International company Middlesex


                                Introduction
      MiddleSex Holdings is a diversified international company, operating
in primary industries (steel, non-ferrous metals and energy), financial
service and agriculture. Additionally, the company has trade investment in
gold and insurance businesses. It is principally engaged in the emerging
economies of the Commonwealth of Independent States (CIS) and Central Asian
republics.

                  The History and Profile of MiddleSex plc.

      MiddleSex was founded in 1984, and originally was a small Welsh
goldmining company called Ferromet that Mainly could be described as
defunct company with a loss about 12m by the year 1991. At that stage, the
shares of the company were about .25p in the in the wake of the disastrous
career. Then in 1992 Phil Edmonds, the former English cricketer, bought
this company and renamed it after at his countryside. But the company
didnt involve into its present shape until 1993, when Masoud Alikhani
joined the board and reversed his Russian businesses into the company.
Since then, MiddleSex has remained committed to Russia and other CIS
countries.
      Over the last four years, MiddleSex has built up an impressive asset
portfolio, developed extensive experience and knowledge of Russian industry
and its Business etiquette and expanded its network of proven contacts.
MiddleSex has secured itself a fundamental and strategic role in a number
of core industries and is now focusing on five business streams:

- Steel (and direct reduced iron);
- Non-ferrous metals (nickel);
- Financial services ;
- Energy; and
- Agribusiness.
In addition, it has trade investment in gold and insurance.

(Each of this these streams in particular Im going to describe later on in
my research paper.  )

      1996 proved to be a significant year for MiddleSex, in which the
company experienced strong growth. This is particularly evident in the
metals businesses, with steel being the fastest growing activity. Moreover,
it has become apparent that nickel and the agribusiness could take on a
more significant role in the MiddleSexs future. Other noteworthy event
include the companys appointment to GAZPROM, the worlds largest natural
gas producer, under which MiddleSex will assist GAZPROM with its financial
strategy. (In short words : GAZPROM is considering going ahead with an
innovative financial deal whose first stage will involve issuing a
Eurobond. MiddleSex - together with Interfin Services, a Russian trade
finance house that is also involved in capital markets - will advise
GAZPROM on dealing the financiers and on strategies for fundraising. But,
again, Im going to explain in more details later on how this alliance was
built and what particularly this alliance means for MiddleSex, because I
think that this is the very important stage of the company).

      Success of every company lies in its people.

      Since 1993, the main driving force behind the company has been its
Chief Executive, Masoud Alikhani. Born in Iran and educated at the Hebrew
University of Jerusalem in Israel, Mr. Alikhanis work experience spans
from a kibbutz in Israel to agronomy in Iran and from chemicals(the US
chemicals, Du Pont) to securities business (Prudential-Bache). Alikhani was
one of the first to recognize the enormous potential of Russia and other
CIS countries. He had been trading there through his private businesses and
had a wide network of contacts since 1988.
      Alikhanis plan appeared to be ambitious at first. From a small London
base he aimed to create a group specializing in trading and finance across
a number of industries in the former Russian republics. He saw a big
opportunity to provide development finance, western management skills and
reliable sources of raw material to newly privatized countries. In October
1993, Alikhani and six Russian contacts put 370,000 into MiddleSex. Other
investors came up with another 250,000. As well as the equity, Alikhani
undertook to put enough trading through MiddleSex to earn it 1 million
gross profit within. Masoud Alikhani and Phil Edmonds earlier had an
agreement, once  1 million in the bank, Edmonds would let Alikhani turn
MiddleSex into his own vehicle. Under the terms of Alikhanis first deal,
MiddleSex supplied raw materials to a Tadjikistan smelter and then exported
final goods to the West. This arrangement soon turned to be very profitable
and Alikhani began haunting for new ventures.
      At that time Alikhani understood that the company had changed its
image completely, and had gone to a much higher lever, so it desperately
needed a well known person with a great huge worldwide experience.  Ant
that was the time when Edmonds stood down from the chairmanship and Lord
Owen turned up. A former foreign secretary and long-time European Union
peace negotiator in the troubled Balkans .Also has a deep understanding of
the mentality of the Slavic people and how to conduct business with them.
      In 1996 another well known person in business has joint the company.
Fahrad Moshiri, formerly with Ernst & Young and Deloitte & Touche turned up
as Managing director in MiddleSex. He was mainly responsible for securing
the US$300m contract with OEMK (Oskol Elektro-Metallurgical Kombinat ) and
was the key in building the relationship with GAZPROM.
      There many more people in the company whose personal worldwide
experience has influenced the growth of the company, but it might take me
hundreds of pages to describe the significant work they have for the
company. I have mentioned, in my opinion, three most important and most
affective people in MiddleSex. Once again, I have to say that the success
of any company,  specially with a case of MiddleSex, lies in its people and
how these people effectively manage to bring their past experience into the
company.

      Steel . The flagship operation.
      At the beginning of 1996, MiddleSex entered into a trading agreement
with OEMK, one of the most modern and profitable steel mills in Russia, for
the export of up to US$300m of steel products per annum. As trading was
unfolding successfully, MiddleSex acquired a 7.9% interest in OEMK.
Additionally, its 40 % owned investment vehicle, Interfin, holds another
6.6% of OEMK, which gives MiddleSex a further 2.6% indirect interest.
      In august 1996, MiddleSex acquired DRI (IOM) Ltd. whose sole asset was
the exclusive rights to export 40,000 metric tons per month (10%) of
thermally passivated direct reduced iron (DRI) pellets produced by OEMK.
Direct iron reduction technology is becoming increasingly popular as it
significantly improves composition, reduces impurity contents and
consequently enhances steel quality. DRI pellets are used as replacement
for scrap material n modern electric arc furnace steel mills. Hence, in
addition to steel products, MiddleSex also controls the exports of OEMKs
DRI pellets. DRI trading is carried out through MiddleSexs 100% owned
subsidiary, Oskmet (DRI) Limited.
      In late 1996, MiddleSex acquired WolffSteel Ltd., an established
international steel trading business, with a world-wide distribution
network of clients.
      As a result, MiddleSex currently records steel profits from three
sources : OEMK export contacts, DRI exports contacts and additional
WolffSteel trading :

|Company       |Gross Profit (000)                                        |
|              |1996          |1997          |1998 (est)    |1999 (est)    |
|OEMK export   |3697          |6000          |8250          |8750          |
|Oskmet (DRI)  |96            |1027          |1024          |11027         |
|Wolff Steel   |242           |1200          |1200          |1200          |
|Total         |4035          |8227          |10,477        |10977         |

      The OEMK-MiddleSex relationship extends beyond the trading agreement.
MiddleSex monitors the day to day running of the mill, the companys
management spends considerable time at the mill while two OEMK
representatives monitor steel trading in London on permanent basis. In
addition, OEMK has a 20 % interest in MiddleSexs financial services arm,
Interfin. Overall, according to what I have observed, I believe that this
relationship is very strong.
      Due to increasing environmental concerns and the subsequent growth of
the electric arc furnace (EAF) steel-making facilities, direct iron
reduction technology is becoming more attractive. Originally, all DRI
exports from OEMK were handled by DRI (IOM) Ltd. In August 1996 MiddleSex
bought 100% of DRI Ltd. For a maximum consideration of 2.8m and inherited a
ten year exclusive world wide distribution.

|DRI EXPORTS BY REGION (000 metric tonnes)                                 |
|Region   |1993     |1994     |1995     |1996     |1997     |1998     |
|         |         |         |         |         |         |(Est)    |
|European |218.0    |296.7    |221.1    |161.4    |225.0    |215.0    |
|Union    |         |         |         |         |         |         |
|CIS      |-        |52.1     |96.3     |68.8     |72.5     |95.0     |
|USA      |5.0      |-        |-        |37.1     |42.5     |57.5     |
|Australia|33.0     |26.0     |0.4      |44.3     |28.5     |35.0     |
|Total    |331.0    |402.1    |429.2    |367.1    |453.5    |477.5    |


      Since it gained the control over DRI exports, MiddleSex has managed
to significantly expand the companys customer base. Currently, OEMKs DRI
pellets feed steel mills in USA, Spain, Germany, Italy and Mexico.

      According to my observation I believe that a vertical integration of
MiddleSexs steel activities is possible and would be highly beneficial for
both partners. Assuming that MiddleSex takes an equity interest in
Lebedinsky GOK, the raw material supplier (such as iron ore), and increases
its equity interest in OEMK, MiddleSex would have an economic exposure to
entire steel operation, from the raw material (Lebedisky), through the
steel mill(OEMK) to trading (MiddleSex/WolffSteel)

                             Non-ferrous Metals

      Aluminium was one of the original businesses which Masoud Alikhani
injected into MiddleSex when he joined in 1993. The aluminium business was
built upon Mr. Alikhanis trading relationship with Tadaz, the third
largest aluminum smelter in the world, located in Tajikistan. Historically,
the relationship with Tadaz was that MiddleSex would supply the aluminium;
it would pre-finance the processing and in return it would receive the
aluminium which it would then sell in the international markets. The
relationship worked profitably. However, throughout 1996, the political
situation in Tajikistan deteriorated, trading cycles became longer and no
deliveries were made in the last six months of 1996, leaving MiddleSex
owned some US7.9m( 4.6m). MiddleSex believes it will recover this debt: it
has already received US$2.4m( 1.5m) in late June 1997. Negotiations are
well advanced to collect the balance.
      During 1996 MiddleSex diversified its non-ferrous business into
nickel. In October 1996 it entered into a short-term pilot contract with
Napo Invest and Trade Corp., a company incorporated in the British Virgin
Islands and run by Mr. Yuri Murkin, a business associate of Mr. Alikhani,
and two Russian companies: Koks, which owns the Kemerovo coke plants and
Kombinat Yuzhuralnikel, one of the biggest Russian nickel producers.
      The government recently sold its 38% in troubled Norilsk Nickel, the
biggest but also heavily debt-ridden Russian nickel producer. Following the
Norilsk example, Yuzhuralnikel could be the next to be auctioned. Interfin,
MiddleSexs 40% owned investment, has already secured a 14.7% interest in
the Yuzhuralnikel nickel plant, which gives MiddleSex a 5.9% indirect
interest.
      Overall I believe that MiddleSex is in strong position if it decodes
to increase its interest in
Yuzhuralnikel and therefore its Yuzhuralnikel exposure to nickel. However,
I have assumed that MiddleSex will only extend the trading with
Yuzhuralnikel.


                             Financial Services

       The backbone of MiddleSexs financial services operations is the 40%
owned Interfin (Interbank Investment and Finance Company). The remaining
60% is held by GAZPROM (20%), OEMK(20%) and Mapo Bank(20%). MiddleSexs
financial services include:

. trading in Russian capital markets;

. financial advise to western companies or potential business in Russia,
  and

. advice to Russian companies entering western capital markets.

      Established in late 1994, Interfin commenced by trading in Russian
treasury. Initial returns were good and Interfin quickly made substantial
profits, which enabled the company to start bying stakes  in various
Russian companies. As a result, Interfin has built an impressive asset base
of which the company estimated to be in excess of US$300m.



                      MiddleSex - GAZPROM relationship

            MiddleSex holdings - a small, London based trading group - is
advertising the world biggest producer and Russias biggest company GAZPROM
on cheaper ways to raise finance. The appointment came as a result of the
close contact between MiddleSexs and Interfins top management and
GAZPROM. Principally the role consist of :

      - Providing independent advice in relation to the selection and
        implementation of different fund raising strategies and regulatory
        requirements of international capital markets;
      - Liaison with advisors, once appointed, on behalf of GAZPROM as well
        as coordination of GAZPROMs fund raising and corporate activities;
      - Assisting in the design and implementation of special project
        finance schemes and structured long-term program of public and
        investor relations aimed at strengthening GAZPROMs position in the
        international capital markets.

      In returns for its services MiddleSex receives fees, depending on the
type of service provided, and determined by GAZPROMs board, plus the
reimbursement of its expenses in connection with travel, presentation and
other expenses.

      If relation with GAZPROM maintained, and GAZPROMs current financial
restructuring and capital raising plans are carried out, I think this is
the one of the most important step for MiddleSex holding, and they are well
positioned to benefit and generate significant returns.



                                 Conclusion.

      To sum up then, taking a closer look at the Annual reports of the
companies just confirming what I have researched through different types of
magazines and newspapers, as well some official reports of the company.
Through out the official statements it is crystal clear that company had a
very big boost when Massoud Alikani has arrived and restructured the
company almost completely, as well as brought some past experiences idea
from the time he worked in Russia.
      Then the company had another big growth in 1996 when the steel
trading became the flagship operation and they started to work with OEMK.



References:


1. Guardian newspapers;

2. Financial Times  newspapers;

3. Newsweek magazine;

4. Economic Research (russian);

5. MiddleSex Oficial Financial Statements .





"International company Middlesex "