National Bonds Corporation is planning an international expansion drive after selling Dh1 billion (US$272.2 million) of bonds in the first half of the year, a top official of the Sharia-compliant company says. The expansion plan comes as the company tries to shift its focus from poorly performing investments in property development.
National Bonds, established in 2006, still owns at least one large property, the Dh1.5bn Skycourts in Dubailand that was due to be handed over to buyers more than a year ago. The company is also embroiled in a legal dispute and an arbitration case concerning two other large investments in property, according to court documents and financial statements. Mohammed Qasim al Ali, the chief executive of National Bonds, said the company's new goal was to "inculcate a savings culture that is badly needed" in the UAE and beyond.
Mr al Ali, who was speaking at a corporate suhoor in Dubai on Monday, said the company was in talks with banks, money exchanges and other financial institutions in neighbouring countries about selling its investment product. "More people need to take control of their finances," he said, adding that the company had created a system for UAE residents to automatically buy bonds each month through a standing order with their banks.
In 2007, Mr al Ali said 45 per cent of the funds were invested in property, but on Monday he spoke of a more balanced portfolio. The company had "always gone against the market trend of lending and borrowing" by making "diversified investments", he said. While National Bonds does not issue quarterly statements and gives few details about its investments, the company has previously disclosed that it invests about half of the funds in Sharia-compliant, short-term instruments and the remainder in infrastructure and private equity.
Aside from putting more than Dh1bn into property in 2007 and 2008, other investments include the property management company BCS Strata Management Services, the convenience store chain SouqExtra and a stake in a portfolio of schools through the private operator Taaleem. National Bonds is unique among prize-based savings schemes because it also gives its holders a return on their investments. This return dropped to 3.54 per cent last year, from 7.07 per cent in 2008 and 6.03 per cent in 2007. Investors must buy a minimum of Dh100 worth of bonds, which come in denominations of Dh10, but they can redeem them for cash at any time.
But the larger draw, financial advisers say, is the high-profile but low-probability chance of winning the Dh1m prize draw each month. It also gives out smaller, weekly prizes. In the first half of this year, more than 83,000 bondholders won prizes totalling Dh26m, the company said. More than 8.5 per cent of the UAE population owns the company's bonds. There are a total of 590,000 holders worldwide, the company said.
National Bonds, which is owned by the Dubai Government, Emaar Properties, Dubai Bank and Dubai Holding, uses the proceeds to make investments. The company must give a minimum of 20 per cent of its overall profits to the bondholders, with the remainder divided among its shareholders. The company did not divulge the total amount of funds under its control, but earlier this year it said it had assets of Dh3.7bn.
bhope@thenational.ae