AL Mal UAE Equity Fund — Fund Information / Factsheet 2020

Oct 7, 2020

AZ Al Mal MENA Equity Fact Sheet September 2020 NAV Per Unit: USD 4.96

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Fund Manager Commentary

September saw the S&P 500 drop by 4.5%, a stark contrast to the 7% gains it made in the previous month. The month started with major US Indices falling for a second week in a row as technology heavyweights experienced their worst pullback since March. The themes of the month that contributed to the drop were the inability of US politicians to agree on the next COVID stimulus package pre-election, mixed economic data showing slowing progress on the US labor front, the hawkishness of the fed and election volatility. The old Buffett adage “never bet against the US market” seemed to hold true for another month as the US dollar strengthened 1.7%, whilst Gold was down 3.8%. With regards to the region, September saw the S&P Pan Arab Index lead the beaten down MXEF returning 1.9% in comparison to the MXEF losing 2.8%. Relative strength from Crude helped the recovery of the S&P Pan Arab Index.

Tadawul had a strong September climbing 4.6%, aided by the easing of lockdowns. This month the Saudi Arabian government released their preliminary budget for 2021 in the last week of September. Saudi Arabia plans to cut spending by 7.5% in next year's budget to 990 billion riyals ($263.94 billion) from this year's 1.07 trillion riyals ($285.27 billion). It expects a 12% budget deficit for 2020, falling to 5.1% next year, the document showed spending is expected to decrease to 955 billion riyals and 941 billion riyals in 2022 and 2023, respectively, with the deficit shrinking to 3% and 0.4% in those two years. Portfolio holdings, Malath and Al Khaleej had stellar performances in the month of September, returning 33.8% and 24.6% respectively.

Malath’s strong performance is on the back of their exclusive rights to cover Inherent Defects Coinsurance (IDI). By the Council of Ministers Resolution, The IDI is a compulsory cover which requires all contractors involved in private sector construction projects to obtain an IDI policy. Given the Saudi push towards home ownership, the subsequent boom in the mortgage market has driven Malath’s performance. Portfolio star, Al Khaleej, had major developments on their training and education segments. On the side of their training segment, they signed a SAR142 mn customer service deal with SEC to manage and operate a customer service center for the company. Under the agreement Al Khaleej will merge customer services such as general inquiries and complaints, under one roof. The contract is expected to be reflected in the financial results for the fiscal year 2020. On the side of their education segment, Al Khaleej extended the MOU to acquire a 60% stake in Al Raqi Schools which was announced in July. This extension will allow them to complete the due diligence required to finalise the deal. These schools are already profitable and will allow Al Khaleej to bolster their bottomline.

Egypt delivered a surprise rate cut this month, the first since the reduction of 300 basis points last March in line with the outbreak of COVID-19. The Monetary Policy Committee at the Central Bank of Egypt (CBE) decided to cut rates by 50 bps, bringing the overnight deposit and lending rates to 8.75% and 9.75% respectively. Additionally, the main operation and discount rates are now at 9.25%. The cut in rates follows lower inflation number, August saw this at 3.4% a 10-month low. The implications will be muted on credit growth as the government had already been accelerating lending, through their subsidized lending scheme. The scheme has allowed an increasing number of companies to borrow at 8%, well below market rates. As for the economic activity and/or the carry trade, the 50bps cut will still leave Egypt with an attractive real yield of 6-7%. Portfolio holding, Speed Medical returned 13.6% this month. The company recently undertook a rights issue to raise EGP150mn aiding Speed Medical to put into motion their lab expansion strategy alongside plans to expedite their hospital openings. Furthermore, the company currently trades in Egypt’s Nilex and an increase in liquidity will see the company shift to the larger EGX market, thereby attracting institutional interest and subsequent flows.

Sector Allocation

Objective

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 3.0%	Benchmark2 1.6%	Alpha 1.4%
	YTD3	0.0%	-8.0%	8.0%
	1 Year	2.2%	-3.9%	6.2%
	3 Year	16.3%	7.5%	8.8%
	5 Year	17.0%	-0.3%	17.2%
	Since Inc.	-0.7%	-8.9%	8.1%

1 Performance is net of fees; return is cumulative

2 S&P Pan Arab Composite Index

3 As of 30th September 2020

	1Performance is net of fees; return is cumulative 2S&P Pan Arab Composite Index 3As of 30thSeptember 2020 5 Year 17.0% Since Inc. -0.7%	-0.3% -8.9%	17.2% 8.1%
	Holding	Top 5 Holdings	% of Fund
	Humansoft		4.9
	Al Rajhi Bank MM Group for Industry & International Trade Mouwasat Medical Services		4.5 4.2 3.9
	Centamin PLC		3.9
		Fund Analysis
	Matrix4 Standard Deviation	Fund 13.3%	Benchmark 14.9%
	Sharpe Ratio	0.30	0.0
	Beta	0.8
	Tracking Error No. of Holdings	6.2% 47

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; calculatedusing 3-year weekly data

	Investment Manager	Azimut (DIFC) Limited Fund Information
	Investment Advisers	Al Mal Capital PJSC
	Investment Team	Sherif El Haddad
		Tamara Tannir, CFA Jai Lawrence
	Inception Date	June 26, 2019
	Fund Size Strategy Size	USD 57 million USD 250 million
	Domicile	Luxembourg
	Currency Subscription & Redemption	USD Weekly
	Min Subscription	USD 1 (Retail) -250,000 (Institutional)
	Bloomberg Code Management Fee	AZ3AZUA LX Up to 2.0%
	Benchmark Index	S&P Pan Arab Composite
	Fund Type	Open Ended
	Administrator & Custodian	BNP Paribas

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Communication Services, 4% Others, 3% Industrials, 1%
Utilities, 4% 10Y Fund Strategy Performance
Cash, 5% Financials, 35%
Consumer Staples, 5% 20 Al Mal MENA Equity Fund S&P Pan Arab Composite Index (Rebased)
AZ Al Mal Equity Fund
Real Estate, 6%
18
Materials, 11%
16
Consumer Discretionary, 16%
Health Care, 11%
14
Geographic Allocation
12
United Arab Emirates, 7%
Cash, 5%
10
Others, 7%
Saudi Arabia, 40% 8
Qatar, 10%
6
Kuwait, 12%
Egypt, 19%
Disclaimer
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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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. Such products and transactions are only suitable for sophisticated and knowledgeableprofessionalusers of financialinstruments, and are structured and customized to the needs and objectives of each investor. The information and opinions contained herein have beenprepared 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 describedherein. Neither AlMalCapitalPSC nor any of its affiliates, directors, authorized managers 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. 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 September 2020 NAV Per Unit: USD 8.83

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Fund Manager Commentary

September saw the S&P 500 drop by 4.5%, a stark contrast to the 7% gains it made in the previous month. The month started with major US Indices falling for a second week in a row as technology heavyweights experienced their worst pullback since March. The themes of the month that contributed to the drop were the inability of US politicians to agree on the next COVID stimulus package pre-election, mixed economic data showing slowing progress on the US labor front, the hawkishness of the fed and election volatility. The old Buffett adage “never bet against the US market” seemed to hold true for another month as the US dollar strengthened 1.7%, whilst Gold was down 3.8%. With regards to the region, September saw the S&P Pan Arab Index lead the beaten down MXEF returning 1.9% in comparison to the MXEF losing 2.8%. Relative strength from Crude helped the recovery of the S&P Pan Arab Index.

Tadawul had a strong September climbing 4.6%, aided by the easing of lockdowns. This month the Saudi Arabian government released their preliminary budget for 2021 in the last week of September. Saudi Arabia plans to cut spending by 7.5% in next year's budget to 990 billion riyals ($263.94 billion) from this year's 1.07 trillion riyals ($285.27 billion). It expects a 12% budget deficit for 2020, falling to 5.1% next year, the document showed spending is expected to decrease to 955 billion riyals and 941 billion riyals in 2022 and 2023, respectively, with the deficit shrinking to 3% and 0.4% in those two years. Portfolio holdings, Malath and Al Khaleej had stellar performances in the month of September, returning 33.8% and 24.6% respectively.

Malath’s strong performance is on the back of their exclusive rights to cover Inherent Defects Coinsurance (IDI). By the Council of Ministers Resolution, The IDI is a compulsory cover which requires all contractors involved in private sector construction projects to obtain an IDI policy. Given the Saudi push towards home ownership, the subsequent boom in the mortgage market has driven Malath’s performance. Portfolio star, Al Khaleej, had major developments on their training and education segments. On the side of their training segment, they signed a SAR142 mn customer service deal with SEC to manage and operate a customer service center for the company. Under the agreement Al Khaleej will merge customer services such as general inquiries and complaints, under one roof. The contract is expected to be reflected in the financial results for the fiscal year 2020. On the side of their education segment, Al Khaleej extended the MOU to acquire a 60% stake in Al Raqi Schools which was announced in July. This extension will allow them to complete the due diligence required to finalise the deal. These schools are already profitable and will allow Al Khaleej to bolster their bottomline.

Egypt delivered a surprise rate cut this month, the first since the reduction of 300 basis points last March in line with the outbreak of COVID-19. The Monetary Policy Committee at the Central Bank of Egypt (CBE) decided to cut rates by 50 bps, bringing the overnight deposit and lending rates to 8.75% and 9.75% respectively. Additionally, the main operation and discount rates are now at 9.25%. The cut in rates follows lower inflation number, August saw this at 3.4% a 10-month low. The implications will be muted on credit growth as the government had already been accelerating lending, through their subsidized lending scheme. The scheme has allowed an increasing number of companies to borrow at 8%, well below market rates. As for the economic activity and/or the carry trade, the 50bps cut will still leave Egypt with an attractive real yield of 6-7%. Portfolio holding, Speed Medical returned 13.6% this month. The company recently undertook a rights issue to raise EGP150mn aiding Speed Medical to put into motion their lab expansion strategy alongside plans to expedite their hospital openings. Furthermore, the company currently trades in Egypt’s Nilex and an increase in liquidity will see the company shift to the larger EGX market, thereby attracting institutional interest and subsequent flows.

Objective

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 2.8%	Benchmark2 1.6%	Alpha 1.2%
	YTD3	-0.8%	-8.0%	7.2%
	1 Year	1.5%	-3.9%	5.4%
	3 Year	15.3%	7.5%	7.7%
	5 Year	15.9%	-0.3%	16.2%
	Since Inc.	-1.3%	-39.2%	38.0%

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

2 S&P Pan Arab Composite Index

3 As of 30th September 2020

Top 5 Holdings

	As of 30September 2020	Top 5 Holdings
	Holding		% of Fund
	Humansoft		4.9
	Al Rajhi Bank		4.5
	MM Group for Industry & International Trade		4.2
	Mouwasat Medical Services Centamin PLC	Fund Analysis	3.9 3.9
	Matrix4	Fund	Benchmark
	Standard Deviation Sharpe Ratio	13.3% 0.3	14.8% 0.1
	Beta	0.8
	Tracking Error No. of Holdings 4Calculated using 3-year weekly data	6.2% 47
		Fund Information
	Fund Manager	Sherif El Haddad
		Tamara Tannir, CFA
	Inception Date Fund Size	Jai Lawrence 15th June 2008 USD 22 million
	Strategy Size	USD 250 million
	Domicile Currency	Bahrain USD
	Subscription & Redemption Min Subscription Bloomberg Code	Weekly USD 250,000 MALMENE BI
	Management Fee Benchmark Index	1.75% S&P Pan Arab Composite
	Fund Type	Open Ended
	Administrator	Apex
	Custodian	Standard Chartered

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Sector Allocation
Communication Services, 4% Others, 3% Industrials, 1%
Utilities, 4%
Cash, 4% 10Y Fund Strategy Performance
Financials, 34%
Consumer Staples, 5% Al Mal MENA Equity Fund S&P Pan Arab Composite Index (Rebased)
20
Real Estate, 6%
18
Materials, 11%
16
Health Care, Consumer Discretionary, 16%
12% 14
Geographic Allocation
12
Others, 7%
Kuwait, 10% United Arab Emirates, 7%
10
Qatar, 10% Cash, 4% 8
6
Saudi Arabia, 42%
Egypt, 20%
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. Such products and transactions are only suitable for sophisticated and knowledgeableprofessionalusers of financialinstruments, and are structured and customized to the needs and objectives of each investor. The information and opinions contained herein have beenprepared 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 describedherein. Neither AlMalCapitalPSC nor any of its affiliates, directors, authorized managers 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. 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.

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Al Mal UAE Equity Fact Sheet September 2020 NAV Per Unit: AED 1.11

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Fund Manager Commentary

September saw ADX and DFM finish on opposite ends of the UAE flag, the prior down 0.2% the latter up close to 1%. The theme of the month is largely characterized by COVID-19, considering the second wave became a reality with cases topping May highs.

Following on from their amendments to retirement visas last month, UAE’s Justice Ministry published a circular showing the texts of the amendments that would grant citizenship to investors, entrepreneurs, professionals, and people with special talents in accordance with the terms and conditions stipulated. This is just one of the changes the government has made, in order to support and bolster their expatriate community.

Building on the pivotal signing of the Abraham Accord, Israel and UAE based companies have begun laying the groundwork for cooperation. Israel’s Bank Leumi sign MOU’s with FAB and ENBD, further advancing ties between financial institutions in both countries. The services these agreements are set to provide, include clearance, credit lines and foreign currency trade. Leumi, Israel’s second biggest bank, said it was approached recently by dozens of clients seeking to transfer funds to and from the UAE, until now they had to do this through European banks.

From Banking to Healthcare, Israel’s Sheba Medical Center and UAE’s APEX National Investment also signed a preliminary agreement to promote healthcare tech in UAE and the Gulf. The MOU is the first cooperation announced between an Israeli and UAE company as the two firms hope to form an innovation hub in the Gulf based on Sheba’s big data platform, a joint statement said.

Portfolio holding, Tabreed had a stellar performance this month returning 6%, due to their successful syndication of a landmark term-loan facility. This facility will help support the company’s acquisition funding of an 80% stake in Emaar Properties PJSC’s Downtown Dubai district cooling business. It was structured as a multi-tranche syndicated facility with Islamic and conventional tranches. Following the completion of the Downtown Dubai district cooling transaction, The transaction was a major milestone for Tabreed, as they were able to demonstrate their ability to deliver on their growth potential and it reinforced their position as an industry leader.

The Arabtec saga reached its final act, when the Dubai-based construction company announced it would enter into liquidation. Arabtec chairman, Waleed al-Muhairi, said in a statement published by Abu Dhabi’s state-linked newspaper The National “Despite efforts to pursue legal and commercial entitlements and a restructuring of the company’s finances and operations, the situation in which Arabtec finds itself today is untenable,” Arabtec said its board will have a maximum of two months to allow for discussions with the main stakeholders before a liquidation application.

Finally, Aramex rallied 19% over September on the back of Abu Dhabi’s ADQ acquiring 22% of the firm. ADQ is a holding company for some of UAE’s biggest assets include the ADX and the Abu Dhabi Airports. The shares were acquired through a series of on market transactions and through an off-market deal, according to a statement issued by the firm. The company’s performance was also aided by a possible index inclusion with EFG Hermes estimating flows of as much as $30m in the event the company is included in the MSCI and FTSE Russell benchmarks.

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	-1.1%	-1.9%	0.8%
	YTD3	-5.9%	-18.8%	12.9%
	1 Year	-10.1%	-19.3%	9.2%
	3 Year	-9.9%	-28.8%	18.9%
	5 Year	-4.6%	-31.5%	26.9%
	Since Inc.	29.5%	-53.9%	83.4%

	YTD3 -5.9% 1 Year -10.1% 3 Year -9.9% 5 Year -4.6% Since Inc. 29.5%	YTD3 -5.9% 1 Year -10.1% 3 Year -9.9% 5 Year -4.6% Since Inc. 29.5%	-18.8% -19.3% -28.8% -31.5% -53.9%	12.9% 9.2% 18.9% 26.9% 83.4%
	1Performance is net of fees; return is cumulative
	2S&P UAE Composite Index
	3As of 30thSeptember 2020
			Top 3 Holdings
	Holding			% of Fund
	First Abu Dhabi Bank			19.4
	Emirates NBD			16.0
	Tabreed			13.7
			Fund Analysis
	Matrix4		Fund	Benchmark
	Standard Deviation		16.7%	22.8%
	Sharpe Ratio		-0.34	-0.57
	Beta		0.64
	No. of Holdings		11

• 4 Calculated using 3-year weekly data

	Calculated using 3-year weekly data
		Fund Information
	Fund Manager	Sherif El Haddad
		Tamara Tannir, CFA
		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 10Y Fund Strategy Performance
Real Estate, 15% Cash, 4% Telecom, 8% Al Mal UAE Equity Fund S&P UAE Index (Rebased)
Industrials, 18% Other, 7%
21
16
Financials, 48%
11
Geographic Allocation
Cash, 4%
Abu Dhabi, 31%
Nasdaq, 4% 6
Other, 3%
Dubai, 58%
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 of the information and opinions contained herein is intended to 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 sophisticated and knowledgeable professional users of financial instruments, and are structured and customized to 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 describedherein.

Neither AlMalCapitalPSC nor any of its affiliates, directors, authorized managers 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