Going for Investor Growth Presentation May, 2013 E 1
Disclaimer This presentation is not an offer or invitation to subscribe to or purchase any securities. No warranty is given as to the accuracy or completeness of the information in this presentation. You must make your own independent investigation and appraisal of the business and financial condition of KIPCO Nothing in this presentation shall form the basis of any contract or commitment whatsoever. This presentation is furnished to you solely for your information. You may not reproduce it to redistribute to any other person. This presentation contains forward-looking statements. These statements may be identified by such words as "may", "plans", "expects", "believes" and similar expressions, or by their context. These statements are made on the basis of current knowledge and assumptions. Various factors could cause future results, performance or events to differ materially from those described in these statements. No obligation is assumed to update any forward-looking statements By participating in this presentation or by accepting any copy of the slides presented, you agree to be bound by the forgoing limitations. 2
Index Executive Summary Bloomberg Ticker: KPROJ KK Reuters Ticker: KPRO.KW 3
A diversified company with deep regional expertise and roots We are Operating holding company with an AuM of US$31 bn # Geography Middle East and North Africa Sectors Primarily financial services and media Track record 21 years of continuous profitability, 11 years of continuous dividends Valuation* P/BV of 1.1x. Attractive NAV A transparent Listed on Kuwait Credit ratings: Majority owned company with Stock Exchange by ruling family an experienced with a market S&P: BBB- of Kuwait management cap of US$2.2 Moody’s:Baa3 team bn* Gateway to MENA with superior access to opportunities # As of 31 Dec, 2012 * As on May 15, 2013 4
Our presence by geographies & sectors Major Sectors Asset Geography management Commercial Revenues 1 Media Insurance Real Estate Industrial Others banking & investment (2012) banking ● ● ● ● ● ● ● 49% Kuwait ● ● ● ● 4% UAE ● ● ● ● 6% Bahrain ● ● ● 5% KSA ● ● ● ● 13% Jordan ● ● 6% Algeria ● ● ● Tunisia ● ● ● ● 11% Egypt ● ● ● ● Lebanon ● ● ● 2% Iraq ● ● ● ● ● ● 4% Others Revenues 2 41% 16% 4% 12% 7% 20% 0% (Q1’13) Assets 3 73% 5% 8% 4% 7% 3% 0% (Q1’13) Attractive presence in high growth economies and promising sectors 1. Based on total reported segmental revenues and assuming consolidation of GIC as a subsidiary 2. Based on segmental reporting revenues of US$ 703 mn (Before inter group eliminations) and including GIC’s & OSN’s revenue of US$ 85mn & 110 mn. 3. Based on segmental reporting assets of US$ 29.9 bn (Before inter group eliminations) and GIC & OSN’s assets of US$ 1.1bn & 1.6 bn respectively 5
Track record of generating attractive returns Total Shareholders’ Return (Share Price Return and Dividend Yield) Growth Last 15 years Last 10 years 206 199 96 91 69 139 139 35 1997 2012 2002 2012 Adjusted Share Price (US cents) Cumulative Dividend (US cents) Note: Data adjusted for stock dividend Book Value Per Share Growth (in US cents) Last 15 years Last 10 years 249 244 39 36 1997 2012 2002 2012 Note: Assuming no dividend was paid 6
Net asset value Attractive valuation for investors NAV Computation (US$ per Share) 0.0 0.1 0.1 (0.1) 667 455 405 0.1 fils fils fils 0.1 0.1 0.1 (0.6) 0.3 0.8 47% 0.7 0.5 1.6 1.6 1.4 1.0 Burgan OSN United Gulf Gulf United Real United Net other Net Debt NAV KIPCO BVPS (US$) Bank Bank Insurance Estate Industries Assets Share Price Company Company Company in US$ Note 2 Note 3 Market Cap Share Control Premium (Note 1) 1. Control Premium has been assumed at 50% to the respective market prices to reflect the value of significant stakes in these entities. 2. OSN has been taken at fair value (~US$ 1.5 bn) used for Joint venture accounting in audited financials of KIPCO (notes 9 & 22 of annual financial statements for year ending 2009), further to merger of Orbit and Showtime in August 2009. Other components of the NAV are at book value as of March 31, 2013. 3. Operating expenses of US$0.03 per share adjusted with net other assets ; prices are as of May 15, 2013 7
Q1 2013 Snapshot Revenues Growth (YoY) (US$ m) Burgan Bank 197 31% OSN 110 27% GIC 85 11% URC 47 48%* SADAFCO^ 98 19% KAMCO # 8 (10)% Overall growth is in line with Shafafiyah forum guidance *Calculated excluding non recurring income on sale of Vardun resulting in gain of US$74 mn in Q1’12 ^ Represents Q4’ numbers; as SADAFCO follows March ending #Management fee is growing steadily; effect of cyclicality in income from financial services (advisory business) 8
Index Strategy 9
Strategic roadmap Building Businesses Regional Thought Outlook leadership Investing Strong Being first in engines managerial Diversified in the of growth expertise MENA revenue region streams Team Target Approach ROE: 20% Balanced Portfolio Investment in companies with sustainable and predictable cashflows 10
Controlling or majority stakes Business Commercial Asset Management & Media Insurance Real Estate Segments Banking Investment Banking (AMIB) Main Entities KIPCO Effective 60.2% 60.4% 96.1% 82.5% 3 44.8% 64.8% Stakes 1 Board 6 of 9 2 of 7 5 6 of 6 6 of 6 4 of 10 4 4 of 7 Representation Market Cap 3,347 Unlisted 418 116 366 490 (US$ mn) 2 S&P: BBB+/A2 Credit S&P: A- Moody’s: A3/ Unrated CI*: BBB CI*: BBB- CI*: BBB- Ratings AM Best: A- P2 Solid & well managed portfolio of fast growing and attractive industries Notes: 1. Effective Stakes given are as of March 31, 2013 2. Market Capitalisation as of May 15, 2013 (Source: KAMCO Research) 3. Stake in KAMCO is held through UGB * Capital Intelligence 4. GIC has 10 board members – 4 from KIPCO , 3 from Fairfax and 3 independent directors 5. OSN has 7 board members – 2 each from KIPCO and Mawarid and 3 independent directors 11
Active management Key businesses – progress indicators Active Management – KIPCO Support & Action Business Then Now 1995 Q1’13 ▪ Transformed from a local player to regional player Net Net Interest Interest ▪ Hired new management in 2010/11 to execute on regional strategy Margin Margin ▪ Focused on growth with prudent loan underwriting 1.3% 2.8% 1996 Q1’ 13 ▪ Merged with Orbit in 2009 to create leading pay TV operator in MENA Sub. Sub. ▪ Gained access to premium content and rolled out anti-piracy initiatives Base Base^ 0 ▪ Focused on subscriber acquisition 782K ▪ Incubated pan-MENA commercial banking network 1998 Q1’13 Book Value Book Value ▪ Equipped to assess / develop opportunities identified by KIPCO US$ 193M US$ 463M ▪ Refining strategy to add more value to financial services sector ▪ Transformed from a local player to regional player 1995 2012 By GPW By GPW ▪ Gained market leadership in 3 key geographies #3 of 5 #1 of 32 ▪ Partnered with Fairfax to strengthen operations and enhance growth ▪ Spun-off AM/IB division to separate client funds from KIPCO funds 2000 AUM Q1’13 AUM ▪ Full range of asset management & investment advisory services in Kuwait US$ 0.7Bn US$ 8.9Bn ▪ Streamlined operation in 2012 to focus on core business Number of success stories demonstrating consistent track record of value creation 12 ^ Represents subscriber base post merger
Index Performance Update 13
Q1 2013: Operating performance continues to be strong 31% growth in operating income; 10% growth in pre tax profits NPA reduced to 5.6% (2012: 7%) Aggregate provision coverage increased to 141% ( 2012: 117%) 27% growth in revenues; 30% growth in subscriber base EBITDA margin reached 25% 2 nd quarter of continuous net profit Net profit of US$6 mn Cost base rationalization continues − Total expenses reduced by 15% Revenue grew by 11% & net profits grew by 2% driven by − 16% growth in net premium earned − 12% growth in investment income 14
Burgan Bank Loan Growth Asset Quality Deposit Growth NPA coverage (aggregate of collateral) % US$ billion US$ billion 21% 6% 32% 40% 14% 3% 41% 31% 111% 108% 117% 141% 19% 16% 11.8 73% 13.9 72% Ex BBT Ex BBT 58% 8.4 10.7 49% 7.2 8.1 6.0 7.1 10.5% 1.8 7.3% 7.0% 1.8 5.6% 2.2 1.6 1.7 0.9 2.1 1.0 0.9 0.0 0.7 0.1 0.7 0.6 0.3 0.1 0.2 0.0 2010 2011 2012 Q1'13 BB JKB AGB BOB TIB BBT^ BB BB JKB AGB BOB TIB BBT^ BB Group Group NPA to Gross Credit Facilities Q1'12 Q1'13 Growth in Deposit Provision Coverage Q1'12 Q1'13 Growth in loan Net Profit & Provisions Total Provision Operating Income US$ million US$ million US$ million 2.8% 2.6% 2.6% 2.6% 2.5% 710 581 691 340 627 587 299 613 550 272 283 327 260 417 263 143 317 465 120 197 83 80 150 255 349 22 298 115 198 26 350 70 180 310 292 226 327 79 82 62 55 17 2010 2011 2012 Q1'12 Q1'13 2010 2011 2012 Q1'12 Q1'13 2010 2011 2012 Q1'13 Specific General Kuwait Regional NIM% Provisions charge to P&L 15 ^ BBT represents Burgan Bank Turkey (Eurobank Tekfen acquired by Burgan bank and renamed)
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