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About the AFC Iraq Fund
The launch of the AFC Iraq Fund follows the recent hire of Mr. Ahmed Tabaqchali, who joined AFC’s investment team as CIO of Iraq investments in November 2014. Mr. Tabaqchali now holds the title of CIO of the AFC Iraq Fund.

The open-ended AFC Iraq Fund is designed to offer qualified US and non-US investors high returns which have a low correlation with global, emerging & other frontier markets, as well as to provide a significant diversification opportunity for investor portfolios. The fund's investment universe consists of local companies that have their principal business activities in Iraq, as well as foreign-listed companies that have the majority of their business in Iraq. The AFC Iraq Fund offers investors high return prospects by positioning itself to benefit from the post-conflict recovery and underlying potential of Iraq. In addition, the fund will capture returns linked to the resource-based upside derived from improvements in the overall economy, which will see significant benefits from the next commodity cycle upswing.

The fund aims to achieve long-term capital appreciation for investors by capturing value in growth companies over the next 7-10 years, predominantly targeting companies leveraged to Iraq’s post-conflict recovery and growth trajectory. Outside of post-conflict and oil price recovery opportunities Iraq equities offer value and exposure to sectors less dependent upon oil and ISIS related factors such as banks, insurance, consumer goods and telecoms amongst others.

About the Iraq Investment Opportunity
Iraq offers a very compelling growth story as a young and attractively valued market that has significant room to grow. The development of the domestic economy has been held back by 35 years of wars, sanctions, and civil strife culminating in ISIS occupation and the ongoing war. The country will benefit significantly from post-war recovery as stability offers individuals and businesses the opportunity to work, employ, and spend, which will drive domestic consumption and investment. Equity markets in post-conflict Sri Lanka saw a rally of +250% in the 18 months after the end of its civil war even without the significant resources to rebuild that Iraq has on offer. Other post-conflict country stock markets have also seen significant rallies in the immediate years after conflict.

Compared to other post-conflict countries that often have broken economies, Iraq is unique in that it has such significant oil wealth already at its disposal. Iraq presently holds approximately 9% of proven world oil reserves, which could potentially rise to as much as 15% as further oil fields are explored and developed. From a macroeconomic perspective, the country has a large, young, and rapidly growing population estimated at 35.9 million with rising income levels that will continue to increase as investment in the oil industry and higher exports support domestic consumption. In spite of the well-documented violence in the country since 2003, Iraq has had one the fastest growth rates in the world and an estimated GDP of USD 233 billion in 2014. Increasing oil exports have also supported the country’s balance of payments, leading to a stable currency for the last 2-3 years as well as increasing foreign reserves.

While the long term story is very appealing, the market entry point for investors at this present time is particularly attractive given the current investment environment. The timing of this fund offers a unique opportunity, as present-day valuations in Iraq are significantly depressed by two phenomena that we expect will not continue in the years to come: the ISIS conflict and depressed oil prices. These events have caused Iraq's equity markets to undergo a severe correction, reflecting the challenges present in 2015 as the country continues to mobilize against ISIS and makes progress towards rebuilding its economy in the wake of recent events.

The underlying fundamentals for Iraq are strong and improving, and any slowdown or halt to conflict will have a significant positive impact on the domestic market in the next economic cycle. Being positioned to capture the opportunities of post-conflict Iraq could mean a potential increase of several hundred percent in local terms and even greater upside when coupled with extremely depressed valuations that exist at present.

Thomas Hugger, CEO of Asia Frontier Capital and AFC Iraq Fund commented, “I am a strong advocate for the potential of frontier markets and see our new Iraq offering as incredible value for investors looking for high long-term investment returns. Whilst there are no doubt challenges facing the Iraqi economy, the current market valuations have the characteristics of a short-term negative overreaction and do not reflect the potential of the Iraqi market in the medium and longer term. The AFC Iraq fund will take advantage of this situation to capture the upside of Iraq’s wealth of natural resources and strong underlying fundamentals. Post-conflict countries are unique phenomena for investors offering large potential returns and the AFC Asia Frontier Fund has been investing in Iraq for more than two years. I am looking forward to working with Ahmed to leverage his decades of experience and local market knowledge to invest in best-of-breed companies that are positioned to capture the maximum upside in the Iraq market in the coming years.”

Ahmed Tabaqchali, Chief Investment Officer of AFC Iraq Fund for Asia Frontier Capital, commented, “Asia Frontier Capital has an excellent track record investing in frontier markets and a strong history of launching innovative, successful funds that leverage their core strengths to execute niche strategies. With this in mind, I can think of no better place to launch the AFC Iraq Fund and I am extremely pleased to be working with the Asia Frontier Capital team to offer investors access to Iraq’s investment potential.

"Having worked extensively in the region and seen Iraq’s prospects on the ground, I am tremendously optimistic about the market in the coming years. Iraq has the potential to be an enormously wealthy country, but has been held back by over 35 years of wars, crippling sanctions, and civil strife. While the risks are probably higher than in other frontier markets, I see the perceived risk as being significantly higher than the actual risk, which is one of the things we hope to arbitrage to bring returns to our investors in the coming years.

"I strongly believe that Asia Frontier Capital’s innovative approach will position the AFC Iraq Fund to capture the opportunities that the country presents. As an Iraqi, I am particularly excited to launch this fund at a unique and attractive entry point for investors to provide access to the country’s tremendous upside potential.”
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