National Bonds holders are still waiting to learn whether their investments made a profit last year amid fears that returns could have been hit by falling asset values. On January 24 last year, the government-backed savings scheme announced profits of 7.07 per cent for 2008. Returns for last year, however, have not yet been published. "I am sure that there will not be a profit like last year," said US Sachidanandan, an investor. "Last year the profit was declared by the third week of January."
Investors in the popular Sharia-compliant scheme buy bonds at banks and money exchanges. The company, which is owned by the Government of Dubai, Emaar Properties, Dubai Bank and Dubai Holding, uses the proceeds to make investments. It pays out a profit at the beginning of each year based on the performance of those holdings. It also holds a weekly draw with a top prize of Dh1 million (US$272,000).
National Bonds said that profits would be announced "soon", without providing a specific date. A call centre representative said profit figures would come before the end of this month, but that the exact timing was unclear. Many bond holders have called to ask about profits, he said. The company made more investments last year than in 2008, and accountants were still calculating the payout, he added.
"In 2009 they invested in many projects, not like 2008," he said. Some investors fear that the recession and a drop in asset values across the Gulf could have affected those investments. National Bonds does not give guidance on its profit rates and it does not typically disclose its investments. Officials said last year, however, that the company puts about half of the money in safe, income-generating investments that comply with Islam's ban on charging or collecting interest. The other half goes towards long-term investments such as Skycourts, a six-tower development in Dubailand, and Flamingo Creek, a collection of 244 villas in the Dubai Lagoon project.
It was unclear yesterday how building delays at the Lagoon, which stalled last year, might affect National Bonds' returns. Construction on Flamingo Creek has not progressed beyond the early stages. Property prices in Dubai, meanwhile, are estimated to have declined by as much as half last year. Sama Dubai, a property company owned by Dubai Holding, was the master developer of the Lagoon. It is in the process of merging with Dubai Properties and Tatweer as Dubai Holding consolidates its operations and cuts costs. Analysts said it was unclear whether Flamingo Creek and other projects in the Lagoon would be threatened by the merger.
"With the whole Dubai Properties, Tatweer and Sama Dubai bucket of projects, obviously what they're doing is reviewing which projects will go ahead and which won't," said Craig Plumb, the head of research at Jones Lang LaSalle in Dubai. Mohammed Qasim al Ali, the chief executive of National Bonds, said last year the company had made money in 2008 by investing in the property market. But he said the fund would avoid property investments in 2009. "It is going to be a good year for private equity," he said last year. "A lot of businesses are going to be suffering from a shortage of liquidity." Now, investors are waiting to see just how well those moves played out. * additional reporting by Angela Giuffrida @Email:afitch@thenational.aea
National Bonds is a nationwide saving scheme launched by National Bonds Corp in 2006. The Government of Dubai holds a 50 per cent stake in the company, with each of its local shareholders - Dubai Bank, Dubai Holding and Emaar Properties - holding 16.6 per cent ownership, according to the company's website. The corporation is licensed and regulated by the Central Bank. Bond holders earn a return based on the performance of investments made and managed on their behalf by National Bonds. But the company does not disclose where the funds are invested. It tells investors their money is used to fund projects which "upon completion starts making its own revenue and returns your money along with a profit".