AL Mal UAE Equity Fund — Fund Information / Factsheet 2020

Jun 3, 2020

AZ Al Mal MENA Equity Fact Sheet May 2020

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NAV Per Unit: USD 4.31

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Fund Manager Commentary

Objective

The pandemic, the resulting economic lockdowns and the market’s reaction, in the first four months of the year meant that this May was going to be different to the proverbial ‘sell in May & go away’ – that is generally on collecting dividends after a good start to the year.

Achieve capital appreciation, primarily through investment in equity and equity related securities in the Middle East and North African markets.

			Fund Performance	Fund Performance
	Performance1	Fund		Benchmark2	Alpha
	1 Month	0.6%		1.4%	-0.8%
	YTD3	-13.3%		-18.7%	5.4%
	1 Year	-10.8%		-16.3%	5.4%
	3 Year	6.8%		-3.9%	10.7%
	5 Year	-8.6%		-23.8%	15.2%
	Since Inc.	-13.9%		-19.5%	5.6%

Though May 2020 did begin on a weak note, sentiment changed by the middle of the month on hopes of a coronavirus vaccine and the subsequent re-opening of the economy. The S&P Pan Arab Index closed the month +1.4%: Kuwait, Qatar & Saudi did well (in that order), while Egypt & UAE underperformed once again.

Saudi Arabia announced drastic fiscal measures as the kingdom aims to contain the growing fiscal deficit. VAT was hiked from 5% to 15%, the SAR 1000 per month cost of living allowance to Saudis working in the public sector was scrapped and several projects were cancelled or put on hold. These measures are expected to result in savings of SAR 100 to 150bn & rein in the deficit from 15% to 10% of GDP, but at a huge cost to economic growth. The UAE was quick to say they had no plans to hike the tax. Oman made significant cuts to government spending including a further 5% cut to the budgets of government bodies and the armed forces. In Kuwait, we hear calls for a tax on expat remittances. A senior politician has urged to expel close to two million expatriates from the country over the next five year to rectify its ‘demographic imbalance’.

• 1 Performance is net of fees; return is cumulative

• 2 S&P Pan Arab Composite Index

3 As of 27th May 2020

	1Performance is net of fees; return is cumulative 2S&P Pan Arab Composite Index 3As of 27thMay 2020 5 Year -8.6% Since Inc. -13.9%	-23.8% -19.5%	15.2% 5.6%
	Holding	Top 5 Holdings	% of Fund
	Humansoft		6.1
	DP World		5.2
	Mouwasat Medical Services		5.0
	Al Rajhi Bank		4.4
	National Bank of Kuwait		4.1
		Fund Analysis
	Matrix4 Standard Deviation Sharpe Ratio Beta Tracking Error	Fund 13.1% -0.1 0.8 6.5%	Benchmark 14.8% -0.3
	No. of Holdings	42

At the same time, monetary stimulus continues to pour in. The Central Bank of Egypt is providing EGP 100bn in loan guarantees to banks to encourage lending to businesses at an interest rate of 8%, well below the overnight lending rate of 10.25%. The UAE’s Central Bank said of its AED 50bn liquidity facility to cushion the economic impact of the coronavirus, 77%has been drawn down.

Oil rose above USD 30 a barrel as producers continued to cut activity - the number of rigs in the US fell for the ninth week to levels not seen in more than a decade while Iraq said it planned to halt output from one of its oil fields. These come on top of a curb of almost 10 million barrels a day of from OPEC+, which kicked off at the beginning of the month.

4 The fund characteristics are based on the historical data of the Al Mal MENA Equity Fund as the AZ Al Mal Equity Fund continues to follow the same strategy; calculated using 3-year weekly data

Fund Information

	Investment Manager	Azimut (DIFC) Limited
	Investment Advisers Investment Team	Al Mal Capital PJSC Sherif El Haddad Tamara Tannir, CFA Jai Lawrence
	Inception Date	June 26, 2019
	Fund Size	USD 47 million
	Strategy Size	USD 80 million
	Domicile	Luxembourg
	Currency Subscription & Redemption Min Subscription	USD Weekly USD 1 (Retail) -250,000 (Institutional)
	Bloomberg Code	AZ3AZUA LX
	Management Fee	0.85% (Institutional); 1.5-2% (Retail)
	Benchmark Index	S&P Pan Arab Composite
	Fund Type	Open Ended
	Administrator & Custodian	BNP Paribas

The PMI numbers for April reflected the magnitude of the slowdown– for UAE, the gauge fell to 44.1 from 45.2; the non-oil private sector shrank at a record rate for the second month running. In Saudi Arabia, the index stood at 44.4, still way below the 50 mark, that separates growth from contraction.

The GCC economies are gradually reopening. Dubai will allow 100% of public sector employees to return to work from their offices by Jun 14. Saudi Arabia also said it would lift the suspension as it initiates a threephase plan to have life return to normal by Jun 21. Kuwait also announced it won’t renew its 24-hour curfew.

On the year to date table, the S&P 500 in US is now down just 6%. In this context, it is interesting to note that Dubai & Egypt, are still down around 28% - among the worst performing markets globally. We see some deep value opportunities in the former, while the latter is a medium-term growth story.

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Sector Allocation
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Others, 2% Fund Type Open Ended
Materials, Communication Administrator & Custodian BNP Paribas
5% Real Estate, 5% Services, 5% Utilities, 4%
10Y Fund Strategy Performance
Consumer
Staples, 6% Financials, 31% Al Mal MENA Equity Fund S&P Pan Arab Composite Index (Rebased)
20
AZ Al Mal Equity Fund
Cash, 8%
Consumer 18
Industrials, 9% Discretionary,
16
Health Care, 12% 13%
Geographic Allocation 14
United Arab Cash, 8% Others, 3% 12
Saudi
Emirates, 10% Arabia, 10
34%
Qatar, 12% 8
6
Kuwait, 12%
Egypt, 19%
Dec-09 Dec-10 Dec-11 Dec-12 Dec-13 Dec-14 Dec-15 Dec-16 Dec-17 Dec-18 Dec-19
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Disclaimer

None ofthe information andopinions containedherein is intendedto form the basis for any investment or trading decision, andno specific recommendations are intended. The products andtransactions describedherein are not suitable for every investor. Suchproducts and

transactions are only suitable for sophisticated andknowledgeableprofessional users offinancialinstruments, andare structuredandcustomized to the needs andobjectives ofeachinvestor. The information andopinions containedherein have been preparedfor 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 AlMalCapital PSC nor any ofits affiliates, directors, authorized managers and/or employees accepts liability for any loss arising from the use ofor makes any representation as to the accuracy or completeness ofthe terms andconditions ofproducts andtransactions described herein. Finalized terms and conditions are subject to further discussion and negotiation, and will be determined in part on the basis of pricing and valuation 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 MENA Equity Fact Sheet May 2020

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NAV Per Unit: USD 7.72

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Fund Manager Commentary

Objective

The pandemic, the resulting economic lockdowns and the market’s reaction, in the first four months of the year meant that this May was going to be different to the proverbial ‘sell in May & go away’ – that is generally on collecting dividends after a good start to the year.

Achieve capital appreciation, primarily through investment in equity and equity related securities in the Middle East and North African markets.

					Fund Performance
		Performance1 1 Month	Fund 0.9%		Benchmark2 1.4%	Alpha -0.5%
		YTD3	-13.3%		-18.7%	5.5%
		1 Year	-11.6%		-16.7%	5.1%
		3 Year	6.7%		-3.9%	10.6%
		5 Year	-8.6%		-23.8%	15.2%
	1	Since Inc. -13.7% Performance is net of fees; 3-year and 5-year		-46.3% return is cumulative		32.6%

Though May 2020 did begin on a weak note, sentiment changed by the middle of the month on hopes of a coronavirus vaccine and the subsequent re-opening of the economy. The S&P Pan Arab Index closed the month +1.4%: Kuwait, Qatar & Saudi did well (in that order), while Egypt & UAE underperformed once again.

Saudi Arabia announced drastic fiscal measures as the kingdom aims to contain the growing fiscal deficit. VAT was hiked from 5% to 15%; the SAR 1000 per month cost of living allowance to Saudis working in the public sector was scrapped and several projects were cancelled or put on hold. These measures are expected to result in savings of SAR 100 to 150bn & rein in the deficit from 15% to 10% of GDP, but at a huge cost to economic growth. The UAE was quick to say they had no plans to hike the tax. Oman made significant cuts to government spending including a further 5% cut to the budgets of government bodies and the armed forces. In Kuwait, we hear calls for a tax on expat remittances. A senior politician has urged to expel close to two million expatriates from the country over the next five year to rectify its ‘demographic imbalance’.

2 S&P Pan Arab Composite Index

3 As of 27th May 2020

Top 5 Holdings

	As of 27May 2020	Top 5 Holdings
	Holding Humansoft Holding Co KSC DP World PLC Mouwasat Medical Services Al Rajhi Bank National Bank of Kuwait		% of Fund 5.9 5.2 5.0 4.4 4.1
		Fund Analysis
	Matrix4	Fund	Benchmark
	Standard Deviation	13.2%	14.7%
	Sharpe Ratio	0.0	-0.2
	Beta Tracking Error No. of Holdings	0.8 6.4% 42

At the same time, monetary stimulus continues to pour in. The Central Bank of Egypt is providing EGP 100bn in loan guarantees to banks to encourage lending to businesses at an interest rate of 8%, well below the overnight lending rate of 10.25%. The UAE’s Central Bank said 77% of its AED 50bn liquidity facility to cushion the economic impact of the coronavirus, has been drawn down.

Oil rose above USD 30 a barrel as producers continued to cut activity - the number of rigs in the US fell for the ninth week to levels not seen in more than a decade while Iraq said it planned to halt output from one of its oil fields. These come on top of a curb of almost 10 million barrels a day of from OPEC+, which kicked off at the beginning of the month.

4 Calculated using 3-year weekly data

	Fund Manager Inception Date	Sherif El Haddad Tamara Tannir, CFA Jai Lawrence 15th June 2008 Fund Information
	Fund Size	USD 10 million
	Strategy Size	USD 80 million
	Domicile Currency Subscription & Redemption	Bahrain USD Weekly
	Min Subscription	USD 250,000
	Bloomberg Code	MALMENE BI
	Management Fee	1.75%
	Benchmark Index	S&P Pan Arab Composite
	Fund Type	Open Ended
	Administrator	Apex
	Custodian	Standard Chartered

The PMI numbers for April reflected the magnitude of the slowdown– for UAE, the gauge fell to 44.1 from 45.2; the non-oil private sector shrank at a record rate for the second month running. In Saudi Arabia, the index stood at 44.4, still way below the 50 mark, that separates growth from contraction. The GCC economies are gradually reopening. Dubai will allow 100% of public sector employees to return to work from their offices by Jun 14. Saudi Arabia also said it would lift the suspension as it initiates a three-phase plan to have life return to normal by Jun 21. Kuwait also announced it won’t renew its 24-hour curfew.

On the year to date table, the S&P 500 in US is now down just 6%. In this context, it is interesting to note that Dubai & Egypt, are still down around 28% - among the worst performing markets globally. We see some deep value opportunities in the former, while the latter is a medium-term growth story.

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Sector Allocation Custodian Standard Chartered
Telecom, 5% Consumer Staples, 3%
Materials, 5%
Financials,
Others, 6% 10Y Fund Strategy Performance
31%
Real Estate, 6%
Al Mal MENA Equity Fund S&P Pan Arab Composite Index (Rebased)
Cash, 9% Healthcare, 20
12%
Industrials, 18
Consumer
10%
Discretionary, 12% 16
Geographic Allocation 14
United Arab
Emirates, Cash, 9% Other, 3% Saudi 12
11% Arabia, 10
33%
Kuwait, 8
12%
Egypt, 6
20%
Qatar, 12%
Dec-09 Dec-10 Dec-11 Dec-12 Dec-13 Dec-14 Dec-15 Dec-16 Dec-17 Dec-18 Dec-19
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Disclaimer

None ofthe information andopinions containedherein is intendedto form the basis for any investment or trading decision, andno specific recommendations are intended. The products andtransactions describedherein are not suitable for every investor. Suchproducts and transactions are only suitable for sophisticated andknowledgeableprofessional users offinancialinstruments, andare structuredandcustomized to the needs andobjectives ofeachinvestor. The information andopinions containedherein have been preparedfor 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 AlMalCapital PSC nor any ofits affiliates, directors, authorized managers and/or employees accepts liability for any loss arising from the use ofor makes any representation as to the accuracy or completeness ofthe terms andconditions ofproducts andtransactions described herein. Finalized terms and conditions are subject to further discussion and negotiation, and will be determined in part on the basis of pricing and valuation 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 May 2020

NAV Per Unit: AED 1.03

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Fund Manager Commentary

The UAE unveiled a two-phase plan to reopen the country’s economy - the first stage focused on the short term includes the gradual reopening of businesses, supported by stimulus plans that so far total AED282.5bn. The second-phase is designed to accelerate recovery and advance growth, with a larger focus on the digital economy and technologies such as Artificial Intelligence, 5G networks, the Internet of Things (IoT) and smart cities. The second phase of the strategy will also focus on blockchain, the ‘green economy’ and renewable energy, electric cars, 3d printing, biotech, genetic engineering and robotics. At the same time, representatives of Dubai’s leading family-owned businesses sent a letter to the Supreme Fiscal Committee requesting a reduction in customs duties by 50% until year-end, a 50% cut in electricity, water and service bills and also proposed a reduction in VAT to 2% from 5%.

The UAE Banks are reporting their first quarter results and the trend we see include lenders setting aside precautionary provisions in anticipation of expected deterioration of asset quality. According to S&P, these banks are at risk from a spike in non-performing loans over the next 1-2 years as the economy is hit by a 'triple whammy' of a slump in oil prices, lower economic activity and low interest rates. The volume of stage 3 loans - non-performing loans that require significant write-downs - will rise to 7%-8% of systemwide loans in 2020-2021, and problematic assets will rise to about 20% of total loans. We are underweight the financial sector.

In real estate, Emaar Malls is extending relief package for its retail tenants, while Aldar has launched programs worth up to AED190mn to support residential communities, schools and retail partners. Also, the request by the UAE for the expo to be postponed to 2021 was approved by the BIE executive committee.

‘You can feel the positive vibe in Dubai specifically’ the statement by Accor, the operator of 5,000 hotels in 110 countries. The CEO for Middle East & Africa also revealed that hotels in the UAE have been full at a reduced capacity. The co. plans to attract visitors by focusing on technology that ensures safety, such as touchless check-in and checkout operations, as well as online menus and communication with guests via WhatsApp.

Objective

Achieve medium to long-term capital growth by investing primarily in equities listed on the UAE Exchange.

			Fund Performance
	Performance1	Fund	Benchmark2	Alpha
	1 Month	-1.3%	-1.7%	0.4%
	YTD3 1 Year 3 Year 5 Year Since Inc.	-13.0% -13.0% -12.7% -31.4% 19.7%	-25.2% -22.3% -31.4% -19.5% -57.5%	12.2% 9.4% 18.7% -11.9% 77.2%

1 Performance is net of fees; return is cumulative

2 S&P UAE Composite Index

3 As of 27th May 2020

Top 3 Holdings

	Holding		% of Fund
	DP World		15.8
	First Abu Dhabi Bank		12.3
	Emirates NBD		12.1
		Fund Analysis
	Matrix4 Standard Deviation Sharpe Ratio	Fund 16.4% -0.41	Benchmark 22.6% -0.62
	Beta	0.64
	Tracking Error	11.3%
	No. of Holdings	11

4 Calculated using 3-year weekly data

	Fund Manager	Sherif El Haddad Tamara Tannir, CFA Fund Information
		Jai Lawrence
	Fund Size	AED 42 million
	Domicile	UAE
	Currency	AED
	Subscription & Redemption	Weekly
	Min Subscription	AED 100,000
	Management Fee	1.50%
	Performance Fee	20% over 10% hurdle with high
		watermark
	Financial Year End	31st December
	Benchmark Index	S&P UAE Composite Index
	Fund Type	Open Ended
	Administrator & Custodian	Standard Chartered

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Sector Allocation
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Real Cash,
Telecom,
Estate, 10%
7%
16%
Other,
3%
Industrials,
31%
Financials, 33%
Geographic Allocation
Nasdaq,
Abu 20% Cash,
Dhabi,
10%
21%
Dubai, 49%
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10Y Fund Strategy Performance
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Al Mal UAE Equity Fund S&P UAE Index
24
22
20
18
16
14
12
10
8
6
Dec-09 Dec-10 Dec-11 Dec-12 Dec-13 Dec-14 Dec-15 Dec-16 Dec-17 Dec-18 Dec-19
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Disclaimer

None ofthe information andopinions containedherein is intendedto form the basis for any investment or trading decision, andno specific recommendations are intended. The products andtransactions describedherein are not suitable for every investor. Suchproducts and transactions are only suitable for sophisticated andknowledgeableprofessional users offinancialinstruments, andare structuredandcustomized to the needs andobjectives ofeachinvestor. The information andopinions containedherein have been preparedfor 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 AlMalCapital PSC nor any ofits affiliates, directors, authorized managers and/or employees accepts liability for any loss arising from the use ofor makes any representation as to the accuracy or completeness ofthe terms andconditions ofproducts andtransactions described herein. Finalized terms and conditions are subject to further discussion and negotiation, and will be determined in part on the basis of pricing and valuation 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.