Extraordinary Support Considerations:

DIFC Investments' A1 rating reflects its ownership and control by the Government of Dubai, and the application of Moody's rating methodology for Government Related Issuers (GRI).

As such the rating combines (i) the company's underlying strength, which reflects our view that a favourable legal and regulatory framework provides good support to its ongoing business activities, although it contains speculative characteristics, if fully disaggregated from the government; and (ii) the credit support the Government of Dubai is likely to provide in a distress situation as primary supporter, with additional secondary support from the federal government and Abu Dhabi most likely, if Dubai itself was unable to support.

Moody's considers DIFC Investments to be effectively a government agency given its critical role in the development of DIFC as a financial free zone, an initiative which is considered central to the diversification and strengthening of the Dubai economy.

The Law states that DIFC, 'shall be attached to the Government', and that DIFCA, which owns 100% of DIFC Investments, 'shall have an independent budget and the Government shall provide sufficient funds for this purpose.'

The financial free zone's importance to the economy means the Dubai Government is closely involved in the supervising, planning, budgeting, and funding of DIFC Investments' operations.

This is in turn reflected in, and implemented through, the oversight of DIFC Investments by the Office of the President of the DIFC, which is headed by Dr Omar Bin Sulaiman, who is both Governor of DIFC and Chairman of DIFC Investments, as well as Vice Chairman of the UAE Central Bank.

Moody's believes that it is difficult fully to disaggregate DIFC Investments' stand-alone credit features from government-related characteristics, as Moody's assumes that DIFC Investments will benefit from continuing ordinary course support by the Government (as distinct from an extraordinary bail-out), including, potentially, additional land grants, or other financial support which offsets the challenges it faces.

It is also tightly embedded in a legal framework that has been sponsored by the government. However, the entity's bare stand-alone credit profile has speculative features (including a large debt-financed real estate development programme and investment strategy, rising debt levels over the programme period, and reliance on capital markets for financing) to which investors would be exposed in the hypothetical event of the government severing its legal, regulatory and ownership ties to the company.

DIFC Investments' A1 ratings thus incorporate substantial uplift for exceptional government support, which Moody's believes would be forthcoming in the event of financial distress.

Such uplift involves estimating the likelihood that in the event of impending failure by the company, the Government would step in with assistance sufficient to prevent default. We score the Dubai Government's near-certain willingness to support DIFC Investments as 'high,' considering the economic importance of the financial free zone, and the government's involvement in budget approval and other administrative and policy-related processes.

Because of the financial free zone's closeness to and link with the Dubai economy overall we also score the dependence factor for DIFC Investments as 'high'.

In line with Moody's approach to rating Dubai government-related issuers, we also factor in the likelihood of support from the federal government and Abu Dhabi (both rated Aa2), in the event that Dubai - as primary supporter - were unable to support.

Given the importance of Dubai's financial centre to the wider UAE economy, and Dubai's status as the leading financial hub in the region (and Abu Dhabi itself showing no signs of creating a competing financial centre), we believe that the probability of support from the federal government and Abu Dhabi is high, though not absolute.

Rating Rationale:

DIFC Investments' A1 rating factors in that it remains at an early stage of its planned development. Over the period to 2012 the Company's business plan anticipates a rapid rise in debt as it borrows to finance both development costs and its investment activities.

On current projections, the Company expects net debt to peak at between $5bn and $6bn in 2010-11, when construction is scheduled to be completed. Group net debt in fact increased from $643m at end-2006 to $1.8bn at end-2007 as a result of expenditure both on building out DIFC (including the Gate Village, since completed in 2008), as well as on investment securities, structured derivative products and its subsidiary D-Clear Europe Limited.

At end-2007 DIFC Investments reported investment property ($297m, excluding construction work in progress) and investment securities ($842m) combined of $1,139m.

The Group also has significant investments in associates and JVs, the largest of which are (1) its 20% holding in Borse Dubai Limited, which holds investments in the financial exchange sector, including Nasdaq Dubai and the London Stock Exchange; and (2) its 16.67% stake in Dubai Aerospace Enterprise Ltd.

Rising debt has been reflected in higher leverage, notwithstanding the $496m boost to book equity from the Borse Dubai transaction, which helped offset the loss incurred and dividend distribution in 2007.

Net debt to total capital increased to 70% at end-2007 from 61% at end-2006, although this does not factor in the market valuation of DIFC Investments' investment property assets which CBRE valued at $3.7bn at end-2007 ($2.5bn at end-2006).

The outlook is for debt to increase further as the Group continues to invest, although the pace of growth will be slower than earlier expected, restrained by the negative effects of the economic slowdown on demand for space in DIFC, especially from the financial services industry. Positive operating cash flow from 2011 combined with a partial liquidation of its investment portfolio is expected to begin to reduce borrowing from 2011.

Moody's cautions, however, that the extent to which the company's financial risk profile develops in accordance with its business plan will depend on several variables including its success at building the project to schedule, letting space in the completed estate, the real estate market in Dubai and its ability to sell assets at an acceptable price.

To the extent that construction delays, cost overruns or weaker market conditions negatively impact DIFC Investments' financial risk profile such that it varies materially from plan, the A1 rating factors in that it should benefit from timely tangible support from the Government of Dubai initially, and the federal government subsequently.

Liquidity:

DIFC Investments' business model means that in its early years, pending completion of the build-out of DIFC's hard infrastructure, its liquidity position is reliant on ongoing access to wholesale market funding.

The company requires regular external funding to bridge the gap between limited operational cash in-flows and its substantial infrastructure and financial investment cash outflows.

With regard to the Group's maturity profile at December 2007, $1.9bn of the Group's $2.2bn gross borrowings mature between 2 and 5 years. Longer-term debt includes principally the $1.25bn sukuk, maturing in 2012, as well as certain other bilateral loans maturing in 2010 and 2011.

However, Moody's notes that DIFC Investments retains in addition significant short-term borrowings, for which it is dependent on wholesale markets to refinance in the event that its liquidity resources are insufficient.

A core assumption of Moody's rating is that DIFC Investments will be successful at securing the wholesale funding required to finance its maturing debt obligations, as well as the ongoing DIFC build-out and investment strategy.

To the extent that current volatile conditions limit access to wholesale capital markets, Moody's assumes that DIFC Investments would be able to underpin its liquidity on a timely basis through: (1) asset disposals; and/or (2) in its capacity as a Government-owned subsidiary, access to funding from the Government of Dubai or the federal government. In that connection Moody's notes that in December 2008 DIFCI was advanced a $500m loan from the Government of Dubai.

Rating Outlook:

On 1st April 2009, Moody's confirmed DIFCI's ratings at their current level and changed the outlook to negative.

The outlook reflects the ongoing uncertainty that exists within Dubai Inc., given large-scale refinancing requirements over the next 18 months, ongoing structural changes to some of Dubai's core domestic sectors including real estate, and the potential for economic and market conditions to remain depressed over a longer period.

Moody's will thus continue to monitor both fundamental credit profiles and the relative positioning of financial support beneficiaries within Dubai Inc. over the coming months, in order to ascertain that existing ratings remain appropriately positioned.

Drivers of Rating Change:

Ratings assume that DIFC Investments' status as the 100%-owned subsidiary of DIFCA, and ultimately of the Dubai Government, and the support it can expect to derive therefrom remain unchanged.

In the event that such support were not to be forthcoming as assumed, then negative pressure would likely develop on DIFC Investments' ratings.

Whilst the likelihood of support from the federal government and Abu Dhabi is not as high as from Dubai, ratings remain sensitive to any changes in our assumption of secondary support from the federal level.

Corporate Profile:

DIFC Investments LLC (DIFC Investments, or the company) is a wholly owned subsidiary of the Dubai International Financial Centre Authority (DIFCA), and is held by DIFCA for the beneficial interest of the Government of Dubai.

DIFCA is one of the three public government bodies responsible for administering and developing the Dubai International Financial Centre (DIFC).

DIFC was established as a financial free zone in the Emirate of Dubai under Federal Decree No.35 of 2004 and through the subsequent enactment of the Emirate of Dubai Law No. 9 of 2004 ('the Law'), which provides that DIFC, 'shall have financial and administrative independence, and shall be attached to the Government.'

In setting up DIFC, Dubai has taken advantage of the amendment to the Federal Constitution in 2003 permitting the creation of financial free zones within the United Arab Emirates (UAE), and is aiming to create the leading international wholesale financial hub in the Middle East.

DIFC is therefore the financial free zone (FFZ) within Dubai, owned by the Government of Dubai and whose President is His Highness Sheikh Mohammed Bin Rashid Al Maktoum, who is Vice President and Prime Minister of the UAE, as well as Ruler of Dubai.

DIFC Investments, the entity rated by Moody's, was created subsequent to DIFC itself in November 2005 as a limited liability company (LLC) 100% directly owned by DIFCA, through which it is ultimately owned and controlled by the Government of Dubai.

The company, whose chairman is Dr Oman Bin Sulaiman, the Governor of DIFC, was capitalized through the transfer to it of assets by DIFCA including principally DIFC's 110 acre site centrally located within Dubai City.

Plans for the site provide for the creation of a Gross Floor Area (GFA) of circa 2.2 million square metres upon completion in 2011, just over half of which will be office space, with the balance shared between residential, retail and hotel space.

DIFC Investments, which currently owns 1 million square metres, having sold 1.2 million square metres to third parties for development, is responsible for developing the hard and soft infrastructure of DIFC, as well as the necessary financing thereof.

With some 215,000 square metres completed at 2008, the Group's investment and development property was valued at $3.7bn at end-2007, and had a balance sheet carrying value of $753m.

A complementary objective of DIFC Investments is to position DIFC such that it can sustain itself financially on an autonomous and independent basis in the longer-term.

As part of this overall aim, DIFC Investments' financial strategy includes a remit to make substantial investments in financial instruments and supporting sectors and infrastructure through which it aims to generate additional returns to supplement rental income and contribute to establishing the DIFC as a self-financing, self-sustaining project.

In December 2007, for example, it acquired 100% of Smartstream Technologies Group for approximately $400m; and it has made substantial investments in both equities, diverse equity and infrastructure funds in the EMEA region which were valued at $842m at end- 2007.

Until DIFCI becomes self-financing, the Group will remain dependent upon wholesale market funds to meet both investment commitments and maturing debt obligations.

The Group raised $1.25bn through an al-Mudarabah Sukuk structure in June 2007, but did not access the public debt markets in 2008.

In the event that in current difficult market conditions DIFC Investments were unable to raise necessary funding in the public debt markets, the rating assumes that the Government of Dubai would provide the necessary funding both to meet short-term maturing debt obligations and investment commitments as well as to continue its build out of DIFC.