Research August 2005 - GulfBase.com · Bahrain - Country Report Research August 2005 KUWAIT AND...

Bahrain - Country Report

Research August 2005

KUWAIT AND MIDDLE EAST FINANCIAL INVESTMENT COMPANY

Vijay RabindranathHead of [email protected](965) 224 5023

Ahmad Issam AwadResearch [email protected](965) 224 5094

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KUWAIT AND MIDDLE EAST FINANCIAL INVESTMENT COMPANY k.s.c.c

KMEFIC Research

KREB Building, 12th FloorBanking ComplexP. O. Box 819 Safat 13009 KuwaitTel : (+965) 224 5000Fax : (+965) 244 0627Email : [email protected] : www.kmefic.com.kw

Kuwait Finance House

Specialized Research

1 Bahrain - Country Report

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Bahrain – Country Report

Contents

1 Country Prognosis 4 Bahrain At A Glance – Economic Indicators 6 Economic Review

9 Public Finance

10 External Sector

12 Economic Sectors – Main Developments

12 Oil

14 Natural Gas

15 Manufacturing

16 Infrastructure

18 Banking

22 Real Estate and Construction

23 Monetary Policy

24 Inflation Trends

25 Population and Employment

26 Economic Targets: Vision 2015

28 Economic Outlook

31 Corporate Earnings

36-47 Bahrain Stock Exchange – Review

Tables

48-64 Corporate Sector – Five Years Financial Highlights

Key Financials Page Per Share Stats & Ratio Analysis Page

Assets 48 Earnings 56

Liabilities 49 Dividend 57

Paid-Up Capital 50 Book Value 58

Shareholders Equity 51 Closing Price 59

Net Profit 52 Return On Shareholders Equity 60

Cash Dividend 53 Return On Assets 61

Dividend Payout 54 Price To Earnings 62

Market Capitalization 55 Price To Book Value 63

Dividend Yield 64

65 Bahrain Stock Exchange – Historical Market Statistics

68 Bibliography


Kuwait Finance House - KFH Research

1Bahrain - Country Report

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Country Prognosis

A recent issue of The Economist carried an advertisement from Chevron Corporation and the caption read like this – “It took us 125 years to use the first trillion barrels of oil. We will use the next trillion in 30.” It is a striking and powerful message both to the producers and consumers of this fast depleting and increasingly scarce natural resource.

Next to the above caption, a missive penned by the Chairman and CEO of Chevron is displayed. The opening remarks of the Chairman read like this – “Energy will be one of the defining issues of this century. One thing is clear: the era of easy oil is over. What we all do next will determine how well we meet the energy needs of the entire world in this century and beyond.” No mincing words. The message is loud and clear – Accelerate conservation efforts and look for renewables and alternative energy plays.

The advertisement by Chevron has nothing to do with Bahrain. But the message does - significantly. Bahrain, a relatively less rich country compared to its wealthier and oily neighbors; is at the crossroads of diversifying the economy. Despite the government’s best efforts to lessen its dependence on the hydrocarbon resources, the country’s output measured by GDP still continues to depend on oil which accounts for more than 20% of the GDP and more than 70% of the government revenues.

The government understands the predicament and the inherent risks of such an overdependence on oil. Over the last few years, in a way to stimulate the economy – Bahrain has taken several initiatives notably (a) positioning itself as the financial hub of the region (Bahrain Financial Harbor – BFH), (b) having a strong banking and financial sector, (c) investing in the manufacturing (Aluminum Bahrain – Alba) and infrastructure sectors (notably Batelco, construction of the 40 Km causeway linking Bahrain and Qatar, expansion of Bahrain International Airport – BIA, a large-scale tourism project and liberalization of the port services), (d) seeking private sector participation in the utility sector, and (e) signing the Free Trade Agreement with America. Despite these moves, oil continues to dominate Bahrain; thanks to the sustained higher oil prices over the last two years.

In April this year, The World Economic Forum (WEF) released its Arab World Competitiveness Report for 2005. Bahrain ranked third most competitive Arab economy next to Qatar and United Arab Emirates (UAE). The competitiveness report covered twelve countries and ranked them based on three key performance indicators; quality of the macroeconomic environment, the state of public institutions and technological readiness.

America’s Heritage Foundation/Wall Street Journal 2005 Index of Economic Freedom measures 161 countries against a list of 50 independent variables divided into 10 broad factors of economic freedom. In a report released for 2005, the foundation has ranked Bahrain (at the 20th position) as the freest Arab economy and placed the country in ‘Mostly Free’ category. Commenting on the Middle East region and in particular, Bahrain – the report adds that despite a slightly lower score this year, slipping from 2.08 to 2.10 (on a scale of best to worst; 1 to 5) – Bahrain remains the regions most economically free country. The report further adds “Bahrain is one of the most advanced economies in the Persian Gulf, and its financial sector has eclipsed oil as the leading source of income. Bahrain maintains a pro-business environment with low inflation, an excellent banking and finance system, strong property rights, low regulation and low barriers to foreign investment. Yet it receives nearly 60% of its revenues from state-owned enterprises, mostly oil and gas, demonstrating an unhealthy level of government intervention in the economy”.

Bahrain has bettered its ranking this year climbing from the 21st position last year. United Arab Emirates (UAE) at the 48th position was the next closest and highest ranked Arab State in 2005. Within the ten broad factors of economic freedom index, Bahrain scored high on Banking and Finance, Property rights and Monetary Policy with a score of one. While the country scored two points indicating a stable rating on each of the other economic index variables; Regulations, Capital flows and Foreign Investment. Bahrain scored the worst in Government intervention in the economy with the lowest score of 4.5. The Heritage Foundation report notes that If Bahrain were to improve its regulation score, it would qualify for the Global Free Trade Alliance.




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Having scored low on ‘Government intervention in the economy’, we are least surprised by the Bahraini governments initiative on economic reforms program with the slogan – ‘From red tape to red carpet.’ The vision document: 2015, enumerates five main numeric targets to be accomplished over this decade through the economic reforms process. The seriousness with which the government has made progress, so far is noteworthy.

However, besides these positives, there is major concern with Bahrain’s ruptured relations with Saudi Arabia in the recent past. Relations between the two countries have turned sour after Bahrain entered into a Free Trade Agreement (FTA) with the US. The Saudi officials argue that the FTA with the non-Gulf Co-operation Council (GCC) members contradicts Bahrain’s obligations under the GCC customs union (which imposes a 5% duty on all foreign goods entering the GCC countries). Saudi officials have voiced their concern that, as per the FTA, Bahrain would extend duty-free treatment to all consumer and industrial products arriving from the US, thus breaching the GCC agreement.

Bahrain’s non-oil imports from the US accounted for a shade lesser than 6% of the total non-oil imports in 2004, while non-oil exports accounted for around 12% of the total non-oil exports. With such a small trade happening between Bahrain and the US, waiver of the 5% duty by Bahrain appears to be in a much larger interest to attract foreign direct investment from the world’s largest economic superpower than merely pursuing bi-lateral trade ties.

Following these developments, Saudi has withdrawn its oil grants (50,000 b/d) to Bahrain. The Abu Saafa oilfield (run by the state owned Saudi oil company, Aramco) is jointly owned by Bahrain and Saudi Arabia. Since 1996, the entire output and revenues from the Abu Saafa oilfield have accrued to Bahrain. From a total capacity of around 240,000 b/d of output, Saudi’s withdrawal of oil grants would mean a 20% lower oil receipts.

In another development, capacity expansion of the Abu Saafa oilfield from 150,000 b/d to 300,000 b/d was financed by Bahrain hoping that it would gain a share from this fresh capacity. For now, Saudi has decided to retain all the output without sharing it with

Bahrain. These developments will have significant negative impact on Bahrain’s fiscal situation and GDP growth.

Bahrain in a bid to mend its differences, has appealed to Saudi to revoke its decision on the oil grants and share the additional output of oil from the fresh capacity created at the Abu Saafa oilfield. Saudi officials are yet to respond. Irrespective of the decision, Bahrain cannot afford to jeopardize its ties with Saudi and will need to act fast and straighten the strained relations with its long standing financial backer. In the near term, the Bahraini economy does look vulnerable.

Another concern facing Bahrain, is its growing unemployment – a socio-economic problem. ‘Bahrainisation’, a policy of replacing expat workers with Bahraini’s has not resulted in the desired outcome of arresting the unemployment rate. The vision document has listed employment growth rate as a priority.

Allaying these fears, we are optimistic with the long-term prospects for Bahrain as the government has demonstrated its seriousness to diversify the country’s economy and remains committed to the economic reforms – vision program.

Over the years, the Bahrain Stock Exchange – BSE has grown to become one of the leading emerging stock markets in the region. The evolution of the BSE can be gauged from the growth in the market capitalization that has risen from BD1.04 billion (US$2.7 billion) in 1989 to BD 5.1 billion (US$ 13.57 billion) in 2004. BSE was the first among its GCC peers that opened up to foreign investors back in 1999. Since then, GCC nationals were allowed to own up to 100% while Non-GCC investors are permitted to own up to 49% of any listed company. The other main attraction to invest in Bahraini equities is that the BSE does not enforce tax on capital gain or on dividends.

The performance of the corporate sector remains robust with more than 80% growth in earnings during 2004 over the previous year. Alongside, market valuations measured by the PE multiple also moved up steadily from 11x in 2000 to 13.8x in 2004 reflecting the improved corporate performance.




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However, the compounded growth in market capitalization at slightly above 20% over the last five is not entirely in sync with the net profit growth of 36% during the same period. Apparently, the growth in corporate earnings is fully not reflected in the stock prices, we feel.

The market PE multiple currently at around 17x – is one of the cheapest markets in the GCC region. Going forward, the earnings growth rates seen during the last two years may not be sustainable, though expected to remain strong – above 25%. Moving ahead, we believe, the Bahraini stock markets will continue to demonstrate a modest performance, albeit remain steady as in the past. The chief reasons built into our expectations include; a positive outlook on the oil prices, economic reforms, liquidity, and a healthy banking and financial services sector.

Some closing thoughts from the research office We at KMEFIC Research strongly believe that a ‘top-down’ approach to investments – beginning with a sound understanding of the country fundamentals is a useful way to gain insights into the key variables that drives the performance of the corporate sector – that will further facilitate to identify potential investment opportunities, later on. Bahrain – Country Report is an initiative towards that direction.

This report will be incomplete without appreciating the efforts of my associate and team partner – Ahmad, Research Analyst – in doing most of the spade work this report has demanded. Further, acknowledgments to the Executive Management at KMEFIC for extending all their unconditional support – throughout this research effort.

Our readers time is valuable – as much ours. KMEFIC Research values brevity, concise analysis, and presenting useful information to all its stakeholders and I trust we have lived up to our own aspirations. Importantly, I hope this report serves as a useful starting point to further your understanding on the country.

Vijay Rabindranath Head Of Research




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Bahrain At A Glance – Economic Indicators

BD Million, otherwise stated 2000 2001 2002 2003 2004*

Output and Economic Indicators

Nominal GDP 2,996.9 2,981.2 3,176.5 3,646.9 4,140.5

Y-O-Y Growth, % 20.4 -0.5 6.5 14.8 13.5

- Oil 835.7 731.8 774.0 899.5 963.1

- Non-Oil 2,161.3 2,249.5 2,402.5 2,747.4 3,177.5

Oil as % of GDP 27.9 24.5 24.4 24.7 23.3

Real GDP 2,603.3 2,723.7 2,866.1 3,071.1 3,237.6

Y-O-Y Growth, % 5.3 4.6 5.2 7.2 5.4

GDP Per Capita (BD) 4,700 4,554 4,726 5,290 5,855

Public Finance and Domestic Public Debt

Revenues 1047.3 980.9 1026.9 1145.5 NA

- Oil and Gas 764.6 672.1 691.4 836.1 NA

- Non-Oil 263.9 271.2 297.3 290.6 NA

Oil and Gas as % of Revenues 73.0 68.5 67.3 73.0 NA

Expenditure 787.0 832.8 1031.0 1080.4 NA

Net Surplus / (Deficit) 5.3 3.1 -4.1 13.6 NA

Domestic Public Debt Outstanding 577.0 572.8 597.0 591.5 585.5

External Sector

Exports 2329.3 2096.9 2178.7 2493.5 2827.0

- Oil 1683.7 1384.1 1487.6 1759.7 2087.3

- Oil as % of Exports 72.3 66.0 68.3 70.6 73.8

Imports 1742.2 1619.0 1884.7 2127.1 2438.2

Trade Balance 587.1 477.9 294.0 366.4 388.8

Current Account Balance 312.1 85.4 -19.0 75.5 156.1

Official Reserves** 592.5 637.8 556.4 575.9 637.0

Months of Import Cover 4.1 4.7 3.5 3.2 3.1

Overall Balance of Payments 75.2 46.4 13.1 16.4 59.4

Money and Banking

M1 445.7 552.0 647.2 821.4 861.1

M1 Growth % 4.6 23.9 17.2 26.9 4.8

M2 2156.7 2356.0 2599.6 2765.0 2879.6

M2 Growth % 10.2 9.2 10.3 6.4 4.1

Consolidated Balance Sheet of Banks (USD Mn) 106,400 102,730 73,996 100,935 118,913

Total Deposits - Full Commercial Banks (FCB's) 2568.4 2717.9 2840.5 3228.2 3606.7

Total Domestic Credit (FCB's) 1,421.5 1,448.2 1,629.8 1,798.9 2,230.7

Interest Rates, %

Money Market / Inter-Bank Rate on USD - 6 Months 6.2 2.0 1.4 1.2 2.8

Yield on Short-term Treasury Bills - 6 Months 6.4 2.1 1.4 1.2 2.7

^ Commercial Bank Lending Rate - Personal Loans 11.3 9.4 8.0 7.9 7.7

^ Commercial Bank Lending Rate - Business Loans 9.0 6.8 5.7 5.3 5.3

^ Commercial Bank Deposit Rate (3-12 Months) 5.5 1.5 0.9 0.7 2.0

Source: Ministry Of Finance, Ministry Of Oil and Central Informatics Organization, Bahrain Monetary Agency




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Other Indicators 2000 2001 2002 2003 2004*

As % Of GDP @ Market Prices

Consumption 64.7 66.0 63.7 61.4 59.1

Gross Capital Formation (or) Investment 13.5 13.3 17.3 19.7 21.6

Trade Balance 19.6 16.0 9.3 10.0 9.4

Current Account Balance 10.4 2.9 (0.6) 2.1 3.8

Official Reserves 19.8 21.4 17.5 15.8 15.4


Net Surplus / (Deficit) 0.2 0.1 -0.1 0.4 NA

Domestic Public Debt 19.3 19.2 18.8 16.2 14.1

Deposits (FCB's) 85.7 91.2 89.4 88.5 87.1

Domestic Credit (FCB's) 47.4 48.6 51.3 49.3 53.9

Market Capitalization 79.5 79.5 87.6 97.8 124.4

Key Products

Oil Production (US Barrels Thousands) 178,606 173,145 177,622 179,831 169,006

Crude Oil 84,869 85,380 86,500 87,481 76,337

- Bahrain Oilfield 13,766 13,656 13,800 13,720 13,647

- Abu Saafa Oilfield 71,103 71,724 72,700 73,761 62,690

Refined Oil 93,737 87,765 91,122 92,350 92,669

Gas (Million Cubic Feet - MMCF) 411,967 424,358 429,169 434,537 428,375

Aluminium (Metric Tonnes) 509,734 522,749 518,924 531,991 531,626

Petrochemicals (Thousand Metric Tonnes) 1,333 1,477 1,496 1,317 1,287

Electricity (GWH) 6,298 6,779 7,279 7,768 8,267

Prices

Consumer Price Index 102.1 100.9 100.4 102.0 107.0

Avg. Consumer price inflation, % -0.7 -1.2 -0.5 1.6 4.9#

Brent Oil (USD Per Barrel) 28.3 24.4 25.0 28.9 38.3

Aluminium (USD / MT) 1,551.3 1,446.8 1,351.1 1,432.8 1,718.5

Population and Employment

Population 637,582 654,619 672,124 689,418 707,160

Total Employment 189,985 205,168 229,879 249,493 285,390

Employment as % of Population 29.8 31.3 34.2 36.2 40.4

Private Sector 158,828 173,090 195,889 212,964 247,814

Public Sector 31,157 32,078 33,990 36,529 37,576

Average Monthly Wages (BD) - Private Sector 235 230 221 219 214

Average Monthly Wages (BD) - Public Sector NA NA 597 564 597

Bahrain Stock Exchange

Bahrain Index (Old) 1,805.8 1,761.5 1,821.5 2,346.3 3,054.2

Bahrain All Share Index (New) - - 1,040.3 1,336.8 1,773.7

@ Market Capitalisation (BD Mn) 2,382 2,369 2,783 3,567 5,151

P/E (x) 11.0 11.3 12.3 12.4 13.8

Source: Ministry Of Finance, Ministry Of Oil and Central Informatics Organization, Ministry Of Electricity and Water, Bahrain Monetary Agency, General Organization for Social Insurance and Civil Service Bureau, Aluminum Bahrain (ALBA), Bahrain Stock Exchange, IMF – International Financial Statistics (IFS),

Notes: * Provisional ** Includes holdings of monetary gold, foreign currencies, SDR and reserve position at IMF, # Economic Intelligence Unit (EIU) Estimates, ^ - Weighted average rates (Deposit rates offered and loan rates charged extended during the last month of each quarter), NA – Not Available @ Mkt. Cap is for the end period and arrived at excluding the Preferred, Closed and Non-Bahraini companies and PE Multiple is for the total market excluding Preferred, Closed and Non–Bahraini companies.




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Economic Review

Gross Domestic Product (GDP)

GDP up by around 14% in 2003 and 2004

Source: Ministry Of Finance *Provisional

Robust Growth – GDP highest in six years Bahrain economy witnessed a robust growth in 2003 (up by 14.4%) and 2004 (up by 13.7%), underpinned by high oil prices and production, accelerated government spending and a noticeable improvement in the performance of the financial sector. Bahrain’s economic performance and provisional GDP figures for 2004 were discussed at the cabinet session held during early July 2005.

Consistent Real GDP growth

Bahrain’s real GDP (measured at constant prices) increased by 5.2% in 2004 to BD 3.23 Bn compared to a 7% rise in 2003. Real GDP growth in 2004 is mainly attributed to an improvement in most of the non-oil sectors and economic activities particularly financial sector, manufacturing, transportation and communication, government services, education and health services.

Nominal GDP – Oil and Non-Oil sector

(BD Mn) 2000 2001 2002 2003 2004*

Oil Sector 836 732 774 900 963

Non-Oil Sector 2,161 2,249 2,402 2,747 3,177

GDP 2,997 2,981 3,176 3,647 4,141

Contribution

% 2000 2001 2002 2003 2004*

Oil Sector 27.9 24.5 24.4 24.7 23.3

Non-Oil Sector 72.1 75.5 75.6 75.3 76.7Source: Ministry Of Finance *Provisional

Economic activity driven by oil and natural gas According to the BP Statistical Review, at $38 per barrel (Brent), the average oil price during 2004 was almost $10 above the 2003 level. The increase was driven fuelled by demand growth, particularly in Asia, where Chinese consumption rose by 900,000 barrels per day (b/d) – almost all of which was accounted for by imports. Globally, with economic growth at a 15-year high, demand for oil grew by 2.5 million b/d. This rise in oil prices acted as the main engine underpinning the contribution of crude petroleum and natural gas in Bahrain’s GDP. Crude petroleum and natural gas contributed to 23.3% of the GDP in 2004 compared to around 24% seen during the previous three years. The total value added from crude oil and natural gas rose by BD 63.6 Mn or 7% to BD 963 Mn in 2004 compared to the previous year.

Non-oil sector contribution inches up to 76.7% The total value added at current prices to non-oil sector rose by 15.6% to BD 3,177.5 Mn during 2004 over the previous year. All sub-sectors under the non-oil recorded a growth in their value added except for agriculture and fishing. The increase in total value added in non-oil sector rose at a faster pace than the noticeable increase in the oil sector which led to an increased contribution of non-oil sector to Bahrain’s GDP from 75.3% (2003) to 76.7% (2004).

Nominal GDP, BD Bn

2.49

3.00 2.983.18

3.64

4.14

1999(A) 2000(A) 2001(A) 2002(A) 2003(A) 2004*

Real GDP, BD Bn

2.472.60

2.722.87

3.073.23

1999(A) 2000(A) 2001(A) 2002(A) 2003(A) 2004*




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GDP by Economic Activity % Chg

(In BD million) 2000 2001 2002 2003 2004* 2003-04

Crude Petroleum & Natural Gas 835.7 731.8 774.0 899.5 963.1 7.1%

Mining & Quarrying 5.2 8.2 10.2 10.9 12.1 10.7%

Agriculture & Fishing 22.1 21.7 21.0 22.3 19.6 -12.2%

Manufacturing 342.8 358.1 374.8 405.0 439.4 8.5%

Electricity & Water 42.8 42.8 43.8 49.6 51.0 2.8%

Trade 240.7 252.4 288.5 320.5 410.1 28.0%

Hotels & Restaurants 59.6 64.6 66.5 65.3 92.5 41.6%

Transport and Communication 211.0 224.2 248.9 262.6 300.9 14.6%

Social & Personal Services 81.7 90.4 104.7 124.5 141.3 13.4%

Construction 107.0 119.4 134.3 139.1 153.1 10.1%

Real Estate & Business Activities 273.0 285.3 303.3 320.6 374.6 16.8%

Non-Financial Activities 2,221.5 2,198.7 2,370.0 2,619.9 2,957.4 12.9%

Financial Institutions 167.6 165.2 186.4 205.1 224.9 9.6%

Offshore Financial Institution 344.6 296.4 289.5 433.5 612.0 41.2%

Insurance 127.9 95.3 82.6 133.6 181.6 35.9%

Financial Activities 640.0 556.9 558.5 772.2 1,018.5 31.9%

Education Services 91.3 98.9 114.3 130.7 143.3 9.6%

Health Services 48.8 52.1 56.1 64.0 67.3 5.1%

Other Services 314.9 321.3 336.8 360.4 371.8 3.2%

Government Services 455.0 472.4 507.2 555.1 582.3 4.9%

Private Non-Profit Institutions 1.5 2.6 3.5 4.1 4.4 7.6%

Household with Employed Persons 18.3 18.9 20.0 20.5 20.8 1.6%

Financial Intermedation Indirectly measured (395.2) (325.8) (329.6) (374.7) (496.3) 32.5%

GDP at Producer's price 2,941.2 2,923.7 3,129.6 3,597.1 4,087.1 13.6%

Imports Duties 55.8 57.6 46.9 49.9 53.4 7.1%

GDP at Purchasers' prices 2,996.9 2,981.2 3,176.5 3,646.9 4,140.5 13.5%

Source: Ministry of Finance *Provisional

Financial sector – Highest non-oil contributor The value added in the financial sector (the highest contributor to Bahrain’s GDP among non-oil sectors) rose by BD 246.3 Mn; up by 32% to BD 1018.5 Mn, accounting for 24.6% of the GDP in 2004 (21.1% in 2003). This increase resulted mainly from the rise in investment banking, advisory, management fees and non-interest income.

Manufacturing contribution; lowest since 1999 In 2004, the value added in the manufacturing sector reached BD 439.4 Mn; up by 8.5% mainly due to increase in value added in petrochemical, gas liquidation, metal industries and building materials. Despite the increase in value, the contribution to GDP marked the lowest at 10.6% in 2004 compared to 11.1% in 2003 and 12.3% in 1999.

Government sector contribution dips to 14% Value added by this sector increased by 5% (mainly due to increase in wages and salaries) in 2004. Contribution to GDP dropped to 14% compared to around 15% over the previous four years.

Contribution from trade sharply rises while transportation, real estate maintain their share The trade sector comprising wholesale and retail increased their contribution to GDP noticeably from 8.8% in 2003 to 9.9% in 2004. Also, the transport and communication sector registered a marginal increase in contribution to 7.27% in 2004 compared to 7.2% in 2003. The real estate sector registered a healthy growth in value in 2004 up by 17% mainly due to increase in the number of residential and commercial buildings coupled with higher rents. The combined contribution of real estate and construction sector stood at 12.7% to GDP similar to 2003 levels.

Insurance and educational sector do better The value added in the insurance sector rose by 36%; the highest growth recorded compared to other sectors. This translated into a higher contribution to the GDP at 4.4% in 2004 compared to 3.6% in 2003.The education services sector rose by 9.6% to BD 143.3 Mn in 2004 (contributing to 3.6% of the GDP), compared to BD 130.7 Mn in 2003.




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Bahrain – Country Report 11

GDP by type of expenditure activity

(In BD million) 1999 2000 2001 2002 2003 2004*

Government Consumption (1) 518.2 526.2 550.6 588.7 672.3 705.6

Y-o-Y Growth 1.5% 4.7% 6.9% 14.2% 4.9%

Private Consumption (2) 1,378.4 1,411.8 1,415.7 1,435.1 1,567.0 1,739.5

Y-o-Y Growth 2.4% 0.3% 1.4% 9.2% 11.0%

Total Consumption = (1)+(2) 1,896.6 1,938.0 1,966.3 2,023.8 2,239.3 2,445.1

Y-o-Y Growth 2.2% 1.5% 2.9% 10.6% 9.2%

Government Investment (3) 135.5 129.6 172.8 291.2 269.0 249.9

Y-o-Y Growth -4.4% 33.3% 68.6% -7.6% -7.1%

Private Investment (4) 202.4 275.0 225.0 257.8 451.2 645.1

Y-o-Y Growth 35.8% -18.2% 14.6% 75.0% 43.0%

Gross Capital Formation (5)=(3)+(4) 338.0 404.6 397.7 549.0 720.2 895.0

Y-o-Y Growth 19.7% -1.7% 38.0% 31.2% 24.3%

Domestic Demand (6)=(1)+(2)+(5) 2,234.6 2,342.6 2,364.0 2,572.8 2,959.5 3,340.1

Y-o-Y Growth 4.8% 0.9% 8.8% 15.0% 12.9%

Exports Goods & Services 1,963.4 2,680.3 2,454.2 2,580.3 2,955.6 3,412.8

Imports Goods & Services 1,567.5 1,929.7 1,802.8 2,114.2 2,333.0 2,657.9

Net Exports Goods & Services 395.9 750.6 651.4 466.1 622.6 754.9

Y-o-Y Growth 89.6% -13.2% -28.4% 33.6% 21.2%

Change in stocks (141.2) (96.3) (34.3) 137.6 64.8 45.6

Gross Domestic Product 2,489.3 2,996.9 2,981.2 3,176.5 3,646.9 4,140.5


Buoyant domestic demandThe domestic demand which constitutes expenditure on government and private consumption and gross capital formation, rose by BD 380.6 Mn; up by 13% to BD 3,340 Mn in 2004, compared to the previous year. During the same period, expenditure on government consumption increased by 5% while the private consumption was even higher by 11%. The gross capital formation which constitutes government and private investment – significantly increased during each of the last three years; up by 38% in 2002, up by 31.2% in 2003 and up by 24.3% in 2004. The strong growth in gross capital formation is mainly driven by the surge in private investment that increased by 43%. Government investment that saw a sharp growth of 68.6% in 2002, however, declined by 7.6% in 2003 and by another 7% in 2004.

Net exports grew sharply in the last two years Net exports saw a sharp decline by 28.4% in 2002 to 466 Mn. However, in 2003 and 2004, net exports grew by 33.6% and 21.2% respectively on the back of a strong demand for oil. In 2004, exports grew by 15.5% (higher by BD 457.2 Mn) to reach BD 3,412.8

Mn mainly due to increase in the value of oil exports from BD 1,851.1 Mn in 2003 to BD 2,163.2 Mn in 2004, representing a 17% growth.

Expenditure Components of Gross Domestic Product


Share of private consumption declines while private investment rises Over the last six years, private consumption continued to form the largest part of the total expenditures measured as a percentage of the GDP. Since 1999, there is a steady decline and marked shift in private consumption expenditure dropping from 55.4% to 42% to 2004. On the contrary, during the same period, private investment expenditure has seen a sharp rise from around 8% to 15.6%.

(%) 1999 2000 2001 2002 2003 2004*

Government Consumption 20.8 17.6 18.5 18.5 18.4 17.0

Private Consumption 55.4 47.1 47.5 45.2 43.0 42.0

Government Investment 5.4 4.3 5.8 9.2 7.4 6.0

Private Investment 8.1 9.2 7.5 8.1 12.4 15.6

Net Exports Goods & Serv 15.9 25.0 21.9 14.7 17.1 18.2

Change in stocks (5.7) (3.2) (1.1) 4.3 1.8 1.1

GDP 100 100 100 100 100 100




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Public Finance

Revenue and expenditure

2003 % Chg

(In BD million) 1999 2000 2001 2002 2003 2003 2004 Act vs Bud

Revenue 660.4 1,047.3 980.9 1,026.9 1,145.5 797.0 806.0 43.7%

Oil 371.4 764.6 672.1 691.4 836.1 490.0 490.0 70.6%

Non-Oil 251.4 263.9 271.2 297.3 290.6 269.4 278.4 7.9%

Grants 37.6 18.8 37.6 38.2 18.8 37.6 37.6 -50.0%

Expenditure 723.8 787.0 832.8 1,031.0 1,080.4 1,159.0 1,188.7 -6.8%

Recurrent 596.0 664.1 669.8 740.0 821.2 829.0 858.7 -0.9%

Projects 127.8 122.9 163.0 291.0 259.2 330.0 330.0 -21.5%

Strategic & Sovereign Projects - 255.0 145.0 - 51.5 0.0 -

Surplus/(Deficit) (63.4) 5.3 3.1 (4.1) 13.6 (362.0) (382.7) 103.8%

Oil, % Revenue 56.24 73.01 68.52 67.33 72.99 61.48 60.79

Actual Budget

Source: Ministry of Finance & National Economy

Oil accounts for a large portion of the revenues During 2003, total revenue stood at BD 1.14 Bn, higher by 11.5% over the previous year and up by 43.7% compared to budget. Despite lower non-oil revenue in 2003 over the previous year, a 21% growth in oil revenue resulted in a healthy total revenue. Oil revenue was significantly up on the back of higher oil prices that averaged around USD 29 a barrel in 2003 up by 15.6% over the previous year. Oil income accounted for 73% of the revenues; sharply higher compared to around 67% a year earlier and 61.5% budgeted.

Although the government budgeted a deficit of BD 362 Mn, the windfall oil revenue accompanied with prudent spending resulted in a surplus of BD 13.6 Mn.

Government trying hard to diversify revenues Over the last few years, the government has made sincere efforts to lessen its dependence on oil by making huge investments in the manufacturing sector in a bid to boost the non-oil revenue. This is beginning to gradually pay-off as can be seen with increasing non-oil income since 1999 except for a marginal decline in 2003. Despite the government’s clear intentions, oil revenue still continue to form a significant portion of the income, thanks mainly to the oil prices.

Government revenue and expenditure statements for 2004 are not yet available. However, at the recently concluded cabinet meeting, oil revenue for 2004 was pegged at BD 963 Mn which is higher by 15% over a

year ago. Year 2004, though budgeted to have a huge deficit of BD 382.7 Mn, is once again likely to see a surplus on the back of higher oil revenue (crude oil prices were higher by 32.5% at USD 38.3 a barrel in 2004 over the previous year).

Emphasis on infrastructure and social sector spending

Chg % CAGR

(In BD Mn) 1999 2000 2001 2002 2003 02-03 99-03

Infrastructure 184 196 240 354 326 -7.7% 15.5%

Social Serv. 172 172 194 222 238 6.8% 8.4%

Economic Serv. 30 17 13 26 21 -19.4% -9.0%

Public Adm. 248 248 264 298 332 11.4% 7.5%

Others 9 12 16 18 17 -9.8% 18.2%

Transfer Budget 81 142 106 113 148 30.4% 16.2%

Total 724 787 833 1,031 1,080 4.8% 10.5%

Actual

Source: Ministry of Finance & National Economy

Over the period 1999-03, the government spending increased at a compounded rate of around 10%. During 2003, the total expenditure rose by 4.8% over the previous year; the lowest increase in the last five years. Public expenditure was up by 11.4% and stood at BD 331.5 Mn (30.7% of total expenditure) while spending on infrastructure declined by 7.7% to BD 326 Mn (30% of the total expenditure). However, a little lower expenditure on infrastructure should be viewed in light of the huge jump of 47% in 2002. Also, over the last few years, the government has increasingly spent on the developing the social services sector which now accounts for 22% of the total expenditure.




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Research


External sector

BD Mn 2000 2001 2002 2003 2004*

Total Exports (FOB) 2329.3 2096.9 2178.7 2493.5 2827.0

Y-o-Y Growth, % 42.0 -10.0 3.9 14.4 13.4

Oil Exports 1683.7 1384.1 1487.6 1759.7 2087.3

% of Total Exports 72.3 66.0 68.3 70.6 73.8

Non-Oil Exports 645.6 712.8 691.1 733.8 739.7

% of Total Exports 27.7 34.0 31.7 29.4 26.2

Total Imports (CIF) 1742.2 1619.0 1884.7 2127.1 2438.2

Y-o-Y Growth, % 25.3 -7.1 16.4 12.9 14.6

Oil Imports 771.3 578.4 628.8 777.1 1039.7

% of Total Imports 44.3 35.7 33.4 36.5 42.6

Non-Oil Imports 970.9 1040.6 1255.9 1350.0 1398.5

% of Total Imports 55.7 64.3 66.6 63.5 57.4

Trade Balance 587.1 477.9 294 366.4 388.8

% of GDP 19.6 16.0 9.3 10.0 9.4

Current Account Balance 312.1 85.4 -19.0 75.5 156.1

% of GDP 10.4 2.9 -0.6 2.1 3.8

Official Reserves ** 592.5 637.8 556.4 575.9 637.0

Months of Import Cover 4.1 4.7 3.5 3.2 3.1


% of GDP 2.5 1.6 0.4 0.4 1.4

International Investment Position (IIP) , Net 1938.8 2074.3 2155.6 1964.3 2127.4

Oustanding Assets 36582.2 35136.0 24499.8 33773.9 39235.0

Outstanding Liabilities 34643.4 33061.7 22344.2 31809.6 37107.6 Source: Ministry of Oil and Central Informatics Organization * Provisional ** Includes Holding of monetary gold, foreign currencies, SDR and reserves at IMF

Foreign trade continue to be buoyant Exports recorded good growth during the last two years up by 14.4% and 13.4% driven mainly by higher oil exports. Contribution from oil to total exports has gone up from 66% in 2001 to 73.8% in 2004. Oil exports have grown mainly due to sustained higher oil prices. As a result, oil exports increased by a little lesser than 19% during each of the last two years. Non-oil exports remained more or less at the same levels of around BD 730 Mn in last two years.

Imports also increased by 14.6% to BD 2,438 Mn (slightly higher than the exports) mainly attributed to higher oil imports. Growth in oil imports is higher as Bahrain imports crude oil from Saudi Arabia for its use in the country’s only refinery.

With exports growing in absolute value higher than the imports, Bahrain posted a trade surplus of BD 388.8 Mn in 2004 compared to BD 366.4 Mn in 2003.

Current Account Surplus increases substantially

BD Mn 2002 2003 2004*Current Account (a+b+c+d) (19.1) 75.5 156.1 a. Goods 447.4 527.1 558.5 General Merchandise 412.5 493.5 520.1 Repairs on goods 34.9 33.6 38.4 b. Services (net) 53.1 140.7 234.9 - Transportation (78.6) 23.5 69.5 - Travel 135.6 130.9 179.5 - Insurance Services (11.9) (12.7) (13.1) - Other Business Services 8.0 (1.0) (1.0) c. Income (net) (197.4) (185.4) (216.2) Investment Income (197.4) (185.4) (216.2) - Direct Investment Income (263.0) (258.1) (248.0) - Portfolio Income 107.0 90.9 175.3 - Other Investment Income (41.4) (18.2) (143.5) d. Current Transfers (net) (322.2) (406.9) (421.1) - Workers' Remittances (327.7) (406.9) (421.1)Source: Bahrain Monetary Agency * Provisional

Current account turned from a deficit in 2002 to a surplus of BD 156 Mn in 2004 due to growing trade surplus and increasing inflows from services.




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Research


Capital & Financial Account

Net outflows of BD 187.5 Mn in 2004

BD Mn 2002 2003 2004*

Capital & Financial Account (438.9) 187.8 (187.5)

Capital Account 38.2 18.8 18.8

Financial Account** (477.1) 169.0 (206.3)

Direct Investments 10.1 (84.5) (64.0)

Direct Investments Abroad (71.5) (278.7) (389.4)

Foreign Direct Investment 81.6 194.2 325.4

Portfolio Investment (net) (1,588.5) (905.1) (1,317.8)

Other Investment (net) 1,114.4 1,175.0 1,234.9

Reserve Assets (net) (13.1) (16.4) (59.4)

Source: Bahrain Monetary Agency, *Provisional, ** Figures in brackets indicate net outflows / increase in external assets.

In 2004, the capital and financial account net outflow stood at BD 187.5 Mn compared to a net inflow of a similar amount in the previous year. Capital account which comprises the official grants received by government dropped by more than half to BD 18.8 Mn in 2003, compared to BD 38.2 Mn in the previous year and remained unchanged during 2004. The financial account registered a net outflow of BD 206.3 Mn in 2004, compared to a net inflow (surplus) of BD 169 Mn in 2003, mainly attributed to a sharp increase (outflows) in portfolio investments.




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Economic Sectors - Main Developments

Oil

Bahrain and Saudi Arabia; Strained relations The US and Bahrain signed the Free Trade Agreement (FTA) in September 2004. Bahrain’s closeness to the US has irked Saudi Arabia and in late 2004, Saudi Arabia openly expressed its displeasure to Bahrain for signing the FTA. The Saudi officials have argued that the FTA with the non-Gulf Co-operation Council (GCC) members contradicts Bahrain’s obligations under the GCC customs union (in effect since January 2003). However, Saudi’s views are somehow not shared by the other GCC members as they are also in various stages of FTA negotiations with the US. United Arab Emirates (UAE) and Oman are close to concluding negotiations with the US, while Kuwait and Qatar have openly expressed their support for such economic agreements. This leaves Saudi Arabia as the only GCC member not in favor of such FTA’s, thus weakening the GCC customs union.

Why the FTA between the US and Bahrain has irritated Saudi? Under the GCC customs union agreement, the union imposes a 5% duty on all foreign goods entering the GCC countries. To the contrary, under the FTA, Bahrain would extend duty-free treatment to all consumer and industrial products arriving from the US, thus breaching the GCC agreement and annoying the Saudi authorities. Bahrain’s non-oil imports from the US stands at a mere BD 81.1 Mn accounting for a shade lesser than 6% of the total non-oil imports at BD 1,398.5 Mn in 2004, while non-oil exports to the US stood at BD 91.1 Mn representing around 12% of the total non-oil exports. With such a small trade happening between Bahrain and the US, waiver of the 5% duty by Bahrain appears to be in a much larger interest and goal to attract foreign direct investment from the world’s largest economic superpower; the US than merely pursuing trade ties.

Saudi withdraws oil grants to Bahrain Bahrain’s onshore proven oil reserves at 125 Mn barrels are located in Awali – the only oilfield. According to the Energy Information Administration (EIA) , Awali discovered in 1932, had peak production of more than 75,000 b/d in the 1970’s, but has declined since then. As of late 2004, Awali oilfield was producing around 35,000 b/d of crude oil.

Apart from the onshore oilfield, Bahrain receives oil through a sub-sea pipeline from Saudi Araiba. Some of this oil comes from the Abu Saafa offshore oilfield which lies in the Saudi waters. The Abu Saafa oilfield (run by the state owned Saudi oil company, Aramco) is jointly owned by Bahrain and Saudi Arabia. Since 1996, the entire output and revenues from the Abu Saafa oilfield have accrued to Bahrain, a gesture made by Saudi Arabia to support the fragile economy of its neighbor. Output from the Abu Saafa oilfield cannot be undermined as it accounts for about 82% of the total crude oil production in Bahrain. According to the Economic Intelligence Unit (EIU) report Bahrain crude transfer receipts have declined. The EIU report states that Bahrain’s output from Abu Saafa (as released by the BMA Economic Indicators) has fallen from around 200,000 b/d in the second quarter of 2004 to 148,000 b/d in the third quarter of 2004 – a loss of some 50,000 b/d. Further, the report also argues that this loss of 50,000 b/d is somewhat misleading as Bahrain had never received 200,000 b/d from Abu Saafa oilfield (whose capacity was only 150,000 b/d), but in recent years Saudi Arabia made an additional 50,000 b/d in oil transfers other than the Abu Saafa oilfiled.

In mid-2004, Bahrain financed the expansion of Abu Saafa oilfield to double its capacity from 150,000 b/d to 300,000 b/d expecting that it would receive a share of the fresh capacity. Instead, Saudi has kept the additional output of 150,000 b/d, leaving Bahrain with where it started.

These developments make it amply clear that Saudi is unhappy with Bahrain because of the Free Trade Agreement with the US. Though the Saudi government has so far made no official statements on the issue or explained the reasons for its withdrawal of the 50,000 b/d oil grants, the Bahraini authorities understand that the withdrawal of the oil grants and not sharing the new capacity from Abu Saafa output is an indication of Saudi disapproval on the FTA.




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Bahrain Petroleum Company – BAPCO In early 2000, consolidation of Bahrain’s state owned petroleum sector was initiated with the merger of upstream Bahrain National Oil Company (BANACO) and BAPCO. In 2002, the merged entity was rechristened as Bahrain Petroleum Company BSC. BAPCO, the only refinery in Bahrain – is responsible for exploration, production, refining, marketing and distribution of oil both for domestic consumption as well as exports. Bahrain exports refined petroleum products (located at Sitra) rather than crude oil unlike other Arab states. The Sitra refinery built in 1936, currently has a capacity of about 248,000 b/d. BAPCO is amidst a major upgrade of its refining facilities at a cost of around USD 1 Bn.

According to MEED, a six-year saga came to an end in early February this year when the financing package (which involved nine banks as lead arrangers of finance) was signed for the refinery upgrade of BAPCO. The size of the deal is pegged at USD 1 Bn, consisting of a USD 370 Mn conventional facility, a USD 330 Mn Islamic facility and a USD 311 Mn tranche from Japan Bank for International Co-operation (JBIC) and Nippon Export Credit Agency (Nexi). The financing package, which started life in 1999 at some USD 450 Mn, will now cover not only the low-sulphur diesel production (LSDP) unit for which it was designed but also the refinery gas desulphurisation (RGD) and lube base oil refinery projects.




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Natural Gas

According to EIA, Bahrain has natural gas reserves of about 3.25 Trillion Cubic Feet (TCF), much of it associated from the Awali oilfield. In 2004, Bahrain’s gas production stood at 428 Billion Cubic Feet (BCF). Associated Gas Project was launched in late 1979, marking a significant step by the government’s determination to use the energy resource effectively. The Associated Gas Project was aimed at using the large quantities of associated gas extracted from the Bahrain Oil Field.

Bahrain Natural Gas Company - BANAGAS The project was incorporated as the Bahrain National Gas (BANAGAS), 75% owned by the Government of Bahrain while the rest of the stake is equally owned by the Arab Petroleum Investment Corporation and Caltex Bahrain. BANAGAS was set up in 1979 at a cost of US$ 100 million with four gas compressor stations, a processing plant to recover Propane, Butane and Naphtha, and a storage area at Sitra. BANAGAS mainly produces LPG products.

During the subsequent years, due to the substantial increase in the quantity of associated gas extracted from the Bahrain Oil Field, BANAGAS expanded its capacity from 170 to 280 MMSCFD; to process all the available quantity of associated gas.

Natural gas – Mainly consumed by Alba & BAPCO The associated gas is separated from crude oil and from the central gas plant; LPG is recovered from the gas in addition to Propane, Butane and Naphtha. While Propane and Butane are exported, Naphtha is transferred to the Bahrain Refinery (BAPCO). The residual lean gas, mainly methane and ethane, is routed to Aluminum Bahrain (Alba), BAPCO and Riffa Power Station used for operating their gas turbines.

Bahrain to import gas from Qatar For long, relations between Bahrain and Qatar were not cordial over the territorial disputes between the two countries. In March 2001, the International Court of Justice (Hague) awarded the disputed Hawar Islands to Bahrain, and Qatar had to retain the neighboring islands of Zubarah and Janan. Qatar accepted the court ruling; putting an end to the 62

years of conflict. Since then, the economic ties between Bahrain and Qatar have noticeably improved with the former recently announcing that it will import gas from Qatar. Details of the deal are yet to be announced.

Earlier this year, in another significant development – the two countries signed a Memorandum of Understanding (MoU) to jointly build the 40 km causeway linking Bahrain and Qatar. The construction of the causeway is expected to take about five years at an estimated cost of BD 1.8 Bn.

The Bahraini government’s intentions and focus is clear – diversify the economy, use the energy resources effectively, lessen the dependence on oil, invest in infrastructure related development projects and create jobs.




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Manufacturing

Value Addition grows, but contribution declines

Source: Ministry Of Finance, KMEFIC Research

Manufacturing sector plays an important role in the economic activities. Consider the provisional figures for 2004 which indicates that the value added in the manufacturing sector reached BD 439.4 Mn contributing to 15% of the non-financial sector and 10.6% of the total GDP.

Alba: The story of industrial diversification Bahrain Aluminum - Alba's success as a primary producer of high-grade aluminum has brought significant economic benefits to the region. The government of Bahrain owns a 77% stake in Alba while 20% is owned by Saudi Arabia’s Sabic Industrial Investments and the remaining by Breton Investments of Germany. May 15th, 2005 will be remembered as a landmark day in Bahrain’s industrial history, as Alba fully commissioned its fifth potline (three weeks ahead of schedule) at a cost of USD 1.7 Bn. The 336-pot expansion will boost capacity to 827,000 tonnes per year (t/y) from 520,000 t/y – making Alba; one of the world’s largest smelters with the longest potline.

According to Bruce Hall, the Chief Executive Officer (CEO) of Alba, the commissioning of the fifth potline, 23 days ahead of schedule had tremendous implications in terms of cost-saving for the company. Every day that the start-up was brought forward

translated to USD 1.4 Mn of additional revenue, bringing in more than USD 32.2 Mn for the 23 days early start-up. Combined with the USD 7.3 Mn saved by the five-day early start-up in February 2005, Alba’s start-up project has resulted in over $39 Mn savings.

According to Trade Arabia News Service, about 50 per cent of Alba's additional output will be kept within Bahrain while the GCC and Far East will consume 15% and 35% respectively. As one of the largest construction projects in the Gulf, Line 5 has brought major added benefits to Bahrain and its economy with the creation of over 8,000 jobs during construction and over 500 permanent jobs during operation.

Also the News Service adds that the project has also created many lucrative opportunities for Bahrain-based companies. In addition, local contractors have benefited from attractive budget allocations and exposure to the international work practices and standards implemented by Alba and Bechtel - Alba's Line 5 engineering, procurement, construction and management (EPCM) contractors. Alba's contribution to the economy is expected to increase from 8% to approximately 12% as a result of the expansion project.

Earlier, in 2003, Alcoa (US) entered into a Memorandum Of Understanding (MOU) with Alba to acquire Bahraini governments strategic stake of 26% at the aluminum smelter. The understanding was that Alcoa will be responsible for adding the sixth potline and supply of alumina feedstock on a long-term basis. However, the deal fell apart in 2004, due to legal and financial tangles.

According to the CEO, Alba recorded sales of USD 888 Mn and net income of USD 270 Mn in 2004. The fifth potline expansion is expected to give further fillip to sales and net income targeted at USD 1,303 Mn and USD 309 Mn respectively during 2005 while in 2006, sales and net income is estimated to reach USD 1,416 Mn and USD 368 Mn respectively.

With the full commissioning of the fifth potline and further plans to expand the sixth potline, Alba’s contribution to the Bahraini economy will play a prominent role, going forward.

Manufacturing Sector - Value Addition to GDP

343358

375405

439

2000 2001 2002 2003 2004*9.5

10.0

10.5

11.0

11.5

12.0

12.5

Manufacturing, BD Mn Contribution, %




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Infrastructure

Privatization of the utility sector In April this year, the government approved the privatization of the Hidd power (phase I and II with a capacity of 1,050 MW and implementation of phase III) and desalination complex (with an additional capacity of 60 Mn gallons a day – g/d). The decision to further privatize the utility sector follows the success of Bahrain’s first independent power project (IPP), Al-Ezzal, in 2004 which was awarded to Belgium’s Tractebel and Kuwait’s Gulf Investment Corporation.

With the sale of Hidd and the ongoing implementation of the Al-Ezzal IPP, going forward, the government plans to increasingly play the role of an independent regulator and bring in the active participation of the private sector for all future power generation projects.

The government unveils plans for tourism sector As part of a wider drive to put the private sector in the forefront of economic development, the government has approved a proposal for the establishment of a BD 250 Mn company to acquire stakes in the country’s tourism projects. About BD 100 Mn of capital will be accounted for by the state’s tourism assets, while the rest will be sold to the public through an initial public offering (IPO).

The government’s shares will be transferred in the project companies for Durrat al-Bahrain (USD 1.3 Bn project), Al-Areen Desert Spa and Resort and Lulu Island, in addition to the Southern Area Development Company, Bahrain Family Leisure Company and Seef Properties. According to a government official, the tourism assets which will come under the umbrella of the new company will be managed by the private sector on a commercial basis.

Batelco leads the telecom sector Bahrain Telecommunications Company – Batelco was established in 1981 as a Bahraini shareholding company. Batelco’s major shareholders representing 80% of the capital include the Government of Bahrain, quasi-government institutions, leading financial and commercial companies, and retail shareholders – Bahraini and GCC citizens, while the

remaining 20% of the shares is held by Cable & Wireless, U.K, which provides support, advice and assistance.

Batelco is a dominant player in the Bahrain telecom space and also plays an active role in the overseas markets through participation in key investment initiatives for developing regional and international telecommunications amongst the GCC states and other countries. Over the last few years, the company has entered in joint ventures in Bahrain, Kuwait, Saudi Arabia, Jordan and Egypt for the providing Internet access and data communications services.

Batelco has unveiled a new initiative – Broadband Bahrain and plans to invest BD 21 Mn (USD 55.1 Mn) over the next three-five years in improving internet infrastructure, rolling out Wi-Fi services and developing multi-protocol label switching (MPLS) services.

Batelco posts good performance in 2004 Batelco’s gross revenues in 2004 were up by 6% to BD 203.76 Mn compared to BD 192.12 in the previous year. During the same period, net profits rose by 36% to BD 82.6 Mn compared to BD 60.66 while earnings per share (EPS) increased by a similar percentage to BD 0.83 from BD 0.61 in 2003. Batelco has done well in the first year of dealing with competition from MTC-Vodafone in the local mobile market.

Competition to intensify Going forward, competition is likely to intensify further, when the Telecom Regulatory Authority (TRA) is likely to award a third mobile licence by the end of 2005. With a total population of around 720,000 in Bahrain, Batelco has around 530,000 mobile customers while MTC-Vodafone in its first year of operations has managed to attract around 100,000 customers.

The government completed the two year liberalization program of the telecom sector in July 2004. Kuwait’s MTC-Vodafone was the second GSM operator that was granted license to operate in mobile telephony market along with Batelco. The license was given in late 2003 for a period of 15 months.




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Liberalization of port services According to reports from MEED, in April this year, four international companies submitted bids to operate the Mina Salman and the new Khalifa bin Salman port under construction at Hidd. The four bidders include: Denmark’s Maersk; Hong Kong’s Hutchison Port Holdings; the Philippines’ International Container Terminal Services; and the UK’s Mersey Docks & Harbour. The terms of the contract include a 25-year concession and the successful bidder will commit to invest BD 25 Mn over the course of the contract. On completion of the work at Hidd, due in 2006, most of the ageing facilities at the Mina Salman port will be shifted to the new port.

Bahrain Financial Harbour – BFH Over the years, Bahrain has been described as the financial services hub of the Gulf owing to the openness and strength of its banking and financial services sector. In an attempt to further strengthen its position as the hub of financial services, Bahrain Financial Harbour – BFH, an ambitious project estimated at USD 1.3 Bn was launched by a group of investors lead by Gulf Finance House.

The implementation of the BFH project (encompassing the Diamond Tower and the Financial Mall) though has seen some delays; the first phase (construction of the financial center) is expected to be complete by the end of 2006. The construction of the Diamond Tower is expected to be complete by the middle of 2007.




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Banking

Economic Value Addition to GDP

(In BD million) 2000 2001 2002 2003 2004*

Financial Institutions (FI's) 168 165 186 205 225

Offshore FI's 345 296 290 434 612

Insurance 128 95 83 134 182

Financial Sector 640 557 559 772 1,018

GDP 2,997 2,981 3,176 3,647 4,141

Contribution to GDP, % 2000 2001 2002 2003 2004*

Financial Institutions (FI's) 5.6 5.5 5.9 5.6 5.4

Offshore FI's 11.5 9.9 9.1 11.9 14.8

Insurance 4.3 3.2 2.6 3.7 4.4

Financial Sector 21.4 18.7 17.6 21.2 24.6


The value added in the financial sector (the highest contributor to Bahrain’s GDP among non-oil sectors) rose by BD 246.3 Mn; up by 32% to BD 1018.5 Mn, accounting for 24.6% of the GDP in 2004 (21.2% in 2003). Over the last few years, the number of players in the banking sector has significantly increased. Currently the banking sector comprises; 24 Full Commercial Banks (FCBs), 52 Offshore Banking Units (OBUs), 36 Investment Banks (IBs) and 2 Specialized Banks (SBs). Dominance of these institutions has resulted in (a) competitive banking environment (b) improved efficiency of banks’ performance (c) increase in the size of total banks’ consolidated balance sheet (d) fulfillment of Bahrain’s commitment to free trade in banking and financial services.

Balance sheet; significant growth in last 2 years

Consolidated Balance Sheet – Full Banking* system

(USD million) 2001 2002 2003 2004 1Q05

Assets

Banks @ 5,772 5,383 6,966 8,681 8,822

Private Non-Banks 4,480 5,028 5,506 7,033 7,454

General Govt. # 992 960 1,382 1,787 1,860

Other Assets 569 618 693 731 773

Foreign Assets 90,917 62,007 86,388 100,682 100,341

Total Assets 102,730 73,996 100,935 118,913 119,250

Liabilities

Banks @ 5,266 4,713 6,055 7,622 7,714

Private Non-Banks 6,447 6,792 7,520 7,797 8,300

General Govt. # 1,744 1,698 2,084 2,694 2,622

Other Liabilities 2,136 2,643 2,888 4,108 4,904

Foreign Liabilities 87,136 58,149 82,387 96,692 95,710

Total Liabilities 102,730 73,996 100,935 118,913 119,250

Source: Bahrain Monetary Agency (BMA) * Balance Sheet excluding BMA @ Banks includes Central Monetary Authorities # Central Government and the Social Insurance System

During the period 2002-2004, the aggregate balance sheet of the banking system achieved a remarkable growth (following a slump in 2002) driving the aggregate to USD 118.9 Bn in 2004 compared to USD 74 Bn in 2002 registering a CAGR of 26.8%.

The consolidated balance sheet of the banking system (comprising FCBs, OBUs and IBs) increased by USD 336.7 Mn or 0.28% to reach USD 119.2 Bn (new record level) as of 1Q05 compared to USD 118.9 Bn in 2004. Total domestic assets (mainly comprising banks and private non-banks) stood at USD 18.9 Bn (1Q05) accounting for 15.9% of the total assets, compared to USD 18.2 Bn in 2004 while foreign assets marginally deccreased to USD 100.3 Bn (1Q05) accounting for 84.1% of the total assets.

Total domestic liabilities stood at USD 23.5 Bn as of 1Q05 accounting for 19.7% of the total liabilities compared to USD 22.2 Bn in 2004 while foreign liabilities marginally dropped to USD 95.7 Bn in 1Q05 (accounting for 80.3% of the total liabilities) compared to USD 96.7 Bn in 2004.

Consolidated Balance Sheet – Full Commercial Banks

(BD Mn) 2001 2002 2003 2004 1Q05

Assets

Cash 27 32 40 40 35

BMA 151 172 264 256 290

Banks @ 629 542 604 782 750

Private Non-Banks # 1,411 1,607 1,754 2,173 2,272

General Govt - Loans 116 108 154 207 209

General Govt - Securities 217 203 258 311 327

Other Assets 80 83 129 136 155

Foreign Assets 1,251 1,274 1,398 1,594 1,591

Total Assets 3,882 4,022 4,602 5,498 5,629

Liabilities

BMA 32 44 66 62 97

Banks 315 233 258 446 529

Private Non-Banks * 2,195 2,314 2,566 2,665 2,834

General Government * 428 441 514 680 635

Other Liabilities 44 54 77 108 160

Capital & Reserves 312 358 388 464 520

Foreign Liabilities ^ 557 578 733 1,074 855


Source: Bahrain Monetary Agency (Figures in the above table are rounded) @ Includes Head Office and Affiliates # Loans and Holdings of securities * Includes some non-deposit (non-monetary) liabilities ^ Includes Capital and Reserves




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Balance sheet inches by 2.4% in 1Q05 The aggregate balance sheet of FCB’s rose by 2.4% to BD 5.6 Bn as of 1Q05 compared to BD 5.5 Bn in 2004. This growth resulted from a confluence of several factors, chief among them was the marked increase in the balances of private non-bank deposits (up by BD 158.5 Mn or 6.0% to reach BD 2.8 Bn) on the liabilities side. Against this growth, domestic assets of commercial banks, in particular, claims on the private non-banks increased by BD 98.9 million or 4.6% to BD 2.3 Bn.

2004 reflects close to 20% growth over 2003 The aggregate balance sheet of FCB’s registered a growth of 19.5% (highest growth over the last 10 years) to BD 5.5 Bn as of 2004 compared to BD 4.6 Bn in 2003. During the period 1995-2004, the aggregate balance sheet of commercial banks grew by a healthy CAGR of 8.9%.

Select Banking Indicators, % 2001 2002 2003 2004 1Q05

Loans to Non-Banks/ Total Assets 37.3 40.5 39.1 40.6 41.1

Loans to Non-Banks/ Total Deposits 53.3 57.4 55.7 61.9 64.6

Foreign Assets/ Total Assets 32.2 31.7 30.4 29.0 28.3

Foreign Liabilities/ Total Liabilities 14.3 14.4 15.9 19.5 15.2

Total Deposits/ Total Liabilities 70.0 70.6 70.1 65.6 63.7Source: Bahrain Monetary Agency

Commercial Banks loans and advances

Value, BD Mn

Sectors Value % Value % Value %

Business 837.1 46.5% 1,008.6 45.2% 1,036.8 44.8%

Manufacturing 251.1 14.0% 298.2 13.4% 283.6 12.2%

Mining and Quarrying 1.0 0.1% 2.3 0.1% 2.9 0.1%

Agriculture, Fishing and Dairy 6.3 0.4% 8.5 0.4% 7.7 0.3%

Construction and Real Estate 165.8 9.2% 187.1 8.4% 204.4 8.8%

Trade 286.2 15.9% 341.3 15.3% 365.9 15.8%

Non-Bank Financial 41.1 2.3% 71.0 3.2% 71.3 3.1%

Transportation & Communication 15.1 0.8% 41.5 1.9% 47.4 2.0%

Hotels & Restaurants 26.7 1.5% 27.5 1.2% 24.3 1.0%

Other Sectors 43.8 2.4% 31.2 1.4% 29.3 1.3%

General Government 154.3 8.6% 207.4 9.3% 209.0 9.0%

Personal 807.5 44.9% 1,014.7 45.5% 1,069.8 46.2%

Total 1,798.9 100% 2,230.7 100% 2,315.6 100%

Mar-0520042003

Source: Bahrain Monetary Agency

Bank credit – Key indicator of economic activity Changes in the level of bank credit (loans and advances) to various sectors are essential indicators of the economic activity, in general, particularly the role of banking sector in managing the value and relative distribution of available credit on one hand, and the development of the role of commercial banks as a source of funding for domestic economic activity on the other hand. The significance of following up on bank credit developments is further reinforced as it constitutes a major portion of funds made available to commercial banks that accounted for 40.6% and 41.1% of FCB’s total assets at end of 2004 and at end of 1Q05 respectively. (See select banking indicators).

High consumer confidence drives personal loans Total loans and advances extended by commercial banks to various domestic sectors increased by 3.8% during 1Q05 and stood at BD 2.31 Bn compared to BD 2.23 Bn as of end 2004. Growth in lending continued during 1Q05 underpinned by low interest rates and sustained higher oil prices boosting the consumer confidence. Bank credit continues to rise driven by the personal loans that accounts for 46.2% of the total lending – is up by 5.4%, followed by borrowings from construction and real estate sector that accounts for about 9% - is up by 9.2% while trade sector which accounts for about 16% - is up by 7.2%.

Buoyant economy - Lending up by 24% in 2004 Despite the increase in interest rates, borrowings by various economic segments increased by 24% and stood at BD 2.23 Bn compared to BD 1.79 Bn in 2003. Over the period last three years (2002-04), credit to the personal loan segment increased rapidly from about 0.68 Bn to more than 1 Bn and its share in total borrowings steadily increased from 41.6% to 45.5%. Growth in lending, in particular, the personal loans segment has seen a sharp rise mainly attributed to the banks preference and ability to lend at higher interest rates and earn net interest margins to this segment compared to lending to the business segment where the spreads are lower. Buoyancy in the level of economic activity is clearly visible. Apart from the personal loans, borrowings from the government also increased steadily that accounts for more than 9% of the total borrowings in 2004 compared to 6.7% in 2002. Other key business segments – Trade (15.3% of the total borrowings), manufacturing (13.4%), construction and real estate




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(8.4%) all increased their borrowings ranging between 13-19% in 2004 over the previous year.

BMA tightens consumer finance lending Seeing the rapid growth in personal loans / consumer finance over the last few years, the Bahrain Monetary Agency (BMA) as a measure of prudence tightened the norms for lending in consumer finance effective from 24th January 2005. Bahraini banks are now required to maintain higher levels of disclosure and pay greater attention to individual indebtedness, under new regulations governing the consumer credit business. According to the Executive Director, Banking Supervision at the BMA, the new regulations are enforced to achieve more responsible lending as well as borrowing.

BMA defines consumer finance as any form of credit facility, such as an overdraft, credit card, personal loan or lease, to an individual or a family excluding loans secured against residential property or loans for business activities.

Highlights of the new regulations include limiting an individual’s total consumer finance repayments to a maximum of 50% of a person’s gross monthly income, while the tenor of a loan has been capped at 7 years.

Further regulations aimed at transparency The regulations also introduce, for the first time, a uniform methodology for calculating the total cost of credit to the borrower. The Annual Percentage Rate (APR) is commonly used to calculate the annual cost of loans, taking into consideration all additional charges, such as insurance and documentation/processing fees, besides the interest rate applied. APRs will enable consumers to understand the true cost of a loan and to easily compare the offers made by different banks. Banks will also be required to use the APR for any advertising they undertake for consumer credit, to enable consumers to compare like-for-like.

Offshore Banking Units

Sustainable growth after the end of Iraq war

USD Mn 2001 2002 2003 2004 1Q05

Assets

Banks 3,299 3,022 3,906 5,040 5,213

Private Non-Banks 529 534 554 937 960

General Govt 100 119 263 377 392

Other Assets 261 294 236 224 229

Foreign Assets 84,182 54,847 78,423 91,520 91,194

Total Assets 88,371 58,816 83,382 98,097 97,989

Liabilities

Banks 4,025 3,561 4,875 5,743 5,343


General Govt 437 352 473 633 679

Other Liabilities 669 998 1,089 1,707 2,182




Total assets of Offshore Banking Units (OBUs) stood at USD 97.9 Bn as of 1Q05, a marginal decline of 0.1% from end 2004. A flat 1Q05 of OBUs should be viewed in light of the large jumps seen in 2003 (up by 41.8%) and 2004 (up by 17.6%). Total assets of OBUs as of 1Q05 are higher by 66.6% compared to 2002.

During the period 2002-2004, total assets of OBUs registered a CAGR of 29% to reach USD 98 Bn from USD 58.8 Bn. This growth is mainly attributed to (a) Stability in the geo-political situation in the region subsequent to end of Saddam Hussein’s dictatorial regime in Iraq (b) Positive business and economic conditions on the back of higher oil prices and (c) Depreciation of the US Dollar.




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Investment Banks

Consistent growth over the last four years

USD Mn 2001 2002 2003 2004 1Q05

Assets

Banks 328 376 647 774 749


General Govt 4 12 21 33 41

Other Assets 96 104 114 146 131

Foreign Assets 3,408 3,772 4,246 4,924 4,916

Total Assets 4,034 4,485 5,313 6,193 6,290

Liabilities

Banks 318 415 319 528 706


General Govt 170 173 243 252 255


Foreign Assets 2,843 3,156 3,950 4,233 4,174



The consolidated balance sheet of investment banks rose to a 10-year high to USD 6.3 Bn as of 1Q05. Over the last four years (2000-04) assets of investment banks registered a CAGR of 16.3% to reach USD 6.2 Bn compared to USD 3.4 Bn as of 2000.

Islamic Banks*

Rapid growth in assets

USD Mn 2001 2002 2003 2004 1Q05

Assets

Cash 4 7 10 13 13

Banks 734 774 1,092 1,148 1,459

Private Non-banks 334 439 679 1,023 1,234

General Govt 22 52 106 121 133

Other Assets 68 87 190 232 193

Foreign Assets 1,297 1,553 2,080 2,899 3,052

Total Assets 2,458 2,912 4,157 5,434 6,083

Liabilities

Banks 117 258 430 818 1,039

Private Non-banks 654 793 1,009 1,097 1,277

Genral Govt 18 18 67 154 154


Capital & Reserves 404 536 678 1,057 1,132



Source: Bahrain Monetary Agency * Includes FCB’s, OBU’s and IB’s

Total assets of Islamic banks continued to rise during 2005. Total assets increased by 11.9% to USD 6.1 Bn compared to USD 5.4 Bn as of end 2004. During the period 1998-04, Islamic banks registered a CAGR of

some 26% to reach USD 5.4 Bn from USD 1.3 Bn in 1998. Fundamental for this unhindered and rapid growth may be attributed to the various efforts undertaken by the Bahraini government to develop and position the country as an International Islamic Banking Center in the region.

Islamic banking penetration

Source: Bahrain Monetary Agency, KMEFIC Research

Islamic banking penetration of total banking assets (total assets of banking system plus total assets of Islamic banks) has seen rapid growth since 1998. As of 1Q05, assets of Islamic banks accounted for 4.9% of total banking assets compared to 1.3% in 1998. Going forward, these penetration levels are expected to further increase on the back of increasing awareness and growing acceptance of Islamic products by customers and underlying asset volume growth.

Islamic banking assets to total banking assets, %

4.9

4.4

4.03.8

2.3

1.81.61.3

1998 1999 2000 2001 2002 2003 2004 1Q05




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Real Estate and Construction

Contribution – A shade lesser than 13%

Source: Ministry of Finance

Real estate and construction activity has been brisk favored by the overall economic and political conditions. Buoyancy in the sector is mainly attributed to (a) strong growth in government capital spending (b) boom in private investment (c) abundant liquidity in Bahrain and the regional economies and (d) reforms in the real estate sector leading to liberalization of property ownership. Reforms include (1) GCC citizens to own properties across Bahrain and (2) Non-GCC citizens to own properties in select areas in Bahrain.

The number of commercial licenses issued to the construction sector reached 292 licenses in 2002 (Recording a 235.6% y-o-y growth) and 624 licenses in 2003 (recording a 113.7% y-o-y growth). In the first three quarters of 2004, 195 commercial licenses were issued to the construction sector compared to 435 licenses issued during the same period in previous year recording a decline of 55.2%. However, this decline should be viewed in light of the sharp growth in 2002 and 2003. The commercial licenses issued to real estate, rentals and associated activities reached to 428 in 2002 (recording a 31.7% y-o-y growth) and 610 in 2003 (recording a 42.5% y-o-y growth). In the first three quarters of 2004, 517 commercial licenses were issued to real estate, rentals and associated activities recording an increase of 14.4% compared to the same period previous year.

Key Indicators – Boom Since 2002

Commercial licenses issued

2001 2002 2003 1Q 2Q 3Q

Construction Sector 87 292 624 145 26 24

Real Estate, Rentals & Associated Activities 325 428 610 161 180 176

2004


Construction permits issued

District 2001 2002 2003 1Q 2Q 3Q

Manama 1,033 1,237 1,256 330 373 359

Middle 659 2,619 2,678 636 672 694

Muharraq 95 1,405 1,593 430 454 399

Northern 2,008 3,120 3,162 830 875 788

Southern 49 255 346 76 114 96

Total 3,844 8,636 9,035 2,302 2,488 2,336

2004


New construction permits and additions see growth

2001 2002 2003 1Q 2Q 3Q

Addition 1,091 3,219 3,943 908 1,121 1,241

Demolition & New Construction 94 244 191 59 50 34

New Construction 2,118 4,291 4,153 1,140 1,100 863

Renovation 541 882 748 195 217 198

Construction permits 3,844 8,636 9,035 2,302 2,488 2,336

Demolition 148 269 429 122 116 125

Reclamation 2 26 53 12 11 20

Total 3,994 8,931 9,517 2,436 2,615 2,481

2004


Value traded and number of permits

2001 2002 2003 1Q 2Q 3QTotal Value Traded land

Permits (BD '000) 196,482 246,949 329,562 82,917 102,833 130,519

Total Number of Permits 13,432 14,987 16,084 3,932 4,893 4,117

2004


Infrastructure spending – Growth Catalyst Going forward, growth in the real estate and construction activities is expected to continue on the back of (a) growth in government capital spending in infrastructure (b) anticipated increase in liquidity levels driven by the soaring oil prices and (c) anticipated growth in population.

Real Estate & Construction - Value Addition to GDP

380405

438460

528

2000 2001 2002 2003 2004*10

11

12

13

14

15

16

Real Estate & Const., BD Mn Contribution, %

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Real Estate and Construction

Contribution – A shade lesser than 13%

Source: Ministry of Finance

Real estate and construction activity has been brisk favored by the overall economic and political conditions. Buoyancy in the sector is mainly attributed to (a) strong growth in government capital spending (b) boom in private investment (c) abundant liquidity in Bahrain and the regional economies and (d) reforms in the real estate sector leading to liberalization of property ownership. Reforms include (1) GCC citizens to own properties across Bahrain and (2) Non-GCC citizens to own properties in select areas in Bahrain.

The number of commercial licenses issued to the construction sector reached 292 licenses in 2002 (Recording a 235.6% y-o-y growth) and 624 licenses in 2003 (recording a 113.7% y-o-y growth). In the first three quarters of 2004, 195 commercial licenses were issued to the construction sector compared to 435 licenses issued during the same period in previous year recording a decline of 55.2%. However, this decline should be viewed in light of the sharp growth in 2002 and 2003. The commercial licenses issued to real estate, rentals and associated activities reached to 428 in 2002 (recording a 31.7% y-o-y growth) and 610 in 2003 (recording a 42.5% y-o-y growth). In the first three quarters of 2004, 517 commercial licenses were issued to real estate, rentals and associated activities recording an increase of 14.4% compared to the same period previous year.

Key Indicators – Boom Since 2002

Commercial licenses issued

2001 2002 2003 1Q 2Q 3Q

Construction Sector 87 292 624 145 26 24

Real Estate, Rentals & Associated Activities 325 428 610 161 180 176

2004


Construction permits issued

District 2001 2002 2003 1Q 2Q 3Q

Manama 1,033 1,237 1,256 330 373 359

Middle 659 2,619 2,678 636 672 694

Muharraq 95 1,405 1,593 430 454 399

Northern 2,008 3,120 3,162 830 875 788

Southern 49 255 346 76 114 96

Total 3,844 8,636 9,035 2,302 2,488 2,336

2004


New construction permits and additions see growth

2001 2002 2003 1Q 2Q 3Q

Addition 1,091 3,219 3,943 908 1,121 1,241

Demolition & New Construction 94 244 191 59 50 34

New Construction 2,118 4,291 4,153 1,140 1,100 863

Renovation 541 882 748 195 217 198

Construction permits 3,844 8,636 9,035 2,302 2,488 2,336

Demolition 148 269 429 122 116 125

Reclamation 2 26 53 12 11 20

Total 3,994 8,931 9,517 2,436 2,615 2,481

2004


Value traded and number of permits

2001 2002 2003 1Q 2Q 3QTotal Value Traded land

Permits (BD '000) 196,482 246,949 329,562 82,917 102,833 130,519

Total Number of Permits 13,432 14,987 16,084 3,932 4,893 4,117

2004


Infrastructure spending – Growth Catalyst Going forward, growth in the real estate and construction activities is expected to continue on the back of (a) growth in government capital spending in infrastructure (b) anticipated increase in liquidity levels driven by the soaring oil prices and (c) anticipated growth in population.

Real Estate & Construction - Value Addition to GDP

380405

438460

528

2000 2001 2002 2003 2004*10

11

12

13

14

15

16

Real Estate & Const., BD Mn Contribution, %




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Monetary Policy

Monetary system flush with liquidity driven by growth in money supply

(In BD million) 1999 2000 2001 2002 2003 2004 1Q05

Currency in Circulation (1) 160.3 154.2 149.9 174.2 196.1 213.3 210.8

Currency held by Banks (2) 47.3 33.5 27.0 32.2 40.3 39.6 34.9

Currency Outside Banks (3)=(1)-(2) 113.0 120.7 122.9 142.0 155.8 173.7 175.9

Demand Deposits (4) 313.2 325.0 429.1 505.2 665.6 687.4 778.5

Money Supply (M1) (5)=(3)+(4) 426.2 445.7 552.0 647.2 821.4 861.1 954.4

Quasi Money (6) 1,530.5 1,711.0 1,804.0 1,952.4 1,943.6 2,018.5 2086.9

Money Supply (M2) (7)=(5)+(6) 1,956.7 2,156.7 2,356.0 2,599.6 2,765.0 2,879.6 3041.3

Deposits General Government (8) 432 445.9 427.7 440.9 513.6 666.2 655.2

Money Supply (M3) (9)=(7)+(8) 2,388.7 2,602.6 2,783.7 3,040.5 3,278.6 3,545.8 3696.5


Y-o-Y Growth in Liquidity levels

Money Supply 99-00 00-01 01-02 02-03 03-04 1Q05

Currency in Circulation -3.8% -2.8% 16.2% 12.6% 8.8% -1.2%

Demand Deposits 3.8% 32.0% 17.7% 31.7% 3.3% 13.3%

M1 4.6% 23.9% 17.2% 26.9% 4.8% 10.8%

Quasi Money 11.8% 5.4% 8.2% -0.5% 3.9% 3.4%

M2 10.2% 9.2% 10.3% 6.4% 4.1% 5.6%

M3 9.0% 7.0% 9.2% 7.8% 8.1% 4.3%

Source: Bahrain Monetary Agency * 1Q05 Growth represents Q-o-Q compared to End 2004.

Interest rates move up - drives demand deposits The narrow money supply measured by M1 increased by close to 11% in 1Q05 driven mainly by more than 13% growth in demand deposits. On the contrary, time and savings deposits (Quasi money) which offer lower returns registered a tepid growth of 3.4%.

Broad money supply expands: Reflects buoyancy Broad money supply measured by M2 registered a growth of 5.6% in 1Q05 (Q-o-Q) compared to end 2004. Also, M2 recorded the highest increase (in the last eight years) of more than 11% in 1Q05 (Y-o-Y) compared to 1Q04 reflecting the confidence in the economy owing to higher oil prices.

Interest Rates – Steadily rise since 1Q04 The weighted average time deposit rate (3-12 months) inched up sharply from 0.68% (Q403) to 1.96% (Q404) and 2.62% in 1Q05. This increase was in line with the ascending interest rate environment in the US, as Bahrain Dinar is pegged to US dollar since 1980. Similarly, lending rates also rose both for business as well as personal loans in the last three quarters.

Interest rates on Bahraini deposits and loans

2005

Percent Per Annum Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1

Deposits

Savings 0.36 0.32 0.26 0.26 0.28 0.29 0.27 0.35 0.31

Less than 3 months 0.74 0.53 0.53 0.52 0.56 0.74 1.19 1.63 2.21

3-12 months 0.79 0.53 0.58 0.68 0.64 1.00 1.42 1.96 2.62

Business Loans

Real Estate 4.92 5.46 5.88 4.99 6.19 5.99 6.38 5.47 5.38

Manufacturing 5.06 4.68 4.05 4.20 4.87 8.63 4.53 4.60 5.53

Trade 5.35 5.44 5.75 4.90 5.09 4.72 4.65 4.93 5.06

Personal Loans

Secured by Mortages 7.63 7.77 7.34 7.57 6.92 6.43 6.04 6.82 7.47

Secured by Deposits 5.56 5.97 6.19 5.70 5.91 5.57 6.01 6.59 7.02

Unsecured 8.50 8.53 8.60 7.93 7.95 8.08 8.15 7.77 8.22

2003 2004


Public Debt – Move towards Islamic instruments The government continued to regulate the levels of domestic liquidity through the issuance of public debt instruments reducing its borrowings from conventional instruments and increasing the borrowings from Islamic instruments.

Domestic public debt – Conventional instruments

BD Mn

Year Matured New Issue Balance Matured New Issue Balance

1999 40 140 257 840 840 225 482

2000 - 100 357 655 650 220 577

2001 40 - 317 600 570 190 507

2002 21 - 296 520 490 160 456

2003 156 - 140 500 470 130 270

2004 140 - - 460 460 130 130

Development Bonds Treasury Bills Outstanding Balance





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Over the last four years, the conventional borrowings by the government (Development Bonds and Treasury Bills) steadily declined from BD 577 Mn to BD 130 Mn. The conventional borrowings by the government fell by BD 140 Mn to BD 130 Mn as of 2004 compared to BD 270 Mn in the previous year due to liquidation of the development bonds. The short-term treasury bills remained at BD 130 Mn throughout 2003 and 2004. Since 2001, the government has relied on Islamic Instruments to fund its requirements that increased from about BD 66 Mn to more than BD 450 Mn in 2004.

Domestic public debt – Islamic instruments

BD Mn

Year Matured New Issue Balance Matured New Issue Balance

2001* - 37.6 37.6 37.6 65.8 28.2 65.8

2002 - 75.2 112.8 112.8 112.8 28.2 141.0

2003 - 180.5 293.3 112.8 112.8 28.2 321.5

2004 - 134.0 427.3 112.8 112.8 28.2 455.5

Islamic Leasing Securities Al Salam Islamic Securities

Balance


BD Exchange Rates – Pegged to USD Bahrain maintains a fixed exchange rate against the U.S. dollar. In December 1980 the Bahraini Dinar was officially pegged to the IMF’s Special Drawing Rights (SDRs). As the US Dollar (USD) is the main component of the SDR currency basket, the Bahraini Dinar has not fluctuated from the fixed rate of BD 0.376 to the USD since the establishment of the SDR peg. In 2001, the official peg of the Bahrain Dinar was changed to USD at the historical rate. At the same time, Bahrain and the other GCC countries all agreed to establish a USD peg for their currencies as a first step towards creating a GCC Monetary Union, scheduled for 2010.

Inflation Trends

From deflation to inflation

Source: Ministry Of Finance * EIU Forecast

After witnessing deflationary trends between 1998 and 2002, for the first time in five years, the Consumer Price Index (CPI) rose by 1.6% in 2003. EIU forecasts inflation at 4.9% in 2004 on the back of strong rise in government spending stimulated by domestic demand. EIU further adds that the weakening of the USD against the Euro will also push the inflation rates higher underpinned by increasing cost of imports from Europe.

Y-o-Y Change in CPI, %

-2%

-1%

0%

1%

2%

3%

4%

5%

6%

1998 1999 2000 2001 2002 2003 2004*




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Population and Employment

Population – Steadily rising

Year Bahraini Non-Bahraini Total Bahraini Non-Bahraini Total

1997 370.4 218.7 589.1 2.4% 3.1% 2.7%

1998 379.4 225.4 604.8 2.4% 3.0% 2.7%

1999 388.7 232.3 621.0 2.4% 3.0% 2.7%

2000 398.2 239.4 637.6 2.4% 3.1% 2.7%

2001 408.0 246.7 654.6 2.4% 3.0% 2.7%

2002 417.9 254.2 672.1 2.4% 3.1% 2.7%

2003 428.0 261.5 689.4 2.4% 2.9% 2.6%

2004 438.2 269.0 707.2 2.4% 2.9% 2.6%

Population ('000) Percentage Growth

Source: Central Informatics Organization

Over the last few years, Bahrain’s total population has consistently risen by 2.7% per annum. The consistent growth in total population was the outcome of steady growth in local Bahraini population (up 2.43% per annum) coupled with steady increase in Non-Bahraini population (around 3% per annum). Bahrain’s total population stood at 0.707 million as of end 2004, higher by 2.6% over the previous year.

Bahraini population shrinks

Year Bahraini Non-Bahraini

1997 62.9% 37.1%

1998 62.7% 37.3%

1999 62.6% 37.4%

2000 62.5% 37.5%

2001 62.3% 37.7%

2002 62.2% 37.8%

2003 62.1% 37.9%

2004 62.0% 38.0%


The distribution pattern of total population shows a steady decline in the Bahraini’s comprising 0.438 million or 62.0% of total population as of end 2004 compared to 62.9% as of end 1997.

Male population accounts for 57%

1997 1998 1999 2000 2001 2002 2003 2004

Bahraini Males/ Local Bahraini 50.5 50.5 50.5 50.5 50.4 50.4 50.4 50.4

Bahraini Females/ Local Bahraini 49.5 49.5 49.5 49.5 49.6 49.6 49.6 49.6

Non-Bahraini Males/ Non-Bahraini 69.6 69.4 69.3 69.1 68.9 69.0 69.0 69.0

Non-Bahraini Females/ Non-Bahraini 30.3 30.5 30.7 30.9 31.1 31.0 31.0 31.0

Total Males/ Total Population 57.6 57.5 57.5 57.4 57.4 57.5 57.5 57.5

Total Females/ Total Population 42.4 42.4 42.5 42.6 42.6 42.5 42.5 42.5


Young population

Demographic profile 2000 2001 2002 2003

Population Under Age 15 178,815 180,974 187,105 190,107

Population Above Age 65 15,975 16,586 16,869 17,376


Between the years (2000-2003), the demographic segmentation of Bahrain’s total population shows that around 28% of total population was below the age of 15 and only around 2.52% of the population was above 65 years of age.

Expatriates dominate private sector

2000 2001 2002 2003 2004 1Q05

Total Employment * 189,985 205,168 229,879 249,493 285,390 292,550

As % of Total Population 29.8% 31.3% 34.2% 36.0% 40.4% 41.4%

Change (%) 5.2% 8.0% 12.0% 8.5% 14.4% 2.5%

Private Sector 158,828 173,090 195,889 212,964 247,814 255,894

As % of Total Employment 83.6% 84.4% 85.2% 85.4% 86.8% 87.5%

Bahraini 51,173 55,059 57,794 62,279 66,229 67,192

Non-Bahraini 107,655 118,031 138,095 150,685 181,585 188,702

Public Sector ** 31,157 32,078 33,990 36,529 37,576 36,656

As % of Total Employment 16.4% 15.6% 14.8% 14.6% 13.2% 12.5%

Bahraini 28,125 29,085 30,742 33,034 33,754 33,024

Non-Bahraini 3,032 2,993 3,248 3,495 3,822 3,632

* Registered at GOSI and Civil Service Bureau ** Excluding Ministry Of Interior and Bahrain Defense Force

Unemployment – Socio-economic problem According to some reports, two out of every three new job goes to the expatriates while one out of eight Bahraini is out of work. Expatriates dominate the private sector while Bahraini’s dominate the smaller public sector jobs. The Bahrainisation strategy of replacing the expatriates with local workers has not worked and unemployment continues to be an issue. According to the Economic Development Board, unemployment rate is currently between 13-16%. Mckinsey in a study has cautioned that with some 100,000 Bahraini’s entering the job scene in the next decade could see unemployment soar to as high as 35%. Following the recommendations from Mckinsey, the government has initiated labor reform programs with a steep fee structure of BD 100 per month on expatriates intended at discouraging foreign work force and thereby creating opportunities for Bahraini’s. The moot point is – will this work and benefit the economy in the long run. We are not too optimistic.




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Economic Targets: Vision 2015

EDB revamped and to play a prominent role The Economic Development Board – EDB since its inception in 2000 till May this year, had played a lesser role in the governments economic strategic planning under the supervision of the conservative prime minister, Sheikh Khalifa. However, with the reshuffling of the cabinet in January this year; the ministry of finance and national economy was separated and the latter attached to the EDB. In May 2005, the pro-reformist Crown Prince, Salman Bin-Hamad Al-Khalifa gave the EDB a new leash of life, revamped with powers to select the board chairmen of state-controlled firms and nominate government representatives in companies in which the state has an operating interest.

Economic slogan: From red tape to red carpet Earlier, McKinsey – the world renowned US consultancy firm initiated a survey of the local businesses and identified some salient points that was hindering the investment climate and economic progress. These included bottlenecks to infrastructure, access to capital, labor, and land, government bureaucracy and red tape. Based on these recommendations, the EDB and McKinsey have summed up the economic reform program as “From red tape to red carpet”.

Economic reform vision for Bahrain In February 2005, the EDB presented its vision 2015 for Bahrain under the aegis of the Crown Prince, Salman Bin-Hamad Al-Khalifa. Bahrain’s economic aspirations were identified as: � Re-capture its leadership position as the pre-

eminent economy in the region � Become the preferred destination to create and

grow business by nationals and foreigners � To achieve a 2-3 fold increase in per capita

income by 2015.

Bahrain’s numeric targets – Envisioned by the EDB

Source: Economic Development Board, Ministry of Finance, McKinsey Analysis

Real GDP target of ~ 9%


Annual labor productivity growth target of 4-5%


Per Capita Income, BD

5,290

~ 12,000

2003 2015

From… To…

Annual Real GDP Growth, %

5%

~ 9%

2003 2015

From… To…

Annual labor productivity growth, %

1.5%

4 - 5%

2003 2015

From… To…




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Gross capital formation as % of GDP targeted at 25%


Employment growth targeted at 4-5%


Themes for economic reforms


Emerging themes Key Activities

� From red tape to red carpet

Create a business friendly climate

� Government as a regulator not operator

Reduce the role of government and stimulate growth through private sector

� Fairness and Accountability

Reform regulatory and judicial system

� Stimulate privatesector opportunities

Target initiative to stimulate private sector growth

Annual Investments as % of GDP

16%

25%

2003 2015

From… To…

Employment growth

3.7%

4 - 5%

2003 2015

From… To…




��


Economic Outlook

Oil prices – Cross USD 60 a barrel

Source: The Economist

As we write this piece, the oil prices had crossed the USD 60 a barrel. This would give further fillip to the Bahraini economy which still continues to depend heavily on oil income – despite its best efforts to diversify the economy.

Oil prices have risen and are on the rise due to a confluence of several factors – steadily increasing demand on the back of world economic recovery, secular increase in demand from the US, emerging economies; China and India and Asia as a whole, coupled with historically low excess capacity and frequent supply disruptions. In 2004, global demand for oil sharply increased by 3.3% to 2.7 mbd – the highest growth since 1976. Given this background, oil sector in all probability will continue to remain tight over the next twelve months, at least. Demand is expected to soar, but limited prospects of higher production or fresh capacity to meet this growing demand will be a suspect.

Tough the outlook for the oil prices continue to be positive, Bahraini economy looks vulnerable in the near term on the back of Saudi’s decision to withdraw the oil grants. Still, there are positives favoring the medium to long-tem outlook for the Bahraini economy which may negate the Saudi decision to a good

extent, if not fully. The manufacturing sector, oil, infrastructure, banking and financial sector and construction – all are making substantial investments in large-scale projects. These catalysts will spur the economic growth – resulting in government spending and boosting private consumption. Aluminum Bahrain (Alba) one of the largest aluminum smelters in the world is contemplating of adding the sixth potline on the back of its highly successful commissioning of the fifth potline, in May, this year. Alba’s contribution to the manufacturing sector and exports will play a key role in the economic activities, going forward.

The oil refinery up gradation at BAPCO (estimated at some USD 1 Bn), Bahrain Financial Harbor (estimated at around USD 1.3 Bn), privatization of utility sector, investments in telecom and tourism infrastructure – all of these will give the necessary economic impetus. On the whole, in 2005, we expect the real GDP to grow by some 5% similar to 2004.

On the external front, exports from the manufacturing sector, mainly from Alba, is expected to increase, also imports will grow mainly due to capital spending, but not at the same rate as exports translating to a trade surplus. Current account surplus as a percent of GDP is expected in the vicinity of 5% in 2005 compared to 3.8% in 2004. Capital and financial account is forecast to turn positive and see net inflows as the government continues its efforts to promote Bahrain as the preferred destination to invest in businesses for both national and foreigner investors.

Completion of the Bahrain Financial Harbor by 2007 would be the key growth driver to the financial sector contribution within the non-oil segment. In the banking space, a vigilant regulator – BMA, healthy balance sheets of the banks, strong demand for credit, increase in interest rates and rapid growth in Islamic finance are some solid positives to cheer.

To sum up, the near term outlook appears hazy and vulnerable – but several positives discussed above, outweigh short term fears.




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Corporate Earnings




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Corporate Earnings

Net Profit, BD ‘000

Sector 2000 2001 2002 2003 2004 2003-04 Growth

2000-04 CAGR

Commercial Banks 51,819 60,254 38,687 82,504 99,694 21% 18%

Investment 64,495 61,006 2,534 107,756 289,117 168% 46%

Insurance (30,983) (29,831) (10,028) 7,744 15,721 103% -

Services 61,396 62,956 67,064 75,853 101,727 34% 13%

Industrial 1,621 1,526 1,165 1,522 1,292 -15% -6%

Hotel & Tourism 3,696 4,719 4,575 3,911 6,653 70% 16%

Closed Companies - - - 2,053 4,136 101% -

Non-Bahraini Co. 27,032 114,984 145,036 199,470 223,096 12% 69%

Total Net Profit 179,076 275,614 249,033 480,813 741,436 54% 43%

Source: KMEFIC Research, Bahrain Stock Exchange

Solid growth in 2004 Net profits reported by the 45 companies listed on the Bahrain Stock Exchange (BSE) totaled BD 741.4 million during 2004, up by 54% over the previous year. The solid growth in performance is attributed to the investment sector; the largest contributor at 39% is up 168%. Though the insurance sector contributes to only around 2%, nevertheless the net profit is significantly higher by 103%. The other key contributors; commercial banks and services account for about 13%; are up by 21% and 34% respectively. Non-Bahraini companies account for the second highest contribution at 30% next to the investment sector and the net profit growth is benign at 12%.

Net Profit Growth in 2004 vs 2003

Growth Range Number of Companies

Negative 4

0-21% 6

22-31% 9

32-51% 4

52-71% 3

72-101% 3

>102% 8

Not Available 8

Total 45

Source: KMEFIC Research

Only four companies reported a decline in profits while nine companies grew between 22-31% and eight companies grew by more than 102%.

Compounded growth; equally impressive During the period 2000-04, the CAGR was equally impressive at 43% mainly contributed by the investment sector that posted 46% growth followed by the Non-Bahraini companies that grew by 69%.

Net Profit - Sector Contribution, %

Sector 2000 2001 2002 2003 2004

CommercialBanks 28.9 21.9 15.5 17.2 13.4

Investment 36.0 22.1 1.0 22.4 39.0

Insurance (17.3) (10.8) (4.0) 1.6 2.1

Services 34.3 22.8 26.9 15.8 13.7

Industrial 0.9 0.6 0.5 0.3 0.2

Hotel & Tourism 2.1 1.7 1.8 0.8 0.9

Closed Co. 0.0 0.0 0.0 0.4 0.6

Non-Bahraini Co. 15.1 41.7 58.2 41.5 30.1

Total Net Profit 100 100 100 100 100


Ahli United Bank (AUB) shines in performance Commercial banking sector registered a CAGR of 18%. The main catalyst for this performance came from Ahli United Bank that registered a growth of 28% with net profits increasing from BD 15.1 Mn to BD 40.2 Mn while the second best performance is demonstrated by the Bank of Bahrain and Kuwait that recorded a growth of 18% with net profits increasing from BD 13.1 Mn to BD 25.6 Mn. However, the banking sector’s contribution is sharply down from 29% to 13.4% during the same period.




��


Arab Banking Corporation (ABC) dominates the investment sector Investment sector grew by 46% and was the highest contributor at 39% during 2004 compared to 36% in 2000. During this period net profit for the sector increased from BD 64.4 Mn to BD 289.1 Mn. The key reason for this solid performance is attributed to Arab Banking Corporation that registered a 46% growth in net profit from BD 47.8 Mn to BD 218.3 Mn representing for about 75% of the sector profits in 2004. The second best performance next to ABC is lead by Shamil Bank of Bahrain that contributes about 3.8% of the sector profits and grew by an impressive compounded growth of 48% from BD 2.2 Mn to BD 10.98 Mn during 2000-04. During the same period, United Gulf Bank and Bahrain Commercial Facilities Company grew by 27% and 25% respectively.

Arab Insurance Group (ARIG) – The turnaround story Insurance sector contributes to around 2% of the total profits. This sector earlier had a negative contribution of 17% in 2000 attributed mainly to the Arab Insurance Group which incurred a net loss of BD 34 Mn. Since 2000, the company made a remarkable turnaround in its performance during each of the following four years. During 2004, Arab Insurance Group reported a net profit of BD 10 Mn contributing about 64% of the sector profits. Next to ARIG, the second highest contribution comes from Bahrain National Holding Company and the company’s net profit grew by a compounded 14% during 2000-04.

Bahrain Telecommunications Company (BATELCO) leads the services sector This sector is the third largest contributor to the total net profits at 13.7% and has seen the net profits grow from BD 61.3 Mn to BD 101.7 Mn, recording a 13% compounded growth during 2000-04. Performance of this sector mainly hinges on Bahrain Telecommunications Company that contributes to around 81% of the sector profits. BATELCO’s profits grew by 12% from BD 52.5 Mn to BD 82.6 Mn during 2000-04. The second highest contributor to the sector profits comes from Bahrain Maritime and Mercantile Company that has registered a 33% compounded growth in net profits during the same period.

Qatar Telecom (QTEL) steals the show in Non-Bahraini companies Non-Bahraini companies account for the second highest profit contribution at 30% to the total net profits. Amongst the Non-Bahraini companies, the top performance comes from QTEL that contributes around 68% of the sector profits and grew its net profit from BD 89 Mn (2001) to BD 151 Mn (2004). BankMuscat and Global Investment House are second and third highest profit contributors respectively.

Top Five Companies - 2004

Highest Earnings

Symbol Company Mn BD Rank

ABC Arab Banking Corp. 218.3 1

QTEL Qatar Telcom 151.0 2

BATELCO Bahrain Telecom 82.6 3

AUB Ahli United Bank 40.2 4

BMUSC BankMuscat 33.3 5

Largest Earnings Growth

Symbol Company Growth Rank

UGIC United Gulf Industries 896% 1

ABC Arab Banking Corp. 383% 2

TII International Investor 334% 3

ARIG Arab Insurance Group 235% 4

SICO-C Securities & Inv. Co. 164% 5





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Sector Performance – Same Company Earnings, 2004 registers robust growth but lower compared to 2003

Sector Companies Same-Company Profits (BD Mn) Same-Company profit Growth

2002 2003 2004 2002 2003 2004

Commercial Banks 5 38.7 82.5 99.7 36% 113% 21%

Investment 7 (24.9) 69.3 256.8 -156% 378% 271%

Insurance 5 (10.0) 7.7 15.7 -66% 177% 103%

Service 7 67.1 75.9 101.7 7% 13% 34%

Industrial 2 1.2 1.5 1.3 -24% 31% -15%

Hotel & Tourism 4 4.6 3.9 6.7 -3% -15% 70%

Non-Bahraini 4 113.3 149.3 194.0 36% 32% 30%

Total Market 34 189.8 390.1 675.9 -17% 106% 73%


Since 2002, same-company profits for 34 companies recorded a CAGR of 89% from BD 189.8 Mn to BD 675.9 Mn. Albeit the growth in same-company profits is impressive at 73% in 2004, still the growth rate was lower compared to 106% in 2003.

During 2004, Investment sector registered the highest earnings increase by BD 187.5 Mn or 271% followed by Insurance (up 103%), Hotel & tourism (up 70%), Service (up 34%), Non-Bahraini (up 30%) and Commercial banks (up 21.0%). Industrial was the only sector to post a decline in profits (lower by 15%) compared to 2003.

In 2004, Investment was the most profitable sector by a wide margin with total same-company profits reaching BD 256.8 Mn. Non-Bahraini was the second most profitable sector with profits amounting to BD 194 Mn, followed by Service and Commercial banks (around BD 100 Mn each).

Marked shift in contribution patterns Over the last three years, most of the same-company profits came from Investment (exception to 2002), Non-Bahraini, Commercial banks and the Service sectors. In 2004, Investment sector was the highest contributor to the total same-company profits in the market with 38% contribution followed by Non-Bahraini (28.7%), Service (15.1%) and Commercial banks (14.8%). More importantly, during 2004, there is a marked shift in contribution pattern with Investment sector accounting for 38% of total same-company profits compared to a negative contribution of 13% during 2002. This reversal in contribution from the investment sector resulted in a loss to Non-

Bahraini companies contributing significantly lower to 28.7% in 2004 compared to 59.7% in 2002.

Contribution - Investment dominates in 2004

Sectors 2002 2003 2004

Commercial Banks 20.4% 21.1% 14.8%

Investment -13.1% 17.8% 38.0%

Insurance -5.3% 2.0% 2.3%

Service 35.3% 19.4% 15.1%

Industrial 0.6% 0.4% 0.2%

Hotel & Tourism 2.4% 1.0% 1.0%

Non-Bahraini 59.7% 38.3% 28.7%

Total Market 100% 100% 100%


Same-company profits – Increase significantly


675.9

390.1

189.8227.7

2001 2002 2003 2004

-40%

-20%

0%

20%

40%

60%

80%

100%

120%

Same-Company Profits Y-O-Y Growth




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S.N. Symbol Company Name / Sector 2003 2004 GrowthCommercial Banks Sector 82,504 99,694 20.8%

1 NBB National Bank of Bahrain 22,400 28,260 26.2%2 BBK Bank of Bahrain & Kuwait 23,310 25,678 10.2%3 AUB Ahli United Bank 32,828 40,167 22.4%4 BISB Bahrain Islamic Bank 2,464 3,705 50.4%5 BSB The Bahraini Saudi Bank 1,502 1,884 25.4%

Investment Sector 107,756 289,117 168.3%6 GMG Gulf Monetary Group 3,701 N/A -7 ABC Arab Banking Corporation 45,240 218,283 382.5%8 UGB United Gulf Bank 13,662 16,329 19.5%9 INVCORP Investcorp Bank 33,985 N/A -10 BMB Bahrain & Middle East Bank (4,808) 224 104.7%11 BCFC Bahrain Commercial Facilities Co. 5,685 6,636 16.7%12 UGIC United Gulf Industries Co. 278 2,771 896.8%13 TAIB Taib Bank 794 1,539 93.8%14 SHAMEL Shamil Bank of Bahrain 8,411 10,988 30.6%15 ESTERAD Esterad Investment Co. * 9,239 -16 GFH Gulf Finance House * 21,453 -

17 TAMEER Al Khaleej Development Co. 808 1,655 104.8%

Insurance Sector 7,744 15,721 103.0%18 BKIC Bahrain Kuwait Insurance Co. 1,337 1,609 20.3%19 AHLIA Al-ahlia Insurance Co. 853 920 7.9%20 AIIC Arab International Insurance Co. N/A N/A N/A21 TAKAFUL Takaful Insurance Co. 368 46 -87.5%22 ARIG Arab Insurance Group 2,982 10,003 235.4%23 BNH Bahrain National Holding Co. 2,204 3,143 42.6%

Services Sector 75,853 101,727 34.1%24 BASREC Bahrain Ship Repairing & Eng. Co. 627 503 -19.8%25 CINEMA Bahrain Cinema Co. 1,663 2,447 47.1%26 TRAFCO General Trading & Food Process Co. 1,460 1,873 28.3%27 BMMI Bahrain Maritime & Mercn. Int. Co. 8,286 10,548 27.3%28 BATELCO Bahrain Telecommunications Co. 60,662 82,584 36.1%29 CPARK Bahrain Car Parks Co. 1,170 1,166 -0.3%30 DUTYF Bahrain Duty Free Shop Complex 1,985 2,606 31.3%

Industrial Sector 1,522 1,292 -15.1%31 BFM Bahrain Flour Mills Co. 702 756 7.7%32 POLTRY Delmon Poultry Co. 820 536 -34.6%

Hotel & Tourism Sector 3,911 6,653 70.1%33 BHOTEL Bahrain Hotels Co. 1,855 3,324 79.2%34 NHOTEL National Hotels Co. 1,028 1,673 62.7%35 BTC Bahrain Tourism Co. 968 1,550 60.1%36 FAMILY Bahrain Family Leisure Co. 60 106 76.7%

TOTAL MARKET 279,290 514,204 84.1%

Total Closed Co. Sector 2,053 4,136 101.5%37 SICO-C Securities & Investment Co. 1,567 4,136 163.9%38 UPI United Paper Industries 486 N/A -

Total Non-Bahraini Co. Sector 199,470 223,096 11.8%39 BMUSC Bankmuscat 26,518 33,396 25.9%40 IIG International Investment Group 2,504 3,864 54.3%41 TII International Investor 1,341 5,821 334.1%42 SDTL Sudan Telecommunicaitions Co. 48,861 N/A -43 QTEL Qatar Telcom 118,983 150,918 26.8%44 UFC United Finance Company (SAOG) 1,263 1,823 44.3%45 GLOBAL Global Investment House N/L 27,274 -

TOTAL ALL SECTORS 480,813 741,436 54.2%

Corporate Earnings, BD '000

Source: Bahrain Stock Exchange, KMEFIC Research




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Bahrain Stock Exchange




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Bahrain Stock Exchange – Review

Bahrain Stock Exchange - Summary Market Statistics Key Indicators 2000 2001 2002 2003 2004 CAGR 1Q-2004 1Q-2005 Growth

Number of Listed Companies 39 41 40 44 45 NM 45 45 NM

Volume of Shares Traded ('000) 422,073 335,372 353,132 405,604 336,514 -5.5% 71,835 87,962 22.5%

Value of Shares Traded (BD '000) 92,532 73,624 80,901 102,261 174,575 17.2% 42,582 52,317 22.9%

Number of Transactions 11,906 13,113 12,977 14,629 15,744 7.2% 3,106 6,523 110.0%

Bahrain Index (Old) 1805.76 1761.46 1821.49 2346.29 3054.2 14.0% 2321.2 - NM

Bahrain All Share Index (New) - - 1040.26 1336.83 1773.65 - 1452.69 2078.13 43.1%

@ Market Capitalisation (BD Mn) 2,382 2,369 2,783 3,567 5,151 21.3% 4,163 6,021 44.6%

Shares Turnover (%) 3.89 3.11 2.91 2.87 3.39 NM 1.02 0.87 NM

# Valuations 2000 2001 2002 2003 2004 Avg. 1Q-2004 1Q-2005

P/E (x) 11.02 11.25 12.3 12.43 13.83 12.17 14.16 15.83 -

P/BV (x) 0.99 0.98 1.10 1.28 1.48 1.17 1.55 1.95 -

Dividend Yield (%) 5.34 5.77 4.59 4.97 4.07 4.95 4.42 3.41 -

Return On Equity (%) 9.97 8.87 10.56 11.58 12.88 10.77 12.43 19.86 -

Return On Assets (%) 0.87 0.90 0.54 1.35 3.45 1.42 NA NA -

@ Market Capitalization is for the end period and arrived at excluding the Preferred, Closed and Non-Bahraini Stocks

# Valuations are arrived at excluding the Preferred, Closed and Non-Bahraini Stocks


An overview Bahrain Stock Exchange (BSE) was established in 1987, and officially commenced operations two years later in June 1989. Over the years, BSE has grown to become one of the leading emerging stock markets in the region. The evolution of the BSE can be gauged from the growth in the market capitalization that has risen from BD1.04 billion (US$2.7 billion) in 1989 to BD 5.1 billion (US$ 13.57 billion) in 2004. BSE was the first among its GCC peers that opened up to foreign investors back in 1999. Since then, GCC nationals were allowed to own up to 100% while Non-GCC investors are permitted to own up to 49% of any listed company. The other main attraction to invest in Bahraini equities is that the BSE does not enforce tax on capital gain or on dividends. Also, plans are underway to grant foreign nationals free access to the stock exchange, in order to compete with similar moves made by UAE and Qatar.

Key developments The total number of listed companies increased from 44 to 45 during 2004 with the listing of two companies; Gulf Finance House and Global Investment House while Bahrain International Bank was de-listed. Esterad Investment Company was reclassified from Services sector to Investments due to change in company’s operations and business.

During 1Q05, Al Khaleej Development Company was transformed from a closed company into a public

shareholding company after the company increased its paid-up capital through an initial public offering from BD 16.59 Mn to BD 18.85 Mn. Subsequently, the company was reclassified from closed company to Investment sector.

Dow Jones Bahrain Index launched Dow Jones Indexes, a leading global index provider, and the Bahrain Stock Exchange (BSE) launched the Dow Jones Bahrain Index (DJ-BH) on 5th July 2005. The Dow Jones Bahrain Index aims to be a broad based benchmark and is a composite index of all stocks listed on the Bahrain Stock Exchange. The index is weighted based on full-market capitalization.

According to a press release from the BSE, The Dow Jones Bahrain Index was developed to meet the increasing demand for a transparent and competitive index whose methodology was in line with a international index family. The Dow Jones Bahrain Index will be calculated in both the Bahraini dinar and the U.S. Dollar—making the performance of the Bahrain stock market easily comparable to other Dow Jones GCC market indexes, as well as to more than 40 equity markets globally.

Going forward, we believe, the launch of this Index will boost the profile of the Bahraini financial markets as an investment destination for the international investors and attract more investments.




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BSE performance

Bahrain All Share Index – Ranks fifth in 2004

Source: Country Stock Exchanges, KMEFIC Research

Not as good as the GCC regional peers; But healthy growth on a standalone basisThe Bahrain Index closed higher at 3,054 (recording an increase of 30%; up by 708 points) during 2004 compared to the previous year. The market started on a lackluster note down by 1.1% in 1Q04, but nicely recouped during the subsequent quarters. BSE was up by 7% in 2Q05, 17.4% in 3Q05 and 4.7% in 4Q05. The growth reflected during the last three quarters is attributed mainly to high oil prices, liquidity and a solid performance by the corporate sector.

Volumes in BSE are only a fraction of KSE…..

….and range bound in last five years


Unlike the other GCC counterparts (mainly Kuwait, Saudi Arabia and UAE) volumes in the Bahraini market represent only a fraction of the trading activity. Moreover, the volume of shares traded has remained range bound over the last five years with average volume of shares traded at 371 Mn.

Market Cap. Growth – Not in sync with net profits


* Market capitalization and net profit is arrived after excluding the preferred, closed and Non-Bahraini companies

GCC Indices - 2004 Growth, %

102%

85%

65%

34%30%

22%

UAE(NBAD)

Saudi(TASI)

Qatar(DSM)

Kuwait(KSE)

Bahrain(All Share)

Oman(MSM)

Volume of shares traded in 2004, Mn

317333337

6,069

10,298

33,544

Kuwait SaudiArabia

UAE Bahrain Oman Qatar

Volume of shares traded, Mn

371

337

406

353335

422

2000 2001 2002 2003 2004 Average

2000-04 Compounded Growth, %

21

36

Market Cap.

Net Profit

Growth in market capitalization* has not kept pace with growth in net profits. The PEG ratio for the Bahraini market is attractive and cheap at less than 0.58x, considering that the corporate sector growth willcontinue to remain robust over the medium term.




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1st Quarter, 2005 – Overview

Bahrain All Share – Lagging behind in 2005

Source: Country Stock Exchanges, KMEFIC Research

GCC markets continue to rise with Qatar (Doha Securities Market, DSM) registering the highest growth of 71.7% compared to end 2004. Bahrain All Share Index despite posting a 17.2% growth continues to lag behind its GCC peers.

Growth by sector - Services leads the index


The Bahrain All Share Index closed higher at 2,078 (recording an increase of 17.2%; up by 304 points) during the first quarter 2005. During the same period, all sectors closed in the positive territory with Services registering the highest increase of 30.9% distantly

followed by Commercial Banks (up by 14.0%), Investment (up by 12.5%), Insurance and Industrial (up by around 6% each) and Hotel & Tourism (up by 5.1%).

Impressive performance compared to 1Q04 The BSE (All Share Index) posted a superb performance as of 1Q05 closing at 2,078 up by 43.1% compared to 1,452.7 during 1Q04. BSE witnessed hectic trading activities during 1Q05 with total volumes sharply rising during each of the months during 1Q05 totaling 88 Mn, significantly higher by 22% compared to 72 Mn seen during 1Q04. Also total value traded rose by 23% to reach BD 52.3 Mn in 1Q05 compared to BD 42.5 Mn seen during same period last year.

Increasing volumes push the index


Majority of the trading activities was concentrated in the commercial banking sector that captured 56.8% of the total shares traded during 1Q05, reaching a value of nearly BD 22 Mn and translating to 41.9% of the total value of shares traded in the market. (For a detailed analysis with sector break-up, see Market Summary – 1Q05).

Market capitalization of BSE significantly increased by 44.6% to reach BD 6,021 Mn as of 1Q05 compared to BD 4,163 Mn in 1Q04. Services sector posted an impressive growth in market capitalization, demonstrating a growth of 103% to reach BD 1.6 Bn in 1Q05 compared to BD 796.5 Mn during 1Q04.

1,774

1,871

2,017

2,078

Dec-04 Jan-05 Feb-05 Mar-05

0

10,000

20,000

30,000

40,000

50,000

60,000

Bahrain All Share Index Volume ('000)

GCC Indices - 1st Qtr 2005 Growth vs. end 2004, %

17.2

23.426.727.9

50.6

71.7

Qatar(DSM)

UAE(NBAD)

Saudi(TASI)

Oman(MSM)

Kuwait(KSE)

Bahrain (AllShare)

1st Qtr 2005 Index Growth vs. end 2004, %

5.15.96.5

12.514.0

30.9

Service Banks Investment Insurance Industrial. Hotel




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Improving market fundamentals coupled with attractive valuations

Corporate sector net profits grow at a CAGR of 43%


Profitability nicely improves


Reasonably low PE compared to earnings growth


Market Outlook Despite low volumes on the BSE compared to the GCC regional peers in the past, recent trend in volume of shares traded during 1Q05 is encouraging and reflects increased market activity. The performance of the corporate sector (excluding the closed and Non-Bahraini companies) remains robust with a 169% growth in profits in 2003 and a 84% growth in 2004. Alongside, market valuations measured by the PE multiple also moved up steadily from 11x (2000) to 13.8x (2004) reflecting the improved corporate performance. However, the compounded growth in market capitalization at slightly above 20% over the last five is not entirely in sync with the net profit growth of 36%; resulting in a attractive PEG ratio of 0.58x. Apparently, the growth in corporate earnings is fully not reflected in the stock prices.

The market PE multiple currently stands at around 17x and is one of the cheapest markets in the GCC region. Going forward, the earnings growth rates seen during the last two years may not be not sustainable, though are expected to remain strong – above 25%. Moving ahead, we believe, the Bahraini stock markets will continue to demonstrate a modest performance, but remain steady as in the past. The chief reasons built into our expectations include; a positive outlook on the oil prices, economic reforms, liquidity, and a healthy banking and financial services sector.

Net Profit*, Mn

179

276 249

481

741

2000 2001 2002 2003 2004

*Net Profit for the corporate sector includes total market as defined by BSE plus Closed companies and Non-Bahrain sector

9.978.87

10.5611.58

12.88

2000 2001 2002 2003 2004

*Return On Equity (ROE), %*ROE for the corporate sector reflects only the total market as defined by BSE excluding the Closed companies and Non-Bahraini sector

Price/Earnings (PE) Multiple, x

14.2

15.816.7

11.011.3

12.3 12.4

13.8

12.2

2000 2001 2002 2003 2004 5Yr Avg 1Q04 1Q05 May-05




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Corporate Sector – Financial Highlights

S.N. Symbol Company Name / Sector 2000 2001 2002 2003 20042000-04

CAGRCommercial Banks Sector 3,811,573 4,141,237 4,663,858 5,272,264 6,225,882 13%

1 NBB National Bank of Bahrain 1,035,270 1,078,330 1,104,400 1,237,470 1,359,470 7%2 BBK Bank of Bahrain & Kuwait 1,058,589 1,101,132 1,214,649 1,313,618 1,420,775 8%3 AUB Ahli United Bank 1,324,155 1,546,725 1,936,233 2,363,815 3,062,772 23%4 BISB Bahrain Islamic Bank 194,332 191,182 209,740 231,480 254,775 7%5 BSB The Bahraini Saudi Bank 199,227 223,868 198,836 125,881 128,090 -10%

Investment Sector 12,487,946 12,647,780 13,502,523 14,153,605 7,347,468 -12%6 GMG Gulf Monetary Group 36,241 40,830 48,888 48,300 N/A N/AP7 ABC Arab Banking Corporation 10,056,852 10,007,464 10,900,955 11,335,636 5,625,594 -14%8 UGB United Gulf Bank 268,543 348,084 354,147 447,678 523,274 18%9 INVCORP Investcorp Bank 1,105,999 1,298,042 1,462,071 1,554,345 N/A N/AP10 BMB Bahrain & Middle East Bank 234,743 193,338 71,837 68,122 68,616 -26%11 BCFC Bahrain Commercial Facilities Co. 68,393 73,214 80,384 101,769 121,977 16%12 UGIC United Gulf Industries Co. 15,479 15,008 11,753 12,026 15,344 0%13 TAIB Taib Bank 205,437 203,606 191,103 127,389 146,197 -8%14 SHAMEL Shamil Bank of Bahrain 496,259 468,194 381,385 448,846 608,354 5%15 ESTERAD Esterad Investment Co. * * * * 56,492 N/AP16 GFH Gulf Finance House * * * * 158,505 N/AP17 TAMEER Al Khaleej Development Co. * * * 9,494 23,115 N/AP

Insurance Sector 660,922 628,136 607,069 630,210 713,349 2%18 BKIC Bahrain Kuwait Insurance Co. 35,267 32,957 39,223 36,425 39,966 3%19 AHLIA Al-ahlia Insurance Co. 11,154 11,531 12,312 13,487 15,900 9%20 AIIC Arab International Insurance Co. N/A N/A N/A N/A N/A N/A21 TAKAFUL Takaful Insurance Co. 6,804 6,244 7,932 8,962 10,339 11%22 ARIG Arab Insurance Group 574,081 544,059 513,060 532,197 599,732 1%23 BNH Bahrain National Holding Co. 33,616 33,345 34,542 39,139 47,412 9%

Services Sector 363,098 388,980 415,802 455,326 497,806 8%24 BASREC Bahrain Ship Repairing & Eng. Co. 9,272 10,884 11,442 12,118 13,344 10%25 CINEMA Bahrain Cinema Co. 6,798 10,076 10,459 15,193 20,789 32%26 TRAFCO General Trading & Food Process Co. 15,743 15,821 16,635 21,241 27,420 15%27 BMMI Bahrain Maritime & Mercn. Int. Co. 16,032 18,860 22,310 30,327 36,702 23%28 BATELCO Bahrain Telecommunications Co. 294,340 310,182 331,011 348,709 366,293 6%29 CPARK Bahrain Car Parks Co. 9,698 9,983 10,096 10,669 10,995 3%30 DUTYF Bahrain Duty Free Shop Complex 11,215 13,174 13,849 17,069 22,263 19%

Industrial Sector 17,900 20,692 20,866 22,812 26,477 10%31 BFM Bahrain Flour Mills Co. 8,706 10,102 10,000 11,312 14,049 13%32 POLTRY Delmon Poultry Co. 9,194 10,590 10,866 11,500 12,428 8%

Hotel & Tourism Sector 71,225 73,625 76,398 79,780 90,823 6%33 BHOTEL Bahrain Hotels Co. 24,976 25,413 26,432 27,298 29,155 4%34 NHOTEL National Hotels Co. 25,293 26,825 27,992 29,302 36,002 9%35 BTC Bahrain Tourism Co. 16,454 16,799 17,924 19,172 21,525 7%36 FAMILY Bahrain Family Leisure Co. 4,502 4,588 4,050 4,008 4,141 -2%

TOTAL MARKET 17,412,664 17,900,450 19,286,516 20,613,997 14,901,805 -4%

Total Closed Co. Sector 31,961 27,456 N/AP37 SICO-C Securities & Investment Co. * * * 28,499 27,456 N/AP38 UPI United Paper Industries * * * 3,462 N/A N/AP

Total Non-Bahraini Co. Sector 213,193 611,344 2,225,786 2,379,844 2,654,585 88%39 BMUSC Bankmuscat * * 1,510,385 1,522,471 1,813,897 N/AP

40 IIG International Investment Group 26,718 24,151 22,705 26,026 40,771 11%41 TII International Investor 30,809 91,057 91,744 93,089 105,441 36%42 SDTL Sudan Telecommunicaitions Co. 155,666 192,464 252,715 337,175 N/A N/AP43 QTEL Qatar Telcom * 303,672 348,237 361,685 523,345 N/AP44 UFC United Finance Company (SAOG) * * * 39,398 44,312 N/AP45 GLOBAL Global Investment House * * * * 126,819 N/AP

Assets (BD '000)

Source: Bahrain Stock Exchange, KMEFIC Research *Company was not listed N/A: Information not available N/AP: Not Applicable Note: Based on the latest report from BSE we have reclassified Esterad Investment Co. and Alkaleeji Development Co in investment sector to maintain consistency




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CAGRCommercial Banks Sector 3,214,461 3,444,725 3,873,634 4,381,451 5,242,928 13%

1 NBB National Bank of Bahrain 914,710 932,540 952,520 1,071,950 1,165,540 6%2 BBK Bank of Bahrain & Kuwait 942,002 973,820 1,083,570 1,171,366 1,262,997 8%3 AUB Ahli United Bank 1,173,454 1,333,983 1,623,091 2,010,888 2,685,736 23%4 BISB Bahrain Islamic Bank 19,061 16,614 24,001 31,962 33,195 15%5 BSB The Bahraini Saudi Bank 165,234 187,768 190,452 95,285 95,460 -13%

Investment Sector 10,730,190 10,858,513 11,901,874 12,356,128 5,818,959 -14%6 GMG Gulf Monetary Group 11,764 28,061 36,977 30,767 N/A N/AP7 ABC Arab Banking Corporation 9,181,835 9,138,103 10,209,537 10,545,067 4,912,310 -14%8 UGB United Gulf Bank 191,896 267,368 268,994 328,656 398,679 20%9 INVCORP Investcorp Bank 790,915 951,931 1,039,934 1,115,466 N/A N/AP10 BMB Bahrain & Middle East Bank 210,066 177,063 79,706 78,710 79,087 -22%11 BCFC Bahrain Commercial Facilities Co. 46,553 49,691 56,491 74,881 91,284 18%12 UGIC United Gulf Industries Co. 1,870 2,752 10 5 552 -26%13 TAIB Taib Bank 149,686 148,735 145,412 80,148 87,952 -12%14 SHAMEL Shamil Bank of Bahrain 145,605 94,809 64,813 102,191 172,460 4%15 ESTERAD Esterad Investment Co. * * * * 10,598 N/AP16 GFH Gulf Finance House * * * * 64,784 N/AP17 TAMEER Al Khaleej Development Co. * * * 237 1,253 N/AP

Insurance Sector 524,698 524,538 517,267 529,148 568,891 2%18 BKIC Bahrain Kuwait Insurance Co. 22,235 19,813 25,751 21,611 23,791 2%19 AHLIA Al-ahlia Insurance Co. 8,334 7,988 8,462 8,527 9,221 3%20 AIIC Arab International Insurance Co. N/A N/A N/A N/A N/A N/AP21 TAKAFUL Takaful Insurance Co. 1,484 1,980 3,660 4,133 5,272 37%22 ARIG Arab Insurance Group 476,734 480,556 464,615 477,813 508,997 2%23 BNH Bahrain National Holding Co. 15,911 14,201 14,779 17,064 21,610 8%

Services Sector 68,406 72,067 78,035 86,053 87,906 6%24 BASREC Bahrain Ship Repairing & Eng. Co. 596 739 835 855 969 13%25 CINEMA Bahrain Cinema Co. 634 1,190 1,494 1,769 2,230 37%26 TRAFCO General Trading & Food Process Co. 6,692 5,715 5,880 7,808 8,593 6%27 BMMI Bahrain Maritime & Mercn. Int. Co. 5,454 6,809 8,873 10,959 10,240 17%28 BATELCO Bahrain Telecommunications Co. 51,658 53,083 56,535 59,407 60,367 4%29 CPARK Bahrain Car Parks Co. 177 249 376 505 399 23%30 DUTYF Bahrain Duty Free Shop Complex 3,195 4,282 4,042 4,750 5,108 12%

Industrial Sector 663 646 719 722 1,023 11%31 BFM Bahrain Flour Mills Co. 242 160 234 240 404 14%32 POLTRY Delmon Poultry Co. 421 486 485 482 619 10%

Hotel & Tourism Sector 5,323 4,627 6,283 6,880 6,991 7%33 BHOTEL Bahrain Hotels Co. 3,003 2,434 2,639 3,265 3,516 4%34 NHOTEL National Hotels Co. 961 982 1,520 1,470 1,819 17%35 BTC Bahrain Tourism Co. 1,022 890 1,828 1,872 1,356 7%36 FAMILY Bahrain Family Leisure Co. 337 321 296 273 300 -3%

TOTAL MARKET 14,543,741 14,905,116 16,377,812 17,360,382 11,726,698 -5%


Total Non-Bahraini Co. Sector 42,190 168,603 1,563,747 1,570,118 1,873,100 158%39 BMUSC Bankmuscat * * 1,360,218 1,352,956 1,623,590 N/AP


Liabilities (BD '000)





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CAGRCommercial Banks Sector 261,866 309,556 384,956 389,956 389,956 10%

1 NBB National Bank of Bahrain 40,000 40,000 40,000 45,000 45,000 3%2 BBK Bank of Bahrain & Kuwait 56,906 56,906 56,906 56,906 56,906 0%3 AUB Ahli United Bank 121,960 169,650 245,050 245,050 245,050 19%4 BISB Bahrain Islamic Bank 23,000 23,000 23,000 23,000 23,000 0%5 BSB The Bahraini Saudi Bank 20,000 20,000 20,000 20,000 20,000 0%

Investment Sector 712,177 702,184 739,884 745,916 817,228 3%6 GMG Gulf Monetary Group 30,160 30,160 30,160 30,160 30,160 0%7 ABC Arab Banking Corporation 377,000 377,000 377,000 377,000 377,000 0%8 UGB United Gulf Bank 75,400 75,400 75,400 75,400 75,400 0%9 INVCORP Investcorp Bank 37,700 37,700 75,400 75,400 75,400 19%10 BMB Bahrain & Middle East Bank 34,235 34,235 34,235 34,235 34,235 0%11 BCFC Bahrain Commercial Facilities Co. 10,000 10,000 10,000 10,000 10,000 0%12 UGIC United Gulf Industries Co. 22,550 12,557 12,557 12,557 12,557 -14%13 TAIB Taib Bank 38,422 38,422 38,422 38,422 38,422 0%14 SHAMEL Shamil Bank of Bahrain 86,710 86,710 86,710 86,710 86,710 0%15 ESTERAD Esterad Investment Co. * * * * 7,986 N/AP16 GFH Gulf Finance House * * * * 52,770 N/AP17 TAMEER Al Khaleej Development Co. * * * 6,032 16,588 N/AP

Insurance Sector 158,699 159,299 80,979 82,219 101,429 -11%18 BKIC Bahrain Kuwait Insurance Co. 5,000 5,000 5,000 5,000 5,000 0%19 AHLIA Al-ahlia Insurance Co. 1,800 2,400 2,400 2,640 3,000 14%20 AIIC Arab International Insurance Co. 3,679 3,679 3,679 3,679 3,679 0%21 TAKAFUL Takaful Insurance Co. 4,000 4,000 4,000 5,000 5,000 6%22 ARIG Arab Insurance Group 135,720 135,720 56,550 56,550 75,400 -14%23 BNH Bahrain National Holding Co. 8,500 8,500 9,350 9,350 9,350 2%

Services Sector 122,856 122,856 122,856 123,056 125,011 0%24 BASREC Bahrain Ship Repairing & Eng. Co. 800 800 800 800 800 0%25 CINEMA Bahrain Cinema Co. 1,998 1,998 1,998 1,998 2,298 4%26 TRAFCO General Trading & Food Process Co. 4,492 4,492 4,492 4,492 5,054 3%27 BMMI Bahrain Maritime & Mercn. Int. Co. 6,534 6,534 6,534 6,534 7,187 2%28 BATELCO Bahrain Telecommunications Co. 100,000 100,000 100,000 100,000 100,000 0%29 CPARK Bahrain Car Parks Co. 7,032 7,032 7,032 7,032 7,032 0%30 DUTYF Bahrain Duty Free Shop Complex 2,000 2,000 2,000 2,200 2,640 7%


Hotel & Tourism Sector 30,130 29,684 29,685 30,533 31,466 1%33 BHOTEL Bahrain Hotels Co. 8,484 8,484 8,485 9,333 10,266 5%34 NHOTEL National Hotels Co. 10,446 10,000 10,000 10,000 10,000 -1%35 BTC Bahrain Tourism Co. 7,200 7,200 7,200 7,200 7,200 0%36 FAMILY Bahrain Family Leisure Co. 4,000 4,000 4,000 4,000 4,000 0%

TOTAL MARKET 1,290,852 1,328,703 1,363,484 1,376,804 1,470,214 3%

Total Closed Co. Sector 13,500 13,600 N/AP37 SICO-C Securities & Investment Co. * * * 12,500 12,500 N/AP38 UPI United Paper Industries * * * 1,000 1,100 N/AP

Total Non-Bahraini Co. Sector 142,739 279,479 359,463 412,151 451,215 33%39 BMUSC Bankmuscat * * 48,021 50,422 58,573 N/AP

40 IIG International Investment Group 27,090 26,976 27,638 28,087 28,072 1%41 TII International Investor 19,863 47,161 48,320 49,103 51,638 27%42 SDTL Sudan Telecommunicaitions Co. 95,786 101,772 131,914 174,234 174,234 16%43 QTEL Qatar Telcom * 103,570 103,570 103,570 103,570 N/AP44 UFC United Finance Company (SAOG) * * * 6,735 8,508 N/AP45 GLOBAL Global Investment House * * * * 26,620 N/AP

Paid-Up Capital (BD '000)





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1 NBB National Bank of Bahrain 120,560 145,790 151,880 165,520 193,930 13%2 BBK Bank of Bahrain & Kuwait 114,882 125,766 131,079 142,252 157,778 8%3 AUB Ahli United Bank 150,701 212,742 313,142 352,927 377,036 26%4 BISB Bahrain Islamic Bank 39,122 38,610 38,290 39,989 52,750 8%5 BSB The Bahraini Saudi Bank 33,993 36,100 8,384 10,596 12,630 -22%

Investment Sector 1,331,733 1,337,182 1,199,535 1,343,177 1,169,213 -3%6 GMG Gulf Monetary Group 24,478 12,769 11,911 17,533 N/A N/AP7 ABC Arab Banking Corporation 717,808 705,744 516,867 597,545 698,204 -1%8 UGB United Gulf Bank 72,120 75,448 79,489 98,123 105,455 10%9 INVCORP Investcorp Bank 315,083 346,111 422,137 438,878 N/A N/AP10 BMB Bahrain & Middle East Bank 24,677 16,275 (7,869) (10,588) (10,472) N/AP11 BCFC Bahrain Commercial Facilities Co. 21,840 23,523 23,893 26,888 30,693 9%12 UGIC United Gulf Industries Co. 12,546 11,355 11,743 12,021 14,792 4%13 TAIB Taib Bank 55,525 54,723 45,603 47,214 58,239 1%14 SHAMEL Shamil Bank of Bahrain 87,656 91,234 95,761 106,306 110,856 6%15 ESTERAD Esterad Investment Co. * * * * 45,863 N/AP16 GFH Gulf Finance House * * * * 93,721 N/AP17 TAMEER Al Khaleej Development Co. * * * 9,257 21,862 N/AP

Insurance Sector 130,813 99,258 86,424 96,272 138,614 1%18 BKIC Bahrain Kuwait Insurance Co. 13,032 13,143 13,472 14,814 16,175 6%19 AHLIA Al-ahlia Insurance Co. 2,820 3,543 3,850 4,960 6,679 24%20 AIIC Arab International Insurance Co. N/A N/A N/A N/A N/A N/AP21 TAKAFUL Takaful Insurance Co. 5,320 5,267 5,356 5,876 5,848 2%22 ARIG Arab Insurance Group 91,935 58,161 43,983 48,546 84,110 -2%23 BNH Bahrain National Holding Co. 17,706 19,144 19,763 22,076 25,802 10%

Services Sector 290,116 311,439 331,858 362,194 402,356 9%24 BASREC Bahrain Ship Repairing & Eng. Co. 8,677 10,146 10,607 11,262 12,375 9%25 CINEMA Bahrain Cinema Co. 6,165 8,886 8,965 13,424 18,559 32%26 TRAFCO General Trading & Food Process Co. 7,994 9,361 9,897 12,261 17,374 21%27 BMMI Bahrain Maritime & Mercn. Int. Co. 10,579 12,051 13,437 19,084 26,462 26%28 BATELCO Bahrain Telecommunications Co. 239,166 252,378 269,436 283,685 299,839 6%29 CPARK Bahrain Car Parks Co. 9,521 9,734 9,720 10,164 10,596 3%30 DUTYF Bahrain Duty Free Shop Complex 8,014 8,883 9,796 12,314 17,151 21%


Hotel & Tourism Sector 65,871 68,999 70,117 72,901 83,834 6%33 BHOTEL Bahrain Hotels Co. 21,943 22,980 23,793 24,033 25,640 4%34 NHOTEL National Hotels Co. 24,332 25,844 26,472 27,832 34,183 9%35 BTC Bahrain Tourism Co. 15,431 15,908 16,097 17,300 20,169 7%36 FAMILY Bahrain Family Leisure Co. 4,165 4,267 3,755 3,736 3,842 -2%

TOTAL MARKET 2,295,029 2,395,932 2,350,856 2,607,919 2,613,596 3%




Shareholder's Equity (BD '000)





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1 NBB National Bank of Bahrain 16,770 18,160 19,250 22,400 28,260 14%2 BBK Bank of Bahrain & Kuwait 13,120 16,737 20,009 23,310 25,678 18%3 AUB Ahli United Bank 15,128 18,232 22,517 32,828 40,167 28%4 BISB Bahrain Islamic Bank 3,905 2,650 2,053 2,464 3,705 -1%5 BSB The Bahraini Saudi Bank 2,896 4,475 (25,142) 1,502 1,884 -10%

Investment Sector 64,495 61,006 2,534 107,756 289,117 46%6 GMG Gulf Monetary Group (411) (2,484) (858) 3,701 N/A N/AP7 ABC Arab Banking Corporation 47,879 38,454 (15,457) 45,240 218,283 46%8 UGB United Gulf Bank 6,296 1,526 3,635 13,662 16,329 27%9 INVCORP Investcorp Bank 26,405 18,896 28,326 33,985 N/A N/AP10 BMB Bahrain & Middle East Bank (21,483) (5,899) (19,145) (4,808) 224 N/AP11 BCFC Bahrain Commercial Facilities Co. 2,752 3,763 4,807 5,685 6,636 25%12 UGIC United Gulf Industries Co. (5,048) (1,191) (130) 278 2,771 N/AP13 TAIB Taib Bank 5,834 3,851 (3,955) 794 1,539 -28%14 SHAMEL Shamil Bank of Bahrain 2,271 4,090 5,311 8,411 10,988 48%15 ESTERAD Esterad Investment Co. * * * * 9,239 N/AP16 GFH Gulf Finance House * * * * 21,453 N/AP17 TAMEER Al Khaleej Development Co. * * * 808 1,655 N/AP

Insurance Sector (30,983) (29,831) (10,028) 7,744 15,721 N/AP18 BKIC Bahrain Kuwait Insurance Co. 901 1,016 1,207 1,337 1,609 16%19 AHLIA Al-ahlia Insurance Co. 418 421 558 853 920 22%20 AIIC Arab International Insurance Co. N/A N/A N/A N/A N/A N/AP21 TAKAFUL Takaful Insurance Co. 100 144 151 368 46 -18%22 ARIG Arab Insurance Group (34,261) (33,298) (13,874) 2,982 10,003 N/AP23 BNH Bahrain National Holding Co. 1,859 1,886 1,930 2,204 3,143 14%

Services Sector 61,396 62,956 67,064 75,853 101,727 13%24 BASREC Bahrain Ship Repairing & Eng. Co. 621 542 626 627 503 -5%25 CINEMA Bahrain Cinema Co. 1,294 1,111 833 1,663 2,447 17%26 TRAFCO General Trading & Food Process Co. 924 714 992 1,460 1,873 19%27 BMMI Bahrain Maritime & Mercn. Int. Co. 3,359 3,917 4,278 8,286 10,548 33%28 BATELCO Bahrain Telecommunications Co. 52,503 54,290 58,023 60,662 82,584 12%29 CPARK Bahrain Car Parks Co. 794 881 712 1,170 1,166 10%30 DUTYF Bahrain Duty Free Shop Complex 1,901 1,501 1,600 1,985 2,606 8%

Industrial Sector 1,621 1,526 1,165 1,522 1,292 -6%31 BFM Bahrain Flour Mills Co. 461 854 184 702 756 13%32 POLTRY Delmon Poultry Co. 1,160 672 981 820 536 -18%

Hotel & Tourism Sector 3,696 4,719 4,575 3,911 6,653 16%33 BHOTEL Bahrain Hotels Co. 1,986 2,330 2,588 1,855 3,324 14%34 NHOTEL National Hotels Co. 746 1,414 1,403 1,028 1,673 22%35 BTC Bahrain Tourism Co. 850 523 888 968 1,550 16%36 FAMILY Bahrain Family Leisure Co. 114 452 (304) 60 106 -2%

TOTAL MARKET 152,044 160,630 103,997 279,290 514,204 36%

Total Closed Co. Sector 2,053 4,136 N/AP37 SICO-C Securities & Investment Co. * * * 1,567 4,136 N/AP38 UPI United Paper Industries * * * 486 N/A N/AP


40 IIG International Investment Group (2,523) 568 (2,135) 2,504 3,864 N/AP41 TII International Investor 4,713 (6,465) (6,060) 1,341 5,821 5%42 SDTL Sudan Telecommunicaitions Co. 24,842 31,487 31,759 48,861 N/A N/AP43 QTEL Qatar Telcom * 89,394 99,035 118,983 150,918 N/AP44 UFC United Finance Company (SAOG) * * * 1,263 1,823 N/AP45 GLOBAL Global Investment House * * * * 27,274 N/AP

Net Profit (BD '000)





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1 NBB National Bank of Bahrain 12,000 13,000 14,000 15,750 18,000 11%2 BBK Bank of Bahrain & Kuwait 10,167 14,117 15,247 16,941 19,764 18%3 AUB Ahli United Bank 12,196 15,608 15,665 23,525 26,465 21%4 BISB Bahrain Islamic Bank 2,060 2,297 2,300 2,300 2,760 8%5 BSB The Bahraini Saudi Bank 2,400 2,600 0 0 0 N/AP

Investment Sector 40,772 40,530 22,352 60,531 58,276 9%6 GMG Gulf Monetary Group 0 0 0 0 0 N/AP7 ABC Arab Banking Corporation 24,842 24,882 0 24,842 18,850 -7%8 UGB United Gulf Bank 0 0 0 10,082 10,802 N/AP9 INVCORP Investcorp Bank 11,310 11,293 15,080 15,080 N/A N/AP10 BMB Bahrain & Middle East Bank 0 0 0 0 0 N/AP11 BCFC Bahrain Commercial Facilities Co. 1,975 2,466 2,959 3,460 3,954 19%12 UGIC United Gulf Industries Co. 0 0 0 0 0 N/AP13 TAIB Taib Bank 2,645 1,889 0 0 0 N/AP14 SHAMEL Shamil Bank of Bahrain 0 0 4,313 6,464 7,325 N/AP15 ESTERAD Esterad Investment Co. 0 0 0 0 3,549 N/AP16 GFH Gulf Finance House 0 0 0 0 12,137 N/AP17 TAMEER Al Khaleej Development Co. * * * 603 1,659 N/AP

Insurance Sector 1,985 2,345 2,471 2,920 2,912 10%18 BKIC Bahrain Kuwait Insurance Co. 750 750 875 1,000 1,000 7%19 AHLIA Al-ahlia Insurance Co. 0 360 240 264 375 N/AP20 AIIC Arab International Insurance Co. 0 0 0 0 0 N/AP21 TAKAFUL Takaful Insurance Co. 0 0 0 300 0 N/AP22 ARIG Arab Insurance Group 0 0 0 0 0 N/AP23 BNH Bahrain National Holding Co. 1,235 1,235 1,356 1,356 1,537 6%

Services Sector 45,716 45,898 50,660 51,150 57,014 6%24 BASREC Bahrain Ship Repairing & Eng. Co. 320 320 360 400 360 3%25 CINEMA Bahrain Cinema Co. 569 569 569 569 546 -1%26 TRAFCO General Trading & Food Process Co. 799 664 703 439 741 -2%27 BMMI Bahrain Maritime & Mercn. Int. Co. 2,535 2,852 2,535 3,169 3,486 8%28 BATELCO Bahrain Telecommunications Co. 40,000 40,000 45,000 45,000 50,000 6%29 CPARK Bahrain Car Parks Co. 693 693 693 693 693 0%30 DUTYF Bahrain Duty Free Shop Complex 800 800 800 880 1,188 10%

Industrial Sector 764 764 764 764 764 0%31 BFM Bahrain Flour Mills Co. 323 323 323 323 323 0%32 POLTRY Delmon Poultry Co. 441 441 441 441 441 0%

Hotel & Tourism Sector 2,339 3,250 3,156 3,325 4,258 16%33 BHOTEL Bahrain Hotels Co. 1,485 1,697 1,697 1,867 2,567 15%34 NHOTEL National Hotels Co. 0 700 792 792 891 N/AP35 BTC Bahrain Tourism Co. 667 667 667 666 800 5%36 FAMILY Bahrain Family Leisure Co. 187 186 0 0 0 -100%

TOTAL MARKET 130,399 140,409 126,615 177,206 190,213 10%

Total Closed Co. Sector 775 875 N/AP37 SICO-C Securities & Investment Co. * * * 625 875 N/AP38 UPI United Paper Industries * * * 150 N/A N/AP


40 IIG International Investment Group 0 0 0 0 0 N/AP41 TII International Investor 3,575 0 0 0 4,914 8%42 SDTL Sudan Telecommunicaitions Co. 8,796 17,344 9,025 12,372 0 -100%43 QTEL Qatar Telcom 0 62,142 68,356 75,606 88,035 N/AP44 UFC United Finance Company (SAOG) * * * 674 851 N/AP45 GLOBAL Global Investment House * * * * 18,334 N/AP

Cash Dividend (BD '000)





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S.N. Symbol Company Name / Sector 2000 2001 2002 2003 2004 2000-04 AVGCommercial Banks Sector

1 NBB National Bank of Bahrain 71.6 71.6 72.7 70.3 63.7 70.02 BBK Bank of Bahrain & Kuwait 77.5 84.3 76.2 72.7 77.0 77.53 AUB Ahli United Bank 80.6 85.6 69.6 71.7 65.9 74.74 BISB Bahrain Islamic Bank 52.8 86.7 112.0 93.3 74.5 83.95 BSB The Bahraini Saudi Bank 82.9 58.1 0.0 0.0 0.0 -

Investment Sector6 GMG Gulf Monetary Group 0.0 0.0 0.0 0.0 0.0 -7 ABC Arab Banking Corporation 51.9 64.7 - 54.9 8.6 45.08 UGB United Gulf Bank 0.0 0.0 0.0 73.8 66.2 -9 INVCORP Investcorp Bank 42.8 59.8 53.2 44.4 - 50.110 BMB Bahrain & Middle East Bank 0.0 0.0 0.0 0.0 0.0 -11 BCFC Bahrain Commercial Facilities Co. 71.8 65.5 61.6 60.9 59.6 63.912 UGIC United Gulf Industries Co. 0.0 0.0 0.0 0.0 0.0 -13 TAIB Taib Bank 45.3 49.1 0.0 0.0 0.0 -14 SHAMEL Shamil Bank of Bahrain 0.0 0.0 81.2 76.9 66.7 -15 ESTERAD Esterad Investment Co. 0.0 0.0 0.0 0.0 38.4 -16 GFH Gulf Finance House 0.0 0.0 0.0 0.0 56.6 -17 TAMEER Al Khaleej Development Co. * * * 74.6 100.2 -

Insurance Sector18 BKIC Bahrain Kuwait Insurance Co. 83.2 73.8 72.5 74.8 62.2 73.319 AHLIA Al-ahlia Insurance Co. - 85.5 43.0 30.9 40.8 50.120 AIIC Arab International Insurance Co. 0.0 0.0 0.0 0.0 0.0 -21 TAKAFUL Takaful Insurance Co. 0.0 0.0 0.0 81.5 0.0 -22 ARIG Arab Insurance Group 0.0 0.0 0.0 0.0 0.0 -23 BNH Bahrain National Holding Co. 66.4 65.5 70.3 61.5 48.9 62.5

Services Sector24 BASREC Bahrain Ship Repairing & Eng. Co. 51.5 59.0 57.5 63.8 71.6 60.725 CINEMA Bahrain Cinema Co. 44.0 51.2 68.3 34.2 22.3 44.026 TRAFCO General Trading & Food Process Co. 86.5 93.0 70.9 30.1 39.6 64.027 BMMI Bahrain Maritime & Mercn. Int. Co. 75.5 72.8 59.3 38.2 33.0 55.828 BATELCO Bahrain Telecommunications Co. 76.2 73.7 77.6 74.2 60.5 72.429 CPARK Bahrain Car Parks Co. 87.3 78.7 97.3 59.2 59.4 76.430 DUTYF Bahrain Duty Free Shop Complex 42.1 53.3 50.0 44.3 45.6 47.1

Industrial Sector31 BFM Bahrain Flour Mills Co. 70.1 37.8 175.5 46.0 42.7 74.432 POLTRY Delmon Poultry Co. 38.0 65.6 45.0 53.8 82.3 56.9

Hotel & Tourism Sector33 BHOTEL Bahrain Hotels Co. 74.8 72.8 65.6 100.6 77.2 78.234 NHOTEL National Hotels Co. - 49.5 56.5 77.0 53.3 59.135 BTC Bahrain Tourism Co. 78.5 127.5 75.1 68.8 51.6 80.336 FAMILY Bahrain Family Leisure Co. 164.0 41.2 0.0 0.0 0.0 -

@Dividend Payout (%)

Source: KMEFIC Research *Company was not listed @ Dividend Payout = Cash Dividends / Net Profit - Only listed Bahraini companies are shown here. Non-Bahraini companies are excluded from this list. Note: Based on the latest report from BSE we have reclassified Esterad Investment Co. and Alkaleeji Development Co in investment sector to maintain consistency. Average dividend payout calculations are excluded for companies that have not distributed dividends for two years and above.




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CAGRCommercial Banks Sector 515,406 695,388 857,698 1,328,455 1,778,454 36%

1 NBB National Bank of Bahrain 164,800 204,000 241,600 360,900 450,900 29%2 BBK Bank of Bahrain & Kuwait 124,056 177,548 217,382 310,139 412,570 35%3 AUB Ahli United Bank 151,230 237,510 323,466 568,516 803,764 52%4 BISB Bahrain Islamic Bank 46,920 43,930 40,250 62,100 81,420 15%5 BSB The Bahraini Saudi Bank 28,400 32,400 35,000 26,800 29,800 1%

Investment Sector 1,073,883 858,974 1,091,024 1,268,840 1,846,946 15%6 GMG Gulf Monetary Group 12,480 11,200 11,200 11,200 11,200 -3%7 ABC Arab Banking Corporation 307,632 285,012 229,970 329,875 481,429 12%8 UGB United Gulf Bank 128,800 104,800 136,000 209,600 179,200 9%9 INVCORP Investcorp Bank 361,920 203,580 452,400 452,400 452,400 6%10 BMB Bahrain & Middle East Bank 19,252 13,803 9,081 7,628 6,175 -25%11 BCFC Bahrain Commercial Facilities Co. 21,400 32,000 49,300 66,500 80,000 39%12 UGIC United Gulf Industries Co. 9,020 5,023 4,897 9,167 15,696 15%13 TAIB Taib Bank 39,959 38,807 33,427 34,196 43,033 2%14 SHAMEL Shamil Bank of Bahrain 173,420 164,749 164,749 148,274 156,078 -3%15 ESTERAD Esterad Investment Co. * * * * 81,058 N/AP16 GFH Gulf Finance House * * * * 294,231 N/AP17 TAMEER Al Khaleej Development Co. * * * * 46,446 N/AP

Insurance Sector 92,439 88,611 95,328 111,248 179,352 18%18 BKIC Bahrain Kuwait Insurance Co. 14,400 11,500 14,750 22,500 23,000 12%19 AHLIA Al-ahlia Insurance Co. 4,644 4,896 4,680 9,372 11,100 24%20 AIIC Arab International Insurance Co. 3,122 3,122 3,122 3,122 3,122 0%21 TAKAFUL Takaful Insurance Co. 11,200 11,200 11,200 12,600 12,350 2%22 ARIG Arab Insurance Group 42,073 37,323 41,847 32,799 94,250 22%23 BNH Bahrain National Holding Co. 17,000 20,570 19,729 30,855 35,530 20%

Services Sector 649,595 667,427 677,541 770,892 1,231,440 17%24 BASREC Bahrain Ship Repairing & Eng. Co. 4,800 4,920 5,328 7,600 11,600 25%25 CINEMA Bahrain Cinema Co. 8,752 7,833 8,353 12,789 17,741 19%26 TRAFCO General Trading & Food Process Co. 10,062 9,883 9,433 18,777 25,774 27%27 BMMI Bahrain Maritime & Mercn. Int. Co. 27,443 29,142 29,534 53,906 112,123 42%28 BATELCO Bahrain Telecommunications Co. 580,000 595,000 603,000 644,000 1,018,000 15%29 CPARK Bahrain Car Parks Co. 8,438 8,649 9,493 13,360 12,938 11%30 DUTYF Bahrain Duty Free Shop Complex 10,100 12,000 12,400 20,460 33,264 35%


Hotel & Tourism Sector 40,483 46,671 49,875 72,345 99,605 25%33 BHOTEL Bahrain Hotels Co. 19,175 23,247 24,435 36,865 46,301 25%34 NHOTEL National Hotels Co. 10,028 10,800 11,600 18,000 28,000 29%35 BTC Bahrain Tourism Co. 8,280 8,784 10,080 13,680 21,744 27%36 FAMILY Bahrain Family Leisure Co. 3,000 3,840 3,760 3,800 3,560 4%

TOTAL MARKET 2,381,664 2,368,608 2,783,354 3,566,722 5,151,366 21%

Total Closed Co. Sector 4,070 N/AP37 SICO-C Securities & Investment Co. * * * N/AP N/AP N/AP38 UPI United Paper Industries * * * N/AP 4,070 N/AP

Total Non-Bahraini Co. Sector 88,654 1,006,649 1,608,404 2,231,851 2,803,139 137%39 BMUSC Bankmuscat * * 157,901 165,796 358,892 N/AP

40 IIG International Investment Group 88,654 88,654 88,654 88,654 88,654 0%41 TII International Investor N/AP N/AP N/AP N/AP N/AP N/AP42 SDTL Sudan Telecommunicaitions Co. * N/AP 230,849 304,910 304,910 N/AP43 QTEL Qatar Telcom * 917,995 1,131,000 1,658,800 1,771,900 N/AP44 UFC United Finance Company (SAOG) * * * 13,691 18,669 N/AP45 GLOBAL Global Investment House * * * * 260,114 N/AP

Market Capitalization (BD '000)

Source: Bahrain Stock Exchange, KMEFIC Research *Company was not listed N/A: Information not available N/AP: Not Applicable Note: Based on the latest report from BSE we have reclassified Esterad Investment Co. and Alkaleeji Development Co in investment sector to maintain consistency.




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CAGRCommercial Banks Sector

1 NBB National Bank of Bahrain 0.042 0.045 0.048 0.050 0.063 11%2 BBK Bank of Bahrain & Kuwait 0.023 0.030 0.035 0.041 0.045 18%3 AUB Ahli United Bank 0.012 0.010 0.009 0.013 0.015 6%4 BISB Bahrain Islamic Bank 0.017 0.012 0.009 0.011 0.016 -2%5 BSB The Bahraini Saudi Bank 0.014 0.022 (0.126) 0.008 0.009 -10%

Investment Sector6 GMG Gulf Monetary Group (0.002) (0.010) (0.003) 0.013 N/A N/AP7 ABC Arab Banking Corporation 0.509 0.409 (0.164) 0.481 2.183 44%8 UGB United Gulf Bank 0.009 0.002 0.005 0.018 0.021 24%9 INVCORP Investcorp Bank 0.066 0.047 38.175 45.495 N/A N/AP10 BMB Bahrain & Middle East Bank (0.069) (0.019) (0.062) (0.016) 0.001 N/AP11 BCFC Bahrain Commercial Facilities Co. 0.028 0.038 0.049 0.058 0.067 24%12 UGIC United Gulf Industries Co. (0.224) (0.009) (0.001) 0.002 0.022 N/AP13 TAIB Taib Bank 0.058 0.038 (0.041) 0.008 0.017 -26%14 SHAMEL Shamil Bank of Bahrain 0.010 0.018 0.023 0.037 0.048 48%15 ESTERAD Esterad Investment Co. * * * * 0.118 N/AP16 GFH Gulf Finance House * * * * 0.051 N/AP17 TAMEER Al Khaleej Development Co. * * * 0.040 0.015 N/AP

Insurance Sector18 BKIC Bahrain Kuwait Insurance Co. 0.018 0.020 0.024 0.027 0.032 15%19 AHLIA Al-ahlia Insurance Co. 0.023 0.018 0.023 0.032 0.031 8%20 AIIC Arab International Insurance Co. N/A N/A N/A N/A N/A N/AP21 TAKAFUL Takaful Insurance Co. 0.003 0.004 0.004 0.007 0.001 -24%22 ARIG Arab Insurance Group (0.097) (0.094) (0.094) 0.020 0.051 N/AP23 BNH Bahrain National Holding Co. 0.023 0.023 0.021 0.024 0.035 11%

Services Sector24 BASREC Bahrain Ship Repairing & Eng. Co. 0.078 0.068 0.078 0.078 0.063 -5%25 CINEMA Bahrain Cinema Co. 0.068 0.059 0.044 0.088 0.112 13%26 TRAFCO General Trading & Food Process Co. 0.021 0.016 0.023 0.033 0.038 16%27 BMMI Bahrain Maritime & Mercn. Int. Co. 0.053 0.062 0.067 0.131 0.151 30%28 BATELCO Bahrain Telecommunications Co. 0.053 0.054 0.058 0.061 0.083 12%29 CPARK Bahrain Car Parks Co. 0.011 0.013 0.010 0.017 0.017 11%30 DUTYF Bahrain Duty Free Shop Complex 0.095 0.075 0.080 0.090 0.099 1%

Industrial Sector31 BFM Bahrain Flour Mills Co. 0.021 0.040 0.009 0.033 0.035 14%32 POLTRY Delmon Poultry Co. 0.039 0.023 0.033 0.028 0.018 -18%

Hotel & Tourism Sector33 BHOTEL Bahrain Hotels Co. 0.023 0.027 0.031 0.020 0.032 9%34 NHOTEL National Hotels Co. 0.007 0.014 0.014 0.010 0.017 25%35 BTC Bahrain Tourism Co. 0.013 0.008 0.013 0.015 0.023 15%36 FAMILY Bahrain Family Leisure Co. 0.003 0.012 (0.008) 0.002 0.003 0%

TOTAL MARKET - - - - - -

Total Closed Co. Sector37 SICO-C Securities & Investment Co. * * * 0.013 0.033 N/AP38 UPI United Paper Industries * * * 0.049 N/A N/AP

Total Non-Bahraini Co. Sector39 BMUSC Bankmuscat * * 0.458 0.515 0.558 N/AP

40 IIG International Investment Group (0.012) 0.003 (0.010) 0.012 0.018 N/AP41 TII International Investor 0.033 (0.018) (0.017) 0.004 0.015 -18%42 SDTL Sudan Telecommunicaitions Co. 0.978 1.166 0.908 1.057 N/A N/AP43 QTEL Qatar Telcom * 0.894 0.990 1.190 1.509 N/AP44 UFC United Finance Company (SAOG) * * * 0.184 0.210 N/AP45 GLOBAL Global Investment House * * * * 0.133 N/AP

Earning Per Share (BD)





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1 NBB National Bank of Bahrain 0.030 0.033 0.035 0.035 0.040 7%2 BBK Bank of Bahrain & Kuwait 0.018 0.025 0.027 0.030 0.035 18%3 AUB Ahli United Bank 0.009 0.009 0.009 0.009 0.010 3%4 BISB Bahrain Islamic Bank 0.009 0.010 0.010 0.010 0.012 7%5 BSB The Bahraini Saudi Bank 0.012 0.013 0.000 0.000 0.000 N/AP

Investment Sector6 GMG Gulf Monetary Group 0.000 0.000 0.000 0.000 0.000 N/AP7 ABC Arab Banking Corporation 0.264 0.264 0.000 0.264 0.189 -8%8 UGB United Gulf Bank 0.000 0.000 0.000 0.013 0.014 N/AP9 INVCORP Investcorp Bank 0.028 0.028 20.323 20.187 N/A N/AP10 BMB Bahrain & Middle East Bank 0.000 0.000 0.000 0.000 0.000 N/AP11 BCFC Bahrain Commercial Facilities Co. 0.020 0.025 0.030 0.035 0.040 19%12 UGIC United Gulf Industries Co. 0.000 0.000 0.000 0.000 0.000 N/AP13 TAIB Taib Bank 0.026 0.019 0.000 0.000 0.000 N/AP14 SHAMEL Shamil Bank of Bahrain 0.000 0.000 0.019 0.028 0.032 N/AP15 ESTERAD Esterad Investment Co. * * * * 0.045 N/AP16 GFH Gulf Finance House * * * * 0.029 N/AP17 TAMEER Al Khaleej Development Co. * * * 0.030 0.015 N/AP

Insurance Sector18 BKIC Bahrain Kuwait Insurance Co. 0.015 0.015 0.018 0.020 0.020 7%19 AHLIA Al-ahlia Insurance Co. 0.000 0.015 0.010 0.010 0.013 N/AP20 AIIC Arab International Insurance Co. 0.000 0.000 0.000 0.000 0.000 N/AP21 TAKAFUL Takaful Insurance Co. 0.000 0.000 0.000 0.006 0.000 N/AP22 ARIG Arab Insurance Group 0.000 0.000 0.000 0.000 0.000 N/AP23 BNH Bahrain National Holding Co. 0.015 0.015 0.015 0.015 0.017 3%

Services Sector24 BASREC Bahrain Ship Repairing & Eng. Co. 0.040 0.040 0.045 0.050 0.045 3%25 CINEMA Bahrain Cinema Co. 0.030 0.030 0.030 0.030 0.025 -4%26 TRAFCO General Trading & Food Process Co. 0.018 0.015 0.016 0.010 0.015 -4%27 BMMI Bahrain Maritime & Mercn. Int. Co. 0.040 0.045 0.040 0.050 0.050 6%28 BATELCO Bahrain Telecommunications Co. 0.040 0.040 0.045 0.045 0.050 6%29 CPARK Bahrain Car Parks Co. 0.010 0.010 0.010 0.010 0.010 0%30 DUTYF Bahrain Duty Free Shop Complex 0.040 0.040 0.040 0.040 0.045 3%

Industrial Sector31 BFM Bahrain Flour Mills Co. 0.015 0.015 0.015 0.015 0.015 0%32 POLTRY Delmon Poultry Co. 0.015 0.015 0.015 0.015 0.015 0%

Hotel & Tourism Sector33 BHOTEL Bahrain Hotels Co. 0.018 0.020 0.020 0.020 0.025 9%34 NHOTEL National Hotels Co. 0.000 0.007 0.008 0.008 0.009 N/AP35 BTC Bahrain Tourism Co. 0.010 0.010 0.010 0.010 0.012 5%36 FAMILY Bahrain Family Leisure Co. 0.005 0.005 0.000 0.000 0.000 N/AP




40 IIG International Investment Group 0.000 0.000 0.000 0.000 0.000 N/AP41 TII International Investor 0.025 0.000 0.000 0.000 0.013 -15%42 SDTL Sudan Telecommunicaitions Co. 0.346 0.642 0.258 0.268 N/A N/AP43 QTEL Qatar Telcom * 0.621 0.684 0.756 0.880 N/AP44 UFC United Finance Company (SAOG) * * * 0.098 0.098 N/AP45 GLOBAL Global Investment House * * * * 0.090 N/AP

Dividend Per Share (BD)





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1 NBB National Bank of Bahrain 0.301 0.364 0.380 0.368 0.431 9%2 BBK Bank of Bahrain & Kuwait 0.203 0.223 0.232 0.252 0.279 8%3 AUB Ahli United Bank 0.116 0.118 0.120 0.136 0.145 6%4 BISB Bahrain Islamic Bank 0.171 0.168 0.166 0.174 0.229 8%5 BSB The Bahraini Saudi Bank 0.170 0.181 0.042 0.053 0.063 -22%

Investment Sector6 GMG Gulf Monetary Group 0.095 0.049 0.046 0.061 N/A N/AP7 ABC Arab Banking Corporation 7.626 7.497 5.491 6.348 6.982 -2%8 UGB United Gulf Bank 0.099 0.100 0.104 0.128 0.138 9%9 INVCORP Investcorp Bank 0.788 0.867 568.918 587.521 N/A N/AP10 BMB Bahrain & Middle East Bank 0.080 0.053 (0.025) (0.034) (0.034) N/AP11 BCFC Bahrain Commercial Facilities Co. 0.221 0.238 0.242 0.272 0.311 9%12 UGIC United Gulf Industries Co. 0.557 0.091 0.094 0.096 0.118 -32%13 TAIB Taib Bank 0.554 0.546 0.468 0.497 0.628 3%14 SHAMEL Shamil Bank of Bahrain 0.383 0.399 0.419 0.465 0.485 6%15 ESTERAD Esterad Investment Co. * * * * 0.586 N/AP16 GFH Gulf Finance House * * * * 0.221 N/AP17 TAMEER Al Khaleej Development Co. * * * 0.463 0.199 N/AP

Insurance Sector18 BKIC Bahrain Kuwait Insurance Co. 0.261 0.263 0.269 0.296 0.324 6%19 AHLIA Al-ahlia Insurance Co. 0.157 0.148 0.161 0.188 0.223 9%20 AIIC Arab International Insurance Co. N/A N/A N/A N/A N/A N/AP21 TAKAFUL Takaful Insurance Co. 0.133 0.132 0.134 0.118 0.117 -3%22 ARIG Arab Insurance Group 0.259 0.165 0.299 0.330 0.427 13%23 BNH Bahrain National Holding Co. 0.215 0.233 0.219 0.244 0.285 7%

Services Sector24 BASREC Bahrain Ship Repairing & Eng. Co. 1.085 1.268 1.326 1.408 1.547 9%25 CINEMA Bahrain Cinema Co. 0.325 0.468 0.472 0.707 0.850 27%26 TRAFCO General Trading & Food Process Co. 0.180 0.211 0.225 0.279 0.352 18%27 BMMI Bahrain Maritime & Mercn. Int. Co. 0.166 0.190 0.212 0.301 0.380 23%28 BATELCO Bahrain Telecommunications Co. 0.239 0.252 0.269 0.284 0.300 6%29 CPARK Bahrain Car Parks Co. 0.137 0.140 0.140 0.147 0.153 3%30 DUTYF Bahrain Duty Free Shop Complex 0.401 0.444 0.490 0.560 0.650 13%

Industrial Sector31 BFM Bahrain Flour Mills Co. 0.394 0.462 0.454 0.515 0.635 13%32 POLTRY Delmon Poultry Co. 0.298 0.344 0.353 0.375 0.402 8%

Hotel & Tourism Sector33 BHOTEL Bahrain Hotels Co. 0.259 0.271 0.280 0.258 0.250 -1%34 NHOTEL National Hotels Co. 0.233 0.261 0.267 0.281 0.345 10%35 BTC Bahrain Tourism Co. 0.231 0.238 0.241 0.260 0.303 7%36 FAMILY Bahrain Family Leisure Co. 0.111 0.115 0.101 0.103 0.106 -1%




40 IIG International Investment Group 0.115 0.102 0.093 0.106 0.123 2%41 TII International Investor 0.205 0.227 0.218 0.225 0.245 5%42 SDTL Sudan Telecommunicaitions Co. 4.568 4.834 4.849 4.826 N/A N/AP43 QTEL Qatar Telcom * 2.070 2.422 2.955 3.835 N/AP44 UFC United Finance Company (SAOG) * * * 1.289 1.350 N/AP45 GLOBAL Global Investment House * * * * 0.305 N/AP

Book Value Per Share (BD)





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1 NBB National Bank of Bahrain (BD) 0.412 0.510 0.604 0.802 1.002 25%2 BBK Bank of Bahrain & Kuwait (BD) 0.218 0.312 0.382 0.545 0.725 35%3 AUB Ahli United Bank ($) 0.310 0.350 0.330 0.580 0.820 28%4 BISB Bahrain Islamic Bank (BD) 0.204 0.191 0.175 0.270 0.354 15%5 BSB The Bahraini Saudi Bank (BD) 0.142 0.162 0.175 0.134 0.149 1%

Investment Sector6 GMG Gulf Monetary Group (BD) 0.039 0.035 0.035 0.035 0.035 -3%7 ABC Arab Banking Corporation ($) 8.160 7.560 6.100 8.750 12.770 12%8 UGB United Gulf Bank (BD) 0.161 0.131 0.170 0.262 0.224 9%9 INVCORP Investcorp Bank ($) 2.400 1.350 1,500.000 1,500.000 1,500.000 400%10 BMB Bahrain & Middle East Bank (BD) 0.053 0.038 0.025 0.021 0.017 -25%11 BCFC Bahrain Commercial Facilities Co. (BD) 0.214 0.320 0.493 0.665 0.800 39%12 UGIC United Gulf Industries Co. (BD) 0.400 0.040 0.039 0.073 0.125 -25%13 TAIB Taib Bank ($) 1.040 1.010 0.870 0.890 1.120 2%14 SHAMEL Shamil Bank of Bahrain ($) 2.000 1.900 1.900 1.710 1.800 -3%15 ESTERAD Esterad Investment Co. (BD) * * * * 1.015 N/AP16 GFH Gulf Finance House ($) * * * * 1.840 N/AP17 TAMEER Al Khaleej Development Co. ($) * * * N/AP 1.120 N/AP

Insurance Sector18 BKIC Bahrain Kuwait Insurance Co. (BD) 0.288 0.230 0.295 0.450 0.460 12%19 AHLIA Al-ahlia Insurance Co. (BD) 0.258 0.204 0.195 0.355 0.370 9%20 AIIC Arab International Insurance Co. (BD) 0.080 0.080 0.080 0.080 0.080 0%21 TAKAFUL Takaful Insurance Co. (BD) 0.280 0.280 0.280 0.252 0.247 -3%22 ARIG Arab Insurance Group ($) 0.310 0.280 0.740 0.580 1.250 42%23 BNH Bahrain National Holding Co. (BD) 0.200 0.242 0.211 0.330 0.380 17%

Services Sector24 BASREC Bahrain Ship Repairing & Eng. Co. (BD) 0.600 0.615 0.666 0.950 1.450 25%25 CINEMA Bahrain Cinema Co. (BD) 0.438 0.392 0.418 0.640 0.772 15%26 TRAFCO General Trading & Food Process Co. (BD) 0.224 0.220 0.210 0.418 0.510 23%27 BMMI Bahrain Maritime & Mercn. Int. Co. (BD) 0.420 0.446 0.452 0.825 1.560 39%28 BATELCO Bahrain Telecommunications Co. (BD) 0.580 0.595 0.603 0.644 1.018 15%29 CPARK Bahrain Car Parks Co. (BD) 0.120 0.123 0.135 0.190 0.184 11%30 DUTYF Bahrain Duty Free Shop Complex (BD) 0.505 0.600 0.620 0.930 1.260 26%

Industrial Sector31 BFM Bahrain Flour Mills Co. (BD) 0.186 0.224 0.232 0.280 0.305 13%32 POLTRY Delmon Poultry Co. (BD) 0.197 0.226 0.232 0.300 0.303 11%

Hotel & Tourism Sector33 BHOTEL Bahrain Hotels Co. (BD) 0.226 0.274 0.288 0.395 0.451 19%34 NHOTEL National Hotels Co. (BD) 0.096 0.108 0.116 0.180 0.280 31%35 BTC Bahrain Tourism Co. (BD) 0.115 0.122 0.140 0.190 0.302 27%36 FAMILY Bahrain Family Leisure Co. (BD) 0.075 0.096 0.094 0.095 0.089 4%


Total Closed Co. Sector37 SICO-C Securities & Investment Co. * * * N/AP N/AP N/AP38 UPI United Paper Industries (BD) * * * N/AP 0.370 N/AP

Total Non-Bahraini Co. Sector39 BMUSC Bankmuscat (BD) * * 3.220 3.220 6.000 N/AP

40 IIG International Investment Group (BD) 0.404 0.404 0.404 0.404 0.404 0%41 TII International Investor N/AP N/AP N/AP N/AP N/AP N/AP42 SDTL Sudan Telecommunicaitions Co. ($) N/AP N/AP 17.500 17.500 17.500 N/AP43 QTEL Qatar Telcom ($) * 24.350 30.000 44.000 47.000 N/AP44 UFC United Finance Company (SAOG) ($) * * * 5.280 5.700 N/AP45 GLOBAL Global Investment House (BD) * * * * 1.250 N/AP

Closing Prices





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S.N. Symbol Company Name / Sector 2000 2001 2002 2003 2004 2000-04 AVGCommercial Banks Sector 11.28% 10.78% 10.06% 11.60% 12.55% 11.26%

1 NBB National Bank of Bahrain 13.91% 12.46% 12.67% 13.53% 14.57% 13.43%2 BBK Bank of Bahrain & Kuwait 11.42% 13.31% 15.26% 16.39% 16.27% 14.53%3 AUB Ahli United Bank 10.04% 8.57% 7.19% 9.30% 10.65% 9.15%4 BISB Bahrain Islamic Bank 9.98% 6.86% 5.36% 6.16% 7.02% 7.08%5 BSB The Bahraini Saudi Bank 8.52% 12.40% NM 14.18% 14.92% 12.50%

Investment Sector 6.76% 5.42% 6.77% 8.14% 9.50% 7.32%6 GMG Gulf Monetary Group NM NM NM 21.11% N/A 21.11%7 ABC Arab Banking Corporation 6.67% 5.45% NM 7.57% 31.26% 12.74%8 UGB United Gulf Bank 8.73% 2.02% 4.57% 13.92% 15.48% 8.95%9 INVCORP Investcorp Bank 8.38% 5.46% 6.71% 7.74% N/A 7.07%10 BMB Bahrain & Middle East Bank NM NM NM 45.41% NM 45.41%11 BCFC Bahrain Commercial Facilities Co. 12.60% 16.00% 20.12% 21.14% 21.62% 18.30%12 UGIC United Gulf Industries Co. NM NM NM 2.31% 18.73% 10.52%13 TAIB Taib Bank 10.51% 7.04% NM 1.68% 2.64% 5.47%14 SHAMEL Shamil Bank of Bahrain 2.59% 4.48% 5.55% 7.91% 9.91% 6.09%15 ESTERAD Esterad Investment Co. * * * * 20.14% 20.14%16 GFH Gulf Finance House * * * * 22.89% 22.89%17 TAMEER Al Khaleej Development Co. * * * 8.73% 7.57% 8.15%

Insurance Sector 8.43% 9.27% 9.06% 8.04% 11.34% 9.23%18 BKIC Bahrain Kuwait Insurance Co. 6.91% 7.73% 8.96% 9.03% 9.95% 8.52%19 AHLIA Al-ahlia Insurance Co. 14.82% 11.88% 14.49% 17.20% 13.77% 14.43%20 AIIC Arab International Insurance Co. N/A N/A N/A N/A N/A N/A21 TAKAFUL Takaful Insurance Co. 1.88% 2.73% 2.82% 6.26% 0.79% 2.90%22 ARIG Arab Insurance Group NM NM NM 6.14% 11.89% 9.02%23 BNH Bahrain National Holding Co. 10.50% 9.85% 9.77% 9.98% 12.18% 10.46%

Services Sector 21.16% 20.21% 20.21% 20.94% 25.28% 21.56%24 BASREC Bahrain Ship Repairing & Eng. Co. 7.16% 5.34% 5.90% 5.57% 4.06% 5.61%25 CINEMA Bahrain Cinema Co. 20.99% 12.50% 9.29% 12.39% 13.18% 13.67%26 TRAFCO General Trading & Food Process Co. 11.56% 7.63% 10.02% 11.91% 10.78% 10.38%27 BMMI Bahrain Maritime & Mercn. Int. Co. 31.75% 32.50% 31.84% 43.42% 39.86% 35.87%28 BATELCO Bahrain Telecommunications Co. 21.95% 21.51% 21.53% 21.38% 27.54% 22.79%29 CPARK Bahrain Car Parks Co. 8.34% 9.05% 7.33% 11.51% 11.00% 9.45%30 DUTYF Bahrain Duty Free Shop Complex 23.72% 16.90% 16.33% 16.12% 15.19% 17.65%

Industrial Sector 9.40% 7.61% 5.78% 6.89% 5.08% 6.95%31 BFM Bahrain Flour Mills Co. 5.45% 8.59% 1.88% 6.34% 5.54% 5.56%32 POLTRY Delmon Poultry Co. 13.22% 6.65% 9.45% 7.44% 4.54% 8.26%

Hotel & Tourism Sector 5.61% 6.84% 6.52% 5.36% 7.94% 6.46%33 BHOTEL Bahrain Hotels Co. 9.05% 10.14% 10.88% 7.72% 12.96% 10.15%34 NHOTEL National Hotels Co. 3.07% 5.47% 5.30% 3.69% 4.89% 4.48%35 BTC Bahrain Tourism Co. 5.51% 3.29% 5.52% 5.60% 7.69% 5.52%36 FAMILY Bahrain Family Leisure Co. 2.74% 10.59% NM 1.61% 2.76% 4.42%

TOTAL MARKET 9.97% 8.87% 10.56% 11.58% 12.88% 10.77%

Total Closed Co. Sector 10.16% 13.53% 11.85%37 SICO-C Securities & Investment Co. * * * 9.46% 19.74% 14.60%38 UPI United Paper Industries * * * 20.86% N/A 20.86%

Total Non-Bahraini Co. Sector 20.27% 33.77% 27.26% 24.86% 29.02% 27.04%39 BMUSC Bankmuscat * * 14.94% 15.64% 17.55% 16.04%

40 IIG International Investment Group NM 2.56% NM 10.94% 14.44% 9.31%41 TII International Investor 15.85% NM NM 1.63% 6.18% 7.89%42 SDTL Sudan Telecommunicaitions Co. 21.40% 24.13% 18.72% 21.91% N/A 21.54%43 QTEL Qatar Telcom * 43.18% 40.89% 40.26% 39.36% 40.92%44 UFC United Finance Company (SAOG) * * * 14.25% 15.54% 14.89%45 GLOBAL Global Investment House * * * * 43.72% 43.72%

Return On Shareholders Equity (%)





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1 NBB National Bank of Bahrain 1.62% 1.68% 1.74% 1.81% 2.08% 1.79%2 BBK Bank of Bahrain & Kuwait 1.24% 1.52% 1.65% 1.77% 1.81% 1.60%3 AUB Ahli United Bank 1.14% 1.18% 1.16% 1.39% 1.31% 1.24%4 BISB Bahrain Islamic Bank 2.01% 1.39% 0.98% 1.06% 1.45% 1.38%5 BSB The Bahraini Saudi Bank 1.45% 2.00% -12.64% 1.19% 1.47% -1.31%

Investment Sector 0.52% 0.48% 0.02% 0.76% 3.93% 1.14%6 GMG Gulf Monetary Group -1.13% -6.08% -1.76% 7.66% N/A -0.33%7 ABC Arab Banking Corporation 0.48% 0.38% -0.14% 0.40% 3.88% 1.00%8 UGB United Gulf Bank 2.34% 0.44% 1.03% 3.05% 3.12% 2.00%9 INVCORP Investcorp Bank 2.39% 1.46% 1.94% 2.19% N/A 1.99%10 BMB Bahrain & Middle East Bank -9.15% -3.05% -26.65% -7.06% 0.33% -9.12%11 BCFC Bahrain Commercial Facilities Co. 4.02% 5.14% 5.98% 5.59% 5.44% 5.23%12 UGIC United Gulf Industries Co. -32.61% -7.94% -1.11% 2.31% 18.06% -4.26%13 TAIB Taib Bank 2.84% 1.89% -2.07% 0.62% 1.05% 0.87%14 SHAMEL Shamil Bank of Bahrain 0.46% 0.87% 1.39% 1.87% 1.81% 1.28%15 ESTERAD Esterad Investment Co. * * * * 16.35% 16.35%16 GFH Gulf Finance House * * * * 13.53% 13.53%17 TAMEER Al Khaleej Development Co. * * * 8.51% 7.16% 7.84%

Insurance Sector -4.69% -4.75% -1.65% 1.23% 2.20% -1.53%18 BKIC Bahrain Kuwait Insurance Co. 2.55% 3.08% 3.08% 3.67% 4.03% 3.28%19 AHLIA Al-ahlia Insurance Co. 3.75% 3.65% 4.53% 6.32% 5.79% 4.81%20 AIIC Arab International Insurance Co. N/A N/A N/A N/A N/A N/AP21 TAKAFUL Takaful Insurance Co. 1.47% 2.31% 1.90% 4.11% 0.44% 2.05%22 ARIG Arab Insurance Group -5.97% -6.12% -2.70% 0.56% 1.67% -2.51%23 BNH Bahrain National Holding Co. 5.53% 5.66% 5.59% 5.63% 6.63% 5.81%



Hotel & Tourism Sector 5.19% 6.41% 5.99% 4.90% 7.33% 5.96%33 BHOTEL Bahrain Hotels Co. 7.95% 9.17% 9.79% 6.80% 11.40% 9.02%34 NHOTEL National Hotels Co. 2.95% 5.27% 5.01% 3.51% 4.65% 4.28%35 BTC Bahrain Tourism Co. 5.17% 3.11% 4.95% 5.05% 7.20% 5.10%36 FAMILY Bahrain Family Leisure Co. 2.53% 9.85% -7.51% 1.50% 2.56% 1.79%

TOTAL MARKET 0.87% 0.90% 0.54% 1.35% 3.45% 1.42%

Total Closed Co. Sector N/A N/A N/A 6.42% 15.06% 10.74%37 SICO-C Securities & Investment Co. * * * 5.50% 15.06% 10.28%38 UPI United Paper Industries * * * 14.04% N/A 14.04%

Total Non-Bahraini Co. Sector 12.68% 18.81% 6.52% 8.38% 8.40% 10.96%39 BMUSC Bankmuscat * * 1.49% 1.74% 1.84% 1.69%

40 IIG International Investment Group -9.44% 2.35% -9.40% 9.62% 9.48% 0.52%41 TII International Investor 15.30% -7.10% -6.61% 1.44% 5.52% 1.71%42 SDTL Sudan Telecommunicaitions Co. 15.96% 16.36% 12.57% 14.49% N/A 14.84%43 QTEL Qatar Telcom * 29.44% 28.44% 32.90% 28.84% 29.90%44 UFC United Finance Company (SAOG) * * * 3.21% 4.11% 3.66%45 GLOBAL Global Investment House * * * * 21.51% 21.51%

Return On Assets (%)





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S.N. Symbol Company Name / Sector 2000 2001 2002 2003 2004 2000-04 AVGCommercial Banks Sector 9.95 11.54 12.86 16.10 17.84 13.66

1 NBB National Bank of Bahrain 9.83 11.23 12.55 16.11 15.96 13.142 BBK Bank of Bahrain & Kuwait 9.46 10.61 10.86 13.30 16.07 12.063 AUB Ahli United Bank 10.00 13.03 14.37 17.32 20.01 14.944 BISB Bahrain Islamic Bank 12.02 16.58 19.61 25.20 21.98 19.085 BSB The Bahraini Saudi Bank 9.81 7.24 NM 17.84 15.82 12.68

Investment Sector 11.30 10.86 16.78 10.15 11.94 12.216 GMG Gulf Monetary Group NM NM NM 2.72 N/A 2.727 ABC Arab Banking Corporation 6.05 6.98 NM 6.86 11.72 7.908 UGB United Gulf Bank 18.58 64.90 35.74 14.65 10.48 28.879 INVCORP Investcorp Bank 13.71 10.76 14.81 12.43 N/A 12.9310 BMB Bahrain & Middle East Bank NM NM NM NM NM N/AP11 BCFC Bahrain Commercial Facilities Co. 7.68 8.39 10.12 11.56 11.92 9.9312 UGIC United Gulf Industries Co. NM NM NM 33.00 5.66 19.3313 TAIB Taib Bank 6.74 9.91 NM 40.15 25.47 20.5714 SHAMEL Shamil Bank of Bahrain 75.91 40.03 30.83 17.52 14.12 35.6815 ESTERAD Esterad Investment Co. * * * * 8.60 8.6016 GFH Gulf Finance House * * * * 13.72 13.7217 TAMEER Al Khaleej Development Co. * * * N/AP 28.06 28.06

Insurance Sector 14.25 13.70 11.83 13.62 10.91 12.8618 BKIC Bahrain Kuwait Insurance Co. 15.99 11.32 12.22 16.83 14.29 14.1319 AHLIA Al-ahlia Insurance Co. 11.11 11.61 8.38 10.98 12.06 10.8320 AIIC Arab International Insurance Co. N/A N/A N/A N/A N/A N/AP21 TAKAFUL Takaful Insurance Co. 111.82 77.78 74.27 34.24 267.04 113.0322 ARIG Arab Insurance Group NM NM NM 10.79 9.29 10.0423 BNH Bahrain National Holding Co. 8.86 10.56 9.89 13.54 10.93 10.76

Services Sector 10.34 10.70 10.33 9.84 12.06 10.6524 BASREC Bahrain Ship Repairing & Eng. Co. 7.73 9.08 8.52 12.12 23.05 12.1025 CINEMA Bahrain Cinema Co. 6.42 6.70 9.52 7.31 6.89 7.3726 TRAFCO General Trading & Food Process Co. 10.75 13.64 9.30 12.58 13.45 11.9427 BMMI Bahrain Maritime & Mercn. Int. Co. 7.92 7.22 6.70 6.30 10.31 7.6928 BATELCO Bahrain Telecommunications Co. 11.05 10.96 10.39 10.62 12.33 11.0729 CPARK Bahrain Car Parks Co. 10.47 9.68 13.14 11.25 10.93 11.0930 DUTYF Bahrain Duty Free Shop Complex 5.31 8.00 7.75 10.31 12.77 8.83

Industrial Sector 6.04 7.51 10.14 9.75 12.05 9.1031 BFM Bahrain Flour Mills Co. 8.68 5.64 27.18 8.58 8.67 11.7532 POLTRY Delmon Poultry Co. 4.99 9.89 6.95 10.75 16.61 9.84

Hotel & Tourism Sector 10.74 9.67 9.28 18.10 14.97 12.5533 BHOTEL Bahrain Hotels Co. 9.65 9.98 9.44 19.87 13.93 12.5734 NHOTEL National Hotels Co. 13.43 7.56 8.18 17.34 16.57 12.6235 BTC Bahrain Tourism Co. 9.03 15.57 10.53 13.08 12.98 12.2436 FAMILY Bahrain Family Leisure Co. 24.73 7.88 NM 57.27 30.46 30.09

TOTAL MARKET 11.02 11.25 12.30 12.43 13.83 12.17

Total Closed Co. Sector 0.00 0.00 N/AP37 SICO-C Securities & Investment Co. * * * N/AP N/AP N/AP38 UPI United Paper Industries * * * N/AP N/A N/AP

Total Non-Bahraini Co. Sector NM 11.18 9.91 13.89 11.17 11.5439 BMUSC Bankmuscat * * 7.04 6.25 10.75 8.01

40 IIG International Investment Group NM NM NM 34.96 22.65 28.8141 TII International Investor N/AP N/AP N/AP N/AP N/AP N/AP42 SDTL Sudan Telecommunicaitions Co. * * 7.27 6.24 N/A 6.7643 QTEL Qatar Telcom * 10.27 11.42 13.94 11.74 11.8444 UFC United Finance Company (SAOG) * * * 10.84 10.24 10.5445 GLOBAL Global Investment House * * * * 9.40 9.40

Price To Earnings - PE (x)





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S.N. Symbol Company Name / Sector 2000 2001 2002 2003 2004 2000-04 AVGCommercial Banks Sector 1.09 1.19 1.90 2.01 2.19 1.68

1 NBB National Bank of Bahrain 1.37 1.40 1.59 2.18 2.33 1.772 BBK Bank of Bahrain & Kuwait 1.07 1.40 1.65 2.16 2.59 1.773 AUB Ahli United Bank 1.00 1.12 1.03 1.61 2.13 1.384 BISB Bahrain Islamic Bank 1.19 1.14 1.05 1.55 1.54 1.295 BSB The Bahraini Saudi Bank 0.84 0.90 4.17 2.53 2.36 2.16

Investment Sector 0.96 0.89 0.85 0.97 1.45 1.026 GMG Gulf Monetary Group 0.41 0.71 0.76 0.58 N/A 0.627 ABC Arab Banking Corporation 0.40 0.38 0.42 0.52 0.69 0.488 UGB United Gulf Bank 1.62 1.31 1.63 2.04 1.62 1.649 INVCORP Investcorp Bank 1.15 0.59 0.99 0.96 N/A 0.9210 BMB Bahrain & Middle East Bank 0.66 0.72 (0.98) (0.61) (0.50) -11 BCFC Bahrain Commercial Facilities Co. 0.97 1.34 2.04 2.44 2.58 1.8712 UGIC United Gulf Industries Co. 0.72 0.44 0.42 0.76 1.06 0.6813 TAIB Taib Bank 0.71 0.70 0.70 0.68 0.67 0.6914 SHAMEL Shamil Bank of Bahrain 1.97 1.79 1.71 1.39 1.40 1.6515 ESTERAD Esterad Investment Co. * * * * 1.73 1.7316 GFH Gulf Finance House * * * * 3.14 3.1417 TAMEER Al Khaleej Development Co. * * * N/AP 2.12 2.12

Insurance Sector 1.25 1.21 1.26 1.51 1.52 1.3518 BKIC Bahrain Kuwait Insurance Co. 1.10 0.87 1.09 1.52 1.42 1.2019 AHLIA Al-ahlia Insurance Co. 1.65 1.38 1.21 1.89 1.66 1.5620 AIIC Arab International Insurance Co. N/A N/A N/A N/A N/A N/A21 TAKAFUL Takaful Insurance Co. 2.11 2.13 2.09 2.14 2.11 2.1222 ARIG Arab Insurance Group 0.45 0.63 0.93 0.66 1.10 0.7523 BNH Bahrain National Holding Co. 0.93 1.04 0.97 1.35 1.33 1.12

Services Sector 1.46 1.33 1.27 1.58 1.99 1.5324 BASREC Bahrain Ship Repairing & Eng. Co. 0.55 0.48 0.50 0.67 0.94 0.6325 CINEMA Bahrain Cinema Co. 1.35 0.84 0.88 0.90 0.91 0.9826 TRAFCO General Trading & Food Process Co. 1.24 1.04 0.93 1.50 1.45 1.2327 BMMI Bahrain Maritime & Mercn. Int. Co. 2.53 2.35 2.13 2.74 4.11 2.7728 BATELCO Bahrain Telecommunications Co. 2.43 2.36 2.24 2.27 3.40 2.5429 CPARK Bahrain Car Parks Co. 0.87 0.88 0.96 1.30 1.20 1.0430 DUTYF Bahrain Duty Free Shop Complex 1.26 1.35 1.27 1.66 1.94 1.50

Industrial Sector 0.57 0.57 0.59 0.67 0.62 0.6031 BFM Bahrain Flour Mills Co. 0.47 0.48 0.51 0.54 0.48 0.5032 POLTRY Delmon Poultry Co. 0.66 0.66 0.66 0.80 0.75 0.71

Hotel & Tourism Sector 0.61 0.69 0.74 0.96 1.12 0.8233 BHOTEL Bahrain Hotels Co. 0.87 1.01 1.03 1.53 1.81 1.2534 NHOTEL National Hotels Co. 0.41 0.41 0.43 0.64 0.81 0.5435 BTC Bahrain Tourism Co. 0.50 0.51 0.58 0.73 1.00 0.6636 FAMILY Bahrain Family Leisure Co. 0.67 0.84 0.93 0.92 0.84 0.84

TOTAL MARKET 0.99 0.98 1.10 1.28 1.48 1.17

Total Closed Co. Sector N/AP N/AP N/AP37 SICO-C Securities & Investment Co. * * * N/AP N/AP N/AP38 UPI United Paper Industries * * * N/AP N/A N/AP

Total Non-Bahraini Co. Sector 3.50 4.19 2.86 2.66 3.09 3.2639 BMUSC Bankmuscat * * 1.05 0.98 1.89 1.31

40 IIG International Investment Group 3.50 3.95 4.36 3.82 3.27 3.7841 TII International Investor N/AP N/AP N/AP N/AP N/AP N/AP42 SDTL Sudan Telecommunicaitions Co. * * 1.36 1.36 N/A 1.3643 QTEL Qatar Telcom * 4.43 4.67 5.61 4.62 4.8344 UFC United Finance Company (SAOG) * * * 1.54 1.59 1.5745 GLOBAL Global Investment House * * * * 4.09 4.09

Price to Book Value (Times)





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1 NBB National Bank of Bahrain 7.28% 6.37% 5.79% 4.36% 3.99% 5.56%2 BBK Bank of Bahrain & Kuwait 8.26% 8.01% 7.07% 5.50% 4.83% 6.73%3 AUB Ahli United Bank 8.06% 6.57% 6.97% 4.14% 3.29% 5.81%4 BISB Bahrain Islamic Bank 4.41% 5.24% 5.71% 3.70% 3.39% 4.49%5 BSB The Bahraini Saudi Bank 8.45% 8.02% - - - 8.24%

Investment Sector 3.56% 4.36% 2.05% 4.72% 4.23% 3.78%6 GMG Gulf Monetary Group - - - - - -

7 ABC Arab Banking Corporation 8.58% 9.27% - 8.00% 3.92% 7.44%8 UGB United Gulf Bank - - - 5.04% 6.31% 5.68%9 INVCORP Investcorp Bank 3.13% 5.56% 3.59% 3.57% N/AP 3.96%10 BMB Bahrain & Middle East Bank - - - - - -11 BCFC Bahrain Commercial Facilities Co. 9.35% 7.81% 6.08% 5.26% 5.00% 6.70%12 UGIC United Gulf Industries Co. - - - - - -13 TAIB Taib Bank 6.73% 4.95% - - - 5.84%14 SHAMEL Shamil Bank of Bahrain - - 2.63% 4.39% 4.72% 3.91%15 ESTERAD Esterad Investment Co. * * * * 4.46% 4.46%16 GFH Gulf Finance House * * * * 4.12% 4.12%17 TAMEER Al Khaleej Development Co. * * * N/AP 3.57% 3.57%

Insurance Sector 2.22% 2.74% 2.68% 2.70% 1.65% 2.40%18 BKIC Bahrain Kuwait Insurance Co. 5.21% 6.52% 5.93% 4.44% 4.35% 5.29%19 AHLIA Al-ahlia Insurance Co. - 7.36% 5.13% 2.82% 3.38% 4.67%20 AIIC Arab International Insurance Co. N/A N/A N/A N/A N/A N/AP21 TAKAFUL Takaful Insurance Co. - - - 2.38% - 2.38%22 ARIG Arab Insurance Group - - - - - -23 BNH Bahrain National Holding Co. 7.50% 6.20% 7.11% 4.55% 4.47% 5.97%



Hotel & Tourism Sector 5.78% 6.96% 6.33% 4.60% 4.27% 5.59%33 BHOTEL Bahrain Hotels Co. 7.74% 7.30% 6.94% 5.06% 5.54% 6.52%34 NHOTEL National Hotels Co. - 6.55% 6.90% 4.44% 3.21% 5.28%35 BTC Bahrain Tourism Co. 8.70% 8.20% 7.14% 5.26% 3.97% 6.65%36 FAMILY Bahrain Family Leisure Co. 6.67% 5.21% - - - 5.94%

TOTAL MARKET 5.34% 5.77% 4.59% 4.96% 4.07% 4.95%

Total Closed Co. Sector N/AP N/AP N/AP N/AP N/AP N/AP37 SICO-C Securities & Investment Co. * * * N/AP N/AP N/AP38 UPI United Paper Industries * * * N/AP N/A N/AP

Total Non-Bahraini Co. Sector - 7.90% 5.26% 4.54% 5.07% 5.69%39 BMUSC Bankmuscat * * 4.56% 4.08% 4.08% 4.24%

40 IIG International Investment Group - - - - - -41 TII International Investor N/AP N/AP N/AP N/AP N/AP N/AP42 SDTL Sudan Telecommunicaitions Co. N/AP N/AP 3.91% 4.06% N/A 3.99%43 QTEL Qatar Telcom * 6.77% 6.04% 4.97% 4.97% 5.69%44 UFC United Finance Company (SAOG) * * * 4.92% 4.56% 4.74%45 GLOBAL Global Investment House * * * * 7.18% 7.18%

Dividend Yield (%)





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Bahrain Stock Exchange – Historical Market Statistics

Bahrain Stock Exchange (BSE) officially launched two new indices - Bahrain All Share Index and Esterad Index

Sector Jul-04 Aug-04 Sep-04 Oct-04 Nov-04 Dec-04

2nd Half 2004

Growth

Commercial Banks 1,759 2,011 2,052 2,189 2,165 2,190 24.5%

Investment 1,307 1,378 1,301 1,343 1,339 1,360 4.1%

Insurance 1,765 1,784 1,753 1,812 1,861 2,105 19.3%

Services 1,523 1,660 1,770 1,864 1,881 1,872 23.0%

Industrial 1,313 1,313 1,313 1,313 1,341 1,346 2.5%

Hotel & Tourism 1,790 1,984 2,070 2,160 2,142 2,036 13.7%

Bahrain All Share Index 1,533 1,672 1,674 1,757 1,754 1,774 15.7%

BAHRAIN STOCK EXCHANGE (BSE) LAUNCHES NEW INDEX

*Note: On 1 July 2004, Bahrain Stock Exchange (BSE) officially launched two new indices - Bahrain All Share Index and Esterad Index. The Bahrain All Share Index replaced the Bahrain Index, which was stopped as the beginning of 2005. During the rest six months of 2004, both the Bahrain Index and the Bahrain All Share Index were available to investors.

Period Bahrain Index All Share Index Esterad Index Vol ('000)

Dec-03 2,346 30,527

Jan-04 2,325 28,369

Feb-04 2,333 20,339

Mar-04 2,321 23,128

Apr-04 2,397 40,768

May-04 2,481 37,487

Jun-04 2,484 23,108

Jul-04 2,552 1,533 1,581 15,718

Aug-04 2,809 1,672 1,753 21,359

Sep-04 2,916 1,674 1,752 25,088

Oct-04 3,053 1,757 1,850 28,335

Nov-04 3,035 1,754 1,846 24,016

Dec-04 3,054 1,774 1,870 48,090

Indices Overview - Old and New - 2004





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Volume and Value Traded

Volume Traded (Million) 2002 2003 2004 Value Traded (BD Million) 2002 2003 2004

January 91.7 51.1 28.4 January 16.6 9.0 20.7

February 12.0 13.3 20.3 February 3.9 5.0 11.2

March 19.7 28.2 23.1 March 5.1 5.4 10.7

April 39.4 40.3 40.8 April 10.1 9.4 13.7

May 42.7 31.8 37.5 May 8.2 8.9 15.7

June 16.6 25.4 23.1 June 5.3 7.9 10.9

July 27.0 24.8 15.7 July 6.6 6.2 8.3

August 18.4 76.7 21.4 August 5.0 12.9 10.5

September 19.0 28.5 25.1 September 4.7 8.0 11.6

October 36.9 35.4 28.3 October 7.0 11.7 13.0

November 17.4 19.6 24.0 November 4.4 8.0 10.3

December 12.3 30.5 48.1 December 4.1 9.7 37.7

Total 353.1 405.6 335.8 Total 80.9 102.3 174.3

Sector - Volume Traded ('000) 2002 2003 2004 Sector - Value Traded (BD '000) 2002 2003 2004

Commercial Banks 213,621 270,458 151,158 Commercial Banks 36,120 48,734 58,042

Investment 85,247 59,622 57,683 Investment 20,407 14,409 42,200

Insurance 14,137 12,246 41,658 Insurance 2,706 2,982 12,159

Services 31,703 53,165 64,340 Services 17,136 30,373 53,424

Industrial 801 909 1,434 Industrial 179 236 424

Hotel & Tourism 7,396 8,943 18,763 Hotel & Tourism 1,218 1,648 6,078

Non-Bahraini Companies 224 256 717 Non-Bahraini Companies 2,314 1,704 1,601

Closed Companies 0 0 50 Closed Companies 0 0 17

Preferred Shares 2 6 1 Preferred Shares 822 2,176 332

Total 353,132 405,604 335,804 Total 80,902 102,261 174,278

Volume Contribution 2002 2003 2004 Value Contribution 2002 2003 2004

Commercial Banks 60.5% 66.7% 45.0% Commercial Banks 44.6% 47.7% 33.3%

Investment 24.1% 14.7% 17.2% Investment 25.2% 14.1% 24.2%

Insurance 4.0% 3.0% 12.4% Insurance 3.3% 2.9% 7.0%

Services 9.0% 13.1% 19.2% Services 21.2% 29.7% 30.7%

Industrial 0.2% 0.2% 0.4% Industrial 0.2% 0.2% 0.2%

Hotel & Tourism 2.1% 2.2% 5.6% Hotel & Tourism 1.5% 1.6% 3.5%

Non-Bahraini Companies 0.1% 0.1% 0.2% Non-Bahraini Companies 2.9% 1.7% 0.9%

Closed Companies 0.0% 0.0% 0.0% Closed Companies 0.0% 0.0% 0.0%

Preferred Shares 0.0% 0.0% 0.0% Preferred Shares 1.0% 2.1% 0.2%

Total 100.0% 100.0% 100.0% Total 100.0% 100.0% 100.0%





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Transactions

Number of Transactions 2002 2003 2004

January 2,010 1,239 1,135

February 883 877 997

March 1,130 725 974

April 1,492 1,371 1,174

May 1,347 1,385 1,615

June 960 1,426 1,461

July 1,085 1,121 1,322

August 687 1,010 1,499

September 754 1,369 1,736

October 1,085 1,789 1,807

November 872 867 1,142

December 672 1,450 818

Total 12,977 14,629 15,680

Transaction Break-up By Sector 2002 2003 2004

Commercial Banks 5,240 5,465 5,772

Investment 3,499 2,775 3,086

Insurance 588 849 763

Services 2,772 4,758 5,069

Industrial 126 116 126

Hotel & Tourism 531 563 753

Non-Bahraini Companies 182 94 102

Closed Companies 0 0 4

Preferred Shares 39 9 5

Total 12,977 14,629 15,680

Transaction Contribution By Sector 2002 2003 2004

Commercial Banks 40.4% 37.4% 36.8%

Investment 27.0% 19.0% 19.7%

Insurance 4.5% 5.8% 4.9%

Services 21.4% 32.5% 32.3%

Industrial 1.0% 0.8% 0.8%

Hotel & Tourism 4.1% 3.8% 4.8%

Non-Bahraini Companies 1.4% 0.6% 0.7%

Closed Companies 0.0% 0.0% 0.0%

Preferred Shares 0.3% 0.1% 0.0%

Total 100.0% 100.0% 100.0%





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Bibliography

� Bahrain Monetary Agency – BMA

� Ministry Of Oil, Bahrain

� Ministry Of Finance, Bahrain

� Ministry Of Electricity and Water, Bahrain

� Central Informatics Organization, Bahrain

� General Organization for Social Insurance (GOSI) and Civil Service Bureau

� Aluminum Bahrain – Alba

� Bahrain National Gas Company – BANAGAS

� Economic Development Board – EDB, Bahrain

� Bahrain Financial Harbour – BFH

� Bahrain Stock Exchange – BSE

� Mckinsey Analysis

� The Economist

� Economic Intelligence Unit – EIU

� Economic Information Administration – EIA

� Organization of Petroleum Exporting Countries – OPEC

� World Economic Forum – WEF

� American Heritage Foundation/Wall Street Journal

� International Monetary Fund – IMF

� Middle East Economic Digest – MEED

� Trade Arabia News Service

� Gulf Business




Notes

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��

Research Kuwait Real Estate Bank - KREB

Kuwait Real Estate Bank - 14 -

Disclaimer;

This equity research document has been compiled and published by Kuwait and Middle East Financial Investment Company K.S.C.C. (“KMEFIC”), a licensed investment company regulated by the Central Bank of Kuwait. The information presented in this document was obtained from sources KMEFIC believes to be reliable, but KMEFIC does not represent nor warrant its accuracy and/or completeness nor an independent verification. KMEFIC accepts no liability whatsoever for any loss arising from the use of this document or its content or otherwise arising in connection therewith. This document is not to be used or considered as an offer to sell or a solicitation of an offer to buy any securities mentioned herein. Neither this document nor any of its contents may be copied, transmitted or distributed to any other party without the prior written consent of KMEFIC. The opinions and estimates expressed herein are those of KMEFIC and subject to change without any prior notice. Past performance is not necessarily indicative of future performance. Neither this document nor any of its contents may be distributed in any jurisdiction outside the State of Kuwait where its distribution is restricted by law.

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