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C O N T E N T S Chairman Statement 5 Shareholders 6 Board of Directors 6 Audit & Risk Committee 7 Management 7 Directors’ Report 11 Financial Statements

External Auditors’ Report 21 Balance Sheet 22 Income Statement 24 Statement of Changes in Equity 25 Cash Flow Statement 28 Notes to the Financial Statements 29

Additional Information

Proposal of profit distribution 69 Resolutions to be submitted to the ordinary General Shareholders meeting

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Contact Information 71

CHAIRMAN’S STATEMENT

(THIS CHAIRMAN’S STATEMENT IS FREE TRANSLATION OF THE ORIGINAL ISSUED IN SPANISH)

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CHAIRMAN’S STATEMENT Dear shareholders and friends, This is the second year of Aresbank, S.A. after the changes in the ownership of the bank that began by the end of 2006 and continued through 2007. The consolidation of the ownership of the entity, with the Libyan Foreign Bank, as the main shareholder, and Crédit Populaire d’Algérie, has allowed the principal shareholder to continue with its capitalization program of the entity, increasing the share capital of Aresbank, S.A. to 300 million Euro during this accounting year. Aresbank, S.A. has continued its re-launch, successfully meeting the objectives marked for its principal business at the beginning of the year. The Bank focused its business activities in the international trade with Arab countries and its financing, together with the investments of its own resources. The job performed by our specialized staff in the corporate Head office in Madrid and in Barcelona’s branch, together with the efficient collaboration of the shareholders of the entity and its directors, has contributed with dynamism to the favourable evolution of the bank’s activities. With regard to the financial sector crisis which began in the last quarter of the year, the 2008 results show the prudence of Aresbank, S.A. in allocating provisions as a consequence of the risk exposure on the interbank market, The Bank’s total assets have increased by 92%, loans and advances to other debtors increased by 45%, contingent exposures increased by 184%, and Aresbank’ gross margin increased by 193%, resulting in a Capital Adequacy Ratio of 46.41%, much higher than the minimum required by Bank of Spain. Throughout the year, the bank has kept adapting itself to the regulations and current standards of the international banking system, implementing the requirements of Basel II, which introduced welcomed changes in the bank’s organization and internal control. Likewise, the Bank started to work on the new core banking system project, which will contribute to the modernization of the entity to guarantee a more efficient control and top-quality client service. In the current unfavourable financial environment, Aresbank, S.A. tackles the future challenges with optimism. It will work to contribute to improving the forecasted figures of Spanish exports in the Bank’s traditional markets, in addition to the infrastructure projects which have begun in other neighbouring Arab countries. It will also pursue greater diversification of its activity to other markets. Before I conclude this letter, I want to show my most sincere gratitude to our shareholders for their unconditional support and confidence. I also want to express my gratitude to all those persons, entities, clients and correspondents that have trusted Aresbank, S.A. and with which we want to keep on collaborating, and to our staff for their dedication, effort and loyalty. Juan Carlos Montañola

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S H A R E H O L D E R S 2008 2007 Libyan Foreign Bank 99.86% 99.79% Crédit Populaire D´Algérie 0.14% 0.21%

B O A R D O F D I R E C T O R S Mr. Juan Carlos Montañola (Executive Chairman) Mr. Mohamed Najib H. El-Jamal (Vice-Chairman) Libyan Foreign Bank Mr. Ahmed M. Aburkhis (*) Libyan Foreign Bank Dr. Mokhtar Ali M. Abouzrida (**) Libyan Foreign Bank Mr. Mohamed M. Zarti Libyan Foreign Bank Mr. Yousef S. Migirab Libyan Foreign Bank Mr. Hatim A. Gheriani Libyan Foreign Bank Crédit Populaire D´Algèrie Mr. Mohamed Djellab Independent Directors Mr. Julio Álvarez Mr. Carlos Kinder Mr. Amado Subh Secretary Mr. Fernando Marqués (*) Resigned on November 18th , 2008 (**) Appointed on May 30th , 2008

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A U D I T & R I S K C O M M I T T E E Mr. Julio Álvarez Chairman of the Audit & Risk Committee

and Member of the Board of Directors

Mr. Mohamed M. Zarti Member of the Board of Directors

Mr. Amado Subh Member of the Board of Directors

Secretary Mr. Fernando Marqués

M A N A G E M E N T Mr. Juan Carlos Montañola Executive Chairman

Mr. Ahmed M. Aburkhis Deputy General Manager- Corporate Division

Mr. Abdulla Naama (*) Deputy General Manager- Commercial Division

Mr. Abdel Aziz Mohamed Systems Department Manager

Mr. Hedi Ben Ali Aboukhris Treasury Department Manager

Mr. Manuel Grijota Head of Credit and Investment Department

Mr. Jesús Monge (**) Head of Trade & Marketing Department

Mr. Fernando Marqués Head of Legal Advisory Unit

Ms. Eva Marcos Head of Accounting Department

Ms. Yolanda Santamaría Head of Risk Management Unit

Mr. Youssef Berbash Head of Research & Development Unit

Mr. Manuel Poza Head of Audit Department (acting)

Ms. Carmen Tomás Barcelona Branch Assistant Manager

(*) Appointed on December 18th, 2008

(**) Until February 2009

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RESPONSIBILITY FOR THE INFORMATION CONTAINED IN THIS ANNUAL REPORT

The information contained in this annual report, including the annual accounts and the Directors' report as well as any additional data deemed necessary, has been drawn up by the members of the Board of Directors of Aresbank, S.A., in accordance with its accounting records.

The members of the Board of Directors are responsible for establishing not only the accounting policies but for designing, implementing and maintaining the internal control systems to ensure a proper preparation of the annual accounts, the safeguarding of assets, and the reliability of the accounting records in compliance with the legal requirements, and specifically, with the regulations established by the Bank of Spain.

Our external auditors PRICEWATERHOUSECOOPERS AUDITORES, S.L. examine the annual accounts of Aresbank, S.A. It is their responsibility to express a professional opinion on said accounts, by carrying out their work in accordance with generally accepted auditing principles, based on the evidence which they deemed necessary and to which they were given free access.

DIRECTORS’ REPORT

(THIS DIRECTORS’ REPORT IS FREE TRANSLATION OF THE ORIGINAL ISSUED IN SPANISH COUNTERSIGNED BY ALL THE MEMBERS OF THE BOARD)

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DIRECTORS´ REPORT 1. THE ECONOMIC AND FINANCIAL SITUATION The later part of year 2008 brought a new reality for the banking and investment industry worldwide. The serious liquidity shortage impacted severely the interbank market and the banks drastically reduced their lending to near halt. Real economies followed large global financial institutions to become causalities of the lack of trust and panic in the financial markets. Globally, commodities and food prices swung significantly during 2008. The world saw the cost of oil reaching an all time high in July at US$147.00 a barrel. By the end of December, oil was trading at US$ 35.58 a barrel, less than one fourth of the peak price reached four months earlier. The forecasts show further decline in World demand for Oil. The Euro fell against the US dollar from 1.4721 by end of December 2007 to 1.3917 by the end of December 2008. The exchange rates forecasted for 2009 will be affected by the execution of the fiscal and economic measures planned by the European countries and the US to mitigate the impact of the global financial crisis and fight the recession in their economies. The governments of the European Union states worked desperately to respond effectively to the financial crises and combat the recession that had started in early 2008, mainly in the construction, real estate, retail, and industrial sectors. In November 2008, the European Union approved the recovery plan to mitigate the impacts and stop further deteriorations of the economy. Most of the governments unveiled their domestic plans to help stressed financial institutions which could be affected by the global financial crisis. The GDP in the Euro zone grew by 0.7% over the whole of 2008, and by 0.9% in the European Union of 27 member states, against 2.6% growth in the Euro zone in 2007 and 2.9% in the European Union respectively. The European Commission is expecting the GDP in the European Union to fall by about 1.8% in 2009 before recovering moderately to 0.5% in 2010. During 2008, the trade balance of the Euro zone recorded a deficit of 32.1 billion Euro, compared with a surplus of 5.8 billion Euro in 2007. In 2008, Spain saw a sharp decline in construction and real estate sectors, which were leading the country’s economic growth in the previous years. The government lowered its outlook for 2008 GDP growth to 1.2 percent from 1.6 percent. It also slashed the previously expected GDP of 1 % for the year 2009 to -1.6%, acknowledging a deeper recession. The Spanish government expects gradual recovery of the economy and estimates a 1.2% GDP in 2010, contrasting the European Commission prediction of a GDP contraction of 0.2 percent for the same year. The Spanish exports of Goods and Services amounted to 278.3 billion Euro (26.5% of the Spanish GDP) in 2007. The exports grew by 2.9% in 2008. However, they are expected to decline in 2009 by 2.7%, and then increase by 0.6% for 2010.

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The Spanish banking sector was praised for its regulatory prudence and stricter control. Spanish banks did not have sizable exposure to toxic assets. Nevertheless, the Spanish government has taken several measures to support the banking sector. The increase of the public finance debt due to the government measures to stimulate the economy and support the banking sector prompted Standard & Poor rating agency to downgrade Spain’s AAA sovereign credit rating to AA+. Meanwhile, Fitch is still holding its top-notch AAA rating on Spanish debt. The global crises impacted to a lesser extent Aresbank’s traditional target markets in the Gulf region and North African countries due to their financial reserves and recent increases in oil revenues. Libya and Algeria, which are important energy exporters to Spain, are forging ahead with huge investments in infrastructure projects as well as service contracts for their petrochemical industries, health care, and education. Some of Spanish companies have already established themselves in these countries and compete with other international suppliers. 2. TRENDS IN ARESBANK’S BUSINESS Aresbank’s main activity during 2008 remained focused on expanding the financial activities related to foreign trade between Spain and mainly the Arab world. As planned, Libyan Foreign Bank, the majority shareholder, capitalized Aresbank to reach 300 million Euro in May 2008. The increase of capital enhanced the ability of Aresbank in handling larger business transactions and accepting higher risks. The Bank´s Capital Adequacy ratio decreased from 91.82% by end of 2007 to 46.41% by end of 2008. Interbank deposits increased as a result of the return of Aresbank to money markets. As of December 31st, 2008, deposits placed with financial institutions increased by 94% and loans and advances to other debtors increased by 501% compared to the end of 2007. The total assets amounted to 1.462 billion Euro by the end of 2008 compared to 762.867 million Euro by the end of 2007, marking an increase of 92%. By the end of 2008, the net interest income increased by 186% in comparison with 2007. The increase in the volume of the foreign trade business, mainly due to letter of credits related to Spanish oil imports, resulted in the fees and commissions income increase by 196%. By the year end, the contingent exposures of Aresbank marked 283.015 million Euro in 2008 compared to 99.675 million Euro by end of 2007. The gross margin increased in 2008 by 193% in comparison with 2007. Provisions to cover for the interbank placements with Icelandic banks had a net negative impact of 38.889 million Euro on the bank’s earnings in 2008. Aresbank operated at very comfortable level of liquidity with a composition of liquid assets ratio of 83% by year end in 2008 compared to 79% for 2007. Aresbank continues to have the support of its main shareholder, Libyan Foreign Bank.

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The operating expenses increased by 2% in comparison with 2007, mainly as a result of increased marketing activities, new staff, and bank restructuring. General expenses included severance payments amounting to 715 Thousand Euro. Extraordinary recoveries amounted to 2.2 million Euro. Marketing activities increased to seek new business opportunities and options for revenue diversification. By the end of the year, the bank reshaped its organizational structure into two main divisions. The commercial division is dedicated to focus on the business side. The corporate division is dedicated to focus on the internal supporting functions and strengthening risk management in the bank. Each division is headed by a Deputy General Manager. The efforts to modernize the IT infrastructure and services have resulted in the purchase of the software licence of a new core banking system. The bank also carried out a functionality assessment of the Risk Management software which will be implemented by the Bank in conjunction with the new core banking system. The bank is moving ahead with its business plan that started in 2007. Aresbank’s main objective for the next three years is to strengthen its market share in the foreign trade between Spain and the Arab countries, with special focus on Libya and Algeria. Moreover, Aresbank will continue to work with the Spanish exporters targeting new markets. 3. RELEVANT EVENTS SUBSEQUENT TO DECEMBER 31ST, 2008

Subsequent to December 31st, 2008 no relevant event has occurred which requires inclusion in the accompanying annual accounts in order to adequately present a fair view of the Entity’s equity, financial situation and results. 4. ACQUISITION OF OWN SHARES

As in previous years and due to its equity capital structure, Aresbank has not acquired, held or performed operations with its own shares during 2008. 5. RESEARCH & DEVELOPMENT EXPENSES

The Bank did not invest in projects related to R&D.

6. ENVIRONMENTAL INFORMATION

The overall operations of Aresbank are subject to environmental protection legislation. The Bank has adopted appropriate measures with respect to environmental protection and enhancement and to the minimization, where appropriate, of the environment impacts, in compliance with the relevant current regulations. The Bank did not make environmental investments in 2008 and 2007, nor did it consider it necessary to record any provision for environmental risks and charges, and does not consider that there are significant contingencies relating to environmental protection and enhancement.

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7. COMPLIANCE WITH AML REGULATIONS

Aresbank has also set up a global policy to ensure strict compliance with current legal regulations and with the recommendations put forward both by the Financial Action Task Force on Money Laundering (FATF) and by the Spanish Supervisory Body for the Prevention of Money Laundering. The main objective of Aresbank anti-money laundering policy is to prevent the use of our commercial network for any activities related to Money Laundering and is based on the following points:

• The identification and knowledge of customers and their financial and economic activities.

• The existence of an internal control and active communication.

• Written internal procedures.

• The development of the culture of prevention among all the employees of the bank through specific training activities.

• Reporting to the competent authorities according to the procedures established by the Regulator.

8. RISK REPORT

8.1 Risk management The following key principles underpin the risk and capital management at Aresbank:

• The Board of Directors provides overall risk and capital management supervision for the Bank.

• The Audit and Risk Committee informs the Board of Directors about the outstanding risks and operational performance.

• The ongoing management of risk is supported by control procedures to ensure compliance with the specified limits, the defined responsibilities, and the monitoring of indicators.

• The main goal is the management of the credit, market, liquidity, operational, business and reputational risks as well as the capital in a coordinated manner at all relevant levels within the organization.

• The risk management function is made independent of other departments.

In the second half of the year, Aresbank concluded several risk related activities to strengthen the Bank´s overall risk management and comply with risk regulations. These included:

• Conducting information sessions for Basel II.

• Developing the calculation model for using the Standardized Approach Credit Risk Capital and implementing the calculation in the core banking system.

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Developing Credit Risk Policy and Credit Approval Process and Procedures

Manual.

Producing the Internal Capital Adequacy Assessment Process (ICAAP) Report as per Bank of Spain requirements.

8.2. Capital needs

The following table provides an aggregation of the capital required for each risk faced by Aresbank, according to Pillar I of Basel II.

(EUR ‘000)

Aggregation of Capital Needs Pillar I Capital Charge

Credit Risk (1) 46,066 Market Risk (2) - Operational Risk (3) 1,387

47,453 Total Capital Needs (1+2+3)

For the risks covered under the Pillar I, the Bank adopted the following approaches as at December 31st, 2008:

• Credit Risk – Standardized Approach.

• Market Risk – Standardized Method.

• Operational Risk – Basic Indicator Approach.

8.3 Credit Risk

The credit risk makes up the largest part of Aresbank’s risk exposures. The total credit risk weighted assets under Pillar I, using standard approach, is 575,836 Thousand Euro. Aresbank calculates risk weighted assets as product of the exposure and relevant risk weight determined by its supervisor. Risk weights are determined by the category of the borrower and depend upon external credit assessments by ECAIs (Standard & Poor’s, Moody’s and Fitch) and also on the type of the banking product.

The Bank has seen exponential growth in the size of its balance sheet over the past 2 years, primarily on account of the restructuring exercise, which was conducted in 2006 -2007. The Bank currently has a focussed business target market which caters to the trade finance business, primarily between Spain and the Arab world, and money market transactions. The total lending showed a substantial growth in 2008, amounted to 1,093,490 Thousand Euro, in comparison with 726,649 Thousand Euro in 2007. The key component of the total lending was “Loans and Advances to Credit Institutions”, for an amount of 1,069,974 Thousand Euro. Contingent exposures

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increased from the previous year by 184% to a total amount of 283,015 Thousand Euro.

(EUR ‘000) OVERALL CREDIT RISK EXPOSURE 2008 2007

Total Loans and Advances (Gross) 1,093,490 726,649

Contingent exposures 283,015 99,675

Unused portion of credit lines (Drawable by third parties)

113,916

58,391

Total credit risk exposure 1,490,421 884,715

8.4 Quality and Geographical Distribution of Interbank Placements

More than 96% of the Bank’s balance sheet is held in money market transactions. From the total money market transactions, 82% of interbank placements are set with banks characterized with investment grade ratings (or ratings from AAA to BBB+) and 18% of interbank deposits are placed at banks characterized with speculative grade ratings (or ratings less than BBB+ and not rated). In reference to geographical distribution, more than 82% of the interbank placements are made in Europe, and 58% of total placements are in Spain.

8.5 Credit risk weighted assets The composition of the portfolio exposure and its capital charge by assets class as of December 31st, 2008 is provided in the table below:

(EUR ‘000) Asset Class Credit RWA Capital Charge

Central Governments & Central Banks 1,086 87

Financial Institutions 320,579 25,646

Corporate 127,639 10,211

Retail 929 74

Mortgages 62 5

Past Due 91,629 7,330

Other Assets 33,912 2,713

Total 575,836 46,066

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The following table breaks down the eligible Credit Risk Mitigation (CRM) used by the Bank:

Type of CRM Amount (EUR ‘000) Asset Class of Counterparty

Real Guarantees 20,079 Financial Institutions Real Guarantees 3,963 Corporate Real Guarantees 19 Retail Guarantees Received 2,235 Financial Institutions Guarantees Received 5,386 CESCE

8.6 Doubtful Assets and Provisions

The table below provides the classification by type of doubtful exposure, both on balance sheet and contingent exposures, and by type of provision, both specific and country risk provisions held as of December 31st , 2008.

(EUR ‘000) Classification Type Exposures Provisions Debt exposure 130,803 39,404 Contingent exposures 2,333 1,466

Total 133,136 40,870 Country Risk Debt exposure 65 54 Country Risk on Contingent exposures 349 80

Total 414 134 Additionally the bank allocates generic provision for an amount of 27 Thousand Euro (for debt exposure) and 167 Thousand Euro (for contingent exposure).

8.7 Market Risk

The Bank does not have a material trading book, and there is no risk pertaining to interest rate related instruments and equities in the trading book. Accordingly, market risk capital charge has been considered not relevant.

8.8 Operational Risk

The Operational Risk Capital charge, 1,387 Thousand Euro, is based on the average of positive gross income of the previous three years (9,247 Thousand Euro) multiplied by 15%.

(EUR ‘000) 2008 2007 2006

Gross Income 19,930 6,804 1,009

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8.9 Solvency (EUR ‘000) Total computable own funds: 275,259

Tier I: 275,065

Tier II: 194

Capital requirements for Pillar I: 47,453

Surplus of capital: 227,806

Total RWA for Pillar I 593,174

Capital Adequacy Ratio: 46.41%

Capital Adequacy Ratio (of which Tier I): 46.37%

8.10 Liquidity The analysis of the liquidity of the bank as of December 31st , 2008 shows that the Bank is a very liquid bank and has sufficient cash flow to meet its near term liabilities:

Time Buckets Assets Liabilities Gap Cumulative Gap

Up to 1 Month 825,308 859,170 (33,862) (33,862)

1 Month to 3 Months 482,691 313,679 169,012 135,150

3 Months to 6 Months 5,116 7 5,109 140,259

6 Months to 12 Months 1,081 5 1,076 141,335

1 Year to 5 Years 3,739 - 3,739 145,074

Over 5 Years 133,336 - 133,336 278,410

Below is the gap analysis as of December 31st ,2007:

Time Buckets Assets Liabilities Gap Cumulative Gap

Up to 1 Month 351,467 380,058 (28,591) (28,591)

1 Month to 3 Months 338,787 177,115 161,672 133,081

3 Months to 6 Months 32,577 175 32,402 165,483

6 Months to 12 Months 420 - 420 165,903

1 Year to 5 Years 1,452 21 1,431 167,334

Over 5 Years 1,157 - 1,157 168,491

AUDITORS’ REPORT AND ANNUAL ACCOUNTS

(A FREE TRANSLATION FROM THE ORIGINAL IN SPANISH SIGNED BY ALL MEMBERS OF THE BOARD OF DIRECTORS

est001

Cuadro de texto

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BALANCE SHEETS FOR THE YEARS ENDED DECEMBER 31st, 2008 AND 2007 (EXPRESSED IN THOUSAND OF EURO)

ASSETS 2008 2007* Cash and balances with Central Banks (Note 6) 373,687 3,481 Loans and receivables (Note 7) 1,054,004 725,949

Loans and advances to credit institutions 1,031,085 721,880 Loans and advances to other debtors 22,097 3,678 Other financial assets 822 391

Non-current assets held for sale (Note 8) 4,140 3,926

Equity instruments 4,082 3,859 Tangible assets 58 67

Tangible Assets (Note 9) 29,133 29,159

For own use 8,293 8,215 Investment property 20,840 20,944

Tax Assets (Note 10) 640 319

Current 606 285 Deferred 34 34

Other Assets (Note 11) 421 33

TOTAL ASSETS 1,462,025 762,867 OFF BALANCE SHEET ITEMS (Note 17) Contingent Exposures 283,015 99,675

Irrevocable documentary credits 254,993 69,883 Other bank guarantees and indemnities 20,300 22,070

Other contingent risks 7,722 7,722 Contingent Commitments 113,919 58,395

Drawable by third parties 113,916 58,391 Other commitments 3 4

The accompanying Notes 1 to 30 are an integral part of the Annual Accounts as of December 31st, 2008 and 2007. The financial statements are originally issued in Spanish and prepared in accordance with Bank of Spain Circular 4/2004 and Circular 6/2008. In the event of a discrepancy, the Spanish-language version prevails. (*) Restated (see Note 3.3)

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BALANCE SHEETS FOR THE YEARS ENDED DECEMBER 31st, 2008 AND 2007 (EXPRESSED IN THOUSAND OF EURO)

LIABILITIES 2008 2007* Trading Portfolio - 1 Financial liabilities at amortized cost (Note 12) 1,183,429 559,955

Deposits from credit institutions 1,170,143 553,845 Deposits from other creditors 12,807 5,732 Other financial liabilities 479 378

Provisions (Note 13) 2,114 2,514

Provisions for taxes 364 364 Provisions for contingent exposure and commitments

1,714

1,917

Other provisions 36 233 Tax Liabilities (Note 10) 214 376

Current 214 376 Deferred - -

Other Liabilities (Note 11) 1,203 607

TOTAL LIABILITIES 1,186,960 563,453 SHAREHOLDERS EQUITY Total Equity (Note 14) 275,065 199,414

Capital (Note 15) 300,001 200,002 Reserves (Note 16) (1,588) (1,853) Profit or (loss) for the period (23,348) 1,265

TOTAL SHAREHOLDERS EQUITY 275,065 199,414 TOTAL LIABILITIES AND EQUITY 1,462,025 762,867

The accompanying Notes 1 to 30 are an integral part of the Annual Accounts as of December 31st, 2008 and 2007. The financial statements are originally issued in Spanish and prepared in accordance with the Circular 4/2004 and Circular 6/2008, of the Bank of Spain. In the event of a discrepancy, the Spanish-language version prevails. (*) Restated (see Note 3.3)

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INCOME STATEMENTS FOR THE YEARS ENDED DECEMBER 31st, 2008 AND 2007 (EXPRESSED IN THOUSAND OF EURO)

2008 2007* Interest and similar income (Note 19) 79,876 10,199 Interest expenses and similar charges (Note 20) (66,526) (5,527)

A) NET INTEREST INCOME 13,350 4,672 Fees and commissions income (Note 21) 4,340 1,465 Fees and commissions expenses (Note 22) (255) (29) Gains and losses on financial assets and liabilities (Net) - (4) Exchange differences (Net) 851 (730) Other operating income (Note 23) 1,645 1,430 Other operating expenses (4) (1) B) GROSS MARGIN 19,927 6,803

Administrative Expenses (7,071) (6,912)

Personnel expenses (Note 24) (4,911) (4,800) Other administrative expenses (Note 25) (2,160) (2,112)

Depreciation and amortization (Note 27) (206) (186) Provisions expenses (Net) (Note 13) 290 (1,039) Impairment losses (Net) (Note 28) (36,868) 1,389

Loans and receivables (36,860) 1,389 Non-current assets held for sale (Note 8) (8) -

C) OPERATING INCOME (23,928) 55 Other gains / Losses in the disposal of assets non classified as Non-current assets held for sale (Note 29)

580

1,210

D) PROFIT OR (LOSS) BEFORE TAXES (23,348) 1,265 Income Tax ( Note 18 ) - - E) PROFIT OR (LOSS) FROM ORDINARY ACTIVITY (23,348) 1,265 F) PROFIT OR (LOSS) FOR THE PERIOD (23,348) 1,265

The accompanying Notes 1 to 30 are an integral part of the Annual Accounts as of December 31st, 2008 and 2007. The financial statements are originally issued in Spanish and prepared in accordance with Bank of Spain Circular 4/2004 and Circular 6/2008. In the event of a discrepancy, the Spanish-language version prevails. (*) Restated (see Note 3.3)

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STATEMENTS OF CHANGES IN EQUITY FOR THE YEARS ENDED ON DECEMBER 31st, 2008 AND 2007 (EXPRESSED IN THOUSAND OF EURO)

a) STATEMENT OF RECOGNIZED INCOME AND EXPENSE

2008 2007 Profit or (loss) for the period (23,348) 1,265

Profit or (loss) published (23,348) 1,265

TOTAL RECOGNIZED INCOME AND EXPENSE (23,348) 1,265

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b) CHANGES IN EQUITY IN THE PERIOD (EXPRESSED IN THOUSAND OF EURO)

EQUITY

Issued capital

Share premium

Accumulated Reserves (losses)

Other equity instruments

Less: Own

shares

Profit / Loss of the period

Less: dividends payments

VALUATION ADJUSTMENTS

TOTAL EQUITY

1.Balance Sheet as of 31/12/07 200,002 (1,853) 1,265 199,414

a) Adjustments due to accounting policy change

b) Error adjustments

2. Adjusted balance sheet (1+a+b) 200,002 (1,853) 1,265 199,414

3. Total recognized income and expense

(23,348) (23,348)

4.Other changes in equity (c+d+e) 99,999 265 (1,265) 98,999

c) Increase of capital 99,999 99,999

d) Transfers between items 1,265 (1,265) -

e) Issuance (reduction) of equity instruments (1,000) (1,000)

5. Balance Sheet as of 31/12/08 (2+3+4)

300,001

(1,588) (23,348)

275,065

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EQUITY

Issued capital

Share premium

Accumulated Reserves (losses)

Other equity instruments

Less: Own

shares

Profit / Loss of the period

Less: dividends payments

VALUATION ADJUSTMENTS

TOTAL EQUITY

1.Balance Sheet as of 31/12/06 100,002 (902) 49 99,149

a) Adjustments due to accounting policy change

b) Error adjustments

2. Adjusted balance sheet (1+a+b)

100,002

(902) 49

99,149 3. Total recognized income and expense

1,265 1,265

4.Other changes in equity (c+d+e) 100,000 (951) (49) 99,000

c) Increase of capital 100,000 100,000

d) Transfers between items 49 (49) -

e) Issuance (reduction) of equity instruments (1,000) (1,000)

5. Balance Sheet as of 31/12/07 (2+3+4) 200,002 (1,853) 1,265 199,414

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CASH-FLOW STATEMENTS FOR THE YEARS ENDED ON DECEMBER 31st, 2008 AND 2007 (EXPRESSED IN THOUSAND OF EURO)

2008 2007* A) CASH-FLOW FROM OPERATING ACTIVITIES Profit or (loss) for the period (23,348) 1,265

Adjustments: 36,784 (164) Amortization of tangible assets 206 186 Impairment losses 36,868 (1,389) Provisioning expense (net) (290) 1,039

Adjusted Profit or loss 13,436 1,101 Net increase or decrease in operating assets 366,087 623,572

Loans and receivables 366,832 625,734 Other operating assets (745) (2,162)

Net increase or decrease in operating liabilities 624,044 524,440

Financial assets held for trading (1) Financial liabilities at amortized cost 623,098 524,935 Other operating liabilities 947 (495)

B) CASH-FLOW FROM INVESTING ACTIVITIES Investments – Tangible assets 186 (19) Divestments- Held to maturity investments 609 C) CASH-FLOW FROM FINANCING ACTIVITIES

Issuance/Redemption of equity or endowment fund 99,999 100,000 Other items related with financing activities (1,000) (1,000)

D) EFFECT OF THE EXCHANGE RATE FLUCTUATIONS

-

- E) NET INCREASE OR DECREASE IN CASH AND CASH EQUIVALENTS (A+B+C+D)

370,206

1,559 F) CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE YEAR

3,481

1,922

G) CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR

373,687

3,481 (*) Restated (see Note 3.3)

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NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31st , 2008

1. GENERAL INFORMATION Aresbank, S.A. was established by public deed dated April 1st, 1975. The Bank is registered in the Mercantile Registry of Madrid, on page nº 28,537, sheet 18, 1st inscription of General Companies Volume 3,740. Since April 2nd, 1975, Banco Árabe Español, S.A. is registered at the Bank of Spain's Special Registry for Banks and Bankers under number 0136. Its fiscal identity number is A28386191. The Extraordinary General Shareholders Assembly held on July 27th, 2007 agreed to change the company name to “Aresbank, S.A.”. Aresbank is a joint stock company. Its corporate purpose per Article 3 of its bylaws is as follows: “The main object of the Bank is to contribute to the development of the economic cooperation between the Arab countries and Spain by financing foreign trade and promoting investment and attracting funds from Arab and International Financial Markets. Notwithstanding the above mentioned, the corporate object of the Bank consists of all activities relating to banking operations allowed by the Spanish legislation and not forbidden to banking entities except the reception of funds from individuals which will be limited to those who are involved in foreign trade transactions with the Bank. The activities included in the company’s object may be carried out by the company wholly or partly indirectly, by means of holding shares or interests in companies having identical or similar purpose. “ The Bank's registered address is Paseo de la Castellana 257, Madrid, where its Head Office is located. 2. GENERAL OBJECTIVES

The Bank's general objectives can be summarized as follows: To increase the economic cooperation between Spain and the Arab countries by

financing foreign trade and other investments and trying to increase its resources through the fundraising of deposits from Arab and international financial markets.

To identify and evaluate investment opportunities and new projects.

To offer Spanish technical experience and know-how for the implementation of economic and industrial projects in the Arab world.

To promote joint ventures.

To cooperate with Spanish Banks and other institutions channelling financial resources coming from international or Arab monetary markets.

To strengthen relations and cooperation between Arab and Spanish businesses.

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3. BASIS OF PRESENTATION OF THE ANNUAL ACCOUNTS 3.1 Basis of presentation

On January 1st, 2005, the “International Financial Reporting Standards” (IFRS) came into effect in Spain for some economic sectors, credit institutions among others. In order to adapt the accounting system of the Spanish credit institutions to the mentioned standards, Bank of Spain as regulator of the financial sector issued the Circular 4/2004 on public and confidential reporting rules. It was stated that its purpose was to adapt the Spanish banking accounting environment to the one arising from the adoption by the European Union of the IFRS. This Circular has been applicable since year 2005 to the individual financial statements of Spanish credit institutions. The accompanying financial statements of the years 2008 and 2007 were prepared from the accounting records of the Bank in conformity with the accounting criteria of the Circular 4/2004 and Circular 6/2008 (which modifies Circular 4/2004) issued by the Bank of Spain and accordingly give a true and fair view of the Bank net worth and financial position as at December 31st, 2008 and 2007 and of the results of its operations, of the changes in its net worth and of the cash flows for the years then ended. The information in these Annual Accounts is the responsibility of the Directors of Aresbank. The Annual Accounts of the year 2008 have been formulated by the Board of Directors of the Bank in the meeting held on March 26th, 2009 and they will be presented to the General Shareholders’ Assembly on March 27th, 2009 for approval, which is expected to adopt them without any significant changes. Except as otherwise indicated, these Annual Accounts are presented in Thousand Euro. 3.2 Accounting principles

The Bank's Annual Accounts were prepared on the basis of the accounting criteria established by the Bank of Spain in its Circular 4/2004 and its amendments included in Circular 6/2008, as set forth in Note 5.

3.3 Comparison of information During the year 2008, Bank of Spain has included some changes in the format of the Financial Statements by means of the Circular 6/2008, and it has included a new statement of “Changes in equity in the period”. Therefore, the quantitative information corresponding to the year 2007 that appears in this Annual Report has been restated for comparative purpose. The main changes are the followings:

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- In the Balance Sheet, the heading “Other assets” includes both prepayment and accrued income and other assets captions. “Other liabilities” includes accrued expenses and deferred income and other liabilities captions. - In the Profit and Loss statement, the “Ordinary Margin” is now denominated “Gross Margin” and includes gains and losses on financial assets and liabilities, exchange rate differences and other operating income and expenses. - The Impairment losses (net) regarding Loans and receivables and non-current assets held for sale have been included as part of the Operating Income, as well as the provisioning expenses and amortizations. - The old captions “Other gains” and “Other losses” have been replaced by the new captions: “Other gains/losses in the disposal of assets non classified as Non-current assets held for sale” and”Other gains/losses from discontinued operations”.

3.4 Accounting estimates and errors The information included in the accompanying annual accounts is as mentioned, the responsibility of the directors of Aresbank. In these annual accounts strictly where appropriate the use of estimates in valuing certain assets, liabilities, incomes, expenses and commitments has been made by the senior management of the Bank and ratified by the Directors. These estimates are related to:

- The losses for impairment of certain assets. - The useful life adopted for tangible and intangible assets.

These estimates were made in accordance with the best available information about the items concerned and it is possible that future events may make it necessary to modify them in some ways in the forthcoming years. Any such modification will in any case be made prospectively recognising the effects of that change on the related profit and loss account.

In these annual accounts there have been no corrections of errors or changes in accounting estimates other than the restatement done following Circular 6/2008 (see Notes 10 and 12).

3.5 Changes in accounting principles There were no changes in accounting principles in 2008 with a significant effect on earnings for the year or on the balance sheet.

3.6 External Auditors

The Annual Accounts of Aresbank, S.A. as of December 31st, 2008 have been audited by PriceWaterhouseCoopers Auditores, S.L. that also audited those of the previous year. In accordance with the additional provision 14th of the “Ley 44/2002 de Medidas de Reforma del Sistema Financiero” (Spanish law on amendment measures on the financial

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market), dated November 22nd, their fees for auditing the Annual Accounts of the year 2008 amounted to 72.8 Thousand Euro (70 Thousand Euro in 2007). The fees for other services rendered by the audit firm amounted to 9 Thousand Euro (39 Thousand Euro in 2007). 3.7 Risk control

According to the European Commission recommendations on the publication of information regarding financial instruments (risk management), Aresbank has included in the Directors’ Report and Risk report the most significant data. 3.8 Environmental information

The overall operations of Aresbank are subject to environmental protection legislation. The Bank has adopted appropriate measures with respect to environmental protection and enhancement and to the minimization, where appropriate, of the environment impact, in compliance with the relevant current regulations. The Bank did not make environmental investments in 2008 and 2007, nor did it consider it necessary to record any provision for environmental risks and charges, and does not consider that there are significant contingencies relating to environmental protection and enhancement.

3.9 Customer Services Unit activity

Ministry of Economy Order 734/2004 of March 11th, laid down the obligation for the Customer Services Departments to prepare a report on the conduct of their functions during the preceding year.

In accordance with this legal requirement, the department in charge of the Customer Services prepared the report on its activities in 2008, which was submitted to the Bank’s Board of Directors at its meeting held on February 27th, 2009.

This report stated that the Customer Services Department of Aresbank, S.A. had not received any claim during 2008, neither during 2007.

3.10 Solvency

Spanish regulations

The current solvency regulation is basically stipulated by Law 13/1992, of June 1st, as well as by Bank of Spain Circular 3/2008.

Bank of Spain Circular 3/2008 states that the financial institutions should maintain, at all times, enough volume of computable own resources, to cover the minimum requirements to cover credit risk, market risk and operational risk. As of December 31st, 2008 the capital requirements under Pillar I amounts to 47,453 Thousand Euro.

As at December 31st, 2008 and 2007, Aresbank’s computable capital exceeded the regulatory required minimum under Pillar I by 227,806 and 182,450 Thousand Euro respectively.

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3.11 Deposit Guarantee Fund

The entity is integrated in the Deposit Guarantee Fund. The contributions made by the entity in 2008 to this Fund amount to approximately 4 Thousand Euro (1 Thousand Euro in 2007). The contributions are booked in “Other operating expenses” account in the Income Statement. 3.12 Subsequent Events

Irrespective of the information given in this annual report, subsequent to December 31st, 2008 no relevant event has occurred which requires inclusion in the accompanying annual accounts in order to adequately present a fair view of the Entity’s equity, financial situation and results.

4. PROFIT / LOSS DISTRIBUTION

The proposed distribution of 2008 results and the ones previously approved for 2007 are as follows:

2008 2007 Net profit / loss for the Year (23,348) 1,265 Distribution

• Result from previous years - - • Other negative reserves (23,348) 1,265

5. ACCOUNTING PRINCIPLES AND VALUATION METHODS APPLIED

The significant accounting principles and standards and valuation methods applied in preparing the accompanying Annual Accounts are described below. They basically meet those set forth in the Bank of Spain Circular 4/2004 and Circular 6/2008: 5.1 Going concern principle

The Annual Accounts have been formulated considering that Aresbank will continue to operate for a limitless period. Consequently the application of accounting standards is not intended to determine the value of the net worth in the event of liquidation. 5.2 Accrual basis of accounting

Interest income and expenses are recognized on accrual basis using the effective interest rate method. In accordance with standard banking practices, transactions are recorded on the date they take place, which may differ from their value date, which is the basis for computing interest income and expenses. However, following the Bank of Spain regulations, accrued interests related to doubtful debts, including those from country risk transactions, are recorded as income when collected. Income from financial commissions related to the opening of documentary credits or granting of loans that do not correspond to expenses directly incurred in the execution

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of the transactions are apportioned over the life of the transaction, as another component of the effective profitability of the documentary credit or loan. 5.3 Financial Assets

Financial Assets are classified in the Balance Sheet with the following criteria:

a) Cash and Balances with Central Banks relating to the Cash balances and the balances held at the Bank of Spain and other Central Banks (Note 6).

b) Loans and Receivables, which includes financial assets that are not traded in an

active market and are not required to be valued at fair value, which cash flows are of a determined or determinable amount, and in which all the disbursement made by the entity will be recovered, absent reasons imputable to the debtor’s solvency. This category includes both the lending arising from the typical credit activity and the amounts of cash drawn and pending repayment by the customers as loans or the deposits placed with other companies, however legally instrumented, financial guarantees, unlisted debt securities, and the debts of purchasers of goods or users of services that form part of the Bank’s business (Note 7).

c) Held-to-maturity investments, which includes debt securities with fixed

maturity and cash flow of determined amount that the entity has decided to hold until redemption, basically because it has the financial capability to do so or has related financing.

d) Non-current assets held for sale, corresponding to the book value of those

items, whether individually or integrated in a disposal group or being part of a group of units that will be disposed of together (discontinued operations), whose sale is highly probable, given the current conditions of these assets, within one year from the reporting date of the Annual Accounts. Moreover, investments in jointly controlled entities and associates will be considered as “Non-current assets held for sale” when they meet the requirements above mentioned. Therefore, the recovery of the book value of these items will foreseeably occur through the price obtained in disposal of them (Note 8).

Financial assets are generally initially recorded at cost. Subsequent valuations at each accounting close are made as follows:

i) Financial assets are valued at fair value, except for Loans and Receivables, the Held-to-maturity Investments portfolio, Equity Instruments whose fair value cannot be reliably determined, Investments in Associates, Jointly Controlled Entities, Group Entities and the financial derivatives whose underlying asset are such equity instrument and are settled by delivery thereof.

ii) Loans and Receivables and Held-to-maturity Investments portfolio are valued

at their amortized cost, using for determining this cost the effective interest rate method. Amortized cost is the cost of acquisition of a financial asset adjusted by the repayments of principal and the portion allocated to the income statement,

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using the effective interest method, of the difference between the initial cost and the related repayment value at maturity, minus any reduction of value for impairment directly recognized as a decrease in the amount of the asset or through a value adjustment account.

iii) The investments in the capital of other entities, whose fair value cannot be

determined with sufficient objectivity, are maintained at their cost, adjusted, if appropriate, by the losses for impairment that may have occurred.

The variations in the book value of financial assets are generally recorded with a contra-item in the Income Statement, separating those arising from the accrual of interest and similar items which are recorded under the “Interest and similar income” caption, from those arising for other causes, which are recorded at the net amount in the “Gains and Losses of Financial Assets and Liabilities” caption in the Income Statement. However, the variations in the book value of the items included under the “Non-Current Assets held for sale” caption that met certain conditions are recorded with a contra-item under the “Equity Valuation Adjustments” caption. Impairment losses are recognized in the Income Statement as well as any subsequent increase in value up to the amount of any impairment losses previously recognized. 5.4 Non-current assets held for sale

Property assets or other non-current assets foreclosed by the Bank in full or partial fulfilment of the payment obligations of its debtors will be considered “Non-current assets held for sale”, except those that the Bank decides to hold for continuing use. “Non-current assets held for sale” are generally measured at the lower of their fair value less the costs of their sale and their book value calculated at the date of their classification as held for sale. “Non-current assets held for sale” shall not be depreciated or amortized during the time they remain in this category (Note 8). 5.5 Financial Liabilities

Financial Liabilities are recognized in the Balance Sheet as “Financial Liabilities at Amortized Cost”. These financial liabilities are not included in any of the other captions of the Balance Sheet, which relate to typical fund-raising activities, regardless of how instrumented and of their maturity (Note 12). 5.6 Impairment of value of financial assets

The book value of financial assets is generally adjusted with a charge to the Income Statement when there is objective evidence that a loss has arisen by impairment, which occurs:

i) In case of debt instruments (credit and securities representing debt), if after their initial recognition an event occurs or the combined effect arises of several events with a negative impact on their future cash flows.

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ii) In case of equity instruments, if after their initial recognition an event occurs or the combined effect arises of several events signifying that it will not be possible to recover their book value.

As a general rule, the adjustment of the book value of financial instruments for impairment is charged to the Income Statement of the period in which such impairment is disclosed, and the recovery of the previously recorded losses for impairment, if it arises, is recognized in the Income Statement of the period in which the impairment is eliminated or reduced. If the recovery of any recorded amount for impairment is considered remote, it is eliminated from the Balance Sheet. Nonetheless the entity may take the necessary action to attempt to achieve collection until the statute of limitations of its rights has definitively expired, they are forgiven or for other reasons.

In the case of debt instruments valued at amortized cost, the amount of the losses incurred for impairment is equal to the negative difference between their book value and the present value of their estimated future cash flows. In the case of listed debt instruments, instead of the present value of future cash flows, their market value is used, provided that it is sufficiently reliable to be considered representative of the value, which the entity might recover. The estimated cash flows of a debt instrument are all the amounts of principal and interest that the entity estimates it will obtain during the life of the instrument. Consideration is given in this estimate to all relevant information available at the date of preparation of the Annual Accounts, which provides data about the possibility of future collection of the contractual cash flows. Also, in estimating the future cash flows of secured instruments, regarding the flows that would be obtained from realization thereof, less the amount of the cost necessary to obtain and subsequently sell them, regardless of the probability of execution of the guarantee. In calculating the present value of the estimated future cash flows, the discount rate used is the original effective interest rate of the instrument, if the contractual rate is fixed. If the contractual rate is floating, the discount rate used is the effective interest rate at the date of the financial statements determined in accordance with the contract conditions. The portfolios of debt instruments, contingent exposures and contingent commitments, regardless of by whom they are owned, of how instrumented or how guaranteed, are analysed to determine the Bank’s credit risk exposure and to estimate the coverage requirement for impairment of value. For preparation of the financial statements, the entity classifies its operations based on its credit risk, analyzing separately the risk of insolvency attributable to the customer and the country risk, if any, to which the operations are exposed. Objective evidence of impairment is individually determined for all significant debt instruments and individually or collectively for groups of debts instruments, which are not individually significant. If a specific instrument cannot be included in any group of assets with similar risk characteristics, it is analysed exclusively on an individual basis in order to determine whether it is impaired and, if appropriate, to estimate the loss for impairment.

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The collective evaluation of a group of financial assets to estimate their losses for impairment is performed as follows:

i) Debt instruments are included in groups which have similar credit risk characteristics, indicating the capability of the debtors to pay all the amounts of principal and interest in accordance with the contract conditions. The credit risk characteristics considered for grouping the assets include the type of instrument, the debtor’s activity sector, the geographical area of the activity, the type of guarantee, the age of the past due amounts and any other relevant factor for estimating the future cash flows.

ii) The future cash flows of each group of debt instruments are estimated on the

basis of past experience of losses in the sector as calculated by the Bank of Spain for instruments with credit risk characteristics similar to those of the group concerned, after making the necessary adjustments to adapt the historical data to current market conditions.

iii) The loss for impairment of each group is the difference between the book value

of all the debt instruments in the group and the present value of their estimated future cash flows.

Debt instruments not valued at fair value through profit or loss, contingent exposures and contingent commitments are classified on the basis of the risk of insolvency attributable to the customer or to the transaction in the following categories: standard risk, substandard risk, doubtful risk due to customer arrears, doubtful risk for reasons other than customer arrears and write-off risk. In the case of debt instruments not classified as standard risk, an estimate is made, based on the experience of the entity and of the sector, of the specific coverage required for impairment, taking into account the age of the unpaid amounts, the guarantees provided and the economic situation of the customer and, if appropriate, of the guarantors. This estimate is generally based on arrears schedules based, in turn, on the experience of the entity and the information it has of the sector. Similarly, debt instruments not valued at fair value through profit or loss and contingent exposures, regardless of who the customer may be, are analysed to determine their credit risk attributable to country risk. Country risk is deemed to arise with customer resident in a given country because of circumstances other than habitual commercial risk. Bank of Spain Circular 4/2004 and Circular 6/2008 bring in the obligation to make a provision for inherent losses incurred, determined individually or collectively, that are those held by all the risk transactions assumed by the entity since the moment it grants the risk. It also sets forth maximum and minimum limits that shall be, at all times, between 10% and 125%, and a mechanism for the annual allowance of this provision that provide the risk variation in the year, and the specific allocations taken during the year for specific doubtful risks.

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Additionally, the Circular requires that the non-payment of an instalment will mean the non-payment of the whole transaction. 5.7 Transactions and balances in foreign currency

The Bank’s functional currency is the Euro and, therefore, all balances and transactions denominated in currencies other than the Euro are deemed to be denominated in foreign currency. Monetary assets and liabilities denominated in foreign currency are translated into Euro at the year-end average spot exchange rate on the date of the financial statements, as published by the European Central Bank. The exchange differences arising in the translation are recorded, generally, for their net amount in the caption “Exchange Differences” of the Income Statement. The counter value in Euro of the assets and liabilities denominated in foreign currency (US dollars mainly) as of December 31st, 2008 amounts, respectively, to 37,565 and 39,059 Thousand Euro (249,949 and 243,393 Thousand Euro, respectively, as of December 31st, 2007). 5.8 Tangible fixed assets

“Tangible Assets for Own Use” are the property items of which the entity considers it will make ongoing use of, and the property items acquired for finance lease purposes. These assets are valued at cost minus accumulated depreciation and, if appropriate, minus any loss for impairment disclosed by comparing the net value of each item with its recoverable amount. Depreciation is calculated systematically by the straight-line method, applying the years of estimated useful life of the items to the acquisition cost of the assets minus their residual value. In the case of the land on which the buildings and other structures are located, the land is deemed to have an indefinite life and therefore, it is not depreciated. The annual provisions for depreciation of tangible assets are charged to the Income Statement and are calculated on the basis of the following averaged years of estimated useful life of the various groups of items. All assets are depreciated according to the Royal Decree 537/1997 of April 14th. The annual depreciation coefficients used are the following: Coefficient Property 2% Furniture and installation 8% to 12% Office and EDP equipment 12% to 25%

The cost of upkeep and maintenance of the “Tangible Assets for Own Use” are recognized as an expense of the period in which they are incurred.

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The investment property included in the caption “Tangible Assets” comprises the net values of the land, buildings and other structures which the Bank holds for rental or for obtaining a capital gain on their sale as a result of future increases in their respective market prices. The methods applied by the Bank to recognize the cost of assets assigned in operating lease transactions, to determine their depreciation and to estimate their respective useful lives and to record their losses for impairment, are the same as those described for “Tangible Assets for Own Use”. 5.9 Leases

Lease contracts are presented on the bases of the economic substance of the transaction regardless of their legal form and are classified from the outset as finance or operating leases. The Bank has not carried out any financial lease agreement as of December 31st, 2008 or 2007. In the operating leases contracts, when the Bank is the lessor, the acquisition cost of the assets leased is recorded under the “Tangible Assets” caption. These assets are depreciated in accordance with the policies applied for similar tangible assets. Income from lease contracts is recognized in the Income Statement using a straight-line method. On the other hand, when the Bank is the lessee, the lease expenses, including incentives, if any, granted by the lessor, are recorded on a straight-line basis in the Income Statement. 5.10 Contingent Assets

Contingent assets are possible assets that arise from past events and whose existence is conditional on, and will be confirmed only by the occurrence or non-occurrence of events beyond the control of the Bank. Contingent assets are not recognized in the Balance Sheet or in the Income Statement. The Bank informs of their existence provided that it is probable that these assets will give rise to an increase in resources embodying economic benefits. 5.11 Provisions and contingent liabilities

Provisions are present obligations of the entity arising from past events whose nature at the balance sheet date is clearly specified but whose amount or settlement date is uncertain and that the entity expects to settle on maturity through an outflow of resources embodying economic benefits. The entity recognises in the Balance Sheet all the significant provisions when it forecasts that it is more likely that the obligation might have to be settled. Provisions are measured taking into account the best available information on the consequences of the event that gives rise to the obligation, and are reviewed at each closing date and adjusted in the Balance Sheet. They are used to meet the specific obligation for which they were originally recognized, and are fully or partially released when these obligations cease to exist or decrease.

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Provisions are classified according to the obligations covered (Note 13). As of December 31st, 2008 and 2007, there were several legal proceedings and claims brought against the entity arising from the habitual performance of its activities. The legal advisors and the Directors of the Bank consider that the outcome of these legal proceedings and claims will not have any significant negative effect additional to that included as a provision in the annual accounts of the years in which they are concluded. Contingent liabilities are possible obligations of the entity that arise as a result of past events and whose existence is conditional on the occurrence or non-occurrence of one or more future events beyond the control of the entity. They include the present obligations of the entity when it is not probable that an outflow of resources embodying economic benefits will be required to settle them or when, in extremely rare cases, their amount cannot be measured with sufficient reliability. Information regarding the aforementioned contingent liabilities, if any, is disclosed in the Notes to the Financial Statements. 5.12 Pension commitments

As of December 31st, 2008 and 2007, Aresbank’s pension commitments with the serving and retired employees were externalised by means of defined contribution pension plan and an insurance contract. These pension fund commitments cover the rights derived from: a) The Collective Agreement.

b) The agreements approved by the Board of Directors in 1991 for the Management and certain employees, extending the latter agreement to all of the employees, without exception, by means of an agreement approved by the Board of Directors on October 18th, 2002.

As a result of these operations, Aresbank has no actuarial or financial risk by reason of the mentioned commitments.

Serving Employees

On December 27th, 2002, Aresbank, S.A. instrumented the externalisation of its pension commitments to its serving employees by means of the externalisation of the internal funds. As of January 1st, 2003, the Bank undertook the compromise to contribute annually to this fund as follows: • An amount equal to 15 days of current gross salary of each employee on the date

of a new contribution, plus

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• The percentage application equivalent to the increase of salary of each employee, always on the initial contribution (that is to say, in a non cumulative basis) and between 3% minimum and 5% maximum.

The total amount contributed in 2008 amounted to 172 Thousand Euro. In 2007, it amounted to 186 Thousand Euro. Aresbank outstanding balance with the pension fund management company (BanSabadell Pensiones) amounts to a total of 2,621 Thousand Euro as of December 2008 and 3,225 Thousand Euro as of December 2007.

Retired Employees

The pension fund commitments with the retired employees were externalised by means of an insurance contract made with Banco Vitalicio. In accordance with the insurance contract mentioned above, Aresbank has transferred to the insurance company all their pension commitments to retired employees and ceased to have any actuarial, financial or other risk in this connection. 5.13 Income tax

The Bank recognises as expenses the Income Tax that is calculated based on the annual results, taking into account possible timing differences between book profit and taxable income, as well as applicable deductions. The difference between corporate tax payable and the amount actually charged to the Income statement due to timing differences is recorded as either deferred tax assets or liabilities.

At the end of 2006, the Law 35/2006 (Personal Income Tax and partial amendment of the Laws on Corporate Income Tax, Income of Non-resident and Wealth tax) gave approval to a reduction of the Corporate Income tax rate from 35% to 32.5% in 2007 and 30% starting in 2008.

The Rule 42 of the Circular 4/2004 establishes that the quantification of the assets and liabilities for deferred taxes is done by applying the tax rate that it is expected to be recovered or settled to the timing differences or tax credit. As of December 31st, 2008, the entity has deferred tax assets (Note 10). In accordance with the prudent criteria, the Bank has not recognized any tax assets derived from the negative taxable bases pending to be offset for the years ending December 31st, 2008 and 2007. 5.14 Severance payments In accordance with the Labour Laws in force, the entities must pay an indemnity to those employees that under certain circumstances must be laid-off. These indemnities will be charged against results as soon as there is a plan that obliges to carry out their payment.

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5.15 Financial Guarantees

Financial guarantees are contracts whereby the Bank undertakes to pay certain specific amounts to a third party if the obligor does not do so, regardless of their legal form, which may include, inter alia, that of a bond, guarantee, irrevocable documentary credit issued or confirmed. 5.16 Off- Balance Sheet items

Off-balance sheet items shall include balances representing rights, obligations and other legal situations that in the future may have an impact on net assets, as well as any other balances needed to reflect all transactions entered into by entities although they may not impinge on their net assets.

The category “Contingent Exposures” shall include all transactions under which the entity guarantees the obligations of a third party and which result from financial guarantees granted by the entity or from other types of contract. This category comprises:

a) “Other financial guarantees” not included as Financial Bank guarantees, credit derivatives sold or risk arising from derivatives acquired on behalf of third parties

b) Irrevocable documentary credits: include the amount of the risk derived from irrevocable commitments to make payment upon delivery of documents. They shall be recorded at the maximum amount that at the balance sheet date the entity would have committed to third parties.

c) Other bank guarantees and indemnities provided: guarantee contracts and deposits were the entity is committed to compensate to a beneficiary in case of non compliance of a specific commitment other than the obligation of payment ( such as deposits given to ensure the participation in actions, tenders, irrevocable formal undertakings to provide bank guarantees, letters of guarantee to the extent that they may be legally enforceable and any other type of technical guarantees and import/export guarantees).

d) Other contingent exposures: This shall include the amount of any contingent exposures not included in other items.

The maximum guaranteed amount for the transactions with accrual interest shall include, in addition to the guaranteed principal, the interest due and payable. The guaranteed amounts may only be reduced or removed from off-balance sheet items when there is duly documented evidence that the guaranteed exposures have decreased or ceased or when those amounts are paid to third parties.

The category “Contingent Commitments” shall include those irrevocable commitments that could give rise to the recognition of financial assets. This category comprises:

i) Drawable by third parties: balances drawable by third parties at the balance sheet date, within the limit or principal of the credit contracts granted by the entity, whatever their type, distinguishing the amounts immediately drawable by the holder from those that will only be drawable if certain future events occur.

ii) Other contingent commitments: This shall include the amount of any remaining commitments not included in other items that may result in the recognition of financial assets in the future.

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5.17 Cash-Flow Statement

The concepts used in the Cash-Flow Statement have the following definitions: a) Cash-flows that are inflows and outflows of cash and cash equivalents, the latter

being defined as highly liquid short-term investments with low risk of alternation in value.

b) Operating activities that are typical activities and other activities that cannot be

classified as lending or funding. c) Investing activities, relating to the acquisition, sale or disposal by other means of

long-term assets and other investments not included in cash and cash equivalents. d) Financing activities which are activities giving rise to changes in the size and

composition of net worth and of liabilities that do not form part of operating activities and long-term financial liabilities.

6. CASH AND BALANCES WITH CENTRAL BANKS

This caption on the Balance Sheet reflects available cash as well as deposits maintained in the Bank of Spain in accordance with the compulsory reserves ratio. The caption breakdown as of December 31st, 2008 and 2007 is as follows:

2008 2007 Cash 144 101 Bank of Spain

Nostro Account 3,543 3,380 Time deposit 370,000 -

373,687 3,481

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7. LOANS AND RECEIVABLES The detail of this caption as of December 31st, 2008 and 2007 is as follows:

2008 2007 Loans and advances to credit institutions 1,069,974 721,880 Loans and advances to other debtors 22,694 4,378 Other financial assets 822 391

1,093,490 726,649 Impairment adjustments

Loans and advances to credit institutions (38,889) - Loans and advances to other debtors (597) (700)

1,054,004 725,949 The breakdown by currency, residual maturity and sectors of the caption “Loans and Receivables” as of December 31st, 2008 and 2007 is as follows:

2008 2007 By currency

Euro 1,020,557 479,891 Other currencies 33,447 246,058

1,054,004 725,949 By residual maturity

Up to 3 months 1,041,954 691,165 Over 3 months to 1 year 6,197 32,997 Over 1 year to 5 years 3,730 1,452 Over 5 years 2,123 335 1,054,004 725,949

By sector Residents 464,052 114,340 Non residents 589,952 611,609

1,054,004 725,949

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The detail by nature of “Loans and Advances to Credit Institutions” as of December 31st, 2008 and 2007 is as follows:

2008 2007 On demand

Other 1,906 754 Other loans and advances

Time deposits 923,478 717,290 Doubtful Assets (see Note 28) 129,629 - Impairment Adjustments (38,889) - Interest accrued 14,961 3,836

1,031,085 721,880

The breakdown by type of the “Loans and Advances to Other Debtors” as of December 31st, 2008 and 2007, (not considering any impairment adjustment) is as follows: 2008 2007 By type

Secured receivables 160 514 Credits to Spanish General Government 1,056 1,498 Other term receivables 19,621 1,371 Receivable on demand and other 500 142 Doubtful assets 1,239 810 Interest Accrued 118 43

22,694 4,378

The breakdown of “Other financial assets” grouped by financial instrument type is as follows:

2008 2007 By type

Our Rental Deposits 219 216 Commissions for financial guarantees 361 26 Other items 242 149

822 391

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The detail of the Economic Activities of “Loans and Receivables” is as follows: 2008 2007 Economic Activity

Financial intermediation 97.85% 99.40% Public sector 0.10% 0.22% Hotel industry 0.02% 0.05% Trade 0.13% 0.16% Other sectors with lesser participation 0.19% 0.17% Other company services 1.21% 0.00% Oil refinery 0.50% -

100.00% 100.00%

The detail by geographic areas of the above caption in terms of percentage is as follows: 2008 2007 Geographic Area

Spain 42.43% 15.76% European Union 19.67% 38.10% Other European countries 13.28% 5.54% Arab countries ( Asia ) 23.71% 38.69% Arab countries (Africa) 0.77% 0.80% Latin American countries 0.03% 0.09% Other areas 0.11% 1.02%

100.00% 100.00%

47

The movements in 2008 and 2007 of the balance of “Impairment adjustments” per type of coverage of the caption “Loans and Receivables” are as follows:

Specific

Allowance General

Allowance Country

Allowance

Total Balance as of December 31st, 2006

929

54

19

1,002

Net P/L allocation 24 20 - 44 Additions - - - - Disposals (259) - (5) (264) Transfer to write-offs - - - - Other transfers - (9) - (9) Other (70) (2) (1) (73) Balance as of December 31st, 2007

624

63

13

700

Net P/L allocation Additions (see Note 28) 39,072 9 45 39,126 Disposals (291) (32) (4) (327) Transfer to write-offs (8) - - (8) Other transfers - (22) - (22) Other 8 9 - 17 Balance as of December 31st, 2008

39,405

27

54

39,486

8. NON-CURRENT ASSETS HELD FOR SALE The breakdown of this item of the Balance Sheet as of December 31st, 2008 and 2007 is as follows:

2008 2007 Equity instruments 4,082 3,859 Tangible Assets

Tangible Assets awarded 58 67 4,140 3,926

48

Equity instruments as of December 31st, 2008 are shown in the following chart, as well as any other information of interest, according to the last available Financial Statements as of December 31st, 2008:

Audited Figures Thousand €

Company

External Auditors

Location

Business

Direct Stoke

Capital/ Reserves

Profit or

(Loss)

Net

Investment Inversiones Hoteleras Los Cabos

Ernst & Young

Panama

Hotel

31.49%

12,353

(15)

4,082 The detail for year 2007 is as follows:

Audited Figures Thousand €

Company

External Auditors

Location

Business

Direct Stoke

Capital/ Reserves

Profit or

(Loss)

Net

Investment Inversiones Hoteleras Los Cabos

Ernst & Young

Panama

Hotel

31.49%

11,225

119

3,859 During the year 2008, all the shareholders of Inversiones Hoteleras Los Cabos (IHC) constituted a committee in charge of the sale of their stake in IHC. Some initial contacts were made. The bank considers that the sale will be done in the near future. The movements during 2008 and 2007 of the items included in “Non-Current Assets Held for Sale” are as follows:

Equity Instruments

Tangible Assets

Balance as of December 31st, 2006 4,314 67

Reductions for relocation within Balance Sheet - - De-recognition due to sale - - Other movements - - Valuation adjustment (455) -

Balance as of December 31st, 2007 3,859 67

Relocation within Balance Sheet - - De-recognition due to sale - - Other movements - (1) Valuation adjustment 223 (8)

Balance as of December 31st, 2008 4,082 58

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9. TANGIBLE ASSETS

a) Movement

The movements of the caption “Tangible Assets” of the Balance Sheets as of December 31st, 2008 and 2007 are as follows:

For own Use

Investment Property

Total (*)

Cost Balance as of January 1st, 2007 11,917 19,308 31,225 Reallocation (3,196) 3,196 - Additions 205 - 205 Disposals (34) - (34) Balance as of December 31st, 2007 8,892 22,504 31,396 Additions 184 - 184 Disposals (95) - (95) Balance as of December 31st, 2008 8,981 22,504 31,485 (*) The historical value of the land amounts to 23,833 Thousand Euro Accumulated Amortization Balance as of January 1st, 2007 (1,138) (947) (2,085) Allowance (82) (104) (186) Disposals 34 - 34 Reallocation 509 (509) - Balance as of December 31st, 2007 (677) (1,560) (2,237) Allowance (102) (104) (206) Disposals 91 - 91 Balance as of December 31st, 2008 (688) (1,664) (2,352) Net Tangible Assets Balance as of December 31st, 2007 8,215 20,944 29,159 Balance as of December 31st, 2008 8,293 20,840 29,133

The disposals, both in the cost and in the accumulated amortization, correspond mainly to the disposal of assets completely amortized. The reallocation done in 2007 corresponds mainly to the rental of the bank’s properties in Las Palmas and Madrid.

50

b) Tangible Assets for Own Use

The detail by nature of the items, which comprises the balance of the caption “Tangible Assets for Own Use” of the Balance Sheets as of December 31st, 2008 and 2007, is as follows:

Lands &

Buildings Furniture Installations Computer Equipment Others Total

Cost Balance as of 1/1/07 11,413 126 126 28 224 11,917 Additions - 4 178 23 - 205 Disposals - - (13) (21) - (34) Reallocation (3,196) - - - - (3,196) Balance as of 31/12/07 8,217 130 291 30 224 8,892

Additions - 61 51 53 19 184 Disposals - (65) (24) (6) - (95) Balance as of 31/12/08 8,217 126 318 77 243 8.981 Accumulated Amortization Balance as of 1/1/07

(914)

(83)

(70)

(25)

(46)

(1,138)

Allowance (33) (14) (15) (5) (15) (82) Disposals 509 - - - - 509 Reallocation - - 12 21 - 34 Balance as of 31/12/07 (437) (97) (73) (9) (61) (677) Allowance (35) (12) (25) (15) (15) (102) Disposals - 65 19 7 - 91 Balance as of 31/12/08 (472) (44) (79) (17) (76) (688) Net Tangible Assets

Balance as of 31/12/07 7,780 33 218 21 163 8,215 Balance as of 31/12/08 7,745 82 239 60 167 8,293

The Bank did not have any asset leased out under operating lease at the date of the Balance Sheet.

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c) Investment property

During 2008 and 2007, income from rents coming from investment properties amounted to 1,282 and 1,154 Thousand Euro, respectively. They are entered in the item “Other Operating Income” of the Income Statement (Note 23). The operating expenses related to said investment properties amounted to 269 and 235 Thousand Euro respectively, and are entered in the caption “Other Administrative Expenses” (Note 25). These expenses are passed on to the tenants and are recorded in “Other” under “Other operating income”(Note 23).

10. TAX ASSETS AND TAX LIABILITIES

It includes the amount of all assets of a tax nature, divided into “Current” (amounts of tax to be recovered during the next twelve months) and “Deferred” (amounts of tax to be recovered in future periods). The detail of these items as of December 31st, 2008 and 2007 is as follows:

TAX ASSETS 2008 2007 Current:

Corporate Income tax 208 - VAT 25 77 Other 373 208

Deferred:

Other 34 34 640 319

The balance of the item “Tax Assets” is not affected by the modification of the Income Tax rate (Note 5.13). TAX LIABILITIES 2008 2007* Current:

Other 214 376 214 376

(*) For comparative purposes this caption includes the amount accrued in 2007 due to VAT and withholding taxes, which have been reclassified from the caption “Other financial liabilities” (see Note 12).

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11. OTHER ASSETS AND OTHER LIABILITIES The detail of these two captions is as follows: Assets Liabilities

2008 2007 2008 2007 Prepaid expenses 413 33 - - For financial guarantees - - 387 31 Accrued expenses - - 581 566 Other 8 - 235 10 421 33 1,203 607

The caption “Prepaid expenses” includes the advance payment for an amount of 315 Thousand Euro (75% of the license fee of the core banking software purchased by the bank). The caption “Accrued expenses” includes, mainly, the amount of 357 Thousand Euro due to personnel expenses (318 Thousand Euro in 2007). 12. FINANCIAL LIABILITIES AT AMORTIZED COST The breakdown of this caption of the Balance Sheets as of December 31st, 2008 and 2007 is as follows:

2008 2007* Deposits from credit institutions 1,170,143 553,845 Deposits from other creditors 12,807 5,732 Other financial liabilities 479 378 1,183,429 559,955

(*) Restated

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The detail by currency and residual maturity of “Financial Liabilities at Amortized Cost” of the Balance Sheets as of December 31st, 2008 and 2007 is as follows: 2008 2007 By currency

Euro 1,144,606 317,035 Other currencies 38,823 243,296

1,183,429 560,331 By residual maturity

Up to 3 months 1,183,417 560,135 Over 3 months to 1 year 12 175 Over 1 year up to 5 years - 21 1,183,429 560,331

The detail of “Deposits from Credit Institutions” of the Balance Sheet as of December 31st, 2008 and 2007 is as follows: 2008 2007 Time deposits 780,085 543,710 Other accounts 379,982 7,933 Valuation adjustments 10,076 2,202 1,170,143 553,845

As of December 31st, 2008, the Libyan Foreign Bank holds deposits amounting to 240 million Euro (301 million Euro in 2007) and other special account for an amount of 370 million Euro. Financial institutions situated in Arab countries (Asia) hold deposits for an amount of 516 million Euro (154 million Euro in 2007).

54

The detail of the caption “Deposits from Other Creditors” of the Balance Sheet as of December 31st, 2008 and 2007 is as follows: 2008 2007 Other resident sectors

Demand deposits: Current accounts 5,025 1,648 Other 29 7

Time deposits Fixed term deposits 4,502 311

Valuation adjustments 9 6 Other non- resident sectors

Demand deposits: Current accounts 3,022 3,566 Other 22 20

Time deposits Fixed term deposits 197 174

Valuation adjustments 1 - 12,807 5,732

Details of “Other financial liabilities” of the Balance Sheets as of December 31st, 2008 and 2007 grouped by financial instrument are as follows: 2008 2007* Clearing accounts 235 157 Rental deposits 201 201 Special accounts 43 20 479 378 * For comparative purposes, 376 Thousand Euro related to withholding taxes included in this caption in 2007 has been reclassified to “Tax liabilities” (see Note 10). 13. PROVISIONS

The breakdown of this caption of the Balance Sheets as of December 31st, 2008 and 2007 is as follows:

2008 2007 Provisions for taxes 364 364 Provisions for contingent exposures and commitments 1,714 1,917 Other provisions 36 233 2,114 2,514

55

The movements of the caption “Provisions” in 2008 and 2007 are as follows:

Provision for taxes

Contingent Exposures

and Commitments

Other Provisions

Total Balance as of December 31st, 2006

846

1,557

334

2,737

Net P/L allowances 13 377 883 1,273 Allowances released - (16) (218) (234) Utilizations (495) - (1,284) (1,779) Transfers - 9 518 527 Other - (10) - (10) Balance as of December 31st , 2007

364

1,917

233

2,514

Net P/L allowances - 193 - 193 Allowances released (423) (60) (483) Utilizations (1,000) (1,000) Other 1,000 27 (137) 890 Balance as of December 31st , 2008

364

1,714

36

2,114

The balance of the caption “Provisions for Taxes” as of December 31st, 2008 and2007, includes, among others, a provision of 309 Thousand Euro due to the capital transfer tax for properties auctioned. The detail per type of coverage of “Provisions for Contingent Exposures and Commitments” is as follows: 2008 2007 Specific provision 1,468 1,414 Generic provision 167 428 Country risk provision 79 75 1,714 1,917

“Provisions for Contingent Exposures and Commitments” (specific provision) includes, mainly, an amount of 1,142 Thousand Euro corresponding to a legal suit (1,991 Thousand Euro of principal) in which Aresbank is vicarious civil responsible. The rest of the caption “Contingent Exposures and commitments” is considered as a remote risk due to their evolution (Note 17 a).

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14. TOTAL EQUITY

The entity’s equity amounted to 275,065 Thousand Euro at December 31st, 2008. The Bank shows at the end of the year 2008, a capital solvency ratio of 46.41% that exceeds the minimum 8% required by the Spanish Monetary Authorities (Circular 3/2008). As of December 31st, 2008, the computable own funds of Aresbank, including the year’s loss, amounted to 275,259 Thousand Euro, having a surplus of resources for an amount of 227,736 Thousand Euro. The movements of the “Total Equity” during year 2008 and 2007 are as follows:

Capital

Reserves (carry forward losses)

Profit & Loss for the year

Total

Balance as of December 31st, 2006

100,002

(902)

49

99,149

Profit distribution - 49 (49) - Capital increase 100,000 (1,000) - 99,000 Profit for the year - - 1,265 1,265 Balance as of December 31st, 2007

200,002

(1,853)

1,265

199,414

Profit distribution - 1,265 (1,265) - Capital increase 99,999 (1,000) - 98,999 Profit/(loss) for the year - - (23,348) (23,348) Balance as of December 31st, 2008

300,001

(1,588)

(23,348)

275,065

15. SHARE CAPITAL On May 30th, 2008 the Extraordinary Universal General Shareholder’s Meeting unanimously agreed to increase the share capital in an amount of Euro 99,999,360.00, by means of the issuance of 34,722 new shares, having a nominal value of Euro 2,880.00 each, numbered from 69,446 to 104,167 both included, with the same nominal value and rights of the previously existing shares. As a consequence of the above, the share capital of Aresbank, S.A. is reconverted to Euro 300,000,960.00 and it is formed of 104,167 registered shares with a nominal value of Euro 2,880.00 each. On September 7th, 2007, the Extraordinary General Shareholders’ Assembly agreed to increase the share capital in an amount of 99,999,360 Euros by means of issuance of 34,722 new shares.

57

The new composition of the shareholders is as follows:

Amount (€) Number of

shares

% owned Libyan Foreign Bank 299,586,240 104,023 99.86% Crédit Populaire d’Algèrie 414,720 144 0.14% 300,000,960 104,167 100.00%

The composition of the shareholders as of December 31st, 2007 was:

Amount (€) Number of

shares

% owned Libyan Foreign Bank 199,586,880 69,301 99.79% Crédit Populaire d’Algerie 414,720 144 0.21% 200,001,600 69,445 100.00%

There are no convertible shares or any other securities, which might confer similar rights. Aresbank, S.A. does not hold any of its own shares, either directly or indirectly through subsidiaries. 16. RESERVES The breakdown of the reserves as of December 31st, 2008 and 2007 is as follows: 2008 2007 Legal reserve - - Results from previous years 1,265 49 Other negative reserves (2,853) (1,902) (1,588) (1,853)

The caption “Other negative reserves” includes the accrued transfer tax that corresponds to the capital increase carried out in May 2008 and in September 2007, which following the current rules has to be debited directly to the equity.

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LEGAL RESERVE

According to the Companies Act, companies must transfer 10% of annual profits to the legal reserve until it reaches, at least, 20% of capital. The legal reserve can be used to increase capital, provided that the remaining legal reserve balance does not fall below 10% of the final stock capital. Except for this purpose, whilst the legal reserve does not exceed the limit of 20% of capital, it can only be used to compensate losses, if there are no other reserves available. 17. OFF-BALANCE SHEET ITEMS

“Off-balance sheet items” shall include balances representing rights, obligations and other legal situations that in the future may have an impact on net assets, as well as any other balances needed to reflect all transactions entered into by the Bank although they may not impinge its net assets. a) Contingent exposures

“Contingent exposures” comprises the amounts which the entity will have to pay on behalf of third parties if the original obligors do not do so, as a result of the commitments undertaken by the entity in the course of its habitual activity. The breakdown as of December 31st, 2008 and 2007 is as follows: 2008 2007 Financial guarantees

Irrevocable issued documentary credits 168,456 19,450 Irrevocable confirmed documentary credits 86,537 50,433 Other Bank guarantees and indemnities 20,300 22,070

Other contingent risks 7,722 7,722 283,015 99,675 Memorandum item: Doubtful contingent exposure (Note 13)

2,333

8,488

The detail by geographic area of “Irrevocable documentary credits issued and confirmed” is as follows: Geographic Area 2008 2007 2008 2007 Spain 101,505 - 39.8% - EU Countries 64,770 19,774 25.4% 28.3% Other European countries 3,494 - 1.4% Arab countries

Libya 28,802 29,281 11.3% 41.9% Algeria 37,392 11,359 14.6% 16.3%

Other Arab countries 19,030 9,469 7.5% 13.5% 254,993 69,883 100.00% 100.00%

59

The income obtained from these guarantee transactions are recognized in the Income Statement as “Fee and Commission Income” (Note 21). The detail by geographic area of “Other Bank guarantees & indemnities” is as follows: Geographic Area 2008 2007 2008 2007 Spain 18,622 21,281 91.74% 96.43% EU Countries 741 - 3.65% - Arab countries Other Arab countries 937 789 4.61% 3.57% 20,300 22,070 100.00% 100.00% b) Contingent commitments

Its breakdown is as follows: 2008 2007 Drawable by third parties

By financial institutions 42,717 46,601 By other resident sectors 628 2,698 Non-residents 70,571 9,092

Other contingent commitments: Documents delivered to clearing houses 3 4

113,919 58,395

18. TAX MATTERS

Profits, adjusted in accordance with fiscal regulations, are taxed at 30% rate for 2008 and at 32.5% rate for 2007. The resulting quota can be reduced applying certain legal deductions. Tax declarations cannot be considered definitive until either the Tax Authorities have inspected them or until the inspection period has legally expired. At present, this is a four-year period to be counted from the end of the tax declaration period. The years of Aresbank, S.A. subject to Tax Inspection are 2005 onwards, except for the Corporate Income Tax, which is subject to inspection from 2004 onwards.

60

The conciliation between the annual profit and the taxable income of the Corporate Tax is as follows: 2008 2007 Accounting profit for the year (23,348) 1,265 Timing differences

Positives - Pensions Fund allocation 7 14 - Provisions 38,944 187 - Other 28 155

Negatives - Externalised Pension Fund (499) (499) - Bad debts provision recoveries (429) (450) - Other (60) - - Transfer Tax due to the increase of capital (1,000) (1,000)

Total 13,643 (328)

Offset of prior year negative taxable bases 13,643 - Negative taxable bases for the year - 328 Taxable profit - -

The Bank has negative taxable bases (carry-forward losses) for an amount of 115,816 Thousand Euro that can be offset by the profits to be obtained in the coming fifteen years and which its breakdown over the years is as follows:

1994 1997 1999 2000 2001 2002 2003 2004 2 006 2007

11,712 1,547 26,556 12,904 8,844 1,842 2,643 48,045 1,395 328 The different interpretations that may be made of the Spanish tax regulations applicable to the entity operations might give rise to contingent tax liabilities for the open years that cannot be objectively quantified. Nevertheless, the Bank’s Directors, based on the opinion of the Tax Advisors, consider that these possible contingent liabilities would not significantly affect these Annual Accounts.

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19. INTEREST AND SIMILAR INCOME

This chapter of the Income Statement comprises the interest accrued in the year on all financial assets with an implicit or explicit return, calculated by applying the effective interest rate method. Interest is recorded Gross, without deducting any withholding tax. The breakdown of this caption as of December 31st, 2008 and 2007 is as follows: 2008 2007 Cash balances with central banks 2,246 39 Loans and advances to credit institutions 77,029 9,766 Loans and advances to other debtors 574 329 Debt securities - 22 Doubtful assets 9 40 Other interest 18 3 79,876 10,199

20. INTEREST EXPENSE AND SIMILAR CHARGES

This chapter of the Income Statement records the interest accrued in the period on all financial liabilities with an implicit or explicit return. It is calculated by applying the effective interest rate method. Its breakdown as of December 31st, 2008 and 2007 is follows: 2008 2007 Deposits from Central banks - 8 Deposits from credit institutions 66,428 5,396 Deposits from other creditors 98 123 66,526 5,527

The origin of these interests comes from the “Financial liabilities at amortized cost”. 21. FEES AND COMMISSIONS INCOME

It comprises the amount of all fees and commissions accrued in favour of the entity in the accounting year, except those than form an integral part of the effective interest rate on financial instruments that are included in the “Interests and Similar Income”. The detail of this chapter of the Income Statement as of December 31st, 2008 and 2007 is as follows:

62

2008 2007 Arising from contingent exposures 3,971 1,178 Arising from exchange of foreign currencies and banknotes

1

1

Arising from collection and payment services 261 158 Other commissions 107 128 4,340 1,465

22. FEES AND COMMISSIONS EXPENSE

It shows the amount of all fees and commissions paid or payable by the entity in the accounting year, except those that forms an integral part of the effective interest rate on financial instruments that are included in “Interest and Similar Charges”. The detail of this chapter of the “Income Statement” as of December 31st, 2008 and 2007 is as follows: 2008 2007 Fees and commissions assigned to other entities and correspondents:

Other 6 5 Other fees and commissions 249 24 255 29

23. OTHER OPERATING INCOME

It includes the income from other operating activities of credit institutions not included in other captions. The detail of this chapter of the “Income Statement” as of December 31st, 2008 and 2007 is follows: 2008 2007 Operating income from investment properties (Note 9.c) 1,282 1,154 Other 363 276 1,645 1,430

63

24. PERSONNEL EXPENSES The personnel of the Bank as of December 31st, 2008 and 2007 are as follows: 2008 2007 Women Men Total Women Men Total Senior Managers - 3 3 - 2 2 Managers - 2 2 - 4 4 Administrative Staff 14 32 46 12 29 41 Other - 2 2 - 1 1 14 39 53 12 36 48 The breakdown of Personnel expenses caption as of December 31st, 2008 and 2007 is as follows: 2008 2007 Wages and salaries 2,957 2,690 Social Security expenses 531 490 Transfers to defined contribution plans 172 186 Severance payments 715 1,070 Professional training expenses 16 10 Other 520 354 4,911 4,800 25. OTHER ADMINISTRATIVE EXPENSES

The breakdown of this caption as of December 31st, 2008 and 2007 is as follows:

2008 2007 Property, fixtures and materials

Rental 136 160 Maintenance of fixed assets 293 275 Lighting, water and heating 114 105 Printing and office materials 40 26

Communications 163 123 Technical reports and legal and lawyer expenses 366 378 Surveillance and security carriage services 83 64 Insurance and self-insurance premiums 17 18 Governing and control bodies 476 520 Entertainment and staff travel expenses 195 95 Contribution and taxes 152 205 Other expenses 125 143 2,160 2,112

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26. REMUNERATION AND OTHER COMPENSATIONS TO THE BOARD OF DIRECTORS AND TOP MANAGEMENT OF THE BANK

a) Board of Directors The detail of the Attendance Fees (before taxes) received by the Bank’s Directors in

2008 and 2007 is as follows: 2008 2007 Mr. Juan Carlos Montañola 30.00 32.50 Mr. Mohamed El-Jamal (*) 40.00 20.00 Mr. Ahmed Mohamed Aburkhis (**) 10.00 12.00 Mr. Yousef S. Migirab (*) 12.00 6.00 Mr. Mohamed M. Zarti (*) 20.00 8.00 Mr. Hatim A. Gheriani (*) 12.00 6.00 Mr. Mokhtar Abouzrida (***) 8.00 - Mr. Omar Mohamed A. Seghayer (****) - 6.00 Mr. Abduelhadi Taher Giuma (****) - 10.00 Mr. Abdurauf Shneba (****) - 6.00 Mr. Mehemed A. Razzaghi (****) - 8.00 Mr. Ahmad Abdulqader Mohammad (*****) - 10.00 Mr. Khalid H.I. Al-Shayea (*****) - 8.00 Mr. Mohamed Djellab (Crédit Populaire d’Algérie ) 10.00 10.00 Mr. Julio Álvarez 55.00 61.60 Mr. Carlos Kinder 30.00 32.50 Mr. Amado Subh 40.00 44.10 267.00 280.70

(*) Appointed at the General Shareholders’ Assembly on July 27th, 2007 (**) Resigned on November 18th, 2008. (***) Appointed at the General Shareholders’ Assembly on May 30th, 2008 (****) Resigned at the General Shareholders’ Assembly on July 27th, 2007 (*****) Resigned on September 7th, 2007

Aresbank, S.A. has no other obligations derived from pensions or life insurance premiums with any of the non-executive members of the Board of Directors.

Neither as of December 31st, 2008 nor as of December 31st, 2007, has the Bank held any direct risks with any Non-Executive Director. The members of the Board of Directors of the Bank do not have any share participation in the capital of other financial entities higher than 0.0001%, except for: - Crédit Populaire d’Algérie, which hold the following participations in the following financial institutions:

• Banque du Maghreb Arabe pour l´Investisment et le Commerce “BAMIC” 12.50% • Programme de Financement du Commerce Arabe PFCA 0.01%

65

None of the members of the Board of Directors hold any position in other financial entities, except: - Mr. Mohamed Najib El-Jamal is a member of the Board of Directors of the following financial institutions:

• Arab International Bank ( Egypt ) • ALMASRAF ( United Arab Emirates ) • A & T Financial Kiralama ( Leasing ) A.S. ( Turkey ) • Alubaf Arab International Bank (Bahrain) • Suez Canal Bank ( Egypt )

- Mr. Hatim A. Gheriani is a member of the Board of Directors of Saraya Bank (Libya).

b) Top Management (Executive Directors)

The breakdown of the retribution received by the General Management of the Bank in the years 2008 and 2007 (the attendance fees to the Boards are not included in this chart because they are included in a different caption) is as follows:

Year

Number of Managers

Salary

Other remuneration

Total

2008 3 662.50 79.80 742.30 2007 2 488.00 70.50 558.50

The amounts debited for pension funds in the Income Statement of the Bank in

2008 and 2007 amounted to 25.9 Thousand Euro and 25.1 Thousand Euro, respectively.

The direct risks held with the General Management as of December 31st, 2008 and

2007 amounted to 5 Thousand Euro and 5.3 Thousand Euro, respectively.

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27. DEPRECIATION AND AMORTIZATION

The detail of this caption as of December 31st, 2008 and 2007 is as follows:

2008 2007 Investment Property 104 104 For own use 102 82 206 186

28. IMPAIRMENT LOSSES (NET)

The detail of this caption is as follows: 2008 2007 Investments

Allowances ( see Note 7) (39,126) (44) Recoveries from written-off debts 1,939 1,169 Other recoveries 327 264

Non-current Assets held for sale (Note 8) 8 - (36,868) 1,389

In 2008, the bank has recovered written-off debts amounted to 1.9 million Euro, mainly in relation with an enforcement of guarantees (Sánchez Polaina) done by the Tax Authorities. Other recoveries included 195 Thousand Euro due to the total amortization of Aresol Cabos’ loans and 95 Thousand Euro from Chiclana Town Council. Early 2007, two worth mentioning recoveries were made, one from the National Bank of Angola for an amount of 1,086 Thousand Euro, and another from Chiclana Town Council for an amount of 145 Thousand Euro. The allowances for impairment are mainly due to the banks’ money market exposure with Icelandic banks (129,629 Thousand Euro) that were put under moratorium. During the year 2008, the General Management of the bank after several discussions with the lawyers in charge of the legal case, prudently allocated a provision of 30% of its money market deposits with Icelandic banks (38,889 Thousand Euro).

67

29. OTHER GAINS AND LOSSES These chapters of the Income Statement include income and losses from non-ordinary activities that are not included elsewhere. The gain of 615 Thousand Euro mainly rises from the recovery of a penalty imposed on Aresbank for allocation of bad debts provisions in 1998 Corporate Income Tax, and from the recovery of interest of an enforcement of a guarantee issued by Aresbank covering the deferred payment of Customs duties of Sanchez Polaina. The amount of 1,363 Thousand Euro comes from the upholding of several tax appeals in 2007. The losses of 153 Thousand Euro of 2007 mainly rises from the Withholding Tax corresponding to the 2000 fiscal year in relation with the application of exemptions of withholding from employees severance payments, and from “Sánchez Polaina” legal costs. 30. ADDITIONAL INFORMATION

a) Fair value of assets and liabilities

As mentioned in Note 5, most of the non-impaired financial assets and liabilities of the Bank are recognized for their amortized cost in the accompanying Balance Sheet. Their fair value does not present significant difference from the amounts that are recorded as they had been contracted at short-term and at market interest rate. b) Most significant balances with related companies.

The most important balances with related companies as of December 31st, 2008 and 2007 are as follows: 2008 2007 ASSETS

Loans to customers (*) - 326 LIABILITIES

Deposits from customers 89 120 (*) Impairment adjustments excluded

In addition, the Libyan Foreign Bank maintains the deposit mentioned in Note 12.

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c) Transactions with related companies

The most relevant transactions with related companies as of December 31st, 2008 and 2007 are as follows: 2008 2007 Interest collected 10 76 Interest paid 3 38

In addition, the interest and commissions paid to Aresbank’s shareholders for the deposits and accounts held in the Bank amounted to 21,042 Thousand Euro in 2008 and 2,467 Thousand Euro in 2007.

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P R O P O S E D

D I S T R I B U T I O N O F

A N N U A L P R O F I T / (L O S S)

(Thousand Euro)

2008 PROFIT/(LOSS) BEFORE TAXES (23,348)

CORPORATE TAX ESTIMATION - NET PROFIT / (LOSS) (23,348) DISTRIBUTION

OTHER NEGATIVE RESERVES (23,348)

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RESOLUTIONS THAT THE BOARD OF DIRECTORS SUBMITS TO THE

ORDINARY GENERAL SHAREHOLDERS' MEETING

OF ARESBANK, S.A. TO BE HELD ON MARCH 27th, 2009

1. Examination and approval, as the case may be, of ARESBANK, S.A.

Audited Annual Accounts (Annual Report, Balance Sheet and Profit and Loss Account) and Directors' Report, corresponding to the fiscal year 2008.

2. Application of 2008 fiscal year results. 3. Approval and ratification, as the case may be, of the conduct of the

corporate affairs carried out by the Board of Directors during the year 2008. 4. Approval of changes, as the case may be, in the Board's members. 5. Board of Directors remuneration for the year 2009. 6. Requests and questions. 7. Drafting, reading and approval, as the case may be, of the Minutes the

meeting.

71

CONTACT INFORMATION

HEAD OFFICE Paseo de la Castellana, 257 28046 MADRID Telephones: 913 14 95 95 (General) 913 14 96 97 (Treasury) Telex: 43358 AREB-E (Trade & Marketing Department) 44139 AREB-E (Trade & Marketing Department) Fax: 913 14 97 68 (Management) 913 14 97 08 (Trade & Marketing Department) 913 14 95 87 (Treasury) 913 14 97 26 (Banking Operations & Client Services Unit) 913 14 97 47 (Accountancy Department) 913 14 97 26 (Administration Department) SWIFT CODE: AREBESMM

REUTERS CODE: AREX

Web site: www.aresbank.es E-mail: aresbank@aresbank.es BARCELONA BRANCH Paseo de Gracia, 25 – 2º - 1ª 08007 BARCELONA Telephone: 934 67 19 50 (General)

Fax: 934 87 46 87 SWIFT CODE: AREBESMMBAR E-mail: aresbank.barcelona@aresbank.es

Mercantile Registry of Madrid, Volume 6,823, Page 81, Sheet nº M-111.123, Inscription 140 C.I.F. A-28386191