From: Salem Patel

Sent: 20 June 2012 19:25

To: Ajay Subramanian; Hisham Alrayes; dhaigh@gcap.ae; Chandan Gupta; Paul Mckendry
Cc: Irshad Mohammed; Nibras Mohammed Talib
Subject: FW: Leeds investment Application

Please see below

Best Regards,
Salem Patel
Acting Head of Investment Management | Investment Management
Gulf Finance House B.S.C.

Islamic finance pioneer, innovator and leader

gfh.com
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From: Ajay Subramanian

Sent: Tuesday, June 19, 2012 3:15 PM
To: Salem Patel; Hisham Alrayes; David Haigh; Chandan Gupta; Paul Mckendry
Cc: Irshad Mohammed; Nibras Mohammed Talib
Subject: RE: Leeds investment Application

Dear Salem,
Interesting opportunity. I have the following queries on the proposed transaction:

How have you arrived at the acquisition figure of GBP 31.025mn (including deferred payment)
If its purely on negotiations, then we need to be sure that it is a fair price. Do we have a financial
advisor experienced in such deals advising us on the price? EXCOM will need to see such reports.
The final price has been reached via negotiations but the Acting CEO, CFO and myself were
directly involved in the negotiations. With respect to benchmarks, we have gathered all the
publically available material on football transactions in the UK to use as a benchmark (this was
included in the application). The median EV to sales multiple is 1.4 times, which helps us to
arrive at GBP 45m. We then discounted all of the known and contingent liabilities of the club to
give us a value of GBP31.25m. This was then split between cash payment and deferred payment
by an approx ratio of 60:40.

What is the nature of GBP 4.75mn contingent liability is LUFC is promoted? When will this be
due? How are we budgeting for this if we assume that LUFC will be promoted in 2012 or in 2013?
This is a liability that the club owes to the Premier League, and will be payable upon the club
being promoted back to the premier league before 2017. The contingent liability is on the club so
this amount was deducted from the purchase price.

Please elaborate on how the figure of GBP 40mn is arrived at for y clubs in PL How much will
this translate to LUFC; is this a fixed amount irrespective of the standings in the table?
This is the average payment received by Premier league clubs under the old media deal with SKY.
Some of the larger clubs do earn more (e.g. Man Utd earned 60m). This amount is expected to
increase due to the new tv deal in place by between a further 20 to 30m

Can you please elaborate on the revenue model for LUFC Match day figures are ticket sales?
What are non-match day figures pls elaborate on how this will be achieved?
Match day is ticket sales, food, drinks, programmes, etc that the club earns every time it plays a
game at its own stadium. Non-matchday includes sponsorships (ground, kit, etc) and other
revenue streams that the club has created such as conference facilities, internet etc

Current revenue is stated as GBP 32mn What does this constitute of?
Mainly Ticket sales and in addition retail, advertisement, academy etc
What is Central Income? Pls elaborate on how the forecasted figure of GBP 48.6mn and GBP
49.4mn is arrived at what are the dependencies?
Central income is premier league distribution, the above numbers are Sky Broadcasting revenues
which has been based on distributions during last year.
Who owns the stadium now? If we have to purchase the stadium, how do we expect to raise GBP
15mn and why will it be sold to us for GBP 15mn when the valuation is expected to be GBP
50mn. Also, is there a valuation supporting GBP 50mn?
The stadium was acquired by a local businessman when the club was put into liquidation.
However, as part of the deal, the club inserted a buy back clause so it could buy back the stadium
at any point for a certain yield. Today this figure stands at GBP 15m. There is no compulsion for
us to purchase the stadium at this point. But we could purchase it in the future as a yielding
asset.
How realistic is it to expect that we will be able to sell the stadium even if we acquire it?
The club can always buy back from us, if we (GFH / G Cap) choose to acquire it
What constitutes the fixed cost of GBP 5mn per year if LUFC doesnt get promoted How are we
budgeting to pay this?
This is worst case cash flow shortfall in case the club does not achieve promotion.
In the Financials snapshot LUFC lost heavily (negative Operating Profits) in 2001 to 2003 when
it was in PL. Why did this happen? How can we ensure that this does not recur when LUFC gets
promoted again?
The club was not managed properly and took on very high levels of debt. They used the debt to
acquire players at high prices, which they were not able to subsequently sell, so had to take large losses
on them.
As mentioned in the application, player transfers / purchases and capex will be very critical to
remain competitive What is the action plan for this given that this is very expensive but critical
to remain competitive. How do we plan to garner funds for this?
In the first year, a max amount of GBP 5m is required of which 2m is player transfer fees and the
remainder is increased wages. If the club achieves premier league, no further injection will be
required from the owners as the TV money would cover the fees.
Following from the above, it is important to note that London is a football crazy nation and GFHs
every action as a 100% owner will be scrutinized we cannot afford to buy the stake and just sit
tight. This will severely damage our reputation in UK and Europe
Agreed, and we need to work proactively to ensure we come out of this positively. We are
looking to work with a PR firm.
I didnt quite understand the forward sale agreement of LUFC catering business pls explain
what happens to the cash flow and how it will impact us
The club is selling forward for 5 years 35% of the profit of the catering business. It means the
club receives 2m in cash today, but for next five years, will not receive associated cash or profits.

However, from our perspective this works well as approx 37% of the catering business revenue is
made up from sale of alcohol. Therefore, we will not need to take any hits.
The terms of the purchase (including details of deferred payments etc) have to be very carefully
drafted into a binding agreement Legal needs to vet this thoroughly
Agreed.
Sharia needs to give its approval for the transaction
Agreed
Will GFH take a prop stake? How will this transaction affect our CAR?
This will be on GCap balance sheet. However, if one large investor is interested in taking the
transaction we could even flip.
I understand that this transaction is going to be routed through G Capital Will G Capital be
using its own cash even for exclusivity fees? If GFH cash is going to be used, we will need to
inform the CBB and get them in the loop.
Yes.
Exclusivity fee of GBP 4mn Do we have a watertight binding agreement to safeguard against
credit risk?
Yes.
Given the nature of this deal it is very important to have high level monthly and detailed
quarterly updates on the progress of the project. This would need to be coordinated by the
investment team and sent to EXCOM
Agreed
This is a niche area of business and very new to GFH / G Capital What is the action plan with
regards to the team on ground to manage the day to day affairs besides the coach / manager? Is
there a team in place? How strong? Does the salaries of all staff including other operational
expenses get factored into the yearly outflow of GBP 5mn?
Explained above

Please let me have your detailed replies to all of the above. If I have further queries I will send them
across. Thanks.

Best Regards,
Ajay Subramanian
Head of Risk Management
Gulf Finance House B.S.C.

Islamic finance pioneer, innovator and leader

gfh.com
This electronic message transmission is for the intended recipient only and may contain information which is confidential or privileged. If you are
not the intended recipient, be aware that any disclosure, copying, distribution, or use of the contents of this information including attachments is
prohibited. If you have received this electronic transmission in error, please completely delete it (and any attachments) and notify us by
telephone immediately or mail us at info@gfh.com. E-mail transmission cannot be guaranteed to be secured, accurate, complete or errorfree. All representations or warranties, express or implied, statutory or otherwise are hereby excluded. Nothing in this e-mail should be
construed as an offer, solicitation or recommendation, to acquire or dispose of any investment or to engage in any other transaction. Please
note that all e-mail communications to and from Gulf Finance House may be monitored. Gulf Finance House B.S.C. is a public joint stock
company incorporated in the Kingdom of Bahrain with CR 44136 and licensed as an Islamic wholesale bank by the Central Bank of Bahrain.

From: Salem Patel

Sent: Monday, June 18, 2012 11:09 AM
To: Hisham Alrayes; David Haigh; Chandan Gupta; Ajay Subramanian; Paul Mckendry

Cc: Irshad Mohammed; Nibras Mohammed Talib

Subject: Leeds investment Application

Dear all,
Please find attached first draft of the investment application. Based on Hisham, he wants this to be
approved by the g capital board.... Please let me have your comments if any...

Best Regards,
Salem Patel
Acting Head of Investment Management | Investment Management
Gulf Finance House B.S.C.
Bahrain Financial Harbour | Floor 36, East Tower | PO Box 10006 | Manama, Kingdom of Bahrain
Mobile: +973 39609197 | Main Tel: +973 17 538538 Ext 225 Main Fax: +973 17 540006 | web: www.gfh.com
Islamic finance pioneer, innovator and leader
gfh.com
This electronic message transmission is for the intended recipient only and may contain information which is confidential or privileged. If you are
not the intended recipient, be aware that any disclosure, copying, distribution, or use of the contents of this information including attachments is
prohibited. If you have received this electronic transmission in error, please completely delete it (and any attachments) and notify us by
telephone immediately or mail us at info@gfh.com. E-mail transmission cannot be guaranteed to be secured, accurate, complete or errorfree. All representations or warranties, express or implied, statutory or otherwise are hereby excluded. Nothing in this e-mail should be
construed as an offer, solicitation or recommendation, to acquire or dispose of any investment or to engage in any other transaction. Please
note that all e-mail communications to and from Gulf Finance House may be monitored. Gulf Finance House B.S.C. is a public joint stock
company incorporated in the Kingdom of Bahrain with CR 44136 and licensed as an Islamic wholesale bank by the Central Bank of Bahrain.