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Sun 1 May 2011 11:12 AM

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DIFC Investment narrows loss in 2010; property weighs

DIFC Investments, which operates Dubai's financial free zone, plans to sell certain assets this year

DIFC Investment narrows loss in 2010; property weighs
The company, which runs the Dubai International Financial Centre, posted a yearly loss of $272m, compared with $562m in 2009

DIFC Investments (DIFCI), the investment arm of the firm
that runs Dubai's financial free zone, posted a further loss on Sunday, weighed
on by its property portfolio, and said it plans to sell assets this year,
including financial software firm SmartStream.

But the company said losses narrowed last year to $272mfrom
$562m in 2009, helped by a return to profit at Dubai Aerospace, in which DIFCI
has a 23.3 percent stake.

The Dubai-based aircraft leasing firm made a profit of $10.4m
after losing $21.1m in 2009.

"The loss in 2010 was mainly attributable to the
devaluation of the real estate portfolio due to the market conditions,"
Chairman Ahmed Humaid Al Tayer said in a statement.

Among the assets the company plans to dispose of in 2011 is
SmartStream Technologies, which it acquired in 2007 and helps investment banks
and fund managers with the back and middle-office processing of stock, bond and
derivative trades.

In October, Reuters reported that DIFCI was looking for a
buyer for SmartStream and had hired UBS to help with the sale.

"Management expects that the disposal of D-Clear would
be completed in 2011," DIFCI said in its financial statement. According to
financial statements, D-Clear Europe is the holding company of SmartStream.

DIFCI also plans to complete the sale of high-end Kuwaiti
fashion retailer Villa Moda in 2011 having indicated its intention to sell the
company in 2009.

"During 2010, certain circumstances arose which were
considered unlikely and as a result, Villa Moda was not sold by the end of the
current financial year," it said, adding management expects a sale during
2011.

DIFCI has been grappling with a debt pile of more than $3
billion, hurt mainly by a fall in the value of its investments.

Although assets sales will be welcomed, a lack of clarity on
short term debt repayments could still worry investors.

"It's positive that they're trying to divest non-core
assets," said Abdulkadir Hussain, chief executive of Mashreq Capital.

"Operating trends seem to be moving in the right
direction, but in terms of the company's financing capabilities, there are
still questions to be answered."

Revenue slipped to $146.3m last year, from $152.2m in the
prior-year period.

Its financial statements showed that it has extended
repayment of two $500m loans due to the government of Dubai.

Repayment on one of the loans - split equally between May
2011 and May 2013 - has been deferred to 2014, while interest payments on the
second loan, due 2013 in one installment, have been suspended for 18 months
from March 2010.

The firm, a wholly owned subsidiary of Dubai International
Financial Centre Authority, has a $1.25bn Islamic bond, or sukuk, due in 2012.

Dubai, famous for extravagant real estate projects like
man-made islands in the shape of palms and a world map, has been digging itself
out of a debt crisis in the wake of a property slump.