the middle east private equity landscape

The Middle East Private Equity LandscapeKey Market Opportunities & Developments

Arif Masood NaqviExecutive Vice Chairman & CEO

20th September 2005

2

• Introduction

• Private Equity in the Middle East

• Drivers of the Private Equity Industry

• Regional Private Equity Trends

• Conclusions

3

Christopher Columbus

• Conceived of special incentives (carried interest) to take the trip to the “new world”

• All expenses paid

• 10% of all profits (no preferred return)

• 5% of all gold

• Title of Admiral for life

4

• Picked site of National Capital of the US – included land on which he held options to buy

• Worked for “expenses” only

George Washington

5

Global Private Equity Syndrome

1. Prematurely grey hair

2. Inability to remember city or country in which one is awakening

3. Persistent daze / jet lag / hoarse throat

4. Equating sleep on an airplane with real sleep

5. Inabilities to remember (or be present at) birthdays, anniversaries, or school conferences

6. Contact with new friends concerned about holding charitable dinners in your honour or naming school buildings for you

7. Frequent musings about the fairness of pre-nuptial agreements

8. Doubling of golf handicap every 6 months

9. Ability to schedule annual physical only every five years

10. Frequent spousal / child discussions about the value of sound estate planning

6

Why is there growth in this industry?

Professionals enjoy approximately 20% carry (25% - 30% in best venture funds) – flock to industry and provide product to investors

Profits Profits

Available Capital Available Capital

Regional Macro Trends

Regional Macro Trends

Returns Returns

Key Factors Description

Returns are consistently better than other investment opportunities

With public returns expected to go down in the coming years, private equity is even more attractive

IN THE END, THE RETURNS ARE THERE – THAT IS BY FAR THE KEY FACTOR

Economic disequilibriums, corporate restructuring, acceptability of selling assets, rapid technological change, and available financing – all provide private equity opportunities

Investors have an abundance of equity capital – the rise in public markets has ironically provided more capital for private equity (percentage allocation might stay same – but base is larger)

7

Performance of Private Equity

40.0%

12.7%8.4%

Top Quartile AllPrivate Equity

Mean All PrivateEquity

S & P 500

34.7%

11.7%8.7%

Top Quartile AllPrivate Equity

Mean All PrivateEquity

S & P 500

US Private Equity 10-year returns1 European Private Equity 10-year returns1

• Private equity on average has outperformed public equities benchmarks over a 10 year period by 4.3% in the US

• Top quartile managers have outperformed by a much wider margin of 31.6%

• Selection and access to top quartile funds is required to achieve superior performance

Premium of 31.6%

Premium of 26.0%

1. % annualized net IRR: Net 10-year returns for period ending 12/31/03; Net IRR is the rate of return after the exclusion of management fees, expenses and carried interest.

Source: Thomson Financial/Venture Expert and MSCI

1. % annualized net IRR: Net 10-year returns for period ending 12/31/03; Net IRR is the rate of return after the exclusion of management fees, expenses and carried interest.

Source: Thomson Financial/Venture Expert and MSCI

8

Private Equity Evolution

• Investment professionals moving abroad, taking their private equity skills with them

• Support infrastructure is changing to assist global investing (lawyers, accountants, consultants, investment bankers, commercial bankers etc)

• General acceptance in local markets of foreign based private equity firms

• Once was a Cottage Industry in the United States

• First firms were early 60’s U.S. venture firms - $10 million in capital was large (often took a year to raise that amount)

• Firms were “Mom and Pop” businesses – no succession planning

• In the 70 – 80’s, private equity spread to Europe (firms there were typically supported by large institutions or one-two investors – less entrepreneurial)

• Ever growing amount of investment by firms outside of their home

• Emergence of global, mega funds and firms

• Expansion of private equity programs by global banks, investment banks, insurers

1960’s Current

9

• Introduction




• Conclusions

10Note: Excludes all VC and real estate fundsSource: Gulf Venture Capital Association, Zawya, Company websites, AltAssets, Industry Interviews

There are approximately 27 PE firms in the Middle East, primarily concentrated in the UAE…

UAE:1. Abraaj Capital2. HSBC Private Equity3. Injazat Tech. Fund4. Ithmar Capital5. Shuaa Capital6. The GCC Energy Fund Managers7. The Group8. The National Investor

Lebanon:1. Middle East Capital

Group2. Capital Trust Group3. Byblos Bank

Tunisia:1. Tuninvest

Egypt:1. Citadel Capital2. EFG Hermes3. Gulf Arab Investment Co.4. Oasis Capital

Jordan:1. Foursan Group2. The Jordan Fund

Kuwait:1. Kamco2. Global Investment House3. Kuwait Financial Center

Bahrain:1. Emerging Markets

Partnership2. Gulf Finance House

Saudi:1. Amwal Al Khaleej2. Athar Al Majid Hold.3. Swicorp

India:1. Over 100 foreign PE

players operating

Morocco:1. ATLAMED SA

11Note: Excludes all VC and real estate funds Source: Gulf Venture Capital Association, Zawya, Company websites, Private Equity Online, Industry interviews

…With over 24 traditional private equity funds…

Firm Fund NameInception

DateFund Size (US$ mn) Status Geographic / Sector Focus

Abraaj Capital Abraaj Buyout Fund I 2003 116 Fully Invested MENA, South Asia, No sector focus

Abraaj Capital Abraaj Special Opportunities Fund I

2004 32.5 Profit Distribution MENA, Pre-IPO & listed equities

Amwal Al Khaleej Amwal Al Khaleej Private Equity Fund

2004 267 Investing GCC, No sector focus

Atlas Investment Group, Foursan Group

The Jordan Fund 2002 50 Investing Jordan, No sector focus

Capital Trust Middle East, Shuaa Capital

MENAVEST 1998 50 Fully Invested MENA, No sector focus

EFG Hermes Private Equity Technology Development Fund 2004 8.6 Investing Egypt, VC, Seed, & Early stage on tech & media sectors

EFG Hermes Private Equity Jordan Hi-Tech Venture Fund 2000 4.5 Fully Invested Jordan, VC& Early stage on tech & media sectors

EFG Hermes Private Equity Middle East Technology Fund 2000 25 Fully Invested MENA, VC& Early stage on tech & media sectors

EFG Hermes Private Equity Horus Private Equity Fund I LP 1997 54 Fully Invested Egypt, No sector focus

EFG Hermes Private Equity Commercial Int'l Investment Company

1994 145 Fully Invested Egypt, No sector focus

Emerging Markets Partnership (Bahrain)

IDB Infrastructure Fund L.P. 2002 950.5 Investing IDB member countries, No sector focus

Global Investment House Direct Investments Fund 2003 99 Investing Kuwait, No sector focus

12

…With over US$ 2.3 billion in total fund size

Note: Excludes all VC and real estate fundsSource: Gulf Venture Capital Association, Zawya, Company websites, AltAssets, Industry Interviews

Firm Fund NameInception

DateFund Size (US$ mn) Status Geographic / Sector Focus

HSBC Private Equity Middle East HSBC Private Equity Middle East

2003 118 Investing GCC, No sector focus

Injazat Capital Limited Injazat Technology Fund 2001 50 Fully Invested MENA, Iran, VC & Early stage, Tech. focus

Ithmar Capital Ithmar Fund I 2003 70 Fully Invested GCC, No sector focus

KAMCO Kuwait Private Equity Opportunities Fund

2004 45 Investing Kuwait, No sector focus

Markaz Markaz Energy Fund 2004 165 Investing GCC, Energy sector

Swicorp Financial Advisory Services

MENA Water Ventures 2003 NA Investing MENA, Water related companies and technologies

Tuninvest Tuninvest Sicar 1994 7.5 Fully Invested Tunisia, No sector focus

Tuninvest Tunisie Sicar 1997 3.7 Fully Invested Tunisia, No sector focus

Tuninvest Tuninvest Interantional Sicar 1998 7.5 Fully Invested Tunisia, No sector focus

Tuninvest Tuninvest International Ltd. 1998 13.5 Fully Invested Tunisia, No sector focus

Tuninvest Maghreb Private Equity Fund 2000 23.1 Fully Invested Tunisia, Morocco, Algeria, No sector focus

Tuninvest Tuninvest Innovations Sicar 2002 4.1 Investing Tunisia, Tech. focus

Total 24 Funds 2,309.5 Size of 1 fund unavailable

13

There are another 17 funds currently being raised for over US$ 2.6 billion

Note: Excludes all VC and real estate fundsSource: Gulf Venture Capital Association, Zawya, Company websites, AltAssets, Industry Interviews

Firm Fund NameFund Size (US$ mn)

Geographic / Sector Focus Comments

Abraaj Capital Limited Abraaj Buyout Fund II 500 MENA, South Asia, No sector focus

Initial close June 2005 with $ 300 mn in commitments, 2nd close at firm $ 500 mn

Abraaj Capital Limited Abraaj Special Opportunities Fund II

100 MENA, South Asia Launched June 2005

Athar Al Majd Holdings Ltd.

Athar Al Majd Diversified Private Equity Fund I

27 MENA, No sector focus Launched in 2005

ATLAMED SA ATLAMED Invest 60 Morocco, MENA, No Sector focus

Launched May 2005, 1st closing target $ 60 mn, another $ 60 mn within 5 years

Byblos Bank, European Investment Bank

Byblos Private Equity Fund

40 No sector focus Announced

Capital Trust Group EuroMena Fund 120 Levant & North Africa, No sector focus

Launched April 2005

Catalyst Private Equity NA 50 MENA, Technology intensive industry focus

NA

EFG Hermes Horus Private Equity Fund II LP

70 NA Expected closing Q3 2005

EFG Hermes Horus AgriBusiness Fund

50 Egypt, Agricultural industry focus

Expected closing July 2005

Global Investment House Global Opportunistic Fund

500 GCC, Pre-IPO & IPO situations

Launched June 2005

Ithmar Capital Ithmar Fund II 150 MENA, no sector focus Launched May 2005, 1st closing at over US$ 60 million in Sept. 2005

National Bank of Kuwait Not Disclosed NA NA NA

Oasis Capital Oasis Capital 150 Egypt, no sector focus Announced July 2005, Naguib Sawaris ($ 60 mn), MAF Trust ($ 45 mn), Olayan Financing Co. ($ 45 mn)

Shuaa Capital Shuaa Partners I LP 200 GCC, Levant, & Egypt, No sector focus

Initial close July 2005, 2nd close September 2005

Swicorp Intaj Capital 260 MENA, No sector focus Savola anchor investor, initial close at $ 60 mn, will raise add. $ 200 mn

The National Investor Not Disclosed NA NA Launching 2nd Half 2005

The GCC Energy Fund Managers Ltd.

GCC Energy Fund LP 350 GCC, Energy sector Launched March 2005, subscriptions open for 18 months

Total 17 Funds 2,627 Sizes of 2 funds not available

14

The majority of funds currently in the investing stage primarily do not have a sector focus and invest across the MENA region

Diversified

38%

Infrastructure

33%

Real Estate

9%

Technology

20%

Sector Focus of Funds Currently Investing

Source: Private Equity Monitor (Zawya)

GCC

6%

Worldwide

19%MENA

32%

Other

14%

Egypt

19%

Kuwait

10%

Geographic Focus of Funds Currently Investing

15Source: Global Venture Capital Database 2004

Global Private Equity Firm Distribution

1%

2%

7%

29%

61%

MENASA

Oceana

Rest of Asia

Europe

AmericasComments

Region was historically small with deal flow and exit opportunities rare

Regional turmoil and strict regulations for foreign investors

More recently, the regional dynamic has changed with relative government stability, gradual improvement of regulations, developing capital markets, and increased liquidity looking to be deployed within the region

With the exception of India, global private equity firms have historically ignored the region…

*

Currently minimal competition from global players in the region

*Excluding India

16

Large-tier PE firms are concentrated in Europe and the US with only regional PE firms covering the local market

* Include only private equity funds

Source: Abraaj Capital Analysis

Global Reach

Americas Europe Asia Middle East

Carlyle

Blackstone*

Abraaj - $700 millionShuaa - $200 million

CVC Partners$42 billion

$31 billion

$14 billion

Texas Pacific Group

$15 billion

Bain Capital$26 billion

Silver Lake$6 billion

Global Reach of PE Firms

Apax Partners$18 billion

17

By the end of 2005 it is estimated that the total PE industry will have US$ 5 billion of funds under management

Middle East PE Total Fund Size (US$ million) Comments

• Funds under management were estimated to be approximately US$ 280 million in 1998

• Consisted of a number of relatively small funds from Capital Trust, EFG Hermes, Tunisvest, etc.

• Between 1998 – 2002, funds increased with additional firms entering including Emerging Markets Partnership (Bahrain), Atlas Group, Foursan Group, Injazat, Rasmala, etc.

• The last couple of years have seen a number of new entrants including Global Investment House, Ithmar Capital, Shuaa Partners, etc.

• If all announced funds reach their targets within 2005, there will be US$ 5.0 billion of PE funds in the region

Note: Does not include VC and real estate fundsSource: Gulf Venture Capital Association, Zawya, Company websites, Private Equity Online, Industry interviews

$5,000

$1,400

$280

1998 2002 2005

CAGR

49%

CAGR

53%

18

Private Equity allocation versus other asset classes

Stocks

35.7%

Bonds

54.7%

Real Estate

5.1%

Cash Equiv.

3.9%PE

0.6%

GLOBAL

Total Investable Capital Market - $87.2 trillion

Note: As of December 2004

Source: Ennis Knupp & Associates

Difficult to estimate the size of total investable capital market:

Equity market cap of over $900 billion

Absence of bond markets

Lack of publicly traded real estate securities

Middle East estimated to have up to $2 trillion in investable net worth

US$5 billion commitment to Private Equity as a % of total investable capital is below global standards

Regional Perspective

19

• Introduction




• Conclusions

20

Drivers of The Private Equity Industry

Macroeconomic Conditions

Macroeconomic Conditions

Stable economic growth and macroeconomic environment

Description

The Region has witnessed impressive growth rates despite unstable political environments in some countries

Regional Perspective

Regulatory & Economic Restructuring

Regulatory & Economic Restructuring

Improvement in regulatory infrastructure and shift in economic policies caused by privatizations, globalization and efficient deployment of capital

Improving regulatory environment in most countries with competition to attract capital

Economic liberalization under way in a number of countries and family businesses undergoing generational change

Availability of Capital

Availability of Capital

Financial institutions and pension funds providing capital

Post 9/11 the appetite of local investors turned to regional investment opportunities

Exit mechanism Exit mechanism

Availability of exit routes either through trade sales or IPOs

Increasing IPO and M&A activity, as well as impressive performance of stock markets

New exchanges like DIFX to be launched shortly

21Source: Economist Intelligence Unit

Majority of countries in the region are growing at above 5% p.a.

0

50,000

100,000

150,000

200,000

250,000

300,000

0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 5.0 5.5 6.0 6.5 7.0 7.5 8.0 8.5 9.0 9.5

Real GDP Growth Average 2005 – 2006, %

No

min

al G

DP

US

$ m

illi

on

, 20

05E

Pakistan

Qatar

Saudi Arabia

Egypt

Bahrain

Oman

UAE

Kuwait

Morocco

JordanLebanon

India

GDP: 750,000

Population Size

Tunisia

• With real GDP growth in most countries exceeding 5%, the regional economies are amongst the fastest growing in the world

• Real GDP growth is expected to increase faster than the rate of population growth leading to an accelerated growth in living standards across the region

Note: Bubble size not to scale

22Source: Economist Intelligence Unit, Moody’s Investor Service

Large forex reserves, low inflation, and budget surpluses in many countries have led to economic stability and growth

2.0

4.0

5.0

5.0

6.0

9.0

10.0

11.0

16.0

19.0

23.0

30.0

149.0

Bahrain

Tunisia

Oman

Qatar

Jordan

Kuwait

Pakistan

Lebanon

Morocco

Egypt

UAE

Saudi Arabia

India

Total Forex Reserves

2005E, US$ billion

CPI Inflation Rate

2004 - 2005E, %

4.1%

0.6%

4.1%

4.9%

2.4%

2.5%

7.3%

3.0%

3.6%

6.4%

NA

2.4%

2.0%

Budget Balance

% of GDP, 2005E

(4.3%)

18.7%

3.6%

(7.0%)

(6.8%)

(10.7%)

(3.1%)

33.2%

(9.6%)

14.8%

11.5%

(-3.3%)

7.7%

Credit Rating

Moody’s

Baa3

Baa2

A1

Ba1

Ba1

B3

B2

A2

Ba2

A1

Baa2

Baa2

Baa1

23

The regional equity markets have added significant depth and liquidity since 2002, creating a viable exit mechanism for PE players

234

811

1,941

4,676

2002 2003 2004 July 2005

206

352

606

923

2002 2003 2004 July 2005

126

238

207

363

2002 2003 2004 July 2005

41%

65%

101%

137%

2002 2003 2004 July 2005

Market Capitalization* (US$ billion)

Average Daily Value Traded*(US$ million)

Average Daily Volume Traded**(million)

Market Capitalization/GDP*(Percentage)

*Excludes Tunisia ; **Excludes Morocco and TunisiaSource: Shuaa Capital, Relevant stock exchanges

24

In 1999, the GCC and ME region had negative FDI inflows, however, post 9/11 there has been a reversal of capital flight and increased amounts of FDI…

Source: UNCTAD

-5,000

0

5,000

10,000

15,000

20,000

GCC Middle East North Africa South Asia MENA MENASA

1999 2003

CAGR 15%

CAGR 35%

FDI Inflows US$ million, 1999 - 2003

CAGR 33%

CAGR 34%

25Source: Energy Information Administration, Bloomberg

Comments

…Which combined with oil prices over US$ 60 per barrel has created a tremendous amount of excess liquidity looking for investment

• Due to high oil prices, the GCC economies (especially Saudi Arabia and Kuwait) have recorded large budget surpluses for FY 2004 and FY 2005

• Oil prices are expected to come down to US$ 25 – 30 per barrel over the next five years

Historical and Projected Oil Prices1980 -2015, Brent Crude US$ per barrel

0

10

20

30

40

50

60

70

80

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

May

-05

July

-05

Sep

-05

2015

E

Asian financial crisis

• OPEC raises production triggering a price war

• Iran/Iraq tensions

Iraq war

Peak Price - $68.00

Aug 2005

Gulf war

Current Price - $60.10

26

Examples of privatizations in recent years illustrate the drive towards increasing the role of the private sector in the economy resulting in increased deal flow for PE…

Company Country Sector Size US $ M Equity Offered Date BuyerVitrac Egypt F&B 20.1 35% 2005 Switzerland-based HeroSuez company for Cement Egypt Building Materials 153.0 14% 2005 Ciments FrancaisSuez company for Cement Egypt Building Materials 207.0 19% 2005 Other buyersJoramco Jordan MRO 58.0 80% 2005 Abraaj CapitalEmirates Foodstuff & Mineral Water Co. UAE Agriculture and Food 80.0 49% 2004 Capital MarketNCCI Saudi Arabia Financial Services 382.7 70% 2004 Capital MarketBanque Centrale Populaire Morocco Financial Services 85.0 20% 2004 Capital MarketFirst Domestic Fuel Marketing Co. Kuwait Oil and Gas 76.0 76% 2004 Capital MarketAl Maha Petrol. Products Mktg. Co. Oman Oil and Gas 24.0 60% 2004 Capital MarketEtihad Etisalat Company Saudi Arabia Telecoms and IT 267.0 20% 2004 Capital MarketAl Kamil Power Company Oman Power and Utilities 15.0 35% 2004 Capital MarketMaroc Telecom Morocco Telecoms and IT 1,037.0 15% 2004 Capital MarketIndustries of Qatar Qatar Oil and Gas 674.0 30% 2003 Capital MarketMaroc Telecom Morocco Telecoms and IT 815.0 16% 2003 VivendiRegie des Tabacs Morocco Tobacco 1,520.0 80% 2003 Altadis (French-Spanish)Arab Potash Company Jordan Mining 173.5 52% 2003 Potash Corp. of Saskatch., CanadaJordan Telecom Jordan Telecoms and IT 88.0 15% 2002 Capital MarketQatar Fuel Company (Woqod) Qatar Oil and Gas 50.0 80% 2002 Capital MarketSaudi Telecom Saudi Arabia Telecoms and IT 2,720.0 30% 2002 Capital MarketSaudi Electric Company Saudi Arabia Power and Utilities - 19% 2002 Capital MarketSaudi Basic Industries Saudi Arabia Oil and Gas - 30% 2002 Capital MarketAl Ahram Beverages Egypt F&B 280.0 98% 2002 Heineken of HollandVitrac Egypt F&B - 65% 2002 Switzerland-based HeroMaroc Telecom Morocco Telecoms and IT - 35% 2001 VivendiSuez company for Cement Egypt Building Materials - 40% 2001 Ciments FrancaisRoyal Jordanian Catering Ltd Jordan Services 20.0 80% 2001 Alpha Flight Services, UKJordan Telecom Jordan Telecoms & IT 508.0 40% 2000 France Telecom & Arab BankJordan Telecom Jordan Telecoms & IT 114.0 15% 2000 PF & SSCQatar Telecom Qatar Telecoms and IT 717.0 - 1998 Capital Market

Company Country Sector Size US $ M Equity Offered Date BuyerVitrac Egypt F&B 20.1 35% 2005 Switzerland-based HeroSuez company for Cement Egypt Building Materials 153.0 14% 2005 Ciments FrancaisSuez company for Cement Egypt Building Materials 207.0 19% 2005 Other buyersJoramco Jordan MRO 58.0 80% 2005 Abraaj CapitalEmirates Foodstuff & Mineral Water Co. UAE Agriculture and Food 80.0 49% 2004 Capital MarketNCCI Saudi Arabia Financial Services 382.7 70% 2004 Capital MarketBanque Centrale Populaire Morocco Financial Services 85.0 20% 2004 Capital MarketFirst Domestic Fuel Marketing Co. Kuwait Oil and Gas 76.0 76% 2004 Capital MarketAl Maha Petrol. Products Mktg. Co. Oman Oil and Gas 24.0 60% 2004 Capital MarketEtihad Etisalat Company Saudi Arabia Telecoms and IT 267.0 20% 2004 Capital MarketAl Kamil Power Company Oman Power and Utilities 15.0 35% 2004 Capital MarketMaroc Telecom Morocco Telecoms and IT 1,037.0 15% 2004 Capital MarketIndustries of Qatar Qatar Oil and Gas 674.0 30% 2003 Capital MarketMaroc Telecom Morocco Telecoms and IT 815.0 16% 2003 VivendiRegie des Tabacs Morocco Tobacco 1,520.0 80% 2003 Altadis (French-Spanish)Arab Potash Company Jordan Mining 173.5 52% 2003 Potash Corp. of Saskatch., CanadaJordan Telecom Jordan Telecoms and IT 88.0 15% 2002 Capital MarketQatar Fuel Company (Woqod) Qatar Oil and Gas 50.0 80% 2002 Capital MarketSaudi Telecom Saudi Arabia Telecoms and IT 2,720.0 30% 2002 Capital MarketSaudi Electric Company Saudi Arabia Power and Utilities - 19% 2002 Capital MarketSaudi Basic Industries Saudi Arabia Oil and Gas - 30% 2002 Capital MarketAl Ahram Beverages Egypt F&B 280.0 98% 2002 Heineken of HollandVitrac Egypt F&B - 65% 2002 Switzerland-based HeroMaroc Telecom Morocco Telecoms and IT - 35% 2001 VivendiSuez company for Cement Egypt Building Materials - 40% 2001 Ciments FrancaisRoyal Jordanian Catering Ltd Jordan Services 20.0 80% 2001 Alpha Flight Services, UKJordan Telecom Jordan Telecoms & IT 508.0 40% 2000 France Telecom & Arab BankJordan Telecom Jordan Telecoms & IT 114.0 15% 2000 PF & SSCQatar Telecom Qatar Telecoms and IT 717.0 - 1998 Capital Market

Completed Privatization Examples

Source: Zawya, Saudi General Investment Authority, United Nations Development Program

27Source: Dealogic, Thomson Financial

…As can be witnessed in the increased regional deal flow over the past four years

$15.5$17.0

$20.8

$25.1

626

940922875

2002 2003 2004 May 2005

Value of Deals (US$ billion) Number of Deals

Comments

There have been 626 deals announced in the first 5 months of 2005 or 67% of the 2004 total

The value of deals has increased at a CAGR of 16% from 2002 – 2004

The total value of deals announced in the first 5 months of 2005 has already exceeded the 2004 total by 21%

Value of Deals vs. Number of Deals Announced (2002 – May 2005, US$ million)

28

Investment Opportunities: GCC IPO Market

Characteristics of Current GCC IPO Market

Excess capital chasing few investment opportunities

IPOs over-subscribed well over 50 times, especially in the U.A.E. Miniscule allocations for non-founder investors

Significant capital gains for investors available to get large founding blocks

* Portfolio companies of Abraaj Capital Limited

Country Year Company

Over-subscription

(times) Stock appreciation since

floatation (%)

Bahrain2005 Al Khaleej Development Company 265 28%

Oman2004 Al Maha Petroleum Products Marketing Company 7 144%2004 AES Barka 17 119%2004 Al Kamil Power Company 1 -6%2005 Dhofar Power Company 9 26%2005 Oman Telecommunications Company 2 64%

Qatar2004 Qatar Meat & Livestock Company 47 311%2005 Qatar LNG Transportation Company 10 274%2005 Dlaleh Brokerage & Invstment Holding 1 938%

Saudi Arabia2004 Sahara Petrochemical Company 125 776%2004 NCCI 12 200%2004 Etihad Etisalat Company 50 1131%2005 Bank Al Bilad 4 1354%2005 Saudia Dairy & Foodstuff Company 7 114%2005 Al Marai Company 4 62%

UAE2004 Amlak Finance 34 1134%2004 Aldar Properties 448 703%2004 Arabtec* 74 455%2004 Emirates Foodstuff & Mineral Water Company 8 249%2004 Finance House 75 1266%2005 Arab International Logistics Company* 80 242%2005 RAK Properties 57 To be listed 2005 Aabar Petroleum 800 To be listed 2005 Sorouh Real Estate Company 176 To be listed

Kuwait2004 Boubyan Bank 4 To be listed 2004 Al Qurain Petrochemicals Industries 2 To be listed 2004 Al Jazeera Airways 12 To be listed 2004 First Domestic Fuel Marketing Company 5 To be listed

Egypt2005 Raya Holding 3 2%2005 Sidi Krier Petrochemicals Company 2 48%

Morocco2004 Maroc Telecom 22 30%2004 Banque Centrale Populaire 11 13%2005 DARI Couspate - 14%2005 Lyonnaise des Eaux de Casablanca 24 51%2005 Sothema Pharmaceutical Laboratories 7 -2%

Tunisia2005 Khartago Airlines - 114%2005 L'Accumulateur Tunisien ASSAD - -55%2005 Societe Generale Industrielle de Filtration - 62%

Source: Zawya as of September 8th, 2005

29

Investment Opportunities: Privatization

Robust Privatization Pipeline with several companies being taken public by various governments in the region in 2005

Source: Zawya

Privatization Issues in the Pipeline (2005)

Company Country Sector Size US$ M Equity Offered

Bahrain Telecommunications Co. Bahrain Telecom 800 -Eastern Tobacco Egypt Agriculture and Food - 14%Telecom Egypt Egypt Telecom - 49%Alexandria Mineral Oil Company Egypt Oil and Gas 135 20%Jordan Telecom Jordan Telecom - 10-20%Kuwait Finance House Kuwait Financial Services 1,000 25%Touristic Enterprises Co. Kuwait Travel and Tourism - 60%Mobile Telecommunications Co. Kuwait Telecom 1,300 25%Kuwait Airways Corp. Kuwait Transport - -Al Jazeera Channel Qatar Media - -Al Jubail Petrochemical Co. Saudi Arabia Oil and Gas - 30%Islamic Development Bank Kuwait Financial Services 240 30%Taaqa Electricity Distribution UAE Power and Utilities - 55%National Commercial Bank Saudi Arabia Financial Services 1,280 30-40%Compagnie Marocaine de Navigation Morocco Transport - -Power & Water Util. for Jubail & Yanbu Saudi Arabia Power and Utilities 300 30%Saudi Arabia Mining Company Saudi Arabia Mining - -Saudi Arabian Airlines Saudi Arabia Aviation - -Pachin Egypt Manufacturing - -Cairo Oil Egypt Oil and Gas - -Misr Hotels Egypt Hospitality - -Egypt Air Egypt Aviation - 40%Egyptian Fertilizers Egypt Manufacturing - -Regie des Tabacs Egypt Transport - 20%

30

Investment Opportunities: Family Groups

Source: Zawya

Family Groups within the region are looking to monetize their investments in their respective companies by exiting or cashing out

Family Groups within the region are looking to monetize their investments in their respective companies by exiting or cashing out

IPO Pipeline of Family led Enterprises (2005)

Company Country Sector Equity Offered

Rotana Hotel Management Co. UAE Travel and Tourism -

Axiom Telecom UAE Telecom -

Swiss Arabian Perfumes UAE Consumer Goods -

Al Bassami International Group Saudi Arabia Transport 30%

Nasser Rashid Lootah and Sons UAE Conglomerate 55%

Jabal Omar Development Co. Saudi Arabia Construction 12%

Al Habtoor Hospitality UAE Travel and Tourism -

31

• Introduction




• Conclusions

32

There will be a number of trends emerging in the regional PE landscape over the next few years

Variation in PE Performance

Variation in PE Performance

Shari’a Compliant PE

Shari’a Compliant PE

Institutional Investment

Institutional Investment

Secondary Buyouts & Exits

Secondary Buyouts & Exits

Emergence of International Players

Emergence of International Players

Trend Description

Increased amounts of regional institutional investments as PE has become a viable asset class in the region

Assets allocated for PE abroad will increasingly be available for PE investment within the region

Rapid growth in Islamic banking, and other Shari’a compliant products in the region

Lack of Shari’a compliant investment opportunities in the region

Will be new and innovative Islamic PE structured funds introduced soon

Is a trend being seen increasingly frequently in the West

The rapid increase in firms in the region will allow PE shops to work together on sizeable transactions and create another viable exit route

Currently almost no international PE presence in the region

Dedicated PE firms will not enter the region very soon, however PE arms of investment banks that have had relationships in the region are looking to enter currently

As the number of PE firms and funds increase there will be significant variation amongst top and bottom quartile performance

33

With a large number of players in the PE arena LPs will be forced to carefully select their G.P.s

Difference between Top and Bottom Quartile performance1

US All Private

Equity

-20%

-10%

0%

10%

20%

30%

40%

50%

Top Quartile

Median

Bottom Quartile

EuropeAll Private

Equity

US Stock Funds

EuropeanStock Funds

Spread Top-Bottom 53.7%




• Manager selection is the critical component to a superior performance in the private equity markets

• Private equity quartile spreads are 15x to 20x greater than comparable public market spreads

Notes:

1 Annualized net 10-year returns (12/31/93 – 12/31/2003); Source: Venture Economics

Past performance is not indicative of future results

Notes:

1 Annualized net 10-year returns (12/31/93 – 12/31/2003); Source: Venture Economics

Past performance is not indicative of future results

34

Advantage of Being Regional

1. Expanded deal flow

2. Enhanced financial resources

3. More industry expertise

4. Ability to pursue / consummate trans-border transactions

5. Ability to recruit more senior, experienced professionals

6. Ability to centralize fundraising, back office tasks

7. Ability to franchise value

8. Ability to focus on the kind of performance investors increasingly want:

– Uniformity - No surprises– No embarrassments - Low-Beta approach– Predictability - Attractive but not heroic IRRs

35

• Introduction




• Conclusions

36

Regional Private Equity – Passing fancy or permanent addition to M.E. Investment World?

1. Globalization in all business areas will accelerate – the same trend will continue for private equity

2. Impact of economic slowdown– Will regional private equity recede or decline?– Will private equity return to early 90’s, traditional nature – smaller firms – one specialty –

local focus only – no cross border operations?

3. Economic predictions / private equity predictions– Are often wrong (look at predictions a few years ago – Internet investing wave of future,

not overvalued; high yield investing still attractive; IPO market would continue to provide exits)

4. Regional private equity firms will continue their growth– Newer funds will have a harder time getting capital– Continue to raise capital in meaningful amounts – investors will focus on brand names,

predictability, and length of track record– Commercial banks, investment banks, insurance companies with global franchises will

take advantage of them / grow their private equity franchises– Regional firms will provide their own internal funds of funds – to allow investors more

balanced private equity portfolios– Emergence of new regional firms will be slowed down – portfolio problems will have to be

addressed first

the middle east private equity landscape

Economy & Finance

introduction private

european private equity

private equity skills

global private equity

abundance of equity

venture firms

oasis capital jordan

site of national capital