AL Mal UAE Equity Fund — Fund Information / Factsheet 2020

Feb 11, 2020

AZ Al Mal MENA Equity Fact Sheet

NAV Per Unit: USD 4.95

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January 2020

January 2020	January 2020
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:
Investment Manager	Azimut (DIFC) Limited
Investment Advisers	Al Mal Capital PJSC
Inception Date	26th June 2019
Fund Size	USD 52 million
Strategy Size Fund Registration	USD 80 million Luxembourg
Currency	USD
Subscription	Weekly (Tuesday, 1:00PM CET)
Min Subscription	USD 1 (Retail) -250,000 (Institutional)
Bloomberg Code	AZ3AZUA LX

Management Fee	0.85% (Institutional); 1.5-2% (Retail)
Subscription Fee Redemption	Up to 2% Weekly (Tuesday, 1:00PM CET)
Benchmark Index	S&P Pan Arab Composite
Fund Type	Open Ended
Administrator	BNP Paribas
Custodian	BNP Paribas
Auditors	PricewaterhouseCoopers

Performance	Fund	Benchmark	Relative Perf.
2020	-0.3%	-1.2%	0.8%
2019	-0.7%	-0.9%	0.2%
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.	-1.0%	-2.1%	1.0%
Performance2	Fund	Benchmark3	Relative Perf.
1 Month	-0.3%	-1.2%	0.8%
YTD1	-0.3%	-1.2%	0.8%
1 Year	3.6%	0.4%	3.2%
3 Years	27.0%	12.6%	14.4%
5 Year	6.9%	-7.3%	14.3%
Since Inc. 1	-1.0%	-2.1%	1.0%

Performance

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Al Mal MENA Equity Fund S&P Pan Arab Composite Index (Rebased) AZ Al Mal Equity Fund
12.0
10.0
8.0
6.0
4.0
Jun-08 Dec-08 Jun-09 Dec-09 Jun-10 Dec-10 Jun-11 Dec-11 Jun-12 Dec-12 Jun-13 Dec-13 Jun-14 Dec-14 Jun-15 Dec-15 Jun-16 Dec-16 Jun-17 Dec-17 Jun-18 Dec-18 Jun-19 Dec-19
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• As of 29[th] of January 2020

• ** The AZ Al Mal Equity Fund was launched on June 30th, 2019. The fund follows the same investment strategy as the Al Mal MENA Equity Fund. Source: Al Mal internal performance measurement based on reports from third-party administrators (BNP Paribas)

• 1 The fund YTD and Since Inception are calculated as of June 26, 2019

• 2 Performance is net of fees; 3-year and 5-year return is cumulative; returns are calculated using the data of Al Mal MENA Equity Fund

• 3 S&P Pan Arab Composite Index

AZ Al Mal MENA Equity Fact Sheet

NAV Per Unit: USD 4.95

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January 2020

Fund Manager Commentary:

Middle East and North Africa (MENA) markets had a rough start to 2020. First, we had the geo-political tensions flaring up between US and Iran, which receded rather quickly. And then closer to the end of the month, the spread of a new coronavirus spooked equity markets. Overall, the 1.2% monthly decline of the S&P Pan Arab Index looks decent in the context of Brent oil falling 9.4% below the USD 60 mark. The Azimut Al Mal MENA equity return is flat over the month (-0.3%) as some of our bottom up ideas outperformed the index.

Our core holding eXtra - the electronics retailer in Saudi - reported results ahead of consensus once again. Net Income grew 15% y/y as its market share further increased to 20% in 2019. Sales growth was driven by the Mega Sale festival, the new e-platform, higher after-sale service and the Shariah-compliant consumer finance. National Bank of Kuwait - the top constituent in the Fund - also announced decent fourth quarter results. The stock would be a major beneficiary of passive flows in the month of May when Kuwait gets included in the MSCI EM Index. Within our ‘beta’ sub-portfolio - which aims to provide market exposure and enhance overall liquidity of the Fund – FAB and NCB reported their Q4 results. It is important to note that we are generally underweight these large caps on account of relative value.

The World Bank slashed growth forecasts for the GCC region to 1.3%, 1.0%, and 0.1%, for 2019, 2020, and 2021 respectively. While these figures are not exciting, we believe there are several companies in specific sectors that can deliver strong double-digit earnings growth.

We spent two days in Kuwait meeting companies across various sectors. The dynamics in this market are unique and can differ substantially from the rest of the Gulf. While there is a lot of fiscal room for the government to expedite the infrastructure spending program, the execution on the ground is slower, but steadier. Moreover, unlike in Dubai, the big spenders in retail and restaurants are local Kuwaiti citizens who are relatively unscathed by a weaker economic environment. While we have identified some potential alpha ideas, the broader market is currently at elevated levels driven by the MSCI inclusion. We thus prefer to wait for better entry points.

Geographic Allocation

	Top Portfolio Holdings	% of Fund
	National Bank of Kuwait	6.1
	Al Rajhi Bank	5.3
	Qatar National Bank	4.4
	DP World	4.2
	Emirates NBD	4.0
	SISCO	3.9
	Jarir Marketing Al-Hassan G.I. Shaker	3.6 3.6
	Cleopatra Hospital	3.3
	Leejam Sports	3.2
	Total # of Holdings	38

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

	Fund Characteristics2	Fund	Benchmark
	Standard Deviation	9.5%	10.1%
	Sharpe Ratio	0.53	0.06
	Beta	0.80
	Tracking Error	6.0%
	Information Ratio	0.59

2 The fund characteristics are based on the historical data of the Al Mal MENA Equity Fund as the AZ Al Mal Equity Fund will continue to follow the same strategy. It is calculated using 3-year weekly data

Sector Allocation

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Others Others
Cash
Cash
Communication…
Egypt
Real Estate
Qatar Health Care
Materials
Kuwait
Industrials
United Arab Emirates
Consumer Discretionary
Saudi Arabia Financials
0% 20% 40% 60% 0% 20% 40% 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.

NAV Per Unit: USD 8.87

Al Mal MENA Equity Fact Sheet

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January 2020

Fund Manager Sherif El Haddad Vrajesh Bhandari, CFA Tamara Tannir, CFA Inception Date 15th June 2008 Fund Size USD 12 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 PricewaterhouseCoopers 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:

Performance1 Fund Benchmark2 Relative Perf. 1 Month -0.3% -1.2% 0.9% YTD -0.3% -1.2% 0.9% 1 Year 4.3% 1.5% 2.8% 3 Years 26.9% 12.6% 14.2% 5 Year 6.8% -7.3% 14.1% Since Inc. -0.8% -34.7% 33.9% Performance Fund Benchmark Relative Perf. 2020 -0.3% -1.2% 0.9% 2019 8.6% 8.2% 0.4% 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.* -0.8% -34.7% 33.9%

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
As of 29 [th] of January 2020
Jun-08 Dec-08 Jun-09 Dec-09 Jun-10 Dec-10 Jun-11 Dec-11 Jun-12 Dec-12 Jun-13 Dec-13 Jun-14 Dec-14 Jun-15 Dec-15 Jun-16 Dec-16 Jun-17 Dec-17 Jun-18 Dec-18 Jun-19 Dec-19
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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 8.87

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January 2020

Fund Manager Commentary:

Middle East and North Africa (MENA) markets had a rough start to 2020. First, we had the geo-political tensions flaring up between US and Iran, which receded rather quickly. And then closer to the end of the month, the spread of a new coronavirus spooked equity markets. Overall, the 1.2% monthly decline of the S&P Pan Arab Index looks decent in the context of Brent oil falling 9.4% below the USD 60 mark. The Al Mal Mena equity return is flat over the month (-0.3%) as some of our bottom up ideas outperformed the index.

Our core holding eXtra - the electronics retailer in Saudi - reported results ahead of consensus once again. Net Income grew 15% y/y as its market share further increased to 20% in 2019. Sales growth was driven by the Mega Sale festival, the new e-platform, higher after-sale service and the Shariah-compliant consumer finance. National Bank of Kuwait - the top constituent in the Fund - also announced decent fourth quarter results. The stock would be a major beneficiary of passive flows in the month of May when Kuwait gets included in the MSCI EM Index. Within our ‘beta’ sub-portfolio - which aims to provide market exposure and enhance overall liquidity of the Fund – FAB and NCB reported their Q4 results. It is important to note that we are generally underweight these large caps on account of relative value.

The World Bank slashed growth forecasts for the GCC region to 1.3%, 1.0%, and 0.1%, for 2019, 2020, and 2021 respectively. While these figures are not exciting, we believe there are several companies in specific sectors that can deliver strong double-digit earnings growth.

	Top Portfolio Holdings	% of Fund
	National Bank of Kuwait	6.4
	Al Rajhi Bank	5.4
	Qatar National Bank	4.7
	Saudi Industrial Services	4.5
	Jarir Total # of Holdings	4.2 38.0

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

	Fund Characteristics2 Standard Deviation	Fund 9.5%	Benchmark 10.0%
	Sharpe Ratio	0.72	0.21
	Beta	0.77
	Tracking Error	5.9%
	Information Ratio	0.76

2 Calculated using 3-year weekly data

We spent two days in Kuwait meeting companies across various sectors. The dynamics in this market are unique and can differ substantially from the rest of the Gulf. While there is a lot of fiscal room for the government to expedite the infrastructure spending program, the execution on the ground is slower, but steadier. Moreover, unlike in Dubai, the big spenders in retail and restaurants are local Kuwaiti citizens who are relatively unscathed by a weaker economic environment. While we have identified some potential alpha ideas, the broader market is currently at elevated levels driven by the MSCI inclusion. We thus prefer to wait for better entry points.

Geographic Allocation

Sector Allocation

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Other Consumer Staples
Cash
Cash
Telecom
Egypt
Real Estate
Qatar Others
Materials
Kuwait
Industrials
United Arab Emirates
Consumer Discretionary
Saudi Arabia 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.

Al Mal UAE Equity Fact Sheet

NAV Per Unit: AED 1.21

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January 2020

	Fund Manager Sherif El Haddad Vrajesh Bhandari, CFA Tamara Tannir, CFA Inception Date 5th April 2006 Fund Registration UAE Currency AED Fund Size AED 42mn 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 Performanc Yearly 2020 2019 2018 2017 2016 2015 2014 2013 2012 2011 2010 2009 2008 2007 2006 Since Inc.*	e Fund Benchmark Relative Perf.
		2.2% 0.8% 1.4% 4.9% 0.3% 4.6% -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% 40.7% -42.7% 83.4%
		Fund Benchmark2 Relative Perf.
		2.2% 0.8% 1.4% 2.2% 0.8% 1.4% 7.4% 0.9% 6.5% 5.8% -10.6% 16.4% -0.8% -18.6% 17.8% 40.7% -42.7% 83.4%

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 Oct-06 Apr-07 Oct-07 Apr-08 Oct-08 Apr-09 Oct-09 Apr-10 Oct-10 Apr-11 Oct-11 Apr-12 Oct-12 Apr-13 Oct-13 Apr-14 Oct-14 Apr-15 Oct-15 Apr-16 Oct-16 Apr-17 Oct-17 Apr-18 Oct-18 Apr-19 Oct-19
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• As of 29[th] of January 2020

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 1.21

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January 2020

Fund Manager Commentary:

Both Dubai and Abu Dhabi are off to a good start as healthy dividend yields come in focus. The Al Mal UAE equity fund outperformed with core holdings DP World, Emirates NBD and others delivering good returns.

Emirates NBD’s fourth quarter results showed marked deterioration in asset quality at the newly acquired Turkish bank - almost half of the provisions (AED 900mn of 2bn) were on account of Denizbank. For the current year, the bank is guiding for a mid-single digit loan growth, stable NIMs (Net Interest Margins) and slight increase in loan loss charges, thereby implying flat earnings. Our investment case hinges on further rerating of the P/E multiple (~7x) as foreign investors assume a larger ownership post the increase in limits. In other results, Tabreed, the district cooling company reported a good set of numbers. While EBITDA rose 7% y/y, associates and JV income grew 50%. More importantly, the company increased the dividend to 10.5 fils per share, implying a 5.5% dividend yield. Abu Dhabi Commercial (ADCB)’s numbers are a bit concerning as it took a bigger than expected hit on the provision line post the takeover of UNB and Al Ahli Bank. Including stage 3 loans, the NPL ratio stood at 4.5% while coverage dropped to 85%. We are re -evaluating the investment thesis.

	Top Portfolio Holdings	% of Fund
	Emirates NBD	17.4
	DIB	12.1
	DP World	12.0
	Total # of Holdings	10.0

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

	Fund Characteristics2 Standard Deviation	Fund 12.1%	Benchmark 13.0%
	Sharpe Ratio	-0.03	-0.46
	Beta	0.75
	Tracking Error	7.9%
	Information Ratio	0.73

2 Calculated using 3-year weekly data

After a sluggish 2018, Dubai recorded a 5% increase in tourist arrivals last year to 16.7m. The city emirate has a target of 20m tourists in 2020 driven by the Expo which opens in October. In our view, the market is not expecting much from this extraordinary event and we could thus get some positive surprise in terms of the direct economic impact. This would act as a headwind for business and investors’ sentiment. It is also worth mentioning that Dubai announced a new district dedicated to the ‘new economy’ along with a Dh 1 billion fund to support the companies. Ten initiatives will be launched in the coming period to support the economy of the future by providing an attractive investment, technological, legislative, service and enabling environment.

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Geographic Allocation Sector Allocation
Energy
Cash
Cash
Telecom
Abu Dhabi
Other
Real Estate
Nasdaq
Industrials
Dubai Financials
0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% 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.