BLOMINVEST BANK S.A.L.

BLOMINVEST BANK S.A.L. Economic Research Department can be accessed via Internet at the following web address: http://www.blom.com.lb

Highlights of the Week Economic Statistics........p.69 Gross FX Reserves Down $623m in FirstHalf of October 2004 Total Money Supply (M3) Up $210m Airport Passengers Up 20% in FirstNine Months of 2004 Cleared Checks Up 9.7% in FirstThree Quarters of 2004 Beirut Port Revenues Increase by 24% Up to September 2004 Trade Deficit Up 36% in FirstEight Months of 2004 BoP Registers Surplus of $479m up to August 2004 Kafalat Loans Reached $241m up to August 2004 Weekly Developments..... ṗ.1011 MoF to Exchange Maturing TBs with Premium Papers Lebanon Ranked 97 th in Corruption Index World Bank: 46 Days Are Required on Average to Start a Business in Lebanon Corporate News........p.12 RYMCO Posts 20% Drop in ThirdQuarter 2004 Profits Bank of Beirut s Listed Funds Issue ThirdQuarter Results Beirut Duty Free Receives Frontier Award BLOMINVEST Bank S.A.L. 1

EQUITY MARKET Financial Markets Stock Market 22/10/04 15/10/04 % Change BLOM Stock Index 551.56 584.13 (5.58%) Total Volume Traded 232,988 501,837 (53.57%) Total Value Traded $2,298,209 $3,739,741 (38.55%) 22 January 1996 = 1000 670 640 610 580 550 520 490 460 430 400 Oct 03 Nov 03 Lo 424. 87 Dec 03 BLOM STOCK INDEX Yearly Evolution Jan 04 Hi 649.24 Feb 04 Mar 04 Jun Apr 04 May 04 Activity on the Beirut Stock Exchange regressed significantly this week as the value of total trades reached $2.3m, dropping 39% from $3.7m registered a week earlier. In parallel, the BLOM Stock Index followed the same direction witnessing a decline on every trading session to close down 33 points at 551.56. Heavyweighted Solidere shares were the main catalyst behind this fall with the prices of both classes losing more than 9% on a weekly basis amid the resignation of the company s founding shareholder Prime Minister Rafik Hariri. Banking Sector Mkt 22/10/04 15/10/04 % Change BLOM (GDR) BSE $25.01 $25.75 (2.87%) BLOM (GDR) LSE $25.00 $25.00 0.00% Audi (C) BSE $23.55 $23.50 0.21% Audi (GDR) LSE $24.50 $24.50 0.00% Byblos (C) BSE $1.53 $1.49 2.68% Byblos Preferred BSE $100.10 $100.10 0.00% Bank of Beirut (C) BSE $8.10 $8.10 0.00% Bank of Beirut Pref. BSE $12.20 $12.20 0.00% BLC (C) BSE $2.94 $2.94 0.00% BLC (GDR) Lux Fransabank (B) OTC $1.58 $1.58 0.00% BEMO (C) BSE $3.45 $3.45 0.00% Byblos Bank was the top gainer on the local bourse as its share price edged up by 2.7% to $1.53 on a total volume of $19,053. Additionally, the price of Banque Audi gained 0.2% to $23.55 on a higher volume of $95,802. On the opposite side, BLOM s GDR lost ground this week to hit a low of $25.01 on Friday posting $789,175 worth trades. Internationally, both BLOM and Audi s GDRs stabilized at $25 and $24.5 respectively. 04 Jul 04 Aug 04 Sep 04 BLOMINVEST Bank S.A.L. 2

Real Estate Mkt 22/10/04 15/10/04 % Change Solidere (A) BSE $6.55 $7.26 (9.78%) Solidere (B) BSE $6.50 $7.15 (9.09%) Solidere (GDR) LSE $6.50 $6.90 (5.80%) Solidere shares were subject to supply pressures throughout the week peaking on Thursday when both shares lost more than 6% on the day that followed the shock resignation of Hariri. However, investors selling activity was calmer on Friday leading to a weekly drop of 9.8% in class A shares to $6.55 on a volume approximating $1m while the B shares edged back by 9.1% to $6.5 on a much lesser volume worth $166,216. On the international front, the company s GDR regressed by 5.8% to $6.5. Manufacturing Sector Mkt 22/10/04 15/10/04 % Change HOLCIM Liban BSE $0.60 $0.59 1.69% Ciments Blancs (B) BSE $1.49 $1.49 0.00% Ciments Blancs (N) BSE $1.50 $1.50 0.00% Uniceramic (A) BSE $1.40 $1.40 0.00% Uniceramic (C) BSE $1.75 $1.75 0.00% A single trade of $10,000 pushed the price of cement giant HOLCIM Liban up 1.7% to $0.6. Mkt 22/10/04 15/10/04 % Change Funds Lebanon Holdings BSE $4.75 $4.75 0.00% Beirut Interbank Fund BSE $105.80 $105.80 0.00% Beirut Global Income BSE $108.20 $108.20 0.00% Beirut Lira Fund BSE LP102,000 LP102,000 0.00% Beirut Golden Income BSE LP102,600 LP103,000 (0.39%) Retail Sector RYMCO BSE $1.60 $1.60 0.00% ABC (New) OTC $13.50 $13.50 0.00% Tourism Sector Casino Du Liban OTC $135.00 $135.00 0.00% SGHL OTC $4.50 $4.50 0.00% Locally listed fund Beirut Golden Income, which realized a $702,129 net increase in its assets up to September 2004, saw its share price dropping by less than half a percent to LP 102,600 ($68) on a volume activity of 2,000 shares while its peer Beirut Lira Fund stabilized at LP 102,000 ($68) posting a trading activity of 1,586 shares. Financial Markets BLOMINVEST Bank S.A.L. 3

FOREIGN EXCHANGE MARKET Financial Markets Foreign Exchange Market 22/10/04 15/10/04 % Change LP / Dollar 1,507.5 1,507.5 0.00% Dollar / Euro 1.2676 1.2474 1.62% Yen / Dollar 107.25 109.27 (1.85%) Dollar / Sterling 1.8277 1.8036 1.34% Following the government s belated resignation and under the continuous critical political situation, the local foreign exchange market witnessed some demand for the US dollar this week which pushed the Central Bank to intervene in order to prevent any pressure on the local currency. This was reflected in a drop registered by BdL s portfolio of gross foreign currency reserves which stood at $11.3bn at midoctober 2004, down $623m from end of September figures. In Interbank trading, the green currency was exchanged at a stable rate of LP/$ 1,5141,515. MONEY MARKET Money Market Rates 22/10/04 15/10/04 b.p. Change Interbank Average 3.50% 3.50% 0 BDL 45day CD 4.40% 4.40% 0 BDL 60day CD 4.89% 4.89% 0 Treasury Yields 21/10/04 14/10/04 b.p. Change 3M TB yield 5.22% 5.22% 0 6M TB yield 6.31% 6.31% 0 12M TB yield 6.69% 6.69% 0 24M TB coupon 7.74% 7.72% 2 36M TB coupon 8.68% 8.68% 0 daytoday rate Commercial banks are still holding abundant levels of LP liquidity with the average interbank rate remaining throughout the week at 3.5%. However, the offering of the latest lucrative premium treasury bills (see story p. 10) is expected to absorb part of these local currency funds. October 14 th TBs auction resulted in a surplus of LP64bn ($42.5m) over maturities, with nominal resubscriptions of October 7 th auction amounting to LP248bn ($165m) in medium and longterm papers, while nominal subscriptions of the latest auction totalled LP105bn ($69m) in short term papers. This surplus came amid a drop in the value of maturing bills to LP289bn ($192m). Starting this week and until November 25 th, 2004, maturing papers can be exchanged with 6 month and 1year TBs carrying cash premiums. Nearly 70% of October 14 th purchases were resubscriptions in October 7 th TBs auction, and allocated between 36M and 12M papers at a constant rates of 8.68% and 6.69% respectively. In parallel, 20% were invested in 6M papers at a stable yield of 6.31% while the remaining 9% were subscribed in 3M TBs at 5.22%. Accordingly, the weighted effective yield on all auctioned bills edged down to 7.93% compared to 8% a week earlier. For the second consecutive week, the Central Bank did not sell any Certificates of Deposit. BLOMINVEST Bank S.A.L. 4

EUROBOND MARKET Reuters Lebanese Government Bond Index 22/10/04 15/10/04 % Change Reuters Bond Index 148.28 148.24 0.03% Lebanese Government Eurobonds MaturityCoupon Currency 22/10/04 Weekly MidYield MidPrice Change % 20049.500% USD 101.000 (0.17%) 1.76% 20058.750% USD 103.813 (0.24%) 4.31% 200510.250% USD 102.500 (0.24%) 3.10% 20059.375% USD 103.625 (0.24%) 3.75% 20069.875% USD 106.500 (0.12%) 5.29% 200610.500% USD 107.500 (0.12%) 5.29% 2006 8.875% EUR 105.750 (0.12%) 5.66% 20078.625% USD 105.875 (0.12%) 6.41% 200810.125% USD 112.000 (0.11%) 6.48% 20097.25% EUR 102.000 0.12% 6.71% 200910.25% USD 114.250 0.00% 6.80% 20107.125% USD 101.500 0.18% 6.78% 20117.875% USD 103.375 0.18% 7.22% 20127.75% USD 101.750 0.00% 7.45% 201611.625% USD 117.000 0.21% 9.20% BLOM Bond Index MaturityCoupon Currency 22/10/04 15/10/04 Weekly Change % BLOM Bond Index 100.25 100.41 (0.16%) Total Volume Traded 0 0 Total Value Traded $0 $0 7 April 2004 = 100 Amid the recent political developments including the resignation of Prime Minister Hariri and Karameh s assignment to form a new Cabinet, the Eurobond market witnessed some supply pressures over short and medium term papers pushing their prices down. On the contrary, longterm sovereign bonds continued to attract investors, however at a lower pace, allowing their prices to edge slightly up weekonweek. Accordingly, the average offeryield on all traded papers went up 9 points on Friday to 5.28%. On the local bourse, the BLOM Bond Index edged down by 0.16% to 100.25 posting a null activity for the fifth consecutive week. Lebanese Corporate Eurobonds Issuer Maturity 22/10/04 Weekly MidYield Coupon MidPrice Change % Méditerranée 20059.500% 102.313 (0.06%) 2.70% Crédit Libanais 20059.000% 103.688 (0.18%) 3.78% Méditerranée 20059.750% 104.750 (0.18%) 4.12% BLOM 20059.000% 105.063 (0.06%) 4.28% Crédit Libanais 20066.750% 101.625 0.00% 5.73% HOLCIM Liban 200610.000% 107.500 0.00% 5.37% Méditerranée 20066.375% 100.500 0.00% 6.10% First National Bank 20076.875% 101.000 0.00% 6.38% Audi 20077.220% 101.500 0.00% 6.65% Fransabank 20078.500% 107.000 0.00% 6.01% Audi 201010.75% 116.750 0.00% 7.04% Byblos 20129.000% 108.000 0.00% 7.57% Financial Markets BLOMINVEST Bank S.A.L. 5

Gross FX Reserves Down $623m in FirstHalf of October 2004 Economic Statistics Banque du Liban s biweekly balance sheet revealed that its gross foreign currency reserves, which include deposits from commercial banks, retreated by $623m to $11.35bn on October 15 th, 2004 while dropping by $824m from the same period last year. Furthermore, deposits of the financial sector edged back by $412m on a biweekly basis to $21.7bn, while those of the public sector retreated to $1.3bn, down $142m in the same period. It is to note that gold reserves held by the BdL rose by $48m to $3.9bn at midoctober 2004, representing one of the highest levels of gold reserves in the region. $m 14,000 11,000 8,000 5,000 2,000 6,283 BdL's Gross FX Reserves 4,018 4,717 12,172 11,348 15 Oct' 00 15 Oct' 01 15 Oct' 02 15 Oct' 03 15 Oct' 04 Total Money Supply (M3) Up $210m Figures released by the Central Bank for the week ending October 7 th, 2004 indicated that LP deposits edged back by LP124bn ($82m), while foreign currency deposits rose by $247m weekonweek. In turn, TBs subscriptions by the public, unlike the previous weeks, took an upward path increasing, from September 30 th figures, by LP15bn ($10m). As for money supply (M3), which includes deposits in foreign currencies, it increased by $210m weekonweek to reach LP68,641bn ($45.5bn), while rising by 10.4% yearonyear. It is to note that the latest figures of the Central Bank s gross foreign currency reserves covers around 65% of money supply (M2) which includes currency in circulation in addition to total LP deposits. in billions of LP 80,000 70,000 60,000 50,000 40,000 48,608 Money Supply (M3) 51,774 53,965 62,190 68,641 7 Oct '00 7 Oct '01 7 Oct '02 7 Oct '03 7 Oct '04 BLOMINVEST Bank S.A.L. 6

Airport Passengers Up 20% in FirstNine Months of 2004 Activity at the Beirut International Airport (BIA) posted a 20% yearly increase in the firstnine months of 2004, as the total number of passengers (including transit passengers) reached 2.66m of which 350 thousands were reported for September only. BIA s traffic is expected to hit record levels this year to around 3 million passengers amid a remarkable flow of tourists in the country which exceeded the one million figure up to September 2004. In parallel, the number of airplanes (departures and arrivals) reached 30,197 in the first three quarters of 2004, compared to 26,116 in the same period last year. The following chart demonstrates the major growth in airport passengers up to Q32004 compared to the past four years. 3,000,000 2,500,000 2,000,000 1,500,000 1,863,544 Airport Passengers First NineMonths 2,005,937 2,062,170 2,212,473 2000 2001 2002 2003 2004 2,659,712 Cleared Checks Up 9.7% in FirstThree Quarters of 2004 Banks clearing activity up to September 2004 appreciated by 9.7% yearonyear, with the value of cleared checks totaling $24bn (of which $478m in returned checks, down 22.2% yearonyear), thus reflecting a growth in private demand in its investment and consumption components. LP and FC denominated checks took similar directions as the former edged up by 2.8% to $7bn, while FC checks rose by 12.6% to $17bn up to September 2004. It is to note that the rate of cleared checks in US dollars, the most relevant estimate of economic dollarisation, grew by 190 b.p. yearonyear to stand at 71.66% up to September 2004. 30,000 Total Value of Cleared Check FirstNine Months Economic Statistics $m 24,000 20,017 19,642 20,937 21,975 24,097 18,000 12,000 2000 2001 2002 2003 2004 BLOMINVEST Bank S.A.L. 7

Beirut Port Revenues Increase by 24% Up to September 2004 Economic Statistics According to the latest statistics released by the Port of Beirut, maritime activity in the first nine months of 2004 witnessed a 3.78% rise in freight to 3.7 million tons compared to the same period in 2003, while the number of total vessels edged up by 1.4% to 1,765. In turn, the port s revenues increased by nearly 24% to $64m, while the number of passengers rose significantly by 62% to 36,276. For the month of September 2004, vessels were up 8% yearonyear to 212, revenues surged by 27.5% to $7.7m, while freights dropped by 2% to 411,500 tons. Beirut Port Activity JanSept'04 JanSept'03 % change Total Vessels 1,765 1,741 1.38% Freight (millions of tons) 3.71 3.58 3.78% Revenues ($m) 64.4 52.1 23.79% Trade Deficit Up 36% in First Eight Months of 2004 Statistics issued by the Higher Customs Council reveal that the trade deficit edged up by 36% yearonyear to $4,846m up to August 2004. Exports amounted to $1,152m, up 27% from that of 2003, while imports for the same period rose by 34% to $5,998m. Italian goods accounted for 10% of total imports followed by those from France (8%), China (8%), Germany (7%), USA (6%), Russia (6%) and Switzerland (6%). As for exports, Iraq came in first place purchasing 17% of Lebanese products in a total of $194m, while Switzerland followed by a 12% share of total exports, then Syria and UAE by 8% each, Turkey by 7% and Saudi Arabia by 6%. For the month of August, the trade balance deteriorated from a deficit of $518m in August 2003 to one of $782m in August 2004. $m 6,000 5,000 4,000 3,000 2,000 3,594 Trade Deficit First Eight Months 4,110 3,557 3,555 4,846 2000 2001 2002 2003 2004 BLOMINVEST Bank S.A.L. 8

BoP Registers Surplus of $479m up to August 2004 Figures released by the Central Bank revealed that Lebanon s balance of payments (BoP) registered a deficit of $98.8m in August 2004 compared to a surplus of $313m in July 2004 and a surplus of $271m a year earlier. July s BoP came as a result of a $27m drop in the net foreign assets of the Central Bank, coupled with a $72m decline in the banks net foreign assets. For the firsteight months of 2004, the country s BoP accumulated to a surplus of $479m compared to one of $3,210m in the same period last year, when the country was receiving inflows from Paris II donors. $m 4,000 3,000 2,000 1,000 0 (1,000) (2,000) 25 Balance of Payment First Eight Months 635 281 3,210 479 2000 2001 2002 2003 2004 Kafalat Loans Reached $241m up to August 2004 Total loans covered by government subsidized program Kafalat reached LP363.2bn ($241m) since its inception in June 2000 up to August 2004 on a total of 3,172 applications averaging to LP114.5m ($75,954) per loan. For the month of August, a total of 46 loans worth LP6.4bn ($4.2m) were granted. Kafalat, jointly established by commercial banks and the government, guarantees to repay participating banks 75% of the value of loans in case of a default. The program target s small to mediumsized firms, mainly in the industry, agriculture and tourism sector. Geographically, more than 47% of the guarantees were given in Beirut and Mount Lebanon, followed by the South (29%), Bekaa (15%) and North (9%). In turn, subsidized loans were divided among the following sectors: Breakdown of Kafalat Loan (Jun. 2000Aug. 2004) Others 6% Industry 37% Economic Statistics Agriculture 47% Tourism 10% BLOMINVEST Bank S.A.L. 9

Weekly Developments MoF to Exch ange Maturing TBs with Premium Papers The Finance Ministry unveiled this week its plan to exchange LP 3 trillion ($2bn) worth of Treasury Bills maturing from October 21 st till November 25 th, 2004 with 6month and 1year TBs. Both papers will carry a cash premium equivalent to LP45 ($0.03) for the first and LP100 ($0.07) for the second. Pledges for the voluntary swap will be made at the Central Bank. Lebanon Ranked 97 th in Corruption Index Transparency International (TI), a nongovernmental anticorruption watchdog, released this week its world Corruption Perception Index (CPI) for 2004 ranking Lebanon at 97 out of 146 surveyed countries. In turn, Lebanon received a low score of 2.7 on a scale of ten where ten reflects no corruption. TI explained that this CPI score is the result of numerous scandals that hit the country including AlMadina bank and the mismanagement of Electricité du Liban. It is to note that the CPI ranks countries in terms of the degree to which corruption, defined as the abuse of public office for private gain, is perceived to exist among public officials and politicians. In the MENA region, both Oman and UAE were named as the least corrupted states with a score of 6.1 while Iraq ended as the most corrupted at 2.1. Lebanon shared the same ranking with Algeria, lagging behind Jordan, Syria, and Egypt. Internationally, Finland was labeled as the least corrupted country, while Haiti scored the lowest CPI index. 2004 Corruption Perception Index MENA Region Country Rank 2004 CPI Score Oman 29 6.1 UAE 29 6.1 Bahrain 34 5.8 Jordan 37 5.3 Qatar 38 5.2 Tunisia 39 5.0 Kuwait 44 4.6 Saudi Arabia 71 3.4 Syria 71 3.4 Egypt 77 3.2 Morocco 77 3.2 Algeria 97 2.7 Lebanon 97 2.7 Libya 108 2.5 Palestine 108 2.5 Yemen 112 2.4 Sudan 122 2.2 Iraq 129 2.1 Source: Transparency International BLOMINVEST Bank S.A.L. 10

World Bank: 46 Days Are Required on Average to Start a Business in Lebanon Statistics issued by the World Bank reveal that it takes on average 46 days to launch a business in Lebanon compared to a regional and OECD average of 39 and 25 days respectively. In parallel, entrepreneurs are expected to go through six procedures to establish their business (which is almost half the regional average of 10) at a cost of 131.5% of gross national income per capita (GNI). As for the minimum capital requirements, obtaining a business registration number requires a bank deposit of at least 82.3% of GNI per capita. On the opposite side, a closing business needs on average 4 years to resolve its bankruptcy issues. Lebanon Regional Av. OECD Av. Starting a Business (2004) Nb of Procedures 6 10 6 Time (days) 46 39 25 Cost (% of income per capita) 131.5 51.2 8.0 Min. Capital (% of income per capita) 82.3 856.4 44.1 Closing a Business (2004) Time (years) 4.0 3.9 1.7 Cost (% of estate) 18 13.0 6.8 Recovery Rate (cents on the dollar) 19.3 28.6 72.1 Source: World BankDoing Business 2004 Weekly Developments BLOMINVEST Bank S.A.L. 11

RYMCO Posts 20% Drop in ThirdQuarter 2004 Profits Corporate News Car retailer Rasamny Younis Motor Co. S.A.L. (RYMCO) released this week its third quarter results for 2004 showing a continual drop in profitability as the company s net income stood at $1.86m, down 20% from the same period last year. As such, earnings per share decreased by LP29 to LP112 on September 30 th, 2004. This came amid a 13.5% yearly growth in sales to $51.8m accompanied by a considerable 35.5% rise in operating charges to $5.8m partly driven by a more aggressive advertising campaign. Consequently, the company s profit margin (net income to sales) regressed significantly from 5.1% in Q32003 to 3.6% in the first nine months of 2004. In parallel, total assets shrunk by 1.5% to $84.8m, resulting in a 56.6% debt ratio (liabilities to assets) in September 2004, down 145 b.p. yearonyear. RYMCO s shares listed on the Beirut Stock Exchange were last traded at $1.6. Bank of Beirut s Listed Funds Issue ThirdQuarter Results Locally listed Bank of Beirut s four funds released their financials for the thirdquarter of 2004. The dollardenominated funds, which include Beirut Global Income and Beirut Interbank Fund, posted a net increase in assets of $2.15m and $1.02m respectively with Lebanese Republic eurobonds constituting the highest portion of investment income. In parallel, the performance of the LP funds Beirut Golden Income and Beirut Lira Fund came in parallel with their peers with the first achieving a total of $702,129 in net increase in assets while the latter s figure stood at $1.2m. Currently, the combined market capitalization of the funds constitute around 6% of the bourse s total market capitalization. Beirut Duty Free Receives Frontier Award During the 20th Frontier Awards in Cannes, Beirut Duty Free won the prize of the best Special Concept of the Year for its VIP Lounge at la Casa Del Habano cigar shop. The prestigious award is considered the highest tribute for the airport duty free industry worldwide. The Beirut Duty Free reopened its doors back in 1996 and is, since then, managed by the PhoeniciaAer Rianta Company S.A.L., a jointventure between Aer Rianta InternationalMiddle East and Beirut based Phoenicia Trading Afro Asia. It currently includes a 4,500 square meters retail space, including two arrival shops measuring a total of 460 square meters. BLOMINVEST Bank S.A.L. 12

Lebanon s most unique Landmarks The Cedars BLOMINVEST Bank S.A.L. Rachid Karameh Street Verdun P.O.Box: 111540 Riad El Solh Beirut 11072080 BLOM Bldg. 2nd Floor Tel: 961 1 743 300, 738 938 Fax: 961 1 738 916 email: balom@balom.com.lb 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. BLOMINVEST Bank S.A.L. 13