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The latest research report from Kuwait Financial Center S.A.K. (“Markaz”) recommends increased allocation to Saudi Arabia for the month of June 2007. The research publishes a monthly report suggesting allocation weights to various GCC markets based on proprietary research. The asset allocation recommended during the month of May 2007 generated a return of nearly 7.7% which is 2% higher than the benchmark index. The out performance can be primarily attributed to over weight positions in UAE, Kuwait and Qatar. In general, all the GCC markets performed well during May 2007. Markaz research has increased the allocation to Saudi Arabia from an underweight position of 28% in May to a neutral position of 54% in June. This is due to a turnaround in performance in May, after a decline in the previous two months. It may be noted that fund managers still have lower allocation to Saudi Arabia (26%). Markaz research continues to be over weight on Kuwait with an allocation of 29%. This overweight position on Kuwait is in line with fund manager’s average allocation at 27%. There has been a consistent positive performance in the Kuwait market during the current year. It retains overweight position on UAE due to its continued out performance. The Dubai index (DFM) was up by 17.15% during May, after rising by 5.23% in April. Markaz Research recommends 20% allocation to UAE as compared to benchmark weight of 14%. The research has retained over weight position on Oman and Qatar. However, as the benchmark allocation to these markets is not significant, the difference is marginal. Interestingly, compared to a 7% allocation to cash last month, the model is leveraged this month by 20%, indicating a tactical shift to higher allocation towards equity. Benchmark allocation (%) Recommended Allocation - June 2007 (%) Fund Manager’s Average (%) Saudi Arabia 56 54 26 Kuwait 19 29 27 UAE 14 20 20 Qatar 8 12 11 Bahrain 2 2 2 Oman 1 2 4 Cash/(Loan) 0 -20 10 Other MENA 0 0 1 Total 100 100 100 Market Review: Saudi reversed a declining trend in May and ended on a flat note. The market increased by 0.93% during the month, driven by heavyweights like SABIC and Saudi Telecom, which advanced by 2% and 8% respectively during the month. Al-Rahji Bank and Saudi Electricity Company declined by 4% each. On the YTD basis the market is still down by 5.55%. The corporate numbers in Saudi remained unimpressive. On an overall basis, of the 55 companies, that announced their results witnessed a decline in the consolidated bottom line by 2%. During the month, SABIC agreed to buy GE Plastics for $11.6 Bn. The company also reported impressive earnings growth of 50% in 1Q 07. However, it failed to cheer the stock price, which has only advanced 2% during the month. The Kuwait stock market advanced 7.27% in May, after advancing 4.78% in April. Strong growth in corporate earnings was the main driver. The aggregate corporate results of 53 companies, which announced their results in May, witnessed a consolidated earnings growth of 189% for 1Q07 on a YoY basis. Kuwait Cement reported a growth of 228% to KWD 15.59 Mn. Boubyan Petrochemical reported a 85% growth in 1Q07 to KWD 40.63 Mn. Coast Investment Corporations, Kuwait Financial Centre, Noor Financial Investment company, Al Khaleej Development Company all reported robust growth in 1Q07 earnings. Kuwait dropped the dollar peg during the month, which also boosted the sentiment in the market. In addition, Agility acquired two US based firms, two firms in the ANZ (Australia & New Zealand) region and also a company in Egypt. Commercial Bank of Kuwait remained in news for acquisition of a regional player after being an acquisition target itself. We expect more news flow on mergers and acquisitions during the month of June. Our Model remains overweight on Kuwait, keeping in mind gains in April and May. The Dubai index rose 17.2% in the month of May. The 32 companies which reported results in May witnessed a 6.1% growth in consolidated earnings in 1Q07. ALDAR Properties reported 78% y-o-y growth in earnings to AED 450 Mn in 1Q07. Mashreq bank reported 30% y-o-y growth in earnings to AED 445 Mn in 1Q 07. Heavyweights such as Emaar Properties advanced 13% during May, while DIB rose 33% during the month. Corporate results of the heavyweights have been good. Furthermore a series of investment proposals in infrastructure are expected to keep the sentiments positive. Qatar (DSM) witnessed a rise of 12.15% during the month of May, after advancing by 7.70% in April. The market has provided a YTD return of 2.45%, recovering losses suffered in the earlier months. Heavyweights Qatar National Bank and Industries Qatar each advanced by 14% during the month. The bank had reported a growth of 7% in profits to USD 1.7 Bn in 1Q 07. The overall corporate performance has also been robust in Qatar with the consolidated earnings of 24 companies witnessing a growth of 18.59%. Bahrain index improved by 9.7% during May 07. The 21 companies that reported results in May reported a consolidated y-o-y earnings growth of 21.1% in 1Q07. The Oman market advanced 7.02% in May, after rising by 4.48% in April. ### About Markaz Kuwait Financial Centre 'Markaz', with total assets under management of over KD1.21 billion as of March 31, 2007, was established in 1974 has become one of the leading asset management and investment banking institutions in the Arabian Gulf Region. Markaz was listed on the Kuwait Stock Exchange (KSE) in 1997; and was recently awarded a BBB+ corporate rating by Capital Intelligence Ltd.