THE LEBANON BRIEF. ISSUE 653 Week of November, 2009

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1 SAL Your Investment Reference THE LEBANON BRIEF ISSUE 653 Week of November, 2009 ECONOMIC RESEARCH DEPARTMENT Rashid Karame Street, Verdun Area P.O.Box Beirut, Lebanon T (01) /12 F (+961) research@blominvestbank.com

2 The Lebanon Brief Table Of Contents Page 2 of 12 TABLE OF CONTENTS FINANCIAL MARKETS 3 Equity Market 3 Foreign Exchange Market 5 Money & Treasury Bills Markets 5 Eurobond Market 6 ECONOMIC STATISTICS & INDICATORS 7 Port of Beirut s Revenues Hit $135.3M by October Airport Passengers Surpassed 4M up to October New Car Sales Down by 2.48% up to October ECONOMIC AND FINANCIAL NEWS 9 Paris III 10 th Progress Report 9 IMF Issues Half Yearly EPCA Progress Report 9 Lebanon Received $68M Worth of Aid in October Consumer Confidence Index Down 5.3% in Oct Pharmaceutical Spending Expected to Increase 11 CORPORATE DEVELOPMENTS 12 FNB to Acquire 90% of CFC 12 BLC Bank s Net Profits at $25.6M by September Bank Med Issues New Preferred Shares 12 Casino du Liban Elects New Board of Directors 13 RYMCO s Net Income at $2.4M up to September Chedid & Associates to Start Operations in Qatar 13 FOCUS IN BRIEF 14 Doing Business in The Arab World is Becoming Easier 14 This report is published for information purposes only. The information herein has been compiled from, or based upon sources we believe to be reliable, but we do not guarantee or accept responsibility for its completeness or accuracy. This document should not be construed as a solicitation to take part in any investment, or as constituting any representation or warranty on our part. The consequences of any action taken on the basis of information contained herein are solely the responsibility of the recipient.

3 The Lebanon Brief Financial Markets Page 3 of 12 FINANCIAL MARKETS Equity Market Stock Market 13/11/ /11/2009 % Change BLOM Stock Index* % Weekly Traded Volume 1,780,207 1,370, % Weekly Traded Value 46,911,003 31,758, % *22 January 1996 = Nov -08 Jan-09 Mar -09 May-09 Jul-09 Sep-09 Nov -09 Banking Sector Blom Stock Index LO:1042 HI:1600 The rally observed in the Lebanese equity market in the past four consecutive weeks, eased this week as the formation of the new cabinet on Tuesday sent most of the traded stocks to close at a lower level on profit taking, with heavyweight Solidere weighing down on the BLOM Stock Index (BSI). In fact, during Monday s session, ahead of the formation of the cabinet, Lebanon s equity benchmark recorded a new 52 week high level of Nevertheless, the BSI lost its up trend in the coming four sessions to close at 1,558 points on a corrective move, down by 2.7% from last week s close of 1600 points. In comparison with regional markets however, the MSCI Arabia for Arab benchmarks, outperformed the BSI and closed 1.2% lower on a weekly basis. Mkt 13/11/09 06/11/09 % Change BLOM (GDR) BSE $88.85 $ % BLOM Listed BSE $85.00 $ % BLOM (GDR) LSE $89.90 $ % Audi (GDR) BSE $84.60 $ % Audi Listed BSE $75.00 $ % Audi (GDR) LSE $85.50 $ % Byblos (C) BSE $2.01 $ % Byblos Priority BSE $2.02 $ % Byblos (GDR) LSE $93.00 $ % Bank of Beirut (C) BSE $18.75 $ % BLC (C) BSE $1.25 $ % Fransabank (B) OTC $28.00 $ % BEMO (C) BSE $4.50 $ % Mkt 13/11/09 06/11/09 % Change Banks Preferred Shares Index * % BLOM Preferred 2004 BSE $ $ % BLOM Preferred 2005 BSE $ $ % BEMO Preferred 2006 BSE $ $ % Audi Pref. D BSE $ $ % Byblos Preferred 08 BSE $ $ % Bank of Beirut Pref. C BSE $25.96 $ % Bank of Beirut Pref. D BSE $25.31 $ % * 25 August 2006 = 100 In details, a daily average of $12M worth of stocks exchanged hands this week, double the year to date average with Solidere stocks grabbing the bulk of trade with a stake of 67%. The real estate company s A&B class shares were the main drivers of the market and tumbled 5.6% and 6.5% to $25.5 and $25.3 respectively as investors closed their positions booking profits gained in the past four weeks. However, both shares reached a 52 week high of $27.9 and $27.7 on Monday after the announcement of the formation of a new government. In London, the company s shares followed its local counterparts and declined 6.6% to $25.3.

4 The Lebanon Brief Financial Markets Page 4 of 12 Real Estate Mkt 13/11/09 06/11/09 % Change Solidere (A) BSE $25.48 $ % Solidere (B) BSE $25.25 $ % Solidere (GDR) LSE $25.62 $ % Manufacturing Sector In the financial sector, the BLOM Mena Banking Index (BMBI) for Lebanese financial stocks dropped 0.8%. Nevertheless, it outperformed the BMBI index for financial stocks in the Arab markets which fell by 1.4%. Audi GDR led the drop slipping 2.8% to $84.6. On the other hand, Audi listed maintained its price at $75 and accounted for 27.7% of total value traded on the Beirut Stock Exchange (BSE). Moreover, Byblos common shares decreased 1.5% to $2.01. However, Blom GDR and Bank of Beirut s shares outperformed the market gaining 0.3% and 0.8% to $88.9 and $18.55 respectively. In international markets, low activity was witnessed on Lebanese financial stocks with Blom remaining flat at $89.9 while Audi shares tumbled 6.2% to lose its gains in the last three weeks. Mkt 13/11/09 06/11/09 % Change HOLCIM Liban BSE $13.02 $ % Ciments Blancs (B) BSE $3.15 $ % Ciments Blancs (N) BSE $0.50 $ % Funds In conclusion, stocks on the Blom Stock Index underwent a heavy correction given the excess speculation throughout the prolonged 5 month period that culminated in the formation of the new cabinet. This was coupled by profit taking on the part of investors that discounted any major developments in the coming months. Mkt 13/11/09 06/11/09 % Change Beirut Preferred Fund BSE $ $ % BLOM Cedars Balanced Fund Tranche A , % BLOM Cedars Balanced Fund Tranche B , % Retail Sector Mkt 13/11/09 06/11/09 % Change RYMCO BSE $3.08 $ % ABC (New) OTC $19.00 $ % Tourism Sector Mkt 13/11/09 06/11/09 % Change Casino Du Liban OTC $ $ % SGHL OTC $6.00 $ %

5 The Lebanon Brief Financial Markets Page 5 of 12 Foreign Exchange Market Lebanese Forex Market 13/11/09 06/11/09 %Change Dollar / LP % Euro / LP % Swiss Franc / LP % Yen / LP % Sterling / LP % *Close of GMT 09:00+2 International Forex Market 13/11/09 06/11/09 % Change Euro / Dollar % Sterling / Dollar % Dollar / Swiss Franc % Dollar / Yen % NEER Index** % **Nominal Effective Exchange Rate; Base Year Jan 2006=100 **The unadjusted weighted average value of a country s currency relative to all major currencies being traded within a pool of currencies. The NEER represents the approximate relative price a consumer will pay for an imported good. Money & Treasury Bills Markets Money Market Rates 13/11/09 06/11/09 Change bps Overnight Interbank 3.25% 3.25% 0 BDL 45-day CD 4.40% 4.40% 0 BDL 60-day CD 4.89% 4.89% 0 Treasury Yields 13/11/09 06/11/09 Change bps 3-M TB yield 4.75% 4.75% 0 6-M TB yield 5.98% 5.98% 0 12-M TB yield 6.08% 6.17% M TB coupon 6.62% 6.74% M TB coupon 7.30% 7.42% M TB coupon 8.00% 8.00% 0 The US dollar remained oversupplied in the local exchange market although at a declining pace due to reaching a relative saturation level. That said, the Lebanese Central Bank, Banque du Liban(BdL), maintained intervention by purchasing the excess US dollar. By the end of October, foreign assets of the Central Bank reached $26.5B from $25.8B in the middle of the month. The double yielding(3.5% vs. 7% for the US currency) Lebanese Pound deposits continued to attract funds. The local exchange rate between banks has for the past 13 months stabilized at the $/LP $/LP level with a mid price of $/LP1501. In international markets, the single European currency lost some ground against the greenback after US petroleum reserves showed a higher than forecast stock level. In turn, this was translated in a drop in commodity prices that are priced in dollars as concerns over the recovery in global economic activity increased. The US dollar relatively appreciated to $/ by Friday noon (Beirut time) from $/ 1.49 a week earlier. The dollar-pegged Lebanese Pound reflected the appreciation of its benchmark and advanced to LP/ 2, against the Euro from LP/ 2, a week earlier. Following on the dollar s relative come back, the Nominal Effective Exchange Rate (NEER) slightly bettred to from last week s Its year to date performance remained negative at 3.19% from last week s 3.16%, thus reflecting the relative expensiveness of imported products from year start. The Lebanese money market maintained its liquidity during the period extended from October 22, to 29, 2009, leading the central bank to keep its overnight rate at 3.25%. Broad money aggregate M3 rose LP721B ($478M) to settle at LP119,971B ($79.58B), extending its year on year performance to 19.88%. In fine points, Savings in Lebanese pounds progressed by LP363B ($241M) while foreign currencies deposits rose by $124M. Thus, the dollarization rate of overall money in circulation fell 21bps from last week to 59.51%. Investors demand over Lebanese treasury Bills registered its highest level in a month at the November 5, 2009 auction, with the bid to cover ratio hitting 9.91/10. The treasury issued LP449.32B ($298M) worth of TBs split between LP72B ($48M) of 1Y T-Bills, LP56.52B ($37M) of 2Y T-Bonds and LP320.75B ($213M) of 3Y T-Bonds. Hence, 94% of 1Y papers were purchased while 2 years treasuries were sold at par at a time higher-yielding Long term 3 years bonds traded above their nominal value. The auction resulted in a surplus of LP72.35B ($48M) as maturing TBs amounted LP372.9B ($247M). As for the weighted effective return, it rose by 53bps to 7.15%.

6 The Lebanon Brief Financial Markets Page 6 of 12 Eurobond Market Eurobonds Index and Yield 13/11/09 06/11/09 Change Year to Date BLOM Bond Index (BBI)* % 16.05% Weighted Yield** 5.28% 5.36% Weighted Spread*** *Base Year 2000 = 100; includes US$ sovereign bonds traded on the OTC market ** The change is in basis points ***Against US Treasuries (in basis points) Lebanese Government Eurobonds Maturity - Coupon 13/11/09 Price* 06/11/09 Price* Weekly Change% 13/11/09 Yield 06/11/09 Yield Weekly Change bps 2010, Mar % % 1.20% 1.55% , May % % 3.78% 3.83% , Aug % % 3.87% 3.90% , Mar % % 4.42% 4.45% , Sep % % 4.58% 4.60% , Mar % % 4.91% 4.97% , Jun % % 4.97% 4.99% , Apr % % 5.50% 5.51% , May % % 5.57% 5.58% , Aug % % 6.20% 6.21% , Jan % % 6.29% 6.30% , May % % 6.63% 6.64% , Mar % % 6.44% 6.40% , Apr % % 6.87% 6.91% -4 Mid Prices provided by BLOMINVEST bank Blom Bond Index Nov-08 Jan-09 Mar-09 May-09 Jul-09 Sep-09 Nov-09 The Lebanese eurobonds portfolio went up this week as investors were bullish about the market after the formation of the new cabinet. Hence, the BLOM bond index recorded a new all-time high of points on Wednesday before retreating to end the week at 109.9points, 0.16% higher than last week. In details, there were some offers over long term eurobonds, but though at relatively low volumes as investors are awaiting the new $500M issue. As for the portfolio s weighted return that has slipped 417bps since year start, it fell 8bps to 5.28% from last week s 5.36%. However, the Lebanese eurobonds yield closed the gap by 480 bps against the US benchmarks' weighted rate throughout this year, ending the week at 345bps. Moreover, Eurobond and CDS spreads have moderated and now move around the emerging markets average, according to the International Monetary Fund s EPCA report. As a matter of fact, Lebanon s credit default swaps for 5 years eased to bps, reflecting the cabinet formation, noting that Lebanon s most vital risk factor is politics. On a comparative scale, both Dubai and Saudi Arabia s protection against the Sovereign risk thru 5 year credit default swaps eased to bps and 68-88bps respectively while Bahrain s CDS went up to bps. In emerging markets, the risk retreated with Turkey s premium at bps while Brazil is at bps.

7 The Lebanon Brief Economic Statistics & Indicators Page 7 of 12 ECONOMIC STATISTICS & INDICATORS PoB Revenues up to October ($M) Source: Port of Beirut Authorities Port of Beirut s Revenues Hit $135.3M by October 2009 Despite the global recession that had a negative impact on the worldwide maritime industry, activity at the port of Beirut bucked the trend, as it witnessed a remarkable expansion. Total revenues of the port hit $135.3M in the first ten months of 2009 compared to $107.3M a year earlier. This was mainly attributed to the 7.9% rise in the number of imported cars that reached 82,246 units in the first ten months of 2009 versus 69,791 vehicles during the same period last year. Moreover, the 9% increase in imported and exported merchandises to 5,273M tons contributed to the rise in port s revenues. The number of docked ships since year start till October attained 2,002, 17.3% higher than a year earlier, as international companies are favoring Beirut s port over other regional ports on better services at lower costs. Total container activity including transshipment improved as well during the first ten months of 2009 to 836,939 TEU, up by 7% from In October alone, the port generated $14.53M, 9.3% higher than the same month in 2008, as the 19.6% increase in imported and exported merchandises offset the 20.5% drop in the number of imported cars. Airport Passengers up to October 4,174,508 3,369,040 2,832,134 2,342, Source: Beirut International Airport Airport Passengers Surpassed 4M up to October 2009 Statistics published by Rafic Hariri International Airport revealed that up to October, a total of 4,174,508 passengers passed through Beirut International Airport representing an increase of 24% from the same period last year. The total number of airport passengers in October 2009 increased by 11% from the same month last year to reach 388,711. Total arrivals reached 176,387, while departures attained 209,097 as tourists that came to celebrate the Fitr holiday by the end of September left the country in October. Moreover, 3,287 passenger were in transit. The stable security situation in the country during the year led to a large improvement in airport activity. In terms of airline traffic, MEA topped the list as 138 planes of the national carrier landed and took off at BIA with nearly 126,584 passengers on board, representing 33% of total passengers in October. With respect to the country of origin of passengers, France and Dubai topped the list of incomers in October with respective shares of 6.4% and 6.1%. Turkey and Amman came in 3rd and 4th places with 3.9% and 3.6%.

8 The Lebanon Brief Economic Statistics & Indicators Page 8 of 12 Total Number of Cars Sold up to October 27,341 26,664 13,728 14, Source: Association of Imported cars New Car Sales Down by 2.48% up to October 2009 The association of car importers in Lebanon revealed a 31.52% decrease in the number of new cars sold in October 2009 compared to the same month in European, Japanese, Korean and US car sales declined. Furthermore, the year to date sales reached 26,664, representing a 2.48% decrease from last year. This was mirrored by the continuous slump in the consumer confidence index since June as a result of the delays in the cabinet formation. In addition, the depreciation of LBP against the Euro did not help imports of European brands. In details, whereas total European year to date car sales declined by 0.78%, Renault s total car sales rose by 32.28% to 1,299 grabbing some market share from both Peugeot and Citroen which declined by 35.94% and 28.75% respectively.. Both BMW and Mercedes year to date sales increased as well by 79.92% and 9.82% respectively. As for Japanese car sales, they rose mainly due to a surge in Lexus, Mitsubishi and Nissan sales. Moreover, US total sales shrunk as GMC and Chrysler declared bankruptcy as the recession hit the global economy. With respect to Chinese car sales, they rose as well to reach 256 seizing some market share from Korean cars which declined by 10.5%. As for car importers, Rasamny Younis Motor Co, distributors of both Nissan and Infinity brands, maintained the lion s share with 24.7% of cars sold during the year. BUMC followed with 17.4% of the total

9 The Lebanon Brief Economic & Financial News Page 9 of 12 ECONOMIC AND FINANCIAL NEWS Updated Pledges by Type of Support ($M) Pledged Signed Received Budget Support 1,737 2,134 1,610 BdL Project support 3,481 1, In kind Private sector 1,463 1,536 1,183 Through UN Through civil society org Total 7,532 5,697 3,772 Source: Ministry of Finance Paris III 10 th Progress Report The Ministry of Finance(Mof) published the 10 th Progress Report on the International Conference for Support to Lebanon(Paris III) that provides an update on the implementation of the Lebanese Government s economic and social reform program in the second and third quarters of By end September 2009, $5.7B of the pledges were signed into agreements, representing 76% of total pledges compared to 74% at the end of the first quarter of The balance of pledges to be executed includes pledges by Saudi Arabia, World Bank Group, European Investment Bank, Arab Fund for Economic and Social Development and European Commission. Several achievements were made in the different sectors benefiting from the funds provided. In the social cluster, The Ministry of Public Health upgraded primary healthcare services: catchment areas were defined for 125 centers, the package of services was enhanced, and the accreditation program was developed. In the economic cluster, The Ministry of Finance achieved notable progress in the implementation of the revenue management and administrative reform program as well as in strengthening debt management. Banque du Liban met the target for reserves, which reached $22 billion by June 2009, and released several instruments to increase the access to credit by businesses. In the energy sector, the Ministry of Energy and Water signed a contract with Egypt in May for the supply of natural gas and the first batch of Egyptian gas to the Beddawi plant arrived in early September Lebanon Monitorable Actions, Dec08-Jun09 Submit to parliament the Global Income Tax draft law Establish a Treasury Single Account Establish an investment committee and draft formal guidelines for foreign reserve management Adopt policies for BdL s external auditor Revise Electricity tariff structure Issue a Request for Application in participating in the process of acquiring the licenses and assets of the two mobile telephone companies Source: IMF Target Date Mar 09 Jun 09 Implementation Not met Not met Dec 08 Met Jan 09 Jun 09 Met Jan 09 Dec 08 Mar 09 Not met Not met. Postponed due to unfavorable conditions IMF Issues Half Yearly EPCA Progress Report The IMF published its H1 report evaluating Lebanon s performance under the program supported by emergency postconflict assistance. The report showed that Lebanon has started to reap the benefits of prudent macroeconomic policies implemented by the program. The main two key objectives of EPCA, reducing the government debt-to-gdp ratio and strengthening international reserves were clearly met, buoying confidence and economic activity despite the difficult international environment and recent delays in forming a government. The debt-to-gdp ratio, although still very high at above 150%, has dropped 27 percentage points since end- 2006, while international reserves have doubled over the past 18 months to reach $25B. These were boosted by strong deposit inflows surpassed the program target. Moreover, strong growth and the reintroduction of gasoline excises boosted tax revenues. However, these were partly offset by larger transfers to the Higher Relief Council and Electricité du Liban.

10 The Lebanon Brief Economic & Financial News Page 10 of 12 Aid to Lebanon in 2009 ($M) January 121 June 67 February 23.9 July 94 March August 78 April 152 September 4 May 147 October Source: Ministry of Finance Lebanon Received $68M Worth of Aid in October 09 According to the aid coordination newsletter published by the Ministry of Finance, Lebanon obtained a total of $68.66M in aid during the month of October, of which 94% were received from the European Commission. Consequently, the cumulative aid received by Lebanon in the first ten months of 2009 reached $869M. In details, the European Commission granted the Lebanese government 43 million euros ($64.5M), part of its 2009 Annual Action Program that aims at supporting the Lebanese government reform agenda. On the other hand, the United States, through the USAID program, disbursed $3M to launch a quality assurance project for Lebanese farmers. Furthermore, the United States granted the American University of Beirut (AUB) $457,475 that comprises the final portion of a $2.3M educational scholarship grant. This grant is part of the US support to higher education in Lebanon. Finally, the Italian Embassy pledged to rehabilitate Al Fanar Psychiatric Hospital in South Lebanon by covering the 470,000 euros ($705,000) cost of the project. Consumer Confidence Index in October Source: Araa Research & Consultancy Company Consumer Confidence Index Down 5.3% in Oct 09 The Lebanese Consumer Confidence index (CCI) decreased by 5.3% on a monthly basis to reach 142 according to a report published by Araa Research and Consultancy. The CCI mainly slumped in North and South Lebanon due to some security disturbances that raised consumer anxiety. Therefore, the security index declined by 12% to reach 306. On the other hand, the economic index gained 175 points to reach 400. This increase is due to growth in economic activity observed in the construction sector, cleared checks, port activity and tourism. On the other hand, the personal income level remained at 186 as the decrease in the security index offset the increase in economic activity. However, the poll shows that both the expected economic and the personal income indices are forecast to decrease by 2% and 11% respectively as consumers were not confident, at the time of the poll, of an imminent cabinet formation. Consequently, the consumption of durable goods was expected to tumble by 5.5%.

11 The Lebanon Brief Economic & Financial News Page 11 of 12 Pharmaceutical Spending Expected to Increase Drug Expenditure Indicators Forecast Drug Expenditure at consumer prices ($M) f 2011f 2012f 2013f %Ch from Drug Expenditure per capita ($) Source: World Bank In its Q pharmaceutical and healthcare report, Business Monitor International (BMI) highlighted that pharmaceutical spending in Lebanon is set to increase in the coming five years. Drug spending in Lebanon is expected to increase from under $500M in 2008 to $605M in 2013, a compounded annual growth rate of 3.9%, with 1.75% of GDP devoted to pharmaceutical expenditure by This expected surge in drug spending is partly due to the Lebanese government s decision to reform the drug pricing mechanism thus reducing average drug prices by 5%. This comes as a result of studies showing that consumers in other countries with similar economies were paying significantly less for medicines than in Lebanon. Moreover, government subsidies will contribute to the boosting of the drug market. However, the generic drug sector in Lebanon will experience slow growth over the next five years, largely due to the lack of awareness, in addition to the dubious quality of existing generics. Another key issue is that the country lacks an internationally accredited drug testing and analysis laboratory, and therefore relies on patented medicines that conform to global standards.

12 The Lebanon Brief Corporate Developments Page 12 of 12 CORPORATE DEVELOPMENTS FNB Financial Highlights ($M) % Ch Total Assets 1,662 1, % Customers' Deposit 1,247 1, % Loans to customers % Net profit % Source: Bilanbanques FNB to Acquire 90% of CFC First National Bank (FNB), Lebanon-based bank which conducts retail, commercial and investment activities, agreed to acquire more than 90% of Capital Finance Company (CFC). The latter provides consumer financing services including personal loans and the issuance of credit cards. This move came as part of FNB s expansion strategy in the retail banking business. However, the deal worth $10M, is still pending the approval of the Central Bank to be completed. FNB announced that it will pay 50% in cash and the remaining 50% will be settled through a share swap. Worth noting that Capital Finance Company is owned by several corporate and private investors, such as Credit Libanais Investment Bank and Century Motor Company. BLC Bank Financial Highlights ($M) Sep 09 Sep 08 % Ch Operating Income % Net Profits % ROAE ROAA Source: Company Data BLC Bank s Net Profits at $25.6M by September 2009 BLC Bank, part of Fransabank group, reported a 50% growth in QIII net profits that totaled $25.6M, compared to the same period a year earlier, and from $6.3M recorded in This was mainly attributed to the 22% rise in net operating income to $38.8M in the first three quarters of the 2009 versus last year, with net commission income advancing 76% to reach $7.6M. This led to an improvement in the bank s profitability ratios, as both return on average assets (ROAA) and return on average equity (ROAE) rose to 1.58% and 18.7% from 1.54% and 16.1% in With respect to the bank s balance sheet, total assets added 22% from December 2008 to attain $2,410M by September 2009, driven by a 22% surge in total deposits to $2,110M. Bank Med Balance Sheet Highlights ($M) Jun-09 Dec-08 % Ch Total Assets 9,736 9, % Total Loans 2,641 3, % Total Deposits 7,332 7, % Total Equity % Source: Company Data Bank Med Issues New Preferred Shares Bank Med obtained the approval of the Central Bank to raise its capital from LP530B ($351.57M) to LP540B ($358.21M) by issuing 1,000,000 of non cumulative redeemable preferred shares Series 1 with a nominal value of LP10,000 a share. The issue will be priced at $100 a share. Holders of this issue will receive $5 per share in dividend in 2009 and $7.75 per share (dividend yield of 7.75%) in Worth noting that in the event of redemption by the bank, the preferred shares will be cancelled and the bank s extraordinary general assembly will take all necessary measures to maintain the bank s capital.

13 The Lebanon Brief Corporate Developments Page 13 of 12 Casino du Liban s Board s Hamid Kraidi President and GM Mohammad Cheaib Mohammad Tabbara Majid Jumblat Michel Ferneini Mohammed Al-Nakib Georges Nakhle Hisham Nasser Farid Sleiman Fadi Tamim Source: Annahar Newspaper Casino du Liban Elects New Board of Directors Hamid Kraidi was elected the new president of the Board of Directors and general manager of Casino du Liban. The new board of directors was elected for three years at the ordinary general assembly that was headed by the former President, Dr. Khater Abi Habib, and in the presence of the major shareholders of the Casino, namely Intra and Abella. Moreover, the new board comprises ten members: Hamid Kraidi, Mohammed Cheaib, Mohammad Hashem Tabbara, Majid Jumblat, Michel Ferneini, Mohammed Al-Nakib, Georges Nakhle, Hisham Nasser, Farid Sleiman, and Fadi Tamim. Rymco Financial Highlights ($M) Sep-09 Sept-08 %Change Total Assets Net Profits COGS Inventory Source: Company Data RYMCO s Net Income at $2.4M up to September 2009 Rasamny Younis Motor Co.(RYMCO), dealers of Nissan, Infiniti and GMC vehicles, posted a net income of LP3.63B ($2.4M) in the first nine-months of Though sales rose a yearly 4% to LP215.4B, net income slid 70% up to September this year from a year earlier as costs increased. In details, cost of goods sold went up by 7.35% to LP194B that in turn caused the Gross operating income to slide 19% to LP23.44B. Moreover, total operating charges climbed 15.4% to LP14B. Thus, income from operations fell 45% to LP9B. However, the major loss came from financing activities as payment defaults increased four folds in the first three quarters of 2009 to LP4.65B. Furthermore, Rymco s investments soared to LP15.2B from LP180M a year earlier due to its expansionary policy. The company will invest $10M in a U.K. joint venture with Nissan International SA. Worth noting that RYMCO is the only retail sector company that actively trades on the Beirut Stock Exchange. It has 10,920,000 outstanding shares with a stock price of $3.08. Chedid & Associates Company Highlights Date established 2004 Share capital Executives: LBP150,000,000 Farid S Chedid ( Chairman & General Manager) Georges Mokbel (Deputy General Manager) Jihad Ghanem (Director) Habib Jalouk (Director) Source: Company Data Chedid & Associates to Start Operations in Qatar Chedid & Associates, Lebanon-based provider of insurance and reinsurance services to over 100 insurance companies in the Middle East, Africa and Europe, was granted License by the Qatar Financial Center Regulatory Authority (QFCRA) to operate in Qatar. This move was part of the company s long term strategic expansion to strengthen its presence in the MENA region. Chedid & Associates Qatar LLC will offer a full range of insurance and reinsurance products in both life and non-life including technical advice and risk analysis.

14 The Lebanon Brief Focus In Brief Page 14 of 12 FOCUS IN BRIEF Doing Business in The Arab World is Becoming Easier Rankings on the Ease of Doing Business Economy 2010 Global Rank Arab World Rank Saudi Arabia 13 1 Bahrain 20 2 United Arab Emirates 33 3 Qatar 39 4 Kuwait 61 5 Oman 65 6 Tunisia 69 7 Yemen 99 8 Jordan Egypt Lebanon Morocco Algeria West Bank and Gaza Syria Iraq Sudan Comoros Djibouti Mauritania Source: Doing Business in the Arab World 2010 The World Bank s Doing Business project recently published a report entitled Doing Business in the Arab World 2010 that compares the regulatory environment in 20 Arab economies. The report highlights that doing business reforms picked up around the world in 2008 and 2009, with at least 60% of economies reforming in every region, mainly in emerging markets such as Eastern Europe and Central Asia as well as in the Middle East and North Africa region. In the latter two regions, competition among peers contributed to the spending of reforms, according to the World Bank. The study highlighted that doing business in the Arab world is becoming easier and that Arab economies have increasingly picked up reform practices from one another. According to the report, 16 of 20 Arab economies implemented 38 reforms in the measured area, up from 31 reforms in the previous year. Among these reforms, 38 made it easier to do business and 2 made it more difficult. The United Arab Emirates (UAE) and Egypt were the most active reformers and ranked among the top 10 global doing business reformers. There were also other active reformers in the Arab world, namely Jordan, Yemen and Algeria. The study articulated that the successes of reform in some economies have spurred similar measures in neighboring countries. One main focus of the reform led by economies like Egypt, Jordan, Morocco, Saudi Arabia, Syria and Yemen was the reduction of the minimum capital requirement for starting a limited liability company. Eight economies in the region have

15 The Lebanon Brief Focus In Brief Page 15 of 12 abolished or at least lowered this requirement since Other barriers to market entry were also eliminated or moderated, in terms of procedures and the delay requires to establish a company, formalities related to construction permits, customs and legal matters. As far as Lebanon is concerned, the report highlighted that the country made it easier to pay taxes by introducing electronic payment and eliminating the requirement for businesses to obtain permission to use accelerated depreciation. It also eased business start-up by ending the requirement to have company books stamped at the commercial registry and allowed company books and records to be maintained electronically. On a global scale, Lebanon ranked 108 th among 183 countries in terms of the ease of doing business. In the Arab world, Lebanon came 11 th among 20 countries. In the starting a business category, Lebanon ranked 108 th on a global scale and 10 th in the Arab world. According to Doing Business, to start a business in Lebanon, 5 procedures, a delay of 9 days, a cost of 78.2% of the gross national income per capita (GNI, $6,353) and a minimum capital of 51% of the GNI are required. In the dealing with construction permits category, Lebanon ranked 125 th in the world and 14 th in the region. The report indicated that 20 procedures, 211 days and a cost equal to 194.8% of the GNI were required from a company in the construction sector to build a warehouse. As for the employing workers criteria, the country ranked 66 th in the world and 7 th in the region. On a scale of 0 to 100, 100 being the most difficult, Lebanon has a difficulty of a hiring index of 44, a difficulty of redundancy index of 30, a rigidity of working hours index of 0 and a rigidity of employment index of 25. Moreover, the redundancy cost in Lebanon is around 17 weeks of salary. In the registering property category, Lebanon ranked 111 th on a global scale and 17 th in the Arab World. The study highlighted that 8 procedures, 25 days and 5.8% of the GNI were needed in order for a business to buy a property and transfer the title. According to the getting credit criteria, Lebanon ranked 87 th in the world and 4 th on a regional scale. The result of the strength of legal rights index for Lebanon was 3, 10 being the highest grade. This index measures the degree to which collateral and bankruptcy laws protect the rights of borrowers and lenders. As for the credit information sharing, Lebanon had a result of 5 in the depth of credit information index. This index measures on a scale from 0 to 6 the rules affecting the scope, quality and accessibility of information available through public or private credit agencies. In the protecting investors category, Lebanon was ranked at the 93 rd position in the world and the 8 th position in the region. On a scale of 0 to 10, the country had a strength of investor protection index of 5. In the paying taxes category, Lebanon made it to the 34 th position in the world and the 9 th in the region. The report said that businesses had to conduct 19 tax payments on average per year and spend 180 hours per year to prepare and file tax returns and pay all types of taxes (income taxes, VAT, mandatory contributions, etc.). It also highlighted that the total tax rate in Lebanon is equal to 32.2% of total profits. As for the trading across borders category, Lebanon ranked 95 th on a global scale and 11 th in the world. According to Doing Business, 5 documents are needed in Lebanon to export and 7 documents are required to import. The time to export a product from Lebanon is 26 days while the time to import a good to the country is 35 days. The cost to export a container is $1,002 whereas the importing counterpart stands at $1,203. Based on the enforcing contracts criteria, Lebanon ranked 121 st in the world and 10 th in the Arab world. Businesses need to conduct 37 procedures, wait 721 days and bear a cost of 30.8% of the claim to enforce a contract through a lawsuit. Finally, in the closing a business category, Lebanon ranked 124 th on a global scale and 12 th in the Arab world. On average, a bankruptcy process lasts 4 years in Lebanon and costs 22% of the estate with a recovery rate of 19 cents each dollar, according to Doing Business.

16 Research Department: Marwan Mikhael Alexandre Mouradian Cynthia Zeilah Rebecca Nakhoul Joanna El Awar Jean-Claude Cherfane SAL Your Investment Reference