International Capital FlowsSaudi Arabia as destination and source of capital for asset management

Abdullah M. AlfouzanChairman, The Investor for Securities Co.

Riyadh, Saudi Arabia3 April 2014

The Investor for Securities Co. 2

BASIC DATA

Population 27 million

% population 0-24 years 47%

Urbanization 82%

GDP per capita $31,300

Daily value of crude exports > $650 million

2011 2012 2013 $825

$845

$865

$885

$905

$925

GDP

Saudi Arabia, a destination for global capital

• Approaching $1 trillion GDP

• Consistent positive GDP growth

• Gross national savings among highest in the world

• Highly urbanized, young population

• $717 billion foreign currency reserves

• > $120 billion inward Foreign Direct Investment, 2008-2011

• An ancient culture, but also thoroughly modern

2011 2012 2013

GDP 8.6% 5.1% 3.6%

The Investor for Securities Co. 3

Saudi capital markets, young and growing

• Capital Market Law, 2003

• Capital Market Authority (CMA), 2005

• CMA enforces a clear line between banking & investments

• Tadawul, national stock market, > $510 billion total market capitalization

• More than 11 million investors, 159 traded companies, growing sukuk market

• Tadawul up: 11% YTD, 33% YoY (31 March 2014)

The Investor for Securities Co. 4

Saudi financial intermediaries

• 83 active CMA-licensed investment companies

10 linked to domestic Saudi banks 19 to foreign banks 13 to foreign investment companies

• > 30 Saudi investment companies are fully independent & local

• Top foreign names in Saudi Arabia: JP Morgan, Merrill Lynch, BNP Paribas, Credit Suisse, HSBC, Deutsche Bank, KKR, Lazard

• Top domestic names: The Investor, Falcom, Jadwa, Alkhabeer

• Core businesses: Investment banking, brokerage, asset management

• 256 mutual funds, > $27 billion AUM

The Investor for Securities Co. 5

Inward investments into Saudi Arabia

• Market preparing for King Abdullah’s signature, replace existing swap arrangement

• Draft legislation prepared, awaiting only final royal approval

• CMA chairman wants short delay, time for upgrading market systems

• At one point SAMBA’s Saif Saudi fund was largest country fund in the world

• Portfolio rebalancing, eventual inclusion in MSCI, creates demand

• Some analysts predict up to $10 billion foreign investor demand for Tadawul listings (up to 20% of market cap)

Key drivers: Industry & Real Estate

The Investor for Securities Co. 6

Next step, global investment in Saudi real estate• Currently restricted, no foreign investment in

Saudi real estate sector

• Exceptions: GCC nationals, some expatriate and international investors

• Large middle class, purchasing power in SAR 500,000 to SAR 1 million range

• Housing demand today: Over 300,000 new units required

• Total Saudi construction spending 2012-2013 was > $225 billion

• Expected yields of 25% IRR or more in almost any sector, any region of Saudi real estate

“With its young and expanding population, Saudi Arabia should remain the most buoyant [real estate] market, in line with its overall economic development plan….the recent approval of the mortgage law should help to drive growth in residential construction in response to the current housing shortage”

President MENA, BofA Merrill Lynch

The Investor for Securities Co. 7

Saudi Arabia, a source for global capital• Global demand for Islamic investments, > $3 trillion

• Existing $3.5 trillion AUM owned by Muslims, almost none sharia compliant

• Estimated $200 billion under management in Switzerland owned by Saudis

• Most Muslims live a sharia life, want sharia-compliant investing

King Abdullah Financial City

• Safa Investment Services: the world’s first global Islamic asset manager

• Collaboration between Swiss and Saudi units of The Investor for Securities Co.

• Professional team of asset managers, growing client base

The Investor for Securities Co.

Safa balanced portfolio allocation

6.0%

40.0%

48.0%

6.0%

Cash / Cash Equivalent Fixed Income Global EquityAlternatives

• Global asset allocation

• Fully diversified across all asset categories

• Fully diversified within each category

• 100% liquid, can be redeemed at any time

• Robust portfolio construction, fully optimized

• All assets meet global professional standards for size, track record, liquidity

• Fully sharia compliant

Source data: Bloomberg

8

The Investor for Securities Co.

Safa portfolios

9

Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14-40%

-30%

-20%

-10%

0%

10%

20%

30%

40%Safa conservative portfolioSafa balanced portfolioSafa growth portfolio

Perf

orm

ance

Source data: Bloomberg

Past performance is not a reliable indicator of future results. Performance data is calculated NAV to NAV, and does not take account of commissions and costs incurred on the issue and redemption of units.

Portfolio Statistics

Safa conservative

Safa balanced

Safa growth

(6 Years) (6 Years) (6 Years)

Return

Total return 30.90% 36.38% 37.44%Annualized total return 4.53% 5.23% 5.37%

Risk

Standard deviation (annualized) 5.20% 10.71% 13.88%

Islamic asset allocations: above-market performance lower risk metrics

The Investor for Securities Co. 10

The Investor for Securities Co.

• Key player in Saudi capital markets

• Founded 2007, SAR 200 million paid-in capital

• Profits 2013, > SAR 82 million

• > 50 professional staff

• > SAR 10 billion AUM (CHF 2.5 billion)

• Strong presence in Saudi equity markets, private placements and real estate

The Investor for Securities Co. 11

Conclusion

• Capital flows from and to Saudi Arabia will continue to be important Increasingly sophisticated investors & businesses

• Saudi Arabia is a major destination for investors in emerging markets Foreign direct investment, particularly in future Saudi real estate funds Portfolio investment in the Saudi stock and sukuk markets, Tadawul

• Foreign bankers are welcome, but only with CMA regulatory approvals

• Our new Safa Investment Services will capture an important part of global Saudi portfolio investments

• The Investor for Securities Co. is ideally placed for both inward and outward Saudi investments

The Investor for Securities Co. 12

Thank you.

Abdullah M. AlfouzanChairmanThe Investor for Securities Co.Aljumaiah Center, King Fahd RoadP.O. Box 67838Riyadh 11517Saudi Arabia

Telephone: +966-11-200-7002 x 333E-mail: a.alfouzan@theinvestor.com.saWebsite: www.theinvestor.com.sa

Abdullah M. AlfouzanChairmanIslamic Wealth & Asset Management S.A.11, rue Verdaine1204 GenevaSwitzerland

Telephone: +41-22-310-6212E-mail: a.alfouzan@theinvestor.com.saWebsite: www.safainvest.com