His Highness Shaikh Khalifa His Majesty King Hamad His Highness Shaikh Salman bin Salman Al Khalifa bin Isa Al Khalifa bin Hamad Al Khalifa The Prime Minister The King of Bahrain The Crown Prince & Commander-in-Chief of the Bahrain Defence Force IN THE NAME OF ALLAH, MOST GRACIOUS, MOST MERCIFUL PROFILE VISION & MISSION Profile Vision Established in the Kingdom of Bahrain as the first Islamic To be a leading and diversified domestic and regional Islamic commercial bank, Bahrain Islamic Bank has grown, steadily since financial institution that drives 1979 to become a leading Islamic institution with shareholders’ innovation in the industry and effectively meets the fast- funds of approximately BD75 million and total assets in excess evolving needs of the markets of BD436 million at year-end 2006. we serve. The Bank has established leadership in the application of Islamic modes of investment and financing and excelled in the provision of Mission a diversified range of products and services for retail customers, To provide value and superior commercial businesses and financial institutions. returns to shareholders, investors and customers through Publicly listed on the Bahrain Stock Exchange, the Bank is owned the continuous development of our assets and resources largely by prominent local and regional financial institutions and is including the introduction of regulated by the Central Bank of Bahrain. value-added retail, investments and corporate banking products With a strong and growing network of branches, currently and the achievement of the highest levels of service and numbered at 12, the Bank is well positioned to meet the strong customer satisfaction. and growing demand in the market for banking, financing and investment opportunities on behalf of individuals and institutions with the highest ethical standards and an unwavering commitment to the principles of Islamic Shari’a. Bahrain Islamic Bank Annual Report 2006 03 FINANCIAL SUMMARY Net Income Summary (in BD millions) 2006 2005 2004 2003 2002 Total operating income 34.3 17.7 10.8 8.9 7.9 Investors’ share in income 12.7 5.1 2.1 1.6 2.1 Bank’s share in income 21.6 12.6 8.7 7.3 5.8 Expenses and other charges 8.5 5.2 5.0 4.9 3.7 Net income for the year 13.1 7.4 3.7 2.5 2.1 Balance Sheet Summary (in BD millions) 2006 2005 2004 2003 2002 Short term murabaha 179 105 111 97 104 Murabaha receivables 101 75 52 51 36 Investments 77 85 43 39 43 Sukuk and other assets 79 57 48 45 27 Total Assets 436 321 255 231 210 Current accounts 51 47 30 29 21 Investment by non banks 153 142 129 122 122 Banks and other liabilities 157 60 43 41 29 Total liabilities 361 249 202 191 172 Shareholders' equity 75 72 53 40 38 Total liabilities and equity 436 321 255 231 210 04 Bahrain Islamic Bank Annual Report 2006 COMPOSITION OF NET INCOME TOTAL OPERATING INCOME EXPENSES AND OTHER CHARGES (BD MILLIONS) (BD MILLIONS) 34.3M 8.5M 5.2M 5.0M 17.7M 4.9M 3.7M 10.8M 8.9M 7.9M 02 03 04 05 06 02 03 04 05 06 INVESTORS’ SHARE IN INCOME NET INCOME FOR THE YEAR (BD MILLIONS) (BD MILLIONS) 12.7M 13.1M 7.4M 5.1M 3.7M 2.5M 2.1M 2.1M 1.6M 02 03 04 05 06 02 03 04 05 06 Bahrain Islamic Bank Annual Report 2006 05 FINANCIAL HIGHLIGHTS 2006 2005 2004 2003 2002 Net Income (BD millions) 13.1 7.4 3.7 2.5 2.1 Total Assets (BD millions) 436 321 255 231 210 Total Equity (BD millions) 75 72 53 40 38 Return on average equity 17.8% 12.0% 7.9% 6.2% 5.4% Return on average assets 3.5% 2.5% 1.5% 1.1% 1.0% Book value per share (Fils) 235 284 229 174 166 Earnings per share (Fils) 47 30 15 11 9 Share price (Fils) 655 522 354 270 175 Distribution - cash dividend 20% 15% 12% 10% 10% bonus shares 12.5% 12% 10% - - 06 Bahrain Islamic Bank Annual Report 2006 COMPOSITION OF ASSETS TOTAL ASSETS TOTAL EQUITY (BD MILLIONS) (BD MILLIONS) 436M 75M 72M 321M 53M 255M 40M 231M 38M 210M 02 03 04 05 06 02 03 04 05 06 RETURN ON AVERAGE ASSETS RETURN ON AVERAGE EQUITY (%) (%) 3.5% 17.8% 2.5% 12.0% 7.9% 1.5% 6.2% 1.1% 1.0% 5.4% 02 03 04 05 06 02 03 04 05 06 Bahrain Islamic Bank Annual Report 2006 07 THE BOARD OF DIRECTORS Khalid Abdulla Al Bassam Sh. Hisham Bin A. Rahman Nabil Ahmed Mohamed Khalid Mohamed Najibi Aref Ahmed Al Kooheji Chairman Al Khalifa Amin Board Member and Chairman Board Member and Member of Vice Chairman & Head Board Member and of the Executive Committee the Executive Committee Chairman of the Board of of Audit Committee Managing Director Directors, Bahrain Real Founding Member and Chairman, Liquidity Estate Company - Bahrain Chairman of the Board of Chairman of the Board of Executive Director, Najibi Management Center - Directors, Abaad Real Estate Directors and Managing Investment Company - Bahrain Chairman of the Board Company – Bahrain Director, Almadar Bahrain of Directors, Capital Chairman of the Finance and Investment Management House – Chairman of the Board of Director and Chairman Consultative Commission, Company - Kuwait Bahrain Directors, Oqyana of Executive Committee, Dubai International Properties – Kuwait Vice Chairman, Crown Industries – Bahrain Financial Center – Chairman of the Board Al-Wathaeq Takaful Dubai, UAE of Directors, Al Bassam Chairman of the Board of Board Member, Gulf Insurance Company - Investment Company - Directors, International Finance House - Bahrain Board Member, Abaad Real Kuwait Bahrain Trading & Investment Estate Company - Bahrain Founding and Board Company - Bahrain Board Member, Deputy Chairman, Member, Capital Board Member, Khartoum Boubyan Bank - Kuwait European-Islamic Vice Chairman, Rasmal Management House - Bank – Sudan Investment Bank - Holding Company – Kuwait Bahrain Board Member, Dubai London, UK Board Member & Chairman Islamic Bank Pakistan - Board member, of the Executive Committee, Pakistan Gulf Investment Abaad Real Estate Board Member, Emirates Corporation - Kuwait Company - Bahrain & Sudan Bank - Sudan Board member, Board Member, Bosnia Bank Liquidity Management International - Bosnia Center – Bahrain 08 Bahrain Islamic Bank Annual Report 2006 Adnan A. Qader Razam Mohammed Yousif Yousif Mohammed Mohammed Al Zarooq Ali Mohamed Al Olimi Al Musalam Al Roumi Al Awadhi Rajab Board Member and Member Board Member and Member Board Member and Member Board Member and Member Board Member and Member of the Audit Committee of the Executive Committee of the Executive Committee of the Executive Committee of the Audit Committee Vice Chairman, Chairman and Managing Chairman, Adeem Member of the Board of Board Member, Islamic Abaad Real Estate Director, Investment Investment Company - Trustees, Islamic- Development Bank - KSA Company – Bahrain Dar Company - Kuwait Kuwait American College - Board Member, Chicago, USA Chairman of the Board of Vice Chairman and Kuwait Finance Directors, Al-Sham Islamic Managing Director, Efad House – Kuwait Bank - Syria Holding - Kuwait Board Member, Vice Chairman, Vice Chairman, Refad Hotels Adam Company - Kuwait Almadar Finance and and Resort - USA Board Member, Investment Company - Board Member, Investment Capivest – Bahrain Kuwait Dar Company - Kuwait Board Member, Al Dar Board Member, Aston Martin Assets Management Lagonda Group Limited - UK Company - Kuwait Bahrain Islamic Bank Annual Report 2006 09 CHAIRMAN’S STATEMENT IN THE NAME OF ALLAH, MOST GRACIOUS, MOST MERCIFUL, PEACE AND BLESSINGS BE UPON HIS MESSENGER. Dear valued shareholders, There was a significant growth in the profitability per share, which rose from 30 fils at the end of 2005 to On behalf of the Board of Directors, it is my privilege to 47 fils at the end of 2006, an increase of 57 percent. present the annual report of Bahrain Islamic Bank This high level of profitability contributed to the (B.S.C.) for the year ended 31 December 2006. This increase in return on equity to 18 percent, which proved to be an excellent year for the Bank, with represents a 50 percent increase over the previous significantly improved performance across all areas of year’s figures. Significantly, this is one of the highest operations, and outstandingly enhanced value for our performance ratios of commercial banks operating in shareholders. It gives me great pleasure to report that the Kingdom of Bahrain. the record achievements during 2006, well out- performed our expectations, and that we were able to In view of these excellent results, the Board of deliver even more than we expected for our Directors has recommended to the Shareholders’ shareholders last year. Annual General Meeting the payment of a total dividend at the rate of 32.5 percent of the paid up Bahrain Islamic Bank achieved yet again another year capital, compared to the dividends distribution of 27 of strong financial results during 2006, with net profits percent in 2005. The 2006 distributable profits are increasing by 76.6 percent to a record of BD13.1 represented by a cash dividend of 20 percent in million compared to BD7.4 million the previous year. addition to the distribution of bonus shares of 12.5 Accompanying this record growth, the Bank’s total percent or one share for each 8 shares held. In 2005, assets rose during 2006 to BD436 million, an increase the profit distribution comprised the payment of 15 of 36 percent over 2005. This was primarily due to the percent in cash dividends and 12 percent bonus shares. continuous growth in Islamic finance transactions and various investment activities, in addition to realizing attractive returns on the Bank’s investments in equity holdings and real estate assets.