First tranche of Daman Iraq Fund grows 134% in eight months
Daman Iraq Opportunity Fund announced today first results from its operations in Iraq, indicating a Net Asset Value (NAV) of US$234.92 per share for investors in its first investment tranche. This translates to a growth in NAV of 134.92% within the first eight months since the launch of the Fund.
Commenting on the performance of the Fund, Shehab M Gargash, Director, said: “We are obviously very pleased with this performance, especially since it vindicates us for our early belief in the potential of the Iraqi market. These are still early days and the situation in Iraq is far from clear. However, our belief in the eventual triumph of the Iraqi economy over adversity is still very much in place.”
Having believed in the potential for success in Iraq during a time when others were speculating whether the war would occur or not, Daman launched the Iraq Opportunity Fund in January 2003, before the beginning of the Gulf War in March, at an NAV of US$100 per share.
Dr. Mohamed Hamdan, Director, comments on the early performance of the Fund: “Iraq was, in the days before the war, flush with quality assets at low valuations, assets such as real estate and equities. It was a matter of time before investors pick up these valuations. For those who moved in early, such a move was a calculated risk that paid off handsomely.” Despite increases in asset valuations since the end of the war, Iraqi assets remain poised for growth in the period to come.
The Fund is a US$50 million private investment vehicle. Daman continues to pursue investments in multiple tranches, but this is the first publication of an NAV for the Fund since its launch.
The methodology of valuing the assets of the Fund takes into consideration the volatile nature of the Iraqi economy at this critical juncture in history. Therefore, significant provisions have been taken with regards to the valuation of the different classes of assets as well as the currency exchange rate. These provisions result in the NAV reflecting a more conservative valuation than would otherwise have been achieved.
“We are weary of over-valuing our investments in a unique market such as today’s Iraq, where valuations, liquidity and general levels of information leave much to be desired. Therefore, we have implemented strict criteria for achieving the most conservative valuations of the assets acquired,” said Mr. Gargash.
Among the criteria implemented to achieve a more conservative valuation of assets are:
– Applying the last quoted prices from the Baghdad stock exchange on equities purchased, whereby the exchange has been closed since the beginning of the war, and thus valuation prices do not reflect price spikes that took place after the end of the war.
– Acquiring multiple independent valuations of real estate holdings, applying lowest-in- range valuation prices, and finally taking a 30% across the board discount on these prices.
– Applying below market prices on commodities acquired.
– Applying conservative Iraqi Dinar exchange rates. GOING FORWARD
The coming period will see Daman focus on two specific objectives: Paying dividends to investors, and translating some of the opportunities identified into specific projects.
Dividends will be paid to investors in the first Tranche through realization of some of the gains achieved to date. Daman has already commenced selling some of the assets earmarked for short- term investment, and the Fund is likely to see its first dividend payout within the next 12 months.
As for future projects, Daman is likely to be more focused on building business opportunities going forward and less so on asset acquisition. Dr. Hamdan comments: “The days of the opportune purchases are ending, and prices have risen significantly over the past few months. The way forward for us is a decided shift from asset gathering to asset building. We are committed to this market over the long run. We are confident that the business environment in Iraq will be more and more investor-friendly, and our confidence is evidenced by our ability and willingness to commit capital to this market.”
Daman had earlier identified specific opportunities that it is now working on translating into specific projects. These projects will no doubt benefit from the gradual rehabilitation of the Iraqi economy and the inevitable restoration of law and order to the country.
About Daman Iraq Opportunity Fund
Daman Iraq Opportunity Fund is a private equity initiative targeting investment opportunities presented by the economic reconstruction of Iraq. It is an investment initiative that has been created and is managed by Daman Asset Management. Opportunity to invest in the Fund is presented to small groups of informed private investors through multiple investment tranches strictly on an invitation basis only.
The Fund is a BVI-registered offshore private equity fund, and has an authorized capital of US $50 million. It is audited on an annual basis, and its first annual audit is expected to take place on March 31, 2004.
For more information, please contact Ahmed Al Saidi, Daman Securities Tel: + 971.4.332.4140 Fax: + 971.4.332.4240 Email: [email protected]