Q3 2020 MAYAR FUND LTD LETTER TO PARTNERS Cover Image: The windmills (“asbads”) in the Iranian town of Nashtifan are more than a 1000 years old. They are used to generate power to grind grains and are among the oldest known windmills in the world. 4
Table of Contents
Our Partnership Principles 5
Our Strategy 6
Investment Process 7
Performance History 8
Letter from the Managing Director 10
Asset Allocation 14
About Mayar Fund and Mayar Capital 17 5
Our Partnership Principles
We will communicate with you regularly and in a straightforward manner. We will not sugarcoat or exaggerate the truth. We will never promise what we cannot deliver.
We will continue to keep a substantial percentage of our net worth invested along your side, as have many of our family members and friends. Rest assured that our interests are aligned with yours.
We will strive to manage your capital to maximize long-term results and will gladly accept “bumpier” short-term results to achieve them.
We will look at risk before return and will ignore high-risk opportunities regardless of potential payoffs.
6 Our Strategy
We invest globally in great businesses that have durable economic moats, favorable customer economics, consistent financial results, high and stable returns on capital, strong cash flow generation, and attractive capital redeployment opportunities.
We do that by buying securities of great companies with able and shareholder-oriented managements, a conservative capital structure, and a strong track record of rational capital allocation.
We pay reasonable prices for these securities, giving us a margin of safety on our investment, and we place significant amounts of our capital into such rare opportunities and continue to own such companies as long as these conditions are satisfied.
We are patient and disciplined. We don’t view ourselves as investing in little pieces of paper that trade in markets. Behind every stock there is a real business and we, the shareholders, collectively own that business. This mental framework drives our decision- making process. Many in the investment field call us value investors, we call ourselves businesspeople.
Most of the time, the successful execution of our strategy requires us to act against the crowd. Or, in the words of Warren Buffett: “Be fearful when others are greedy. Be greedy when others are fearful.” Our edge over other market participants is in having a much longer investment horizon, better temperament, and the investment discipline to stay the course, especially in down and volatile markets.
Great Business Great Company Great Value
> Customer Economics > Management Margin of Safety > Consistent > Capital Structure
> High ROIC > Capital Allocation
> Cash Conversion Intrinsic Value Market Price > Redeployment 7 Investment Process
PROPRIETARY CHECKLIST-BASED SCORING SYSTEM
Killing the Idea The Deep Dive
Understandable Red Flags Evaluate the Moat, Industry, Ethical Quantitative Management, Financials, & Qualitative Prospects
Regular Monitoring Valuation & Portfolio
Daily Quarterly Intrinsic Value Position Size News, Company Financials, Range of Values Risk vs return Filings, Portfolio Checklist, Diversification prices Valuation 8 Performance History Mayar Fund Class A (Initial Series) - Since Inception
Value of $100,000 invested
$260,000 $257,001
$240,000 Mayar Fund (net) MSCI World Index $220,000 $213,310
$200,000
$180,000
$160,000
$140,000
$120,000
$100,000
$80,000 1 2 4 5 6 7 8 9 9 -13 17 1 ay-11 ay-13 ug-14 ug-17 eb-18 ay-18 ug-18 ay-20ug-20 M Aug-11Nov-1 Feb-12May-12Aug-12Nov-1Feb-13M Aug-13Nov Feb-14May-14A Nov-1Feb-15May-15Aug-15Nov-1 Feb-16May-16Aug-16Nov-1 Feb-17May- A Nov-1 F M A Nov-1 Feb-19May- Aug-19Nov-1Feb-20M A
Annualized Performance Firm AUM* Millions 12% 160
140 $143 10%
120
8% 100
80
6% 10.18% 60 8.22% 40 4% 20
2% -
ay-11 ay-13 ay-15 Mayar Fund - Class A M Nov-11May-12Nov-12M Nov-13May-14Nov-14M Nov-15May-16Nov-16May-17Nov-17May-18Nov-18May-19Nov-19May-20Nov-20 MSCI World Index Net TR *Firm AUM is a combination of the AUM of the fund and managed accounts 9
Cumulative Performance
Class A Class B
Fund (net), % MSCI World, % Fund (net), % MSCI World, % MTD -1.28 -3.45 -1.09 -3.45
QTD 11.96 7.93 12.48 7.93
YTD 7.35 1.70 8.13 1.70 1 Year 18.36 10.41 19.44 10.41
3 Years 37.92 25.06 40.50 25.06
5 Years 80.65 64.56
7 Years 95.57 75.23
Since Inception 157.00 113.31 47.87 34.40
Annual Performance
Class A Class B
Fund (net), % MSCI World, % Fund (net), % MSCI World, % 2011* -1.93 -10.40
2012 13.37 15.83
2013 26.91 26.68 2014 5.68 4.94
2015 1.33 -0.87
2016 7.64 7.51
2017 18.73 22.40 9.20 13.39
2018 -0.56 -8.71 -0.06 -8.71
2019 24.67 27.67 25.30 27.67
2020 7.35 1.70 8.13 1.70
Performance Statistics (Class A, Since Inception)
Class A Class B Class A Class B
ANNUALIZED ALPHA 3.17 3.27 ANNUALIZED VOLATILITY 12.17 14.45
SHARPE RATIO 0.89 0.91 BETA 0.85 0.89
TREYNOR RATIO 12.36 14.44 R-SQUARED 0.91 0.93
INFORMATION RATIO 0.5 0.57 UPSIDE CAPTURE RATIO 94.15 94.07
SORTINO RATIO 1.3 1.26 DOWNSIDE CAPTURE RATIO 77.12 77.05
TRACKING ERROR 4.29 4.23
*Calendar year 2011 is a partial year starting May 15 10 Letter from the Managing Director
Our For the three months ending September 30, 2020, Mayar Fund (Class A) returned Performance 11.95% net of all expenses and fees while the MSCI World Index increased by 7.93% Since its inception in May 2011, Mayar Fund is up 157.00% net versus a 113.31% increase for the MSCI. That corresponds to a 10.18% annualized rate of return for Mayar Fund, compared to 8.22% for the MSCI.
General UNDERPERFORMANCE AND ACTIVE SHARE Commentary It may seem odd to you that I would lead this letter with some thoughts on under- performance in one of the strongest periods of outperformance in Mayar’s history. But I’ve always believed in the importance of reminding our partners that periods of underperformance from time to time are inevitable in our line of business, and that they should expect such periods and be mentally prepared when they do occur. We’ve had several periods of underperformance in the past and I’m sure we’ll have others in the future. Deciding how to deal with such periods, is one of the biggest challenges that any active portfolio manager must face from time to time.
It is never easy, no matter who you are and where you work. There are multiple sources of pressure depending on the manager’s structure and organization. Whether it’s office politics, questions or redemptions from clients, or reduced take- home pay, managers in organizations big and small will be under some degree of stress.
Organizations and individuals deal with this in different ways. Big organizations typically diversify their offerings into different strategies and asset classes so that no one strategy has a big impact on their results. Or, phrased differently, no one strategy or asset class really matters! While that approach protects the organization’s overall interests, it doesn’t remove the individual pressure on the portfolio manager because it doesn’t necessarily deal with the internal politics of underperformance. 11
What is Active Share? As a result, portfolio managers often react to these incentives by reducing their risk Investopedia defines Active of underperformance over any one period by running portfolios that look a lot like the Shares as the fraction of a benchmark. This is known in academia as having a portfolio with low “active share”. fund’s portfolio holdings that deviate from the benchmark Unfortunately, while doing that reduces the risk of under-performing the benchmark, index. The active share of it also reduces the chances of out-performing it and ensures that when the strategy a mutual fund ranges from does outperform, the magnitude of this outperformance will be smaller and often zero (pure index fund) to eaten up by the fund’s management fees. It is no wonder then that most portfolio 100 percent (no overlap with the benchmark). managers at these big firms underperform their benchmarks year after year.
Read more about it here It is rarer, however, to see this kind of behavior in boutique firms. Because they are owned and lead by the portfolio manager and their team, they can avoid the internal politics prevalent at bigger organizations. And while pressure from clients and finances might still exist, being owners gives these portfolio managers the ability to take a longer-term approach to both their client relations and their compensation. By being able to defer their own gratification, they end up in a better position to take a longer-term view to managing their portfolios. This, I believe, allows them to specialize in fewer strategies and to run portfolios with high active share, increasing the odds of outperformance over the long run.
Mayar Fund’s Active Share (5 Years)
Over the past decade, fund investors have started wising up to what much of the industry has been doing. They started dumping their low active share fund managers and putting their money in passive index funds that charge lower fees. They realized that they were paying higher fees to active managers but getting funds that look very much like an index that they could buy for cheap. I expect that over the next few years only managers with high active share will be able to retain their clients. It will make the job of many portfolio managers a lot harder, but there is no reason why this job should be easy! 12
RESPONSIBLE INVESTING Last month marked twenty years since I started investing from my university dorm room. At the suggestion of my dear friend Saud Alblehed, I had read Peter Lynch’s One Up on Wall Street and Robert Hagstrom’s The Warren Buffett Way and got instantly hooked.
I started reading everything on business and investing that I could get my hands on. The following years I raised $550 from my sister Yasmeen and $1,000 from my friend Hamad Al Saleh, and, combined with my savings started my “professional” money management career.
In my first annual letter to my new investors I wrote:
We will invest in companies that adhere to our ethical principles, we want to be shareholders of companies that provide a needed service or product to their customers, cherish their employees, and help make this world a better place. We believe companies that follow this path will become model citizens of this world and, on the way, create substantial value for their shareholders — us.
I’ve put on a few pounds and lost most of my hair since then, but my desire to invest responsibly in a way that allows me to sleep well at night has never wavered. I’ve always believed that there are many ethical ways of making money for someone with a long-term horizon, so why bother with the non-ethical ones.
For most of those twenty years, the most we could do if we didn’t like the way a company behaved was to sell the shares we owned. Our small size made it impractical to try and do anything else. But as Mayar Capital grows, we can and will do more. The bigger we get, the more power and responsibility we will have to make a difference.
Last year we announced that we had become signatories of the Principles for Responsible Investment. By becoming signatories, we cemented our long-existing commitment to incorporate environmental, social, and corporate governance issues into our investment process.
Since then we have engaged with management, other institutional shareholders, and the press on multiple issues including objecting to the takeover of Merlin Entertainments on governance grounds, lobbying Alphabet to create an independent Human Rights Risk Oversight Committee, and pushing to rein in excessive management pay at Electronic Arts.
We have created a “Responsible Investing” section on our website where you can find our Responsible Investing Policy, our commitments under the PRI, and soon, full disclosure of our proxy voting record. 13
And we’re applying the same rules to Mayar as a firm as well. We are working on better ways to engage with our stakeholders including investors like you, our employees, and our community. Earlier this year we started a program for Mayar Capital employees to volunteer locally. We are working on improving our environmental and carbon footprint as a company. And, starting this quarter, we will be holding quarterly investors calls to hear from you, share our thoughts, and answer your questions.We might still be small, but we’re already at a size that means we can do a lot, and as we grow our commitment to act responsibly as investors will grow with us.
Our Portfolio During the quarter we added to our investments in Discovery, PZ Cussons, Unilever, Howdens Joinery, SAP, and Evertec. We also trimmed our positions in UPS, Vestas, and Toll Brothers on valuation.
We expanded our “homebuilders’ basket” by adding three Spanish homebuilders to our portfolio and trimmed three of our UK homebuilders to free up cash to buy them. The thesis for both remains the same. After the burst of the housing bubble and the great financial crisis, many countries ended up with excess housing supply and a battered homebuilding sector. This was followed by many years of exceptionally low building volumes as the excess supply was worked through. We believe that many countries have now reached the point where that excess supply has turned into a shortage and many more homes will need to be built. That, combined with better balance sheets at home builders and very low mortgage rates, will translate into accelerating demand in the coming years.
The Fund and The Mayar family welcomed a new member this quarter with the arrival of Constantine the Company Ivan Mayes on August 21st. Kamea and her newborn son are well, and we can’t wait to meet him!
Mayar Capital achieved another milestone last week with Assets Under Management (AUM) reaching $150 million. I am very grateful for the wonderful team we have at Mayar and for an amazing group of partners like you that continue to support and trust us with their capital.
As always, I remain available if you have any questions or thoughts.
Best regards,
Abdulaziz A. Alnaim, CFA Managing Director October 15, 2020 14 Asset Allocation
Ten Largest Positions
Company Name % Industry Country of Listing Vestas Wind Systems 7.46 Capital Goods Denmark
Unilever 6.83 HH & Personal Prod United Kingdom
Samsung Electronics 5.99 Tech Hardw & Equip South Korea
Johnson & Johnson 5.65 Pharm & Biotech United States
United Parcel Service 5.11 Transportation United States
Brenntag 4.94 Capital Goods Germany
Alphabet 4.76 Media & Entertainment United States
Discovery 4.41 Media & Entertainment United States
Henkel 4.20 HH & Personal Prod Germany
SAP SE 3.84 Software & Services Germany
Total 53.20
Top Contributors to Gains (%) Top Contributors to Losses (%)
Vestas 3.86 Nordstrom Inc -0.57
United Parcel Service 3.49 Taylor Wimpey -0.28
Toll Brothers 1.02
Vistry Group -0.21
Pz Cussons 0.86
Redrow -0.14 Evertec 0.82
Electronic Arts -0.01 Brenntag 0.80 15
Last Quarter This Quarter
Portfolio (by revenue)
North America 41% 40% North America
Europe 32% 35% Europe
Asia 11% 11% Asia
Cash 10% 9% Cash
Other 5% 5% Other
Portfolio (by listing)
North America 45% 44% Europe
Europe 38% 41% North America
Cash 10% 9% Cash
Asia 6% 6% Asia
Portfolio (by country of listing)
41% United States United States 45% 18% United Kingdom United Kingdom 15% 14% Germany Germany 13% 9% Cash Cash 10% 8% Denmark Denmark 7% 6% South Korea South Korea 6% 3% Switzerland Switzerland 4% 2% Spain 16
Portfolio (by industry) Last Quarter
17% Capital Goods 14% Software & Services 10% Cash 10% Household & Personal Products 9% Media
8% Retailing 8% Pharmaceuticals & Life Sciences 8% Consumer Durables & Apparel 7% Transportation
6% Technology Hardware & Equipment 4% Health Care Equipment & Services
Portfolio (by industry) This Quarter
18% Capital Goods 12% Software & Services 12% Media 11% Household & Personal Products 9% Cash
9% Pharmaceuticals & Life Sciences 7% Retailing 7% Consumer Durables & Apparel
6% Technology Hardware & Equipment 5% Transportation 4% Health Care Equipment & Services 1% Real Estate
17 About Mayar Fund and Mayar Capital
Mayar Fund Ltd. (the “Fund”) was incorporated as an Exempted Limited Liability Company under the Laws of the Cayman Islands on March 7th, 2011 and commenced operations on May 16th, 2011. The Fund registered under the Mutual Funds Law of the Cayman Islands on May 3rd, 2011 and was converted into an administered mutual fund on January 23rd, 2017. The principal and registered office of the Fund is located in the Cayman Islands.
The principal activity of the Fund is to carry out the business of an investment fund. The Fund’s principal investment objective is to achieve long-term growth of capital by investing in equities and other securities to generate satisfactory risk-adjusted returns over the long term.
The Investment Manager, Privium Fund Management (UK) Limited, has been appointed by the Manager on November 2nd, 2015 to provide investment management services in relation to the Fund. The Investment Advisor, Mayar Capital Advisors Ltd., has been appointed by the Investment Manager on November 2nd, 2015 to provide investment advisory services in relation to the Fund. 18 Investment Objective
The fund’s investment objective is to achieve long-term growth of capital by investing in equities and other securities to generate satisfactory risk-adjusted returns. The fund seeks to achieve its objective over the long term, which we define as a minimum of five years, by applying a disciplined value investing strategy to the selection of securities in global financial markets, and only invests in securities that comply with the Ethical Investment Criteria (as per PPM).
Structure & Providers
FUND ASSETS (US$): 72,932,734.45 FIRM AUM* (US$): 143,546,277.02 FISCAL YEAR END: June 30 FUND INCEPTION: May 16, 2011 FUND MANAGER: Abdulaziz A. Alnaim, CFA MINIMUM INVESTMENT (CLASS A): $100,000 MINIMUM INVESTMENT (CLASS B): $2.5 million BROKERAGE MANAGEMENT FEE: 1.5% (Class A) / 1.0% (Class B) INCENTIVE FEE: 20% (Class A) / 14% (Class B) of spread above benchmark, with a high watermark BENCHMARK: MSCI World Index DOMICILE: Cayman Islands CUSTODY ADMINISTRATOR: Apex Fund Services AUDITOR: KPMG (Cayman Islands) BLOOMBERG TICKER: MAYARFD KY, MAYARLB KY ISIN: KYG5905A1058 (Class A); KYG5905A1132
(Class B) ADMINISTRATION
*Firm Assets Under Management (“AUM”) include all assets managed by the firm within the fund and separately managed accounts. The present investment strategy was adhered to by the portfolio manager while managing predecessor funds: TwentyEight Inc (2003), and Yareem Ltd (2004 – 2011). FINANCIAL OUTSORSING SERVICES This communication is confidential and is intended solely for shareholders of Mayar Fund Ltd. MIDDLE & BACK OFFICE Mayar Capital Advisors Ltd and its affiliates provide investment advisory and asset management services to institutions, family offices, and high net-worth individuals globally. Mayar Capital Advisors Ltd is an Appointed Representative of Privium Fund Management (UK) Ltd, which is authorised and regulated by the UK’s Financial Conduct Authority. Mayar Capital Advisors Ltd | 31 Clerkenwell Close, office G07 London AUDIT EC1R 0AT United Kingdom | [email protected] | www.mayarcapital. com Privium Fund Management (UK) Ltd | The Shard, 24th Floor 32 London Bridge Street London SE1 9SG | [email protected] | www. Venture One Legal priviumfund.com LEGAL
19 Board of Directors Mayar Fund Ltd
Abdulaziz A. Alnaim, CFA Managing Director, Mayar Capital
Ali M. Al Daftari CEO, Pantera Investment Management
Ayman Afghani Advisor to the Saudi Minister of Economy and Planning.
Mayar Capital Advisors Ltd
Abdulaziz A. Alnaim, CFA Managing Director, Mayar Capital
Aubrey W. Brocklebank Director, Senior Analyst & Assistant Portfolio Manager
Our Team Research & Investment Operations (Apex Financial Outsourcing Services) Abdulaziz A. Alnaim, CFA Managing Director Venki Subramanian Middle and Back Office Manager Aubrey Brocklebank Director, Senior Analyst Akhtar Ansari Middle and Back Office Team Zhuang Jiang Research Intern Fund Administration (Apex Fund Services Operations Bahrain) Avinash Gungadoo Stefan Dawidowski Managing Director Chief Operating Officer Hawraa Alshakhoori Marc Cox Fund Accountant Head of Investor Relations Rachna Bhatia Kamea Mayes Account Manager Operations Associate Taha Alsadadi Sophie Forsyth Compliance Officer & MLRO Assistant Offshore Legal Advisor (Venture One Compliance & Risk (Privium Fund Legal Ltd) Management UK Ltd) Fawaz Elmalki John Griffiths Counsel Compliance Officer
Reuben Leemeijer Risk Manager 20 Awards 2020 MAYAR FUND CLASS A USD AS OF 30/09/2020
5-CROWNS FE TRUSTNET CROWN RATING 2019 2018 MAYAR FUND MAYAR FUND CLASS A USD CLASS A USD AS OF 31/12/2019 AS OF 31/12/2018
2017 Award for Excellence in Value Investing Long Only Equity Fund of the MAYAR FUND Strategies 2017 & Best Performing Value Fund CLASS A USD Year — 2017 AS OF 31/10/2017 (5 Years): Mayar Fund
Winner - Acquisition International Award for Innovation in Value Mayar Capital Management Saudi Asset
2015 Hedge Fund Awards 2015 – Best Investing — 2015 Investment Company Manager of the Year Global Equities Hedge Of The Year — Saudi Arabia 2015 Shortlisted — 2015 Fund — Cayman Islands 2014 2013
Saudi Asset Manager of the Saudi Asset Manager of the European Hedge Fund of the Year Year Shortlisted — 2014 Year Shortlisted — 2013 Shortlisted — 2013
21 Disclaimer
This document is prepared by Mayar Capital Advisors Limited distribute this presentation in whole or in part, nor to disclose any (“MCA”), an Appointed Representative of Privium Fund of its contents (except to its professional advisors), without the Management (UK) Limited (“Privium”), which is authorised and prior written consent of MCA. regulated by the Financial Conduct Authority (“FCA”) in the United Kingdom. It is not intended for distribution to or use by Comparison to the index where shown is for information only any person or entity in any jurisdiction or country where such and should not be interpreted to mean that there is a correlation distribution or use would be contrary to local law or regulation. between the portfolio and the index. The views expressed in this Within the EEA Mayar Fund (“the Fund”) is only available to document are the views of MCA and Privium at time of publication Professional Investors as defined by local Member State law and may change over time. Where information provided in this and regulation. Outside the EEA, the Fund is only available to document contains “forward-looking” information including Professional Clients or Eligible Counterparties as defined by estimates, projections and subjective judgment and analysis, no the FCA, and in compliance with local law. This document is representation is made as to the accuracy of such estimates or not intended for distribution in the United States (“US”) or for projections or that such projections will be realised. Nothing in the account of US persons, as defined in the Securities Act of this document constitutes investment, legal tax or other advice 1933, as amended, except to persons who are “Accredited nor is it to be relied upon in making an investment decision. Investors”, as defined in that Act and “Qualified Purchasers” as These materials and any tax-related statements are not intended defined in the Investment Company Act of 1940, as amended. or written to be used, and cannot be used or relied upon, by any It is not intended for distribution to retail clients. This document taxpayer for the purpose of avoiding tax penalties. Tax-related is qualified in its entirety by reference to the Private Placement statements, if any, may have been written in connection with Memorandum (together with any supplements thereto, “the the “promotion or marketing” of the transaction (s) or matter(s) PPM”) of Mayar Fund. Please see the section of the PPM on addressed by these materials, to the extent allowed by applicable information required by Securities Laws of certain jurisdictions. law. Any taxpayer should seek advice based on the taxpayer’s particular circumstances from an independent tax advisor. This document is provided for information purposes only and should not be regarded as an offer to buy or a solicitation of an Prospective investors should inform themselves and take offer to buy shares in the fund. The prospectus and supplement appropriate advice as to any applicable legal requirements and of the fund are the only authorised documents for offering of any applicable taxation and exchange control regulations in the shares of the fund and may only be distributed in accordance countries of their citizenship, residence or domicile which might with the laws and regulations of each appropriate jurisdiction be relevant to the subscription, purchase, holding, exchange, in which any potential investor resides. Investment in the fund redemption or disposal of any investments. Each prospective managed by Privium carries significant risk of loss of capital investor is urged to discuss any prospective investment in the and investors should carefully review the terms of the fund’s Fund with its legal, tax and regulatory advisors in order to make an offering documents for details of these risks. Mayar Fund independent determination of the suitability and consequences follows a long-term investment strategy. Short-term returns will of such an investment. vary considerably and will not be indicative of the strategy’s merits.This document does not consider the specific investment No recommendation is made positive or otherwise regarding objectives, financial situation or particular needs of any investor individual securities mentioned herein. No guarantee is made and an investment in the fund is not suitable for all investors. as to the accuracy of the information provided which has been Investors are reminded that past performance should not be obtained from sources believed to be reliable. The information seen as an indication of future performance and that they might contained in this document is strictly confidential and is Intended not get back the amount that they originally invested. only for use of the person to whom MCA or Privium has provided the material. No part of this document may be divulged to any This document is confidential and solely for the use of MCA other person, distributed, and/or reproduced without the prior and the existing and potential clients of MCA to whom it has written permission of MCA. been delivered, where permitted. By accepting delivery of this presentation, each recipient undertakes not to reproduce or Mayar Capital Advisors Ltd www.mayarcapital.com [email protected]
27-31 Clerkenwell Close Office G07 London EC1R 0AT United Kingdom