annual report 2003 - bahrain bourse to develop the financial and banking sectors and bolster the...

w w w . b a h r a i n s t o c k . c o m

A n n u a l R e p o r t 2 0 0 3

H.H. Shaikh Khalifa Bin Salman Al Khalifa

The Prime Minister

H.M. Shaikh Hamad Bin Isa Al Khalifa

King of Bahrain

H.H. Shaikh Salman Bin Hamad Al Khalifa

Crown Prince and Commander-in-Chief of the Bahrain Defence Force

A N N U A L R E P O R T 2 0 0 33

B A H R A I N S T O C K E X C H A N G E2

Bahrain Stock ExchangeAl Hidaya Building No 2, Government AvenueP.O. Box 3203, Manama, Kingdom of BahrainTelephone: (973) 17 261260, Facsimile: (973) 17 256362E-mail: [email protected]: www.bahrainstock.com of the Annual Report 2003

4 The Chairman’s Statement

6 Director’s Message

8 Members of the Board

9 Management Team

10 World Stock Markets Performance During 2003

12 Bahrain Stock Exchange - 2003

14 Key Statistical Data 2002-2003

19 Traded Securities and Instruments

21 Members of the Exchange

22 Listing and Annual Subscription Fees

23 Financial Statements

Contents

Islamic, Local and Foreign Bonds, at a value exceeding US $ 1 billion.

BSE exerted strenuous efforts that resulted in many conventional bonds

and a group of closed shareholding companies and investment funds

listed on the BSE. There remains an ever-increasing goal aiming to offer

multiple investment options and channels for investors, as well as, to

create a more appropriate atmosphere for companies desiring to turn

into public shareholding firms.

In view of the advances of modern technology, and their recent

applications that represent a key element in the activities of stock

exchanges and bourses, BSE attached prior importance to this vital

factor. In 2003, an ambitious plan was carried out to upgrade electronic

systems in order to meet global standards set by the International

Organization for Stock Exchange, and complete all requirements within

a time limit program.

The BSE completed the process of developing its own website, which

contributed to improving its services in terms of quality and volume of

data it offers. Ongoing efforts were exerted to foster human

development, with a main focus on training programs to qualify human

cadres and polish their skills and efficiency at work, this enables the BSE

to develop its operations and assume its role efficiently.

Cooperation and coordination were enhanced between BSE and Bahrain

Institute for Banking and Finance (BIBF) to implement a number of

specialized training programs and courses in securities industry. These

programs were useful to a large spectrum of securities personnel not only

in the Kingdom, but also in the region.

We look forward to the future with optimism and confidence in BSE’s

ability to assume its role properly in bolstering the Kingdom’s pioneering

financial status and developing an appropriate atmosphere for multiple

investment options to attract more investors and encourage them to

benefit from the sound investment climate, supported by solid

infrastructure and wise legislations of the Kingdom, in order to enable

them to diversify their investment portfolio.

To conclude, I would like to express my sincere appreciation and

gratitude to His Majesty King Hamad bin Isa Al Khalifa, His Highness the

Prime Minister, Sheikh Khalifa bin Salman Al Khalifa, and His Highness

the Crown Prince and Commander in Chief of the BDF, Sheikh Salman bin

Hamad Al Khalifa, for their ongoing and limitless support.

Ahmed bin Mohammed Al Khalifa

Governor – Bahrain Monetary Agency

Chairman of Bahrain Stock Exchange

A N N U A L R E P O R T 2 0 0 35

The Chairman's Statement

Last year’s activities witnessed numerous events that positively affected

the economies of the region, and eventually contributed to creating a

healthier environment to promote activities of capital markets in Gulf

States in general and Bahrain Stock Exchange in particular. 2003

recorded a remarkable increase in listing Islamic, Local and Foreign

Bonds, and Shares of a number of Bahraini Closed Shareholding

Companies.

Bahrain Stock Exchange (BSE) has developed an ongoing desire to

further activate its role within an ambitious strategy , adopted by the

Bahrain Monetary Agency (BMA), to work in harmony with other

elements to develop the Financial and Banking sectors and bolster the

Kingdom's pioneering status as the key financial hub in the region for

attracting investments and fostering strong economic and social

development.

There is an integral vision aimed at promoting the Islamic Capital Market

and strengthening the Kingdom's role in this field. Additionally, other

institutions are encouraged to benefit from the available financing

opportunities in order to facilitate expansion projects and boost future

activities. As a result, last year’s activities witnessed the issuance of


latest in modern technology in its operations, the BSE launched its

website on the Internet in 2003. The site was enabled with services and

facilities, that enable investors to acquire trading indications, price

changes, and traded quantities with immediate access. This will help to

ensure that investors can make the best decision with regard to directing

their investment(s) with the BSE on basis of prompt, reliable, and

accurate sources of information.

The BSE Website also allows investors to receive short messages on their

mobiles or emails, in order to keep informed of the prices and updates

of selected shares and investments.

Last years activities also reflected a remarkable level of coordination

between BSE and BMA, following the initiative adopted by the Kingdom

of Bahrain to assign the BMA with the legislation, monitoring and

supervision over the Capital and Insurance sectors. This advanced level of

coordination was clearly shown in the activities related to the issuing of

Islamic SUKUK, which are instruments issued by the BMA in order to

activate Islamic financial markets.

In 2003, four issues of Government Islamic Lease Sukuk, released by

BMA on behalf of the Government of Bahrain, were listed at a value of

US $ 480 million. In addition, the completion of the first process of

listing international bonds in BSE, through Malaysian Islamic Bonds, (US

$ 600 million), in addition to three conventional bonds (US $ 261

million). Three Bahraini closed companies were listed with total paid-up

capital value of BD 26.2 million, in addition to listing the shares of an

Omani public shareholding company.

BSE continues to pursue its ongoing and dedicated efforts to further

develop its internal work environment to ensure stability and enhance

efficiency at work. To that end, an agreement was signed with a Bahraini

ISO specialization company to enable the BSE’s to acquire an

ISO2000/9001 quality certificate. It is expected to complete the required

formalities in 2004.

As part of its strong belief in fostering external relations with other

financial markets in the region, and benefiting from their expertise and

views, BSE signed a Memorandum of Understanding with Tehran Stock

Exchange in 2003, and participated in a number of specialized internal

and global forums in the field of financial markets and bourses.

I would like to take this opportunity to extend my sincere thanks and

appreciation to the Governor of the Bahrain Monetary Agency and

Chairman of the Bahrain Stock Exchange, His Excellency Sheikh Ahmed

bin Mohammed Al Khalifa, the BSE Board Members, officials, and

personnel, for their dedicated efforts throughout the year to further the

progress and prosperity of Bahrain Stock Exchange.

Special thanks are also extended to the listed companies, for their fruitful

cooperation with BSE in providing it with required information and

ongoing support.

On this occasion, I would like to express my deepest appreciation and

gratitude to His Majesty King Hamad bin Isa Al Khalifa, His Highness the

Prime Minister, Sheikh Khalifa bin Salman Al Khalifa, and His Highness

the Crown Prince and Commander in Chief of the Bahrain Defense Force,

Sheikh Salman bin Hamad Al Khalifa, for their invaluable support.

Fouad Rashid

Director

Bahrain Stock Exchange

A N N U A L R E P O R T 2 0 0 37

Director’s Message

2003 saw a combination of domestic and regional factors that set the

stage for the Bahrain Stock Exchange (BSE) and other Gulf bourses to

achieve positive and distinguished performance at all levels. All elements

of trading in 2003 witnessed a noticeable growth against figures of

2002. Traded shares in terms of value, volume and number of

transactions recorded an increase of 26.40%, 14.86% and 12.73%

respectively, while market value increased by 28.31% compared to 2002.

BSE pursued the development of its work environment and activating the

channels of communication with the Bahrain Monetary Agency, in

addition to promoting a stronger internal work atmosphere. BSE also

continued the process of strengthening relations with Stock Exchanges

in the region, with the aim of increasing the volume of transactions and

fostering its competitive abilities in attracting domestic and foreign

investments.

An agreement was signed in 2003 between BSE and

PricewaterhouseCoopers in order to carry out a comprehensive audit of

its automated systems of trading and central depository, to ensure that

all operations are compatible with internationally recognized standards

as set forth by IOSCO.

In pursuit of its goal to increase the application and utilization of the


Mr. Fouad A. Rahman RashidDirector

Mr. Jassim A. Karim SalmanDeputy Director for IT & CDS

Mr. Yousif Ahmed Al SharafHead of Finance and Administration Department

Mr. Issa Ebrahim Al AmadiHead of Operations Department

Mr. Abdul Hamid A. GhafferHead of Financial Analysis and Information Unit

Mr. Ali Ahmed Al MansoorHead of Public Relations Unit

Mr. Mohammed Khaled HamedInternal Auditor

A N N U A L R E P O R T 2 0 0 39

Board of Directors Management Team

HE Shaikh Ahmed bin Mohammed Al Khalifa Governor of Bahrain Monetary AgencyChairman

HE Khalid Abdulla Al Bassam* Deputy Governor of Bahrain Monetary AgencyVice Chairman

Mr. Ali Salman Thamer* Bahrain Monetary AgencyCapital Markets Supervision Directorate

Mr. Khalid Mohammed Kanoo Bahrain Chamber of Commerce & Industry

Dr. Essam Abdulla Fakhro Bahrain Chamber of Commerce & Industry

Mr. Adnan Ahmed Yousif*Bahrain Islamic Bank

Dr. Fareed Ahmed Al Mula Bank of Bahrain & Kuwait

Shaikh Mohammed Bin Isa Al KhalifaSecurities & Investment Company

Mr. Abdul Wahab A. Hassan Al Mansoor Indo Gulf Financial Services

* Member of Executive Committee


2003. The Dow Jones 30 index has increased by 25.3%, Nasdaq 100 by

49.1% and S&P by 26.4%.

The European bourses, though remained sensitive to the movements of

the US Stock markets, have achieved varying levels of performance for

the year. While the FTSE was up by 13.6% and the CAC by 16.1%, the

DAX closed the year advancing by 37.1%.

The Tokyo Stock Exchange ( Nikkie ) was up by 24.5% in 2003. On the

overall Asian scene the Hong Kong Stock Exchange (Hang Seng ) led

other Asian markets rising by 34.9% followed by Singapore, which

advanced by 31.6%.

Arab Financial MarketsThe Arab Stock Markets closed the year 2003 up by 40.9 % compared to

the year 2002 according to the Arab Monetary Fund’s Compound Index,

the best performance ever achieved by these Markets since 1994.

Gulf bourses ended 2003 with considerable gains benefiting from the

improved economic conditions triggered by high oil revenues, which

exceeded the general budgets forecasts, making these countries among

the most attractive markets.

Overall, the Saudi market was the best performer during 2003 rising by

76.2% followed by the Qatar 69.8%, Kuwaiti 63.9%, Jordan 53.8%,

Oman 42.1% and UAE 32.1%, Egypt 24.4%, Casablanca 24%, Tunisia

20%.

The Local MarketThe Bahraini economy grew by 6.8% in the year 2003, thanks to the

diversification policies adopted by the Government. Statistical data

showed a wide base growth in all non-oil sectors of the economy without

any exception, particularly in the financial, manufacturing, transport,

telecommunication, tourism, government services, education and health

sectors. These positive results and the diversified economic base were

behind the attraction of more foreign investments to the Bahraini

market. Foreign investments inflow strongly grew during last year to

reach US$ 218 million compared to US$ 81 million for the year 2002, an

increase of 169%. The main factor behind this significant growth was

the increase in the number of tourists, industrial and financial projects

financed by foreign funds, which gave an indication of healthy

investment climate and improved both investor confidence and the

contribution of non-oil economic sectors in the national economy.

The Bahrain Stock Exchange Index added 515.3 points during 2003 to

close at 2346.3 points compared to 1831.0 points at the beginning of the

year recording an increase of 28.1%.

The performance of sub-indices in The Bahrain Stock Exchange showed

that the Insurance Sector was the best performer for the year closing at

2417.39 points posting a gain of 58.3%, followed by the Commercial

Banks Sector which closed at 2896.9 points representing a growth of

49.8%, and the Hotels and Tourism sector which closed the year at

2337.54 points registering an increase of 41.3%.

During the year, The Bahrain Stock Exchange has witnessed the listing of

3 new Bahraini closed companies and one GCC public share-holding

company with a total paid-up capital of BD 26.2, bringing the total

number of companies listed at The Bahrain Stock Exchange to 44

companies compared to 40 companies at the end of 2002. The Year 2003

has seen the listing of 8 bonds of which 4 were Islamic Government

Sukuk with a total value of US $ 480 million and 3 conventional bonds

with a total value of US$ 261.3 million, in addition to US$ 600 million

Malaysian Islamic bonds issue. The total number of mutual funds listed

on The Bahrain Stock Exchange reached 29 by the end of 2003.

A N N U A L R E P O R T 2 0 0 311

World Stock Markets Performance During 2003

By mid 2003 the US economy started to recover driven by tax cut

coupled with prevailing low interest rates and improvements in the

consumer spending. Despite the growth of the economy at a rate of

3.1% for the year 2003 compared to 2.2% in 2002, the year 2003 growth

figures are still short of the 1999 and 2000 rates when the economy

grew by 3.7% and 4.5% respectively.

The US economy slowed down 2003 in terms of job opportunities with

unemployment reaching 5.7% while the trade deficit as a percentage of

the GDP edged up to 5% against 4.6% for the year 2002. The budget

deficit rose to 3.5% for 2003 compared to 2% in 2002.

On the other hand the European Union economies slowed down for the

year growing by only 0.5%, the lowest among the global major

economies with a budget deficit of 2.8%. Contrary to the easing tax

environment in USA, taxes increased in 2003 in the Eurozone compared

to 2002. The record increase of the Euro against the US Dollar also

remained a source of concern among the Euro zone countries over their

competitive edge in the international arena.

On the Asian front, the Japanese economy positively grew by 2.7%

compared to 0.4% in 2002. The Japanese trade balance stood at 2.5%

in 2003 against 2.3% in 2002.

Global Financial MarketsGlobally, most of the markets posted a noticeable gain at the end of


� Four government Islamic Securities Issues worth a total of US$480.

� Securities & Investment Co. as the first local brokerage company listed

in BSE with a paid-up capital of BD12.5 million.

� United Finance Company of Oman listed both its shares and convertible

bonds issue.

� Alba floating rate bonds issue worth $200 million.

� Gulf Development Company (Tameer) as the first real estate and the

second closed company listed in BSE with a paid-up capital of

$16 million.

� The Malaysian Global Islamic Sukuk worth $600 million as the first

International Islamic Sukuk listed on BSE.

� United Papers Industries Co. as the third closed company listed in BSE

with a paid up capital of BD3 million.

� United Gulf Bank bonds issue worth $60 million.

Internal Working Environment:The BSE’s management continued focusing on quality assurance in all the

different aspects of its work. An agreement was signed with Itqan

Management Consultant, one of the local specialized agencies in

conducting the ISO quality program. This agreement includes running

training courses to BSE’s staff to qualify them to work according to ISO

9000:2000 that the BSE is expected to qualify to by the end of 2004.

Foreign Relations:The BSE signed a Memorandum of Understanding with Tehran Stock

Exchange to strengthen ties between both Stock Markets and benefits

from the experience that both parties have especially in the area of

training and IT.

Training:Bahrain Stock Exchange organized for the fifth consecutive year the

“Investment Representative Program”, in cooperation with Bahrain

Institute of Banking & Finance. This programe qualifies brokers licensed

by BSE in accordance to the best international standards. It is known

that this program is the same that qualifies brokers licensed by New York

Stock Exchange. This year program was attended by more that 25

participants representing more that 15 Bahraini and non-Bahraini

institutions.

This program provides comprehensive treatment for a broad range of

products, including equity securities, debt securities, options and mutual

funds.

A N N U A L R E P O R T 2 0 0 313

Bahrain Stock Exchange - 2003

In 2003, the Bahrain Stock Exchange (BSE) continued focusing on

developing its technical infrastructure, internal working environment

and the foreign relations in order to ensure a healthy environment that

would participate to increase the volume of trading in BSE and to attract

more investment to the Kingdom. Following are the main objective in

each of the above-mentioned area.

Technical Infrastructure:In regard of high-tech infrastructure, BSE has appointed Price Water

House to implement a compressive auditing on both the automated

trading system (ATS) and Central Depository System (CDS). The objective

of this audit is to ensure that both systems are operated according to the

best international standards applied by the International Organization of

Securities Commissions (IOSCO).

In addition to that BSE has launched its new website that enables

investors to have live access on all BSE’s trading activities and any other

activity that BSE organizes or participate in.

Listing:In coordination with Bahrain Monetary Agency, the following listings

have taken place in BSE during 2003:


Trading Activities During 2002 - 2003

A N N U A L R E P O R T 2 0 0 315

Key Statistical Data 2002-2003


No. of Listed Bonds 2002 - 2003

No. of Listed Companies Common Shares Preferred Shares

Bahraini

Non Bahraini

Total

2002

35

5

40

2003

38

6

44

2002

1

1

2003

1

1

Composite Index 2002 - 2003

Composite Index 2002 - 2003

Year end

High

Low

2002

1821.49

1843.27

1690.53

2003

2346.29

2346.29

1727.40

2002

2

2

3

-

2003

4

1

7

2

2002

29

2003

29

Bonds

Corporate

Government

Islamic Leasing Sukuk

Non-Bahraini Bonds

Composite

Banks

Investment

Insurance

Services

Industrial

Hotel & Tourism

2002

1821.49

1934.24

1632.42

1526.80

1697.25

1991.61

1654.83

2003

2346.29

2896.90

1829.41

2417.39

1951.71

2503.31

2337.54

%Chg.

28.81%

49.77%

12.07%

58.33%

14.99%

25.69%

41.26%

Volume

MonthJanFebMarAprMayJunJulAugSepOctNovDecMarketNo. of Trading Days

200291,672,09812,022,80419,686,63139,369,15642,652,83016,632,63627,013,12518,408,68719,031,64136,889,22117,449,39512,303,940

353,132,164247

200351,113,57113,308,75028,219,58140,319,72431,757,05825,384,10324,789,32276,705,14928,493,24935,408,88319,577,12530,526,991

405,603,506

% Chg.-44.24%10.70%43.34%

2.41%-25.55%52.62%-8.23%

316.68%49.72%-4.01%12.19%

148.11%14.86%

Value (BD)

MonthJanFebMarAprMayJunJulAugSepOctNovDecMarket

200216,596,6753,894,2955,069,670

10,115,3018,165,9045,281,0006,596,2015,023,3714,714,4666,958,5464,434,9544,051,100

80,901,482

20039,033,4214,957,4965,418,1529,424,2618,944,3127,928,2736,192,183

12,876,5377,994,749

11,731,8928,028,6199,731,326

102,261,221

% Chg.-45.57%27.30%6.87%

-6.83%9.53%

50.13%-6.13%

156.33%69.58%68.60%81.03%

140.21%26.40%

No. of Transactions

MonthJanFebMarAprMayJunJulAugSepOctNovDecMarket

20022,010

8831,1301,4921,347

9601,085

687754

1,085872672

12,977

20031,239

877725

1,3711,3851,4261,1211,0101,3691,789

8671,450

14,629

% Chg.-38.36%-0.68%

-35.84%-8.11%2.82%

48.54%3.32%

47.02%81.56%64.88%-0.57%

115.77%12.73%

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

2002 2003

9080706050403020100

Shar

es M

illio

n


2002 2003

18

16

14

12

10

8

6

4

2

BD M

illio

n


2002 2003

2100192017401560138012001020840660480300

No. of Listed Mutual Funds 2002 - 2003

A N N U A L R E P O R T 2 0 0 317

Key Statistical Data 2002-2003

The Breakdown of Market Capitalisation by Sector, for the Years 2003 and 2002


Changes in Market Capitalisation for the Year 20032003 2002 % Change

BD million BD million

Commercial Bank Sector

Investment Sector

Insurance Sector

Services Sector

Industrial Sector

Hotels & Tourism Sector

Total Local Companies

Total Non-Bahraini Companies

Closed Company Sector

Preferred Shares

1,328.46

1,297.25

111.25

833.33

14.94

72.35

3,657.57

2,148.15

0.00

79.17

857.70

1,116.42

95.33

719.29

11.89

49.88

2,850.49

1,608.40

0.00

80.68

54.89%

16.20%

16.70%

15.85%

25.69%

45.05%

28.31%

33.56%

0.00%

-1.87%

0.41%

22.78%

3.04%

1.98%

36.32%

35.47%

0.42%

25.23%

3.34%

1.75%

30.09%

39.17%

Commercial Banks Sector

Investment Sector

Insurance Sector

Services Sector

Industrial Sector



Investment Sector

Insurance Sector

Services Sector

Industrial Sector


2003

2002

Change In Paid-Up Capital for the BSE Market in 2003

160%140%120%100%80%60%40%20%0%

-20%-40%

129.26%

-29.26%

Percentage Change in Paid-Up Capital for Each Sector as of the Year End 2003

Commercial Banks

Insurance

Services

Industrial

Hotel & Tourism

Bonus Share

88.68%

21.99%

3.55%

15.05%

Delisted

-29.26%

Bonus Share Delisted

100%

80%

60%

40%

20%

0%

-20%

-40%

88.68%

21.99%

3.55%

-29.26%

15.05%

Commercial Banks Insurance Services Industrial Hotel & Tourism

Bonus Share Delisted


National Bank of Bahrain

Bank of Bahrain & Kuwait

Ahli United Bank

Bahrain Islamic Bank

The Bahraini Saudi Bank

Investment Sector

Gulf Monetary Group

Arab Banking Corporation

United Gulf Bank

Bahrain International Bank

Investcorp Bank

Bahrain Middle East Bank

Bahrain Commercial Facilities Co.

United Gulf Industries Corp.

Taib Bank

Shamil Bank of Bahrain

Insurance Sector

Bahrain Kuwait Insurance Co.

Al-Ahlia Insurance Co.

Arab International Insurance Co.

Takaful International Co.

Arab Insurance Group

Bahrain National Holding Co.

Services Sector

Bahrain Ship Repairing & Eng. Co.

Bahrain Cinema Co.

National Import & Export Co.

General Trading & Food Processing. Co.

Bahrain Maritime & Mercantile.

Bahrain Telecommunications Co.

Bahrain Car Parks Co.

Bahrain Duty Free Shop Complex.

Industrial Sector

Bahrain Flour Mills Co.

Delmon Poultry Co.

Hotel & Tourism Sector

Bahrain Hotels Co.

National Hotels Co.

Bahrain Tourism Co.

Bahrain Family Leisure Co.

Closed Company

Al-Khaleej Development Co.

Securities & Investment Co.

United Paper Industries

Non-Bahraini Companies

BankMuscat (Oman)

Sudan Telecommunications Company (Sudan)

The International Investor (Kuwait)

International Investment Group (Kuwait)

Qatar Telecommunications Company (Qatar)

United Finance Company (Oman)

Preferred Shares

Investcorp Preferred Shares

A N N U A L R E P O R T 2 0 0 319

Key Statistical Data 2002-2003 Traded Securities and Instruments


Trading Value in Terms of Legal Entity and Nationality

Trading by Legal Entity

Bahraini G.C.C Non-G.C.C

Trading by Nationality

40%

35%

30%

25%

20%

15%

10%

5%

0%

16.84%

13.43%

4.45% 4.58%

0.00% 0.00%

38.82%

11.30%

0.41%

6.70%

2.64%0.84%

Non-G.C.C

G.C.C

Bahraini

8.63%

4.17%

19.58%39.58%

71.80%

56.25%

2002

2003

Financial Institutions Govermental Institutions Individuals Other Institutions

Listed Companies on the BSE :

Brokerage Firms

ABC Securities

Bank of Bahrain & Kuwait Financial Services

Ahli United Bank

Gulf Securities

IndoGulf Securities

Securities & Investments Co.

TAIB Securities Co.

Gulfinvest Securities

U.G.B Securities

Abdulla Zain Al-Abedin

Nassir Abbas Khosrou

Yousif Al-Ajaji

A N N U A L R E P O R T 2 0 0 321

Traded Securities and Instruments

The Housing Bank Jordan Fund

Islamic Development Bank Unit Investment Fund ($)

SICO Selected Securities Funds (BD)

SICO Assured International Fund (SAIF)

MAN-AHLI Guaranteed 360 E.C Fund ($)

MAN-AHLI Prisma Guaranteed Fund E.C Fund ($)

MAN-AHLI Guaranteed 220 Plus E.C Fund ($)

TAIB American Explorer Fund, Ltd. ($)

TAIB Everest Fund ($)

Taib Healthsciences Fund (Prev. Biomed Fund)

TAIB Crescent Globel Fund ($)

TAIB Currency Fund ($)

TAIB Income Fund ($)

TAIB Rocky Mountain Fund ($)

TAIB Technology Growth Fund ($)

TAIB Thames Fund ($)

BNP Paribas Caravan Fund ($)

First Arabian Equity 2000 Fund ($) (Islamic)

Gulf International Bank Falcon High Yield Defencive Fund ($)

Gulf International Bank Falcon Emerging Markets Bond Fund ($)

Gulf International Bank Faclon Dollar High Yield Fund ($)

Gulf International Bank Global Equity Fund ($)

Gulf International Bank Enhanced Liquidity Fund ($)

Gulf International Bank Falcon US Long/Short Equity

Gulf International Bank Falcon Relative Value Fund ($)

The Investment Trust Fund Investment Trust Capital-Guaranteed GCC Fund (BD)

The Investment Trust Fund Investment Trust Capital-Guaranteed GCC with Minimum Return Fund (BD)

The Investment Trust Fund Investment Trust Capital-Guaranteed Gulf Fund

The First Iran Fund

Long term Government Bonds

Islamic Leasing Sukuk

Islamic Leasing Sukuk (Second Issue)

Islamic Leasing Sukuk (Third Issue)

Islamic Leasing Sukuk (Fourth Issue)

Islamic Leasing Sukuk (Fifth Issue)

Islamic Leasing Sukuk (Sixth Issue)

Government Islamic Securities Leasing - 2008

Corporate

BCFC Bonds (3rd issue)

BCFC Bonds (4th issue)

United Gulf Bank Bond - 2008

ALBA Floating Rate Bonds 2013

Non-Bahraini Bonds

Convertible Bonds United Finance Company SAOG-2008

Malaysian Global Sukuk - 2007


Listed Mutual Funds As of 31/12/2003

Listed Bonds:

Members of the Exchange

Brokers’ List:

Individual Brokers

A N N U A L R E P O R T 2 0 0 323

Listing and Annual Subscription Fees Financial Statements for the year ended 31 December 2003


24 Report of the Auditors to the Board of Directors

25 Balance Sheet

26 Income Statement

27 Cash Flows

28 Notes to the Financial Statements

ContentsListing*:0.1% of the company's paid-up capital, with a maximumamount of BD 15,000 and a minimum amount of BD 5,000.

Annual subscription**:1. 0.1% of the first BD10 million of the company's paid

up capital, with a minimum of BD 3,000.2. 0.05% of the amount exceeding BD10 million,

up to BD50 million.3. 0.025% of the amount exceeding BD 50 million, with a

maximum amount of BD 20,000/-.

Central Depositary:1. 0.0125% of the first BD 15 million of the company's paid-up

capital with a minimum of BD 1,000.2. 0.00625% of the amount exceeding BD15 million of the

company's paid-up capital, with maximum gross fees of BD 4,000.

Non-Bahraini EquitiesListing*:0.1% of the company's paid-up capital, with a maximumamount of BD 15,000 and a minimum amount of BD 5,000.

Annual Subscription**:50% of the Bahraini shareholding company.

Local Closed CompaniesListing*: BD1,000.

Annual Subscription:1. 0.025% of the first BD 5 million of the company's paid-up

capital, with a minimum of BD 1,000.2. 0.025% of the amount exceeding BD 5 million, with a

maximum amount of BD 5,000.

Mutual FundsListing*: BD 300Annual Subscription: BD 250

Bonds & Sukuk:Government:Listing*: BD 1,500Annual Subscription**: BD 2,000

Private & Non Bahraini:Listing*: 0.05% of the total value with a minumum of BD 2,000and maximum of BD 5,000.Annual Subscription**: BD 2,000.

Currency Warrants:Listing*: BD 250Annual Subscription: Nil.

Transfer AgentsMembership*: BD 500Annual Subscription: BD 250

Individual BrokersMembership*: BD 500Annual Subscription: BD 250

Brokerage FirmsMembership*: BD 1,000Annual Subscription: BD500

CustodianshipMembership*: BD 1,000Annual Subscription: BD 500

All the above amounts are expressed in Bahraini Dinars (BD).* A one-off payment.** Applicable to companies only, whereby the remaining part ofthe financial year of a company's registration will be taken intoconsideration and charged on a quarterly basis.

Local Equities

For the year ended 31 December 2003 in Bahraini Dinars

A N N U A L R E P O R T 2 0 0 325

Report of Auditors Balance Sheet

We have audited the Financial Statements of Bahrain Stock Exchange as of, and for the year ending, 31 December 2003, as set out

on pages 25 to 33.

Responsibilities of Board of Directors and the Auditors

These Financial Statements are the responsibility of the Board of Directors of Bahrain Stock Exchange, and our responsibility is to

express an opinion on these Financial Statements based on our audit.

Basis of Opinion

Our audit has been conducted in accordance with international Standards for Auditing, which requires placing and implementing

an auditing plan, to reasonably assure that the financial statements are free of any materials mis-statements.

An audit includes examining on a test basis, evidence supporting the amounts and disclosures in the financial statements.

An audit also includes assessing the accounting principles implemented, and the significant estimates made by management, as well

as evaluating the overall Financial Statements presentation. We believe that our audit provides a reasonable basis for our opinion.

The Opinion

In our opinion, the Financial Statements present fairly, in all material respects, the Financial position of Bahrain Stock Exchange as

at 31 December 2003, and the result of its operations and its Cash Flows for the year then ended, in accordance with International

Financial Reporting Standards.

Other Regulatory Matters

In addition, in our opinion, Bahrain Stock Exchange has maintained proper accounting records and the financial statements are in

agreement therewith. To the best of our knowledge and belief, no violations of the Exchange's Internal Regulations have occurred

that might have had a material adverse effect on the operations of the Stock Exchange or its financial position. Satisfactory

explanations and information have been provided to us by management in response to all our requests.

KPMG

Manama – Kingdom of Bahrain

2004


Current Assets

Cash and balances with banks

Short-term deposit

Account receivables

Other receivables

Specialized Regional Market

Total Current Assets

Non Current Assets

Investment held maturity

Fixed assets

Total Assets

Current Liabilities

Accounts Payables

Payable Expenditures and other Accounts payables

Employees Salaries & Benefits

Specialized Regional Market

Total Liabilities

Net Assets

Total Liabilities and Net Assets

2003 2002Notes

3

4

9

5

6,2

7

8

9

101,468

338,940

70,557

28,875

199,080

738,920

625,911

547,276

1,912,107

57,984

69,660

18,883

199,080

345,607

1,566,500

1,912,107

153,867

879,233

48,051

199,080

199,080

1,280,231

-

736,870

2,017,101

73,955

23,676

15,925

199,080

312,636

1,704,465

2,017,101

Shaikh Ahmed bin Mohammed Al KhalifaThe Chairman

Fouad A. Rahman RashidDirector of the Exchange

The Board of Directors approved the Financial Statements of pages 25 to 33 in 2004

A N N U A L R E P O R T 2 0 0 327

Income Statement Cash Flows



Income of Operations

Subscription Fees

Registration Fees

Commissions

Other Incomes

Banks Interest

Expenses

Staff salaries & allowances

General & administration expenses

Remuneration of the Board of Directors

Depreciation

Market’s Contribution in Regional Specialized Market

Provision of doubtful

Operation Income Deficit

Subsidy from the Ministry of Finance & national

Economy to the exchange's automation process

Total Income of the year

Balance at the beginning of the year

Balance as at 31st December

2003 2002Notes

2

10

2,6

771,609

7,300

78,917

42,156

27,826

927,808

678,657

370,872

12,400

217,679

-

36,165

1,315,773

(387,965)

250,000

(137,965)

1,704,465

1,566,500

772,695

5,500

71.694

45.513

28,824

924,226

658,164

389,175

13,710

206,077

10,080

-

1,277,206

(352,980)

250,000

(102,980)

1,807,445

1,704,465



The Financial Statements consisting of pages 25 to 33


Operations

Amounts Received from Participants

Comissions & other Income

Staff expenses & allowances

Paid expenses

Board of Directors and Committees' remuneration

Net (outgoing) Incoming Cash Flow from Operation

Investment & Financing Activities

Fixed assets purchased

Purchase of Investment Securities

Bank Interest

Subsidy from the Ministry of Finance & National Economy-

to the Exchange's automation process

Amounts paid for Specialized Regional Market

Cash Flow from Investment and Financing Activities

Net (outgoing) Incoming Cash Flow during the year

Cash and Cash equivalents at the beginning of the year

Cash and Cash Equivalents in 31 December

Cash and Cash equivalents according Balance Sheet

Cash and balances with Banks

Short-term fixed deposits

2003 2002

708,846

96,365

(675,699)

(329,361)

(12,400)

(212,249)

(28,085)

(625,911)

23,553

250,000

-

(380,443)

(592,692)

1,033,100

440,408

101,468

338,940

440,408

786,677

117,207

(681,667)

(363,740)

(13,710)

(155,233)

(110,891)

-

28,824

250,000

(199,080)

(31,147)

(186,380)

1,219,480

1,033,100

153,867

879,233

1,033,100




A N N U A L R E P O R T 2 0 0 329

Notes to the Financial Statements



1. Status and Operations

Bahrain Stock Exchange is considered as an independent organization with its own legal identity, established in accordance with

the Amiri Decree No. 4/1987. The Minister of Commerce and Agriculture has issued the Ministerial Resolution No. 13/1988 to issue

Bye-Law organizing the activities and outline the objectives of the Exchange.

The supervision authority, of the Exchange, was transferred to the Bahrain Monetary Agency during year 2002 in accordance to the

Decree No. 21/2002.

These objectives are summarized in developing the Bahrain Stock Exchange, encouraging savings, upgrading the investment

awareness among the nationals, developing and rationalizing the methods of dealing and developing traded securities and financial

instrument in the Market to serve the economical development operations in the country, and to help in achieving the objectives of

the economic policies and enhancing the financial position of the Kingdom of Bahrain.

The Exchange operation include the supervision securities issuing and facilities providing to facilitate the dealing with authorized

securities in the Market, and provide the needed finance to support the economical development requirements.

2. Significant Accounting Policies

Accounting Standards:The financial statements have been prepared in accordance with the Internatioanal Financial Report Accounting Standards

Promulgated by the Internatioanal Accounting Standard Board.

Accounting Convention:The Financial Statements are prepared under the historical cost convention, same as previouse years.

The most applied Accounting Policies:

Incomes from subscription and registration fees, services, interest from fixed deposits, commission on transfer and other incomes,

which are calculated on maturity.

The fixed assets maintained to be used for administrative purposes, not intended to be sold and calculated as cost less accumulated

depreciation.

The depreciation has been calculated on cost by the straight-line method at annual rates, which are intended to write off the net

cost of the assets over the useful life for each asset:

Furniture, equipments and auto trading system 5 years

Computers and cars 5 years

The fixed Assets which amounted less than BD50 fully depreciated in the year of purchase.



2. The Significant Accounting Policies (Continued)

Reduction in the Value of Fixed Assets: The management revises the values of fixed assets on the day of preparing the Balance Sheet, and compares it with the book values

to show if there is permanent reduction in the book value. This reduction, if existed, will be transferred to cash statement.

Accounts Receivable:Is stated net of provision amounts estimated to be uncollectable.

Employee’s Leaving IndemnitiesThe Non-Bahrainis Employees are entitled to leaving indemnities payable under the Bahrain Labour Law, based on the length of

service and final remuneration.

Bahraini Employees are covered by the Pension Fund Commission Regulations to which employers and employees contribute monthly

on a fixed-percentage of salaries basis.

Foreign Currency:Foreign currency transactions have been translated at the rates ruling at the time of the transactions. Financial assets and liabilities

have been translated in to Bahraini Dinars at the market rates ruling on the balance sheet date. All resulting exchange differences

are taken up in the income statement.

Cash and Cash Equivalents:Consist of bank balances and cash on hand and short term fixed deposits, and all investments which are readily convertible into

known amounts of cash which are subject to an insignificant risk of change in value.

3. Accounts Recieivable:

Due Subscription and Regitration Fees

Due Commissions

Due Services fees

Deducted: Provision of doubtful.


2003

64,89139,4912,340

106,722(36,165)

70,557

2002

8,073

24,366

2,400

34,839

-

34,839

A N N U A L R E P O R T 2 0 0 331




4. Other Accounts Receivable

Interest payable

Pre-paid expenses

Others

5. Investment Held Maturity:

Islamic Leasing Sukuk (Kingdom of Bahrain)

Islamic Leasing Sukuk (Kingdom of Bahrain)

6. Fixed Assets

Cost

Balance at 1 January

Additions

Disposals

Reclassification

At 31st December

Depreciation

At 1st January

Depreciation

Disposals

At 31 December

Net Book Value

The Financial Statements consisting of pages 25 to 33 The Financial Statements consisting of pages 25 to 33

2003

6,285

5,888

16,702

28,875

2002

2,013

4,143

7,056

13,212

2006

2008

358,201

267,705

625,906

3%

3,75%

Amount Due Date Interest earnedon investment

1,424,619

28,085

-

-

1,452,704

687,749

217,679

-

905,428

547,276

192,565

8,033

-

(45,168)

155,430

-

-

-

-

155,430

1,384,569

111,549

(71,499)

-

1,424,619

552,512

206,077

(70,840)

687,749

736,870

ProjectUnder

Implement

2003Total

6,120

-

-

-

6,120

4,828

1,224

-

6,052

68

900,237

16,706

-

49,095

966,038

425,916

187,334

-

613,250

352,788

Computers

325,697

3,346

-

(3,927)

325,116

257,005

29,121

-

286,126

38,990

Furniture & Other

Equipments

Cars 2002Total


7. Other Payables

Advance recoveriesAccrued expenses

8. Provision for Staff Entitlements

Leave entitlementsLeaving indemnity and air tickets

The Exchange employs 52 Bahraini nationals and two expatriate as at 31 December 2003 (49 and one employee for the year 2002)

Pension rights and other social benefits for the Bahrainis employees are covered by the Pension Fund Scheme to which the Exchangeand employees contribute monthly on a fixed percentage of salaries basis. The Exchange contributions of Bahraini employees for theyear 2003 amount to BD 55,995 (BD 40,319 for 2002).

Expatriates employed under a specified contract period are entitled to leaving indemnity at the rate of one month's salary for eachyear completed in service.

9. Specialized Regional Market

Total amounts represent receivable and payable related to the Specialized Regional Market that are registered in the Exchange'sbooks till the end of the project and then will be transferred with all the details to the Specialized Regional Market’s management.The entire received amount up to 31st December 2003 paid by the Ministry of Finance & National Economy is BD. 189,000 inaddition to BD. 10,080 paid by the Bahrain Stock Exchange.

10. Other Incomes

Ticker tape incomeRemote trading incomeSubscription in the Investors’ Guide publicationServicesOthers

2003

43269,22869,660

200317,2101,673

18,883

2002

13,6789,998

23,676

200215,056

86915,925

2003

-8,7008,640

14,39010,42642,156

2002

7,500-

6,27014,16017,58345,513

A N N U A L R E P O R T 2 0 0 333




11. Financial Instrument and Risk Management:

Financial instruments consist of financial assets and liabilities.

Financial Assets include Cash, Short term fixed deposit, Investment held maturity and other receivables.

Financial liabilities of the Exchange include account payable, accrued liabilities and employees benefit.

Accounting policies for financial assets and Liabilities are set out in note (2).

The risk associated with financial instrument and its risk management is explained below.

Interest Rate Risk is the risk that the value of a financial instrument will fluctuate due to changes in interest rates.

The short-term deposit interests are calculated at fixed interest rates and mature within one year. Pricing occurs when funds are

reinvested on maturity of a deposit.

The effective interest rate is the historical rate for the fixed rated instrument carried at cost. The average actual interest rate on

short-term fixed deposit during the year is stood at 1.35% (1.45% in 2002).

Credit risk is the risk that one party to a financial instrument will fail to discharge an obligation and causes the other party to incur

a financial loss.

Cash is placed with national banks with good credit ratings.

The Exchange is not exposed to credit risk with respect to its financial assets.

Currency risks are the risk that the value of a financial instrument will fluctuate due to changes in foreign exchange rates.

All BSE's deposits are in Bahraini Dinars and US Dollar as such the BSE is not exposed to the currency risk.

Interest on short-term fixed deposits are computed on a straight-line basis and accrued within one year.

Reprising occurring when funds are reinvested on maturity of a deposit.

The effective interest rate is the historical rate for a fixed rate instrument carried at cost. The average actual interest rate on

short-term fixed deposits during the year stood at 1.45% (2% in 2001).

Credit risk is the risk that one party to a financial instrument will fail to discharge a obligation and cause the other party to incur

a financial loss.

Cash is placed with national banks with good credit ratings.

The BSE is not exposed to credit risks with respect to its financial assets.

Currency risk is the risk that the value of the financial instrument will fluctuate due to changes in foreign exchange rates.



11. Financial Instrument and Risk Management (continued):

All the BSE's deposits are in Bahraini Dinars, and as such the BSE is not exposed to currency risks.

Liquidity risk is that the BSE will encounter difficulty in raising funds to meet commitments associated with financial instruments.

Liquidity risk may result from an inability to sell a financial asset quickly at close to its fair value.

The management of the BSE is managing the liquidity risk by maintaining cash and cash equivalents at a high level so that sufficient

funds are available, including unutilized credit facilities with banks, to meet any future commitments.

Fair value of financial instruments is the amount for which an asset could be exchanged or a liability settled between

knowledgeable, willing parties in an arm's length transaction. Differences can therefore arise between the book value under the

historical cost method and fair value estimates.

Underlying the definition of fair value is a presumption that the BSE is a going concern without any intention or need to liquidated,

curtail materially the scale of its operations, or undertake a transaction on a adverse terms.

12. Distribution of assets and liabilities:All BSE's assets and liabilities are in Bahrain, and as such the BSE is not exposed to any risk outside Bahrain.

13. Comparative Figures:The comparative figures have been reclassified where necessary to conform with the current year's presentation. Such

reclassification has not affected net income and expenses nor total assets nor accumulated funds previously stated.


A N N U A L R E P O R T 2 0 0 334


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