Richard Melson

December 2004

AUDI BANK

Historical Background

Bank Audi is one of the leading banks in Lebanon.  Its heritage rests on 173 years of banking tradition and experience. The origins of the Bank are rooted in Sidon , South Lebanon , when Hanna Audi inherited his father's exchange business in 1830. However, it was not until 1938 that the first branch of the Bank was established in Beirut . In 1962, the Bank was incorporated under its present form and was named "Bank Audi sal", and its shareholders' base was opened up to Lebanese and Arab nationals. The Bank is continuously expanding its network, and with 66 branches presently operational, it provides an extensive coverage of the Lebanese territory.

The Bank's capital stood at LL 3 million in 1962 but has constantly been increased over the years to reach LL 30 million in 1979, LL 150 million in 1983 and LL 1.5 billion in 1990 through cash injection. In November 1995 the shareholders' base was further expanded, through a Global Depositary Receipts issue, to include international investors from Europe , the USA , the Middle East and the Far East . Shareholders' equity at year end 1995, including the proceeds of US$ 34 million raised through the GDR issue, stood at US$ 86 million. This GDR issue was the first use of such an instrument in the Middle East and marks the first international public equity issue by a Lebanese institution. The GDRs are presently listed on the London Stock Exchange. The issue was followed by a second similar one in 1997, largely oversubscribed by international institutional and individual investors. The capital base was further reinforced in mid 2001 following the merger with Lebanon Invest which enjoys an important shareholder base of renowned Arab and Gulf investors.

Recently, Bank Audi sal has successfully closed a capital increase of US$ 100 million on local and regional financial markets through a preferred share issue in two series. The Bank has the option to redeem the first series starting in the fifth year while the second series is mandatory convertible into common shares in the fifth year at most. The use of proceeds consists of increasing the financial flexibility of the Bank, supporting the organic and non-organic growth of its activities and financing its development in Lebanon and abroad. Beyond the consolidation of the local and regional shareholder base, this operation, closed in July 2002, increased the Bank's shareholders' equity to above US$ 400 million, confirming its privileged position in the market place and allowing it to ensure a larger coverage and a more significant support to its customers.

The establishment of Audi Investment Bank sal, previously named Infibank sal, goes back to 1974 when it was incorporated as a medium-to-long term credit bank. At its foundation, shareholders included such internationally renowned companies as Nomura Securities Co. Ltd., Renault (Sofexi), Hambros Bank, Caisse Centrale des Banques Populaires and Mitsui Bank Ltd. In 1985, to prevent these companies from incurring any undue losses, due to the political uncertainty prevailing at that time, Bank Audi purchased their shares to raise its stake in Infibank to 95%. In 1996, Bank Audi increased its venture in Infibank to 99.9% thus making it a fully owned subsidiary. Furthermore, Infibank acquired a seat on the Beirut Stock Exchange in early 1996 and by the middle of the year, the decision was taken to increase its shareholders' equity to US$ 16 million. Infibank became Audi Investment Bank, and along with Lebanon Invest will take charge of the new investment banking role foreseen for the Bank.

The expansion of Bank Audi coincided with the implantation of its sister banks in Europe and the USA . Banque Audi (Suisse) sa was established in Geneva in 1975 with a branch in Zurich and a representative office in Miami , Florida which was opened in 1985. Banque Audi ( France ) sa followed in 1979, then Bank Audi (USA) in New York in 1983. In 1993, the latter moved to its new headquarters on 54th Street and in late 1995 it established a representative office in Sao Paulo , Brazil . The expansion was further strengthened when Banque Audi ( Luxembourg ) sa was established in 1991. Recently, the Bank concluded the acquisition of its European sister banks, with the acquisition of Banque Audi ( France ) finalized in mid-2000 and that of Banque Audi (Suisse) finalized by the end of the year 2001.

By the end of 2001, Bank Audi proudly moved all central departments and Head Office functions to Bank Audi Plaza - a very intelligent building comprising total office space in excess of 16000 sq. m and housing some 400 staff. Bank Audi Plaza is fully equipped with IP Telephony solutions being the first building in Beirut to run on fiber optic links.

AUDI RESEARCH DEPARTMENT:

research@audi.com.lb

Research Department

Bank Audi sal
Bank Audi Plaza - Bab Idriss
Beirut 2021 8102 Lebanon
P.O.Box: 11-2560 Riad El-Solh
Beirut 1107 2808 Lebanon
Phone: 961-1-994 000
Fax: 961-1-980 535

E-mail: celeco@audi.com.lb

Research Department Bank Audi

Audi - Saradar Group Bab Idriss - Riad El Solh

P.O.Box 11-2560

Beirut

Lebanon

Tel: (961-1) 994000 Fax: (961-1) 980535

Website: www.audi.com.lb

customerhelpline@audi.com.lb