Richard Melson

April 2006

TAIB Bahrain III

http://www.taib.com

9th April 2006

Dear Investor

Market Diversification

After 2 years of considerable growth, the GCC markets have been in a correction mode for the past 6 months. The Saudi market, which defied the general trend in other markets succumbed to selling pressure in late February and early March 2006 - an unprecedented sell-off which can best be characterized as "panic selling". Even after official efforts to staunch the sell-off and to reduce the panic, the KSA eased to 23% off its peak. UAE, the second largest market in the GCC, had already begun its correction in November 2005 itself and slid down 50% off its peak. Kuwait was a relatively steady market with low volatility and better relative valuations. Kuwait fell by 11% off its peak in a matter of 5 trading sessions. Both the Oman and Bahrain Markets have been relatively better off, adjusting lower by a small margin.

Some characteristics of the fall across all markets were:

  1. Selling pressure was spread across all stocks and stock diversification did not necessarily offer much protection.

  2. Large -cap stocks were the most affected as liquidity was relatively better than small-caps. Holding companies fell the sharpest.

  3. The sell offs were accompanied by very low volumes, which cannot be interpreted as an indication of strength, as in most cases the bid-offer spreads were wide or non-existent.

The fundamentals and macro-economic indicators of the GCC countries are strong. Both liquidity levels and oil prices, the twin engines of the recent rally, continue to be intact. Thus, the GCC markets may recover from the current levels and provide good returns over the medium term. This leads us to believe that long term investors can continue to stay invested in fundamentally strong companies in the GCC markets.

With the current GCC market situation we advise our investors to consider a prudent diversification into other promising and high growth markets for which TAIB Securities WLL provides execution capabilities.

Committed to providing a "one-stop-shop" to the regional and global financial markets, TAIB Securities team of experts will help map out your investment needs, plan your financial future and provide the research services and experience to successfully reach your financial goals. It’s our individualized approach that makes our people, products, support and services truly different. We have continued to expand since our inception, and now serve the needs of both individual and institutional investors. Clients can now invest in the following:

GCC and MENA markets through a single brokerage account

Bahrain, Saudi Arabia, Kuwait, UAE, Oman, & Qatar, Jordan, Egypt and Morocco.

U.S. equity and derivatives markets.

Via state-of-the-art online trading platforms or via professional brokers.

U.K, major Asian and European stock exchanges.

Including but not limited to Germany, France, Switzerland, Spain, Italy, Japan, Singapore, Thailand, Hong Kong and Korea.

India and Turkey where TAIB has banking and investment presence.

The GCC Research desk at TAIB provides Investment Research on the GCC markets, in the form of Daily Reports on market activity and market news, alongside detailed Equity Research on listed companies across the seven GCC markets.

The Daily Market Reports from TAIB provide a snapshot of the respective GCC bourses, with indicators such as Year-to-date and Month-to-date change to help gauge performance, in addition to extensive coverage of news and corporate actions from listed companies. Our Equity Research coverage extends across all sectors in the GCC markets, and focuses on companies that have been identified on the basis of their investment-worthiness and market potential. In addition to an overall view on the company’s operations and financial performance, we also provide Fair Value estimates and Investment opinions to guide investors. We also aim to provide a broad macro-economic perspective to clients, through economy and country reports, which shall be published on a periodic basis

We also provide Daily Bulletins and Company Research on the Indian markets, which are produced by our subsidiary in India, and provides a broad insight into the performance of the Indian markets. In addition to market indicators, the daily bulletins also include in-depth research coverage on select stocks in the Indian market. In addition, we provide market commentary on the Turkish markets produced by our Turkish subsidiary, through weekly bulletins that are aimed at educating readers through providing Market Outlook, review of Economic and political news and information about listed companies.

We look forward to discuss your investment strategy further. In the meantime, please do not hesitate to contact us at +973 17549499 for further details.

With best regards

Ali Abdulla Al Bastaki

Head of TAIB Securities WLL

Market Diversification

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TAIB Research Research@taib.com

Sunday, April 9, 2006