AUB is a bank holding company and a commercial bank, incorporated in the Kingdom of Bahrain and has banking subsidiaries and affiliates in Bahrain, Kuwait, Qatar, Egypt, Iraq and the United Kingdom. The major shareholders of the Bank are:

- The Public Institution for Social Security of Kuwait;
- Tamdeen Investment Company; and
- The Civil and Military Pension Funds of the Kingdom of Bahrain.

Their aggregate ownership stake in AUB is approximately 44%.

As of 30 September 2006, AUB had approximately $19.1 billion in assets and $1.8 billion in equity.

The proposed investment consists of:

- a convertible subordinated tier 2 term loan of $200 million to AUB;
- an equity investment of up to $40 million in DIB for an equity stake of up to 10%.

240.0 million (USD)

Product Line	IFC Investment (million USD)
Risk Management
Guarantee
Loan	200.0
Equity	40.0

* These investment figures are indicative

AUB is headquartered in Manama, Kingdom of Bahrain and DIB is headquartered in Cairo, Arab Republic of Egypt.

The project supports south-south investments from the more developed and resource surplus countries in the GCC region to the developing middle eastern economies. More specifically, it will support AUB’s expansion in Egypt and in new markets in developing countries of the Middle East, where it proposes to acquire and restructure local banks and financial institutions and to develop their operations on a sustainable basis in line with modern banking practices.

AUB’s expansion and investments in banks in developing middle eastern countries will help to recapitalized the acquired local banks such as DIB, develop their operations on a sound footing, and help to introduce better operational practices and polices. AUB’s investment in DIB is expected to facilitate and promote the significant trade, investment, remittances and tourism flows between Egypt and the Middle Eastern countries where AUB and its affiliates operate. AUB is also expected to train staff of DIB and other banks to be acquired and develop appropriate skills which are expected to enable the acquired local banks and DIB to increase lending, reduce non-performing assets and achieve greater operational efficiency.

The project is also expected to catalyze an increased flow of funds from markets in the GCC to Egypt and other developing countries in MENA region where AUB plans to expand and would establish institutional linkages between them.

The project will have a catalytic effect in helping transform the financial sector in less developed AUB target markets such as Egypt, Iraq, Iran, Yemen, Lebanon and potentially Libya and Jordan where AUB expects to expand, subject to available attractive opportunities. IFC’s investment will help AUB’s ability to increase its investments and commitments in these markets and to establish operations, introducing new products and services. IFC’s investment will lead to transfer of management expertise, technology and corporate governance best practices by a leading GCC based banking institution, AUB, to banks in developing countries in the Middle East (including Egypt where DIB is based) and is expected to facilitate and promote inter-regional trade, investment, remittances and tourism flows.

This project has been classified as a Category FI project according to IFC’s Environmental and Social Review Procedure.

During appraisal, IFC analyzed the FI portfolio and the activities proposed to be supported with IFC financing and determined the following Applicable Requirements:

- The IFC FI Exclusion List and
- The applicable National Social and Environmental Laws and regulations

IFC also reviewed the FI’s current social and environmental risk management practices and capacity.

Based on the Applicable Requirements and FI risk management and capacity review, AUB/DIB will be required to:

- Provide IFC with evidence of their current procedures related to environmental & social
considerations as applied to corporate and project finance transactions and commit to formalizing
these over mutually agreed time frame through clear reference to these issues in their credit policy
and through the development of checklists and guidance documents (as considered appropriate) in
their operational procedures that provide formal direction to their credit officers.
- Commit to establish similar social and environmental policies and procedures in banks in which AUB
will take a controlling stake using IFC funding.
- Nominate an officer to serve as the Environmental Coordinator.
- Commit to implementing the system described above, to ensure that its investments/activities are in compliance with the Applicable Requirements.
- Commit to take action to remedy any gaps in implementation on an ongoing basis.
- Submit an annual report to IFC as per a format to be provided by IFC.