanese Treasury bills 1,313,864,364 - 1,376,741,737 62,877,373 - - - -

Lebanese Government bonds - - - - 1,005,574,965 - 1,042,048,268 36,473,303

Banks Eurobonds - - - - 26,827,440 (140,985) 26,577,372 (109,083)

Certificates of deposit issuedby Central Bank of Lebanon 2,890,118,984 - 3,094,793,820 204,674,836 427,100,687 - 447,270,665 20,169,978

Certificates of deposit issued by banks - - - - 67,062,230 - 68,733,790 1,671,560

Mutual funds - - - - 541,133 - 365,579 (175,554)

Banks and corporate bonds - - - - 27,828,238 - 27,701,737 (126,501)

Asset-backed securities - - - - 2,226,102 - 2,224,392 (1,710)

Accrued interest receivable 74,520,672 - 74,520,672 - 32,299,329 - 32,299,329 -

TOTAL 4,366,491,888 (170,000) 4,665,674,424 299,352,536 1,640,634,575 (8,954,403) 1,693,671,888 61,991,716

December 31, 2008

Balances in LBP Balances in F/CyAllowance Carrying Cumulative Allowance Carrying Cumulative

Amortized for Fair Change in Amortized for Fair Change inLBP’000 Cost Impairment Value Fair Value Cost Impairment Value Fair Value

Quoted equities - - - - 20,674,017 - 22,481,890 1,807,873

Unquoted equities 87,845,868 (170,000) 109,728,444 22,052,576 27,529,520 (7,532,044) 20,071,748 74,272

Lebanese Treasury bills 1,146,972,231 - 1,176,475,461 29,503,230 - - - -

Lebanese Government bonds - - - - 933,470,235 - 876,173,605 (57,296,630)

Certificates of deposit issuedby Central Bank of Lebanon 1,195,953,396 - 1,235,573,234 39,619,838 427,447,332 - 422,261,080 (5,186,252)

Certificates of deposit issuedby banks - - - - 57,555,874 - 55,103,913 (2,451,961)

Accrued interest receivable 58,193,916 - 58,193,916 - 29,924,005 - 29,924,005 -

TOTAL 2,488,965,411 (170,000) 2,579,971,055 91,175,644 1,496,600,983 (7,532,044) 1,426,016,241 (63,052,698)




86

December 31, 2009

AmortizedCost (Net of Average

Redemption Allowance for Net Carrying InterestRemaining period to maturity Value Impairment) Fair Value Rate %

Lebanese Treasury bills:Up to one year 264,163,260 261,425,508 263,951,540 8.181 year to 3 years 1,028,199,250 1,026,691,270 1,086,489,011 9.343 years to 5 years 25,750,000 25,747,586 26,301,186 8.23TOTAL 1,318,112,510 1,313,864,364 1,376,741,737Lebanese Government bonds:Up to one year 56,385,909 56,264,212 56,316,916 7.061 year to 3 years 352,455,706 351,607,791 353,106,462 6.963 years to 5 years 95,081,859 94,926,575 96,574,690 7.795 years to 10 years 271,590,446 281,806,667 298,894,937 9.05Beyond 10 years 221,724,608 220,969,720 237,155,263 8.25TOTAL 997,238,528 1,005,574,965 1,042,048,268Bank Eurobonds:Up to one year 12,555,242 12,555,242 12,555,242 15.431 year to 3 years 1,402,244 1,402,244 1,402,244 15.503 years to 5 years 3,768,750 3,748,655 3,692,979 5.005 years to 10 years 7,537,500 7,476,506 7,404,405 7.50Beyond 10 years 1,507,500 1,503,808 1,522,502 5.25TOTAL 26,771,236 26,686,455 26,577,372Certificates of deposit issued byCentral Bank of Lebanon:Up to one year 96,000,000 95,880,248 97,572,654 11.301 year to 3 years 169,045,020 168,944,371 176,830,485 8.613 years to 5 years 2,635,698,000 2,643,440,458 2,859,092,807 10.015 years to 10 years 406,426,250 408,954,594 408,568,539 8.47TOTAL 3,307,169,270 3,317,219,671 3,542,064,485Certificates of deposit issued by banks:Up to one year 14,924,250 14,927,474 14,946,711 7.631 year to 3 years 52,158,657 52,134,756 53,787,079 7.63TOTAL 67,082,907 67,062,230 68,733,790Banks and corporate bonds:3 years to 5 years 20,116,581 19,977,805 19,941,172 5.235 years to 10 years 7,914,067 7,850,433 7,760,565 7.44TOTAL 28,030,648 27,828,238 27,701,737Asset-backed securities:3 years to 5 years 2,261,250 2,226,102 2,224,392 7.25TOTAL 2,261,250 2,226,102 2,224,392

Available for sale fixed income investments are segregated over remaining periods to maturity as follows:

LBP’000




December 31, 2008

AmortizedCost (Net of Average

Redemption Allowance for Net Carrying InterestRemaining period to maturity Value Impairment) Fair Value Rate %

Lebanese Treasury bills:Up to one year 323,251,130 323,232,826 326,290,601 6.071 year to 3 years 584,821,560 583,455,193 593,879,413 8.603 years to 5 years 242,371,250 240,284,212 256,305,447 11.34TOTAL 1,150,443,940 1,146,972,231 1,176,475,461

Lebanese Government bonds:Up to one year 42,619,297 42,704,556 42,265,917 9.051 year to 3 years 185,389,402 185,035,091 179,574,911 7.913 years to 5 years 216,213,721 215,231,335 199,104,457 7.375 years to 10 years 177,187,028 187,732,759 174,794,147 8.66Beyond 10 years 303,848,685 302,766,494 280,434,173 8.56TOTAL 925,258,133 933,470,235 876,173,605

Certificates of deposit issued byCentral Bank of Lebanon:1 year to 3 years 351,000,000 348,421,836 365,502,065 11.243 years to 5 years 1,234,743,020 1,237,746,478 1,255,759,249 10.415 years to 10 years 35,426,250 37,232,414 36,573,000 9.61TOTAL 1,621,169,270 1,623,400,728 1,657,834,314

Certificates of deposit issued by banks:1 year to 3 years 14,924,250 14,933,454 14,566,066 7.633 years to 5 years 42,888,375 42,622,420 40,537,847 8.49TOTAL 57,812,625 57,555,874 55,103,913

Available for sale fixed income investments are segregated over remaining periods to maturity as follows:

LBP’000




88

The movement of the allowance for impairment of available for sale investments was as follows:

Accrued interest receivable on available for sale investments is broken down as follows as at December 31:

LBP’000 2009 2008


Additions 126,269



7,702,044

-

-

7,702,044

Certificates of deposit issued by Central Bank of Lebanoninclude certificates of deposit with carrying value ofLBP 46.25 billion and nominal value of LBP 41.46 billionmaturing in 2015 with a put option exercisable at aredemption value of 91.63% of par in year 2012. TheGroup follows the policy of providing annually for the

difference of 8.37% between the nominal value and theearly redemption value in 2012. Provisions booked up to2009 year-end is reflected under “Other Liabilities” (Note21) and amounted to LBP 1.38 billion (LBP 1.2 billion upto 2008 year-end).

LBP’000 2009 2008



Banks Eurobonds 268,503

Certificates of deposit issued by Central bank of Lebanon 56,704,549

Certificates of deposit issued by banks 763,082

Banks and corporate bonds 368,891

Asset-backed securities 26,051

TOTAL 106,820,001

26,189,386

21,745,867

-

39,381,752

668,068

132,848

-

88,117,921




B. Held to Maturity Investments:

December 31, 2009

Balances in LBP Balances in F/CyCarrying Fair Carrying Fair

Value Value Value Value

Unquoted equities - - 1,507,500 1,507,500Lebanese Treasury bills 352,659,724 357,725,309 - -Lebanese Government bonds - - 702,990,633 727,557,145Banks Eurobonds - - 248,788 234,114Certificates of deposit issuedby Central Bank of Lebanon - - 309,580,585 325,277,707Certificates of deposit issued by banks - - 7,434,190 7,594,868Corporate bonds - - 2,862,576 3,096,554Accrued interest receivable 13,705,056 13,705,056 20,784,762 20,784,762TOTAL 366,364,780 371,430,365 1,045,409,034 1,086,052,650

December 31, 2008

At December 31, 2009 and 2008 the Group had Held to maturity treasury bills with carrying value of LBP 319 billion thatare pledged against soft loans granted by Central Bank of Lebanon in connection with the acquisition by the Group ofproblematic banks – (Notes 20(g) and 42).

Balances in LBP Balances in F/CyCarrying Fair Carrying Fair

Value Value Value Value

Unquoted equities - - 1,507,500 1,507,500Lebanese Treasury bills 601,597,901 615,627,650 - -Lebanese Government bonds - - 714,106,175 694,174,805Certificates of deposit issuedby Central Bank of Lebanon 94,382,179 100,377,013 300,593,731 295,238,493Certificates of deposit issued by banks - - 7,404,439 7,123,691Corporate bonds - - 358,785 358,785Accrued interest receivable 23,281,321 23,281,321 18,633,828 18,633,828TOTAL 719,261,401 739,285,984 1,042,604,458 1,017,037,102

LBP’000

LBP’000




90

December 31, 2009

AverageRedemption Amortized Interest

Value Cost Fair Value Rate %

Lebanese Treasury bills:Up to one year 319,405,020 319,371,063 323,184,211 8.421 year to 3 years 30,711,720 30,703,691 31,814,635 9.103 years to 5 years 2,560,000 2,584,970 2,726,463 8.54TOTAL 352,676,740 352,659,724 357,725,309Lebanese Government bonds:Up to one year 98,289,000 98,281,900 98,239,891 7.131 year to 3 years 325,965,865 323,297,243 324,966,094 7.443 years to 5 years 67,762,125 67,756,576 71,824,633 8.995 years to 10 years 164,338,605 163,840,719 179,095,048 9.01Beyond 10 years 49,955,535 49,814,195 53,431,479 8.25TOTAL 706,311,130 702,990,633 727,557,145Bank Eurobonds:Up to one year 226,125 248,788 234,114 12.00TOTAL 226,125 248,788 234,114Certificates of deposit issued by Central Bank of Lebanon:1 year to 3 years 273,415,275 277,756,522 292,141,496 9.093 years to 5 years 23,119,020 23,177,854 23,970,436 8.545 years to 10 years 8,215,875 8,646,209 9,165,775 10.00TOTAL 304,750,170 309,580,585 325,277,707Certificates of deposit issued by banks:1 year to 3 years 7,537,500 7,434,190 7,594,868 7.63TOTAL 7,537,500 7,434,190 7,594,868Corporate bonds:1 year to 3 years 148,628 148,628 217,345 6.003 years to 5 years 770,382 783,882 849,587 7.505 years to 10 years 1,940,190 1,930,066 2,029,622 9.34TOTAL 2,859,200 2,862,576 3,096,554

Held to maturity investments are segregated over the remaining period to maturity as follows:

LBP’000




December 31, 2008

AverageRedemption Amortized Interest

Value Cost Fair Value Rate %

Lebanese Treasury bills:Up to one year 266,911,080 266,596,976 268,749,750 10.301 year to 3 years 335,116,740 335,000,925 346,877,900 9.40TOTAL 602,027,820 601,597,901 615,627,650Lebanese Government bonds:Up to one year 205,479,755 205,464,667 203,349,317 7.921 year to 3 years 208,035,000 207,443,704 202,029,537 7.763 years to 5 years 150,750,000 150,506,409 143,498,728 8.535 years to 10 years 106,149,105 106,908,036 104,757,876 9.01Beyond 10 years 43,925,535 43,783,359 40,539,347 8.58TOTAL 714,339,395 714,106,175 694,174,805Certificates of deposit issued by Central Bank of Lebanon:1 year to 3 years 96,000,000 94,382,179 100,377,013 7.743 years to 5 years 294,520,275 300,593,731 295,238,493 9.35TOTAL 390,520,275 394,975,910 395,615,506Certificates of deposit issued by banks:3 years to 5 years 7,537,500 7,404,439 7,123,691 9.31TOTAL 7,537,500 7,404,439 7,123,691Corporate bonds:Beyond 10 years 358,785 358,785 358,785 4.75TOTAL 358,785 358,785 358,785

Held to maturity certificates of deposit issued by CentralBank of Lebanon include certificates of deposit withcarrying value of LBP 103 billion and nominal value ofLBP 98 billion maturing in 2015 which carry a put optionexercised at a redemption value of 91.63% of par in year2012. The Group follows the policy of providing annually

for the difference of 8.37% between the nominal valueand the early redemption value in 2012. Provisionsbooked up to 2009 year-end is reflected under “OtherLiabilities” (Note 21) and amounted to LBP 5.49 billion(LBP 4.32 billion up to 2008 year-end).

LBP’000




92

Accrued interest receivable on Held to maturity investments is segregated as follows:

LBP’000 2009 2008



Banks Eurobonds 6,391

Certificates of deposit issued by Central bank of Lebanon 3,814,631

Certificates of deposit issued by banks 28,343

Corporate bonds 111,864

TOTAL 34,489,818

20,569,321

15,004,679

-

6,301,232

28,343

11,574

41,915,149

11. CUSTOMERS’ LIABILITY UNDER ACCEPTANCES

Acceptances represent documentary credits which the Group has committed to settle on behalf of its customers againstcommitments by those customers (acceptances). The commitments resulting from these acceptances arestated as a liability in the statement of financial position for the same amount.

During 2008, the Group has acquired an equity stake of18.01% in “Golden Taler Bank” in Belarus which namewas subsequently changed to “Fransabank OJSC”.Although the interest held is 18.01%, this investment isclassified as “Investment in Associate” since the Groupexercised a significant influence over the bank. During2009, “Fransabank OJSC”, increased its capital and theGroup subscribed in all this increase therefore increasingthe interest held in “Fransabank OJSC” to 62.21%.Consequently, the Group achieved control over this

entity (reclassified to subsidiary) which has been includedin the consolidated financial statements.

During 2009, the Group sold part of its equity interest in“International Payment Network” for an amount of LBP250 million resulting in a gain of LBP 14 million (Note 38).Although the interest held in “International PaymentNetwork” decreased below 20%, nevertheless, theGroup is still exercising a significant influence over thisentity.

12. INVESTMENTS IN ASSOCIATES

Investments in the associates, which are unlisted, are as follows:

Country of Interest Held Interest HeldIncorporation 2009 2008 2009 2008

% %

Bancassurance SAL Lebanon 39.99 39.99 9,211,328 4,440,584United Capital Bank Sudan 20.00 20.00 36,702,558 37,740,252International Payment Network Lebanon 18.80 23.50 1,125,466 1,252,993Fransabank OJSC Belarus - 18.01 - 5,240,217TOTAL 47,039,352 48,674,046

LBP’000




The movement of investments in associates is as follows:

Assets acquired in satisfaction of loans have been acquired through enforcement of security over loans and advances to customers.

LBP’000 2009 2008


Acquisition of equity interest in "Fransabank OJSC" -

Unrealized gain / (losses) through other comprehensive income 1,800,062

Dividends received (2,949,254)

Share in net profit (Note 38) 7,579,190

Investment incorporated in consolidation (6,021,194)

Partial disposal of equity interest (236,498)

Currency translation adjustment (1,807,000)

Prior year's adjustment (booked to retained earnings) -


45,014,174

5,440,387

(1,773,391)

(1,614,241)

6,268,558

-

-

(4,517,135)

(144,306)

48,674,046

13. ASSETS ACQUIRED IN SATISFACTION OF LOANS

Real EquityEstate Interest Total

Cost:Balance January 1, 2008 214,225,776 1,499,963 215,725,739Additions 19,154,039 7,537 19,161,576Disposals (14,984,916) - (14,984,916)Sundry movements (7,500) - (7,500)Transfer from property and equipment - prior year adjustment 483,102 - 483,102Transfer to property and equipment (207,459) - (207,459)Balance December 31, 2008 218,663,042 1,507,500 220,170,542Additions 5,111,411 - 5,111,411Disposals (19,335,873) (1,507,500) (20,843,373)Transfer to property and equipment (1,285,314) - (1,285,314)Balance December 31, 2009 203,153,266 - 203,153,266

Impairment allowance:Balance January 1, 2008 (15,072,380) - (15,072,380)Retirement upon disposal 206,567 - 206,567Write-off against unrecorded registration fees 12,861 - 12,861Balance December 31, 2008 (14,852,952) - (14,852,952)Retirement upon disposal 800,999 - 800,999Write-off against unrecorded registration fees 227 - 227Balance December 31, 2009 (14,051,726) - (14,051,726)

Carrying amount:DECEMBER 31, 2009 189,101,540 - 189,101,540DECEMBER 31, 2008 203,810,090 1,507,500 205,317,590

The movement of assets acquired in satisfaction of loans during 2009 and 2008 was as follows:



LBP’000


94

The major asset component of entities in which the Grouphas acquired an equity interest in satisfaction of debtsconsists of real estate properties.

The acquisition of assets in settlement of loans requires theapproval of the banking regulatory authorities and theseshould be liquidated within 2 years. In case of default ofliquidation, a regulatory reserve should be appropriatedfrom the yearly net profits over a period of 5 years. However,

the intermediary circular No.41 has allowed banks to extendyearly appropriation over a period of 20 years with respectto those assets acquired through loans’ restructuringsapproved by Central Bank of Lebanon or with respect to theentirety of those assets acquired in settlement of loansprovided that the Banks restructure before 2007 year end, atleast 50% of the balance of non-performing loansoutstanding at June 30, 2003. This condition was satisfied bythe Group during year 2006.

14. PROPERTY AND EQUIPMENT

Additions andBalance at Transfer from Additions due Transfer from Currency Balance atJanuary 1, Advance to Acquisition Assets Acquired Translation December 31,

LBP’000 2009 Payments Retirements of Subsidiaries against Debts Adjustment 2009

Cost/Revaluation:

Land 1,809,242 15,175,962 - - - (16,760) 16,968,444

Building 134,827,384 5,778,614 (1,042,531) 5,121,584 1,285,314 54,459 146,024,824

Furniture, equipment and computer 54,866,400 5,007,601 (1,410,849) 2,168,588 - 26,188 60,657,928

Vehicles 2,993,296 326,200 (191,210) 403,720 - (530) 3,531,476

Office improvements and installations 46,117,481 4,777,999 (345,111) 123,899 - 17,944 50,692,212

Key money 133,687 - - - - - 133,687

TOTAL 240,747,490 31,066,376 (2,989,701) 7,817,791 1,285,314 81,301 278,008,571

Accumulated depreciation:

Building (21,507,289) (2,896,336) 126,198 (176,974) - (2,362) (24,456,763)

Furniture, equipment and computer (32,560,061) (5,284,443) 1,122,894 (928,430) - (9,384) (37,659,424)

Vehicles (1,132,582) (310,074) 188,171 (170,743) - (1,155) (1,426,383)

Office improvements and installations (31,075,564) (4,764,313) 341,542 (24,102) - (9,012) (35,531,449)

Key money (133,653) - - - - - (133,653)

TOTAL (86,409,149) (13,255,166) 1,778,805 (1,300,249) - (21,913) (99,207,672)

Provision for impairment: (3,253,236) - - - - - (3,253,236)

Advance payments 8,609,947 20,029,296

Provision allocated to advance payments (3,694,425) (3,243,225)

Net advance payments 4,915,522 16,786,071

NET BOOK VALUE 156,000,627 192,333,734




Additions and Transfer to AssetsBalance at Transfer from Acquired against Transfer from Currency Balance atJanuary 1, Advance Debts – Prior Year Assets Acquired Translation December 31,

2008 Payments Retirements Adjustment against Debts Adjustment 2008

Cost/Revaluation:

Land - 1,809,242 - - - - 1,809,242

Building 105,589,365 29,030,560 - - 207,459 - 134,827,384

Furniture, equipment and computer 47,589,643 9,522,254 (2,162,530) - - (82,967) 54,866,400

Vehicles 2,207,900 954,880 (158,165) - - (11,319) 2,993,296

Office improvements and installations 39,735,315 7,047,740 (2,644) (619,962) - (42,968) 46,117,481

Key money 133,687 - - - - - 133,687

TOTAL 195,255,910 48,364,676 (2,323,339) (619,962) 207,459 (137,254) 240,747,490

Accumulated depreciation:

Building (19,347,767) (2,162,004) - - - 2,482 (21,507,289)

Furniture, equipment and computer (30,045,280) (4,653,367) 2,083,795 - - 54,791 (32,560,061)

Vehicles (986,730) (251,834) 99,065 - - 6,917 (1,132,582)

Office improvements and installations (27,237,588) (3,998,094) 2,644 136,860 - 20,614 (31,075,564)

Key money (133,653) - - - - - (133,653)

TOTAL (77,751,018) (11,065,299) 2,185,504 136,860 - 84,804 (86,409,149)

Provision for impairment: (3,253,236) - - - - - (3,253,236)

Advance payments 8,495,106 8,609,947

Provision allocated to advance payments (3,694,425) (3,694,425)

Net advance payments 4,800,681 4,915,522

NET BOOK VALUE 119,052,337 156,000,627



LBP’000


96

15. INTANGIBLE ASSETS

Additions andBalance at Transfer from Additions due Currency Balance as atJanuary 1, Advance to Acquisition Translation December 31,

LBP’000 2009 Payments Retirements of Subsidiary Adjustments 2009

Cost:Purchased software 20,253,963 1,228,882 (88,365) - 11,096 21,405,576Goodwill 43,194,326 - - 1,621,818 - 44,816,144Licenses - - - 20,577 - 20,577TOTAL 63,448,289 1,228,882 (88,365) 1,642,395 11,096 66,242,297

Accumulated depreciation:Purchased software (10,102,074) (3,347,257) 65,390 - (14,791) (13,398,732)Licenses - (542) - (1,587) - (2,129)TOTAL (10,102,074) (3,347,799) 65,390 (1,587) (14,791) (13,400,861)

Advance payments: 1,824,211 2,809,839

NET BOOK VALUE 55,170,426 55,651,275

The additional goodwill recognized during 2009 is derived from 2 subsidiaries as follows:

- Goodwill in the amount of LBP 721 million being original goodwill upon initial acquisition of “Fransabank OJSC”.- Goodwill in the amount of LBP 901 million derived from the additional equity interest in BLC Bank SAL.

Additions andBalance at Transfer from Decrease due to Currency Balance as atJanuary 1, Advance Partial Disposal Translation December 31,

LBP’000 2008 Payments Write-off of Subsidiary Adjustments 2008

Cost:Purchased software 15,560,798 4,778,541 - - (85,376) 20,253,963Study and research expenses 1,586 - (1,586) - - -Goodwill 65,665,340 - (8,835,979) (13,635,035) - 43,194,326TOTAL 81,227,724 4,778,541 (8,837,565) (13,635,035) (85,376) 63,448,289

Accumulated depreciation:Purchased software (6,957,409) (3,206,115) - - 61,450 (10,102,074)Goodwill (8,835,979) - 8,835,979 - - -TOTAL (15,793,388) (3,206,115) 8,835,979 - 61,450 (10,102,074)

Advance payments: 1,345,689 1,824,211

NET BOOK VALUE 66,780,025 55,170,426

In 2008, the Group disposed of 23.48% of its interest in BLC Bank SAL which resulted in net gain of LBP 27 billionreflected under “Other Operating Income” in the accompanying consolidated income statement. The Group hasremeasured goodwill by the share disposed of.




16. OTHER ASSETS

(a) Deferred charges on acquired problematic banksrepresent losses related to problematic banks acquiredin previous years and compensated by Central Bank ofLebanon in the form of future cash flows and benefitsoriginated from the soft loans granted to the Group (referto Note 20 g).

The Group is amortizing these charges against thereduction of future economic benefits derived from thesoft loans and thus the carrying value of these deferredcharges corresponds to the present value of future cashflows expected to be derived from the soft loans.

The movement of “deferred charges on acquired problematic banks” was as follows:

LBP’000 2009 2008

Deferred charges on acquired problematic banks (a) 9,772,748

Derivative assets held for risk management (b) 1,170,480

Deferred tax asset (c) 1,943,450

Regulatory blocked deposit (d) 7,854,950

Assets in process of acquisition in settlement of loans (e) 1,011,272

Deferred charges (f) 4,036,120

Deferred receivables (g) 30,588,391

Sundry accounts receivable (h) 61,558,637

Prepayments 23,432,493

Foreign exchange operations 2,026,965

Accrued income 724,386

Sundry assets -

Allowance for doubtful accounts receivable (247,864)

TOTAL 143,872,028

22,918,633

2,885,412

620,802

7,803,164

1,011,272

4,833,661

-

30,399,551

18,827,890

341,885

786,535

51,550

(605,131)

89,875,224

United BankUniversal of Saudi and

LBP’000 Bank SAL Lebanon SAL Total

Gross:As at December 31, 2009 and 2008 123,426,043 160,008,712Accumulated amortization:Balance January 1, 2008 (89,436,183) (123,943,243)2008 amortization (12,798,841) (13,146,836)Balance December 31, 2008 (102,235,024) (137,090,079)2009 amortization (12,798,841) (13,145,885)Balance December 31, 2009 (115,033,865) (150,235,964)Carrying value:DECEMBER 31, 2009 8,392,178 9,772,748 DECEMBER 31, 2008 21,191,019 22,918,633




98

36,582,669

(34,507,060)(347,995)

(34,855,055)(347,044)

(35,202,099)

1,380,570 1,727,614

(b) The derivative assets held for risk management consist of the following:

(f) Deferred charges consist of the following at December 31:

The OTC structured derivative is designated as fair valuehedge. The OTC structured derivative represents an embedded derivative in 3 structured deposit products whichguarantee a minimum redemption value of 100% (95%,100% and 100% during 2008) (Note 18).

The forward contract swap derivative is designated as cashflows hedge.The Group used forward contract swaps to manage itsexposure to exchange rate movements on forwardcontracts with National Bank of the Republic of Belarus bypurchasing foreign currencies against buying BelarussianRuble. At December 31, 2009 currencies with notionalprincipal amounts of BYR 12.5 billion were designated ashedges of future cash flows against USD 5 million.

(c) Deferred tax asset as at December 31, 2009 and 2008represent deferred tax on loss of a subsidiary.

(d) The regulatory blocked deposits represent non-interestearning compulsory deposits placed with the LebaneseTreasury and Central Bank of Syria upon the inception ofbanks according to Article 132 of the Lebanese Code ofMoney and Credit and article 19 of the Syrian Law No.28respectively and are refundable in case of cease ofoperations.

(e) Assets in process of acquisition in settlement of debtsrepresent the value of loans written-off against enforcementof real estate security held and will be reallocated to “AssetsAcquired in Settlement of Loans” once the registration in thename of the Group is finalized.

(g) Deferred receivables represent excess of considerationand acquisition costs over fair value of net assets of Bank LatiSAL acquired by the Group.

On September 8, 2009, the Group signed an agreement toacquire the shares of Bank Lati SAL totaling to 10,500,000shares with a nominal value of LBP 1,000 per share for a totalconsideration of USD 20,037,192. An approval has beengiven to the Group by the Central Council of the Central Bankin relation to the acquisition of all the assets, liabilities, rights,and commitments of Bank Lati SAL based on clause 10 of lawnumber 93/192 and its amendments, waiting for the final

approval of the Central Council in order for the Group toproceed with the merger. The Group will be granted a softloan from the Central Bank for a period of five years to coveran approximate amount of USD 25 million with thepossibility of increasing the loan amount to cover additionalcharges that will be determined in a period of six monthsfrom the date of the final approval on the merger. The loancarries a fixed interest of 3.5% per annum and will be investedin five years Lebanese Treasury bills. In this sense, the Groupbooked the excess of consideration paid over the fair valueof net assets acquired as deferred receivables subject toamortization over the term of the soft loan expected.

Fair Value as at December 31,

LBP’000 2009 2008

Over-the counter (OTC) structured derivative 1,157,920

Forward contracts SWAP 12,560

TOTAL 1,170,480

2,885,412

-

2,885,412

LBP’000 2009 2008

Unamortized costs related to deposits with embedded derivatives 4,006,284

Other deferred charges 29,836

TOTAL 4,036,120

4,577,199

256,462

4,833,661




The condensed classes of assets and liabilities of Bank Lati that were acquired and assumed are as follows:

Deposits and borrowings from banks are reflected at amortized cost and consist of the following:

Money market deposits and other short term borrowings have maturities of one year or less.

(h) Sundry account receivable include an amount of LBP 36.5 billion (USD 24,228,000) representing the amount paid by theGroup on behalf of one of the shareholders in Fransabank El-Djazaïr for the increase of the capital of this subsidiary. Thispayment was deferred against pledging of the shareholder’s shares and possible subsequent acquisition of the shares.

LBP’000 December 31, 2009

ASSETSCash and banks 27,912,538

Loans and advances to customers 6,739,031

Investment securities 48,701,667

Customers’ liability under acceptances 2,491,769

Property, equipment and other assets 4,953,629

TOTAL ASSETS 90,798,634

LIABILITIESDeposits and borrowings from banks 2,279,562

Customers’ accounts at amortized cost 85,033,147

Liability under acceptances 2,491,769

Provisions and other liabilities 739,241

TOTAL LIABILITIES 90,543,719

FAIR VALUE OF NET ASSETS 254,915

Consideration paid 30,206,067

Additional acquisition costs 637,239

TOTAL 30,843,306

EXCESS OF CONSIDERATION AND ACQUISITION COSTS OVER FAIR VALUE OF NET ASSETS 30,588,391

17. DEPOSITS AND BORROWINGS FROM BANKS

LBP’000 2009 2008

Current deposits of banks and financial institutions 85,023,119

Current deposits - related parties 110,751

Money market deposits 183,675,025

Money market deposits - related parties 30,736,482

Other short term borrowings 30,020,522

Accrued interest payable 970,647

Accrued interest payable - related parties 10,601

TOTAL 330,547,147

67,724,803

947,787

22,060,537

42,992,484

22,848,258

160,794

70,597

156,805,260




100

(a) Certain deposits from customers have been designat-ed at fair value through profit or loss as they are matchedwith an embedded derivative. An accounting mismatchwould arise if customers’ deposits were accounted for atamortized cost, because the related derivative ismeasured at fair value with movements in the fair valuetaken through the income statement. By designatingthose deposits from customers at fair value, themovements in the fair value of these deposits arerecorded in the income statement. These instrumentsprovide notional amounts protection for customers ofLBP 157 billion equivalent to 100% of the initially invest-

ed amount (LBP 156 billion in 2008 equivalent to 95% to100% of the initially invested amounts).

(b) Represents deposits denominated in Lebanesepounds with option to redeem in US Dollar at fixed rateof exchange. An accounting mismatch would arise ifcustomers’ deposits were accounted for at amortizedcost, because the related derivative is measured at fairvalue with movements in the fair value taken through theprofit or loss. By designating those deposits fromcustomers at fair value, the movements in the fair valueof these deposits are recorded in the income statement.

18. LIABILITIES DESIGNATED AT FAIR VALUE THROUGH PROFIT OR LOSS

LBP’000 2009 2008

Customers’ deposits with guaranteed capital

at fair value through profit or loss (a) 157,942,443

Customers’ deposits at fair value through profit or loss (b) 2,249,996

Accrued interest payable 2,519,961

TOTAL 162,712,400

159,402,178

2,249,996

1,935,611

163,587,785

LBP’000 2009 2008

Customers’ deposits at fair value through profit or loss 160,192,439

Related derivative contracts - Note 16 1,157,920

161,652,174

2,885,412

This section consists of the following:

The fair value recognized on these deposits and the related derivatives is as follows:

Fair Value




19. CUSTOMERS’ ACCOUNTS AT AMORTIZED COST

December 31, 2009LBP Base Accounts F/Cy Base Accounts

Interest Non-Interest Interest Non-InterestLBP’000 Bearing Bearing Total Bearing Bearing Total Total

Deposits from customers:

Current / demand deposits 80,148,588 146,952,587 227,101,175 272,120,144 717,458,235 989,578,379 1,216,679,554

Term deposits 4,750,984,543 43,203,791 4,794,188,334 6,526,471,525 70,689,266 6,597,160,791 11,391,349,125

Collateral against loans and advances 224,829,980 8,807,193 233,637,173 289,776,591 18,184,700 307,961,291 541,598,464

Margins and other collateral:

Margins for irrevocable import letters of credit 208,294 27 208,321 35,930,579 43,886,870 79,817,449 80,025,770

Margins on letters of guarantee 27,906,172 2,273,613 30,179,785 36,282,683 8,077,046 44,359,729 74,539,514

Other margins 1,360,549 9,111 1,369,660 5,895,944 2,288,747 8,184,691 9,554,351

Blocked accounts 2,074,254 1,983,421 4,057,675 23,105,758 7,399,828 30,505,586 34,563,261

Credit versus debit - - - 211 1,593,875 1,594,086 1,594,086

Accrued interest payable: 40,800,995 - 40,800,995 33,706,698 - 33,706,698 74,507,693

TOTAL 5,128,313,375 203,229,743 5,331,543,118 7,223,290,133 869,578,567 8,092,868,700 13,424,411,818

December 31, 2008

LBP Base Accounts F/Cy Base AccountsInterest Non-Interest Interest Non-Interest

LBP’000 Bearing Bearing Total Bearing Bearing Total Total

Deposits from customers:

Current / demand deposits 83,475,030 110,331,013 193,806,043 260,259,329 533,610,452 793,869,781 987,675,824

Term deposits 3,458,928,175 45,719,051 3,504,647,226 5,392,038,169 51,866,960 5,443,905,129 8,948,552,355



Margins for irrevocable import letters of credit - 45,425 45,425 8,372,637 41,790,636 50,163,273 50,208,698

Margins on letters of guarantee 4,912,456 1,904,347 6,816,803 11,433,444 7,439,030 18,872,474 25,689,277

Other margins 1,804,638 68 1,804,706 4,602,709 973,724 5,576,433 7,381,139

Blocked accounts 2,124,399 1,609,145 3,733,544 11,911,633 7,119,124 19,030,757 22,764,301

Credit versus debit - - - 98 233,836 233,934 233,934

Accrued interest payable: 24,906,331 - 24,906,331 32,154,575 - 32,154,575 57,060,906

TOTAL 3,661,297,547 308,021,511 3,969,319,058 5,962,664,036 682,516,360 6,645,180,396 10,614,499,454




102

Customers’ deposits include related parties deposits detailed as follows:

December 31, 2009



Deposits from related:

Current / demand deposits 549,695 598,443 1,148,138 2,045,359 10,020,507 12,065,866 13,214,004

Term deposits 5,982,533 3,050,046 9,032,579 54,018,881 3,562,968 57,581,849 66,614,428

Collateral against loans and advances 144,171,740 - 144,171,740 551,092 361,800 912,892 145,084,632


Margins for irrevocable import letters of credit - - - - 381,466 381,466 381,466

Margins on letters of guarantee - - - 2,261 10,779 13,040 13,040

Blocked accounts - - - 1,077,763 72,645 1,150,408 1,150,408

Accrued interest payable: 15,670 - 15,670 1,480,733 - 1,480,733 1,496,403

TOTAL 150,719,638 3,648,489 154,368,127 59,176,089 14,410,165 73,586,254 227,954,381

December 31, 2008



Deposits from related:

Current / demand deposits 517,653 851,882 1,369,535 1,972,304 4,929,296 6,901,600 8,271,135

Term deposits 975,308 461 975,769 36,401,791 375,718 36,777,509 37,753,278



Margins for irrevocable import letters of credit - - - - 1,071,961 1,071,961 1,071,961

Margins on letters of guarantee - 120 120 2,261 4,824 7,085 7,205

Blocked accounts - - - 1,013,176 72,646 1,085,822 1,085,822

Accrued interest payable: 2,185 - 2,185 1,168,083 - 1,168,083 1,170,268

TOTAL 3,720,151 146,449,120 150,169,271 47,870,382 11,755,927 59,626,309 209,795,580




Deposits at amortized cost are allocated by brackets of deposits as follows:

Deposits from customers at amortized cost include atDecember 31, 2009 coded deposit accounts totaling LBP228.73 billion (LBP 186.17 billion in 2008). These accountsare subject to the provisions of Article 3 of the LebaneseBanking Secrecy Law dated September 3, 1956 whichprovides that the Bank’s management, in the normal courseof business, cannot reveal the identities of these depositors

to third parties, including its independent public accountants.

Deposits from customers include fiduciary depositsreceived from resident and non-resident banks for a totalamount of LBP 16.6 billion and LBP 408.9 billion respectively(LBP 32 billion and LBP 69 billion respectively in 2008).

December 31, 2009

LBP Base Accounts F/Cy Base AccountsNo. of Total % to Total Total % to Total

Accounts Deposits Deposits Deposits Deposits Total

December 31, 2008

LBP Base Accounts F/Cy Base AccountsNo. of Total % to Total Total % to Total

Accounts Deposits Deposits Deposits Deposits Total



LBP’000

LBP’000

376,301 2,558,373,541 48 2,130,989,338 26 4,689,362,879

8,147 1,576,210,592 30 2,119,725,752 26 3,695,936,344

778 1,196,958,985 22 3,842,153,610 48 5,039,112,595

385,226 5,331,543,118 100 8,092,868,700 100 13,424,411,818

Less than LBP 200 million

From LBP 200 million to LBP 1.5 billion

Above LBP 1.5 billion

TOTAL

Less than LBP 200 million

From LBP 200 million to LBP 1.5 billion

Above LBP 1.5 billion

TOTAL

376,388 2,119,229,826 53 2,157,249,817 32 4,276,479,643

7,071 1,049,225,014 27 1,986,677,791 30 3,035,902,805

609 800,864,218 20 2,501,252,788 38 3,302,117,006

384,068 3,969,319,058 100 6,645,180,396 100 10,614,499,454


104

20. OTHER BORROWINGS

Borrowings are reflected at amortized cost and consist of the following:

(a) Borrowings from European Investment Bank:

Borrowings from European Investment Bank represent termborrowings obtained by the Group to finance loansextended to customers. These borrowings are divided into2 types, a 12 years line of credit for touristic loans for a limitof Euro 30 million (LBP 65 billion) or its equivalent in U.S.Dollars and a 10 years line of credit for industrial loans for alimit of Euro 30 million (LBP 65 billion). These loans matureduring 2012, 2013, 2015, 2019 and 2020 and the applicableaverage interest rate is 2.86%.

(b) Borrowings from Proparco:

Borrowings from Proparco represent a 5 years line of creditfor a limit of Euro 5 million (LBP 11 billion) or its equivalentin USD and are granted to co-finance new investments.Proparco is a subsidiary of “Agence Française deDéveloppement”. These loans matured during 2009 and theapplicable average interest rate was 6.17%.

(c) Borrowing from Agence Française de Développement:

Borrowing from Agence Française de Développementrepresents a 10 years line of credit for a limit of Euro10 million (LBP 22 billion) and is granted to help the smalland medium enterprises that were affected by the July andAugust 2006 Lebanon war. This loan matures during 2017and the applicable average interest rate is 3.83%.

(d) Borrowing from International Finance Corporation:

The borrowing from International Finance Corporationrepresents a 6 years line of credit for a limit of USD 25 million(LBP 38 billion) and is granted to help the Group’s customersthat were affected directly and indirectly by the July andAugust 2006 Lebanon war. This loan matures during 2013and the applicable average interest rate is 2.7%.

(e) Borrowing from EFSD-CDR:

ESFD loan is funded by European Union through theLebanese Council for Development and Reconstruction forthe purpose of lending to small size enterprises. Loanduration is for six years with a grace period of 12 monthsstarting the date of disbursement of the first tranche fromthe fund. Repayments of principal will be in quarterlyinstallments in the remaining five years. The cost of funds islinked to the benchmark of the two-year certificates ofdeposits as issued by Central Bank of Lebanon.

(f) Borrowing from Arab Trade Financing Program:

The borrowing from Arab Trade Financing Programrepresents a revolving line of credit for USD 15 million(LBP 23 billion) granted in year 2000 to support inter-Arab Trade exchanges. The applicable average interestrate is 1.46%.


LBP’000 LBP C/V of F/Cy Total LBP C/V of F/Cy Total

Borrowings from European Investment Bank (a) - 39,979,646 39,979,646 - 15,635,394 15,635,394Borrowings from Proparco (b) - - - - 1,154,557 1,154,557Borrowings from Agence Française de Développement (c) - 27,041,505 27,041,505 - 21,354,675 21,354,675Borrowings from International Finance Corporation (d) - 11,122,938 11,122,938 - 13,903,673 13,903,673ESFD-CDR loan funded by the European Union (e) 11,456,600 - 11,456,600 11,844,407 - 11,844,407Borrowings from Arab Trade Financing Program (f) - 3,621,015 3,621,015 - 1,046,205 1,046,205Soft loans from Central Bank of Lebanon (g) 318,811,712 - 318,811,712 318,811,712 - 318,811,712Accrued interest payable 399,381 387,294 786,675 392,698 496,384 889,082

TOTAL 330,667,693 82,152,398 412,820,091 331,048,817 53,590,888 384,639,705




g) Soft Loans from Central Bank of Lebanon:This caption represents soft loans granted by the Central Bank of Lebanon in connection with the acquisition in previous yearsof problematic banks as detailed below:

December 31, 2009 December 31, 2008Interest Interest

Carrying Expense Carrying ExpenseDate Maturity Interest Value of during Interest Value of during

Granted Date Rate % Loan the Year Rate % Loan the Year

Additional soft loanagainst mergerwith Universal Bank SAL June 30, 2005 June 28, 2013 4.86 8,843,712 435,774 4.86 8,843,712 427,837

Soft loan against merger with United Bank of Saudi and Lebanon SAL August 8, 2002 August 6, 2010 6.24 289,000,000 17,979,161 6.054 289,000,000 17,787,661

Additional soft loan against merger with United Bank of Saudi and Lebanon SAL Dec. 22, 2005 Dec. 20, 2013 4.6 10,468,000 488,216 4.6 10,468,000 494,671

Additional soft loan against merger withUnited Bank of Saudi and Lebanon SAL October 25, 2007 October 25, 2012 4.82 10,500,000 513,129 4.82 10,500,000 514,535

Soft loan against merger with United Bank of Lebanon October 5, 2000 October 5, 2008 - - - 4.82 - 3,855,985

TOTAL 318,811,712 19,416,280 318,811,712 23,080,689



LBP’000


106

Soft loans are secured against pledged Lebanese treasury bills detailed as follows:

The remaining contractual maturities of all above borrowings are as follows:

The Group has not had any defaults of principal, interest or other breaches with respect to these borrowings.


Interest InterestIncome Income

Redemption Amortized Interest during Redemption Amortized Interest duringValue Cost Rate % the Year Value Cost Rate % the Year

Additional soft loan against merger with Universal Bank SAL 8,843,720 8,843,720 9.26 821,178 8,843,720 8,843,720 9.26 826,868

Soft loan against merger with United Bank of Saudi and Lebanon SAL 289,000,000 289,000,000 9.32 27,008,797 289,000,000 289,000,000 9.32 27,080,570

Additional soft loan against merger with United Bank of Saudi and Lebanon SAL 10,468,000 10,468,000 9.00 944,708 10,468,000 10,468,000 9.00 984,400

Additional soft loan against merger with United Bank of Saudi and Lebanon SAL 10,500,000 10,500,000 9.32 981,289 10,500,000 10,500,000 9.32 983,977

Soft loan against merger with United Bank of Lebanon - - - - - - 8.50 6,737,825

TOTAL 318,811,720 318,811,720 29,755,972 318,811,720 318,811,720 36,613,640

LBP’000 2009 2008

Less than one year 301,819,941

From 1 to 3 years 33,712,413

From 3 to 5 years 45,362,430

From 5 to 10 years 31,732,298

More than 10 years 193,009

TOTAL 412,820,091

4,870,525

292,196,185

53,900,537

30,431,333

3,241,125

384,639,705



LBP’000

Pledged Treasury Bills against


Accrued interest payable is segregated as follows as at December 31:

LBP’000 2009 2008

European Investment Bank 141,346

Proparco -

Agence Française de Développement 161,188

International Finance Corporation 64,973

ESFD-CDR loan funded by the European Union 1,375

Arab Trade Financing Program 19,787

Soft loans from Central Bank of Lebanon 398,006

TOTAL 786,675

120,734

12,259

195,117

154,078

1,316

14,196

391,382

889,082

21. OTHER LIABILITIES

LBP’000 2009 2008

Current tax liability (a) 8,151,696

Deferred tax liability on change in fair value of investment securities 51,978,018

Deferred tax liability on interest 1,236,303

Deferred tax liability on share in profits of associates 13,395,289

Withholding and other taxes payable 5,513,614

Due to the Social Security National Fund 1,468,330

Checks and incoming payment orders in course of settlement 28,580,450

Accrued expenses 29,788,630

Accrued interest payable - Cash contribution to capital 3,282

Derivative liabilities held for risk management (b) 42,954

Provision for early redemption of available for sale investments (Note 10) 1,380,268

Provision for early redemption of held to maturity investments (Note 10) 5,488,017

Financial guarantee contracts issued 1,627,290

Effect of exchange rates changes on structural position 2,493,015

Sundry accounts payable 47,471,810

TOTAL 198,618,966

11,007,158

3,563,448

1,270,762

11,485,896

4,393,053

1,304,851

17,913,804

28,839,353

3,273

-

1,206,185

4,317,283

1,144,756

2,212,804

59,859,822

148,522,448




108

22. PROVISIONS

(a) Current tax liability is computed as follows:

(b) The derivative liabilities held for risk management as at December 31, 2009 represent forward contract swapdesignated as cash flow hedge.

The Group used forward contract swaps to manage its exposure to exchange rate movements on forwardcontracts with National bank of the Republic of Belarus by purchasing foreign currencies against buying BelarussianRuble. At December 31, 2009 currencies with notional principal amounts of BYR 6.8 billion were designated as hedgesof future cash flows against Euro 1.5 million.

Provisions consist of the following:

LBP’000 2009 2008

Profit before tax 191,586,290

Income tax based on national applicable rates 29,607,327

Effect of non-deductible expense and non taxable income (921,266)

Income tax expense 28,686,061

Less: Tax paid in advance (21,881,049)

Net effect of deferred tax assets (Note 16 (c)) 1,322,648

Effect of exchange rates changes 24,036

CURRENT TAX PAYABLE 8,151,696

165,344,832

25,182,833

1,483,296

26,666,129

(16,118,650)

620,802

(161,123)

11,007,158

LBP’000 2009 2008

Provision for staff termination indemnities 17,804,543

Provision for contingencies 20,080,252

Provision for loss on foreign currency position 87,432

TOTAL 37,972,227

The movement of provision for staff termination indemnities is as follows:

LBP’000 2009 2008


Additions - Employees 3,229,089

Additions - Lawyers 60,362

Additions in business combination (Bank Lati SAL) 185,481

Additions - Legal expenses 76,122

Transfer from other liabilities -



11,913,372

4,637,844

84,877

-

-

226,125

(1,301,087)

15,561,131




15,561,131

21,567,707

247,932

37,376,770

The movement of the provision for contingencies was as follows:

LBP’000 2009 2008


Additions 1,950,434

Additions in business combination (Fransabank OJSC) 71,643


Write-back (1,865,605)

Transfer from collective provision (Note 9) -

Effect of exchange rates changes 21,223


14,012,954

1,990,260

-

(515,843)

(60,300)

6,234,251

(93,615)

21,567,707

26. RESERVES

Reserves consist of the following:

LBP’000 2009 2008

Legal reserve 28,406,857

Reserve for general banking risks 43,573,937

Reserve for assets acquired in satisfaction of loans – Note 13 22,286,706

Owned buildings revaluation reserve 26,140,614

Foreign currency translation reserve 3,406,833

TOTAL 123,814,947

15,937,412

36,996,586

17,122,647

25,914,110

214,285

96,185,040

23. SHARE CAPITALAt December 31, 2009 and 2008, the authorized ordinary share capital of the Bank was LBP 420 billion consisting of 21,000,000 fully paid shares of LBP 20,000 each.

25. PREFERENCE SHARESOn June 30, 2008 and upon the decision taken in the shareholders’ General Assembly meeting held on March 28, 2008 andthe approval of the Central Bank of Lebanon dated March 15, 2008, the Bank issued 500,000 non-cumulative convertibleredeemable series “A” preference shares with nominal value of LBP 20,000 each at an issue price of USD 200 per share.

The shareholders’ cash contribution to capital is for a total amount of LBP 17.1 billion (USD 11,352,494) as at December 31,2009 and 2008 and it is subject to a yearly interest of 7% payable from unrestricted profits after securing the approval of CentralBank of Lebanon.

This sort of financial instrument is accounted for in foreign currency and therefore allows hedging against nationalcurrency exchange fluctuation.

24. SHAREHOLDERS’ CASH CONTRIBUTION TO CAPITAL




110

LBP’000 2009 2008

Unrealized gain on Lebanese Treasury bills 49,337,049

Unrealized gain/(loss) Lebanese Government bonds 62,915,013

Unrealized loss Banks Eurobonds (109,083)

Unrealized gain on certificates of deposit issued by Central Bank of Lebanon 229,377,467

Unrealized gain/(loss) on certificates of deposit issued by banks 2,614,561

Unrealized loss on corporate bonds (126,501)

Unrealized gain on equity securities 33,471,316

Unrealized loss on asset-backed securities (1,710)

Other (471,264)

Less: Deferred tax (51,978,018)

Total 325,028,830

Non-controlling interests share (20,632,360)

OWNERS OF THE BANK'S SHARE 304,396,470

15,962,905

(30,860,481)

-

38,966,390

(1,509,280)

-

21,521,721

-

(471,264)

(3,563,448)

40,046,543

(3,077,980)

36,968,563

27. SPECIAL RESERVEBased on item “4” paragraph “f” of article 1 of the intermediary circular 41, the Bank has allocated during 2009 an amountof LBP 2.5 billion to special reserve for the uncovered portion of the doubtful debts outstanding as at June 30, 2003.

28. CUMULATIVE CHANGE IN FAIR VALUE OF INVESTMENT SECURITIES

The legal reserve is constituted in conformity with therequirements of the Lebanese Money and Credit Code onthe basis of 10% of net profit. This reserve is not availablefor distribution.

The reserve for general banking risks is constituted according to local banking regulations, from net profit, onthe basis of a minimum of 2 per mil and a maximum of 3 per

mil of the total risk weighted assets, off-financial position riskand global exchange position as defined for the computation of the solvency ratio at year-end. This reserveis constituted in Lebanese Pound and in foreign currenciesin proportion to the composition of the Group’s total riskweighted assets and off-financial position items. Thisreserve is not available for distribution.

The cumulative change in fair value of available for sale investment securities consists of the following:

The cumulative change in fair value as reflected above was adjusted for the effect of fair value adjustment ofinvestment securities acquired through the business combination with BLC Bank SAL during 2007.




LBP’000 2009 2008

Capital 163,054,006

Change in fair value of available for sale investment securities 20,632,360

Reserves and retained earnings 14,923,666

Effect of acquisition of Fransabank OJSC 2,726,744

Profit for the year 12,355,000

TOTAL 213,691,776

103,847,359

3,077,980

9,945,729

-

8,268,570

125,139,638

29. NON-CONTROLLING INTERESTS

30. PROFIT FOR THE YEAR

The consolidated income is allocated as follows between the Bank and its subsidiaries:

Non-controlling interests represent the minority share in the subsidiaries’ equities as follows:

Owners of Non-Controllingthe Bank Interests

Share Share Total

Income of the Bank 90,323,298 - 90,323,298

Income of subsidiaries:

Fransa Invest Bank SAL 13,844,356 368 13,844,724

Fransabank France SA 1,599,548 1,067,339 2,666,887

Lebanese Leasing Company SAL 708,113 101,437 809,550

Switch and Electronics Services SAL 270,093 1,085 271,178

Sogefon SAL (192,675) (6) (192,681)

Fransabank El-Djazaïr SPA 1,499,234 703,907 2,203,141

Fransabank Insurance Services SAL 1,565,614 4,711 1,570,325

BLC Bank SAL and subsidiaries 38,527,364 13,089,003 51,616,367

Express SARL 5,138 86 5,224

Fransabank Syria (2,016,689) (2,184,746) (4,201,435)

Fransabank OJSC 3,529,932 453,719 3,983,651

Deferred tax on profit from associates and subsidiaries (4,903,123) (881,903) (5,785,026)

TOTAL 144,760,203 12,355,000 157,115,203

Year ended December 31, 2009



LBP’000


112

Owners of Non-Controllingthe Bank Interests

Share Share Total

Income of the Bank 95,807,388 - 95,807,388

Income of subsidiaries:

Fransa Invest Bank SAL 5,828,812 198 5,829,010

Fransabank France SA 873,863 583,107 1,456,970

Lebanese Leasing Company SAL 733,513 129,693 863,206

Switch and Electronics Services SAL 241,804 971 242,775

Sogefon SAL (1,346,201) (5,481) (1,351,682)

Fransabank El-Djazaïr SPA 2,381,018 1,122,540 3,503,558

Fransabank Insurance Services SAL 902,433 2,715 905,148

BLC Bank SAL and subsidiaries 25,544,647 9,177,144 34,721,791

Express SARL (186,805) (92,008) (278,813)

Fransabank Syria (1,449,911) (1,570,737) (3,020,648)

Deferred tax on profit from associates and subsidiaries (4,437,962) (1,079,572) (5,517,534)

TOTAL 124,892,599 8,268,570 133,161,169

Year ended - December 31, 2008

LBP’000 2009 2008

LBP 1,000 per Ordinary share paid by the Bank paid from 2008net income (LBP 1,000 during 2008 paid from 2007 net income) 21,000,000

USD 10 (LBP 15,075) per Preference share 7,537,500

LBP 86 per Ordinary share paid by BLC Bank SAL to its non-controlling interests 3,687,105

21,000,000

-

-

31. DIVIDENDS PAID

The following dividends were declared and paid by the Group:



LBP’000


LBP’000 2009 2008

Deposits with Central Banks 38,620,368

Deposits with banks and financial institutions 13,482,205

Deposits with related party banks and financial institutions 102,888

Available for sale investment securities 464,769,001

Held to maturity investment securities 101,947,594

Held to maturity investment securities against soft loan 29,755,972

Loans to banks 2,906,973

Loans to related party banks 905,093

Loans and advances to customers 215,776,364

Loans and advances to related parties 10,394,087

Interest recognized on impaired loans and advances to customers 8,406,228

Interest recognized on impaired loans transferred to off financial position 747,018

Other interest 127,910

TOTAL 887,941,701

94,077,168

31,433,538

17,124

295,908,313

144,664,478

36,612,641

2,585,801

1,080,328

181,487,216

8,081,950

8,803,471

159,912

173,989

805,085,929

32. INTEREST INCOME

Interest income realized on impaired loans and advances to customers represent recoveries of interest. Accruedinterest on impaired loans and advances is not recognized until recovery / rescheduling agreements are signed withcustomers.

Interest income on trading portfolio is included under net interest and gain on trading portfolio. (Note 36).

LBP’000 2009 2008

Deposits and borrowings from banks and financial institutions 3,231,147

Deposits and borrowings from related party banks and financial institutions -

Customers’ deposits at amortized cost 528,619,010

Related parties’ deposits at amortized cost 16,597,469

Other borrowings (Note 20) 22,308,991

Borrowings from related party (Note 20) -

Shareholders’ cash contribution to capital (Note 24) 1,197,972

TOTAL 571,954,589

3,066,181

73,531

469,168,092

15,153,306

25,391,322

834,522

1,197,972

514,884,926

33. INTEREST EXPENSE

Interest expense on customers’ accounts designated at fair value through profit or loss is included under net interest and gainon financial instruments designated at fair value through profit or loss. (Note 37).




114

LBP’000 2009 2008

Commission on documentary credits 12,192,641

Commission on letters of guarantee 4,960,117

Service fees on customers’ transactions 54,863,946

Commission on transactions with banks 53,919

Asset management fees 2,681,329

TOTAL 74,751,952

11,113,889

3,862,669

46,101,100

94,967

1,332,864

62,505,489

34. FEE AND COMMISSION INCOME

This caption consists of the following:

Fee and commission income include fees and commission to related parties with immaterial amounts.

LBP’000 2009 2008

Commission on transactions with banks and financial institutions 2,592,168

Other (including commissions on customers' transactions) 20,480,441

TOTAL 23,072,609

2,284,720

17,987,531

20,272,251

35. FEE AND COMMISSION EXPENSE


Fees and commission expenses include fees and commission to related parties with immaterial amounts.

LBP’000 2009 2008

Interest income 5,318,688

Dividends received 1,050,973

Net unrealized gain / (loss) 10,889,336

Net realized gain 5,691

TOTAL 17,264,688

5,394,092

1,025,871

(5,252,641)

280,560

1,447,882

36. NET INTEREST AND OTHER GAIN / LOSS ON TRADING PORTFOLIO





LBP’000 2009 2008

Interest expense on customers’ accounts designatedat fair value through profit or loss (9,887,123)

Fee income on customers’ accounts designatedat fair value through profit or loss 31,562

TOTAL (9,855,561)

(9,259,714)

67,753(9,191,961)

37. NET INTEREST AND OTHER GAIN / LOSS ON FINANCIAL INSTRUMENTSDESIGNATED AT FAIR VALUE THROUGH PROFIT OR LOSS


LBP’000 2009 2008

Gain on sale of available for sale securities 3,425,253

Dividends received on investment securities 5,710,871

Gain from sale of subsidiary -

Gain from disposal of part of equity interest in an associate (Note 12) 14,100

Share in profits of associates (Note 12) 7,579,190

Foreign exchange gain 10,395,796

Other operating income - Net 19,456,150

TOTAL 46,581,360

1,015,442

5,795,642

27,370,728

-

6,268,558

9,017,944

12,624,024

62,092,338

38. OTHER OPERATING INCOME


39. FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISKS

The guarantees and standby letters of credit and the documentary and commercial letters of credit representfinancial instruments with contractual amountsrepresenting credit risk. The guarantees and standby letters of credit represent irrevocable assurances that theGroup will make payments in the event that a customercan not meet its obligations to third parties and are not different from loans and advances on the statement of

financial position. However, documentary and commercialletters of credit, which represent written undertakings bythe Group on behalf of a customer authorizing a thirdparty to draw drafts on the Group up to a stipulatedamount under specific terms and conditions, are collateralized by the underlying shipments documents ofgoods to which they relate and, therefore, have significantly less risks.



Other operating income includes an amount of LBP 2.9 billion representing income recognized from the increase of investmentin "Fransabank OJSC".


116

LBP’000 2009 2008

Shareholders, directors and other key management personneland close family members:Direct facilities & credit balances

Secured loans and advances 135,982,095Unsecured loans and advances 1,774,356Deposits at amortized cost 179,829,978

Indirect facilitiesLetters of guarantees 1,521,113

Associated companies:Term placement with banks 24,839,425Loans to banks 2,431,596Deposits from banks 110,751Money market deposits from banks 30,736,482Direct facilities & credit balances

Secured loans and advances 13,560,952Unsecured loans and advances 18,793,873Deposits at amortized cost 46,628,000

Indirect facilitiesLetters of credit 2,543,108Letters of guarantee 625,543Acceptances -

Accrued interest receivable:Term placement with banks 3,534Loans to banks 75,515Loans and advances 777,414

Accrued interest payable:Money market deposits from banks 10,601Deposits at amortized cost 1,496,403Cash contribution to capital 3,282

Income statement accounts:Interest income from deposits with banks 102,888Interest income from loans to banks 905,093Interest income from loans and advances 10,394,087Interest expense on deposits from banks -Interest expense on deposits at amortized cost 16,597,469Interest expense on borrowings from related parties -Interest expense on cash contribution to capital 1,197,972

141,562,8556,771,896

160,123,600

1,519,229

45,942,92025,355,747

947,78742,992,484

-6,067,377

48,501,712

727,6287,296,1956,283,591

16,441573,370145,287

70,5971,170,268

3,273

17,1241,080,3288,081,950

73,53115,153,306

834,5221,197,972

40. BALANCES / TRANSACTIONS WITH RELATED PARTIES

In the ordinary course of its activities, the Group conductstransactions with related parties including shareholders,directors, subsidiaries and associates. Also, the Group conducts sale and purchase transactions of investment

securities with subsidiary banks and these transactions aremade at net book value of the financial instruments.Balances with related parties as at year-end consist of thefollowing:




Interest rates charged on balances outstanding are thesame rates that would be charged in an arm’s transaction.Secured loans and advances are covered by real estatemortgage to the extent of LBP 24.7 billion (LBP 1.5 billionin 2008) and by pledged deposits of the respectiveborrowers to the extent of LBP 144.6 billion (LBP 143.8 billion

in 2008) and by shares pledged to the extent of LBP 10.4 billion.The remunerations of executive management amountedto LBP 22.1 billion during 2009 (LBP 19.3 billion during2008). This includes accrued remuneration payable to thechairman and vice chairman calculated on the basis of 8%of profit before tax.

Time deposits with and from Central Banks and banks and financial institutions represent inter-bank placements andborrowings with an original term of 90 days or less.

LBP’000 2009 2008

Cash 81,336,245

Current accounts with Central Banks 206,453,846

Time deposits with Central Banks 752,221,310

Purchased checks 12,458,021

Current accounts with banks and financial institutions 113,249,966

Time deposits with banks and financial institutions 1,252,160,873

Demand deposits from banks (85,133,870)

Time deposits from banks (167,217,665)

TOTAL 2,165,528,726

80,781,336

97,409,281

812,828,090

10,545,218

61,873,301

790,242,984

(68,672,590)

(65,053,021)

1,719,954,599

41. CASH AND CASH EQUIVALENTS

Cash and cash equivalents for the purpose of the cash flows statement consist of the following:

Treasury bills held to maturity 8,843,720 Soft loan 8,843,712 June 28, 2013

Treasury bills held to maturity 10,468,000 Soft loan 10,468,000 December 20, 2013

Treasury bills held to maturity 289,000,000 Soft loan 289,000,000 August 6, 2010

Treasury bills held to maturity 10,500,000 Soft loan 10,500,000 October 25, 2012

TOTAL 318,811,720 318,811,712

42. COLLATERAL GIVEN

Financial assets given as collateral are as follows:



December 31, 2009

LBP’000


118

Redemption valueof Pledged Assets

Nature ofFacility

Amount ofFacility

MaturityDate

Corresponding Facilities

Deposit with bank 3,043,251 Letters of guarantee 2,864,250 July 2, 2009

Deposit with bank 160,420 Letters of guarantee 150,750 July 2, 2009

Deposit with bank 842,166 Letters of guarantee 366,298 April & July 31, 2009

Treasury bills held to maturity 8,843,710 8,843,712 June 28, 2013

Treasury bills held to maturity 10,468,000 10,468,000 December 20, 2013

Treasury bills held to maturity 289,000,000 289,000,000 August 6, 2010

Treasury bills held to maturity 10,500,000 10,500,000 October 25, 2012

TOTAL 322,857,547 322,193,010

43. RISK MANAGEMENT OF FINANCIAL INSTRUMENTS

Risk Management Framework

The Group is exposed to different types of risk mainlycredit risk, liquidity risk, market risk and operational risk.These risks are inherent in the Group’s activities but aremanaged through an ongoing process of identification,measurement and monitoring, subject to risk limits.The Board of Directors has overall responsibility for theestablishment and oversight of the Group’s RiskManagement framework. The Chief Risk Officer and othermanagers also have certain responsibilities in supportingFransabank Group’s risk management and promotingcompliance with its risk appetite.

Board of Directors

Within the risk management framework, the Board ofDirectors is ultimately responsible for defining the strate-gic objectives, identifying and setting the level of tolera-ble risks to which the Group is exposed, approving theRisk Management policies and procedures, and takingcorrective measures to improve the risk managementprocess.

Risk Management Division

The Risk Management Division, which is headed by theChief Risk Officer, is independent of the business lines. Itworks closely with the Risk Management Committee andSenior Management to assist them in managing theGroup's risks and ensuring that proper controls are set upin order to highlight risks and mitigate them.In addition to the above, the Risk Management Division

ensures that the capital adequacy ratio is adequate tocover credit, market and operational risks as defined bythe Central Bank of Lebanon and the Banking ControlCommission, as well as, it monitors compliance with policies, procedures and risk limits and accordinglyreports to the Board Risk Management Committee withappropriate recommendations if necessary.

Internal Audit Department

Risk management processes are independently reviewedby the Internal Audit Department, at least annually. Thisreview includes examination of both adequacy andeffectiveness of risk control procedures.

Credit Risk

Credit risk is most simply defined as the potential that abank’s borrower or counterparties fail to meet theirobligations in accordance with agreed terms. One of theprimary goals of credit risk management is to maximizeGroup’s risk-adjusted rate of return by maintaining creditrisk exposure within acceptable parameters.

Oversight of credit risk starts at the level of the ExecutiveCommittee, which is responsible for: (1) deciding onstrategies and credit policies within the guidance providedby the Group’s main regulator (Central Bank of Lebanon),(2) evaluating the quality of the credit portfolio based onapplicable policies and procedures and (3) evaluatingexpansion projects.



LBP’000

December 31, 2008


Redemption valueof Pledged Assets

Nature ofFacility

Amount ofFacility

MaturityDate

Corresponding Facilities

Soft loan

Soft loan

Soft loan

Soft loan

Management of credit risk mainly includes:

a) Establishing and developing credit policies namelywith respect to the authorization structure for new andexisting customers, real and personal guaranteesrequirements, procedures and templates for creditassessment, loans grading and checklist ofdocuments to be collected from customers.

b) Providing guidance for compliance with regulatoryrequirements while assessing credit risk at theborrower’s level.

c) Assessing credit risk for new and existing facilitiesthrough conducting a credit review that tackles amongother things following up the accounts’performance, recurring over-limits and counterparty’sfinancial situation.

d) Providing adequate controls over risk by ensuring thatcredit exposures are within levels consistent withprudential threshold limits stipulated by Central Bankof Lebanon Circular No. 48 dated August 1998, as wellas internal limits.

Retail Lending

Different retail credit applications are used for eachproduct type which are submitted by sales channels andanalyzed centrally based on the set policies andprocedures. These comprise the following:

• Borrower’s eligibility criteria (i.e., age, nationality, yearsof experience, monthly income / salary, etc…)

• Required documents (i.e., income declaration, proof ofresidence, etc…)

• General conditions ( i.e., monthly installment over monthlyincome ratio, financing ratio)

• Collateral

Loan applications are approved by the Retail & HousingCommittee which is composed of the Head of Product andCredit Manager. The Head of the Retail Risk Departmentapproves or rejects the request in case of un-unanimous agreement and/or deviations fromstandard credit policies and procedures.

The Retail & Housing Committee is held on a daily basis tocater for prompt feedback to clients. Different authority levels are specified for approving each producttypes depending on loan amount. The Collection Unit

handles delinquency issues. The main purpose ofcreating this unit in 2004 is to centralize the follow-up ofdelinquent retail loans. Clients in default are contactedwithin 7 days after the maturity becomes due.Rescheduling, extension of payment, warning letters,salary domiciliation and other means of payment arrange-ments are frequently considered by the collection staff toprevent downgrading a loan, eventually subject to a legalsuit.

The efficiency of the collection unit is evidenced by a2.14% infection rate during 2009 (2.76% during 2008).

Corporate and SME Lending

The Corporate Banking Department processes creditapplications with total combined facilities above theequivalent of USD 2 million and/or turnover aboveUSD 5 million. These applications are reviewed and completed by the Relationship Manager and forwardedto an analyst within the department who proceeds with afull review of applications on hand. Credit Reviews arethen sent to Corporate Banking Management for comments and thereafter to the Credit Appraisal unit fora second opinion prior to their discussion and approvalby the Credit Committee.

A company is classified Small and Medium enterprise(SME) as long as its annual sales turnover does notexceed USD 5 million and/or its total exposure is withinUSD 2 million.

Measurement of Credit Risk

Loans and Advances to Customers

In measuring credit risk of loans and advances, the Bankconsiders the following:

• Ability of the counterparty to honor its contractualobligations based on the account’s performance, recurring overdues and related reasons, the counterparty’s financial position and effect thereto ofthe economic environment and market conditions;

• Exposure levels of the counterparty and unutilizedcredit limits granted;

• Exposure levels of the counterparty with other banks;

• Purpose of the credit facilities granted to the counterparty and conformity of utilization by thecounterparty.




120

In accordance with Central Bank of Lebanon circular No.58 the Group’s customers are categorized into five classifications as described below:

Classification Description

1 Standard monitoring Indicates that borrowers are able to honor their commitments andthere is no reason to doubt their ability to repay principal and inter-est in full and in a timely manner. Some of the indicators related to this category are: continuous cash inflows, timely submission of financial statements and / or sufficient collateral.

2 Special monitoring Indicates that borrowers are able to honor their current commitments, although repayment may be adversely affected byspecific factors. Such borrowers are subject to special monitoring.Major characteristics of this category are: inadequate loan information such as annual financial statements availability,condition of and control over collateral held is questionable and /or declining profitability.

3 Sub-standard Indicates that borrowers' ability to serve their commitments is inquestion. In this context, borrowers cannot depend on theirnormal business revenues to pay back principal and interest, i.e.losses may occur. The main characteristics of this category aresevere decline in profitability and in cash inflows. In this case, theGroup considers interests and commissions as unrealized but doesnot establish an allowance for impairment.

4 Doubtful Indicates that borrowers cannot honor their commitments in fulland on time. Significant losses will be incurred even collateral heldis invoked due to payment overdues. The net realizable value ofcollateral held is insufficient to cover payment ofprincipal and interest. In this case, the Group considers interestsand commissions as unrealized and established an allowance forimpairment accordingly.

5 Bad Indicates that commitments cannot be covered even after taking allpossible measures and resorting to necessary legalprocedures. Some signals of this category would be inexistence ofcollateral low value of collateral and / or, losing contact with theborrower. In this case, the bank considers interests andcommissions as unrealized, ceases their accumulation, andprovides the whole amount of the exposure’s balance.

(Watch list)




LBP’000 2009 2008

Less than 30 days 5,128,746

Between 30-60 days 9,577,363

Between 60-90 days 1,010,026

Between 90-180 days 1,667,481

Beyond 180 days 7,988,203

TOTAL 25,371,819

12,710,754

12,367,140

30,505,048

3,040,997

8,787,498

67,411,437

Loans’ classifications are assessed and updated regularly.

Note 9 discloses the distribution of loans and advances to customers by classification.

Most of customers’ exposures represent credit facilities granted to corporations which do not have external credit rating.

Debt Investment Securities and Other Bills

The risk of the debt instruments included in the investmentportfolio relates mainly to sovereign risk (including CentralBank of Lebanon) (96% in 2009 and 2008).

Limiting of Credit Risk

The Bank structures the levels of credit risk undertaken byplacing limits on the amount of risk accepted in relation toone borrower, or groups of borrowers, and to geographicaland industry segments . Such risks are monitored on arevolving basis and subject to an annual or more frequentreview, when considered necessary.

Exposures to any one borrower including banks are furtherrestricted by sub-limits covering on and off-financialposition exposures. Actual exposures against limits aremonitored on a regular basis.

In addition to the above, the Group’s lead regulator (CentralBank of Lebanon – BDL) and the Banking ControlCommission (BCC) have set up the following regulationswith respect to limits of credit risks:

• With respect to loans and advances to customers, BDLbasic circular No.81 provides the following:

- The Board of Directors should be periodicallyinformed about single borrowers (or group of relatedborrowers) with total facilities in excess ofUSD 1 million or equivalent.

- Facilities granted to related parties should not exceed5% of the Bank’s capital base. This percentage falls to2% in case the Bank does not abide with article 152 ofthe Lebanese Code of Money and Credit.

- Allowed temporary and accidental over-limits shouldnot exceed 10% of authorized overdraft limit.

• BDL circular No.48 and BCC circular No.258 (issuedduring December 2007) specify the ceiling for the creditfacilities and regulations related to country limits andexposures per customer or group of customers.

• BDL circular No.51 states that facilities granted against thepledge of shares, in case the purpose is acquiring saidshares, should not exceed 50% of value of listed shares.

Standard and special monitoring loans and advances include overdue accounts but not impaired as follows:




122

Concentration of Credit Risk by Geographical Location:

Middle East NorthLBP’000 Lebanon and Africa America Europe Gulf Other Total

Financial and trading assets:

Cash and Central Banks 2,287,568,583 349,978,650 - 15,349,835 - - 2,652,897,068

Deposits with banks and financial institutions 63,416,987 316,827,727 42,100,261 999,674,070 71,141,248 5,991,715 1,499,152,008

Trading assets 92,206,753 - - 3,445,677 168,959 - 95,821,389

Loans to banks 25,638,716 2,507,113 - 13,882,743 - 16,788,942 58,817,514

Loans and advances to customers 2,893,187,614 357,003,230 512,569 90,528,504 89,228,059 50,282,228 3,480,742,204

Available for sale investments 6,315,600,764 335,288 3,367,154 25,773,125 14,269,981 - 6,359,346,312

Held to maturity investments 1,408,193,258 - - 3,580,556 - - 1,411,773,814

Derivative assets held for risk management 1,125,787 10,344 5,238 22,112 6,119 880 1,170,480

TOTAL 13,086,938,462 1,026,662,352 45,985,222 1,152,256,622 174,814,366 73,063,765 15,559,720,789

Financial liabilities:

Deposits and borrowingsfrom banks 50,957,787 142,218,363 7,593,433 94,520,525 34,535,735 721,304 330,547,147

Liabilities designated at fair value throughprofit or loss 155,861,816 2,019,430 362,028 1,689,132 2,670,658 109,336 162,712,400

Customers' accounts at amortized cost 11,098,049,241 699,254,622 34,080,708 562,003,120 942,020,273 89,003,854 13,424,411,818

Other borrowings 330,667,693 - 11,187,911 67,323,685 3,640,802 - 412,820,091

Derivative liabilities held for risk management - - - 42,954 - - 42,954

Financial guarantee contracts issued 1,627,290 - - - - - 1,627,290

TOTAL 11,637,163,827 843,492,415 53,224,080 725,579,416 982,867,468 89,834,494 14,332,161,700



December 31, 2009


Middle East NorthLBP’000 Lebanon and Africa America Europe Gulf Other Total


Cash and Central Banks 2,558,064,399 102,850,917 - 6,235,503 - - 2,667,150,819

Deposits with banks and financial institutions 47,699,543 121,518,796 14,854,081 613,194,650 116,364,533 939,065 914,570,668

Trading assets 82,888,872 - - 2,438,006 212,993 - 85,539,871

Loans to banks 27,040,397 25,929,117 - - - 16,620,222 69,589,736

Loans and advances to customers 2,253,102,784 202,974,242 376,678 5,545,586 40,277,626 83,911,362 2,586,188,278

Available for sale investments 4,002,975,584 338,423 1,710,128 90,988 872,173 - 4,005,987,296

Held to maturity investments 1,761,495,500 - - 370,359 - - 1,761,865,859

Derivative assets held for risk management 2,800,211 17,151 11,065 22,130 34,855 - 2,885,412

TOTAL 10,736,067,290 453,628,646 16,951,952 627,897,222 157,762,180 101,470,649 12,093,777,939


Deposits and borrowingsfrom banks 23,338,303 20,279,096 5,514,724 82,716,759 19,957,213 4,999,165 156,805,260

Liabilities designated at fair value through profit or loss 156,636,125 1,888,373 339,248 1,658,049 2,988,173 77,817 163,587,785

Customers' accounts at amortized cost 9,159,641,914 376,086,508 26,016,398 252,532,946 750,264,242 49,957,446 10,614,499,454

Other borrowings 331,048,817 - 14,098,789 38,431,698 1,060,401 - 384,639,705

Financial guarantee contracts issued 1,144,756 - - - - - 1,144,756

TOTAL 9,671,809,915 398,253,977 45,969,159 375,339,452 774,270,029 55,034,428 11,320,676,960



December 31, 2008


124

Other specific control and mitigation measures are outlined below:

a) Collateral:

The principal collateral types for loans and advances consist of mortgages over real estate properties, bank guarantees,business assets including inventories and accounts receivable.

The Group will seek additional collateral from the counterparty as soon as impairment indicators are noticed for therelevant individual loans and advances.

b) Netting arrangements:

The Group enters into netting arrangements when with counterparties having a significant volume of transactions inorder to restrict its exposure to credit losses. These arrangements do not generally result in an offset of assets andliabilities balances in the statement of financial position.




December 31, 2009

LBP’000

Standard and special monitoring 3,343,204,140 - 3,343,204,140 576,665,636

Sub-standard (including restructured debts) 27,430,820 - 27,430,820 3,488,732

Doubtful (including restructured debts) 295,669,337 (178,653,975) 117,015,362 2,379,493

Loss (including restructured debts) 45,290,566 (45,290,566) - 2,349,577

Loan portfolio purchased 3,677,874 - 3,677,874 -

Allowance for collectively impaired loans - (10,585,992) (10,585,992) -

TOTAL 3,715,272,737 (234,530,533) 3,480,742,204 584,883,438

December 31, 2008

LBP’000

Standard and special monitoring 2,438,987,773 - 2,438,987,773 566,644,094

Sub-standard (including restructured debts) 20,407,690 - 20,407,690 1,534,740

Doubtful (including restructured debts) 334,830,760 (202,712,021) 132,118,739 2,370,360

Loss (including restructured debts) 49,062,213 (49,062,213) - 1,062

Loan portfolio purchased 4,562,025 - 4,562,025 -

Allowance for collectively impaired loans - (9,887,949) (9,887,949) -

TOTAL 2,847,850,461 (261,662,183) 2,586,188,278 570,550,256

Collateral Held Against Loans and Advances to Customers:

Market RisksMarket risk is defined as the risk of losses in on and off-financial position, arising from adverse movements in market prices.The risks subject to Market Risk include: Interest Rate Risk and Equity Risk in the trading book, Foreign Exchange Risk andCommodities Risk.

The overall authority for market risk is vested in ALCO.



GrossExposure Netof UnrealizedInterest and

Discount

Allowancefor

ImpairmentNet

ExposurePledgedFunds

GrossExposure Netof UnrealizedInterest and

Discount

Allowancefor

ImpairmentNet

ExposurePledgedFunds


126

Fair Value of Collateral held

125,526,453 1,454,582,130 106,771,923 3,204,977 646,397,750 2,913,148,869 1,882,695,047

388,628 55,309,509 183,789 - 726,971 60,097,629 24,422,169

128,008 257,997,395 5,224 - 1,297,908 261,808,028 166,306,045

70,769 12,265,815 13,500 - 1,655,410 16,355,071 10,027,687

- - - - - - -

- - - - - - -

126,113,858 1,780,154,849 106,974,436 3,204,977 650,078,039 3,251,409,597 2,083,450,948

Fair Value of Collateral held

161,309,871 905,228,490 23,623,339 1,422,198 274,876,908 1,933,104,900 1,375,316,253

920,642 46,847,675 185,815 - 842,753 50,331,625 24,826,149

128,008 261,619,343 101,437 - 317,686 264,536,834 178,669,682

- 8,080,235 13,500 - 1,797,978 9,892,775 5,238,134

- - - - - - -

- - - - - - -

162,358,521 1,221,775,743 23,924,091 1,422,198 277,835,325 2,257,866,134 1,584,050,218

Management of Market Risks

Trading PortfolioA Trading Book consists of positions in financialinstru-ments held either with trading intent or in order tohedge other elements of the trading book. The market riskfor trading book is managed and monitored using theStandardized Measurement Method.

Foreign Exchange RiskThe capital charge for foreign exchange risk applies to for-eign exchange risk of the entire business. Two processesare used to calculate the capital charge for foreignexchange risk. The first is to measure the bank’s netopen position in each currency. The second is to meas-ure the risks inherent in the bank’s mix of long and shortpositions in different currencies. The capital charge is 8%of the higher of either the net long currency position or thenet short currency position.



BankGuarantees

& Kafalat

Mortgageon

PropertiesEquity

SecuritiesDebts

Securities Others

TotalCollateral

Held

Lesser ofIndividualExposureor Total

Collateral

BankGuarantees

& Kafalat

Mortgageon

PropertiesEquity

SecuritiesDebts

Securities Others

TotalCollateral

Held

Lesser ofIndividualExposureor Total

Collateral


Assets and liabilities are segregated as follows by major currencies:

December 31, 2009

LBP’000 LBP USD Euro Other Total

ASSETSCash and Central Banks 944,046,626 1,266,250,293 93,044,195 349,555,954 2,652,897,068Deposits with banks andfinancial institutions 35,005,613 672,127,139 531,449,451 260,569,805 1,499,152,008Trading assets 4,971,306 75,301,284 13,996,447 1,552,352 95,821,389Loans to banks 25,638,719 8,386,361 16,788,941 8,003,493 58,817,514Loans and advances to customers 663,337,387 2,456,056,613 183,099,937 178,248,267 3,480,742,204Available for sale investments 4,665,674,424 1,527,327,486 156,039,721 10,304,681 6,359,346,312Held to maturity investments 366,364,780 988,608,002 56,801,032 - 1,411,773,814Customers' liability under acceptances 299,999 90,243,948 12,328,252 10,610,040 113,482,239Investments in associates 10,336,794 36,702,558 - - 47,039,352Assets acquired in satisfaction of loans 63,752,591 125,348,949 - - 189,101,540Property and equipment 169,460,072 (1,028,869) 151,282 23,751,249 192,333,734Intangible assets 53,614,177 57,458 37,633 1,942,007 55,651,275Other assets 59,161,708 62,200,356 2,608,228 19,901,736 143,872,028

TOTAL ASSETS 7,061,664,196 7,307,581,578 1,066,345,119 864,439,584 16,300,030,477

LIABILITIESDeposits and borrowings from banks 34,007,884 149,961,870 16,257,663 130,319,730 330,547,147Liabilities designated at fair valuethrough profit or loss 2,256,269 160,456,131 - - 162,712,400Customers' accounts at amortized cost 5,331,543,118 6,750,772,945 939,684,726 402,411,029 13,424,411,818Customers' acceptance liability 299,999 90,243,948 12,328,252 10,610,040 113,482,239Other borrowings 330,667,693 53,331,447 28,820,951 - 412,820,091Other liabilities 105,003,808 65,584,396 15,167,542 12,863,220 198,618,966Provisions 20,021,753 14,945,224 485,988 2,519,262 37,972,227TOTAL LIABILITIES 5,823,800,524 7,285,295,961 1,012,745,122 558,723,281 14,680,564,888Currencies to be received 1,454,868 347,242,057 20,874,489 5,942,326 375,513,740Currencies to be delivered (300,890,480) (26,608,332) (20,331,022) (25,652,805) (373,482,639)

(299,435,612) 320,633,725 543,467 (19,710,479) 2,031,101

NET ON-BALANCE SHEET FINANCIAL POSITION 938,428,060 342,919,342 54,143,464 286,005,824 1,621,496,690




128

December 31, 2008

LBP’000 LBP USD Euro Other Total

ASSETSCash and Central Banks 993,895,144 1,558,530,161 13,586,424 101,139,090 2,667,150,819Deposits with banks andfinancial institutions 19,188,121 504,660,661 282,755,377 107,966,509 914,570,668Trading assets 5,315,308 65,006,547 13,914,852 1,303,164 85,539,871Loans to banks 27,040,396 25,929,117 16,620,223 - 69,589,736Loans and advances to customers 407,178,796 1,950,753,548 149,692,609 78,563,325 2,586,188,278Available for sale investments 2,579,971,055 1,267,254,862 158,422,956 338,423 4,005,987,296Held to maturity investments 719,261,401 984,545,170 58,059,288 - 1,761,865,859Customers' liability under acceptances 150,000 70,677,807 20,087,037 8,349,916 99,264,760Investments in associates 5,693,577 42,980,469 - - 48,674,046Assets acquired in satisfaction of loans 64,455,728 140,861,862 - - 205,317,590Property and equipment 142,685,988 (1,028,869) 173,544 14,169,964 156,000,627Intangible assets 53,752,596 - 60,324 1,357,506 55,170,426Other assets 45,182,280 29,878,525 2,765,623 12,048,796 89,875,224

TOTAL ASSETS 5,063,770,390 6,640,049,860 716,138,257 325,236,693 12,745,195,200

LIABILITIESDeposits and borrowings from banks 17,350,620 120,678,803 15,173,052 3,602,785 156,805,260Liabilities designated at fair valuethrough profit or loss 2,255,707 161,332,078 - - 163,587,785Customers' accounts at amortized cost 3,969,319,058 5,861,415,064 611,379,985 172,385,347 10,614,499,454Customers' acceptance liability 150,000 70,677,807 20,087,037 8,349,916 99,264,760Other borrowings 331,048,817 30,078,549 23,512,339 - 384,639,705Other liabilities 76,760,607 55,119,602 9,917,485 6,724,754 148,522,448Provisions 19,828,931 16,291,781 - 1,256,058 37,376,770TOTAL LIABILITIES 4,416,713,740 6,315,593,684 680,069,898 192,318,860 11,604,696,182Currencies to be received 7,505,075 54,470,251 18,218,472 5,675,517 85,869,315Currencies to be delivered (31,000) (29,061,940) (17,440,099) (38,984,618) (85,517,657)

7,474,075 25,408,311 778,373 (33,309,101) 351,658

NET ON-BALANCE SHEET FINANCIAL POSITION 654,530,725 349,864,487 36,846,732 99,608,732 1,140,850,676

Non-Trading Portfolio - Interest Rate Risk

Fransabank Group is also exposed to Interest Rate Risk in the Banking Book (IRRBB) which includes financialinstruments not subject to the above definition of Market Risk in the trading book. IRRBB arises from core bankingactivities such as lending, deposit taking, etc… The IRRBB is measured by using a maturity / repricing schedule whichis referred to as “gap analysis”.

Interest rate risk is managed principally through monitoring interest rate gaps.




Interest Rate Sensitivity Statement of Financial Position

FloatingNon-

Interest Up to 3 Months to 1 to 3 3 to 5LBP’000 Bearing 3 Months 1 Year Years Years

ASSETSCash and Central Banks 575,349,039 368,697,587 - - -

Deposits with banks and financial institutions 903,318 34,102,295 - - -

Trading assets 87,730 - - - -

Loans to banks 208,719 - - - -

Loans and advances to customers 22,386,465 175,358,389 34,622,262 81,769,083 55,701,862

Available for sale investments 194,138,867 157,518,607 - - -

Held to maturity investments 13,705,056 99,982 - - -

Customers' liability under acceptances 299,999 - - - -

Investments in associates 10,336,794 - - - -

Assets acquired in satisfaction of loans 63,752,591 - - - -

Property and equipment 169,460,072 - - - -

Intangible assets 53,614,177 - - - -

Other assets 59,161,708 - - - -

TOTAL ASSETS 1,163,404,535 735,776,860 34,622,262 81,769,083 55,701,862

LIABILITIESDeposits and borrowings from banks 12,231,063 19,497,927 2,278,894 - -

Liabilities designated at fair valuethrough profit or loss 6,272 - - - -

Customers' accounts at amortized cost 216,086,509 4,627,106,374 177,430,455 41,407,613 -

Customers' acceptance liability 299,999 - - - -

Other borrowings 398,006 - 292,221,173 15,643,825 22,404,689

Other liabilities 105,003,808 - - - -

Provisions 20,021,753 - - - -

TOTAL LIABILITIES 354,047,410 4,646,604,301 471,930,522 57,051,438 22,404,689

INTEREST RATE GAP POSITION 809,357,125 (3,910,827,441) (437,308,260) 24,717,645 33,297,173

A summary of the Group’s interest rate gap position is as follows at December 31, 2009:

Interest Sensitivity Analysis for Accounts in Lebanese Pounds as at December 31, 2009:




130


Floating FixedOver 3 Months

Over less than 1 to 3 3 to 5 Over Grand5 Years Total 1 year Years Years 5 Years Total Total

- 368,697,587 - - - - - 944,046,626

- 34,102,295 - - - - - 35,005,613

- - - 2,875,790 - 2,007,786 4,883,576 4,971,306

- - 1,400,000 5,646,000 5,646,000 12,738,000 25,430,000 25,638,719

87,096,305 434,547,901 43,813,776 109,947,221 44,872,054 7,769,970 206,403,021 663,337,387

- 157,518,607 204,005,587 1,086,489,011 2,654,488,447 369,033,905 4,314,016,950 4,665,674,424

- 99,982 319,271,082 30,703,691 2,584,969 - 352,559,742 366,364,780

- - - - - - - 299,999

- - - - - - - 10,336,794

- - - - - - - 63,752,591

- - - - - - - 169,460,072

- - - - - - - 53,614,177

- - - - - - - 59,161,708

87,096,305 994,966,372 568,490,445 1,235,661,713 2,707,591,470 391,549,661 4,903,293,289 7,061,664,196

- 21,776,821 - - - - - 34,007,884

- - - 2,249,997 - - 2,249,997 2,256,269

- 4,845,944,442 269,509,746 2,421 - - 269,512,167 5,331,543,118

- - - - - - - 299,999

- 330,269,687 - - - - - 330,667,693

- - - - - - - 105,003,808

- - - - - - - 20,021,753

- 5,197,990,950 269,509,746 2,252,418 - - 271,762,164 5,823,800,524

87,096,305 (4,203,024,578) 298,980,699 1,233,409,295 2,707,591,470 391,549,661 4,631,531,125 1,237,863,672





Floating

Up to 3 Months to 1 to 3 3 to 5LBP’000 3 Months 1 Year Years Years

ASSETSCash and Central Banks 235,785,903 691,781,636 130,398,750 472,601,250 149,242,500

Deposits with banks and financial institutions 88,391,703 470,543,521 875,109,646 - -

Trading assets 26,929,575 - - - -

Loans to banks 116,350 10,406,999 7,662,770 8,374,053 4,187,026

Loans and advances to customers 117,817,986 2,031,302,922 131,004,085 129,326,877 77,455,277


Held to maturity investments 22,292,262 98,281,900 - - -

Customers' liability under acceptances 113,182,240 - - - -





Other assets 84,710,320 - - - -

TOTAL ASSETS 950,781,771 3,357,104,592 1,144,175,251 610,302,180 230,884,803

LIABILITIESDeposits and borrowings from banks 8,277,207 241,068,215 47,193,841 - -

Liabilities designated at fair valuethrough profit or loss 3,671,609 - 85,414,950 71,369,572 -


Customers' acceptance liability 113,182,240 - - - -

Other borrowings 387,294 2,776,394 5,201,026 9,233,349 12,965,680


Provisions 17,950,474 - - - -

TOTAL LIABILITIES 1,194,233,703 6,429,436,479 819,237,937 112,640,655 12,965,680

INTEREST RATE GAP POSITION (243,451,932) (3,072,331,887) 324,937,314 497,661,525 217,919,123

Interest Sensitivity Analysis for Accounts in Foreign Currencies as at December 31, 2009:




132

Non-InterestBearing




- 1,444,024,136 18,843,750 4,144,690 6,051,963 - 29,040,403 1,708,850,442

- 1,345,653,167 24,839,425 - 5,262,100 - 30,101,525 1,464,146,395

- - 1,752,974 950,186 39,283,873 21,933,475 63,920,508 90,850,083

- 30,630,848 2,431,597 - - - 2,431,597 33,178,795

45,844,053 2,414,933,214 97,574,056 60,152,950 101,971,857 24,954,754 284,653,617 2,817,404,817

- 54,787,614 29,031,236 589,648,768 351,114,392 594,496,713 1,564,291,109 1,693,671,888

- 98,281,900 248,787 608,636,588 91,718,310 224,231,187 924,834,872 1,045,409,034

- - - - - - - 113,182,240

- - - - - - - 36,702,558

- - - - - - - 125,348,949

- - - - - - - 22,873,662

- - - - - - - 2,037,098

- - - - - - - 84,710,320

45,844,053 5,388,310,879 174,721,825 1,263,533,182 595,402,495 865,616,129 2,899,273,631 9,238,366,281

- 288,262,056 - - - - - 296,539,263

- 156,784,522 - - - - - 160,456,131

- 6,899,057,724 229,575,776 7,085,479 - - 236,661,255 8,092,868,700

- - - - - - - 113,182,240

18,764,933 48,941,382 836,048 8,835,239 9,992,061 13,160,374 32,823,722 82,152,398

- - - - - - - 93,615,158

- - - - - - - 17,950,474

18,764,933 7,393,045,684 230,411,824 15,920,718 9,992,061 13,160,374 269,484,977 8,856,764,364

27,079,120 (2,004,734,805) (55,689,999) 1,247,612,464 585,410,434 852,455,755 2,629,788,654 381,601,917





FloatingNon-

Interest Up to 3 Months to 1 to 3 3 to 5LBP’000 Bearing 3 Months 1 Year Years Years

ASSETSCash and Central Banks 655,484,426 41,410,718 - - -

Deposits with banks and financial institutions 52,515 19,135,606 - - -

Trading assets 149,615 - - - -

Loans to banks 210,396 - - - -

Loans and advances to customers 15,066,116 102,367,546 791,284 5,148,974 10,797,889


Held to maturity investments 23,281,321 266,596,976 - - -

Customers' liability under acceptances 150,000 - - - -





Other assets 45,182,280 - - - -

TOTAL ASSETS 1,174,086,918 543,286,661 791,284 5,148,974 10,797,889

LIABILITIESDeposits and borrowings from banks 7,817,528 9,289,958 - - -Liabilities designated at fair value throughprofit or loss 5,711 - - - -

Customers' accounts at amortized cost 313,421,625 3,433,764,668 66,016,303 3,600 -

Customers' acceptance liability 150,000 - - - -

Other borrowings 391,382 - 1,781,997 292,196,185 36,679,253


Provisions 19,828,931 - - - -


INTEREST RATE GAP POSITION 755,711,134 (2,899,767,965) (67,007,016) (287,050,811) (25,881,364)

Interest Sensitivity Analysis for Accounts in Lebanese Pounds as at December 31, 2008:




134




- 41,410,718 - 297,000,000 - - 297,000,000 993,895,144

- 19,135,606 - - - - - 19,188,121

- - - 2,076,577 2,777,968 311,148 5,165,693 5,315,308

- - - - - 26,830,000 26,830,000 27,040,396

25,579,978 144,685,671 57,304,300 122,161,814 40,331,600 27,629,295 247,427,009 407,178,796

- 113,775,815 212,514,786 959,381,478 1,126,376,616 - 2,298,272,880 2,579,971,055

- 266,596,976 - 429,383,104 - - 429,383,104 719,261,401

- - - - - - - 150,000

- - - - - - - 5,693,577

- - - - - - - 64,455,728

- - - - - - - 142,685,988

- - - - - - - 53,752,596

- - - - - - - 45,182,280

25,579,978 585,604,786 269,819,086 1,810,002,973 1,169,486,184 54,770,443 3,304,078,686 5,063,770,390

- 9,289,958 243,134 - - - 243,134 17,350,620

- - - 2,249,996 - - 2,249,996 2,255,707

- 3,499,784,571 154,636,380 1,476,482 - - 156,112,862 3,969,319,058

- - - - - - - 150,000

- 330,657,435 - - - - - 331,048,817

- - - - - - - 76,760,607

- - - - - - - 19,828,931

- 3,839,731,964 154,879,514 3,726,478 - - 158,605,992 4,416,713,740

25,579,978 (3,254,127,178) 114,939,572 1,806,276,495 1,169,486,184 54,770,443 3,145,472,694 647,056,650




Interest Sensitivity Analysis for Accounts in Foreign Currencies as at December 31, 2008:




Floating

Up to 3 Months to 1 to 3 3 to 5LBP’000 3 Months 1 Year Years Years

ASSETSCash and Central Banks 124,688,305 797,078,620 - 130,398,750 621,090,000

Deposits with banks and financial institutions 46,956,284 802,262,143 21,590,000 - -

Trading assets 21,409,247 - - - -

Loans to banks 624,371 - - - 16,569,222

Loans and advances to customers 138,837,600 1,632,822,553 20,946,217 23,557,073 30,098,414

Available for sale investments 67,955,143 - - - -

Held to maturity investments 20,141,328 - - - -

Customers' liability under acceptances 99,114,760 - - - -





Other assets 44,692,944 - - - -

TOTAL ASSETS 762,994,782 3,232,163,316 42,536,217 153,955,823 667,757,636

LIABILITIESDeposits and borrowings from banks 20,716,595 118,738,045 - - -

Liabilities designated at fair value throughprofit or loss 1,929,900 40,109,078 - 119,293,100 -


Customers' acceptance liability 99,114,760 - - - -

Other borrowings 496,384 - 2,200,762 - 17,221,283


Provisions 17,547,839 - - - -


INTEREST RATE GAP POSITION (132,746,159) (2,440,974,235) (248,857,630) 26,911,848 650,536,353

Non-InterestBearing


136






- 1,548,567,370 - - - - - 1,673,255,675

- 823,852,143 - 24,574,120 - - 24,574,120 895,382,547

- - 1,967,076 2,666,574 30,898,941 23,282,725 58,815,316 80,224,563

- 16,569,222 20,735,572 4,620,175 - - 25,355,747 42,549,340

23,266,719 1,730,690,976 72,491,751 116,363,466 83,948,435 36,677,254 309,480,906 2,179,009,482

- - 42,265,917 198,663,477 625,330,384 491,801,320 1,358,061,098 1,426,016,241

- - 205,464,667 207,443,704 458,504,579 151,050,180 1,022,463,130 1,042,604,458

- - - - - - - 99,114,760

- - - - - - - 42,980,469

- - - - - - - 140,861,862

- - - - - - - 13,314,639

- - - - - - - 1,417,830

- - - - - - - 44,692,944

23,266,719 4,119,679,711 342,924,983 554,331,516 1,198,682,339 702,811,479 2,798,750,317 7,681,424,810

- 118,738,045 - - - - - 139,454,640

- 159,402,178 - - - - - 161,332,078

- 5,811,234,388 141,767,641 3,577,870 4,426,875 - 149,772,386 6,645,180,396

- - - - - - - 99,114,760

33,672,459 53,094,504 - - - - - 53,590,888

- - - - - - - 71,761,841

- - - - - - - 17,547,839

33,672,459 6,142,469,115 141,767,641 3,577,870 4,426,875 - 149,772,386 7,187,982,442

(10,405,740) (2,022,789,404) 201,157,342 550,753,646 1,194,255,464 702,811,479 2,648,977,931 493,442,368


Liquidity Risk

The table below summarizes the maturity profile of theGroup's financial liabilities based on contractual undiscountedrepayment obligations. The Group maintains a portfolio ofhighly marketable and diverse assets readily liquefiable in theevent of an unforeseen interruption to cash flow.

The Group maintains obligatory reserves with CentralBank of Lebanon and other Central Banks. Liquidity isassessed and managed using a variety of stressedscenarios applicable to the Group.

December 31, 2009

Lebanese Pounds Base AccountsAccounts with Up to 3 Months to 1 to 3 3 to 5 Over

LBP’000 No Maturity 3 Months 1 Year Years Years 5 Years Total

ASSETS

Cash and Central Banks 575,427,168 368,619,458 - - - - 944,046,626

Deposits with banks andfinancial institutions 1,305,613 33,700,000 - - - - 35,005,613

Trading assets (2) - - 2,959,786 - 2,011,522 4,971,306

Loans to banks - - 1,608,719 5,646,000 5,646,000 12,738,000 25,638,719

Loans and advances to customers 82,088,446 51,163,359 142,426,338 191,951,295 100,657,890 95,050,059 663,337,387

Available for sale investments 119,714,446 208,163,553 227,785,062 1,086,489,011 2,654,488,447 369,033,905 4,665,674,424

Held to maturity investments - 13,557,335 319,518,785 30,703,691 2,584,969 - 366,364,780

Customers' liabilityunder acceptances 299,999 - - - - - 299,999

Investments in associates 10,336,794 - - - - - 10,336,794

Assets acquired insatisfaction of loans 63,752,591 - - - - - 63,752,591

Property and equipment 169,460,072 - - - - - 169,460,072

Intangible assets 53,614,177 - - - - - 53,614,177

Other assets 59,161,708 - - - - - 59,161,708

TOTAL ASSETS 1,135,161,012 675,203,705 691,338,904 1,317,749,783 2,763,377,306 478,833,486 7,061,664,196

LIABILITIES

Deposits and borrowings from banks 13,424,686 20,583,198 - - - - 34,007,884

Liabilities designated at fairvalue through profit or loss 6,272 - - 2,249,997 - - 2,256,269

Customers' accounts at amortized cost 277,452,653 4,583,478,887 431,288,579 39,322,999 - - 5,331,543,118

Customers' acceptance liability 299,999 - - - - - 299,999

Other borrowings - - 292,619,179 15,643,825 22,404,689 - 330,667,693

Other liabilities 105,003,808 - - - - - 105,003,808

Provisions 20,021,753 - - - - - 20,021,753

TOTAL LIABILITIES 416,209,171 4,604,062,085 723,907,758 57,216,821 22,404,689 - 5,823,800,524

MATURITY GAP 718,951,841 (3,928,858,380) (32,568,854) 1,260,532,962 2,740,972,617 478,833,486 1,237,863,672




138

December 31, 2009

Foreign Currencies Base AccountsAccounts with Up to 3 Months to 1 to 3 3 to 5 Over


ASSETS

Cash and Central Banks 517,148,436 410,419,086 149,242,500 476,746,085 155,294,335 - 1,708,850,442

Deposits with banks and financial institutions 123,057,695 1,217,178,912 118,647,692 - 5,262,096 - 1,464,146,395

Trading assets 25,827,474 - 2,757,647 965,796 40,348,216 20,950,950 90,850,083

Loans to banks - 10,523,347 10,094,369 8,374,053 4,187,026 - 33,178,795

Loans and advances to customers 1,513,654,272 383,829,579 454,929,873 202,271,741 187,157,853 75,561,499 2,817,404,817

Available for sale investments 43,558,735 75,130,363 39,718,917 589,648,768 351,114,392 594,500,713 1,693,671,888

Held to maturity investments 1,507,500 112,925,200 6,390,249 608,636,590 91,718,312 224,231,183 1,045,409,034

Customers' liability under acceptances 113,182,240 - - - - - 113,182,240





Other assets 84,710,320 - - - - - 84,710,320

TOTAL ASSETS 2,609,608,939 2,210,006,487 781,781,247 1,886,643,033 835,082,230 915,244,345 9,238,366,281

LIABILITIES

Deposits and borrowingsfrom banks 70,382,162 178,963,260 47,193,841 - - - 296,539,263

Liabilities designated at fairvalue through profit or loss 3,671,608 - 85,414,950 71,369,573 - - 160,456,131

Customers' accountsat amortized cost 972,130,739 6,160,285,875 921,280,289 39,171,797 - - 8,092,868,700

Customers' acceptance liability 113,182,240 - - - - - 113,182,240

Other borrowings - 2,925,107 6,275,655 18,068,588 22,957,741 31,925,307 82,152,398


Provisions 17,950,474 - - - - - 17,950,474

TOTAL LIABILITIES 1,270,932,381 6,342,174,242 1,060,164,735 128,609,958 22,957,741 31,925,307 8,856,764,364

MATURITY GAP 1,338,676,558 (4,132,167,755) (278,383,488) 1,758,033,075 812,124,489 883,319,038 381,601,917




December 31, 2008

Lebanese Pounds Base AccountsAccounts with Up to 3 Months to 1 to 3 3 to 5 Over


ASSETS

Cash and Central Banks 438,114,189 41,431,335 346,643,371 167,706,249 - - 993,895,144

Deposits with banks andfinancial institutions 709,307 18,478,814 - - - - 19,188,121

Trading assets - 149,615 - 2,076,577 2,777,968 311,148 5,315,308

Loans to banks - - 210,396 - - 26,830,000 27,040,396

Loans and advancesto customers 14,296,890 30,838,167 129,732,815 127,831,328 51,141,660 53,337,936 407,178,796

Available for sale investments 109,728,444 158,788,046 225,696,470 959,381,478 1,126,376,617 - 2,579,971,055

Held to maturity investments - 289,638,121 240,176 429,383,104 - - 719,261,401

Customers' liabilityunder acceptances 150,000 - - - - - 150,000





Other assets 45,182,280 - - - - - 45,182,280

TOTAL ASSETS 874,768,999 539,324,098 702,523,228 1,686,378,736 1,180,296,245 80,479,084 5,063,770,390

LIABILITIES

Deposits and borrowingsfrom banks 7,837,738 9,269,748 243,134 - - - 17,350,620

Liabilities designated at fairvalue through profit or loss - 5,711 - 2,249,996 - - 2,255,707

Customers' accountsat amortized cost 188,982,459 3,552,750,208 226,097,715 1,488,626 - 50 3,969,319,058

Customers' acceptance liability 150,000 - - - - - 150,000

Other borrowings - 48,600 2,124,779 292,196,185 36,679,253 - 331,048,817


Provisions 19,828,931 - - - - - 19,828,931

TOTAL LIABILITIES 293,559,735 3,562,074,267 228,465,628 295,934,807 36,679,253 50 4,416,713,740

MATURITY GAP 581,209,264 (3,022,750,169) 474,057,600 1,390,443,929 1,143,616,992 80,479,034 647,056,650




140

December 31, 2008

Foreign Currencies Base AccountsAccounts with Up to 3 Months to 1 to 3 3 to 5 Over


ASSETS

Cash and Central Banks 109,866,020 811,900,905 - 130,398,750 621,090,000 - 1,673,255,675

Deposits with banks andfinancial institutions 63,982,012 785,236,415 21,590,000 24,574,120 - - 895,382,547

Trading assets 20,257,401 1,151,846 1,967,076 2,666,574 30,898,941 23,282,725 80,224,563

Loans to banks - 193,103 21,166,840 4,620,175 16,569,222 - 42,549,340

Loans and advancesto customers 1,270,599,698 206,580,123 387,511,317 140,173,481 114,200,890 59,943,973 2,179,009,482

Available for sale investments 38,031,138 18,984,795 53,206,383 198,663,477 625,329,128 491,801,320 1,426,016,241

Held to maturity investments 1,507,500 9,490,055 214,608,440 207,443,704 458,504,579 151,050,180 1,042,604,458

Customers' liabilityunder acceptances 99,114,760 - - - - - 99,114,760





Other assets 44,692,944 - - - - - 44,692,944

TOTAL ASSETS 1,846,626,273 1,833,537,242 700,050,056 708,540,281 1,866,592,760 726,078,198 7,681,424,810

LIABILITIES

Deposits and borrowingsfrom banks 59,995,696 79,458,944 - - - - 139,454,640

Liabilities designated at fairvalue through profit or loss 1,929,900 40,109,078 - 119,293,100 - - 161,332,078

Customers' accountsat amortized cost 675,120,579 5,520,034,070 434,262,142 11,336,730 4,426,875 - 6,645,180,396

Customers' acceptance liability 99,114,760 - - - - - 99,114,760

Other borrowings - 121,538 2,575,608 - 17,221,283 33,672,459 53,590,888


Provisions 17,547,839 - - - - - 17,547,839

TOTAL LIABILITIES 925,470,615 5,639,723,630 436,837,750 130,629,830 21,648,158 33,672,459 7,187,982,442

MATURITY GAP 921,155,658 (3,806,186,388) 263,212,306 577,910,451 1,844,944,602 692,405,739 493,442,368




44. FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES

The fair value of financial assets and liabilities as at December 31, 2009 and 2008 was as follows:

December 31, 2009

Assets at Fair Other at Total Trading Value through Available for Held to Loans and Amortized Carrying TotalAssets Profit or Loss Sale Maturity Receivables Cost Value Fair Value


Cash and Central Banks - - - - - 2,652,897,068 2,652,897,068 2,656,717,187

Deposits with banks andfinancial institutions - - - - - 1,499,152,008 1,499,152,008 1,499,152,008

Trading assets 95,821,389 - - - - - 95,821,389 95,821,389

Loans to banks - - - - 58,817,514 - 58,817,514 52,245,962

Loans and advances to customers - - - - 3,480,742,204 - 3,480,742,204 3,508,202,170

Available for sale investments - - 6,359,346,312 - - - 6,359,346,312 6,359,346,312

Held to maturity investments - - - 1,411,773,814 - - 1,411,773,814 1,438,329,535

Derivative assets held for risk management - 1,170,480 - - - - 1,170,480 1,170,480

TOTAL 95,821,389 1,170,480 6,359,346,312 1,411,773,814 3,539,559,718 4,152,049,076 15,559,720,789 15,610,985,043


Deposits and borrowings from banks - - - - - 330,547,147 330,547,147 330,547,144

Customers' accounts - 162,712,400 - - - 13,424,411,818 13,587,124,218 13,587,124,218

Other borrowings - - - - - 412,820,091 412,820,091 387,142,100

Derivative liabilities held for riskmanagement - 42,954 - - - - 42,954 42,954

Financial guarantee contracts issued - 1,627,290 - - - - 1,627,290 1,627,290

TOTAL - 164,382,644 - - - 14,167,779,056 14,332,161,700 14,306,483,706

LBP’000




142

December 31, 2008

Assets at Fair Other at Total Trading Value through Available for Held to Loans and Amortized Carrying TotalAssets Profit or Loss Sale Maturity Receivables Cost Value Fair Value


Cash and Central Banks - - - - - 2,667,150,819 2,667,150,819 2,692,532,577

Deposits with banks and financialinstitutions - - - - - 914,570,668 914,570,668 914,570,668

Trading assets 85,539,871 - - - - - 85,539,871 85,539,871

Loans to banks - - - - 69,589,736 - 69,589,736 60,015,052

Loans and advances to customers - - - - 2,586,188,278 - 2,586,188,278 2,621,096,928

Available for sale investments - - 4,005,987,296 - - - 4,005,987,296 4,005,987,296

Held to maturity investments - - - 1,761,865,859 - - 1,761,865,859 1,756,323,086

Derivative assets - 2,885,412 - - - - 2,885,412 2,885,412

TOTAL 85,539,871 2,885,412 4,005,987,296 1,761,865,859 2,655,778,014 3,581,721,487 12,093,777,939 12,138,950,890


Deposits and borrowings from banks - - - - - 156,805,260 156,805,260 156,805,260

Customers' accounts - 163,587,785 - - - 10,614,499,454 10,778,087,239 10,778,087,239

Other borrowings - - - - - 384,639,705 384,639,705 360,010,632

Financial guarantee contracts issued - 1,144,756 - - - - 1,144,756 1,144,756

TOTAL - 164,732,541 - - - 11,155,944,419 11,320,676,960 11,296,047,887

The following table provides an analysis of financial instruments that are measured subsequent to initial recognition atfair value, grouped into Levels 1 to 3 based on the degree to which the fair value is observable:

LBP’000 Level 1 Level 3 Total

Assets at fair value:Trading securities 25,465,674 70,355,715 95,821,389 Available for sale investment securities 24,705,188 6,334,641,124 6,359,346,312 TOTAL 50,170,862 6,404,996,839 6,455,167,701

Liabilities at fair value:

Customers’ deposits at fair value through profit or loss 162,712,400 - 162,712,400

December 31, 2009

LBP’000




45. CAPITAL MANAGEMENTThe Group manages its capital to comply with the capitaladequacy requirements set by the Central Bank of Lebanon,the Group’s lead regulator. The Group’s foreign entities arealso required to respect particular ratios according to thecompetent authorities of supervisions.

The Group’s capital is split as follows:

Tier I capital:Comprises share capital after deduction of treasury shares,Shareholders’ cash contribution to capital, certain reservesfrom appropriation of profits, retained earnings (exclusiveof current year’s net profit) and minority interest. Goodwillis deducted from Tier I Capital.

Tier II capital:Comprises qualifying subordinated liabilities, collectiveimpairment allowance and cumulative change in fairvalue of available for sale securities.

Investments in associates are deducted from Tier I andTier II capital.

Also, various limits are applied to the elements of capitalbase: Qualifying Tier II capital cannot exceed Tier I capitaland qualifying short term subordinated loan capital maynot exceed 50% of Tier I capital.

The Group has complied with the imposed capitalrequirements throughout the period.

46. APPROVAL OF THE FINANCIAL STATEMENTSThe consolidated financial statements were approved by the Bank’s Board of Directors in its meeting held onMarch 23, 2010.

Starting year 2009, the Group started calculating its capital adequacy according to pillar I of Basel II Accord. The Group’scapital adequacy ratio was as follows (without taking into consideration the net profit for the year):

LBP’000 December 31, 2009

Total regulatory capital

Credit risk

Market risk

Operational risk

Risk-weighted assets of credit, market and operational risks

Capital adequacy ratio




144

1,139,584,000

8,880,428,000

142,247,000

595,119,000

9,617,794,000

11.85%

Main Ratios

A. PROFITABILITY

ROAA (Return on Average Assets)

ROACE (Return on Average Common Equity)

Total interest paid to Total interest received

Net interest income to Average assets

Net commissions to Net financial revenues (before allocation to provisions)

Operating expenses to Net financial revenues (Cost-to-income ratio)

Non-interest income to Net financial revenues (before allocation to provisions)

Operating expenses to Average customers creditor accounts

EPS in US$ (Earnings per Common Share in US Dollar)

DPS in US$ (Dividend per Common Share in US Dollar)*

Dividend payout ratio(Dividends on Common and Preferred Shares / Distributable profits)*

B. LIQUIDITY

Average net customers’ loans to Average customers’ creditor accounts

Average customers’ creditor accounts to Average total deposits

Foreign currency customers’ loans to Foreign currency customers’ creditor accounts

C. CAPITAL ADEQUACY

Shareholders’ equity to Total assets

Shareholders’ equity to Loans and acceptances

Capital Adequacy Ratio as per Basel II requirements

D. ASSET QUALITY RATIOS

Doubtful debts (net) to Total customers’ loans (net)

Doubtful debts (net) to Shareholders’ equity

Provisions for doubtful debts to Doubtful debts

Sub-standard accounts (net) to Total customers’ loans (net)

Unrealized interest for sub-standard accounts to Sub-standard accounts

Total provisions and unrealized interest to Total customers’ loans

(*) On an unconsolidated basis.

2008

1.13%

14.54%

64.67%

2.42%

10.92%

53.25%

25.97%

1.98%

3.97

0.66

39.80%

23.61%

98.64%

32.01%

8.95%

42.47%

10.22%

4.90%

11.12%

87.34%

0.79%

41.81%

25.58%

2009

1.08%

12.03%

65.14%

2.14%

12.26%

54.70%

26.14%

1.83%

4.56

0.66

51.00%

24.90%

98.04%

34.14%

9.94%

45.06%

11.85%

3.31%

7.12%

88.29%

0.79%

34.84%

20.35%


Mother Company

- Fransabank SAL

62 branches

• 33 branches in Beirut & Suburbs

• 8 branches in Northern Lebanon

• 10 branches in Southern Lebanon

• 2 branches in Aley & Chouf

• 7 branches in the Bekaa Region

• 2 branches temporarily closed

Subsidiaries

- BLC Bank SAL (with BLC Services, BLC Finance and Banque Lati SAL)

43 branches

• 24 branches in Beirut & Suburbs

• 6 branches in Northern Lebanon

• 3 branches in Southern Lebanon

• 2 branches in the Bekaa Region

• 8 branches temporarily closed

- Fransa Invest Bank SAL (FIB)

- Société Générale Foncière SAL (Sogefon)

- Lebanese Leasing Company SAL

- Fransabank Insurance Services Company SAL

- Switch & Electronic Services SAL

- Société Express SARL

Associated Companies

- Bancassurance SAL

- International Payment Network SAL

Group Network


148

In Lebanon

BLC Bank SAL

Société Générale Foncière SAL "Sogefon"

2009 was an exceptional year for Sogefon. Despite the international financial crisis, theLebanese real estate market remained resilient. Investors from the Arab Countries aswell as Lebanese expatriates, topped with local demand, gave the real estatemarket a great boost.

Sogefon exceeded its targeted sales of Fransabank estates, historically acquired inloans settlement, with an extraordinary 22% increase in sales figures, bearing in mindthat the new real estate acquisition between 2008 and 2009 declined by 30%.Sogefon sales team and management had to deal with each and every sale on a caseby case basis, as they could not rely on earlier evaluation of the properties which hadto be updated almost weekly to follow the upward trend, this resulted inincreasing the profitability margin up to 41%. In addition, Fransabank branch networkplayed an active role in identifying potential buyers, which were then handled bySogefon sales team.

In brief, Sogefon contributed to maximize the profit margin on each and every realestate sale for Fransabank, in addition to its traditional role of providing realestate services within Fransabank Group.

In 2009, BLC Bank has registered a new record growth that exceeded its initialforecasts and advanced its ranking within the Lebanese banking industry.

In this context, the 2009 net profit increased to USD 34.24 million fromUSD 23.03 million in 2008 (+ 48.66%). Also, as at 31 December 2009, totalassets reached USD 2.592 billion against USD 1.971 billion as at 31 December2008 (+ 31.50%), net loans to customers amounted to USD 475.5 million up fromUSD 275.5 million at end 2008 (+ 72.60 %), and customers’ deposits increased toUSD 2.274 billion up from USD 1.733 billion at end 2008 (+ 31.22%).Shareholders’ equity reached USD 228.45 million as at 31.12.09 up from USD157.09 million as at end 2008 (+ 45.43%). ROAA stood at 1.50 % for 2009against 1.24% for 2008 and ROAE at 18.38% for 2009 against 16.80% for 2008.

In 2009 as well, the Bank has allocated important investments to develop andequip its resources to accommodate its expected growth on the medium andlonger terms: The Bank’s IT platform was upgraded providing state-of-the-artsystems both at the front and backends. Advanced internet banking and CRMsolutions projects were initiated, comprehensive revision of the Bank’s policiesand procedures including workflow processes complemented by continuousupgrade and development of human resources skills and capabilities via verywell targeted and multi dimensional training programs.

The Bank as well has achieved considerable progress in developing andimplementing risk management, corporate governance and internal auditrequirements in full synchronization with its parent company.


Group NetworkIn Lebanon

Bancassurance new launched products in 2009 are:

• The range of life insurance for obligatory products

Bancassurance has launched the life insurance products for the housing andeducational loans offered by the BDL and for the Kafalat loans. These contractsaim at guarantying the Bank against the death and disability of the borrower ofa personal, housing or public housing loan.

• The range of term life products

A new product « Fransaplus-Life insurance plan with accidental covers » was added tothis range of products while offering an important coverage due to accidents withattractive premium. These contracts meet the needs for family protection against therisks of death and disability.

• The range of saving and life insurance products

These plans allow the insured to constitute a supplement capital in order tosecure a pleasant retirement or to finance the university studies of his children;the unit link contracts are integrated in the range of saving-investment products.

Bancassurance SAL is the life insurance company for three renowned banks:Fransabank SAL (40%), Banque Libano-Française SAL (31%) and Credit Agricole -France (29%).

In 2009, Bancassurance SAL was ranked first bank insurer and one of the majorleaders in the life insurance market in Lebanon.

The net profits of Bancassurance and its sales turnover have been on a linearupward trend since the foundation of the company in 2000. Net profits reachedUSD 6.05 million as of December 31, 2009, an increase of 27% as compared to lastyear. The sales turnover registered USD 34.77 million, an increase of 14% over last year.These results were achieved due to the strong determination of its banking partnersand the devotion of the sales force, in addition to the reactivity of Bancassurance team.

Group Network

In Lebanon


150

Bancassurance SAL

Group Network

Addresses in Lebanon

• BBiikkffaayyaaAdel Dagher Bldg., Bikfaya Place,Main RoadTel: (961-4) 986901/2Fax: (961-4) 986903

• BBoouurrjj EEll BBrraajjnneehhAhmad Nabbouh Bldg.,Ain El Sekkeh, Dr Hosni Jalloul Str.Tel: (961-1) 453200/1/2

(961-3) 740410Fax: (961-1) 453203

• BBoouurrjj HHaammmmoouuddHarboyan Center, Near St. Vartan Str.,Bourj Hammoud entrance, 2nd floorTel: (961-1) 258100/1/2Fax: (961-1) 264446

• CChhiiyyaahhTayyar Bldg., facing Moawad junctions,Ghobeiri Blvd., ChiyahNext to the Ministry of LaborTel: (961-1) 279671/3Fax: (961-1) 279680

• CChhoouueeiiffaattMahmoud El Kheshen Bldg.,Haret Al Oumara, Saida Main Road(Saida Old Road)Tel: (961-5) 431169

(961-5) 431178Fax: (961-5) 431183

• EEllyyssssaarrFransabank Bldg., Mazraat Yachouh, Bikfaya Main RoadTel: (961-4) 914802/3/4Fax: (961-4) 914805

• FFuurrnn EEll CChheebbbbaakkSaadeh Center,Opposite Planete Abraj, Damas Str.Tel: (961-1) 293025/6Fax: (961-1) 293027

• HHaaddaatthhBechara Beik Karam Str., Al Saha, Near Al Saydeh Church, Main RoadTel: (961-5) 463974/5/6/7Fax: (961-5) 463980

Headquarters

Fransabank Center, Hamra Street.

P.O.Box: 11-0393

Riad El Solh Beirut 1107 2803

Lebanon

Tel (961-1) 340180/8

(961-1) 745761/4

(961-3) 650700

Fax (961-1) 354572

Cable FRANSABANK

Swift FSAB LB BX

Website www.fransabank.com

Email [email protected]

Call Center (961-1) 734000

Forex Tel (961-1) 343706

Reuters: FRBK

Beirut & Suburbs

• AAcchhrraaffiieehh ((SSaassssiinnee))Notre Dame Center, Sassine SquareTel: (961-1) 203466/7Fax: (961-1) 200651

• AAcchhrraaffiieehh ((SSaayyddeehh))Debs Bldg., Saydeh Str.Tel: (961-1) 200842/3

(961-1) 215940Fax: (961-1) 215422

• AAcchhrraaffiieehh ((SSooddeeccoo))Dakota Bldg., Ground Floor, SodecoTel: (961-1) 423573/4

• AAiinn EEll MMrreeiisssseehhNawrass Bldg.,Opposite Ain El Mreisseh MosqueTel: (961-1) 373240/1/2/4Fax: (961-1) 373243

• AAlllleennbbyy(temporarily closed)

• AAnntteelliiaassOrder Antonin Maronite Bldg.,Catholicossat Armenien Str.Tel: (961-4) 417240 /1Fax: (961-4) 412990

• BBaabb EEddrriissssSabbagh Bldg., Patriarch Hoayek Str.(temporarily closed)

• BBaaddaarrooKhatoun Bldg., Badaro Str.Tel: (961-1) 387024

(961-1) 386900Fax: (961-1) 390409

• BBaassttaaFransabank Bldg., Cross Roadsof Saleh Ben Yehia, Basta Str.Tel: (961-1) 663116/7Fax: (961-1) 663117

• BBaauucchhrriieehhChaer Center, Sin El Fil Blvd.Tel: (961-1) 897490/1/2Fax: (961-1) 897029


• HHaammrraaFransabank Center, Hamra Str.,1st FloorTel: (961-1) 340180/1/8

(961-1) 750125Fax: (961-1) 341413

• HHaazzmmiieehhUnigroup Bldg., Sayyad SquareTel: (961-5) 459602

(961-5) 450350Fax: (961-5) 457312

• JJaall EEll DDiibbLe Baron Center, Jal El Dib Highway,1st floorTel: (961-1) 889884/5Fax: (961-1) 902959

• JJbbeeiillCordahi Center, JbeilTel: (961-9) 547178/9

(961-9) 945108/9Fax: (961-9) 540967

• JJnnaahhAssaf Bldg., Adnan El Hakim Str.Tel: (961-1) 857973/4

(961-1) 857833Fax: (961-1) 857972

• JJoouunniieehhSaint Paul Center, P.T.T Str.Tel: (961-9) 830190/1Fax: (961-9) 830192

• MMaannssoouurriieehhMaalouf Center, Opposite P.T.T., Main RoadTel: (961-4) 409840/1

(961-3) 740420Fax: (961-4) 409840

• MMaarr EElliiaassMetco Center,. Moussaitbeh,Mar Elias Str.Tel: (961-1) 818529/30

(961-1) 817770Fax: (961-1) 300617

• MMoouussssaaiittbbeehhAl Ali & Ghalayani Bldg.,Salim Slam Str. Tel: (961-1) 305189(opening soon)

• SSaaiiffiiAndraos Bldg., El-Arz Str.Tel: (961-1) 442418

(961-1) 585699(961-3) 650703

Fax: (961-1) 442417

• SSaarrbbaaAntoine & Youssef Kallas Bldg.,Sarba HighwayTel: (961-9) 640293

(961-9) 640060Fax: (961-9) 640543

• SSiinn EEll FFiillKibinian & Kazangian Bldg.,Delta Center, Horch TabetTel: (961-1) 510571/2/3

(961-3) 650708Fax: (961-1) 481680

• SSttaarrccooStarco Center, Bloc C,Omar Daouk Str.Tel: (961-1) 367346/7/8Fax: (961-1) 367350

• TTaabbaarriissSNA Bldg., Tabaris RoundaboutTel: (961-1) 203422

(961-1) 328600Fax: (961-1) 201141

• TTaarriikk JJddiiddeeKassar Bldg., Loubos Str.Tel: (961-1) 702930/1/2

(961-3) 650705Fax: (961-1) 309090

• VVeerrdduunnVerdun 730 Center,Rachid Karame Str., 1st floorTel: (961-1) 788690/1/2/3/4

(961-3) 650709Fax: (961-1) 788691

• ZZoouukkChrist le Roi Center, Zouk HighwayTel: (961-9) 217271/2/3Fax: (961-9) 217271/2/3

Group Network

North

• CChheekkkkaaFaddous Bldg. Main RoadTel: (961-6) 545035

(961-6) 540642/3Fax: (961-6) 545035

• HHaallbbaaMarwan Ibrahim Bldg., Main RoadTel: (961-6) 693331/2

(961-6) 692000Fax: (961-6) 692001

• KKaallaammoouunnEzzedine Almir Bldg., Main RoadTel: (961-6) 400102/3Fax: (961-6) 400096

• MMeerryyaattaaAyoush Bldg., Ardeh RoadTel: (961-6) 255560/1/2/3Fax: (961-6) 255564

• TTrriippoollii ((AAbboouu SSaammrraa))Sayadi Bldg., Saadoun SquareTel: (961-6) 424617/9Fax: (961-6) 424611

• TTrriippoollii ((AAll MMiinnaa))Hassan & Hassane Abbas Bldg.,Bawabet Al Mina Str.Tel (961-6) 611524

(961-6) 611249/50Fax: (961-6) 611250

• TTrriippoollii ((GGeemmmmaayyzzaatt))Fattal Bldg., Gemmayzat Str.Tel: (961-6) 430011/2/3Fax: (961-6) 625735

• TTrriippoollii ((TTeellll))Gaston Habib Bldg., Kayal SquareTel: (961-6) 442815

(961-6) 441881/2Fax: (961-6) 441881/2

Aley & Chouf

• AAlleeyySaid Chehayeb Bldg. (DANA),Next to Telephone Central, Main RoadTel: (961-5) 557042/3/4Fax: (961-5) 557046

• BBaaaakklliinneeAkram El Eid Center, El MarjTel: (961-5) 303005

(961-5) 301267Fax: (961-5) 303006



152

Group Network



Off-Premises ATM,s

-- UUFFAA IInnssuurraannccee,, DDoowwnn TToowwnn

-- HHaammrraa SSttrreeeett

-- VVeerrdduunn 773300 CCeenntteerr,, VVeerrdduunn

-- VVeerrdduunn 773322 CCeenntteerr,, VVeerrdduunn

-- CCaasseerrnnee EEll HHeelloouu,, MMaarr EElliiaass

-- BBiieell CCoonnvveennttiioonn CCeenntteerr,,

DDoowwnn TToowwnn

-- UUSS EEmmbbaassssyy,, AAoouukkaarr

-- UUnniitteedd NNaattiioonnss CCeenntteerr,, NNaakkoouurraa

-- MMeemmaa GGaass SSttaattiioonn,, FFaarraayyaa

-- CCaalliipprriixx SSuuppeerrmmaarrkkeett,, JJoouunniieehh

-- OObbeeiidd SSuuppeerrmmaarrkkeett,, KKaabbrreecchhmmoouunn

-- CClluubb LLaa MMaarriinnaa,, DDbbaayyeehh

South

• BBiinntt JJbbeeiillFransabank Bldg., Saf El-Hawa,Main RoadTel: (961-7) 450700/1/2/3/4

(961-3) 239092Fax: (961-7) 450701

• CChheehhiimmWehbe Center, Main RoadTel: (961-7) 241916/7Fax: (961-7) 241921

• GGhhaazziieehhKhalifeh Center, Ghazieh,Main Square(opening soon)

• JJeezzzziinneeSt. Therese Center,Jezzine HighwayTel: (961-7) 780941- 780052Fax: (961-7) 780941

• MMaarrjjeeyyoouunnRaef Abla Bldg., Main RoadTel: (961-7) 830139- 830140Fax: (961-7) 830139

• NNaabbaattiieehhKodeih Center, Sabbagh Str.Tel: (961-7) 760258- 764264Fax: (961-7) 761750

• NNaakkoouurraaHamzeh Bldg., Near UNIFIL, Main Road, 1st FloorTel: (961-7) 460235/6/7

(961-3) 067702Fax: (961-7) 460236

• SSaaiiddaaFransabank Bldg., Riad El Solh Str.Tel: (961-7) 722180/1/2

(961-3) 650701Fax: (961-7) 721194

• TTyyrrAbou Saleh Bldg., Senegal Str.,Tyr Main Entrance, 1st FloorTel: (961-7) 345278 - 345315Fax: (961-7) 345308

• TTyyrr ((AAbbbbaassiieehh))Khalaf Bldg., Jal El Bahr, Main RoadTel: (961-7) 740388

(961-7) 740486Fax: (961-7) 740084

Bekaa

• BBaaaallbbeecckkMohammad Said El Lakiss Bldg., Ras Al-Ayn, Main RoadTel: (961-8) 373150/1

(961-8)371800/1Fax: (961-8) 370379

• BBeeddnnaayyeellAli Fouad Sleiman Bldg., Main RoadTel: (961-8) 911124/5

(961-8) 912021Fax: (961-8) 911125

• CChhttaauurraaHaddad Bldg., Main RoadTel: (961-8) 541988

(961-8) 542498Fax: (961-8) 543843

• LLaabboouueeNear Laboue Square, Main RoadTel: (961-8) 230801/2/3/4/5Fax: (961-8) 230805

• RRiiyyaakkHosch HalaTel: (961-8) 900333

(961-8) 900444Fax: (961-8) 900107

• ZZaahhllee ((BBaarrbbaarraa))Ghossain Bldg., St. Barbe Str.Tel: (961-8) 811061

(961-8) 803715Fax: (961-8) 822335

• ZZaahhllee ((WWaarrddee))Warde Center, Main RoadTel: (961-8) 800340

(961-8) 821411Fax: (961-8) 810187

Board of DirectorsMr. Adel Kassar Chairman &

General ManagerMr. Yvan de La Porte De Theil Deputy Chairman Mr. Nabil Kassar Member, representing

Fransabank SAL

Mr. Bruno Deletré Member, representingFinancière Océor

Mr. Adnan Kassar MemberMr. Mansour Bteish MemberAttorney Walid Daouk MemberMr. Dany Makhlouf MemberMr. Charles Milhaud Member

Headquarters & Main Branch 104, Avenue des Champs-Elysées, 75008 - Paris, FranceTel (33-1) 53768400Fax (33-1) 45635700Swift FRAF FR PPEmail [email protected]

Board of Directors

Mr. Adel Kassar Chairman Mr. Adnan Kassar Member, representing

Fransabank SAL

Mr. Nabil Kassar Member, representingFransabank SAL

Mr. Chadi Karam Member, representingFransabank SAL

Mr. Ahmad Al-Shihabi Member Mr. Elie Sioufi Member Mr. Ali Wahib Merhi Member Mr. Sami Rabbath Member Mr. Mohammad Sabih Al-Nahas Member

Headquarters & Main Branch

Abou Remmaneh Al Mahdi Ben Barakeh Str.Al Otaki Bldg. Tel (963-11) 3353030Fax (963-11) 3353037Swift FSBS SY DAE-mail [email protected]

2 branches in Damascus, 2 branches in Aleppoand 1 branch in Homs

Subsidiaries Banks

Supervisory Council

Mr. Adnan Kassar Chairman

Mr. Adel Kassar Deputy Chairman

Mr. Ghantous Gemayel Member

Mr. Georges Andraos Member


3, Tatarskaya Str., 220035, Minsk -

Republic of Belarus

Telefax (375-17) 3064426

Swift GTB NBY 22

E-mail [email protected]

Website www.fransabank.by

21 exchange offices in Minskand 1 branch in Gomel

Group Network

International Presence


154

Fransabank (France) SA Fransabank Syria SA

Fransabank El Djazaïr SPA

Fransabank OJSC (Belarus)

Board of DirectorsMr. Nadim Kassar Chairman Mr. Nabil Kassar Member, representing

Fransabank SAL-Lebanon

Mr. Raja Sarkis Member, representingCMA-CGM SA-France

Mr. Lazhar Hani Member, representingMerit Corporation SAL-Lebanon

Mr. Abdelrahmane Salhi Member, representingMaghreb Truck SPA-Algeria

Mr. Mansour Bteish Member Attorney Walid Daouk Member

Headquarters & Main Branch45B, Lot Petite Provence, Sidi Yahia Hydra, 16405, Algiers - AlgeriaTel Headquarters (213-21) 481296 / 482748Tel Main Branch (213-21) 480029 / 480212Fax (213-21) 606606Swift FSBK DZ ALEmail [email protected]

2 branches in Algiers and Oran

Bourj El Fateh, Tower 1, 17th Floor, Office nº 174,P. O. Box 81963 Tripoli, LibyaTel (218-21) 3351250Fax (218-21) 3351251Email [email protected]

Calle 72 nº 505 e/ 5ta - Ave. y 5ta-A Miramar Playa, Ciudad de la Habana, CubaTel (537-204) 9272 / (537-204) 9305/6Fax (537-204) 9273Email [email protected]

Associate Bank Representative Offices

International Presence

Group Network

Board of Directors

Mr. Saad Al Wazzan Chairman

Mr. Mansour Bteish Deputy Chairman

Mr. Ali Al-Alami Member

Mr. Faras Al Bahar Member

Mr. Ebrahim Al Khuzam Member

Mr. Tareq Alabdulghafour Member

Mr. Al Sharef Al Budr Member(Sudanese Independent Director)


Bldg. n 499, Square 65, Obeid Khatem Str.

East Khartoum, East Riyad Park, P.O. Box 8210 Al Amarat,

Khartoum - Sudan

Tel (249-183) 247700/1

Fax (249-183) 235000

Swift CBSK SD KH

E-mail [email protected]

Website www.capitalbank-sudan.com

www.bankalmal.com

2 branches in Khartoum & Rebak


United Capital Bank Fransabank SAL Libya

Fransabank SAL Cuba


156

w w w . f r a n s a b a n k . c o m

annual report 2009 - fransabank...consolidated financial highlights 20052006 2007 2008 2009 19.34%...

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