CBA Investors Update Date: November 2012

1. CBA Investors Update Date: November 2012 Presentation by: Richard Muriithi Old Mutual Asset Managers (K) Ltd

2. ECONOMIC GROWTH TREND & OUTLOOK G.O.K. Estimate • 2012 GDP forecast of 4%. Treasury estimates this at 5%. • +ve-Improving macroeconomic conditions, increased infrastructure spending, and higher agricultural output. • -ve- last year of political cycle may result in delayed private sector investment and reduced appetite for big ticket consumption items.

3. Overall GDP The economy expanded by 3.3% in the second quarter of 2012 compared to a growth of 3.5% in the second quarter of 2011 owing to the economic slowdown in the first quarter that spilled into the following quarter. Agriculture : growth of 1.6% in the second quarter compared to a growth of 4.2% in the same quarter of 2011.The sector was mostly influenced by severe frost that impacted the production of tea and other vulnerable crops like potatoes, the delay in the onset of the of the long rains. Manufacturing; expanded by 3.0% compared to 2.5% in the second quarter of 2011 mainly from the growth in the activities of manufacture of food and the beverage sub sector which grew by 7.7%. Building and Construction; 1.4% growth in Q2 2012 compared to a 5.1% growth in Q2 2011. This was the second consecutive quarter on quarter deceleration this year despite increased credit to the sector. Financial Services; growth of 6.4% during the quarter compared to a growth of 8.1% in Q2 2011 mainly attributable to the reduction in the overall commercial banks' credit to most sectors in the economy as lending rates remained high.

4. MONETARY POLICY Source: CBK As per our expectations, the CBR was revised downwards by 2% in November to 11%. Short term rates likely to follow lower. May have impact on KES/USD exchange rate.

5. INFLATION 1558 bps drop Source: KNBS • Improved weather conditions leading to falling food prices , contained international oil prices, and the tight monetary policy have helped ease inflationary pressure. • We expect that inflation will continue to decline in Quarter 4, but expect that the first half of 2013 will see gradual pickup in inflation particularly as the high base effects unwind.

6. INTEREST RATES • During the year, the yield curve has shifted significantly downwards mirroring the decreasing inflationary environment and lately the monetary easing undertaken by the Central Bank of Kenya. • The falling inflation combined with the domestic borrowing targets for the 2012/13 fiscal year, as well as the expected easing of monetary policy in the short to medium term should result in a further fall in yields.

7. FOREIGN EXCHANGE USD RATE • Kenya shilling support hanging in the balance as the CBK is expected to continue loosening monetary policy as inflation trends down. • The usable official foreign exchange reserves held by the Central Bank have increased; this is likely to give the Kenya Shilling support as local interest rates continue to decline. • Shilling weakening therefore likely to be gradual

8. EQUITY MARKET • NASI Index up +35% YTD. • Pace of market upturn experienced so far likely to slow down. • Macro economic environment increasingly favours higher allocation to equities; lower inflation and falling interest rates are positives for equity investment considering strong company fundamentals and modest valuation levels. • Key risk is negative foreign portfolio outflows - heavily dependent on currency stability.

9. CBA EQUITY FUND PERFORMANCE • Performance so far in 2012 supported by excellent returns in the equities. • The Fund’s year to date performance as at September 2012 is +40.3% against the benchmark return of +16.6%.

10. MONEY MARKET YIELDS The current effective yield is currently at 9.82%.

11. INVESTMENT OUTLOOK

12. KENYA ECONOMIC OUTLOOK SUMMARY • GDP • Government Forecast 3.5%- 4.5% in 2012. • Inflation • Oil Lower • Falling food prices • A firmer and supported currency. • Interest Rates • Central Bank Rate at 11% from 13%. • Currency • Monetary easing likely to put pressure on currency.

13. INVESTMENT OUTLOOK SUMMARY • Equities • Market attractive due to low valuation following a tough 2011. • Continues to be attractive to investors with a long term perspective. • Shrewd stock selection continues to provide significant alpha. • Fixed Income • Monetary easing cycle should see money market rates fall slightly and converge towards T-bills. • Bond market has anticipated rate easing cycle and yield curve has fallen significantly driving significant gains year to date. Hence return outlook over next year looks moderate • Offshore • Concerns over slowing global growth and evident recession in Europe

14. THANK YOU