Shuaa unveils strategic, operational and financial roadmap

This integrated approach will service high net worth individuals, SME businesses, family offices and conglomerates as well as institutional clients.

Central to the new strategy will be the deployment of Shuaa's balance sheet to capture growth opportunities in the credit space. This will be done on a risk-adjusted basis. The introduction of Shuaa Credit is a direct response to client needs and enables Shuaa to offer a full suite of services and solutions to a broader client base. A greater weighting of Shuaa's corporate balance sheet towards credit will also generate more earnings visbility, lower earnings volatility and higher gross margins.

Shuaa's Credit division will provide accessto capital and liquidity solutions to the private sector and offer investors access to credit investment strategies. Shuaa will do this by providing commercial finance, credit asset management products and corporate debt advisory services. Shuaa alreadyhas a very successful asset finance business, Gulf Finance Corporation, and this new strategy widens the credit offering and builds on its strong SME franchise.

Shuaa will continue to maintain a diversified equities platform underpinned by its Capital Markets, InvestmentBanking and Asset Management divisions.Shuaa has a solid track record in these areas and the economic downturn has forced many competitors to close or retrench, leaving Shuaa well positioned for the next equity cycle. Asset Management will continue to attract clients through its strongfund platform and superior performance, as well as launchnew products in collaboration with Shuaa Credit. Investment Banking will broaden its capability to include debt advisory services.

Commenting HH Sheikh Maktoum bin Hasher Al Maktoum, Executive Chairman of Shuaa Capital, said, "We believe there is a major opportunity for a local,fully integrated investment bank.Shuaa is a unique brand with deep roots in the UAE. The development of a full credit offeringcomplements our core areas of expertise off of which we can build long term client relationships across all business divisions. Access to capital remains a serious challenge for regional private companies and the SME sector in particular. Shuaa's strong balance sheet position allows the Company to respond to the markets needs for credit products, solutions and advice."

This phase of the turnaround strategy follows the three targets that the Board leadership set in mid-2011:

• Stabilize Shuaa's business.
• Set a clear and achievable corporate strategy.
• Relentless focus on effective execution.

As a result, the Firm implemented a systematic rightsizing program which has significantly reduced overall business running costs.Shuaa scaled down loss leading activities. This included exiting retail brokerage operations in Saudi Arabia, Egypt, Jordan and Turkey. Shuaa scaled down Equity Research, streamlined Asset Mangement and reduced headcount in Corporate, as well as its overall operations in Saudi Arabia.

Consequently, Shuaa has improved operating efficiency reducing cash outflow from Dhs10.2m per month in 2011 to Dhs4.3m per month by the end of 1H 2012. This is expected to be reduced further to Dhs3.5m per month by the end of the current financial year; overall a targeted 67% reduction. Group operating expenses are expected to run at Dhs42.5m a quarter, including Gulf Finance, for the remainder of 2012 and 2013. Group operating expenses were Dhs44.7m in 2Q 2012, a major reduction on previous years.

Continuing HH Sheikh Maktoum bin Hasher Al Maktoum said, "We are starting to see the results from our restructuring programme fall through to the bottom line. We are confident that the work we have done and the new revenue generating strategy will continue to improve the profitability trend, with the aim of generating consistent returns for shareholders in the coming years. We are starting to issue market estimates to act as milestones in our further recovery and to show the market our clear intention."

Shuaa has also derisked the balance sheet by reducing the risk exposure to non-core assets. Non-core assets have been reduced to Dhs264.1m from Dhs564.5m at the end of December 2010, helping to ease earnings volatility. Today, Shuaa has a strong balance sheet and liquidity position which remains a significant competitive advantage. Total assets as at 1H 2012 were Dhs1.47bn and liabilities were Dhs329m, down from Dhs447.6m in 2010.Shuaa's balance sheet will be deployed with a view to enhancing revenues and long term sustainable profitability.

Outlook

Shuaa also announces today that it is issuing market guidance. In the absence of unforeseen circumstances, the company is aimimg to reach positive territory in 2013 and attain consistent profitability thereafter. We will continue to drive down operating expenses where possible and bring our target cost/income ratio to 75% by the end of 2014 and into line with the international peer group. Finally,our aspiration is to achieve a return on equity of 7.5% by the end of 2016, again in line with our international peer group.