Opportunities in Fixed Income. Fixed Income. Next Coupon Payment. Shari'ah Compliant

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Alyson Bryant
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1 Opportunities in Fixed Income Name Country of Risk Industry Group Maturity Credit Rating Ask YTM Ask Price Price Change %, WTD Duration S&P Outlook Coupon % Next Coupon Payment Shari'ah Compliant Currency DIFC SUKUK UAE Diversified Finan Serv 11/12/2024 NR STABLE /20/2016 Y USD EMIRATES AIRLINES UAE Airlines 2/6/2025 NR /20/2016 N USD SIB SUKUK CO III LTD CAYMAN ISLANDS Banks 9/8/2021 NR /20/2016 Y USD EA PARTNERS II BV NETHERLANDS Airlines 6/1/2021 NR /20/2016 N USD SHARJAH SUKUK LTD CAYMAN ISLANDS Sovereign 9/17/2024 A /20/2016 Y USD EMAAR SUKUK LTD CAYMAN ISLANDS Real Estate 9/15/2026 BBB /20/2016 Y USD DIB SUKUK LTD CAYMAN ISLANDS Banks 3/30/2021 A /20/2016 Y USD EIB SUKUK LTD CAYMAN ISLANDS Banks 5/31/2021 NR /20/2016 Y USD BURGAN SENIOR SPC LTD UAE Banks 9/14/2021 A /20/2016 N USD ALPHA STAR HOLDING LTD CAYMAN ISLANDS Real Estate 4/9/2019 NR /20/2016 Y USD ABU DHABI NATIONAL ENERG UAE Electric 1/12/2023 A STABLE /20/2016 N USD ABU DHABI NATIONAL ENERG UAE Electric 5/6/2024 A STABLE /20/2016 N USD ABU DHABI NATIONAL ENERG UAE Electric 6/22/2026 A STABLE /20/2016 N USD OMAN GOV INTERNTL BOND OMAN Sovereign 6/15/2026 BBB STABLE /20/2016 N USD OMAN GOV INTERNTL BOND OMAN Sovereign 6/15/2021 BBB STABLE /20/2016 N USD BATELCO INT FIN NO 1 LTD CAYMAN ISLANDS Telecommunications 5/1/2020 BB /20/2016 N USD INVESTCORP SA CAYMAN ISLANDS Diversified Finan Serv 11/1/2017 BB /20/2016 N USD QNB FINANCE LTD CAYMAN ISLANDS Banks 9/7/2021 A /20/2016 N USD KINGDOM OF BAHRAIN BAHRAIN Sovereign 1/26/2021 BB STABLE /20/2016 N USD KINGDOM OF BAHRAIN BAHRAIN Sovereign 1/26/2026 BB STABLE /20/2016 N USD EMBRAER OVERSEAS LTD CAYMAN ISLANDS Aerospace/Defense 9/16/2023 BBB /21/2016 N USD SINO OCEAN LND TRS FIN I BRITISH VIRGIN Real Estate 7/30/2024 BBB /20/2016 N USD EZDAN SUKUK CO LTD CAYMAN ISLANDS Real Estate 5/18/2021 BB /20/2016 Y USD KINGDOM OF JORDAN JORDAN Sovereign 1/29/2026 NR NEG /20/2016 N USD HIKMA PHARMACEUTICALS PL BRITAIN Pharmaceuticals 4/10/2020 BB STABLE /20/2016 N USD KUWAIT PROJECTS CO CAYMAN ISLANDS Holding Companies-Divers 3/15/2023 BBB /20/2016 N USD CEMEX SAB DE CV MEXICO Building Materials 4/16/2026 B POS /21/2016 N USD TELEKOM MALAYSIA BERHAD MALAYSIA Telecommunications 8/1/2025 A STABLE /21/2016 N USD LAMAR FUNDING LTD CAYMAN ISLANDS Electric 5/7/2025 BBB /20/2016 N USD BANK MUSCAT SAOG OMAN Banks 5/3/2021 BBB STABLE /20/2016 N USD OOREDOO INTL FINANCE BERMUDA Telecommunications 6/22/2026 A /20/2016 N USD DAR AL-ARKAN SUKUK CO LT SAUDI ARABIA Real Estate 11/25/2016 NR /20/2016 Y USD SAUDI ELEC GLOBAL SUKUK CAYMAN ISLANDS Electric 4/8/2024 A /20/2016 Y USD FINANSBANK AS TURKEY Banks 4/30/2019 BBB /20/2016 N USD ALTERNATIFBANK AS TURKEY Banks 4/16/2026 BB /20/2016 N USD KOC HOLDINGS AS TURKEY Holding Companies-Divers 3/15/2023 BBB NEG /20/2016 N USD TURKCELL ILETISIM HIZMET TURKEY Telecommunications 10/15/2025 BBB NEG /20/2016 N USD REPUBLIC OF TURKEY TURKEY Sovereign 4/14/2026 BB NEG /21/2016 N USD HAZINE MUSTESARLIGI VARL TURKEY Sovereign 10/10/2018 BBB /20/2016 Y USD TURKIYE IS BANKASI A.S TURKEY Banks 12/10/2023 BB NEG /20/2016 N USD TURKIYE IS BANKASI A.S TURKEY Banks 6/25/2021 BBB NEG /20/2016 N USD BNQ CEN TUNISIA INT BOND TUNISIA Banks 1/30/2025 BB /20/2016 N USD 18-Sep-16 Source: Bloomberg, All Prices are Indicative

2 Yield Curve Analysis 3.50 US Yield Curve (%) Sep Dec-15 One Month Ago: M 3M 6M 1Y 2Y 3Y 4Y 5Y 6Y 7Y 8Y 9Y 10Y 15Y 20Y 25Y 30Y Over the past two weeks and amid the Eid holiday in the MENA Region, global sovereign yields broke up the trading range that plagued them since early August to continue their upward reversal from the nadir reached in early summer. This reversal in advanced economy's sovereign yields came on the back of mixed statements from US Fed officials in relation to the timing and number of interest rate hikes ahead of their meeting on the 20 th 21 st of September, coupled with the markets disappointment from the ECB which refrained from adding new stimulus, preferring a wait-and-see approach and a re-assessment of the bond buying program, albeit the lack of bonds available in the market. While the Bank of England decided to stay put, where it kept its benchmark interest rates at 0.25% and promised further stimulus in terms of rate cuts in the coming months. All eyes seem to be simmered on the Fed meeting this week, but more importantly on the Bank of Japan meeting who is re-assessing its policy tools, sending mixed messages in relation to further stimulus while implicitly appearing to be content with the relative strength in the steepness of the Japanese Yield curve, as this steepness would benefit lamenting banks and pressured pension funds. In all cases, to sum up advanced economies long term yield movement; in the US the 10 year yield climbed from 1.54% at the beginning of September to close at 1.69% last week while almost touching the 1.75% level and thus doing a full roundtrip to where it was pre-the Brexit vote. As for German 10 year bond yields, they crossed into positive territory by climbing from -0.11% to 0.078% before losing ground but still managing to land above zero at 0.007%. The upward trend was similar in the Japanese long term yield, as the 10 year yield rose from -0.06% touched zero then dropped back to %. On a separate note, equities across the globe were following a volatile pattern on the beat of potentially less accommodative central banks, while oil lost ground sharply on renewed reports by the International Energy Agency about the persistence of the oil glut well into 2017, with Brent approaching USD 45 per barrel, and as for gold it declined to the level of early September to around USD 1,310 per ounce. In the US, economic data remained mixed as Retail Sales and Factory Output were below expectations while a better than forecast Consumer Prices (inflation measure) did not affect the probabilities of an interest rate hike in September which stood at 20%, while that of December is around 55%. In the Eurozone, inflation figures came inline with expectations, however Industrial Output data and PMI figures were not highly encouraging. In Asia, we have noticed better than expected data from China at the level of Industrial Production and Retail Sales along with a potential bottoming in sovereign yields. As for Japan and as mentioned earlier, the meeting of the central bank will have a decisive impact on fixed income markets in the coming week. The recent reversal in yields, especially in the long end of the curve, that has occurred since the beginning of the summer, points that central banks while looking to be accommodative in a low growth environment seem to have lost control over some part of the fixed income market. Concurrently, central banks look to be in favor of some steepness in the yield curve as it will help banks, which saw their Net Interest Margins hammered, and pension funds which are experiencing a funding gap. As an extension of the relative steepness in the yield curve, we noticed an outflow form ETFs tracking long term bonds and some correction in the prices of high yield bonds across the board and beyond those that are energy related. As such we would recommend investors to wait for the results of the central banks meetings before deploying new funds into the market and to set wide yield-to-maturity spreads above those of relevant treasuries benchmarks. In the MENA we are waiting for the wave of new issues that started before the Eid holiday to crystalize more by October, which in turn may offer investors a multitude of opportunities.

3 Yield Curve Analysis Japan Generic Govt 10Y Yield Germany Generic Govt 10Y Yield US Generic Govt 10 Year Yield In the MENA region, the show has started, as many issuers are in a rush to issue bonds ahead of the big issuances, where Saudi Arabia is expected to raise USD15bln as early as next month and Kuwait should borrow USD10bln in November and another USD5bln in January 2017, nonetheless and according to the Financial Times, Asian investors showed huge interest in Saudi s new issues, as Asian investors are desperately looking for positive yields, the FT also added that Saudi government entities, lenders, and private corporations are said to be lining up for a debt issuances after the debut sovereign issue. Ratings update: Moody's upgrades DP World's and JAFZ's ratings to Baa2 with stable outlook Fitch affirms Saudi Arabia at 'AA-'; outlook negative Fitch affirms Qatar s AA rating: outlook stable New Issues Update: Sharjah Islamic Bank (Rating: S&P;A3/ Moody s; BBB+/ Fitch; BBB+) priced a 5-year US$500mn Sukuk at MS+185 bps and a profit rate of 3.084% Qatar National Bank (Rating: S&P; Aa3/ Moody s; A+/ Fitch; AA-) priced a 5-year US$1bn bond at MS+115 bps and a coupon of 2.125% Emirates Islamic Bank (Rating: Fitch; A+) taped their existing May-21 maturity Sukuk to raise US$250mn at a spread of MS+170 Emaar Properties rated Baa3 by Moody s / BBB- by S&P (both stable), has mandated banks to arrange a USD2bln Sukuks

4 % Fixed Income Spread Analysis & Macro Analysis LIBOR USD 3 Month US Spread 10yr - 2yr Treasuries US Spread 30yr - 2yr Treasuries LIBOR: is a benchmark rate that some of the world s leading banks charge each other for short-term loans. LIBOR s primary function is to serve as the benchmark reference rate for debt instruments, thus higher rates should affect debt instruments negatively. 4.50% 4.00% 3.50% 3.00% 2.50% 2.00% 1.50% 1.00% 0.50% 0.00% -0.50% 1.692% 0.94% Fed Meeting Probability of a Fed Rate Hike (As of 18, Sept, 2016) Probability of an Interest Rate Hike Probability of an Interest Rate Cut Sep % 0.00% Nov % 0.00% Dec % 0.00% Feb % 0.00% 2.00% 1.80% 1.60% 1.40% 1.20% 1.00% 0.80% 0.60% 0.40% 0.20% 0.00% Spread US IG-US 10yr Treasury Spread Global IG-US 10yr Treasury 1.20% 0.45% Mar % 0.00% The yield spread figure is the difference between two key interest rates. Spreads usually indicate the likelihood of a recession or a recovery. Spreads are also used to gauge the extent of market risk-taking and business confidence. For example a narrowing spread between the 2 &10 treasury yields indicates a flattening yield curve while a widening one implies steepness in the curve. If the spread between US treasury & High yield bond is widening it means that credit risk perception of lower quality bond is increasing in the market. If spread between investment grade bond & treasury yields is declining it means that perception of credit risk is declining and investors are positive on economic activity in general

5 Investment Team Yezan Haddadin CEO Wassim Jomaa, CFA Head of Asset Management Raed Al Momani Portfolio Manager Qasem Bilbeisi Financial Analyst Mohammad Al Zou bi, CFA Financial Analyst Disclaimer The information and opinions contained in this document have been compiled in good faith from sources believed to be reliable. Capital Investments makes no warranty as to the accuracy and completeness of the information contained herein. All opinions and estimates included in this report constitute and reflect our independent judgment as of the date published on the report and are subject to change without notice. Capital Investments accepts no liability whatsoever for any loss ofany kind arising out of the use of all or any part of this report. Capital Investments and its related companies may have performed or seek to perform any financial or advisory services for the companies mentioned in this report. Capital Investments, its funds, or its employees may from time to time take positions or effect transactions in the securities issued by the companies or securities mentioned in this report.this document may not be reproduced in any form without the expressed written permission of Capital Investments. The opinions contained within the report are based upon publicly available information at the time of publication and are subject to change without notice. Prior to investing, investors should seek independent financial, tax and legal advice.

Global Markets Update QNB Economics 12 March 2017

Global Markets Update QNB Economics 12 March 2017 Executive Summary Key Takeaways US yields rose on a highly likely Fed rate hike this week; Eurozone yields rose after the ECB president lowered expectations