AL Mal UAE Equity Fund — Fund Information / Factsheet 2019

Oct 9, 2019

Al Mal MENA Equity Fact Sheet

NAV Per Unit: USD 8.70

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September 2019

Fund Manager Charles-Henry Monchau, CFA Vrajesh Bhandari, CFA Tamara Tannir, CFA Inception Date 15th June 2008 Fund Size USD 25 million Strategy Size USD 80 million Fund Registration Bahrain Currency USD Subscription Weekly Min Subscription USD 250,000 Bloomberg Code MALMENE BI Reuters Code LP65123002 Management Fee 1.75% Subscription Fee Up to 3% Redemption Weekly Benchmark Index S&P Pan Arab Composite Fund Type Open Ended Administrator Apex Custodian Standard Chartered Auditors Deloitte Fund Objective:The objective of the Fund is to achieve significant capital appreciation, primarily through investment in equity and equity related securities in the Middle East and North African markets. Key Terms:	Performance Fund Benchmark Relative Perf.
	2019 6.2% 3.6% 2.5% 2018 2.6% 6.8% -4.1% 2017 17.8% 1.3% 16.5% 2016 -3.7% 4.1% -7.8% 2015 -12.5% -17.6% 5.1% 2014 -0.7% -1.5% 0.8% 2013 31.1% 18.9% 12.2% 2012 6.6% 2.6% 4.0% 2011 -8.8% -15.1% 6.3% 2010 15.7% 13.9% 1.8% 2009 17.7% 12.7% 5.0% 2008 -47.5% -49.9% 2.4% Since Inc. -2.0% -35.8% 33.8%
	Performance1 Fund Benchmark2 Relative Perf.
	1 Month -0.8% -1.5% 0.6% YTD 6.2% 3.6% 2.5% 1 Year 4.0% 3.0% 0.9% 3 Years 28.2% 26.0% 2.2% 5 Year -13.1% -23.2% 10.1% Since Inc.* -2.7% -36.7% 34.0%

Performance

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Al Mal MENA Equity Fund S&P Pan Arab Composite Index (Rebased)
12.0
10.0
8.0
6.0
4.0
Jun-08 Sep-08 Dec-08 Mar-09 Jun-09 Sep-09 Dec-09 Mar-10 Jun-10 Sep-10 Dec-10 Mar-11 Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 Sep-12 Dec-12 Mar-13 Jun-13 Sep-13 Dec-13 Mar-14 Jun-14 Sep-14 Dec-14 Mar-15 Jun-15 Sep-15 Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 Mar-17 Jun-17 Sep-17 Dec-17 Mar-18 Jun-18 Sep-18 Dec-18 Mar-19 Jun-19 Sep-19
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• As of 25[th] of September 2019

Source: Al Mal internal performance measurement based on reports from third-party administrators (Apex)

1 Performance is net of fees; 3-year and 5-year return is cumulative

2S&P Pan Arab Composite Index

Al Mal MENA Equity Fact Sheet

NAV Per Unit: USD 8.70

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September 2019

Fund Manager Commentary:

With the -1.5% decline of the S&P Pan Arab Index last month, MENA Equities have now wiped off 10 percentage points from the 13% year to date return achieved as of April 2019. It was Kuwait’s turn (-3.5%) to drag the overall market lower in September. Al Mal Mena equity Fund outperformed and is now 250 basis points ahead of the benchmark since the start of the year. We note that the Fund has generated a positive alpha 7 out of the 9 months this year.

Egypt fell -10% in the last few days (ending Wed, the 25th of Sep) however it has subsequently recovered most of the losses. Retail investors in Egypt, with long memories of the events in 2011 were unnerved by the protests. The investment case based on receding inflation driving interest rates lower and thus leading to a pickup in consumer spending and corporate capex is largely intact. Government’s achievements are very tangible starting with a recovery in tourism, falling inflation, infrastructure spending, job creation, restoration of security, GDP growth and strength of EGP (the currency is up 10% year-to-date).

Cleopatra Hospitals – one of the fund holdings - reported a strong set of results (excluding non -cash items and impairments). Revenues grew 25% y/y driven by footfall rise of 14%. Interestingly the story is now volume driven coupled with strong pricing power (10%), value added services, and room for organic growth. EBITDA is expected to grow at a solid 3-year CAGR of 30%.

	Top Portfolio Holdings	% of Fund
	National Bank of Kuwait	7.9
	Al Rajhi Bank	5.8
	Qatar National Bank	5.2
	Saudi Basic Industries Corp	3.7
	Emirates Telecom Group Company Total # of Holdings	3.1 39

Source: Al Mal internal performance measurement based on reports from third-party administrators (Apex)

	Fund Characteristics2	Fund	Benchmark
	Standard Deviation	9.7%	9.9%
	Sharpe Ratio	0.56	0.45
	Beta	0.69
	Tracking Error	7.5%
	Information Ratio	0.09

2 Calculated using 3-year weekly data

National Bank of Kuwait (NBK) was held in the portfolio in the past and has been recently re-introduced. Last month market pullback (where at one point the stock was 10% below its recent peak) gave us a nice opportunity to build the position. NBK is a clean, well-funded, high quality franchise with a strong corporate brand and government ties and exposure to the fast growing, highly profitable Egyptian market and Islamic operations in Kuwait. Cost of risk levels are easing leading to double digit rise in bottom line. Valuations are now more reasonable at a P/B ratio of 2.1x, while it can sustainably deliver RoE of 17%. NBK also would be the prime beneficiary of passive flows when Kuwait gets included in the MSCI EM Index.

Geographic Allocation

Sector Allocation

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Cash Cash
Others
Other
Consumer Discretionary
Egypt
Consumer Staples
United Arab Emirates Industrials
Real Estate
Kuwait
Telecom
Qatar
Materials
Saudi Arabia Financials
0% 10% 20% 30% 40% 50% 60% 0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0%
Benchmark Fund Benchmark Fund
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Disclaimer

None of the information and opinions contained herein is intendedto form the basis for any investment or trading decision, and no specific recommendations are intended. The products and transactions described herein are not suitable for every investor. Such products and transactions are only suitable for sophisticatedand knowledgeable professional users of financial instruments, and are structured and customizedto the needs and objectives of each investor. The information and opinions contained herein have been prepared for informational purposes only and do not constitute an offer to sell, or solicitation of an offer to purchase, any security, any commodity futures contractor commodity-related product, any derivative product, or any trading strategy or service described herein.

Neither Al Mal Capital PSC nor any of its affiliates, directors, authorizedmanagers and/or employees accepts liability for any loss arising from the use of or makes any representation as to the accuracy or completeness of the terms and conditions of products and transactions described herein. Finalizedterms and conditions are subject to further discussion and negotiation, andwill be determinedin part on the basis of pricing andvaluation models, data, and assumptions that are proprietary to Al Mal Capital and its affiliates. No assurance can be given that a product or transaction can, in fact, be executed on any representative terms indicated herein.

Al Mal UAE Equity Fact Sheet

NAV Per Unit: AED 1.24

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September 2019

	September 2019
	Fund Manager Charles-Henry Monchau, CFA Vrajesh Bhandari, CFA Tamara Tannir, CFA Inception Date 5th April 2006 Fund Registration UAE Currency AED Fund Size AED 38mn Subscription Weekly Dividend Frequency Yearly Min Subscription AED 100,000 Management Fee 1.50% Performance Fee 20% over 10% hurdle with high watermark Subscription Fee Up to 2% Redemption Weekly Benchmark Index S&P UAE Composite Index Fund Type Open Ended Administrator Standard Chartered Custodian Standard Chartered Financial Year End 31st December Auditors Deloitte Fund Objective: The Al Mal UAE Equity Fund’s objective is to achieve medium to long-term capital growth by investing primarily in equities listed on the UAE Exchange. Key Terms:	Performance1 1 Month YTD 1 Year 3 Years 5 Year Since Inc. Performance Yearly 2019 2018 2017 2016 2015 2014 2013 2012 2011 2010 2009 2008 2007 2006 Since Inc.*	Fund Benchmark2 Relative Perf. Fund Benchmark Relative Perf. 9.9% 1.0`% 8.9% -5.7% -7.7% 2.0% 7.8% -1.6% 9.4% 7.9% 9.0% -1.1% -15.3% -17.6% 2.3% 11.2% 7.5% 3.7% 81.4% 88.0% -6.6% 28.7% 23.5% 5.2% -18.4% -17.7% -0.7% -1.0% -8.8% 7.8% 31.2% 24.6% 6.6% -56.9% -69.4% 12.5% 50.4% 54.8% -4.4% -19.1% -35.2% 16.1% 40.5% -42.0% 82.5%
			2.1% -1.5% 3.5% 9.9% 1.0% 8.9% 0.5% -4.3% 4.8% 14.8% -7.8% 22.6% -13.8% -33.4% 19.6% 44.0% -42.8% 86.9%

Performance

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Al Mal UAE Equity Fund S&P UAE Index (Rebased)
1.80
1.60
1.40
1.20
1.00
0.80
0.60
0.40
0.20
0.00
Apr-06 Aug-06 Dec-06 Apr-07 Aug-07 Dec-07 Apr-08 Aug-08 Dec-08 Apr-09 Aug-09 Dec-09 Apr-10 Aug-10 Dec-10 Apr-11 Aug-11 Dec-11 Apr-12 Aug-12 Dec-12 Apr-13 Aug-13 Dec-13 Apr-14 Aug-14 Dec-14 Apr-15 Aug-15 Dec-15 Apr-16 Aug-16 Dec-16 Apr-17 Aug-17 Dec-17 Apr-18 Aug-18 Dec-18 Apr-19 Aug-19
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• As of 25[th] of September 2019

Source: Al Mal internal performance measurement based on reports from third-party administrators (Standard Chartered Bank)

1 Performance is net of fees; 3-year and 5-year return is cumulative

2S&P UAE Composite Index

Al Mal UAE Equity Fact Sheet

NAV Per Unit: AED 1.24

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September 2019

Fund Manager Commentary:

Dubai further added to its 2019 recovery with a 1.6% gain, driven by a 13% gain by Emirates NBD. On the other hand, Abu Dhabi closed 0.8% lower. Our UAE Fund had one of its best relative months ever, with a 350 basis points outperformance over the Index (helped by 15% rise in NMC, in addition to ENBD).

Emirates NBD finally made the long-awaited announcement to increase its Foreign Ownership Limit to 20% (from 5%) effective immediately. It further intends to hike it to 40%. This will result next year in the inclusion of the stock in global indices such as MSCI and FTSE, which are tracked by passive funds, thus resulting in close to USD 900m in inflows. Combined with the fact that valuation is still cheap at 1.2x for a ROE of 18%, we think there is still plenty of upside for the stock.

DP World signed a deal with Indonesian conglomerate Maspion Group to create a USD 1.2bn container port with a capacity of 3mn and an industrial logistics park in East Java. The company earlier reported consolidated throughput growth of 11% driven by the Asia Pacific as well as Americas and Australia geographies.

	Top Portfolio Holdings	% of Fund
	Emirates NBD	10.2
	DP World	9.2
	Dubai Islamic Bank	8.9
	Total # of Holdings	14

Source: Al Mal internal performance measurement based on reports from third-party administrators (Apex)

	Fund Characteristics2 Standard Deviation	Fund 12.0%	Benchmark 13.2%
	Sharpe Ratio	0.20	-0.38
	Beta	0.75
	Tracking Error	7.6%
	Information Ratio	0.95

2 Calculated using 3-year weekly data

Dubai formed a committee that aims to achieve a balance between supply and demand in the real estate sector. The aim is to control the pace, have a strategic comprehensive plan and ensure semigovernmental companies do not compete with the private sector. Members include EMAAR, Nakheel, Dubai Properties Group and Meraas. We see this as a recognition of the issue of oversupply, however in our view it would do little to halt the decline in the present cycle.

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Geographic Allocation Sector Allocation
Cash Cash
Other
Other
Energy
Nasdaq Industrials
Telecom
Dubai
Real Estate
Abu Dhabi
Financials
0% 10% 20% 30% 40% 50% 60%
0% 10% 20% 30% 40% 50% 60%
Benchmark Fund
Benchmark Fund
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Disclaimer

None of the information and opinions contained herein is intendedto form the basis for any investment or trading decision, and no specific recommendations are intended. The products and transactions described herein are not suitable for every investor. Such products and transactions are only suitable for sophisticatedand knowledgeable professional users of financial instruments, and are structured and customizedto the needs and objectives of each investor. The information and opinions contained herein have been prepared for informational purposes only and do not constitute an offer to sell, or solicitation of an offer to purchase, any security, any commodity futures contractor commodity-related product, any derivative product, or any trading strategy or service described herein. Neither Al Mal Capital PSC nor any of its affiliates, directors, authorizedmanagers and/or employees accepts liability for any loss arising from the use of or makes any representation as to the accuracy or completeness of the terms and conditions of products and transactions described herein. Finalizedterms and conditions are subject to further discussion and negotiation, andwill be determinedin part on the basis of pricing andvaluation models, data, and assumptions that are proprietary to Al Mal Capital and its affiliates. No assurance can be given that a product or transaction can, in fact, be executed on any representative terms indicated herein.