Union National Bank. Benefits from margin expansion; Raise TP. Overweight. 21 June 2011

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1 Flashnote Union National Bank MENA research Benefits from margin expansion; Raise TP UNB s margins should improve on the back of falling deposit rates Loan loss charges under control, though very little provided for GREs Overweight Target price (AED) 4.5 Current price (AED) 3.7 Potential return 21% We increase EPS 19.5% for 2011e and 10.9% for 2012e, raise our TP to AED4.5 (21% upside) from AED3.5, and reiterate our OW rating Bloomberg Reuters UNB UH UNB.AD Increasing margins: We substantially raise our forecasted net interest margins (NIMs) as UNB actively reprices its deposits. It has already beaten our 1Q11 interest revenue forecast, driven by NIM, and may benefit further in 2Q11 and 3Q11. We expect another bps margin expansion via lower deposit rates, more than offsetting pressure on lending rates. We raise NIMs to 2.81% from 2.54% for 2011e and to 2.77% from 2.52% for 2012e still below average among UAE banks. Despite weak growth in 1Q11 ( 1% q o q/+12% y o y), we forecast 6% loan growth at the lower end of UNB s guidance of 5% 10% driven by retail (despite recent cap), SME, and corporate (public sector/construction) loans. Furthermore, we expect UNB s cost/income ratio to improve to 25% in 2011e from 28% in 2010 on cost containment. Limited impact from cap on retail charges: UNB anticipates pressure on fees; we expect a 6% fall in 2011e. However, the impact is mitigated by fee amortization and faster growth in loans to SMEs and expats (15% of loans). Loan losses very well under control: 1Q s annualized loan loss charge of 50 bps was actually helped by write backs, and thus the full year charge could be higher. Moreover, UNB will add to collective provisions, which amount to just 0.78% of credit risk weighted assets versus the minimum threshold of 1.5% by So far, it has taken very small impairments on its Dubai World (DW) exposure, and Dubai Holding s (DH) write off should be lower than DW s. Also, UNB sees no impact from the new provisioning rule as it impairs loans whenever it expects a loss and thus does not need to provide for loans that are more than 90 days past due if it expects no final loss. Well positioned for Basel III: We think UNB is well capitalized under Basel III and estimate core equity Tier 1 of 12.7%. It may benefit by moving to an internal ratings method (likely to lower risk weightings if credit quality of loan book is strong) from the standardized approach. Valuation: Despite UNB s stellar run y t d, we maintain our Overweight rating. We raise our TP to factor in margin expansion. UNB trades at a 2012e P/E of 7.7x, a 2011e P/tNAV of 0.9x, and a 2011e P/PPP of 4.4x. Our valuation reflects write off of 15% for DW and DH and 55% for property investments. Key indicators 2010a 2011e 2012e 2013e P/E 7.0x 8.2x 7.7x 7.4x P/tNAV 1.0x 0.9x 0.8x 0.8x Source: Company data, HC Mcap (AEDm) 9,537 Mcap (USDm) 2,599 Free float 40% Daily volume (USDm) 0.58 Foreign own. limit 40.0% Foreign ownership 6.38% Note: All prices as of 20 June 2011 Price performance FMAM J J A S OND J FMAM J UNB ADX Jaap Meijer, MBA, CFA Head of the financials team jaap.meijer@hc si.com Janany Vamadeva Analyst janany.vamadeva@hc si.com Please refer to important disclosures and analyst certifications on pages of this report.

2 Valuation methodology Our valuations are made up of 3 core elements: (1) valuation of operations, (2) capital surplus/deficit, and (3) various other adjustments (underprovisioning, investment losses on real estate, etc). (1) Valuing the banking operations: We start by valuing the core operations of the bank. We adjust net earnings for distributions that are not subtracted from reported earnings (such as social contributions) and for coupons on Tier 1 bonds, then add noncash amortizations (such as goodwill amortization). We do not include realized bond gains in our forecasts. We use a discount of c11% for UAE banks, representing a risk free rate of 5% and an equity risk premium of 6%. We use a perpetual growth rate of 4% for UNB. We calculate earnings based on a normalized capital structure (11% of risk weighted assets plus investments in financial associates). The returns on excess capital or the capital deficit are added to/subtracted from the earnings to arrive at an underlying earnings pattern given an adequate capital base. (2) Valuing the capital surplus/deficit: We calculate available capital as follows: (1) we calculate the common equity of the bank; (2) we add minorities as they are part of the capital structure; (3) we deduct all intangibles and goodwill; (4) we deduct all noncommon equity elements such as preferred shares, convertibles, subordinate debt, and other bridge capital; (5) we include mandatory convertibles; (6) we do not deduct deferred tax assets as they represent cash flows for shareholders; and (7) we do not deduct positive available for sale reserves as these are easy to free up by selling the positions. We calculate capital requirements as follows: (1) we estimate the risk weighted assets under Basel III; (2) we set a minimum core Tier 1 of 11%; and (3) we include all financial associates (we do not use the 10% threshold the Basel Committee has agreed upon). (3) We add or subtract other elements such as provisioning needs that are above and beyond those in our 4 year forecast period and stem from our asset quality screen, and potential losses on associates and other investments (real estate, equities, structured credit, and level 3 assets). All in all, our target prices provide a very informed view of the most important value drivers of a bank, such as its returns and capital strength. Key risks Key downside risks include (1) further deterioration of UNB s asset quality beyond the results of our asset quality screen, (2) potential additional impairments on its real estate investment portfolio, (3) weakness in the broader economy, (4) any additional caps on retail charges set by the regulator, and (5) a potential increase in capital requirements under new solvency rules. 2

3 MENA bank valuation screen Rec Mcap (USDm) Curr Current price Target price Upside P/E (x) Target CAGR P/tNAV (x) ROE Dividend yield P/PPP (x) 10a 11e 12e P/E 12e 11 14e 10a 11e 12e 10a 11e 12e 10a 11e 12e 10a 11e 12e ADCB UW 4,312 AED % % % 11.7% 6.9% 0.0% 1.2% 2.0% ADIB N 2,192 AED % % % 13.0% 12.6% 6.5% 2.2% 2.4% CBD OW 1,587 AED % % % 12.5% 12.0% 6.7% 3.9% 4.0% DIB N 2,173 AED % % % 6.3% 6.3% 4.8% 2.4% 2.5% ENBD OW 6,906 AED % % % 13.0% 8.4% 4.4% 4.1% 4.0% FGB OW 7,364 AED % % % 14.9% 14.6% 3.3% 2.9% 3.2% NBAD OW 9,306 AED % % % 16.7% 15.9% 2.5% 2.1% 2.4% UNB OW 2,599 AED % % % 10.1% 10.0% 2.6% 2.7% 2.9% Shuaa UW 295 AED % (4.8) (71.9) % % 1.0% 1.9% 0.0% 0.0% 2.6% (13) (59) 39.6 Tamweel OW 262 AED % % % 2.9% 3.9% 0.0% 0.0% 0.0% UAE 36,995 3% % 12.8% 11.0% 3.2% 2.7% 2.9% CBQ OW 4,745 QAR % % % 13.2% 13.5% 10.0% 8.6% 8.6% Doha OW 2,947 QAR % % % 16.2% 13.8% 9.6% 9.6% 9.6% QIB OW 5,089 QAR % % % 14.4% 14.7% 6.4% 6.4% 6.4% QNB OW 24,449 QAR % % % 19.6% 17.5% 2.6% 2.5% 3.5% Qatar 41,969 32% % 17.0% 16.1% 3.6% 4.0% 5.0% CAE N 549 EGP % % % 15.6% 17.3% 11.1% 6.7% 8.4% CIB UW 3,220 EGP % % % 16.0% 17.8% 3.2% 2.5% 3.1% HDB N 391 EGP % % % 7.9% 11.8% 0.0% 3.6% 5.8% NSGB UW 2,448 EGP % % % 18.2% 20.5% 3.3% 3.3% 4.4% EFG UW 1,484 EGP % % % 7.5% 8.5% 13.8% 2.2% 2.0% Egypt 8,091 13% % 12.5% 14.5% 5.5% 3.0% 3.8% Audi N 2,439 USD % % % 12.5% 12.8% 3.2% 5.1% 5.7% BLOM OW 1,828 USD % % % 17.1% 16.1% 5.3% 4.9% 5.2% Byblos N 1,031 USD % % % 9.8% 9.3% 7.1% 4.8% 4.9% Lebanon 5,298 24% % 13.4% 13.1% 4.6% 4.9% 5.3% ANB UW 6,767 SAR % % % 13.5% 13.7% 2.6% 2.7% 2.7% Al Rajhi OW 29,000 SAR % % % 23.7% 24.6% 2.1% 3.8% 3.8% BSFR N 8,293 SAR % % % 15.4% 16.3% 2.3% 2.3% 3.5% Riyad N 9,480 SAR % % % 8.3% 10.0% 5.5% 5.5% 5.5% Samba OW 12,000 SAR % % % 15.7% 15.3% 3.3% 3.3% 3.3% SABB N 8,360 SAR % % % 14.8% 16.9% 1.6% 1.6% 1.6% KSA 73,899 19% % 14.6% 15.6% 2.7% 3.4% 3.5% MENA 166,253 19% % 14.3% 14.0% 3.3% 3.4% 3.9% Source: Bloomberg, HC 3

4 Union National Bank valuation (AEDm) 2010a 2011e 2012e 2013e 2014e Perp. Subtotal % total DCF Net profit 1,359 1,161 1,241 1,409 1,748 1,748 Other adj (comprehensive inc and GW amrt) Less: Excess return on surplus capital Risk free rate 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% Tax shelter 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% Adjusted net profit 1, ,002 1,146 1,456 1,456 Capital requirements 8,929 9,081 9,230 9,783 10,525 10,525 ROECC 13.5% 10.5% 10.9% 11.7% 13.8% 13.8% Cost of capital 11.0% 11.0% 11.0% 11.0% 11.0% 11.0% Capital charge ,015 1,076 1,158 1,158 Economic profit Discount factor NPV of economic profit DCF EVA forecast period % Perpetual growth rate (nominal GDP) 4.0% Terminal value 3,113 Terminal value discounted 2, % Required capital 8, % Value of bank operations 11, % Capital surplus/deficit Available capital Shareholder equity ,931 10,996 11,868 12,890 14,211 Minorities Less: Goodwill and intangibles Less: Non equity elements reported in equity Less: Associates Tangible equity 9,682 10,746 11,619 12,641 13,961 Capital needs RWA (Basel I in 2011, Basel II/III starting 2012) 76,338 77,640 83,912 88,934 95,682 RWA (Basel III) 81,171 82,556 83,912 88,934 95,682 Equity as a % of RWA 11% 11% 11% 11% 11% Financial stakes Capital requirements 8,929 9,081 9,230 9,783 10,525 Surplus capital 753 1,665 2,388 2,858 3, % Other adjustments Real estate losses (50% on RE inv & advances) 755 Corporate bond fair value losses Under/overprov not covered in forecast period Level 3 assets (15%) 235 Capital gain on sale of RHB Capital 1 Total adjustments % Total fair value YE , % Number of shares 2,496 Fair value/share (AED) 4.5 Current share price (AED) 3.7 Potential return 21.0% Implied P/E 10.8x 10.0x Implied P/B 1.1x 1.0x Source: HC 4

5 Union National Bank financial statements (AEDm) 2008a 2009a 2010a 2011e 2012e 2013e 2014e Income statement Interest income 3,136 3,781 3,786 3,933 4,073 4,348 4,675 Interest expense 1,639 2,133 1,835 1,701 1,774 1,900 2,037 Net interest income 1,498 1,648 1,951 2,233 2,300 2,448 2,638 Fees and commissions Forex income Investment income (181) Other income 392 (45) (11) Noninterest income Total income 2,294 2,118 2,555 2,917 3,032 3,269 3,529 Total operating expenses Pre provisions income 1,654 1,470 1,840 2,184 2,270 2,442 2,635 Loan loss provision charges ,001 1, Associate and other income Pretax income 1,450 1,181 1,357 1,191 1,269 1,438 1,782 Income tax Net income after tax 1,441 1,158 1,350 1,173 1,254 1,420 1,761 Minority interest 36 (3) (9) Net income reported 1,405 1,160 1,359 1,161 1,241 1,409 1,748 Adjustments Net income adjusted 1,405 1,100 1,239 1,041 1,121 1,289 1,628 Balance sheet Assets Cash and due from CB 3,027 7,878 5,973 7,232 9,922 10,541 10,628 Due from banks 5,930 9,336 11,364 8,669 6,462 6,947 7,468 Investments 2,609 4,170 4,333 4,768 4,616 4,962 5,334 Gross loans 51,069 51,580 57,756 62,088 66,745 71,751 77,849 Provisions ,183 2,077 2,178 2,282 2,385 Net loans 50,429 50,769 56,573 60,011 64,567 69,468 75,464 Other assets 2,866 3,200 3,171 5,624 6,348 6,906 7,356 Net fixed assets Total assets 65,225 75,726 81,780 86,687 92,321 99, ,689 Liabilities Total deposits 49,473 51,279 57,941 63,562 68,329 73,454 79,698 Due to banks 646 3,197 3,229 2,848 4,454 5,032 4,685 Borrowings 5,672 10,511 8,909 5,236 5,236 5,236 5,236 Other liabilities 1,739 2,071 1,770 4,045 2,434 2,633 2,859 Total liabilities 57,529 67,058 71,849 75,691 80,453 86,355 92,478 Shareholder equity 7,696 8,668 9,931 10,996 11,868 12,890 14,211 Source: Company data, HC 5

6 Union National Bank financial ratios 2008a 2009a 2010a 2011e 2012e 2013e 2014e Profitability ratios Net interest margin 2.59% 2.46% 2.59% 2.81% 2.77% 2.76% 2.77% Cost/income 27.9% 30.6% 28.0% 25.1% 25.1% 25.3% 25.4% Net interest income/average earning assets 2.6% 2.5% 2.6% 2.8% 2.8% 2.8% 2.8% Noninterest income/average earning assets 1.4% 0.7% 0.8% 0.9% 0.9% 0.9% 0.9% Net interest income/total income 65.3% 77.8% 76.4% 76.5% 75.8% 74.9% 74.7% Noninterest income/total income 34.7% 22.2% 23.6% 23.5% 24.2% 25.1% 25.3% Fees and commissions/total operating income 23.0% 21.0% 21.9% 18.0% 17.9% 18.1% 18.2% Trading gains/total operating income 4.8% 4.2% 2.8% 1.6% 2.3% 3.1% 3.1% Total income/average earning assets 4.0% 3.2% 3.4% 3.7% 3.6% 3.7% 3.7% Noninterest expenses/total operating income 27.9% 30.6% 28.0% 25.1% 25.1% 25.3% 25.4% ROA 2.3% 1.6% 1.6% 1.2% 1.3% 1.3% 1.6% ROE 19.9% 13.7% 13.6% 10.1% 10.0% 10.6% 12.2% Revenue/RWA 3.43% 3.15% 3.35% 3.85% 3.64% 3.68% 3.69% Costs/RWA 0.96% 0.96% 0.94% 0.97% 0.92% 0.93% 0.94% PPP/RWA 2.47% 2.18% 2.41% 2.88% 2.73% 2.75% 2.75% Cost of risk/rwa 0.31% 0.43% 0.63% 1.31% 1.20% 1.13% 0.89% RORWA 2.10% 1.63% 1.62% 1.37% 1.35% 1.45% 1.70% Asset quality ratios Nonperforming loans/total loans 0.73% 1.54% 4.32% 4.10% 4.00% 4.00% 3.90% Loan loss provisions/total loans 1.3% 1.6% 2.0% 3.3% 3.3% 3.2% 3.1% Coverage 170% 102% 47% 82% 82% 80% 79% Loan loss provision charge/total loans 0.3% 0.5% 0.9% 1.6% 1.5% 1.4% 1.1% Loan loss provision charge/operating income 8.7% 18.8% 25.4% 45.5% 44.1% 41.1% 32.4% Funding and liquidity ratios Deposits/liabilities 86% 76% 81% 84% 85% 85% 86% Core deposits/loans 97% 99% 100% 102% 102% 102% 102% Loans/deposits 103% 101% 100% 98% 98% 98% 98% Capital and leverage ratios Tier 1 ratio 9.6% 15.5% 15.2% 17.8% 17.9% 17.9% 18.0% Total capital ratio 11.6% 20.7% 20.1% 19.1% 19.2% 19.2% 19.4% Tangible equity/assets 11.4% 11.1% 11.8% 12.4% 12.6% 12.7% 13.1% Total equity/total liabilities 13.4% 12.9% 13.8% 14.5% 14.8% 14.9% 15.4% Growth Asset growth 18% 16% 8% 6% 7% 8% 8% Earning asset growth 16% 16% 8% 3% 6% 7% 8% Net loan asset growth 35% 1% 11% 6% 8% 8% 9% Deposit growth 23% 4% 13% 10% 8% 8% 9% Net income growth 20% 17% 17% 15% 7% 14% 24% Source: Company data, HC 6

7 Union National Bank snapshot Loan portfolio (as of 2010) AED50.1bn 42% 1% 20% Total assets (as of 2010) AED81.8bn 5% 3% 7% 0% 14% 27% 10% 71% Mortgage Property and construction Corporate: other Retail: non mortgage SME Cash T bills/bonds Interbank Loan Investment securities Other 2.9% 2.8% 2.81% 2.77% 2.76% 2.77% 40% 35% 30% 35% 2.7% 25% 2.6% 2.59% 2.59% 20% 15% 2.5% 2.4% 2.46% 10% 5% 0% 1% 12% 8% 8% 8% 9% e 2012e 2013e 2014e Net interest margin e 2012e 2013e 2014e Loan growth Deposit growth 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 2.47% 0.31% 2.18% 0.43% 2.41% 0.63% 2.81% 1.28% 2.71% 2.75% 2.75% 1.19% 1.13% 0.89% 5% 4% 3% 2% 1% 180% 160% 140% 120% 100% 80% 60% 0.0% 0% 40% e 2012e 2013e 2014e PPP/RWA Cost of risk/rwa RORWA e 2012e 2013e 2014e NPL ratio (LHS) Coverage (RHS) 25% 20% 20.7% 20.1% 23.0% 23.2% 23.1% 22.9% 13.0% 12.5% 12.4% 12.6% 12.7% 15% 11.60% 12.0% 11.8% 10% 11.5% 11.40% 11.4% 11.1% 5% e 2012e 2013e 2014e Tier I CAR 11.0% e 2012e 2013e 2014e Tangible equity to assets Source: Company data, HC 7

8 Probability of default and loss given default P&C % of loan book Probability of default (PD) (%) Weig Non Other Non Other hted SME Mortg P&C SME Mortg P&C retail P&C retail PD P&C Loss given default (LGD) (%) Weig hted LGD Expected loss (EL) (bps) UAE ADCB , , ADIB , , CBD , , DIB , , ENBD , , , FGB , NBAD UNB , Tamweel , , Qatar QNB QIB % Doha % CBQ % Egypt CIB NSGB CAE HDB EFG/CL Lebanon Audi BLOM Byblos KSA Samba Riyad Al Rajhi BSFR SABB ANB Source: HC Non P&C SME Mortg Other retail P&C Non P&C SME Mortg Other retail Total EL (bps) Annu al EL (bps) 8

9 Asset quality screen (LCYm) Curr Total private lending Expected loss from corp. P&C EL from corp. non P&C EL from SME EL from mortg EL from other retail Total EL 10 13e Total EL 10 13e (bps) Avg EL 10 13e (bps) Stock of prov n YE2009 Remaining NPL prov ning (after deducting EL for existing NPLs) EL to be covered 10 13e Prov n forecast 10e Remaining prov n 11 13e Forecast prov n 11 13e Add to (deduct from) val n ADCB AED 119,274 4,155 3,381 1, ,900 11, , ,159 3,287 6,872 5,578 1,294 ADIB AED 41, ,465 3, , , ,186 3, CBD AED 27, ,836 1, , ,012 1, DIB AED 47,691 3, ,096 1, , , ,166 4, ENBD AED 172,573 6,890 8,224 1, ,535 20,213 1, ,948 2,883 17,330 2,926 14,404 10,772 3,632 FGB AED 92,576 3,186 2, ,225 8, , ,453 1,639 5,814 5, NBAD AED 118,841 2,251 2,126 1, ,921 7, ,658 1,411 6,243 1,114 5,129 3,604 1,525 UNB AED 45,108 1,449 1, , , ,234 2, Tamweel AED 10, UAE 64, ,026 CBQ QAR 29, Doha QAR 24, QIB QAR 23, QNB QAR 60, , , ,831 1,963 Qatar 5, ,217 CIB EGP 28, ,444 1, ,174 1,381 NSGB EGP 27, , , , CAE EGP 8, HDB EGP 6, EFG/CL EGP 7, Egypt 3, ,311 Audi LBP 10,490,761 24, ,701 68,681 34,665 58, , ,227 8, ,767 47, , ,752 18,512 BLOM LBP 6,263,579 18, , , , ,946 23, ,554 26, , ,061 58,652 Byblos LBP 5,103, , ,395 58, , ,117 31, ,595 30, , ,584 19,647 Lebanon 712, ,916 Samba SAR 84, , , ,376 1,297 1, ,000 2,103 1,103 Riyad SAR 107, , , , , ,597 2,993 1,396 Al Rajhi SAR 128, , ,189 5, ,192 1,133 4,090 1,909 2,181 4,886 2,706 BSFR SAR 78, , , , , ,571 1, SABB SAR 75, , , , ,125 1,243 1,882 2, ANB SAR 68, , ,008 2, , , ,403 2, KSA 1, Source: Company data, HC 9

10 Disclaimer HC Brokerage, which is an affiliate of HC Securities & Investment (referred to herein as HC ) a full fledged investment bank providing investment banking, asset management, securities brokerage, research, and custody services is exclusively responsible for the content of this report. JonesTrading Institutional Services LLC ( JonesTrading ), a member of SIPC/FINRA, has not had any input informing or determining the content of this report. The information used to produce this document is based on sources that HC believes to be reliable and accurate. This information has not been independently verified and may be condensed or incomplete. HC does not make any guarantee, representation, or warranty and accepts no responsibility or liability for the accuracy and completeness of such information. Expression of opinion contained herein is based on certain assumptions and the use of specific financial techniques that reflect the personal opinion of the authors of the commentary and is subject to change without notice. The information in these materials reflects HC s equity rating on a particular stock. HC, its affiliates, and/or their employees may publish or otherwise express other viewpoints or trading strategies that may conflict with the views included in this report. Please be aware that HC and/or its affiliates, and the investment funds and managed accounts they manage, may take positions contrary to the included equity rating. This material is for informational purposes only and is not an offer to sell or the solicitation of an offer to buy. Ratings and general guidance are not personal recommendations for any particular investor or client and do not take into account the financial, investment, or other objectives or needs of, and may not be suitable for, any particular investor or client. Investors and clients should consider this only a single factor in making their investment decision, while taking into account the current market environment. Foreign currency denominated securities are subject to fluctuations in exchange rates, which could have an adverse effect on the value or price of, or income derived from, the investment. Investors in securities such as ADRs, the values of which are influenced by foreign currencies, effectively assume currency risk. Neither HC nor any officer or employee of HC accepts liability for any direct, indirect, or consequential damages or losses arising from any use of this report or its contents. Copyright No part or excerpt of this research report s content may be redistributed, reproduced, or conveyed in any form, written or oral, to any third party without prior written consent of the firms. The information within this research report must not be disclosed to any other person until HC has made its information publicly available. Issuer of report: HC Brokerage Building F15 B224, Smart Village KM28 Cairo Alexandria Desert Road 6 October 12577, Egypt Telephone: Fax: Website: si.com Pursuant to Rule 15a 6, this report is only available in the United States to Major US Institutional Investors and is being distributed pursuant to an agreement between JonesTrading and HC. The Alembic Global Advisors trade name is licensed by JonesTrading. Brokerage services in the United States are made available through JonesTrading. JonesTrading Institutional Services LLC Lindero Canyon Road, Suite 208 Westlake Village, CA Telephone: Website: Alembic Global Advisors 780 Third Avenue, 8th Floor New York City, NY Telephone: Website: 10

11 IMPORTANT DISCLOSURES Analyst certification: The analysts preparing and contributing to this report are not associated persons of JonesTrading, are not registered/qualified as research analysts with FINRA, and are not subject to the NASD Rule 2711 and incorporated NYSE Rule 472 restrictions on communications with a subject company, public appearances, and trading securities held by a research analyst account. We, Jaap Meijer and Janany Vamadeva, certify that the views expressed in this document accurately reflect our personal views about the subject securities and companies. We also certify that we do not hold a beneficial interest in the securities traded. Analyst disclosures: The analyst or a member of the analyst s household does not have a financial interest in the securities of the subject company (including, without limitation, any option, right, warrant, future, long or short position). The analysts or a member of the analysts household do not serve as an officer, director, or advisory board member of the subject company. The analysts compensation is not based upon HC s investment banking revenues and is also not from the subject company in the past 12 months. HC disclosures: Company name: Union National Bank Disclosures: 5 and 6 1. HC or its affiliates beneficially own 1% or more of any class of common equity securities of the subject company. 2. HC or its affiliates have managed or co managed a public offering of securities for the subject company in the past 12 months. 3. HC or its affiliates have received compensation for investment banking services from the subject company in the past 12 months. 4. HC or its affiliates expect to receive or intend to seek compensation for investment banking services from the subject company in the next 3 months. 5. HC has received compensation for products or services other than investment banking services from the subject company in the past 12 months. 6. The subject company currently is, or during the 12 month period preceding the date of distribution of this research report was, a client of HC. 7. HC makes a market in the subject company s securities at the time this report was published. The HC Rating System consists of 3 separate ratings: Overweight, Neutral, and Underweight. The appropriate rating is determined based on the estimated total return of the stock over a forward 12 month period, including both share appreciation and anticipated dividends. Overweight rated stocks include a published 12 month target price. The target price represents the analysts best estimate of the market price in a 12 month period. HC cautions that target prices are based on assumptions related to the company, industry, and investor climate. As such, target prices remain highly subjective. The definition of each rating is as follows: Overweight (OW): Estimated total potential return greater than or equal to 20% Neutral (N): Estimated total potential return greater than or equal to 0% and less than 20% Underweight (UW): Estimated total potential return less than 0% NR: Not Rated SP: Suspended Stocks rated Overweight are required to have a published 12 month target price, while it is not required on stocks rated Neutral and Underweight. Distribution of HC ratings Rating Count Percent Percent provided investment banking services in past 12 months Overweight (OW) Neutral (N) Underweight (UW)

12 Union National Bank as of 19/06/ Date Recommendation Target price 04/03/2009 Overweight AED /04/2009 Overweight AED /07/2009 Overweight AED /09/2009 Overweight AED /11/2009 Overweight AED /02/2010 Overweight AED /04/2010 Overweight AED /03/2011 Overweight AED /06/2011 Overweight AED4.50 All HC employees and its associate persons, including the analyst(s) responsible for preparing this research report, may be eligible to receive non product or service specific monetary bonus compensation that is based upon various factors, including total revenues of HC and its affiliates, as well as a portion of the proceeds from a broad pool of investment vehicles consisting of components of the compensation generated by directors, analysts, or employees and may affect transactions in and have long or short positions in the securities (options or warrants with respect thereto) mentioned herein. Although the statements of fact in this report have been obtained from and are based upon recognized statistical services, issuer reports or communications, or other sources that HC believes to be reliable, we cannot guarantee their accuracy. All opinions and estimates included constitute the analysts judgment as of the date of this report and are subject to change without notice. HC may affect transactions as agent in the securities mentioned herein. This report is offered for information purposes only, and does not constitute an offer or solicitation to buy or sell any securities discussed herein in any jurisdiction where such would be prohibited. Additional information available upon request. 12