May 13, 2007

Shamil Bank Makes a Lucrative Exit in the US Development Opportunities Fund I

Shamil Bank, a leading Bahrain-based commercial and investment bank, has announced a successful partial exit of the US$ 50 million United States Development Opportunities Fund I Limited (“USDOF I”) through the disposition of one of the assets comprising the portfolio.

USDOF I, one of Shamil’s real estate Modaraba Funds, provided investors with an opportunity to invest in the development of two (2) condominium projects in the Unites States: one in Fairfax, Virginia and the other in Miami, Florida. The Fund, which was subscribed for in December 2005, projected the realization of an internal rate of return (“IRR”) of 17% over an investment period of two (2) years.

In its capacity as the Modareb, Shamil Bank has closely monitored the investment’s progress leading to the successful exit from the Virginia- based project at an IRR one-hundred basis points higher than initially projected. After applying the proceeds (principal and profits), Shamil would pay investors close to 55% of their invested capital in the Fund from the project which weighed only 46% at the time of subscribing to the Fund.

Commenting on the achievement, Mr. Ahmad Tayara, Head of Investment Banking, Shamil Bank said: “The creation of attractive, well structured funds and their successful placement is one aspect of our business. The real challenge is to appreciate that once a fund is closed, it is at that time that the deal truly starts. He added: “The post-closing monitoring aspect of our business, to ensure that corrective measures are constantly being applied to keep asset performance on track, consumes a considerable amount of our time but in the end it paid off in this case.“

Mr. Tayara continued: “When the assets were acquired, interest rates in the US were still relatively low and the demand for condominium units (residential flats for sale) surged. Later on and in order to curb potential inflation risk, the Fed decided to hike up interest rates. We decided, in consultation with the developer and other real estate expert consultants, to convert part of the Virginia–based asset that was still under construction into a luxury apartment block for rent. Upon completion, we evaluated offers from investors wanting to acquire the entire block, and since the condominium units of the other block were almost all sold out, we went ahead with the sale. On an asset basis, investors realized close to 18% IRR. We are now focusing on the sale of the condominium units of the Florida-based asset."

“The successful partial exit from the USDOF I in this challenging investment climate being witnessed by the US real estate sector is a testament to Shamil’s strong management capabilities. The year in progress is expected to be an exciting year as we announce further exits and build a strong pipeline of attractive investment opportunities for our investors. Indeed, there is more to come and we will release the news in due time," Mr. Tayara added.