April 15, 2003
Daman UAE Value Fund Pay-out ratio reaches 42%
Fund posts 1.39% First Quarter growth and declares dividend; Out-performs benchmark index and other funds
Daman UAE Value Fund has distributed 42% of gains achieved in its first 21 months of operation as dividends, Shehab M Gargash, Director, announced today. The total dividend payment over that period is AED 15.50/share, which represents a yield of 7.30% based on the current NAV price of AED 121.39/share. The UAE market average yield is 3.57% as of April 13, 2003.
“The Fund’s generous distribution policy reflects our firm belief that investors should receive the profits from their investment in hand through dividend payments,” Mr. Gargash said. “We feel that dividend payments are important for both our Fund and for UAE publicly listed companies in general, in order to create more dynamic capital markets where money flows more freely.”
During the First Quarter of 2003, the Fund grew by 1.39%, compared to growth of 0.56% in the benchmark National Bank of Abu Dhabi (NBAD) Index. During March 2003, the Fund grew 0.81%. “The Fund’s ability to grow during months when the UAE market loses ground has been one of the most important contributors to its consistent positive track record since it was launched in July, 2001,” Mr. Gargash said. “This stability has enabled the Fund to declare consistent quarterly dividends every quarter since inception. As the only mutual fund in the UAE that pays regular dividends, minimizing volatility and ensuring consistent performance are critical goals of the Fund Manager.” In 21 months of activity, the Fund has posted only one monthly decline, while the NBAD Index has posted 7 monthly declines during the same period. The Fund was the only UAE-focused mutual fund to post a gain in March, 2003. The NBAD Index declined 0.58% during the month.
The Fund’s lower volatility is apparent in its Beta measurement, which is 0.73. This measurement shows that the Fund Manager has succeed in insulating investors from market swings, while still managing to out-perform the Index. Mr. Gargash also announced that the Fund ended its 2002-2003 financial year on March 31, 2003, posting growth of 6.54% during the financial year. Since inception, the Fund’s annualized performance is 21.08%, which exceeds the goal of 10-15% annual returns for the Fund over its life. The Fund’s Annual General Meeting is expected to be held in May, 2003.
Market Expected to stabilize until Fourth Quarter rally Mustafa Farid, Senior Investment Manager, noted that despite great uncertainty in the market due to the war on Iraq and other factors, his expectation published in January 2003 that the market would reach the 3,550 level was accurate. The NBAD Index stood at 3,562.81 as of April 13, 2003.
Going forward, Mr. Farid expects the market to continue trading at 3,500-3,600 through the 2nd and 3rd quarters. He said that investors should be extremely selective, as the market is overheated and speculative trading by large investors will pose a risk for
smaller investors. By the 4th quarter, Mr. Farid expects the market to rally, approaching the 3,800 level.
In the past week, the market has been driven by small cap banks, many of which posted low or negative growth in 2002. Mr. Farid believes this is due to speculation on the part of large investors in these equities, and that these large investors are being
followed by smaller investors. Ultimately, this speculative cycle will harm smaller investors.
“Some of the companies that posted losses or minimal profitability in 2002 have grown by more than 10% in this past one week,” Mr. Farid said. “Fundamentally, there is no justification – either in terms of past performance or future expectations – for this price
appreciation.” “The companies that investors should try to identify are those with solid growth stories,” Mr. Farid said. “These are companies whose growth is reflected in their dividend distributions and therefore in their dividend yields. However, even these stocks
can be hijacked by a general downturn in the market if conditions deteriorate. This is a major problem in the UAE market – each stock is strongly correlated with the market, so even solid companies can be dragged down by negative market sentiment.”
Overall, however, Mr. Farid remains fundamentally optimistic about the value present in the UAE market, especially compared to other GCC markets (see table). He notes that growth in other GCC markets has far exceeded that of the UAE market for some time, a
trend which he attributes to the unwillingness of UAE public companies to distribute dividends that reflect the growth of their companies.
“UAE public companies have been very profitable but other GCC markets have outperformed the UAE because UAE public companies have not shared those profits with investors in the form of higher dividend pay-outs,” Mr. Farid said. He added that when Board’s of public companies show an increased willingness to be investor-friendly, the results are positive and reflect positively in the UAE market.
Daman UAE Value Fund Data
Current NAV Price (April 1, 2003) AED 121.39/share
Total Dividend Declared Since Inception AED 15.50/share
Dividend Distributed, 2003 AED 2.25/share
Annualized Dividend Yield, 2003 7.30%
Performance since inception (July 1, 2001) 36.89%
Performance, 2003 1.39%
Performance, National Bank of Abu Dhabi Gen. Index, 2003 0.56%
Payout Ratio 42.02%
About Daman UAE Value Fund
Daman UAE Value Fund is a closed-ended, offshore mutual fund focused on the UAE stock market. It was launched on July 1, 2001 with shares valued at a par value of AED 100.00. The Fund commissions an independent audit of its Net Asset Value (NAV) at the
end of each month, and releases monthly NAV statements. The Fund has announced seven quarterly dividend distributions totaling AED 15.50/share, the most recent being AED 2.25/share for the First Quarter of 2003.
Daman UAE Value Fund is a Mauritius-registered public company. The Fund’s governance structure is designed to ensure maximum transparency and accountability to shareholders.
For more information, please contact Mohammed Sulaiman, Daman Securities
Tel: + 971.4.332.4140 Fax: + 971.4.332.4240 Email: [email protected]