Management and Administration 2. Chairman s Report 3. Investment Manager s Report 5. Portfolio Update 8. Breakdown of Assets Portfolio 9

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2 Contents Management and Administration 2 Chairman s Report 3 Investment Manager s Report 5 Portfolio Update 8 Breakdown of Assets Portfolio 9 Underlying Portfolio Companies 10 Directors Report 21 Independent Auditor s Report 24 Consolidated Statement of Assets and Liabilities 26 Consolidated Statement of Operations 27 Consolidated Statement of Changes in Net Assets 28 Consolidated Statement of Cash Flows 29 Consolidated Schedule of Investments 30 Notes to the Consolidated Financial Statements 34 Notice of Annual General Meeting 49 Schedule to AGM Notice 52 Annual Report and Audited Consolidated Financial Statements 1

3 Management and Administration Directors Hisham Al Otaibi (Chairman) Maha Al-Ghunaim Anne Ewing Kishore Dash Registered Office Arnold House St. Julian s Avenue St. Peter Port Guernsey GY1 3NF Channel Islands Investment Manager Global Capital Management Ltd. c/o Walkers SPV Limited Walker House St. Mary Street George Town Grand Cayman KY Cayman Islands Administrator and Secretary HSBC Securities Services (Guernsey) Limited PO Box 208 Arnold House St. Julian s Avenue St. Peter Port Guernsey GY1 3NF Channel Islands Registrar Capita Registrars (Guernsey) Limited Longue Hougue House St. Sampson Guernsey GY2 4JN Channel Islands Custodian HSBC Custody Services (Guernsey) Limited PO Box 208 Arnold House St. Julian s Avenue St. Peter Port Guernsey GY1 3NF Channel Islands Legal advisers to the Company (as to English law) Allen & Overy LLP One Bishops Square London E1 6AD United Kingdom Legal advisers to the Company (as to Guernsey law) Ogier Ogier House St. Julian s Avenue St. Peter Port Guernsey GY1 1WA Channel Islands Matched Bargain Facility Provider Jarvis Investment Management Ltd 78 Mount Ephraim Tunbridge Wells Kent TN4 8BS United Kingdom Independent Auditor KPMG Channel Islands Limited PO Box New Street St. Peter Port Guernsey GY1 4AN Channel Islands 2 Global MENA Financial Assets Ltd

4 Chairman s Report Chairman s Report The Board of Directors of Global MENA Financial Assets Limited (the Company or GMFA ) are pleased to present the third Annual Report of the Company together with the consolidated financial statements for the year ended 31 March Dear Shareholders, The financial year (FY) 2011 has been another challenging year for the MENA region, affected by prolonged financial crisis, lower economic activity and political instability. The beginning of 2011 witnessed unprecedented calls for political and economic reform by protestors in countries like Tunisia, Egypt, Yemen, Bahrain, Libya and Algeria. Prolonged economic crises coupled with political uncertainty have had a major bearing on the performance of number of corporates, triggering defaults. The banking and financial services sector suffered enormously due to lower credit off take, tightening of spreads and high bad debt provisions. The FY 2011 was uneventful for GMFA due to lackluster performance of the financial services sector and economy in general. In US dollar terms, the NAV declined by 6.4 per cent. from US$1.57 to US$1.47 per share. The region, nevertheless has its own merits and strong fundamentals. Compared to other regions of the world, the MENA region and GCC countries, in particular, were relatively less affected, due to higher budget surplus and robust public spending regime, adopted by respective governments to support the economy. In GCC countries, higher oil prices and external demand are boosting production and exports. In addition, government spending programs continue to foster recovery. The region will continue to benefit from sustained efforts and increased trade links with other emerging countries. However, sociopolitical discontent, high unemployment and rising commodity prices in most oil importing countries may dampen the short term growth. Going forward, the key challenges for the regional economies are to restore capital and liquidity buffers and improve regulatory and supervisory regimes. Recent Developments In the backdrop of fast changing business scenarios, at GMFA a conservative portfolio management approach has been pursued with the focus on efficiency and return maximization. This helped improve and maintain performance of the portfolio companies. Amongst GMFA portfolio companies, Al Soor Financing and Leasing Co and Jordan Trade Facilities Company have maintained their positive performance and have declared dividends. Al Manar Financing and Leasing Company has demonstrated a marked improvement in its operations and generated a net profit for the year. Dar Al Tamleek, a mortgage finance company in Saudi Arabia has shown significant improvement in performance, since acquisition. The Company achieved a fivefold increase in revenue in 2010 and has partnered with the Saudi Public Pension Agency to mobilize mortgage finance to government employees in Saudi Arabia. During the year, through its indirect subsidiary, GMFA Asia Ventures Ltd ( GAV ), GMFA invested US$12.84 million of equity in the PTC Financial Services Ltd. (PFS), the financial services arm of Power Trading Corporation of India, a government of India promoted company. PFS is also the largest power trading company in India. PFS finances and acquires strategic equity stakes in projects across the energy value chain in India. Islamic Money Market Instruments As at 31 March 2011, the Company s assets included cash and cash equivalents of US$141.1 million and Wakala receivables of US$9.25 million. The cash has been deposited with superior rated banks. The Wakala receivables are short term Islamic deposits placed with two Kuwaiti financial institutions. A committee, comprising of independent directors of the Company, continues to monitor and advise the Investment Manager on recovery and settlement of the outstanding Wakala receivables. Annual Report and Audited Consolidated Financial Statements 3

5 Chairman s Report Corporate Governance The directors have endeavored to adhere to the best corporate governance practices during the period. They believe that appropriate internal controls and systems are in place. The financial services sector, being worst affected by the economic crisis, continues to elude recovery, limiting the universe of investment grade opportunities in the sector. Non financial services sector, on the other hand, has fared better on top of strong oil prices and increased government spending. Considering this and weak business outlook for the financial services sector, the board has recommended expanding sectoral focus to include non-financial sectors. This will broaden GMFA s investment opportunity horizon and enable it to benefit from potential high growth opportunities in the real sectors in the region. Further, the Board has also recommended cash distribution of US$50 million under a share buy-back programme. I would like to take this opportunity to thank the shareholders for their continued support and reiterate our commitment to maximize shareholders value while adhering to the highest ethical and professional standards. Hisham Al Otaibi Chairman July Global MENA Financial Assets Ltd

6 Investment Manager s Report Dear Investors, In the wake of political uprisings across the Middle East and North Africa (MENA), 2011 continues to remain volatile. Starting from Tunisia and Egypt in early 2011, the wave of unrest spread across the region, disrupting economic activity and weakening economic outlook. Following the crises of the western developed economies, emerging markets of Asia and MENA are rapidly turning to be the main driver of world economic growth and development. Many of the portfolio companies of GMFA have also embarked upon the path of recovery in Geopolitical developments and the macro economy of the MENA region The political unrest of 2011 has necessitated the need for widespread policy reforms across MENA countries. Until late 2010, the region was right on the recovery path from the global financial crisis. The GDP growth accelerated to 3.8 percent in 2010 from a level of 1.8 percent in 2009, mainly driven by the region s oil exports. Though, the MENA region weathered the global crisis relatively well, yet the decline in growth rate led to high levels of unemployment in the educated youth, which gave rise to public protests in varying degrees across MENA countries. Most of the governments are responding with counter measures including higher public spending and job-creation to alleviate social tensions and foster recovery. Saudi Arabia announced earmarking of 15 per cent. of its GDP for residential development, salary increments and benefits and capital infusion into specialized credit institutions. Similar fiscal and regulatory measures have been taken by most other regional governments. The MENA region which produces over 30 per cent. of the world s oil supply witnessed 15 per cent. growth in oil prices during the first quarter of The oil prices reacted quickly to the regional instability and crossed the level of US$100 per barrel. Average spot oil prices, having steadily increased by 25 per cent. to US$95, between August 2010 and January 2011, shot up amid greater volatility to over US$110 per barrel during March The price increase continued in early April, as social and political turmoil intensified in Libya. Prices slightly declined in May but have recovered beginning June. The Crude oil price trend for the period May 2009 to May 2011 is captured in the figure below. The regional economies are expected to grow in 2011, backed by higher oil prices and increase in government spending. GDP of the MENA region grew by 11 per cent., in nominal terms, during 2010 to reach US$2.0 trillion. With rising commodity prices in the region, inflation was at 7 per cent. leading to an average real GDP of 3.8 per cent. The region witnessed mixed macroeconomic outcomes due to political disorder. The real GDP growth in the GCC region was 5 per cent. On the other hand, the oil-importers are expected to witness a lower real GDP growth of 2 per cent.-2.5 per cent. due to reduced economic activity, decline in tourism and lower investment. As compared to the regional market performance, the emerging economies of India, China demonstrated a growth of around 8 per cent. during the same period. GCC s real GDP is expected to grow by 7.8 percent in 2011, led by Qatar s breathtaking 20 per cent. growth forecast. The non-financial Annual Report and Audited Consolidated Financial Statements 5

7 Investment Manager s Report sector of the region is expected to have a major boost from a number of development plans announced by governments of Kuwait, Saudi Arabia, Qatar and Oman. We, therefore believe that, going forward, the real sector will be the main driver of growth in MENA economies. Capital Market and performance of Financial Services Sector In 2010 the MENA region witnessed early signs of economic recovery, however, the chain reaction of political uprisings across the MENA and GCC regions, at the beginning of 2011, wiped off most of the gains achieved by the capital markets. All the major regional indices, as measured by MXGCC index, fell by over 10 per cent. from January to mid-june The worst performers of the year were Kuwait and Oman, with 8.9 per cent. and 10 per cent. drop respectively. The chart below highlights the performance of regional indices during January 2009 to May Comparing the sectoral performance over the last three years, the financial services sector of the MENA region was widely affected due to reduced economic activity, lower credit off-take and stringent provisioning norms. A number of major financial institutions of the region went into deep financial distress. The credit crises had a significant bearing on the profitability of most of the banks, financial institutions and insurance companies alike. This prolonged inactivity coupled with geo-political developments is feared to have far reaching impact on the growth prospects of the sector. The following charts show how the banking sector of the region performed vis-à-vis world markets Jan-07 Apr-07 Jul-07 Oct-07 Jan-08 Apr-08 Jul-08 Oct-08 Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jan-07 Apr-07 Jul-07 Oct-07 Jan-08 Apr-08 Jul-08 Oct-08 Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 MSCI World FTSE 350 MSCI EM S&P 500 NIKKEI Source: MSCI Amman Banks Dubai Banks Bahrain Banks Kuwait Banks In comparison to the financial services sector, the non-financial services sector is expected to do significantly better, driven mainly by higher oil prices and government spending through various development plans. 6 Global MENA Financial Assets Ltd

8 Investment Manager s Report Development with the investments of GMFA Due to adverse condition in the MENA financial services sector during 2010, our focus remained on protection and maintenance of capital. We enhanced our role with the portfolio companies, in terms of implementing good corporate governance and risk management systems; cost reduction strategies; and stronger asset liability management. Our efforts resulted into more stabilized and improved performance of some of the portfolio companies where GMFA has significant ownerships. Jordan Trade Facilities Company and Al Soor Financing and Leasing Co, maintained their operating performance despite adverse market conditions. The mortgage finance company, Dar Al Tamleek, increased its income fivefold during the year. It should be noted that Dar Al Tamleek secured partnership with Public Pension Agency of Saudi Arabia as its channel partner for Masakin program. The underwriting business and operating performance of Gulf Takaful and Al Fajer Re-takaful have also improved. During the year 2011, GMFA invested US$12.84 million of equity in PTC Financial Services Ltd. (PFS) the financial services arm of the largest power trading company in India, promoted by the Government of India. PFS makes strategic equity investments and finances projects across entire energy value chain. Since incorporation in July 2008, GMFA has invested in eleven companies in MENA and Asian emerging markets in line with the investment guidelines. The principal reason for slow pace of investment was the spill-over effect of the 2008 financial crisis on the MENA region. Further, the widespread deterioration in political situation early this year in the MENA region is expected to have a significant impact on the pace of recovery. All of this has tremendously limited our ability to identify investment grade opportunities in the target geography. The prolonged inactivity and uncertainty prevailing in the regional financial markets, prompted us to review the situation and Company s investment framework, in terms of geography and target sector. After assessing the situation, we have recommended appropriate changes to the investment policy to expand the present investment focus to other non-financial sectors in the MENA and emerging countries. We believe this is the most prudent approach towards adapting to the changing scenario in the region. Sincerely, Rajiv Nakani, CFA Managing Partner Global Capital Management Ltd. July 2011 Sources of external data used in this report are International Monetary Fund, Global Investment House Research, Bloomberg and MSCI Annual Report and Audited Consolidated Financial Statements 7

9 Portfolio Update BREAKDOWN OF INVESTMENT PORTFOLIO Company Country GMFA s Acquisition Fair Value % of Fair % Stake Cost (US$) (US$) Value Bindar Trading and Investment Jordan 69.60% 47,108,519 10,991, % Jordan Trade Facilities Company Jordan 87.30% 44,361,542 20,918, % PTC India Financial Services India 3.68% 12,830,286 11,377, % Al-Manar Financing & Leasing Company Kuwait 13.63% 26,981,697 20,992, % Al Soor Financing & Leasing Company Kuwait 12.40% 30,837,597 39,313, % Dar Al Tamleek Saudi Arabia 5.00% 7,459,605 9,039, % Total Finance & Leasing 112,633, % Asian Finance Bank Malaysia 6.67% 13,139,520 11,623, % BMI Bank Bahrain 10.00% 43,949,116 29,064, % Industrial Bank of Kuwait Kuwait 2.50% 19,201,610 28,694, % Total Banking 69,382, % Gulf Takaful Insurance Kuwait 18.20% 14,546,569 6,345, % Al Fajer Retakaful Kuwait 20.00% 34,000,000 33,150, % Total Insurance 39,495, % Total Overall 221,511, % 8 Global MENA Financial Assets Ltd

10 Breakdown of Assets Portfolio Breakdown of Total Assets Unlisted, 47.7% Cash, 37.8% Listed, 11.6% Receivables, 2.9% Breakdown of Fair Value of Investments Corporate Banking, 13.0% Commercial Banking, 18.4% Finance & Leasing, 50.8% Minority 10-30%, 63.4% Majority >30%, 14.4% Minority <10%, 22.2% Insurance, 17.8% Bahrain, 13.12% Jordan, 14.41% Kuwait, 58.01% Malaysia, 5.25% India, 5.14% Saudi Arabia, 4.08% Annual Report and Audited Consolidated Financial Statements 9

11 Underlying Portfolio Companies Bindar Trading and Investment Country Jordan Industry Credit and Finance Acquisition Cost US$47,108,519 Market Value US$10,991,587 Valuation Basis Quoted % Ownership 69.6% Bindar Trading and Investment ( BTIC ) is a Shariah compliant consumer finance company operating in Jordan. BTIC was established in 2000 and was listed on the Amman Stock Exchange in BTIC is primarily engaged in vehicle and real estate financing. BTIC also offers car rentals and operates a car showroom. BTIC s capital was increased in October 2008 from JD14.3 million (US$20 million) to JD20 million (US$28 million). Currently, BTIC has three wholly owned subsidiaries, namely A ayan Trading and Investment Ltd, Mouta alika Co. (Car trading), and Al Sahm Al Feddi (Car rental). In the financial year ended 31 December 2010 (FY-2010), the loan portfolio was maintained at US$31.7 million with 9.2 per cent. net interest margin. BTIC recorded operational profit of US$2.5 million, but write offs of some real estate investments, amounting US$0.6 million, and a Murabaha loan provision of US$1.9 million, resulted in a net loss of US$340k. BTIC s share price was JD 0.79 and JD 0.56 towards the end of 2010 and on 31 March 2011, respectively. Key Financials US$ 000 FY 2009 FY 2010 Net Interest Income 2,872 2,979 Non-interest Income 1,333 1,425 Net Profit/(Loss) 1,783 (344) Book Value 30,800 29,045 Total Assets 48,787 43,155 Net Interest Margin (%) Return on Assets (%) 3.65 (0.80) Return on Equity (%) 5.79 (1.18) Source: BTIC s Audited Financial Statements Note: December year end Exchange rate as of respective year end 10 Global MENA Financial Assets Ltd

12 Underlying Portfolio Companies Jordan Trade Facilities Company Country Jordan Industry Credit and Finance Acquisition Cost US$44,361,542 Market Value US$20,918,715 Valuation Basis Quoted % Ownership 87.3% Jordan Trade Facilities Company ( JOTF ) was established in 1983 in the Kingdom of Jordan and was listed on the Amman Stock Exchange in JOTF was one of the first companies to enter the consumer finance business in Jordan and provides financing for vehicles and durable assets. JOTF witnessed marked improvement in revenue and profits in the financial year ended 31 December 2010 (FY-2010). Revenue increased by 7 per cent. and net profit grew by 5.5 times to US$2 million. The loan portfolio grew by 1 per cent. from FY-2009, compared to a decrease of 11 per cent. between FY-2008 and FY In the first quarter ending 31 March 2011, JOTF booked operating revenue of US$1.3 million with 31 per cent. net margin. At the end of FY-2010, the new credit card product line was offered to employees and existing customers meeting the collateral requirements. Also JOTF commenced cars, equipment, and real estate lease financing in SME financing is another area, JOTF intends to venture in towards the second half of JOTF declared 8 per cent. dividend for FY The share price towards the close of 2010 was JD1.0 with minor fluctuations to date. Key Financials US$ 000 FY 2009 FY 2010 Net Interest Income 2,168 2,072 Non-interest Income 1,781 2,474 Net Profit 370 2,045 Book Value 25,626 27,661 Total Assets 42,189 41,433 Net Interest Margin (%) Return on Assets (%) Return on Equity (%) Source: JOTF s Audited Financial Statements Note: December year end Exchange rate as of respective year end Annual Report and Audited Consolidated Financial Statements 11

13 Underlying Portfolio Companies PTC India Financial Services Ltd. Country India Industry Credit and Finance Acquisition Cost US$12,830,286 Market Value US$11,377,319 Valuation Basis Quoted % Ownership 3.68% PTC India Financial Services Ltd ( PFS ), established in 2006, is a non-banking financial institution promoted by PTC India Limited ( PTC ) with the intent to provide financial solutions to companies and invest in projects across the energy value chain. PFS is amongst a few infrastructure finance companies in India. For the financial year ended 31 March 2011 (FY-2011) total income stood at US$$23.4 million with net interest income of US$10.4 million, contributing 44 per cent. to the top line. Non-interest income for FY-2011 was US$4.5 million, including US$3.3 million of gains on partial exit from an investment. Total loan disbursements were US$152.2 million for FY-2011, compared to US$59.2 million in FY Since 2007, PFS has no nonperforming assets. PFS is regulated by Reserve Bank of India as a non-deposit taking, nonbanking financial institution. Being an infrastructure finance company, PFS can assume higher sector exposure to infrastructure projects. In February 2011, PFS launched an infrastructure bond to raise US$6.5 million and issued green shoe option of US$15.2 million. PFS plans to focus on fee based services, offer long-term credit, reduce interest costs and improve product mix. Key Financials US$ 000 FY 2010 FY 2011 Net Interest Income ,398 Non-interest Income 8,875 3,335 Net Profit 5,659 8,339 Book Value 141, ,210 Total Assets 213, ,648 Net Interest Margin (%) Return on Assets (%) Return on Equity (%) Source: PFS s Audited Financial Statements Note: March year end Exchange rate as of respective year end 12 Global MENA Financial Assets Ltd

14 Underlying Portfolio Companies Al Manar Financing & Leasing Company Country Kuwait Industry Credit and Finance Acquisition Cost US$26,981,697 Market Value US$20,992,023 Valuation Basis Price to Book Value % Ownership 13.63% Al Manar Financing and Leasing Company ( Al Manar ) is an Islamic financial institution established in November Al Manar provides Islamic Shari'ah compliant financial products and services for consumer, real estate and fleet financing. Despite continued lower economic activity in the region in the financial year ended 31 December 2010 (FY-2010), Al Manar managed to deliver a top line of US$22 million and reduce total liabilities by approximately 46 per cent. Al Manar s overall profitability improved to US$2.7 million in FY-2010 compared to losses of US$14.9 million in FY Al Manar continued with its conservative portfolio approach and managed to collect over US$68.7 million during FY-2010 and another US$7 million during Q It successfully repaid US$83 million of debt in FY-2010 and US$33 million in Q G& A expenses were streamlined and investment losses plugged in to achieve net profit of US$2.1 million. Al Manar is looking to diversify its revenue stream, explore alternative funding sources, reduce operating costs, obtain new credit facilities, and reshuffle investment portfolio to focus on strategic investments. In addition, it is considering listing on the Kuwait Stock Exchange. Key Financials US$ 000 FY 2009 FY 2010 Net Interest Income 13,275 13,637 Non-interest Income (3,679) (725) Net Profit/(Loss) (14,871) 2,709 Book Value 116, ,127 Total Assets 282, ,730 Net Interest Margin (%) Return on Assets (%) (5.26) 1.27 Return on Equity (%) (12.8) 2.24 Source: Al Manar s Audited Financial Statements Note: December year end Exchange rate as of respective year end Annual Report and Audited Consolidated Financial Statements 13

15 Underlying Portfolio Companies Al Soor Financing & Leasing Company Country Kuwait Industry Credit and Finance Acquisition Cost US$30,837,597 Market Value US$39,313,661 Valuation Basis Price to Book Value % Ownership 12.4% Al-Soor Financing and Leasing Co ( Al Soor ), established in July 2005, is a Kuwaiti shareholding company operating under the regulatory supervision of the Central Bank of Kuwait ( CBK ). Al Soor was incorporated with a capital of US$110 million, which was subsequently increased to US$183 million with the acquisition of financing arm of Al-Mulla Company. Al-Soor offers consumer, trade and supplementary home improvement finance services. In the financial year ended 31 March 2011 (FY-2011), finance income declined by 15 per cent. to US$35.5 million largely due to modification of terms of a portfolio of facilities, as mandated by CBK. Al Soor earned a net interest margin of 10.2 per cent. and net margin of 41.6 per cent. for FY It conservatively maintained provisions for doubtful debts to the tune of 12 per cent. of its portfolio. Total assets stood at US$391 million including net loan receivables of US$309 million. The management intends to continue with the conservative approach in preferring corporate clients, while managing the concentration risk, in a bid to limit non performing loans. Al Soor is in the process of converting one of its financing subsidiaries, Al Mulla International Financing and Investment, into an Islamic finance entity, in order to tap into the growing demand of Islamic financing services. Key Financials US$ 000 FY 2010 FY 2011 Net Interest Income 36,445 31,393 Non-interest Income Net Profit 18,486 14,808 Book Value 227, ,953 Total Assets 378, ,924 Net Interest Margin (%) Return on Assets (%) Return on Equity (%) Source: Al Soor s Audited Financial Statements Note: March year end Exchange rate as of respective year end 14 Global MENA Financial Assets Ltd

16 Underlying Portfolio Companies Dar Al Tamleek Country Saudi Arabia Industry Home Financing Acquisition Cost US$7,459,605 Market Value US$9,039,931 Valuation Basis Price to Book Value % Ownership 5.0% Dar Al Tamleek ( DAT ) is a Saudi closed joint stock Shariah compliant company established on 11 May 2008 with a paid-up capital of US$133.3 million (US$ million authorized). DAT offers real estate financing solutions to the Saudi households. DAT witnessed an increase in top line revenue from US$3.8 million for the 20-month period ended 31 December 2009 to US$18.08 million for the financial year ended 31 December 2010 (FY-2010). DAT managed to sell US$106.6 million of its home finance assets to Al Inma Bank during FY The sale effectively transferred all the credit risk to Al Inma, while DAT retained the benefit of customer account servicing. The deal generated an income of US$7.5 million. DAT also entered into a management agreement with the Saudi Arabian Public Pension Agency ( PPA ) whereby DAT was appointed by the PPA to service government employees financed by the Masakin program, for a fixed agency fee per contract, generating US$4.3 million for the first quarter ended 31 March 2011 as income on acquisition of mortgage servicing rights. Key Financials US$ 000 FY 2009 FY 2010 Net Interest Income 3,286 7,334 Non-interest Income ,347 Net Profit/(Loss) (6,337) 6,076 Book Value 120, ,071 Total Assets 139, ,801 Net Interest Margin (%) Return on Assets (%) (4.55) 3.83 Return on Equity (%) (5.24) 4.78 Source: DAT s Audited Financial Statements Note: December year end Exchange rate as of respective year end Annual Report and Audited Consolidated Financial Statements 15

17 Underlying Portfolio Companies Asian Finance Bank Country Malaysia Industry Commercial Banking Acquisition Cost US$13,139,520 Market Value US$11,623,555 Valuation Basis Price to Book Value % Ownership 6.67% Asian Finance Bank ( AFB ) commenced operations in 2007 in Kuala Lumpur, Malaysia. AFB is one of the three foreign Islamic banks that were granted license by the Central Bank of Malaysia to undertake Islamic banking business. AFB offers Shari ah compliant products covering consumer, commercial (including SME and trade finance), corporate, treasury and investment banking. AFB incurred a loss of US$11.25 million in the financial year ended 31 December 2010 (FY-2010), largely due to increase in non-performing loans to the SME sector, warranting provisions of US$11.34 million. Income from financing and investment activities increased by 27 per cent. to US$27.9 million in FY Total advances and investments in securities increased by 35 per cent. to US$ million in FY In the first quarter ended 31 March 2011 (Q1-2011), AFB incurred loss of US$548K compared to profit of US$433K in the corresponding quarter last year. The loss was attributable to higher than expected rise in cost of funds, reduction in fees income and lower growth in loan portfolio. In Q1-2011, AFB conducted the rights issue of US$50 million in two tranches of US$25 million each. GMFA did not participate in the rights issue. Key Financials US$ 000 FY 2009 FY 2010 Net Income from financing & investments 8,122 12,054 Other Income 4,295 4,748 Net Profit/(Loss) 1,267 (10,420) Book Value 95, ,746 Total Assets 605, ,545 Net Interest Margin (%) Return on Assets (%) 0.21 (1.43) Return on Equity (%) 1.32 (8.35) Source: AFB s Audited Financial Statements Note: December year end Exchange rate as of respective year end 16 Global MENA Financial Assets Ltd

18 Underlying Portfolio Companies BMI Bank Country Bahrain Industry Commercial Banking Acquisition Cost US$43,949,116 Market Value US$29,064,199 Valuation Basis Price to Book Value % Ownership 10.0% BMI Bank ( BMI ) was established in 2005 in the Kingdom of Bahrain. BMI operates under the supervision of Bahrain Monetary Agency and is engaged in commercial banking activities through its eight branches in Bahrain and a branch in the Qatar Financial Center in the State of Qatar. BMI also operates an Offshore Bank in the Seychelles and has per cent. shareholding in Gulf African Bank in Kenya. In addition, BMI owns the Diners Club Services Bahrain W.L.L and operates the Diners Club cards franchise across Bahrain, Syria and Yemen. BMI currently offers a wide range of financial solutions including retail banking, SME banking, corporate banking, private banking, Islamic financial services and treasury services. BMI recorded net losses of US$70.2 million for the financial year ended 31 December 2010 (FY-2010) due to fragile economic environment, higher suspended interest in its Bahrain operations, and lower loan volumes. BMI s assets reduced by about 12 per cent. due to continued rundown on the investment and corporate portfolio. The first quarter ending 31 March 2011 (Q1-2011) witnessed losses of US$4.5 million. While maintaining comfortable capital adequacy ratios, BMI is currently focusing on accelerating growth in the retail, commercial, and SME segments. Key Financials US$ 000 FY 2009 FY 2010 Net Interest Income 40,469 38,491 Non-interest Income 11,778 9,038 Net Profit/(Loss) (44,936) (70,242) Book Value 298, ,087 Total Assets 1,786,089 1,565,986 Net Interest Margin (%) Return on Assets (%) (2.52) (4.49) Return on Equity (%) (15.04) (30.66) Source: BMI s Audited Financial Statements Note: December year end Exchange rate as of respective year end Annual Report and Audited Consolidated Financial Statements 17

19 Underlying Portfolio Companies Industrial Bank of Kuwait Country Kuwait Industry Corporate Banking Acquisition Cost US$19,201,610 Market Value US$28,694,946 Valuation Basis Price to Book Value % Ownership 2.5% The Industrial Bank of Kuwait ( IBK ) was established in 1973 at the initiative of the Government of Kuwait for the purpose of supporting industrial projects in Kuwait. IBK provides medium to long term financing for the establishment, expansion and modernization of the industrial sectors in Kuwait. IBK s rating was upgraded by Fitch Ratings to A+ with a Stable Outlook, reflecting the high probability of support from the government of Kuwait. The Government of Kuwait owns 49 per cent. of IBK giving boost to the lending profile of IBK as well as its stability. For the financial year ended 31 December 2009 (FY-2009), the loan portfolio of IBK increased by 6 per cent., while customer deposits increased by 229 per cent. The overall asset base of IBK increased by 10 per cent. However, as a result of the prevailing market conditions, both investment income and net interest income of IBK declined significantly leading to a bottom-line of US$10.6 million in FY-2009 from US$32.9 million in FY Nonetheless, the fundamentals of IBK remain intact and it continues to receive strong support from the Government of Kuwait. IBK declared a 10 per cent. dividend (KD 1 per share) for FY IBK still has not released its 2010 year-end results as of the date of issue of this report. Key Financials US$ 000 FY 2008 FY 2009 Net Interest Income 79,376 65,411 Non-interest Income 5,871 8,449 Net Profit 32,882 10,624 Book Value 689, ,028 Total Assets 1,995,885 2,196,404 Net Interest Margin (%) Return on Assets (%) Return on Equity (%) Source: IBK s Audited Financial Statements Note: December year end Exchange rate as of respective year end 18 Global MENA Financial Assets Ltd

20 Underlying Portfolio Companies Gulf Takaful Insurance Company Country Kuwait Industry Insurance Islamic Acquisition Cost US$14,546,569 Market Value US$6,345,098 Valuation Basis Price to Book Value % Ownership 18.2% Gulf Takaful Insurance Company ( GTIC ) is a closed Shariah compliant shareholding company, established in September 2004 with a share capital of KD15 million. GTIC primarily focuses on providing Shariah compliant life and non-life insurance services including life and medical, motor, property, and general accident insurance. GTIC has the largest medical provider s network in Kuwait, which includes over 74 hospitals, clinics, pharmacies and labs. During the financial year ended 31 December 2010 (FY-2010), GTIC focused on improving the quality of its insurance portfolio, besides improving its top line by introducing new products and increasing its vehicle insurance client base. Investment losses dropped substantially leading to improved bottom line. GTIC proactively reduced the G&A expenses by over 25 per cent. as compared to the same period last year. GTIC holds a market share of around 15 per cent. and closely achieved the premium target of US$14.38 milion in FY-2010 by servicing new quality clients despite the drop in rates by 25 per cent. GTIC received a Ba1 rating from Moody s for Key Financials US$ 000 FY 2009 FY 2010 Gross Contributions Written 15,769 14,245 Net Surplus / (Deficit) from Takaful operations (2,910) 151 Net Loss Attributable to Shareholders (5,318) (2,514) Shareholders Equity 49,821 49,016 Participants Fund Deficit (12,619) (12,724) Total Assets 52,720 51,971 Source: GTIC s Audited Financial Statements Note: December year end Exchange rate as of respective year end Annual Report and Audited Consolidated Financial Statements 19

21 Underlying Portfolio Companies Al Fajer Retakaful Insurance Company Country Kuwait Industry Reinsurance Islamic Acquisition Cost US$34,000,000 Market Value US$33,150,814 Valuation Basis Price to Book Value % Ownership 20.0% Al Fajer is the first retakaful company established in Kuwait and commenced its operations in April Al Fajer has a paid up capital of US$175.1 million, and is licensed to operate reinsurance business for all types of takaful insurance. Al Fajer remains committed to portfolio diversification approach for risk management. Gross contributions, emanating from MENA, Asia and Europe, collectively increased by 32 per cent. during the financial year ended 31 March 2011 (FY-2011). Al Fajer is planning to expand in Far East and is in the process of opening a marketing office in Kuala Lumpur. Facultative business in the MENA region is growing and Al Fajer is aiming to venture in Africa. The management of Al Fajer is considering to redefine the business and market approach with the view to offer new products and value added services to clients. Al Fajer achieved a B++ rating from AM Best with a stable outlook. Key Financials US$ 000 FY 2010 FY 2011 Gross Contributions 44,367 56,280 Net Profit/(Loss) Attributable to Shareholders (19,646) 122 Shareholders Equity 153, ,166 Accumulated Deficit from Retakaful Operations (12,328) (15,515) Total Assets 153, ,177 Source: Al Fajer s Audited Financial Statements for 2010 and MIP for 2011 Note: March year end Exchange rate as of respective year end 20 Global MENA Financial Assets Ltd

22 Directors Report Directors Report The Directors are pleased to present their Annual Report and the Audited Consolidated Financial Statements of Global MENA Financial Assets Limited (the Company ) for the financial year ended 31 March Principal Activity The Company is a closed-ended investment company and was incorporated in Guernsey on 2 June The Company invests in the Middle East and North Africa ( MENA ) and emerging market regions either directly or by using its wholly-owned investment vehicles based in Bahrain: Financial Assets MENA W.L.L. and Financial Assets Bahrain W.L.L. (the Subsidiaries ). The Company, through Financial Assets Bahrain W.L.L., recently established a 100 per cent. subsidiary in Mauritius GMFA Asia Venture Ltd to invest in India. Collectively, the Company and its Subsidiaries are known as the Group. On 14 September 2010, GMFA Asia Venture Ltd (the special-purpose vehicle or SPV ), a private company limited by shares, was incorporated in the Republic of Mauritius to facilitate investment in India in a tax-efficient manner under the laws of Mauritius. The Company, through Financial Assets Bahrain W.L.L. ( FAB ), is the beneficial owner of the SPV. The Company is an authorised closed-ended investment scheme as defined by the Authorised Closed-ended Investment Schemes Rules (2008) (and, as such, is subject to ongoing supervision by the Guernsey Financial Services Commission). The Company is governed by the provisions of the Companies (Guernsey) Law, Investment Objective The Group s investment objective is to generate attractive total returns on a diversified portfolio of financial sector assets in the target MENA region and Emerging Market regions. The Group s investment strategy is to utilise Global Capital Management Ltd. s (the Investment Manager ) proven private equity approach to acquire and manage controlling and significant minority stakes in unlisted companies and stakes of any size, which will include controlling and non-controlling stakes in listed companies in the financial services sector. The Group may invest in private equity funds focusing on the MENA region. The Investment Manager seeks to play an important role in shareholder value creation through active engagement with portfolio companies. In addition, any related party transactions are entered into with the consent of the independent committee. While making investments, the policy of the Group includes the following: to maintain at least an 80 per cent. exposure towards target MENA and a maximum of 20 per cent. to other emerging markets; and not to invest more than 30 per cent. of the net asset value of the Group in any single company or institution at the time of investment. No investment limit is set on any particular country, but the Group will not invest in Iran, Sudan and Syria. Investment Strategy And Process The Investment Manager adopts an investment approach based on macro-economic and sector analyses to identify stable, high return investment opportunities. The Group invests only in companies it believes have high growth potential. The Group will not restrict its investments to any specific sub-sector within the financial services sector. Annual Report and Audited Consolidated Financial Statements 21

23 Directors Report Management Of Cash And Islamic Instruments The Group places uninvested cash with banks with strong credit ratings as approved by the Board from time to time where the limit per bank is US$50 million. For the year ended 31 March 2011, the Group has not entered into any new investment in Islamic instruments. Statement Of Directors Responsibilities The Directors are responsible for preparing the Directors Report and the consolidated financial statements in accordance with applicable laws and regulations. Company law requires the Directors to prepare financial statements for each financial year. Under that law, they have elected to prepare the consolidated financial statements in conformity with accounting principles generally accepted in the United States of America ( US GAAP ) and applicable law. The consolidated financial statements are required by law to give a true and fair view of the state of affairs of the Group and of the profit or loss of the Group for that period. In preparing these consolidated financial statements, the Directors are required to: select suitable accounting policies and then apply them consistently; make judgements and estimates that are reasonable and prudent; state whether applicable accounting standards have been followed, subject to any material departures disclosed and explained in the consolidated financial statements; and prepare the consolidated financial statements on a going concern basis unless it is inappropriate to presume that the Group will continue in business. The Directors are responsible for keeping proper accounting records which disclose with reasonable accuracy at any time the financial position of the Group and the Company and to enable them to ensure that the consolidated financial statements comply with the Companies (Guernsey) Law, They have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Group and the Company and to prevent and detect fraud and other irregularities. Tax Status The Company is exempt from Guernsey Income Tax under the Income Tax (Exempt Bodies) (Guernsey) Ordinances, 1989 and is charged an annual exemption fee of 600. Results The total loss for the year ended 31 March 2011 for the Group amounted to US$23,880,977 (31 March 2010: loss of US$22,982,831). No dividends were approved and paid for the year ended 31 March 2011 (31 March 2010: $0.08 per share or US$21,052,085). Capital Values At 31 March 2011, the value of the Group s equity was US$371,171,514 (31 March 2010: US$395,052,491), the net asset value per share was US$1.47 (31 March 2010: US$1.57) or 0.92 (31 March 2010: 1.03) converted at the US$/GBP exchange rate of at the reporting date (31 March 2010: ). 22 Global MENA Financial Assets Ltd

24 Directors Report Directors The Directors who held office during the year are detailed on the Management and Administration page 2. The Board comprises four non-executive Directors, three of whom are independent, being Hisham Al Otaibi, Anne Ewing and Kishore Dash. All of the Directors have no beneficial interest in the shares of the Company at the end of the year. Global Investment House ( Global ), through Global MENA Macro Fund Company B.S.C.(c)., owns shares in the Company. Maha Al-Ghunaim is Chairperson and Managing Director of Global. Maha Al-Ghunaim is a shareholder of Global. Subsequent Event Subsequent to 31 March 2011, the Board of Directors decided at a Board Meeting held on 6 June 2011 to buy-back shares to the value of US$50,000,000 subject to approval from shareholders at the forthcoming Annual General Meeting. It was also decided that the buy-back of shares to be on the net asset value as at 31 March Resolutions to be proposed at the AGM At the forthcoming Annual General Meeting of the Company ( AGM ) resolutions six to eight (inclusive) constitute special business of the AGM and will be proposed as special resolutions of the Company. Resolution 6 is a proposal that the Company amends its investment policy which will enable the Company to invest a) in the non-financial sectors of the approved geographic regions and b) in minority stakes in listed companies of the emerging markets outside the MENA region. The Board is proposing this resolution after considering Investment Manager s recommendation and in view of the prolonged inactivity prevailing in the regional financial services sector. Resolution 7 relates to how often the Company publishes NAV. The Company currently publishes NAV on a weekly basis. As the Company is no longer actively traded, and the investments of the Company are predominantly unlisted, the Board, on the advice of the Investment Manager, is proposing that the Company publishes NAV on a quarterly rather than a weekly basis as a cost saving measure. Resolution 8 relates to the proposed buy-back of shares by way of tender offer referred to above. Further information about this buy-back may be found in the accompanying circular. The full text of the resolutions to be proposed at the AGM is set out in the notice of AGM. Disclosure Of Information To Auditor The Directors who held office at the date of approval of this Directors Report confirm that, so far as they are each aware, there is no relevant audit information of which the Group s auditor is unaware; and each Director has taken all the steps that he ought to have taken as a Director to make himself aware of any relevant audit information and to establish that the Group s auditor is aware of the information. Independent Auditor KPMG Channel Islands Limited have indicated their willingness to continue in office and a resolution re-appointing them will be proposed in the Annual General Meeting. By order of the Board Director 12 July 2011 Director Annual Report and Audited Consolidated Financial Statements 23

25 Independent Auditor s Report to the Members of Global MENA Financial Assets Limited We have audited the consolidated financial statements (the financial statements ) of Global MENA Financial Assets Limited (the Company or Group ) for the year ended 31 March 2011 which comprise the Consolidated Statement of Assets and Liabilities, the Consolidated Statement of Operations, the Consolidated Statement of Changes in Net Assets, the Consolidated Statement of Cash Flows, the Consolidated Schedule of Investments and the related notes. The financial reporting framework that has been applied in their preparation is applicable law and accounting principles generally accepted in the United States of America. This report is made solely to the Company s members, as a body, in accordance with section 262 of the Companies (Guernsey) Law, Our audit work has been undertaken so that we might state to the Company s members those matters we are required to state to them in an auditor s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company s members as a body, for our audit work, for this report, or for the opinions we have formed. Respective responsibilities of directors and auditor As explained more fully in the Statement of Directors Responsibilities set out on page 22, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board s Ethical Standards for Auditors. Scope of the audit of the financial statements An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the Group s circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the Board of Directors; and the overall presentation of the financial statements. In addition, we read all the financial and non-financial information in the Annual Report to identify material inconsistencies with the audited financial statements. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report. Opinion on financial statements In our opinion the financial statements: give a true and fair view of the state of the Group s affairs as at 31 March 2011 and of its return for the year then ended; are in conformity with accounting principles generally accepted in the United States of America; and comply with the Companies (Guernsey) Law, Global MENA Financial Assets Ltd

26 Independent Auditor s Report to the Members of Global MENA Financial Assets Limited Matters on which we are required to report by exception We have nothing to report in respect of the following matters where the Companies (Guernsey) Law, 2008 requires us to report to you if, in our opinion: the Company has not kept proper accounting records; or the financial statements are not in agreement with the accounting records; or we have not received all the information and explanations, which to the best of our knowledge and belief are necessary for the purpose of our audit. KPMG Channel Islands Limited Chartered Accountants Guernsey 12 July 2011 Annual Report and Audited Consolidated Financial Statements 25

27 CONSOLIDATED STATEMENT OF ASSETS AND LIABILITIES as at 31 March March 31 March Notes US$ US$ Assets Investments at fair value (cost basis of US$294,429,588 (2010: US$281,585,775)) 4 221,511, ,005,080 Cash and cash equivalents US dollar-denominated cash 5 65,220, ,438,692 Foreign currency cash 5 75,892,795 50,156,583 Wakala receivables 6 9,258,757 30,793,515 Dividend receivable 1,624, ,431 Other receivables 7 97,312 65,616 Total Assets 373,605, ,441,917 Liabilities Directors fees payable 3 43,151 42,671 Investment management fees payable 3 1,823,150 1,950,011 Other payables 8 568, ,744 Total Liabilities 2,434,403 2,389,426 Net Assets 371,171, ,052,491 Net Assets consist of : Ordinary shares 9 497,623, ,623,330 Accumulated gains/(losses) Accumulated net investment loss (48,804,737) (25,360,670) Accumulated net realised gain from investments and foreign currencies 16,240,907 16,387,492 Accumulated net change in unrealised loss from investments and foreign currencies (72,835,901) (72,545,576) Accumulated distributions to shareholders (21,052,085) (21,052,085) Net Assets 371,171, ,052,491 Net Asset Value per Share (in US Dollar based on 252,040,002 shares in issue at 31 March 2011 and 31 March 2010) Net Asset Value per Share (in Sterling) The consolidated financial statements on pages 26 to 48 were approved by the Board of Directors on 12 July By order of the Board Director Director The accompanying notes form an integral part of the consolidated financial statements. 26 Global MENA Financial Assets Ltd