GMFA Global Mena

 

TIDMGMFA 
 
RNS Number : 0911H 
Global MENA Financial Assets Ltd 
12 February 2010 
 

Global MENA Financial Assets Limited 
Interim Management Statement 
11 February 2010 
This is an Interim Management Statement issued by Global MENA Financial Assets 
Limited. (GMFA or the Company) in accordance with the FSA's Disclosure and 
Transparency Rule 4.3. This statement relates to the period ended 11 February 
2010, as date of publication. 
 
Macroeconomic Environment 
The global financial crisis has severely affected economies around the world to 
varying degrees and MENA has not been any exception, although some of the 
regional economies, such as Qatar, Oman & Saudi Arabia, demonstrated some 
resilience. The hydrocarbon sector, being the principal GDP contributor to the 
Gulf Cooperation Council (GCC) economies, has always played the key role in 
driving the economic cycle of the region.  On the back of a strong turnaround in 
hydrocarbon prices, the GCC's capital markets started recovering in the second 
quarter of 2009. Crude oil increased from US$30 per barrel in early 2009 to 
US$70 per barrel in August 2009 and is expected to remain over US$75 per barrel 
in 2010. 
 
The IMF estimates (October 2009) that GDP growth will be 18.5% in Qatar, and 
3.8% and 3.7% in Oman and Bahrain, respectively.  The UAE and Kuwait are 
expected to post growth of 2.4% and 3.3% in 2010, respectively. Although 
financial conditions have started improving, they are still far from their 
pre-crisis levels.  Looking ahead, governments will need to balance the need to 
unwind the liquidity support provided at the height of the crisis, while 
maintaining public spending on infrastructure and social development.  In the 
medium term, financial market development, and employment generation measures, 
will remain a priority of governments in the region. 
 
NAV Performance 
GMFA's investment portfolio as of 11 February 2010, consisted of ten equity 
assets comprising two listed companies and eight unlisted companies.  The net 
asset value per share as of 11 February 2010 (unaudited) was GBP1.00 compared to 
a net asset value of GBP1.07 on 30 September 2009, representing a decrease of 
6.5%. Regular updates of the Company's NAV can be found on the Company's 
website, www.gmfa.com. 
 
Portfolio Update 
As of 11 February 2010, the portfolio's cash and cash equivalent investments 
amounted to a face value of US$187 million.  This comprises approximately US$157 
million of cash and deposits with highly rated banks and approximately US$30 
million of investments (net of provision) in two murabaha1 contracts with two 
Kuwaiti companies. The two Kuwaiti companies defaulted in paying their financial 
obligations.  As referred to in previous statements, a committee comprised of 
independent directors was established to monitor and recover these murabaha 
investments. With the help of the Investment Manager, this committee has to date 
recovered US$22.4 million (KD 6.5 million) owed under these murabahas.  The 
committee is working to recover the remaining balances as soon as possible.  The 
Company has made no further investments in murabahas and will not do so in 
future. 
 
2009 was a difficult year for the portfolio companies of GMFA. The operating 
performance was hit hard due to the international financial market crisis 
affecting the MENA region. The year-on-year performance also declined due to the 
fact that most companies registered high revenue and profit in 2008, before the 
financial market crisis entered the MENA region. In 2009 we focused mainly on 
fortifying the core operations of the companies where we had controlling stakes. 
We strived to achieve this through shifting focus from non-core activities to 
core-activities, introducing higher corporate governance norms, stringent 
operational and financial risk management mechanisms, cost reduction strategies, 
organizational restructuring, and exacting efficiency measurement norms. Our 
efforts are expected to bear fruit in the current year and that the operating 
performance of the two Jordanian companies where GMFA has a controlling stake 
will continue to improve. We also expect significant business consolidations to 
take place in the markets where some of the GMFA portfolio companies operate. 
 
We are currently evaluating a number of investment opportunities in banking, 
financial services and insurance (BFSI) sectors across the MENA region. Given 
the future prospects of some of the emerging markets outside the MENA region, 
there is also interest in considering investments outside of the MENA region, to 
the extent permitted under the investment mandate. Separately, we are also 
exploring profitable exits from some of the portfolio companies. 
[1]Murabaha is an Islamic financing structure, where an intermediary buys an 
asset with free and clear title to it. The intermediary and prospective buyer 
then agree upon a sale price (including an agreed upon profit for the 
intermediary) that can be made through a series of instalments, or as a lump sum 
payment. Pricing depends on credit ratings, transaction size and types of goods 
being financed. The premium is generally based on a benchmark figure, such as 
LIBOR, plus a margin. A bank cannot re-price its receivables if LIBOR rises 
during the contract's duration. A Murabaha is not an interest-bearing loan, 
which is considered riba (or excess). Murabaha is an acceptable form of credit 
sale under Sharia (Islamic religious law). Similar in structure to a rent to own 
arrangement, the intermediary retains ownership of the property until the loan 
is paid in full. 
 
Changes to the Company's Board and Auditors 
Messrs. Richard Bernays, John Hawkins, and Terrence Allen (who were not 
re-elected to their positions to the board at the Company's AGM), and Mr. Omar 
El-Quqa (who resigned due to his departure from Global Investment House K.S.C.C 
(Global) ) are no longer directors of the Company. Ms. Anne Ewing and Mr. Hisham 
Al Otaibi have both joined the board as independent directors.  Mr. Al-Otaibi 
was also appointed as the chairman of the board. Currently the board has three 
independent directors being Messrs. Hisham Al-Otaibi, Kishore Dash, and Ms. Anne 
Ewing (from Guernsey) and one non-independent director, being Ms. Maha Al 
Ghunaim from Global. As announced in September last year, the Company has 
appointed Allen & Overy LLP as its legal advisor and KPMG as its auditors. 
 
 Investment Activity in the Company 
On 17 June 2009, GMFA, through its wholly owned subsidiary, Financial Assets 
Bahrain W.L.L.,  acquired a minority holding in Twenty Third Project Management 
Company W.L.L., and consequently an indirect equity stake of 5% in Dar Al 
Tamleek Company (DAT)  from Global, a 29.99% shareholder in the Company. The 
consideration of US$ 4,117,358 was set off against a corresponding amount owning 
under certain Islamic money market instruments with Global and its subsidiaries. 
 In October 2009, GMFA also participated in the 25% second capital call of DAT, 
raising the aggregate acquisition cost to US$ 7,459,605. 
 
On 4 January 2010, GMFA, through its subsidiary, Financial Assets Bahrain W.L.L 
(FAB), acquired a 49% shareholding in Twenty Fourth Project Management Company 
W.L.L. from Global, resulting in an indirect interest of 20% in Al Fajer 
Retakaful Insurance Company KSCC.  The consideration of US$ 34, 000,000 for this 
acquisition was adjusted against an equivalent amount receivable from Global 
under Islamic money market instruments.  As a result of this transaction, GMFA 
ended its exposure to Global under the Islamic money market instruments. 
 
As announced on 19 November 2009, following the Company's shareholders' approval 
to settle the put option agreement entered into between the Company and Global, 
the Company received US$21.26 million in cash from Global, which was distributed 
to the Company's shareholders by way of a special dividend of GBP0.05 per share. 
 
 De-listing 
The Company received communications from a number of shareholders during 2009 
requesting that the Company consider cancelling its listing on the Official List 
of the UK Listing Authority and their trading on the London Stock Exchange's 
market for listed securities (the LSE).  Taking into consideration the prolonged 
illiquidity of GMFA's shares since their admission to trading, a market price at 
a large discount to NAV and the significant administrative costs arising from 
maintaining its listing on the LSE, on 21 December 2009, the board put forward a 
proposal to the Company's shareholders (by way of a notice of EGM), that the 
Company should cancel its listing on the Official List and cease trading of its 
shares on the LSE.  By a significant majority of those who voted, GMFA's 
shareholders approved a resolution to this effect on 27 January 2010. 
GMFA is currently exploring various options to provide liquidity in the 
Company's shares, including (amongst other things) providing a matched bargain 
facility to facilitate a mechanism for an exit for those shareholders who are 
unable or unwilling to hold un-listed securities.  Notwithstanding the 
de-listing, GMFA's board intends to adhere to international best practices in 
the area of corporate governance and risk management, following the de-listing. 
Such practices will include, but will not be limited to, a) the maintenance of a 
majority independent board, the continued appointment of a third party 
independent administrator, a custodian, a reputable legal advisor, and a 
reputable audit firm; and b) providing quarterly updates on the Company's 
operations and portfolio performance, timely updates on all key material 
developments, an annual audit and interim review of the Company's performance, a 
performance review of the investment manager by the Company's board, and a 
performance review of the board. 
 
Rajiv Nakani, CFA, Managing Partner, Global Capital Management Ltd. commented: 
"While we have a renewed focus on driving overall strategic direction and value 
add in the portfolio companies of GMFA, we are also reviewing a number of new 
investment opportunities in the BFSI sectors with an aim to create a growth 
portfolio utilizing the cash available to the Company. For portfolio companies 
where growth prospects, after comprehensive analysis, appear limited, we may 
consider disposing such investments to shift funds into opportunities that may 
generate returns commensurate to the GMFA investment mandate. 
 
In light of the major events of 2009 in the banking and finance sectors in the 
GCC countries, we are cautiously optimistic about the prospects of these sectors 
in 2010. We are evaluating available investment options to take advantage of 
opportunities in the BFSI sectors in emerging markets outside of the MENA region 
where the fundamentals, overall and sector specific, are relatively stronger." 
 
For information please contact: 
Rajiv Nakani, CFA 
Managing Partner 
Global Capital Management Ltd. 
T: +965 2295 1200 
F: +965 2295 1648 
E: rnakani@global.com.kw 
 
Financial Dynamics 
Ed Gascoigne-Pees 
Nick Henderson 
+44 (0)20 7269 7114 
 
 
Notes to Editors 
About Global Mena Financial Assets Limited. 
Global MENA Financial Assets Limited is a Guernsey incorporated investment 
company formed on 2 June 2008 to make attractive absolute gains through 
investment in a diversified portfolio of financial sector assets focused 
predominantly in the MENA Region (including Turkey). 
www.gmfa.com 
 
About Global Capital Management Limited. 
Global Capital Management Limited is a wholly owned subsidiary of Global 
Investment House K.S.C.C. The Manager has one of the largest private equity 
teams in the MENA region. The members of the private equity team have diverse 
sector and geographic experience in countries and sectors across the MENA and 
other emerging markets. The team collectively maintains a broad network of 
institutional relationships within the regions targeted for investments by its 
funds. Global Capital Management Limited currently manages assets of more than 
US$3 billion. 
 
 
 
 
 
This information is provided by RNS 
            The company news service from the London Stock Exchange 
   END 
 
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