Abraaj Capital

Abraaj Capital Annual Review 2007

Annual Review 2007

Abraaj Capital
Level 7
A unique perspective
Emirates Towers Offices
PO Box 504905
on unlocking value
Dubai, United Arab Emirates

T +9714 3191500
F +9714 3191600
E info@abraaj.com
W www.abraaj.com

A unique perspective on unlocking value

Abraaj: Empowering potential
across the MENASA region.
Our foresight and innovation – along with our
skilled and experienced team, robust processes
and true understanding of our region – are what
make us the leading private equity firm in the
Middle East, North Africa and South Asia.

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 Our Year
Contents

Our year
2 Abraaj at a glance
4 Board of Directors’ statement
10 Group Chief Executive Officer’s review

Private Equity
Private equity
18 The future of private equity
22 The case for private equity in the MENASA region

empowering potential
Empowering potential
30 Our unique route to unlocking value
32 Capitalising on regional insight
34 Investing in high potential companies
36 P artnering with strong management teams
to foster growth
38 Delivering superior returns

Our investments
Our investments
42 Abraaj funds year in review
45 Abraaj Buyout Fund LP (ABOF)
52 Abraaj Real Estate Fund LP (AREF)
63 Abraaj Special Opportunities Fund II LP (ASOF II)
65 Abraaj Buyout Fund II LP (ABOF II)
73 Infrastructure and Growth Capital Fund LP (IGCF)
THOUGHT LEADERSHIP

Thought leadership
82 Corporate governance
85 Our Advisory Board
86 Sustainable development
89 Connecting with our stakeholders
92 Our people
94 Management team
96 Our shareholders
 Abraaj at a glance

A remarkable track record A unique team

> 50
Average IRR across 20+ exits compared
to a US top quartile performance of
Abraaj has 135 employees representing
25% IRR over a comparative period 27 nationalities achieving coverage that
spans our region. Half of the team are

5 Funds investment professionals while its senior

managers have 228 years of combined
experience. Our Executive Directors have
US$5bn Assets under management
a long history of working together and
are associated with landmark private

400
equity transactions in the region.
In the last year profits of our
parent company grew 400%

128 Gross capital gains on exited

regional investments

US$1bn We returned over US$1 billion

to our investors in 2007

Abraaj has put private equity on

the map in the MENASA region
No current investment plans

Turkey

Tunisia
Syria
Lebanon
Morocco Jordan Iraq
Kuwait
Pakistan
Algeria Bahrain
Libya Qatar
Egypt UAE

India
Saudi Arabia
Oman Bangladesh

Abraaj has an unmatched geographical spread of investors

and stakeholders. Abraaj’s more than 200 investors represent Yemen
some of the most influential individuals and progressive
family groups in the region as well as prominent institutional
investors globally. Sri Lanka

02 | 03 abraaj Capital annual review 2007

 Our Year
IRRs of 2007 exits:

Arabtec

116

Private Equity
Our funds: Delivering
superior returns EFG-Hermes
ABOF

70 ABOF exited 5 investments

at an average 4.3x multiple of
investment and an IRR of 70%
93

Empowering potential
AREF

5X AREF exited 2 investments

Maktoob

75 +
at an average 5x multiple of
investment and an IRR of 91%

Our investments
6 completed investments in 2007
ASOF II

45
Acibadem – Turkey
Air Arabia – UAE
Egyptian Fertilizers Company (EFC) – Egypt
Global Education Management Systems (GEMS) – MENASA
GMMOS – UAE Exited with a
Tadawi – Saudi Arabia net gain of 45%

Septech

39
THOUGHT LEADERSHIP
04 | 05 abraaj Capital annual review 2007

Board of Directors’
statement
We are proud to present Abraaj Capital’s
first public annual review.
In a remarkably short time Abraaj Capital
has become the premier private equity
firm operating in the Middle East, North
Africa and South Asia (MENASA). Abraaj
leads by example, demonstrating an
innovative approach to investment in what
we say and what we do. Since its inception
in 2002, Abraaj has grown exponentially
to include US$5 billion of assets under
management, and five private equity funds.
We are the first pure private equity firm
to be registered by DFSA to operate out
of Dubai International Financial Centre
(DIFC). Abraaj Capital Holdings Limited
(ACHL) itself is also extremely well
capitalised, with an issued share capital
of US$1 billion.
We have evolved to meet the needs
of our investors, our investments and
the size of the organisation; and the
anticipated competition in the future.
The main objective driving this thinking
has been to create an institution that is
built to last in the region. Our history
is here and Abraaj’s unparalleled network
means that the majority of our deal flow
is purely proprietary and that potential
investee companies have first-hand
knowledge of our exceptional track
record that sets us apart from the
competition. In fact, in performance
terms, in 2007, we are in the top decile
(10%) of private equity firms globally,
that manage US$5 billion or more in
aggregate terms.
Our Year
Private Equity
We can see evidence of the impact
of Abraaj in all our home countries;
from banks to supermarkets, from ship “Arabian Business
manufacturers to airlines, from hospitals recognised Abraaj
to schools and from process manufacturing
plants to high street retail outlets, Abraaj among the 50 Most
is helping shape our nations. Admired Companies
in the GCC this year.”
Empowering potential
We are the winner of industry awards
including ‘Middle East Private Equity
Firm of the Year’ from Private Equity
International (2006, 2007 and 2008),
the Banker Middle East Award for ‘Best
Private Equity Institution’ in 2006
and for ‘Outstanding Contribution to
Financial Services in the Middle East’ in
2007 and ‘Best Private Equity House’ at
the World Private Equity Awards, MENA
in 2007. Arabian Business recognised
Abraaj among the 50 Most Admired
Companies in the GCC this year.
Our investments
In addition, our Group Chief Executive
Officer, Arif Naqvi, was voted by Private
Equity International magazine (the
largest trade journal in the private
equity industry globally) as one of
the 50 most influential private equity
personalities in the world.
THOUGHT LEADERSHIP
 Board of Directors’ statement
Continued
Though multinational in its staff and
international in outlook, Abraaj retains
the distinctive values and ethos of our
home region. We are focused on the
markets we know and understand:
the markets where we have a unique
ability to add value for our investors.
Abraaj’s initial geographic focus was
the Middle East – essentially the GCC
countries and the Levant. But given the
significant synergies – cultural and
business – within the broader region, the
goal was always to expand our focus to
include the Sub-Continent and North
Africa, and ultimately Turkey, a region
in overall terms we named MENASA
(Middle East, North Africa and South
Asia). There were compelling reasons for
this which outsiders sometimes fail to
comprehend. The Sub-Continent has more
in common with the Middle East than it
has with China or Russia; links and ties go
back centuries and are based in culture,
politics, religion and business. It makes
eminent sense to look at this region
as one, especially since trade links and
investment cross-fertilisation are on the
rise. We are pleased to report that the
term MENASA is now in wide usage and
more and more businesses are adopting
this approach regionally, rather than
having separate strategies for MENA
and India.
06 | 07 abraaj Capital annual review 2007
We recognise that a business such as
Abraaj is nothing without its people.
Our employees bring us the vision, the
drive and the commitment to achieve
success. We will continue to open new
markets in MENASA and to source deals
where others don’t see them – that’s
our strength. We have become a major
conduit for international capital flows
into our region, through our Infrastructure
and Growth Capital Fund (IGCF), which
is clearly well-positioned in terms of
sustainable economic growth and
public-private partnerships for many years
to come and is being perceived as such
by the global investment community.
Abraaj will continue to operate ahead
of the curve, just as we have in the
areas of transparency and regulation in
the past and are now doing in the area
of corporate sustainability. We are the
first private equity company to support
the Hawkamah Institute for Corporate
Governance and have signed a three-year
corporate sponsorship agreement to
promote corporate governance across
the MENASA region.
We believe Abraaj is in a unique position
to spread high standards of corporate
governance throughout the region by
influencing the practices of the companies
we invest in. This is upheld, for example,
by the chief executive officer and chief
financial officer of each business we invest
in signing off a monthly report covering
59 separate governance issues. On a
broader level, we feel that widespread
good governance is essential for sustained
growth in the region.
We also feel it is essential to set the
agenda in areas such as corporate social
responsibility and in sustainability; how
we behave and act as an organisation and
as an investor has profound consequences
for all stakeholders, including employees,
for the environment and for future
generations. The group conducted a
landmark sustainability study in 2007,
modelling and benchmarking our processes.
As a result, we have implemented a new
group-wide strategy which puts sustainable
investment at the heart of what we do.
We are strongly committed to this.
We do not see sustainability as being
at the expense of profits; rather it is an
approach that will safeguard and enhance
future profits.
The publication of this first public
Abraaj annual review is a further
demonstration of our commitment
to transparency and sustainability.
We have always provided full and regular
reports to our Limited Partners: now we
have decided to open this channel to
all our stakeholders. In doing so, we are
introducing to the public domain seminal
company information and setting out,
without reservation, Abraaj’s current
sustainability status and our future
targets. Going forward, our progress
against those sustainability targets will be
there for all to see.We are proud to be an
ambassador for our region on prestigious
global bodies such as the World Economic
Forum’s Global Private Equity Task Force,
the Emerging Markets Private Equity
Association and the steering committee
of the Gulf Venture Capital Association’s
first Middle East Private Equity Report.

“We believe Abraaj is in a unique
position to spread high standards
of corporate governance
throughout the region by
influencing the practices of the
companies we invest in.”
Increasingly, Abraaj is becoming an agent
to enhance regional growth. A growing
number of our investors are now from
outside the MENASA region. More than
30% of the capital raised this year for our
biggest fund – the US$2 billion IGCF –
has come from such external investors.
We are transforming perceptions, giving
institutions and key individuals a fresh
and positive impression of the companies
and the people of the MENASA region.
Abraaj is playing an active part in
revitalising the infrastructure of our
region. Be it developing essential
industries, such as fertiliser production
or transport, or creating hospitals
and schools, Abraaj is leaving a legacy
of transformation across the region.
We anticipate that this legacy will
grow strongly in the years to come.
The next generation is critical to progress
in the Arab world. We need to create
80 million new jobs in the next 15 years
just to keep our rate of unemployment
constant, a challenge not surpassed
anywhere else in the world in the last
100 years; this will happen through
technical and vocational training, but also
through empowering the entrepreneurs
of tomorrow. We believe very strongly
in mentoring the next generation of
entrepreneurs and are involved in the
development of the London School of
Economics’ Centre for Middle East Studies,
including offering 50 MSc students (10
a year for five years) from the Arab
world a full academic scholarship. We are
delighted to play a part in this initiative,
which will develop a core of highly
trained people to build our region.
Our Year
30
of the money raised in 2007
came from investors outside
the region. Abraaj is channelling
Private Equity
fresh capital to our markets.
In many ways, the story of Abraaj in
2007 has been the story of our own
nations: one of exciting progress, rapid
growth and an awareness of fresh
opportunities on many fronts. Abraaj
is both a cause of this progress and a
beneficiary of it. We straddle a region
of great potential, and one that will
Empowering potential
experience dramatic growth in the
coming decade. We are known for our
regional expertise; having deployed
capital in 14 countries over the last six
years, each with its own unique local
characteristics, we are as international
as we would like to be.
Our opinion is that we could deploy
ten times the capital we currently
manage and not run out of investment
opportunities here. There are tremendous
regional infrastructure opportunities in
public-private partnerships, and at the
Our investments
same time, governments are privatising
state assets, since the realisation has
dawned that they need to be in the
business of governance and not in
the business of management. Just
investing into these two sectors across
25 countries will keep us very busy for
many years to come. We are confident
that Abraaj and our region will continue
to prosper together, in 2008 and beyond.
THOUGHT LEADERSHIP
 Board of Directors’ statement
Continued

Sheikh Abdulrahman Ali Al Turki Arif Masood Naqvi Hussain J Al Nowais

Chairman Vice Chairman and Vice Chairman
Group Chief Executive Officer

Sheikh Sultan Bin Saqr Al Qassimi Bisher Barazi Fadi Ghandour Mohammed Ali Al Hashimi
GIBCA Group DIFC Investments Aramex International Zabeel Investments

08 | 09 abraaj Capital annual review 2007

 Our Year
“We will continue to open new
markets in MENASA and to source
deals where others don’t see them
– that’s our strength. We operate
ahead of the curve.”

Private Equity
Empowering potential
Ashok Aram Hamid Jafar Saud Abdulaziz Kanoo Sheikh Khaled Bin Zayed Al Nehayan
Deutsche Bank Crescent Petroleum Group Oasis Property Developers
of Companies BSC in Bahrain

Our investments
THOUGHT LEADERSHIP

Mohamed Al Jaber Engineer Salah Salem Sheikh Nawaf Nasser Mustafa Abdel-Wadood
Al Jaber Group Bin Omeir Al Shamsi Bin Khalid Al Thani Abraaj Investment
Al Qudra Holding NBK & Sons Group of Companies Management Limited
 “Abraaj finished this extraordinary
year with US$5 billion of assets under
management, through our five funds
and co-investment vehicles.”

10 | 11 abraaj Capital annual review 2007


Group Chief Executive
Officer’s review
Looking back on 2007, our people and our
investors have a great deal to be proud of.
2007 was a year when we outstripped
all of our targets and delivered a strong
performance across every part of our
business. From exceptional returns to
investors and an impressive average
exit IRR to record-breaking fundraising
and a leap in the value of assets under
management, we ticked the boxes
across the board.
Notwithstanding the stellar results, it
was not an uncharacteristic year for us
considering our growth, since 2002, when
we have doubled in size every single
year. We are now number 45 in the world
in terms of private equity assets under
management and, by the same yardstick,
are among the top five in the emerging
markets. However, suffice to say, 2007
was a momentous year. To give you an
idea of what we achieved, I’d like to share
some of the highlights:
> We generated an astounding
US$1.2 billion for investors following
the sale of stakes in five companies,
Arabtec, Maktoob.com, ABANAR,
Septech and EFG-Hermes. This
represented an exit IRR of 90%.
>W
 e exited our Abraaj Special
Opportunities Fund II, with net sale
proceeds of US$185.4 million, a net gain
of 45% for investors in the fund. This
performance outshone all regional peer
funds and was notable in the light of
the turbulent state of MENASA stock
markets during the fund’s three-year life.
> All in all, we returned over US$1
billion in cash to our investors in
capital and sales proceeds. In a market
where no one has ever really raised
anything close to that amount, we
returned such an amount in profits
alone in just one year.
Our Year
Private Equity
Outstanding new investments
The year was as significant for the great
companies we bought as for those we sold.
Thanks to our strong, often proprietary,
deal pipeline and in keeping with our track
record for speed in execution, we rapidly
deployed US$1.6 billion of funds through
six outstanding new investments – Air
Empowering potential
Arabia, Egyptian Fertilizers Company (via
the largest private equity-led leveraged
buyout in the region), Global Education
Management Systems (GEMS), Acibadem,
GMMOS and Tadawi.
Each acquisition demonstrated our
team’s skill in identifying and securing
leading companies in growing sectors.
From the stake in Air Arabia, the first
and leading low cost carrier in MENA
as all signs point to a huge growth in
economy air travel in the region, to
our stake in GEMS, as MENASA is
Our investments
clamouring for more and better schools,
each transaction demonstrated our
characteristic foresight.
Abraaj finished this extraordinary year with
US$5 billion of assets under management,
through our five funds and co-investment
vehicles. This was more than double the
US$2.3 billion we had under management
just 12 months earlier.
Such great results, successful exits and
high potential acquisitions would have
been more than enough for some. But,
as a team, we have wider vistas and a
THOUGHT LEADERSHIP
dynamism and energy that insatiably
seek new challenges and opportunities.
We want to keep evolving our firm, our
industry and our region – for the benefit
of us all. In 2007, we made some
meaningful strides in that direction.
 Group Chief Executive Officer’s review
Continued
A solid foundation
We have evolved into an established
institution in the financial services arena,
in just five years. Furthermore, it’s a model
that we believe is sustainable given the
depth in management talent. We’ve been
developing the firm to ensure that it has
the team, systems and organisation to keep
on supporting – and driving – that growth.
Our analysis shows that we represent
approximately 20% of the regional private
equity industry, so we continue our
prominent role. Competition exists in the
form of global players entering the market
as well as existing regional players. We
need to be cognisant of what they do,
but our biggest potential enemy remains
complacency, not external forces. Obsession
with quality, consistency and speed is the
mantra at Abraaj.
People within and outside Abraaj talk of
our culture. The energy, determination
and skill that characterises our team
is what powers us. During the year, we
increased our number of people from 96
to 135. Our competitors are as aware of
our people’s calibre as we are and it was
both gratifying and humbling to retain
our top-performing employees across all
levels of the firm. Once again this year
we had virtually zero attrition and Abraaj
has emerged in a number of surveys as
being the employer of choice within the
financial services industry in the GCC.
12 |13 abraaj Capital annual review 2007
We developed our structure by
combining the previously distinct
portfolio management and transactional
teams to form fully integrated investment
management teams. Each one is, essentially,
a private equity firm in itself: they nurture
an investment from the very first signs of
a possible target right through to final
exit. The benefits of this move have been
immediate and significant. Our people are
developing a huge breadth of knowledge
and are even more receptive to the needs
of our investors and our investments and
of possible future competition.
At this point in our development, I
am pleased to reiterate our strategic
positioning as the leading alternative
assets investment manager in the region
and in our place at the vanguard of
regional private equity. As such, we
willingly take responsibility for driving
industry standards in the region.
The global private equity industry as a
whole needs to communicate better about
what it does and how it does it. Before long
it will have no option: greater regulation,
demanding greater transparency, will come
– and probably sooner rather than later.
5.4
The World Bank estimates
that MENA will grow by
5.4% in 2008.
Keeping ahead of the curve
in good governance
I believe in our people being entrepreneurs
at heart, but business-builders in substance.
Within the business, we continue to build
the foundations for lasting growth, creating
a world-standard, best-in-class model for
private equity in the emerging markets.
We have always been ahead of the curve
in embracing transparency and good
governance. From our voluntary DIFC
listing to our espousal of the highest
codes of ethics, we have defined as
well as followed best practice.
During 2007, we further raised the bar
of our internal corporate governance.
Following last year’s appointment of
a compliance officer, we have developed
a wide-ranging compliance framework
based on the UK Combined Code of
Corporate Governance, which shapes
all our significant activity.

Improved transparency is just one way
of building confidence in our industry.
In 2007, we proactively promoted our
industry – and our region’s – story
around the world. Articles about us ran
in the Wall Street Journal, New York
Times, Business Week, Private Equity
International and the Financial Times. We
Our Year
Private Equity
“we have been ranked as the
leading foreign investor group
in Turkey, Egypt, Pakistan and
Jordan. This track record has
made us a sought-after advisor

were asked to voice our views on CNN,
CNBC, Bloomberg and the BBC. Our
people were invited to every significant
international conference that looked at
the regional financial services industry,
including the World Economic Forum,
the Global Competitiveness Summit
and the Arab Strategy Forum. We also
delivered numerous keynote addresses
at major events, positioning the firm
among the thought leaders in the region.
Acting as bridge for
international capital
Empowering potential
to many MENASA governments.”
Empowering potential
Businesses are about people. Companies
controlled by us provide employment to
over 50,000 people and I am very aware
that decisions made by Abraaj directly
affect their livelihoods and the security
of their families. I derive enormous
satisfaction from seeing the numerous
companies we have owned move to

One of the great repercussions of
our success has been our ability to
contribute to the regional economy,
particularly in our role as a bridge for
international capital. Many international
investors have long recognised the
opportunities in our region but it was
only their trust in our proven ability to
deliver superior returns that enabled
them to finally gain access to its
potential. An impressive 30% of the
money raised during the record-breaking
US$2 billion fundraising for our IGCF
fund came from outside the region. Over
the course of our investments, we have
Our investments
a higher level of governance and
profitability and the impact that this has
on national and regional economies. As
these companies have grown, they have
acted as catalysts for development and
employment, helping to bring the Middle
East into the global economy and
providing fertile training environments
for the young leaders of tomorrow.
THOUGHT LEADERSHIP

been ranked as the leading foreign

investor group in Turkey, Egypt, Pakistan
and Jordan. This track record has made
us a sought-after advisor to many
MENASA governments, enabling us to
foster a great deal of mutual respect.
As a result we are often counselled by
governments on their privatisation
strategies or job creation initiatives.
 Group Chief Executive Officer’s review
Continued
“All in all, we
returned over ourselves to becoming carbon neutral –
US$1 billion in cash
to our investors – by 2010. (As well as driving our business
in capital and towards sustainability we are, as you would
sales proceeds.”
Abraaj’s commitment to helping people
in need is a material part of the group’s
culture. We contribute to our region in
the form of significant charitable
donations for which, on principle, we
never seek acknowledgement or publicity.
I have been very proud of the way our
people have thrown themselves into
our Community Partnership Programme
(CPP), which funds programmes for
the education, medical care and social
development of children, as well as
responding to individual appeals and
natural disasters. The CPP is run by a
voluntary staff committee, with a
mandate shaped by our whole team.
Our people come from 27 nationalities,
but their commitment to the CPP spells
out their strong loyalty to this region.
14 |15 abraaj Capital annual review 2007
We want to contribute to future
generations, as much as to those of
today. That’s why, in 2007, we committed
and to ensuring that all our investment
companies reduce their carbon emissions
expect, also keeping a steady investor’s eye
on opportunities for sustainability funds.)
A dynamic structure that pushes
forward the boundaries
In our mission to seek opportunity
where others see risk, our success hinges
on our continuing ability to manage
that risk with robust processes and
investment methodologies, and through
an innovative approach to structuring
and risk management.
This year’s great results, and those of the
preceding five years, are just the start of
our growth trajectory. To ensure it goes on,
in early 2008, we made various exciting
changes to our organisation.
Our main investment division, Abraaj
Capital (Cayman) Limited, was renamed
Abraaj Investment Management Limited. It
contains three investment teams that will
originate, execute and manage investments
through to exit. Running teams in parallel
means we will be even better at handling
multiple transactions at the same time.
A separate company, Abraaj Managers
Limited, has been created to work alongside
the investment teams. It will identify and
manage any potential challenges or issues
in the companies we invest in, keeping
these investments on track.
The third pillar of the business is Abraaj
Investor Coverage Limited. This new
London-based operation will manage
relationships between Abraaj and its
growing global community of more
than 200 investors. It will also coordinate
fundraising and drive timely and effective
communication with investors.
We are also planning to expand our network
of regional offices, taking Abraaj yet closer
to the markets we invest in. We expect
to add to our Karachi and Mumbai offices
by opening in Jeddah, Cairo and Istanbul.
In 2008, we are also preparing to launch
some innovative new funds, including
an ASOF III special opportunities fund;
a successor real estate fund; and a new
private equity fund which will target both
infrastructure and buyout opportunities.
As existing funds come towards the end
of their natural cycles and are liquidated,
these new funds will both give current
investors the chance to reinvest and also
allow us to welcome new investors.
 Our Year
“the sale of our stakes in Arabtec,
Maktoob.com, ABANAR, Septech
and EFG-Hermes, represented
an average exit IRR of 90%.”

Outlook
Abraaj – and the MENASA region – has
been remarkably little affected by the
Western economic turbulence of the
last few months. This steady state is a
promising precedent for the coming year
when many signs point to a US recession.
Private Equity
Moreover, we are continuing to see
regional governments investing their
capital surpluses wisely – and for the
long term – mostly in developmental
plays. At the same time we are seeing
growing intra-regional investment flows.
All this bodes well for the future – for
our region and Abraaj. I fully expect us

Empowering potential
That is not to say that the region will not to continue our growth trajectory in
be affected by recession. However, I believe 2008 and to further cement our leading
our superior access to deal flow and our role in regional markets.
attractiveness to lending institutions, due
to our track record, will mitigate its effect
on Abraaj. The key will be in unearthing Arif Masood Naqvi
Vice Chairman & Group Chief Executive Officer
the right transactions, something we have
always proved adept at, and in continuing
to focus on diligent execution.

I am also confident in the prospects for

the wider region. We remain one of the
few parts of the world in overall capital
surplus. Our regional economies are

Our investments
supported by high oil prices. The World
Bank estimates that MENA will grow
by 5.4% in 2008 and South Asia by
7.9%; both comfortably ahead of the
world average. THOUGHT LEADERSHIP
Private equity:
a global force for change
The influence of private equity is spreading, with investors
bringing new vitality to businesses in the Middle East,
North Africa and South Asia.
 The future of
private equity
By Josh Lerner
During the 1980s, 1990s and much
of the 2000s, there has been a
tremendous boom in the private
equity industry. In the US, the pool of
private equity funds – partnerships
specialising in venture capital,
leveraged buyouts, mezzanine
investments, build-ups, distressed
debt and related investments – grew
from US$5 billion in 1980 to slightly
more than US$530 billion at the end
of 2006. The recent growth in many
other parts of the globe, including
Asia and the Middle East, has been
even more spectacular.
What explains this tremendous growth
in these funds? What explains the process
of boom and bust: the rapid increases in
fundraising in the late 1960s, mid-1980s,
late 1990s and mid-2000s, and the
declines in the 1970s, early 1990s and
early 2000s? To what extent is the model
developed and refined over the past few
decades likely to be translated into other
countries and types of investments?
To answer these questions, it is worth
highlighting the fundamental role that
private equity plays both in the American
economy and, increasingly, elsewhere
around the globe. The types of companies
financed by private equity organisations
– whether young start-ups hungry for
capital or ailing giants that need to
restructure – come with challenges
and uncertainties that discourage other
investors and require special skills to
deliver the best returns.
18 |19 abraaj Capital annual review 2007
The role of private equity
The financing of young or restructuring
companies is a demanding business.
Financial information on these companies
is limited. Control may largely sit in the
hands of one or two entrepreneurial
individuals. The products and projects that
excite management may not deliver the
best returns for investors. All these mean
that conventional forms of financing, such
as bank loans, come at a high cost.
If the information issues could be
eliminated, these barriers to financing
would disappear. Specialised intermediaries,
such as private equity organisations,
can and do address these challenges.
By intensively scrutinising companies
before providing capital and then
monitoring them afterwards, they can
alleviate some of the information gaps
and reduce capital constraints. Thus, it
is important to understand the tools
that private equity investors use in this
difficult environment, which enable
companies to receive the financing that
they cannot raise from other sources.
It is the non-monetary aspects of private
equity that are critical to its success. By
seconding staff to work with a company,
by taking seats on its corporate board
and by working hand-in-hand with
management, private equity investors
can mitigate many of the so-called
‘agency problems’ that might thwart
a more passive investor.
Take the example of a bio-technology
company founder. They might choose
to invest in a certain type of research
that brings them great recognition in the
scientific community but provides little
return for the venture capitalist. Similarly,
an entrepreneur may receive initial results
from market trials indicating little demand
for a new product, but may want to keep
the company going because they receive
significant private benefits from managing
their own firm. By becoming intimately
involved with the strategy and decision
making of an organisation, the private
equity investor will steer that business in
a direction that has long-term benefits
for both management and investors.
It is easy to see why individual investors
may not have the expertise to address
the challenge of managing a stake in
a growing or restructuring firm. But it
might be assumed that other financial
intermediaries, such as banks, might
undertake the same sort of monitoring.
Yet even in countries with exceedingly
well-developed banking systems, such
as Germany and Japan, policymakers
today are seeking to encourage the
development of a private equity industry
to insure more adequate financing for
entrepreneurial companies.
 Our Year
Josh Lerner is the Jacob H. Schiff Professor of
Investment Banking at Harvard Business School, with a
joint appointment in the Finance and Entrepreneurial
Management Units. His books, The Venture Capital
Cycle, The Money of Invention and Venture Capital and
Private Equity: A Casebook, reflect his research into the
structure and role of venture capital and private equity
organisations. Professor Lerner is also a member of the

Private Equity
Advisory Board of Abraaj Capital.

PE funds raised Private equity (PE) funds raised

– MENA (US$ million) – US and Europe (US$ million)
Growth to continue with funds Russell Investment Group forecast
under management already allocations to private equity to
exceeding US$20 billion YTD reach record levels in all markets

CAGR CAGR
02-06 02-06

Empowering potential
10,267 90% ’000’s 264 41%
91
40%
187
74
173

3,976
82 113
67 42%
55 23
24
780 27 59
403 267 43
28
02 03 04 05 06 02 03 04 05 06

MENA US Europe

> High oil prices and liquidity; > Significant growth in assets
reinvestment of funds in MENA under management
> Increasing awareness of PE and > Superior risk-adjusted returns

Our investments
higher allocation by regional and offered by PE resulting in
international institutions increased asset allocation

Total funds under management Strong emphasis on development of a superior

(FuM) as a % of GDP (06) governance model and alignment of interests

6.04% 4.59% 65,568 Best in class

corporate
Strategic governance/risk
Growth potential

alignment/ management Equity

intensive alignment
49,875 business
Ability to planning
exercise “Active ownership”
1.45%
control
15,693 Effective Balance
portfolio sheet
THOUGHT LEADERSHIP

US MENA MENA PE management optimisation

Long-term horizon
PE funds under Funds under – no short-term
management management pressures
as a % of GDP as of 2006
 The future of private equity
Continued
The limitations of banks stem from several
of their key institutional features. First,
because regulations in the US limit banks’
ability to hold shares, they cannot freely use
equity to fund projects. Taking an equity
position in the firm allows the private equity
firm to share proportionately in the upside,
guaranteeing that the investor benefits if
the company succeeds. Secondly, banks may
not have the necessary skills to evaluate
projects with few tangible assets and
significant uncertainty. In addition, banks
in competitive markets may not be able
to finance higher-risk projects because they
are unable to charge borrowers rates high
enough to compensate for the company’s
riskiness. Finally, private equity firms’ high-
powered compensation schemes give these
investors incentives to monitor companies
more closely, because their individual
compensation is closely linked to the firms’
returns. Banks, corporations and other
institutions that have sponsored venture
funds without such high-powered incentives
have found it difficult to retain personnel
once the investors have developed a
performance record that enables them
to raise a fund of their own.
The profile of private equity has risen
in recent years. As a force for economic
transformation, the sector has been
involved in increasingly high profile
transactions. In some markets this has
prompted calls for changes to the way
private equity is taxed and regulated.
But such siren calls are often based on
fundamental misunderstandings. As The
Global Economic Impact of Private Equity
Report 2008 – a recent report under the
aegis of the World Economic Forum –
20 |21 abraaj Capital annual review 2007
highlights, many of the frequently expressed
concerns about the industry appear based
on misconceptions about its role and
impact. And some of the initiatives to
rein in the sector seem motivated by a
desire by entrenched actors to protect
an inefficient status quo.
The future of private equity
The nature of the evolution of the
venture and buyout industries over
the next decade will be particularly
critical because the growth in the recent
past has been so spectacular and the
industry’s positive effect on the overall
economy has become significant. It is
natural to ask whether the gains made
in recent years can be sustained; how
firms will respond to the current surge
of international opportunities, and which
approaches will work and which will fail.
These are fair questions. Private equity
is longest established in the US and a
review of its history suggests short-run
shifts in the supply of, or demand for,
private equity investments can have
dramatic effects. A scarcity of capital
enhances investors’ returns and periods
of oversupply of capital can reduce
returns. These patterns have led many
practitioners to conclude that the
industry is inherently cyclical. This view
implies that periods of rapid growth
generate problems and that periods
of retrenchment are sure to follow.
However, capital markets are increasingly
international. And this means that factors
affecting one market may not be affecting
others. As a result, growth in private equity
markets such as the Middle East and Asia
is no longer entirely dependent on what is
happening elsewhere in the world. This
means the tides for private equity can
ebb and flow independently in different
markets, with growth in one market
continuing even while others are slowing.
It is also important to consider the
long-run determinants of the level
of private equity, which is linked to
fundamental issues in a nation or region’s
economy. They are likely to include the
degree of dynamism in the economy,
the presence of liquid and competitive
markets for investors to sell their
investments (whether markets for stock
offerings or acquisitions), the pace of
technological innovation in the economy,
and the willingness of highly skilled
managers and engineers to work in
entrepreneurial environments.
When these more fundamental factors
are considered, there appears to have
been substantial changes for the better
in many respects over the past decade.
These include the increasing willingness
of boards of directors – who even a
few years ago frequently viewed private
equity groups as ‘barbarians’ – to
consider the sale of an underperforming
division, or even an entire company,
to a private equity fund.

The increasing number of professionals and
managers familiar with, and accustomed
to, the employment arrangements offered
by private equity-backed companies (such
as heavy reliance on stock options) has
also been a major shift. The pool of
prospective investors in private equity
funds has also broadened beyond the small
circle of endowments and pensions that
drove much of the activity during the
1980s and 1990s. Finally, the efficiency of
the private equity process has been greatly
enhanced by the emergence of other
intermediaries familiar with its workings.
The presence of such expertise on the part
of lawyers, accountants, managers and
others – even real estate brokers – has
substantially lowered the transaction costs
associated with forming and financing new
companies or restructuring existing ones.
While these effects have been seen
worldwide, they have been particularly
strong in emerging private equity markets
such as Asia and the Middle East.
In short, the increasing familiarity
with the private equity process has
made the long-term prospects for such
investments more attractive than ever
before. At the same time, the pressure
for regulatory change in the more
developed markets, if enacted in
large part, could impede future private
equity activity.
I believe that the institutionalisation
of the industry will continue to
accelerate: indeed, private equity is likely
to continue to go through a period of
rapid globalisation. This process, though,
will not be without challenges. Active
investing is at the heart of industry
returns, but there is no clear template
for what active investing means in
different industries in different places
around the world. The extent to which
the US model will spread overseas and
the degree to which it will – or can –
be successfully adapted during this
process are particularly interesting
questions. In the decade to come,
private equity managers will have
to determine what is universal
and what is local.
Another set of challenges relates to the
‘scaling’ of private equity firms, which is a
natural result of growth and globalisation.
Some private equity houses, to be sure,
have managed to grow while continuing
to enhance returns for investors. But
other firms are straining the limits of
their organisations to invest the assets
they already have. Solving the challenges
of managing multiple locations, large
amounts of money and scores of
independent investment professionals
is a top priority for the industry.
Finally, there is the question of the
governance of private equity firms.
The model of loose governance by
limited partners, who rely on incentive
compensation to ensure that the general
partners ‘do the right thing’, may have
reached its limits. Today, there is a
changing, broader limited partner base
that may require more assurances that
its money is being managed prudently.
Our Year
Private Equity
There is also a rapidly expanding base of
private equity professionals who do not
have the history and culture that were
shared among many of the industry’s
pioneers. And, as noted above, regulatory
authorities, accustomed to scrutinising
public firms with detailed governance
structures, are increasingly interested
Empowering potential
in private equity. All of these point to
an increased attention in the way in
which private equity groups are
governed. Those organisations which
can demonstrate leadership and strong
standards of governance will be better
placed for the decade ahead.
Much is still not yet known about the
future of the private equity industry. It
seems clear, however, that this financial
intermediary will be an exciting and
important feature on the global economic
landscape in the years to come.
Our investments
THOUGHT LEADERSHIP
 The case for private equity
in the MENASA region
The regional tide is flowing in favour of private equity. Markets
have become more open, while economies are growing strongly
and the population expands. Companies and governments are
ready for fresh and innovative ideas – the kind of solutions
that forward-thinking private equity investors can provide.
By Dr Nasser H Saidi
Capital is the ultimate world
traveller. It crosses borders with
ease, finding its way to the
markets and sectors where the
potential for profit is greatest. The
discerning private equity investor
has the entire globe to choose
from. And the discerning investor
is increasingly being drawn to one
region – MENASA.
Despite the international reach of the
industry, international private equity firms
have until recently focused mainly on
Western Europe and North America for
deal flow and the most attractive portfolio
returns. However, as those markets reach
saturation point, the push into emerging
markets has widened and hastened.
During the same period, MENASA has
been forging a fresh identity for itself as
a forward-looking powerhouse with a
growth rate that is the envy of Western
nations. It has begun to successfully shake
off its reputation for having a relatively
opaque business community, having
diversified economies away from an
overwhelming dependence on oil and gas
and developed a great appreciation for the
benefits of public-private partnership in
approaching the tremendous infrastructure
development required to cater to vastly
growing populations.
22 |23 abraaj Capital annual review 2007
Real GDP growth in most MENASA
countries is above 5%, putting them
among the fastest growing economies
in the world, according to the Economist
Intelligence Unit. Regional growth has
averaged 5.5% over the past ten years;
much faster than the rest of the world,
which averaged just 3.1%.
As the region has changed, so has its
private equity market. This is thanks in
large part to the pioneering activities
of Abraaj Capital, which has delivered
exceptional returns to its investors in
the six years since its launch.
Private equity deals are increasing, both
in number and in scale. According to the
Gulf Venture Capital Association, the private
equity sector in the region doubled in
2006 to almost US$18 billion.
Abraaj Capital, which paved the way
with groundbreaking deals, such as
its US$65 million takeover of logistics
company Aramex in 2001, has been
joined by other operators, all eager to
get a slice of this action. No fewer than
15 new players entered the market
between 2006 and 2007.
The speed of growth is breathtaking. Private
equity funds raised across the Middle East
and North Africa have increased at more
than double the rate of the US and Europe;
between 2002 and 2006 PE funds active in
the region increased at a compound annual
rate of 90%, compared with 41% for the
US and Europe. Regional deal flow has
enjoyed even greater growth, at 2.6 times
that seen in the US and Europe.
If anything, the pace of growth has
increased in 2007; Abraaj alone raised
an additional US$1.5 billion for its US$2
billion Infrastructure and Growth Capital
Fund, the biggest private equity fund yet
to focus on the region. Private equity
transactions in the first 10 months of
the year totalled US$2.3 billion –
already 80% higher than in 2006.
Cumulative private equity fund raising
is now approaching US$25 billion.
Even more impressive is the potential
for future growth. While it is developing
rapidly, the MENASA private equity
market is still young by the standards of
the US and Europe. The cumulative value
of private equity investments from 2002
to 2006 accounted for just 0.06% of
regional GDP. By comparison, in the US
the figure was 1.34%. Put another way,
private equity in MENASA can grow
in volume more than 20-fold before
it reaches the same economic level
as in established markets.
 Our Year
Dr Nasser H Saidi is Chief Economist of the Dubai
International Financial Centre Authority and Executive
Director of the Hawkamah Institute for Corporate
Governance. He is a former Lebanese Minister of Economy
and Trade and Minister of Industry and, for 10 years,
was First Vice-Governor of the Central Bank of Lebanon.
He is co-chair, with the OECD, of the MENA Corporate
Governance Working Group and established the Lebanon
Corporate Governance Task Force. He is a former Member

Private Equity
of the UN Committee for Development Policy.

Favourable macroeconomic environment and long-term growth initiatives

undertaken by regional governments have been primary drivers of the PE industry

Corporate

Corporate earnings Growth in Market cap Average daily trading

growth IPO listings CAGR (%) volume CAGR (%)

Empowering potential
(%) (02-06) (%) (02-06) (02-06) (02-06)

41.0% 46.7% 46.9%

40.0%
25.0%
12.6% 14.4% 14.0%

US GCC US GCC US GCC US GCC

Economic demographic Regional initiatives

Real GDP growth Population growth Budget balance Reform oriented government initiatives
(%) (02-06) (%) (02-06) (US$ billions) > Need to create 80 million jobs
(02-06)
7.8% 3.5% > Reinvestment of oil wealth and
3.2% long-term economic diversification
1.0% 308
US > Creation of world class ‘off-shore’
US GCC US GCC GCC special economic zones
> Changes to ‘on-shore’

Our investments
(1,511) company and property laws

THOUGHT LEADERSHIP
 The case for private equity in the MENASA region
Continued
The expansion has been supported by
a number of important developments.
Since 2002, MENASA’s regional equity
markets have added significant depth
and liquidity, creating sustainable exit
opportunities for private equity players.
There is a nascent equity culture among
retail investors, building a following for
IPOs. There were 35 significant IPOs in
the region in the first half of 2007. There
is also a rising awareness of private equity
as an asset class and a higher allocation
by local and international institutions to
private equity in the region.
Crucially, the appetite for deals is obvious:
private equity investors are increasingly
being welcomed with open arms. The
region has a dynamic entrepreneurial
culture and a history of family businesses.
Many of these are already strong
companies; average corporate earnings in
the GCC grew by 40% between 2002 and
2006, comfortably outpacing earnings
growth in the US over the same period.
24 | 25 abraaj Capital annual review 2007
But there is a growing understanding
among company management in these
markets that an active partner, in the form
of an experienced private equity investor,
can give them a fresh perspective. Taking
a stake in a company is often as much
about injecting human capital in the form
of knowledge and experience, as it is about
improving its financial strength.
Even where organisations are already
well managed and well structured, private
equity in MENASA can often rapidly add
value to a company. It may introduce new
techniques of financing, risk management,
corporate governance and internal
accounting that, though established in
Europe or the US, are still innovative in the
local market. Regional specialists such as
Abraaj will also bring an unparalleled
network of local and international
connections that can help a company grow
beyond the expectations of its founders.
Demand for private equity is coming
from local families keen to expand their
businesses, from expatriate entrepreneurs
looking for an exit and from local
governments seeking to privatise state-
owned assets. Latest calculations by
Abraaj show the potential for a fourfold
increase in private equity funds under
management within the next five years.
The rise in private equity is inextricably
linked with the broader economic
transformation that has taken place
across the MENASA nations over the
past few years.
Its origins can be traced back to the oil
price crash of the 1990s, when the
oil price dipped below US$20 per barrel.
This delivered a jolt to the oil-producing
nations and forced them to recognise
the need to focus on reducing their
almost complete dependence on oil and
to pursue the long-term diversification
of their activities instead.
Governments have sought to reinvent
themselves with new leaders who have
been young, articulate and outward
looking – and focused on reducing tariffs
and barriers to trade. Many have been
drawn from the boardrooms of large
global corporations: more than a dozen
leading executives and members of the
Arab Business Council have been given
ministerial jobs in governments across
the region since 2003.
The 9/11 terrorist attacks on New York
gave added urgency to these reforms;
investors based in MENASA opted to
invest at home, rather than trust their
money to the volatile and vulnerable US
and European markets. This ‘reverse flow’
of capital is worth many billions of
dollars, according to the World Economic
Forum’s Arab Competitiveness Report.
 Our Year
Private Equity
PE transactions PE transactions
– MENA (US$ million) – US and Europe (US$ million)
With US$2.3 billion of transactions In the first half of 2007 US$248
announced in the first 3 qtrs of billion of deals were completed
2007, deals have already exceeded in the US
2006 levels by 80%

’000’s CAGR

Empowering potential
CAGR
02-06 02-06

111% 538 43%

1,277
224
27%
363
693 163
241 314
178 104
120 84 199 66%
254 209 87 137
65 94
41
02 03 04 05 06 02 03 04 05 06

MENA US Europe
> Increasing deal flow due to change > Larger funds consummating
in mindset of private companies bigger transactions
> Meaningful increase in average deal size > PE deals accounted for over
> Privatisations and favourable changes 25% of global M&A volume

Our investments
in regulatory framework in 2006, up from 5% in 1999
> Growing trend of public deals;
increasing trend of secondary
buyouts as well

GCC spending multiplier Planned infrastructure spend

Governments spent 30% of additional by state owned entities (US$ billion)
oil revenues and expected to increase Planned non-oil infrastructure
spending in the future spend of over US$358 billion

1.4 153.6
127.3

0.4 134.6
0.3 62.9
58.5 113.8
-1.7
THOUGHT LEADERSHIP

30.6
49.9

15.3 17.4 27.9

19.0
15.0 14.1 13.0 13.5

Bahrain Oman Kuwait UAE Qatar KSA

Oil and gas Others

73-78 79-84 00-05 04-09E
 The case for private equity in the MENASA region
Continued
Today, countries such as Egypt, Jordan,
Morocco and Libya are vigorously
competing to win foreign investment –
a stark contrast to their old protectionist
practices. And capital is flowing between
nations in the region, moving from those
with the greatest wealth to those with
the biggest populations as investors from
Kuwait, Saudi Arabia or Qatar take stakes in
promising ventures in India or North Africa.
In Egypt and Morocco, for example, foreign
direct investment in 2006 was more than
10 times the level five years earlier, according
to the International Finance Corporation,
an arm of the World Bank, as the countries
lowered investment barriers and sold off
government-controlled companies.
The creation of ‘offshore’ special economic
zones, with world-class regulatory and
governance systems, and changes to onshore
company and property laws, are further
fuelling the economic boom.
Again, private equity is at the vanguard of
these deals, helping businesses form new
regional and international alliances. Three
of the biggest transactions Abraaj has
participated in during 2006 and 2007
involved investments into Egypt, for example.
26 | 27 abraaj Capital annual review 2007
Large foreign exchange reserves, budget
surpluses, low inflation and high liquidity,
are all playing a part in promoting a
‘virtuous circle’ of economic stability
and growth. Throughout the region, a
burgeoning middle class, with higher
incomes at its disposal, is demanding better
amenities, products and services. Moreover,
governments in the MENASA region have
realised that they have to invest heavily in
their local infrastructure if they are to stay
ahead of international competitors, and
nurture favourable economic conditions.
In the Middle East, half the total
population of 300 million is below
the age of 20. Coupled with rapid rates
of population growth, this means the
MENASA region as a whole will need
to create between 80 million and
100 million new jobs by the year 2020.
Abraaj is playing its part in job creation.
Its high growth-oriented investment
strategy has resulted in its portfolio
companies experiencing substantial
growth, often exceeding 2-3x during
the investment period. This growth has
accordingly delivered significant job,
wealth and skill creation within all of
the portfolio companies that Abraaj has
invested in. Post-acquisition analysis by
Abraaj shows that through streamlined
efficiency and business growth, it has
created new jobs consistently in all
portfolio companies, often to the extent
of a 20% increase in employment.
Transport, manufacturing, communications,
healthcare and education all need to
develop and improve if countries are to
deal successfully with these pressures.
For the first time, regional governments
are confronting the issue head-on and
systematically using surpluses from higher
oil prices to build up their infrastructure.
Over the past five years alone, governments
of the Gulf Co-operation Council (GCC)
– comprising Saudi Arabia, Kuwait,
Bahrain, Oman, Qatar and the United
Arab Emirates – have built up significant
budget surpluses. Rather than being
invested outside the region, vast sums are
now being ploughed into developing hard
infrastructure: the airports, power stations
and telephone networks that will support
expansion. But capital is also being invested
into so-called soft infrastructure: the
hospitals, clinics and schools that support
the aspirations of a growing population.
In the process, this investment is creating
jobs, generating profits and giving a
massive boost to the region’s economies.
Already, state-owned bodies in the
GCC are committed to more than
US$350 billion of infrastructure projects.
Today the MENASA region is the largest
source of infrastructure-related project
finance in the world, accounting for
US$33 billion in 2006. Abraaj expects
investment requirements to exceed
US$1 trillion over the next 10 years,
which cannot be covered by government
funding alone.
Again, this opens the door for a significant
involvement from private equity. In 2007
Abraaj has structured investments in
the healthcare, education and aviation
sectors, capitalising on expansion in
both hard and soft infrastructure sectors.

Against this positive economic backdrop,
merger and acquisition activity has
blossomed. The value of deals has
increased exponentially, growing at a
compound annual rate of 80% between
2002 and 2005, to reach US$64 billion.
The growing confidence in M&A
transactions is broadening the choice of
exit routes for private equity investors.
The region’s stock and debt markets
have been expanding. This is partly
because of innovations in Islamic
finance, which have found favour with
many Muslims looking for financial
products that meet religious restrictions
on charging interest.
New financial exchanges, such as the
Dubai International Financial Exchange
which opened in 2005, have created
fresh platforms for companies to raise
capital. Listings such as the US$5 billion
IPO of ports business DP World in
November 2007 show that these
exchanges are now the choice of world-
class businesses, while investors enjoy
regulatory standards and transparency
on a par with London or New York.
Privatisations are another transforming
trend. Governments across the region are
seeing the attraction of private sector
partnerships, not least as a way to
accelerate growth. In the first half of 2007,
privatisation deals worth US$11 billion
were completed. I estimate that overall
US$300 billion to US$400 billion of assets
in the region will be moved into private
hands in the coming years.
Our Year
Private Equity
“Today the MENASA region is the
largest source of infrastructure-
related project finance in the
world, accounting for US$33
billion in 2006.”
Empowering potential
Moreover, there are good reasons to remain
bullish about the region’s future prospects
too. Real GDP growth is expected to
average more than 5% a year in the Middle
East and North Africa between now and
2010. Oil and gas prices remain high,
bolstering national reserves. And even as
extra capacity comes on stream, growing
global demand is expected to maintain
prices well above their historic long-term
average, keeping GCC budgets in surplus
Our investments
for the foreseeable future.
But while oil will remain a key driver
of economic growth, each month that
goes by sees MENASA developing a
more diversified economy capable of
sustaining longer-term expansion even
in a period of lower commodity prices.
THOUGHT LEADERSHIP
Empowering potential
A combination of an exceptionally skilled and
experienced team, rigorous processes and unparalleled
regional knowledge is the root of our success.
 Our unique route
to unlocking value
A clear and structured investment process,
from initial contact to final exit, delivers superior
returns for our investors.

Abraaj has a track record of delivering
risk-adjusted returns well above industry
benchmarks to investors. With an average
IRR on 20+ exits of over 50% compared
to a US top quartile performance of 25%
IRR over a comparative period, the figures
speak for themselves.
The key to our consistently superior
performance is the focused and structured
way we approach our business: from the way
we source deals and manage investments
to the way we secure lucrative exits.
We source deals through an extensive
network of influential regional contacts,
backed up by a proactive investment team.
Our regional knowledge and insight means
we are regularly the first to identify a
company’s potential, and so can often
pre-empt auctions. Our history of returning
value to shareholders means we are trusted
by the region’s established pension funds,
family offices and financial institutions.

Capitalising on Investing in high

regional insight potential companies

> We have strong roots in MENASA, with influential
shareholders and extensive local contacts.
> We source deals through our in-house
professional sourcing capacity. As a result the
vast majority of our deals are purely proprietary.
> We have established the strongest investor
base in the region, ranging from leading family
groups to large institutional investors. Our
investors include pension funds, family offices,
university endowments, insurance companies
and financial institutions.
> We have been selected to represent our region
in global organisations such as the World
Economic Forum’s Global Private Equity Task
Force and we serve on the Advisory Board of
the Emerging Markets Private Equity
Association in Washington DC.
> Our strong, long-term relationships mean
many companies trust us to take their business
to the next level.
> We seek to pre-empt an auction process
wherever possible.
> Investment opportunities are actively identified,
often in advance of other potential buyers,
across a wide range of sectors, from mining and
healthcare to transport and pharmaceuticals.
> Attractive candidates for investment are filtered
through rigorous investment criteria intended to
reduce many of the risks typically associated
with leveraged investing.
> We only invest in strong, stable, mature and
profitable companies where our skills and
expertise will create value for the company
and our investors.
> We maximise value through the optimum use
of leverage, strategic and operational support,
and by aligning management interests with
those of shareholders.
> We never invest without a clear and structured
plan to create value.

30 | 31 abraaj Capital annual review 2007


“We actively contribute to the
growth, development and
strategic direction of companies.”
From the moment we identify a
company, we never forget that profitable
exit is the ultimate goal. We carry out
extensive due diligence on potential
investments, identifying a clear strategy
for unlocking value and aligning
management behind the plan. We make
optimum use of debt, balancing the risk
by investing in stable, market-leading
companies with strong management.
Partnering with strong
management teams to superior returns
foster growth
> We seek and develop exceptional management
teams in acquisition targets.
> We grow our businesses organically and
through acquisitions.
> We develop partnerships over a three to
five year period to create value.
> We introduce best practices in corporate
governance, reporting, internal processes
and procedures.
> We incentivise management with such means
as stock option plans linked to targets.
Our Year
Private Equity
We buy and build within our portfolio, Such proactive value creation, along
creating value over a typical three to five with a disciplined, evolving exit strategy,
year investment period. We use Abraaj’s means we deliver superior returns to
financial standing and skills to achieve the our investors, time after time.
best financial structure; introduce best
practice in corporate governance, reporting
and internal processes; and work with, and
incentivise, management to help them
Empowering potential
grow and develop their companies.
Delivering
> We have achieved a gross capital gain of 128% Our investments
on exited regional investments and an average
IRR on 20+ exits of over 50% compared to a
US top quartile performance of 25% IRR over
a comparative period.
> We actively contribute to the growth,
development and strategic direction
of companies.
> We hold comprehensive monthly
portfolio reviews.
> We produce detailed quarterly portfolio reports.
> We compile quarterly performance reports
on each fund which are distributed to LPs.
THOUGHT LEADERSHIP
> We collate all feedback from monthly and
quarterly reports in extensive annual
performance reviews.
 Capitalising on
regional insight
Abraaj has strong roots in
MENASA, with wide regional
contacts, involvement in
influential local bodies, a
highly respected track record
and a 25% Arab staff base.
Our local network, including our
shareholders and Limited Partners,
includes many of the most important
and influential people in the region.
Large institutional investors from
outside the region joined us in 2007,
drawn by our pedigree and the increasing
interest in exposure to our region.
Our strong reputation has been earned
and reinforced by many landmark private
equity transactions. In 2007, for example,
these included the largest private equity-
led leveraged buyout in the history of
the Middle East and North Africa, with
our acquisition of the Egyptian Fertilizers
Company and with our exit from Maktoob,
the Arab world’s leading internet portal,
which generated an IRR greater than 75%.
The breadth of our local knowledge and
contacts means that, when it comes to
sourcing deals, we are not limited to
publicly available opportunities. Our
Limited Partners are our eyes and ears in
their own countries, as well as being our
ambassadors. They can provide us with
regional insights, access to governments
and ways into propitious deals.
32 | 33 abraaj Capital annual review 2007
“Our 100% acquisition
of egyptian fertilizers
company was the
largest private
equity-led leveraged
buyout in the history
of the Middle East
and North Africa.”
Our constant awareness of the key trends Turkey, in itself, has particularly
in our region gives us the edge in identifying strong healthcare potential for several
opportunities, as with our 2007 investment key reasons:
in education. Here, we saw various factors
combining to create a greatly increased >A
 new law provides health insurance
need for quality education – and so a great cover for the entire 70 million population.
opportunity for quality education providers. The law, which enables private health
There is an acknowledged need to improve care, should create additional market
regional education to compete globally. demand of US$8.5 billion
Public sector provision is under increasing
pressure, as high population growth > It is a growing medical tourist
increases MENASA school admissions by destination, with 2005 GCC medical
10% each year. Against such clear need, tourism alone at around US$2 billion
there is growing awareness that public-
private collaboration is required, as seen > The country has both an increasing
by the Abu Dhabi Education Council’s 2006 population and a growing GDP.
initiative to enable private management
of selected public schools. Such points make Turkey – and Acibadem
– a highly attractive choice for regional
Having identified the opportunities for development. In turn, Acibadem felt that
development within the education sector, Abraaj – among the many PE firms who
our existing relationship with the market were interested in the business – was the
leader enabled us to efficiently explore a ideal partner to help them accomplish
potential investment. In 2007, we invested their growth ambitions, due to its regional
US$124 million for a 25% stake in Global and sector understanding.
Education Management Systems Education
(GEMS), a growing network of 35 schools
in five countries. Our investment will allow
aggressive expansion to 350 schools in the
next decade, and help standardise primary
and secondary education in the region.
Our focus on healthcare followed a
similar trajectory. We identified five
key drivers that were putting pressure
on public services: population growth,
income growth, increases in chronic
lifestyle diseases, medical innovation and
technical progress, and increasing growth
in medical insurance. Seeing the great
potential for private health providers
(IGCF) took a stake in Acibadem
Healthcare in August 2007. This leading
Turkish private healthcare provider is
rated fourth out of the top 10 global
companies in its sector outside the US.

Tadawi
2007 Acquisition
A vision to grow a high-quality
pharmacy business across the region
Country Saudi Arabia
Sector Healthcare
Acquisition date December 2007
Stake 40%
Transaction size US$177 million
Our Year
Private Equity
Empowering potential
Recognising that an expanding MENASA
private healthcare market must go
over US$1.86 billion in the next five years
on new healthcare facilities and Tawadi
hand in hand with an escalating demand already has the largest wholesaler and
for pharmaceutical products, we structured retail network in the kingdom.
an investment in a 40% stake in Saudi
Arabia’s leading distributor and retailer Abraaj was chosen, above three other
of pharmaceutical products, Tadawi. contenders, as Tadawi felt that Abraaj had
the best pan-regional network to grow the
This family-owned business offers business regionally. Our success in helping
spectacular opportunities for growth our investors win this unique growth
across the GCC. The opportunities opportunity speaks volumes about our
in Saudi Arabia alone are enormous: strength and standing.
the country accounts for 65% of
the region’s drug expenditure, the
government is committed to spending
Our investments
THOUGHT LEADERSHIP
 Investing in high
potential companies
Abraaj is only interested in the
very best. We invest in the
strongest and most profitable
companies, operating in growing
and lucrative sectors.
Potential investments go through a rigorous
filtering process, to ensure they are stable,
mature, profitable and well managed.
We carry out intensive financial, legal and
operational reviews, looking at everything
from management information systems
to product strategy and we do so within
unprecedented timeframes.
Our value creation starts with an initial
100-day plan to communicate our
proposals and galvanise the workforce.
The following years are shaped by a
strategic expansion plan: we never invest
without knowing how we will leverage
the company, and how we will exit. This
strategic plan is adjusted and evolved
throughout the life of the investment, as
required. Uniquely, we look to buy-and-
build, not asset strip. We aim to develop
exceptional management teams, aligning
shareholder and management interests.
In 2007, we demonstrated our ability to
identify, and invest in, outstanding
businesses with several striking acquisitions.
One of which was Air Arabia, the leading
low cost carrier (LCC), in which we took
strategic co-founder shares. The Sharjah-
based airline carries two and a half times
as many passengers as its closest rival,
and has a highly efficient business model.
Air Arabia’s potential for growth is enormous.
34 | 35 abraaj Capital annual review 2007
Due to factors such as economic growth,
high demand and the liberalisation of the
airline sector, intra-regional air passenger
traffic is forecast to grow annually by
7% until 2010. LCC traffic – which is
currently less than 5% of regional traffic
– is expected to significantly outpace this
industry average. This increase would
reflect global patterns: in Europe, for
example, LCC traffic has increased “Our investments
annually by 40% since 1999. All of our have one thing in
new investments have one thing in common. They are
common. They are leading their sector –
and their sectors are booming. Tapping
leading their sector
into our expertise and ability to leverage – and their sectors
gives them the capacity to move ahead are booming.”
even more strongly, while the extra
capital maximises the value of the
company. As well as benefiting our
business and our investors, such activity
benefits the region too, in terms of
sustainable economic development.
We are, of course, always in active
discussions about further investments
– a shipyard in South East Asia, three dairy
companies in Pakistan and a leading waste
management company in India are just
some of the deals in our pipeline. However,
in these, as in all our deals, we will only
ever commit our investors’ money if we
are absolutely sure the potential – and
pedigree – is unbeatable.

EFC
2007 Acquisition
Reinvigorating a profitable fertiliser
manufacturer and driving the company
on to global leadership
Country Egypt
Sector Urea production
Acquisition date June 2007
Stake 100%
Transaction size US$1.46 billion
Our Year
Private Equity
Empowering potential
Egyptian Fertilizers Company is the largest
private sector fertiliser manufacturer and
EFC had all the hallmarks of high potential:
robust global demand, a clear business
exporter in Egypt, with two state-of-the-art strategy and strong management.
production lines and strong relationships
with leading global fertiliser traders. The same team that worked on the
acquisition is now developing the business.
Its products are in high demand. Egypt We have brought efficiency up to 110%,
is one of only two urea-manufacturing commissioned a project to add extra
countries in Africa, where demand is production capacity, and laid expansion plans
set to increase significantly; EFC has that include factories in Nigeria and Algeria.
the lowest cost of production and
greatest scope for distribution among
urea-producing countries.
Our investments
THOUGHT LEADERSHIP
 Partnering with strong management teams
to foster growth

We unlock value through
partnership. We look to buy-and-
build, taking the business to the
next level before delivering the
rewards to our investors.
That is why we look for strong, profitable
companies with good people. Since
most of our deals are proprietary, senior
management will be working with us from
start to finish. Our aim is to develop the
team, grow the business organically and
introduce best practice and, by doing so,
take the company to new heights.
We have endless examples of the success
of this partnership approach:
>W
 e have worked with JorAMCo, the
Jordanian aircraft maintenance, repair
and overhaul (MRO) business, to develop
and strengthen the business. According
to the strategic plan it opened a new
maintenance hangar in 2007, doubling
capacity. Together with an expanded
workforce and operational savings, this
gave JorAMCo the edge to secure long-
term repair contracts with expanding
European airlines who transferred their
business to the Middle East. The company
is now greatly exceeding its revenue
and net income targets and was named
2007 MRO Company of the Year at the
ITP Aviation Business Awards.
> In 2007 we helped create a new
management committee at ART
Marine. During the year, the business
was named Best Azimut Yachts Dealer
for the second year in a row and
launched an innovative fractional
yacht ownership programme.
>O
 ur support for MS Forgings, the leading
Pakistan steel forging house, has had
impact across the company. A roadmap
for the next two years has been agreed
by the board; a CEO designate to ensure
succession, a CFO and a head of forging
have been appointed; and we have
worked with management on business
development, customer selection and
the mitigation of energy and raw
materials shortages.

By developing our investee companies in

this way, all parties – Abraaj, the companies
themselves and our investors – benefit.

How we track companies’ progress

feedback

Portfolio Reviews Portfolio Reports Portfolio Performance Strategic Review

monthly Quarterly Quarterly Annually

> Monthly reviews of individual
portfolio companies with an
emphasis on management
accounts
> Analysis of individual investment
risk and performance ratings,
analysis of appropriate industry,
sector, geographic and other
pertinent concentrations
> Assessment of all factors
relative to post-acquisition
strategies and plans.
> Portfolio reports containing
cost basis, carrying values,
estimated fair values and
valuation discounts of all
individual investments
> Documentation of any
departures from or variations
to post-investment plans
> Review of reports by
senior management.
> Performance reports on the Fund
> Clear statement of
management fees, profit
share and carried interest
> Clear statement of related party
transactions, benefits and fees
> Complete reports ready for
distribution to LPs
> Consider exit options and
strategies for each investment.
> Collation of all feedback
for an extensive annual
performance review
> The review includes financial
and management performance
of portfolio companies and
forecasts and other key
performance metrics
> Revisit and assess exit strategies
for each investment, and
modify them if necessary.

36 | 37 abraaj Capital annual review 2007


GMMOS group
2007 Acquisition
Inspiring an excellent oil and gas
service business to fulfil its potential
Country UAE
Sector Oil and gas
Acquisition date May 2007
Stake 100%
Transaction size US$69 million
When we bought Gulf Marine Maintenance
& Offshore Company (GMMOS) in May,
CEO and industry veteran Ellias Nassif had
already built up a world-class business in
oil and gas, marine and fabrication services.
We worked with Ellias and his team to help
make GMMOS even better. We focused on
growing capacity in all divisions – adding
400 more employees to the existing
workforce of 1,200; securing an 80,000 sq m
shipyard and workshop in one of the largest
ports in the UAE; and acquiring additional
vessels and cranes.
Our Year
Private Equity
Empowering potential
We helped create the optimum
management environment; developing a
group manpower plan that will strengthen
second tier management to focus on day-
to-day operations, while freeing senior
management for strategic development.
The results have been immediate. In 2007,
all parts of the business were growing, with
sales up almost 40%.
Our investments
THOUGHT LEADERSHIP
 Delivering
superior returns
Superior returns are at the heart
of what we do. With a gross
capital gain of 128% on exited
regional investments and an
average IRR on 20+ exits of over
50%, we believe our track record
is second to none.
Such returns are not just about the way
we exit, or the way we secure a deal.
They are the result of the strength of
our entire investment process – from
identifying unique opportunities and
systematic due diligence to partnering
with managers to our rigorous exit
strategies. The robust and systematic
way that we monitor the progress
and development of our investment
companies against our post-acquisition
strategies is intrinsic to our success.
Monthly portfolio reviews are a key
part of the process. At these, we study
management accounts, analyse key areas,
such as individual investment risk and
performance ratings, and review post
acquisition strategies and plans. Quarterly
portfolio reports are produced which
summarise the status of individual
investments. As part of this process, senior
management reports are assessed and
action plans developed, if required.
38 | 39 abraaj Capital annual review 2007
> 50
Average IRR across 20+ exits
compared to a US top quartile
performance of 25% IRR over
a comparative period.
We also compile quarterly performance Such success creates a virtuous circle for
reports on each fund for our Limited Abraaj and its investors. Because we deliver,
Partners. These summarise their overall they trust us with their investments and
position, identify key events in each their companies. This, in turn, enables
investment’s development and flag up us to keep delivering.
pipeline opportunities.
Abraaj’s strategy is built on a systematic
Extensive annual performance reviews, approach; strong regional relationships,
which collate all feedback from monthly knowledge and expertise; innovation; and
and quarterly reports, are another key a proven track record.
milestone. At the reviews, exit strategies for
each investment are formally reassessed and, Our success in 2007, in delivering
if circumstances have evolved, modified. risk-adjusted returns that outstripped
the norms, showed how well this strategy
The past year’s exits have again works. As we continue to grow our
demonstrated the strength of this business across MENASA, we are confident
rigorous approach as, following our that our strategy will continue to deliver,
stewardship, investments have secured for the prosperity of our investors,
exceptional returns. Exits have included: ourselves and our region.
>A
 rabtec, the UAE-based construction
contracting company, which after three
years generated an IRR of 116%, returning
12x invested capital
>A
 mwal, the leading investment banking
firm in Qatar, which provided an IRR of
101% and 6.8x gain on invested capital
> Maktoob, the leading Arab internet
company, which generated an IRR of
more than 75%
> Septech, a waste water treatment
company, was exited after three years,
generating a 39% IRR.

Maktoob
2007 Exit
Growing a good idea into the
region’s leading internet portal
and a profitable investment
Country Jordan
Sector Internet services
Acquisition date January 2005
Stake 34%
Transaction size US$5.2 million
Back in 1998 two young men decided to set
up an internet portal for the Arabic-speaking
world. Maktoob became such a success it
spawned further businesses, scooped major
awards – and generated an internal rate of
return in excess of 75% for Abraaj investors.
We exited from Maktoob in December
2007, selling out to a hedge fund that development team. Higher advertising and
was already a 30% shareholder.
Our Year
Private Equity
Empowering potential
Under our care, Maktoob developed to
become the 102nd most visited site on
the internet; it grew to include the first
Arabic-language search engine, araby.com,
an interactive TV joint venture, and the
largest Arabic matrimonial website. We
helped find a chief financial officer, open
a Cairo office and enhance its product
auction revenues also meant better-than-
expected revenues for Maktoob.
Our investments
THOUGHT LEADERSHIP
Our investments
Abraaj’s five funds leverage the huge potential of
the MENASA region, driving investments across a
vast geographical footprint from Morocco to India.
 EFG-Hermes
2007 Exit
Abraaj Capital Holdings Limited
Country Egypt
Sector Financial services
Acquisition date September 2006
Stake 25%
Transaction size US$505 million
42 | 43 abraaj Capital annual review 2007
EFG-Hermes was established in 1984 and is
the Arab world’s premier investment banking
firm and the market leader in securities,
brokerage, asset management, investment
banking and private equity.
In September 2006, its shareholders approved
the subscription of 25% of its holding stock
by Abraaj with the resolution receiving a
99.9% endorsement. Over 18 months, Abraaj
provided strategic guidance and financial
support, fortifying the company during a
transformative period as it sought to further
consolidate its leading regional position.
Abraaj helped see EFG-Hermes through
a key period of expansion and helped
the bank identify new markets.
In November 2007, Dubai Financial Group
(DFG), the financial holding company of
Dubai Group (a member of Dubai Holding)
agreed a transaction for DFG to acquire
100% of Abraaj Egypt Limited and Abraaj SPV
26 Limited (which collectively own a 24.62%
stake in Cairo-based EFG-Hermes) from
Abraaj Capital for a total consideration of
approximately US$1.1 billion, representing
an IRR of 93% for Abraaj Capital Holdings.

Abraaj funds year in review
All our funds had a stellar financial year and without exception
ended 2007 substantially up on their individual net asset values
compared to its start.
2007 consolidated our track record in
terms of strong investment performance
and growth in asset values across our
established funds and the year ended
with the successful completion of a
US$2 billion fundraising campaign for
IGCF, the largest private equity fund
focused on the MENASA region – 40%
of which has already been deployed.
Abraaj’s range of five funds provides
investors with access to a diverse range
of dynamic companies, operating in more
than 14 nations. The funds genuinely span
MENASA, from airlines in Saudi Arabia to
petrochemicals in Egypt; from hospitals in
Turkey to manufacturing and infrastructure
companies in Pakistan and India.
Investments vary from heavy industries,
such as shipbuilding, to service sectors,
such as investment banking and education.
We only invest in companies that meet
our strict criteria – which we assess
through rigorous due diligence and
exhaustive screening processes. But that
is only the beginning. A huge portion of
the returns generated for investors comes
from Abraaj’s ability to help a company’s
management realise the full potential
of their business.
Our Year
Private Equity
“The performance during 2007
demonstrates our ability to
deliver returns through
execution of our strategy
and attention to detail.”
empowering potential
The performance during 2007
demonstrates our ability to deliver
returns through execution of our
strategy and attention to detail. The
year saw six significant acquisitions
completed, or agreed to, by the funds.
Several of these investments are already
showing substantial gains.
Alongside the important fundraising
and investment activities during the
Our investments
year, we also realised highly profitable
exits, the sale of our stake in EFG-
Hermes alone doubling investors’
capital in less than 18 months.
THOUGHT LEADERSHIP
 Abraaj funds year in review
Continued

five funds covering the traditional Private equity spectrum

buyouts

Growth capital Buyouts Pre-IPO

> Equity to fund growth in
established businesses via
organic growth or acquisition
> Often in the form of a minority
stake acquisition
> Acquisition of a majority stake > Target to go public within
with significant involvement from 6-18 months of PE investment
the private equity firm > Participation in the founder
> Includes LBOs, MBOs, etc shareholder block

Abraaj Funds

Infrastructure and Abraaj Buyout Fund LP Abraaj Special Opportunities

Growth Capital Fund LP Fund III Limited
Abraaj Buyout Fund II LP

Infrastructure

Hard infrastructure Soft infrastructure Real estate

> Private equity participation in the
construction of hard assets such
as power plants, water and roads
> Leveraged nature of these projects
is ideal for private equity
> Infrastructure investments such > Investments into real estate
as education and healthcare developments, construction
firms and related companies

Abraaj Funds

Infrastructure and Infrastructure and Abraaj Real Estate Fund LP

Growth Capital Fund LP Growth Capital Fund LP

Abraaj Buyout Fund II LP

44 | 45 abraaj Capital annual review 2007

 Our Year
Abraaj Buyout Fund LP (ABOF)

Private Equity
Closed in June 2003 with commitments of US$116 million. Fully
invested by end-2004. Target IRR of 30%. To date ABOF has exited
five investments at an average of over four times the multiple of
cost and an IRR of 70%.

Ongoing investments Fund year in review technology leaders to help the

at start of 2008 An excellent year saw a further company gain significant penetration

BMA Capital
Financial services, Pakistan
Spinneys Holdings
Retail, regional
JorAMCo
Aircraft maintenance repair
and overhaul, Jordan
Exits during 2007
Septech Holdings Limited
Waste and waste water
management, UAE. IRR of 39%
over a three-year holding period
two profitable exits, boosting overall
returns on the fund. Investors, who
had already seen the return of all
their original capital from three
prior transactions, have now seen
five exits successfully concluded.
The sale of leading Arabic internet
portal Maktoob shows the positive
role of Abraaj Capital’s involvement
in the business. In less than three
years Maktoob significantly grew
its product areas, revenue and
profits, with Abraaj helping to identify
empowering potential
in regional markets. This paved the
way for a successful sale back to
management in September.
JorAMCo continues to progress
well along the development track
agreed with Abraaj. It opened a new
maintenance hangar in 2007, doubling
capacity. Together with an expanded
workforce and operational savings,
this gave JorAMCo the edge to
secure long-term repair contracts
with expanding European airlines.

Maktoob.com
Online regional portal, IRR of over
75% over 35-month holding period
Exits during 2006
Amwal Capital
Financial services, Qatar. IRR of 101%
and 6.8 times gain on invested capital
Exits during 2005
Aramex
Logistics, international. IRR of 68%
producing a 5.7 times gain on
invested capital
Our investments
Abraaj expects to have divested
the best opportunities, such as
from the fund’s remaining portfolio
online auctions.
by 2008, making it a six-year cycle
Similarly, Abraaj has guided of completion at very profitable
supermarket chain Spinneys to terms to all investors, well in excess
discover new markets, opening in of the best performing funds globally.
Egypt and planning expansion across
the region. Abraaj led restructuring
at waste water treatment company
Septech to focus the business on
five key areas, partnering with global
THOUGHT LEADERSHIP

> Two further profitable exits in 2007

Exits during 2004
ONIC
Insurance and financial services,
Oman. Gross IRR of 84% and 1.7
times gain on invested capital
> Three ongoing holdings all report growing income and revenues
> Supermarket chain, Spinneys, successfully concludes a
US$180 million financing package to support future growth
> Fund well positioned for further profitable exits during 2008
 Abraaj Buyout Fund LP (ABOF)
Continuing investment
BMA Capital Management Ltd
Country Pakistan
Sector Financial services
Investment date May 2004
Transaction size US$7.3 million
Stake 50%
www.bmacapital.com
Acquisition structure
A rights issue for 3.3 million BMA shares,
100% financed by equity.
Profile
BMA Capital Management Ltd (BMA)
is one of the leading firms in Pakistan’s
securities market and has been a corporate
member of the Karachi Stock Exchange
(KSE) since 1992. The firm provides a wide
range of services with particular focus on
capital markets and is one of the leading
brokers in the equity, fixed income and
inter-bank foreign exchange markets.
Investment rationale
BMA is well established in its field
with a solid track record and a strong
management team. It works with leading
institutions including banks, domestic and
international fund managers and public
and private sector corporations. With the
exception of its first year, the company
has been profitable in each year of its
operations. BMA provides an opportunity
in an attractive industry in Pakistan with
substantial growth potential.
Post-acquisition strategy
A focus on aggressively expanding its
core business activities, by adding new
revenue lines in retail brokerage, asset
management and private equity
investment, to diversify the overall
revenue stream and develop into an
integrated investment bank.
46 | 47 abraaj Capital annual review 2007
Highlights of the year
BMA Capital enjoyed a dynamic year of
achievement and growth, cementing its
position as Pakistan’s top securities and
investment banking firm.
It was a year of record income as
BMA doubled the market share of
its institutional equity business and
was the joint leader of Pakistan’s largest
international equity listing for a decade.
Eight retail broking offices opened,
growing revenues by 570%.
The corporate finance division achieved
international prominence. A particular
highlight was the US$813 million listing
on the London Stock Exchange of
Pakistan’s top energy firm, Oil and Gas
Development Company Limited, jointly
lead managed with Goldman Sachs and
Citigroup. This was Pakistan’s largest
equity-raising in more than a decade.
Institutional equity business saw revenues
surge, doubled market share and captured
over 20% of the international portfolio
flows into Pakistan. This makes BMA the
leading domestic brokerage house for
foreign portfolio investors.
BMA’s share trading platform now
attracts 1,500 customers, with 10 flagship
branches throughout the country. Its latest
branch was officially opened in December
by Caretaker Federal Finance Minister
Dr Salman Shah, in Lahore.
A vigorous flow of major new mandates,
which included beating 10 rivals to win
the Pakistan Human Development Fund,
contributed to a 31% increase in assets
under management. A newly launched fund,
the BMA Chundrigar Road Savings Fund,
attracted US$20 million in just one month.
Other initiatives included the BMA
Pakistan Opportunities Fund, the first
ever open-ended offshore country
fund for Pakistan, and the BMA Principal
Guaranteed Fund, Pakistan’s first
capital guaranteed fund and the only
closed-ended fund to be oversubscribed
since 2005.
Meanwhile, BMA’s Financial Research
Portal, launched at the beginning of the
year, established itself as an indispensable
tool for Pakistan’s fast growing investment
community. The portal at http://research.
bmacapital.com was enhanced by a daily
service, the BMA Research report, which
clients receive via email.
The company’s national profile continued
to rise. When CNBC launched its broadcast
service in Pakistan earlier this year, it
selected BMA Director Muddassar Malik to
chair a studio debate featuring 200 captains
of Pakistani industry and government. The
centrepiece of the show, which was linked
by satellite to global business leaders in
London, Singapore and the Middle East, was
Mr Malik’s interview with Pakistan’s prime
minister Shaukat Aziz.
BMA’s reputation as financial leaders
was underlined by the Securities &
Exchange Commission of Pakistan’s
request for assistance in drafting real
estate investment trust (REIT) regulations.
The company is structuring and listing
Pakistan’s first ever REIT.

Abraaj Buyout Fund LP (ABOF)
Continuing investment
Jordan Aircraft Maintenance Ltd (JorAMCo)
Country Jordan
Sector Aircraft maintenance,
repair and overhaul
Investment date January 2005
Transaction size US$58 million
Stake 80%
www.joramco.com.jo
Acquisition structure
Leveraged investment with US$33 million
of equity, including one co-investor, and
US$25 million of debt.
Profile
JorAMCo is a well-established aircraft
maintenance, repair and overhaul (MRO)
provider operating out of Jordan with
a solid track record, a range of relevant
certifications and strong management.
JorAMCo offers industry standards for
quality and turnaround time at
competitive prices.
Investment rationale
The investment provides an entry into
the lucrative and growing MRO industry
through a well-established player with
potential for tremendous growth and
operational enhancements. JorAMCo
offers airlines an attractive option for
outsourcing maintenance work, in a
regional and global market which is
growing strongly. Moreover, there is
scope to improve operational efficiencies
and marketing to enhance revenues.
Post-acquisition strategy
The post acquisition strategic plan
for JorAMCo aims to develop the
company into a major player in the
aircraft MRO business by building on
its strong reputation for quality and
competitive pricing. An aggressive post
acquisition efficiency improvement
programme has already increased levels
of capacity utilisation. A number of
internal workflow processes have been
implemented including IT systems,
man-hour and inventory management,
and service and training capacity has
been greatly increased.
Highlights of the year
Revenues and net income increased by
61% and 64% respectively in 2007.
Long-term contracts have been signed
with new customers, including European
airline Veuling from Spain and FlyNiki
from Austria; both companies have
ambitious plans to grow their fleets.
JorAMCo was named ‘MRO Company of
the Year’ in the first Middle East Aviation
Business Awards, held in Dubai.
During 2007 JorAMCo became a true
force in the global market for aircraft
maintenance repair and overhaul (MRO).
By opening a second hangar at Queen
Alia International Airport, Amman, the
company doubled its capacity. This
excellent new facility, built by the Royal
Jordanian Government and leased to
JorAMCo, gives an extra 25,000sq metres
of repair space. That’s enough room to
handle four narrow-body aircraft such
as an Airbus A320.
The hangar came into use in September
and was officially opened by His Excellency
the Minister of Transport Saod Nsairat in
November. When added to JorAMCo’s
ongoing programme to improve
efficiency and a near doubling of the
workforce, this extra capacity allows the
company to compete for bigger repair
contracts and expand its customer base.
Our Year
This strategy is clearly working, with
Private Equity
JorAMCo winning a series of long-term
repair contracts during 2007. Landmark
deals include an agreement signed in
February with Spanish airline Vueling
to handle all heavy maintenance on
the airline’s fleet of 21 A320s. Another
high profile new customer is FlyNiki,
the Austrian low cost carrier founded
by Formula 1 motor racing legend Niki
Lauda. JorAMCo has signed a five-year
agreement to handle MRO work on the
airline’s Airbus fleet. Both airlines have
ambitious plans to grow their fleets in
the next few years, enhancing the value
empowering potential
of these long-term agreements. Other
European customers include TUIfly,
Air Mediterranné and Eagle Aviation.
In June, the first students started at
JorAMCo’s new training academy. The
academy, which trains staff in the complex
technicalities of aircraft repair, is one of
the few outside Europe to be certified to
European Aviation Safety Agency standards.
As well as ensuring that JorAMCo itself has
a good supply of highly qualified staff, the
academy will also act as another revenue
stream for the business, providing third
party training.
Our investments
The company also completed
implementation of its Mxi IT project in
the autumn, a new electronic workflow
system to streamline production.
Financially, JorAMCo had an excellent
2007, not only showing phenomenal
growth over 2006 but comfortably
exceeding its targets for revenue and
net income. Employees, too, shared in
this success, through a new employee
share ownership plan.
THOUGHT LEADERSHIP
 Abraaj Buyout Fund LP (ABOF)
2007 exit
Septech Holdings Limited
Country UAE
Sector Waste and waste water
Investment date September 2004
Transaction size US$12.8 million
Stake 78.5%
www.septechemirates.com
Acquisition structure
US$5.8 million of equity, including
one co-investor, plus US$7 million
of mezzanine finance.
Profile
Founded in 1997 and headquartered in
Sharjah, UAE, Septech’s main activity
concentrated on packaged waste water
systems in 2004, at the time of
acquisition. Today, Septech is active in
water and waste water related systems,
products and services, including water
and waste water treatment, landscaping
and environment, pre-cast concrete
products and marinas. Its activities span
consultation, design, manufacturing,
installation, operation and maintenance.
Investment rationale
In 2004, Septech was an attractive
acquisition candidate due to its
profitability, significant market potential,
operational strength and exceptional
management. Rapid population growth,
water shortages, increasing environmental
awareness, and congestion in the main
municipal sewage networks mean that
waste water treatment is a vital
requirement in the Gulf region. With its
proprietary technology and years of
experience, Septech is ideally placed to
continue to deliver value-added solutions
to the wastewater treatment and disposal
challenges faced across the region.
48 | 49 abraaj Capital annual review 2007
Post-acquisition strategy
Abraaj mapped out the evolution that
aided Septech’s plans to expand beyond
the UAE, and then to accelerate that
growth across the region. Septech is now
serving clients in Oman, Qatar and Saudi
Arabia, as well as being involved in major
UAE projects, including the Palm Atlantis,
Festival City Marina, Al Qarsana Island
and Dunes Golf Course. Three years after
Abraaj first invested in Septech, it is a
stronger organisation. It has been
restructured into five divisions around
its core activities of waste and waste
water treatment. Each division has
formed partnerships with world leaders
in key construction techniques and
treatment technologies, giving Septech
an essential edge over other local rivals.
Highlights of the year
A 114% increase in revenues during the
first half of the year showed the strategy
was working.
Revenues in the first half of the year
more than doubled, with profits growing
too. In the three years of Abraaj’s
investment, revenue has grown at a
compound annual rate of 86% and net
income by a CAGR of 29.7%.
2007 was another excellent year
of contract wins for Septech, which
has benefited from the continuing
construction and real estate boom
in the Gulf. The company found a
profitable niche in providing treatment
plant or infrastructure for new
developments in the leisure sector.
For example, it was awarded a contract
to install berths at a new marina in Dubai
Festival City. Cast concrete pontoons,
constructed at the company’s facility
in Ajman, will provide berths for more
than 100 medium and large vessels.
The business also won an order to build
a reverse osmosis plant to supply water
for the Tilal Resort golf course being
developed in the Emirate of Ras Al
Khaimah – a venture of Emirates Heights
Development, one of the investments
in the Abraaj Real Estate Fund.
Septech is making good progress with
its prestigious contract to install a
water processing plant at Atlantis, the
US$1.5 billion marine and water resort
being constructed at The Palm, Jumeirah,
and due to open in autumn 2008. This
resort is a development by the team
behind Sun City in South Africa and is
poised to attract visitors from all over the
world, making it a stunning showcase for
Septech’s expertise. Such successes show
the benefit of the reorganisation
of the business during the three years
of Abraaj’s stewardship.

Septech In 2004, Septech’s main activity was
packaged waste water systems and it
2007 Exit was positioned well to serve the growing
needs of the Gulf region’s rapidly
Our Year
Private Equity
empowering potential
Our investments
This was achieved through the diligent
application and review of our post-
acquisition strategy and the close
alignment we developed with the

39
increasing population. company’s leaders: a close relationship
which was reflected by our exit through
Abraaj guided Septech in developing new a buy-back from the management.
product and service divisions. These proved
extremely successful in serving the
IRR expanding real estate and leisure sectors
in the region. We are extremely pleased to
have contributed to making the company a
more profitable, pan-regional organisation.
THOUGHT LEADERSHIP
 Abraaj Buyout Fund LP (ABOF)
Continuing investment
Spinneys Group Ltd
Country Regional
Sector Retail
Investment date April 2004
Transaction size US$27.1 million
Stake 45%
www.spinneys.com
Acquisition structure
Equity holding.
Profile
Spinneys was founded in 1924 in
Alexandria, Egypt, by Arthur Rawdon
Spinney. One of the leading independent
retailers of consumer goods in the Middle
East, Spinneys currently operates fully-
owned stores in Egypt and Lebanon and,
through a franchise agreement, in the UAE.
Investment rationale
Opportunities to grow based on Spinneys’
enviable record of entering new markets
and securing its target segment. It has
achieved its success due to the qualitative
values maintained across all its outlets,
combined with its flexibility to meet the
needs of its varied consumer base with a
range of store formats, becoming a premier
retail brand within the MENASA region.
Post-acquisition strategy
The opportunities in the retail segment
across the MENASA region have never
been greater, and the injection of funds
will allow Spinneys to increase its
presence significantly and rapidly, taking
advantage of the many opportunities
within the wider region. By utilising the
management expertise of Abraaj Capital
and the financial placement strength of
NBD Investment Bank, the upcoming
share issue will be completed rapidly and
Spinneys will continue to develop into
the leading company in the sector across
the wider region.
50 | 51 abraaj Capital annual review 2007
Highlights of the year
The company and the brand have been
preparing for this aggressive expansion
opportunity for the last 18 months. In
July, the first phase of fundraising was
completed, giving the group the resources
to open up to 50 stores over the next
five years. Spinneys has signed an
US$80 million four-year loan with the
National Bank of Dubai. This will be
followed by a US$100 million preference
share issue, with NBD acting as the
sole placement agent. Together, these
initiatives will give the group the capital
to accelerate its growth plans and move
beyond its three current markets.
Spinneys Group owns six stores in Lebanon
and one hypermarket in Egypt. Spinneys
branded stores in UAE are operated under
licence by an independent franchisee. It
trades as a distinctive, high-end retailer,
meeting the needs of an aspiring and
increasingly wealthy middle class.
The group’s first Egyptian outlet, at
the Citystars Mall in north eastern Cairo,
has entered its second year of trading
on course to grow revenues by 25%.
Encouragingly, customer loyalty surveys
have found a staggering 97% of
respondents expressing a preference
to shop at Spinneys rather than its
competitors. Negotiations for sites for
expansion in Cairo, Sharm el-Sheik and
Hurghada are proceeding to closing.
A site for a second hypermarket in Egypt
has been identified, with a planned
opening in the second half of 2008.
Refreshing Spinneys’ range of own-label
products was another key achievement
this year. The new range was introduced in
Egypt, before being rolled out in Lebanon,
where sales have been encouraging.
The Lebanese stores are posting
month-on-month sales growth,
despite challenging political and
economic circumstances. Customers
have appreciated the company’s ability
to keep stores fully stocked and open
whenever possible, providing essential
support to the community and building
long-term loyalty.
The group has been recruiting key staff,
such as an experienced supermarket
architect, to ensure that new stores being
opened will retain Spinneys distinctive
high-quality look and shopping experience.
Negotiations with joint venture partners
and potential sites have progressed well.
JV partners in Qatar include Nabeel and
Adel Ali Bin Ali and and Sons whereby
Spinneys will hold a 49% stake in a
Qatari entity which will develop and
operate supermarkets in prime locations.
Our JV partner in Syria is Souria Holdings,
the first Syrian Holding company, chaired
by Hayssam Joud. Spinneys will hold
a 50% stake in the Syrian entity which
will lease and operate supermarkets
and hypermarkets in prime locations.
A franchise agreement was signed with
the Abdul Mohsin Al Hokair & Sons Group
in Saudi Arabia which is expected to
deliver more than 20 new outlets over
the next five years. The JV agreement
with Kazimir Group for entry into
Kazakhstan is in final legal review with
openings currently planned for late 2008.
2008 will also see further progress in
MOUs already signed for expansion into
Pakistan and Jordan, together with
significant progress in North Africa and
India in securing JV partners and sites.

Abraaj Buyout Fund LP (ABOF)
2007 exit
Maktoob.com
Country Regional
Sector Online portal
Investment date January 2005
Transaction size US$5.2 million
Stake 34%
www.maktoob.com
Acquisition structure
Equity investment.
Profile
Founded in 1998 and headquartered
in Amman, Jordan, Maktoob is the
leading internet portal in the Arab world,
providing a variety of online services to
millions of users, including the most
visited Arabic-language auction facility
(souq.com), the first Arabic-language
search engine (Araby.com), an interactive
TV joint venture with MBC (Maktoob TV),
the largest Arabic matrimonial website
(Bentelhalal.com), the leading online Arab
sports community (Sport4ever.com), and
Arabic and English web-based email and
chat rooms. Maktoob also offers pre-paid
online payment cards under the brand
name CashU.
Investment rationale
Maktoob was a very attractive
acquisition candidate in 2005. The
company had a strong brand and first-
mover advantage in a growing market.
It was already successfully developing
revenue from premium content and
payment services.
Post-acquisition strategy
Over the past 35 months, the company
has realised the promise of growth,
significantly expanding its web-based
offerings, revenues and gross profits. The
leadership status of Maktoob across the
Arab world is demonstrated not just by
higher page views and user numbers,
but also by increased revenues through
online advertising. It is extremely
well placed for continued growth.
Highlights of the year
Unique monthly visitors reached nine
million and monthly page views of
Maktoob.com 227 million during the
fourth quarter of 2007. Abraaj’s stake
was acquired by an existing shareholder
in December 2007.
Maktoob Group comprehensively
strengthened its position as the Arab
world’s premier online community during
the year. Maktoob.com reached a significant
milestone when it was ranked as the 102nd
most visited site on the internet globally,
the most visited Arabic site in the Arab
world and among the top 10 most visited
global sites in each of the six GCC states.
In Saudi Arabia Maktoob.com is the sixth
most visited global website and it is among
the top 20 in Egypt.
Increased use was matched by higher
revenues, which grew ahead of budget
during the year. Revenue came both
from advertising and from online auction
site souq.com, which launched into
Saudi Arabia during 2007.
Maktoob has taken a lead in reassuring
its advertisers – and challenging its
competitors – with the highest standards
of transparency and disclosure. In June it
invested in an independent audit of its
websites by respected UK media agency
ABC Electronic. This confirmed that
Maktoob is the most popular Arab online
community with almost seven million
unique visitors each month. Maktoob’s
CashU online payments business has also
Our Year
continued to grow, becoming the Middle
Private Equity
East’s largest internet payments service.
In another highlight, the group was
honoured as the Information and
Knowledge Portal of the Year in May
at the 12th Middle East Information
and Communications Technology
Excellence Awards.
Maktoob pressed ahead with continued
enhancements to the portal, and in the
final quarter of the year it launched
Maktoob TV, a joint interactive television
venture with MBC. This takes Maktoob
empowering potential
into one of the fastest growing sectors
of digital entertainment. It has also added
a music search facility to its araby.com
search engine and is developing travel
websites in both Arabic and English.
Behind the online presence, Maktoob
opened a new office in Cairo, expanded
its operations in Saudi Arabia to support
the growth of souq.com and enhanced
its management team with key technical
and financial appointments.
Abraaj’s strategic support has been critical,
providing guidance and counsel as well
Our investments
as capital used for the introduction of a
broad range of new services that have
proved extremely successful. Since 2005,
Maktoob has grown significantly and
further cemented its position as the
leading internet portal, community site
and e-commerce provider in the Arab
world. Through both its organic expansion
and mergers and acquisitions, we are
confident that the company will continue
to demonstrate sustained growth.
THOUGHT LEADERSHIP
 The Abraaj Real Estate Fund LP (AREF)

AREF closed in December 2004 with total commitments of

US$113.5 million. The fund is fully committed, having sought
controlling positions or influencing stakes in distinctive real estate,
construction and leisure investments across the MENASA region.
It has a target IRR of 15%.

Ongoing investments Fund year in review It was an exciting year for the fund’s
at start of 2008 An extremely productive year, 2007 holdings in the hospitality sector.
saw AREF continuing to gain from Abraaj’s support at Seraii Holdings
The Dead Sea Company for
its early investment in companies Limited has been instrumental in
Conferences & Exhibitions
benefiting from the ongoing refining their vision for the provision
Convention complex, Jordan
construction and real estate boom of a range of Shari’a compliant
Marine Hospitality Holdings (MHH)
in the region. The fund’s exit from hospitality, a concept with huge
Marine and leisure services, MENASA
its signature investment in Arabtec, a potential across the region. Signature
Emirates Heights
UAE-based construction contracting Clubs International has a thriving
Development Company
firm, marked the end of the holding membership with numbers exceeding
Golf-oriented residential and leisure
period and natural conclusion of the expectations prior to launch and the
community, RAK
investment cycle for this investment monthly ‘Last Tuesday’ gathering a
Signature Clubs
in December. With this first exit for fixture on the business community’s
International Ltd (SCI)
AREF, approximately half of the social calendar. This is another
Private members clubs, MENASA
original capital of the fund has been example of Abraaj’s investment
Enshaa PSC
returned with the remaining assets foresight, identifying an exciting
Real estate, MENASA
in the fund continuing to perform growth business ahead of the market.
Seraii Holdings Limited
Hotel management, MENASA extremely well.

Exits during 2007 During the year, Abraaj successfully

completed a restructuring of its
Arabtec Holdings PJSC
investment in Enshaa where three
Construction, UAE. IRR 116% and
existing businesses were folded into
a 12 times gain on invested capital
a single entity, enhancing efficiency,
ABANAR LLP
with a fresh capital raising expanding the
Real estate, UK. IRR 8% and a
shareholder base to include Emirates
1.2 times gain on invested capital
Investment Group and the Majid Al
Futtaim Group. The company is poised
to take its distinctive development
projects, such as Palazzo Versace, to
new markets.

52 | 53 abraaj Capital annual review 2007


The Abraaj Real Estate Fund LP (AREF)
Continuing investment
The Dead Sea Company for Conferences & Exhibitions
Country Jordan
Sector Convention complex
Investment date September 2004
Transaction size US$2.1 million
Stake 4.7%
www.dscc.jo
Acquisition structure
Direct equity investment.
Profile
The company was formed to develop
the King Al Hussein Bin Talal Convention
Centre on Jordan’s Dead Sea coast.
It is also developing residential
accommodation and leisure facilities
in the surrounding area.
Investment rationale
Jordan’s tourism industry is forecast
to grow at 10% per year, and there is
a demand for high-quality facilities on
this spectacular and historic coastline.
As well as the Convention Centre,
the company is also investing in the
Samarah Dead Sea Golf & Beach Resort,
a new mixed-use development.
Post-acquisition strategy
Abraaj has worked with management
to attract high profile and profitable
conferences and events to the Centre and
to develop complementary projects in the
area to facilitate the growth of a complete
leisure and business traveller destination.
Highlights of the year
The official launch of the Samarah
Dead Sea Golf & Beach Resort was
a key highlight of the year for the
company, helping it towards its
objective of developing the Dead Sea
coast into a thriving economic region.
This exciting project was officially
unveiled by His Majesty King Abdullah
bin Al Hussein of Jordan in May. This
mixed-use luxury development will
include housing, shops and a golf and
beach resort and aims to strengthen the
growing tourism industry in Jordan. It will
generate employment opportunities, as
well as offering a world-class commercial
and residential environment.
In 2007, the Dead Sea Company acquired
an additional 2.45 million sq ft of land for
a residential phase of the project. Detailed
planning is now under way and will be
revealed in 2008 by the company’s new
chairman Said Darwazeh, a former health
minister of Jordan, who was appointed
to take over from Fadi Ghandour. The
US$500 million project is due to be
completed within five years and is being
developed by EMAAR.
The King Hussein Bin Talal Convention
Centre, the flagship conference destination
for the Dead Sea region, played host to a
series of internationally important events,
including the World Economic Forum’s
Middle East Summit, the Jordan Youth
Conference and the Jordanian Upper
House of Parliament meeting.
Our Year
The World Economic Forum met under
Private Equity
the theme of Putting Diversity to Work,
to highlight the importance of diversifying
Arab economies. More than 1,200
government and business leaders from
56 countries met to discuss how to turn
the region’s religious and ethnic diversity
to advantage, to achieve peace, stability
and economic growth. King Abdullah bin
Al-Hussein called on participants to think
about ‘the day after peace’, and the
infrastructure and economic needs that
will be required.
Abraaj Board member Fadi Ghandour
empowering potential
was co-chair for the summit and spoke
at the opening session on the role
private equity can take in charting
and enhancing the region’s future.
In 2007, Convention Centre bookings
were substantially higher than in 2006.
The location has proved the perfect
venue to demonstrate both the
enormous opportunities and world-class
excellence currently co-existing in the
Middle East. As King Abdullah said at
the World Economic Forum: “This is our
year of opportunity. The future begins
here and now.”
Our investments
THOUGHT LEADERSHIP
 The Abraaj Real Estate Fund LP (AREF)
Continuing investment
Emirates Heights Development Company (EHDC)
Country Ras Al Khaimah
Sector Golf-oriented
residential and leisure
community
Investment date September 2005
Transaction size US$20 million
committed
Stake 50%
Acquisition structure
Direct equity investment.
Profile
EHDC is a development company
incorporated in the UAE to create a
world-class golf resort on a 500-acre
site in the Emirate of Ras Al Khaimah.
Investment rationale
The Tilal Resort – or, in English, Dunes
Resort – will be a landmark leisure
destination designed to capitalise on
the growing demand for real estate in
the northern Emirates. The resort will
include an 18-hole championship golf
course, 900 residential units, a hotel
and other associated facilities and
offers the potential for an IRR of 50%.
Post-acquisition strategy
Abraaj has management control of the
project and has worked with international
experts to bring a distinctive high quality
vision to the resort. EHDC also expects
to secure Royal decrees allowing the
residential units to be sold on a freehold
basis to expatriate buyers.
54 | 55 abraaj Capital annual review 2007
Highlights of the year Discussions were held and commercial
An independent market and financial terms agreed with a five-star hotel
feasibility study was carried out by operator for managing the hotel which
Economic Research Associates, a leading will include a spa and conference centre.
leisure, real estate and hospitality
consultant. This study confirms the The project, when complete, is expected
project’s viability and potential for to capitalise on the growing market
significant returns on investment. for real estate in the northern Emirates,
and will initially target second-home
A master plan for the resort was buying resident in the GCC, as well
finalised during the first half of the as international investors looking for
year and leading international companies a holiday home. With its cloudless skies,
were appointed as project managers high quality accommodation and leisure
and architectural consultants. Preparatory facilities, Tilal Resort is expected to
construction work started on site and be a popular choice for buyers.
the design of the residential villas and
apartments was progressed towards
a sales launch in 2008.
Additionally consultants were engaged for
design of a variety of other components
– Halcrow International Partnership for
infrastructure works, Badri & Bensouda for
landscaping and Godwin Austen Johnson,
for the golf clubhouse and academy.
Septech, a leading international golf course
contractor and a former Abraaj investee
company, was contracted to construct the
course and install the reverse osmosis
plant that will supply water.
 Our Year
The Abraaj Real Estate Fund LP (AREF)
Continuing investment
Enshaa PSC

Highlights of the year On the commercial side, about 70%

Country MENASA region Sale revenues from D1 and Palazzo
Sector Real estate Versace Dubai are both ahead of target
Investment date December 2006 and construction started for delivery
Transaction size Original investments
in 2009. The potential was identified
in predecessor for up to 15 more Palazzo Versace
companies US$29.7 developments globally.
million
Stake 22% It was an exciting year for the business
as a major restructuring and capital-
raising exercise saw the emergence of
Enshaa PSC from Emirates International
Holdings and Enshaa Holdings.
Acquisition structure
In 2007 the fund restructured its The new company capitalised at
Private Equity
of the office space in Emirates Financial
Towers in the Dubai International
Financial Centre has been taken.
Enshaa continues to strengthen
and develop its management team,
recruiting additional professionals with
expertise in real estate, construction
and project management. Raza Jafar,
a leading entrepreneur with extensive
experience in real estate, was appointed
managing director.
It is exploring further opportunities with

investment in Emirates International
Holdings, Emirates Financial Towers and
Enshaa Holdings Limited by folding these
businesses into Enshaa – an existing
LLC company which was converted into
a UAE private joint stock company.
Profile
Enshaa is fast becoming one of the
MENASA region’s leading real estate
development companies, with a
reputation for innovation and quality.
Investments include a 50% stake in
Palazzo Versace resorts in Queensland,
Australia and in Dubai, upscale
empowering potential
US$249 million, with major shareholders joint venture partner Sunland Group,
including Majid Al Futtaim Group, which has a contract to develop up to
Emirates Investments Group and Abraaj. 15 Palazzo Versace resort projects. Major
cities are currently being evaluated, and
It will target niche real estate projects, the conclusions will be announced in 2008.
forming joint ventures with well-
established property companies.
The company’s existing investments had
a great year. In February, it launched
what will be Pakistan’s tallest structure,
Karachi Financial Towers, at a glittering
event attended by President General
Pervez Musharraf. The three-year project,
which is being constructed by Arabtec

residential and commercial property
developments in Dubai, the D1 and
the Emirates Financial Towers and a
landmark project to create Pakistan’s
tallest building, Karachi Financial Towers.
Investment rationale
To profit by participating in
developments of exceptional quality
throughout the region with selected
joint venture partners.
Post-acquisition strategy
Abraaj has worked to maximise potential
Our investments
Pakistan, will develop two identical 37-
storey towers connected by a three-floor
glass skybridge – a truly stunning
landmark for the city’s financial district.
The Towers will be built on a 15-acre site
that is already home to the Karachi
Stock Exchange, State Bank of Pakistan
and Citibank.
Palazzo Versace Gold Coast, the luxury
hotel chain developed with the globally
acclaimed designer Donatella Versace,
goes from strength to strength and
continues to trade above expectations.
THOUGHT LEADERSHIP

returns by restructuring and financing The first Versace hotel, on Australia’s

investments in the most effective way
and by seeking out experienced
development partners.
Gold Coast, in which Enshaa has a 50%
stake, continues to attract high accolades;
the second, Dubai, is now being built
in the Culture Village development,
with a residential tower, D1, alongside.
Condominium reservations are ahead
of forecasts, as are average sales prices;
completion is due in June 2009.
 The Abraaj Real Estate Fund LP (AREF)
Continuing investment
Marine Hospitality Holdings (MHH)
Country MENASA
Sector Marine and
leisure services
Investment date February 2005
Transaction size US$10.6 million
Stake 45%
www.artmarine.net
Acquisition structure
Direct equity investment.
Profile
Through its wholly-owned UAE subsidiary
ART Marine, Marine Hospitality Holdings
is a driving force in the developing market
for luxury yachts and associated marine
leisure activities. It holds the exclusive
franchises to distribute Azimut and Gobbi-
Atlantis boats and yachts and is involved
in luxury charter and marina development.
The company’s highly professional and
experienced marine team also provides
after-sales maintenance service.
Investment rationale
The GCC leisure boating sector is growing
strongly on the back of increased oil
revenues and growing tourism. Waterfront
and marina developments are providing
additional berth spaces and creating the
essential infrastructure to support the
expanding leisure market. ART Marine has
a pre-eminent position in the luxury
yacht industry in the region due to the
strength of the brand names it represents,
strong investor backing and the extensive
experience of its management team.
56 | 57 abraaj Capital annual review 2007
Post-acquisition strategy Art Marine continued to build its
Abraaj has helped the business to expand global presence, attending boat shows
to have a presence in five nations. It has in Monaco, Cannes, Genoa, El Gouna,
also overseen expansion in the scope Barcelona and Düsseldorf. It also formed
of services. Abraaj’s successful development links with carefully selected companies
of the company attracted additional to boost its profile; the charter division
investment from Dubai International formed alliances with a number of
Capital in 2006 when it injected a further exclusive private members clubs such as
US$10 million into the business. Quintessentially and Platinum Concierge,
while a partnership with Laser Middle
Highlights of the year East and Volvo Cars Middle East led to
High levels of professionalism and a the launch of the Volvo Laser SB3 Middle
growing global presence helped Art Marine East Grand Prix, a six-round sailing race.
to continue its strong growth in 2007. Art Marine is the exclusive dealer for
Laser in the UAE.
Azimut chose to partner with MHH
in Dubai for the world premiere of The company opened its first office
the Azimut 103 S, marking the first outside the UAE, at Abu Tig Marina,
inauguration outside of Italy and the El Gouna, in Egypt. The office, which
US in the yacht manufacturer’s history. has a team of six dedicated professionals,
offers yacht sales and after-sales service
Strong sales and the servicing of a to the Egyptian market.
growing customer fleet means that
investment in people is a priority for the
company. Pricing policies and strategies
were reviewed during the year, leading
to the launch of a fractional ownership
scheme, Club Azure. This innovative
project lowers the access threshold
to luxury yacht ownership, introducing
a new group of people to the joys of
life afloat. Club Azure enables eight
individuals to have part-ownership of
an Azimut 68 E, with an initial joining
fee, plus an annual maintenance charge,
allowing for four weeks of top-class
sailing every year, for five years.
After the huge success encountered with
the Azimut range, ART Marine also made
available the first Benetti yacht in the
waters of the Middle East.
 Our Year
The Abraaj Real Estate Fund LP (AREF)
Continuing investment
Seraii Holdings Limited

Post-acquisition strategy The present pipeline of potential projects

Country MENASA region Abraaj has been working with
Sector Hotel management
Investment date July 2006
Transaction size US$2 million
Stake 90% (fully diluted, pre
private placement)
www.seraiihospitality.com
Acquisition structure
Seraii Holdings Limited is a joint venture
management to sharpen the brand
concepts and business plans for this
exciting venture. It has also assisted
in identifying and prioritising markets
for development.
Highlights of the year
The business has adopted Seraii as its
central brand name, with Grand Seraii
as its core hotel brand and Royal Seraii
as its premium brand.
This unique concept includes 11
Private Equity
includes two Royal Seraii projects in
progress in Jeddah and Riyadh; 14
Grand Seraii hotels; seven Caravan Seraii
properties primarily in Pakistan; and two
Tijan projects in major, regional cities.
The fund is currently in the last phase
of finalising a property investment and
development arm – Seraii Properties –
into which it is intended that operating
hotel assets and lands will be transferred
in exchange for share capital, as well as
a private placement. The fund concluded
from an extensive research programme

between Abraaj and company CEO
Sami Zoghbi.
Profile
Seraii was formed to operate a portfolio
of Shari’a compliant, Middle Eastern-
themed hotels to be developed in the
region. It intends to build a contemporary
brand capturing a strong regional
presence and catering to the Islamic/Arab,
intra-regional traveller and others seeking
an authentic Islamic/Arab experience.
Seraii is one of the first Shari’a
compliant, Middle East-themed hotel
locations in its management contract
pipeline, with negotiations under way on
sites in Mecca, Medina, Tripoli, Muscat,
Egypt, Morocco, Jeddah and Dubai.
Additional sites in Doha, Qatar and
Bahrain are even further advanced.
The hotels will be world-class and Shari’a
compliant; with the accent on Islamic
living, with a strong regional flavour.
Seraii hotels will embody the values of
Middle Eastern culture, but in a modern,
progressive context. Each will include
high tech facilities alongside a dedicated
prayer room; modern architectural
empowering potential
that Seraii Properties is a more attractive
and flexible market proposition over
creation of an equity fund, which had been
considered previously. The initial target
capital of Seraii Properties will be up to
US$500 million and the company will
invest in attractive hotel and related real
estate projects which Seraii Hospitality
will manage under contract.

chains in the world. The hotels will be
in a modern architectural style with an
accent on historic Middle Eastern and
Islamic living. The goal is to create a
unique identity that strikes a chord
with target customers.
Our investments
themes with Middle Eastern specialist
restaurants; hammams alongside
women-only facilities (including
swimming pools and beach clubs, with
entire floors reserved for female guests,
served by qualified female staff).

Investment rationale An extensive brand consultation was

With a projected 25 million tourists
travelling among Arab countries by 2020,
there is a strong demand for culturally
sensitive hotels. A growing number of
Western travellers are also looking
beyond the bland experiences offered
undertaken in the third quarter of 2007
to ensure the brand would resonate
with the target audience in the MENASA
region. This concluded that there should
be two five-star brands: the premier
Royal Seraii, and the core Grand Seraii.
THOUGHT LEADERSHIP

by many luxury destinations. Seraii In addition there will be a three-star

Hospitality is set to capitalise on – brand, Caravan Seraii, and a boutique
and even enhance – the unprecedented chain, Tijan, of individual hotels developed
growth in travel and tourism in the in the region’s most historic cities.
Middle East and beyond.
 The Abraaj Real Estate Fund LP (AREF)
2007 exit
ABANAR LLP
Country UK
Sector Real estate
Investment date April 2005
Transaction size US$11.5 million
Stake 33.3%
IRR 8%
Acquisition structure
Investment in property fund, plus a 25%
stake in the fund’s manager Swanbourne
Development Services (SDS).
Profile
ABANAR is a UK property fund, investing in
and developing specialist housing for niche
markets such as students, nurses and other
key workers. Investments include properties
in London and Yorkshire.
Investment rationale
The company’s target areas of the UK
housing sector have not been well served
by other developers and offer attractive
opportunities to develop profitable
residential accommodation. SDS has good
experience in this arena. The longer-term
aim was to raise successor funds, where
Abraaj would also benefit from a share in
the management revenue.
Post-acquisition strategy
Abraaj has been providing investment and
financial advice to SDS. It has also been
helping the management to formalise
some of their business processes and raise
their profile among potential investors.
58 | 59 abraaj Capital annual review 2007
Highlights of the year
Two major property purchases this
year have helped take the portfolio
of properties close to £200 million,
or about 4,000 units.
The Pavilions in Lincoln, bought in March,
is high standard accommodation with
fitted kitchens, flat-screen TVs and internet
connections. Operated under the Mezzino
brand by managing agents Mainstay, this
purpose-built block provides state-of-the-art
student living next to Lincoln University’s
main campus. Mainstay has become an
‘approved provider’ of accommodation for
the university, and with facilities such as free
broadband access, en-suite bedrooms and
a choice of apartments from studios to six
bedrooms, The Pavilions is proving popular
with students.
In Sheffield, the new Pinnacles facility
is currently under construction but will
provide 666 student study bedrooms
in the city centre. With the same high
quality of accommodation, it is expected
to meet great demand when it opens for
lettings in August 2008.
Storthes and Ashenhurst Halls in
Huddersfield are proving popular,
with Ubrique, the manager of the
properties, the University’s preferred,
recommended and approved provider
of student accommodation.
SDS has identified opportunities throughout
Britain to improve centrally located urban
housing for key workers and students. There
remains a significant gap between supply
and demand for affordable accommodation,
with the strength of the property market
and insufficient level of construction driving
up prices.

Abanar Abraaj provided investment and financial
advice to the fund manager, Swanbourne
2007 Exit Development Services (SDS), leading to
two major property purchases in 2007,
1.2x
greatly increasing its portfolio of
properties. SDS is managed by a team
of highly experienced UK property
development and investment professionals.
return on investment
Our Year
Private Equity
empowering potential
Our investments
Following Abraaj’s exit in December
2007, the fund continues to identify
opportunities to improve urban housing
throughout Britain. We are pleased to have
contributed to the development of formal
management processes for the fund and
to have helped raise its profile for other
potential investors. We are confident of its
ongoing successful expansion. This second
exit from the Abraaj Real Estate Fund has
contributed to the return of nearly half of
the original capital of the fund to investors.
THOUGHT LEADERSHIP
 The Abraaj Real Estate Fund LP (AREF)
2007 exit
Arabtec Holdings PJSC
Country UAE
Sector Construction
Investment date August 2004
Transaction size US$11.4 million
Stake 10%
Return on
Investment 12x
Acquisition structure
US$6.4 million equity investment, and
co-investment of US$5 million.
Profile
Arabtec is one of the leading contracting
and construction businesses in UAE.
Fifty-five per cent of the business was
sold through an IPO in 2004, with Abraaj
the largest institutional shareholder of
the remaining founding shareholders.
Investment rationale
Economic expansion has fuelled a
construction boom in the UAE. Arabtec
is a highly respected business, with
a 10-year track record of satisfied
customers, and is ideally positioned
to profit from the construction boom.
Post-acquisition strategy
Giving Arabtec access to additional capital
and helping the business to further
develop a regional expansion strategy that
has already seen it develop operations in
Pakistan. Founding shareholders were
locked in until September 2007. Abraaj
exited in December through an orderly
sale on the Dubai Financial Market.
60 | 61 abraaj Capital annual review 2007
Highlights of the year
Arabtec operated at full capacity
throughout 2007. In October, the
company’s industry leadership was
recognised when Goldman Sachs initiated
coverage on Arabtec and recommended
it as the only company in the contracting
sector on its ‘buy’ list.
In a year of great achievement, 2007
saw Arabtec consolidating this leading
position, winning enough work to take
a temporary moratorium on seeking
new contracts.
Among several high profile contracts, it
won a US$1.25 billion deal to build the
Meydan horseracing complex in Dubai,
in a joint venture with WCT Engineering,
a Malaysian-based contractor. This
ambitious racing complex, with a
grandstand for 60,000 spectators,
restaurants, and a museum and gallery,
will be completed in 2010 to host the
Dubai World Cup.
Projects such as Burj Dubai, the tallest
building in the world; Dubai World
Central, a major logistics centre built
around the world’s largest international
airport; and the luxury resort of Palazzo
Versace, at Culture Village, have all
demonstrated Arabtec’s skill and
experience, making it the contractor of
choice for leading property developers.
This expertise will be put to good
use in Pakistan, where Arabtec will be
building the Karachi Financial Towers, the
country’s tallest building. The contract
was one of five won in the first half of
2007, worth around US$1 billion.
During the year, Arabtec also bought a 55%
stake in Emirates Falcon Electromechanical
Company, which specialises in
electromechanical, air conditioning
and building services contracting.
The construction sector is experiencing
unprecedented growth across the region,
and Arabtec will remain at the forefront of
this expansion. Today, Arabtec has firmly
established its reputation as one of the
region’s leading construction companies,
providing high-quality work, on time and
within budget. The strategic support
provided by Abraaj Capital over the past
three years has proved instrumental to
its success.

Arabtec Arabtec was established as a public joint
stock company in 2004 to invest in and
Holding PJSC acquire companies in the UAE’s booming
construction and contracting sector,
2007 Exit having originally been founded as the
Arab Technical Construction Company
116
in 1975. Abraaj acquired a strategic
stake in August 2004 and, until the
investment was exited in 2007, remained
the largest institutional shareholder.
IRR In the fourth quarter of 2007, Arabtec
posted its second-biggest quarterly profit
ever. At the Arabian Business Awards in
Our Year
Private Equity
empowering potential
Our investments
December 2007, Arabtec won the ‘Company
of the Year’ and it is now Dubai’s largest
construction firm, by value.
The Arabtec exit by the Abraaj Real Estate
Fund marks the end of the holding period and
natural conclusion of the investment cycle
for this investment. We are extremely pleased
to have made a significant contribution to
the success of Arabtec and, of course, to be
able to continue to generate such strong
returns for our investors.
THOUGHT LEADERSHIP
 The Abraaj Real Estate Fund LP (AREF)
Continuing investment
Signature Clubs International Ltd (SCI)

Highlights of the year Personnel announcements included

Country MENASA SCI’s flagship private club, the Capital
Sector Private member clubs Club in Dubai, saw first tier, gold founder
Investment date February 2006 membership completely sell out by the
Transaction size US$20 million
end of June, being oversubscribed by 30%.
committed
Stake 80% The Capital Club membership itself reads
like a directory of the local business
www.signatureclubs.com
community, including Morgan Stanley,
Halliburton, Landmark Properties, Noor
Capital and Zabeel Investments among
other prominent companies in the region.
Of the first 400 people to sign up, half
Acquisition structure were CEOs, managing directors or senior
Abraaj has the majority stake in SCI, partners; 24% were presidents and
which in turn will own 51% of each chairmen; and 14% were regional
club established. directors or directors.
the appointment of Jerry Bastiaan,
whose previous restaurant won a
Michelin star, as executive chef.
Members can be sure of a superlative
dinner to rival any other restaurant
in Dubai when they visit the Club.
SCI is actively looking for further sites.
Additional clubs have been finalised at Jafza
and in Bahrain and Istanbul. Negotiations
are currently under way for a site in Abu
Dhabi and are in final stages for sites in
Doha, Karachi, Mumbai and Kuwait. Final
approval is pending for an Amman location.
The company is also looking for 20,000 –
50,000 sq metres sites for family clubs.

Profile The Capital Club is the first of Signature’s

SCI will develop, own and operate
private member clubs in key cities
across MENASA. The business model
includes business-related clubs and
those designed for family and leisure
membership. Both will operate to the
highest standards, creating a respected
market brand.
Investment rationale
Founded by two experienced managers of
private clubs, SCI has a unique opportunity
to create a network of high quality clubs.
There is a lack of supply, while demand is
growing as more international businesses
expand in the region.
Post-acquisition strategy
Abraaj has enabled the management
to realise their vision, identifying possible
locations and managing negotiations
with developers.
proposed chain of regional private clubs,
which will be located in the premier
business districts of major cities. It aims
to open 12 sites in the next five years,
with the potential for a further 10. With
the rapid growth in multinationals looking
to expand into the MENASA region,
there is a corresponding demand from
internationally-travelled professionals for
clubs with high standards and facilities.
At the Capital Club’s inaugural event,
His Excellency Dr Omar bin Sulaiman,
Governor of the Dubai International
Financial Centre, said the private business
club met an important social and cultural
demand in the Middle East. He compared
it to the majlis, a place where “like-minded
people can meet, talk and balance their
professional and personal aspirations”.
Throughout the year Capital Club has
held a series of high-profile events, with
visits from internationally-renowned
figures such as former President of
Costa Rica, José María Figueres, and the
management guru Ram Charan. The
‘Last Tuesday’ event, where members
get together on the last Tuesday of each
month to socialise, network and meet
new members, has become a regular
pre-opening tradition.

62 | 63 abraaj Capital annual review 2007

 Our Year
Abraaj Special Opportunities Fund II LP
(ASOF II)

Private Equity
Closed in July 2005 with total commitments of US$128 million,
ASOF II’s mandate covered the entire MENASA region with a target
IRR of 30%. The fund focused on IPOs and pre-IPO opportunities
and on taking ‘strong minority’ positions in quoted companies.

Fund year in review ASOF II compared with peer funds (with approximately similar
In 2007, the fund carried on where inception dates, similar geographic focus and approximately

empowering potential
it left off in 2006, a year in which similar size) since inception.
ASOF II defied regional stock markets
by producing positive returns for ASOF II
investors against the backdrop of NBKMF
overall market falls. It continued this
GGLCF
out-performance through a period of
ABGEF
market recovery in 2007, with gains
AAGF
over the year again superior to both
regional stock markets and peer RGF
group funds. ABMF
ARGEF
ASOF II followed the successful MATF
philosophy of its predecessor fund NMF
ASOF, identifying companies that GCF

Our investments
Abraaj believes are undervalued and
where growth or corporate activity 0% 10% 20% 30% 40% 50% 60%
can have a dynamic effect on the
Source: Zawya
investment’s value. Equity investments GCF Gulf Companies Fund
during the year were mainly focused NMF NBD Mena Fund
on the banking, oil and gas, and MATF Makaseb Arab Tigers Fund
ARGEF Al Rajhi GCC Equity Fund
infrastructure sectors. ABMF Aran Bank Mena Fund
RGF Riyad Gulf Fund
Companies held during the course AAGF Al Ahli Gulf Fund
ABGEF Al Basha'er GCC Equity Fund
of 2007 included El Sewedy Cables – NBKMF NBK Gulf Equity Fund
which the fund exited in the second GGLCF Global GCC Large Cap Fund
quarter for a gain of 56.7% – Dana
Gas, Emaar Properties and the Ahil
United Bank.
THOUGHT LEADERSHIP
 Abraaj Special Opportunities Fund II LP (ASOF II)

Abraaj followed a clear strategy ASOF II compared with regional markets since inception
to reduce volatility and risk in the
portfolio by investing in convertible Oman
bonds. For example, the fund ASOF II
profited handsomely from its Bahrain
investment in Dubai Ports Sukuk, Kuwait
a bond issued in 2006. This Dubai
investment, which was leveraged, Jordan
converted into shares in DP World Abu Dhabi
when the company listed through an Qatar
Saudi Arabia
IPO in November. Shares were priced
at the top end of expectations. -40% -20% 0% 20% 40% 60% 80%

Rising commodity prices were a global

investment theme throughout the
year. The fund successfully invested in
commodity-linked instruments, both
as an asset in their own right and as
a hedge to volatile stock markets in
Comparison of ASOF II’s performance with the weighted
average of the regional indices since inception
60%

some regional nations. 50%

Abraaj took advantage of improving 40%

markets to gradually unwind most 30%
of the fund’s holdings in the third
and fourth quarter, locking in gains 20%
ahead of the full liquidation of the 10%
fund in December.
0%

ASOF II Wt.Av.Reg.
Index
Weighted based on market capitalisation

> Fund liquidated at year end, delivering substantial gains (net

gain of 45%) to investors within a three-year investment cycle
> Stunning results against a backdrop of turbulent regional
stock markets
> Abraaj contained risk and enhanced growth with diversified
exposure to convertible bonds and commodities

64 | 65 abraaj Capital annual review 2007

 Our Year
Abraaj Buyout Fund II LP (ABOF II)

Private Equity
The fund closed in November 2005 capped at US$500 million,
after huge investor interest left it substantially oversubscribed.
Its mandate covers the entire MENASA region with a target IRR
of 30% on invested capital contributions.

Ongoing investments It was an exciting year for the In another significant deal, the fund
at start of 2008 fund’s investment in regional aviation agreed to participate in an acquisition

empowering potential
through Aviation Fund Holdings, which to buy up to 50% of Acibadem
Acibadem
includes NAS. Nas Air, its low cost Healthcare, Turkey’s leading private
Healthcare, Turkey
carrier, was launched ahead of its health business along with co-investors
AFHL
competitor SAMA and grew its including the Infrastructure and Growth
Aviation, Saudi Arabia
network to more than 20 routes by Capital Fund. This stake was increased
EFC
year-end. to 69.6% in January 2008 and a related
Urea production, Egypt
50% stake was acquired in leading
GMMOS
ABOF II also holds a majority stake Turkish health insurance company,
Oil and gas services, UAE
in MS Forgings, Pakistan’s leading Acibadem Sigorta. Acibadem owns
Mannan Shahid Forgings
steel forging house. During 2007 it its own hospital network, as well as
Steel forging, Pakistan
strengthened the management team providing health insurance and
Saudi Tadawi Health Care Company
with world-class recruits and helped management services, and is already
Healthcare, Saudi Arabia
the business to target its most enjoying strong growth as the sector
profitable customers. expands in part due to health
Fund year in review

In May, ABOF II acquired 60% of the
shares in Gulf Marine Maintenance
& Offshore Company, an oil and gas
service company headquartered in
the UAE. GMMOS has been operating
at full capacity and Abraaj has been
able to facilitate an expansion of the
workforce and move to new sites to
help the business grow. Post-acquisition
strategies are progressing well for GMMOS
and the company has delivered strong
financial performance.
Our investments
regulation reforms enacted by the
At the end of December, the fund Turkish Government.
agreed to buy a 40% stake in Saudi
Tadawi Health Care, a leading retailer
and wholesaler of pharmaceuticals in
Saudi Arabia, giving the fund exposure
to the rapidly expanding health market
in the most populous GCC nation.
THOUGHT LEADERSHIP

> Fund participates in the region’s biggest leveraged buyout deal

> Driving force behind vibrant new Saudi airline
> Successful investments in established shipbuilding and
automotive firms
> Strong deal pipeline to support further investments in 2008
 Abraaj Buyout Fund II LP (ABOF II)
2007 acquisition
Acibadem Healthcare
Country Turkey
Sector Healthcare
Investment date Deal agreed
August 2007
Transaction size Up to US$585 million
Stake Up to 50%
www. acibadem.com
Acquisition structure
Investment by ABOF II, IGCF, co-investors
and additional acquisition finance.
Profile
Acibadem was founded in 1991 and is
the only healthcare institution to have
shares traded on the Istanbul Stock
Exchange. It is part of a premium
integrated healthcare platform that
provides secondary and tertiary private
healthcare services, laboratory services,
health and life insurance, hospital project
management and hospital facilities
management services. It is the only
hospital group worldwide to be accredited
by Joint Commission International (JCI),
which certifies private hospitals, and is
affiliated with Harvard Medical
International. Acibadem Healthcare
Services operates six premium hospitals
with a bed capacity in excess of 700,
two outpatient clinics, a central laboratory,
a genetic and cell therapy lab, an
ophthalmology centre and five specialised
medical centres. It is currently building
another eight hospitals, which will take
the total number of beds to 1,595.
66 | 67 abraaj Capital annual review 2007
Investment rationale
Acibadem is a world-class health provider
already operating in an attractive market.
Regional demand for healthcare services
is being driven by a range of factors,
including high levels of population
growth, changing socio-economics,
prevalence of health risk factors, medical
innovations and increasing insurance
spend. In response to this growing
demand, governments in the Middle East
are increasingly focused on the provision
of broadly available, high-quality services.
Post-acquisition strategy
Abraaj’s strategic support will accelerate
the development of the healthcare group
in Turkey and facilitate the long-term
expansion of its healthcare services in
the MENASA region, where the existing
supply of high-quality medical services is
generally insufficient. There are currently
twice as many physicians per 1,000
people in the 30 countries within the
OECD than there are in Turkey and
in the GCC, and nearly three times the
available hospital beds. In the GCC states
alone, demand for treatment is expected
to grow more than twofold by 2025, to
approximately US$60 billion per annum.
Highlights of the year
The increased demand for private medical
care is already feeding through to
Acibadem’s performance and profitability.
There was a positive market reaction
to the Abraaj investment, with a ‘Buy’
recommendation on Acibadem from
KBC Securities.
This was a landmark year for the health
market in Turkey as the state-backed
General Health Insurance (GHI) Fund
was launched. This initiative gives
patients a wider choice of where they
are treated, using public money to pay
for up to half the cost of selected private
treatment. It has also helped to drive an
exciting year of growth for Acibadem,
the nation’s premier private health group.
The hospitals business continued its
expansion, with the construction of
two new hospitals in 2007, including
a joint venture with Besiktas Sports
Club in Istanbul and a wholly owned
hospital in the Maslak district of Istanbul.
Development plans were announced for
hospitals at Izmir, Eskisehir and Bodrum.
The medical laboratories division also
expanded with the opening of two stem
cell laboratories in April.
The arrival of the GHI is increasing the
scope for private medical insurance
as companies start offering voluntary
top-up plans which pay the difference
between the GHI contribution and the
total cost of treatment. This will benefit
Acibadem’s A-Insurance business, Turkey’s
fifth largest health insurer.
Overall growth in the healthcare market
is also leading to new business for the
Acibadem healthcare project management
division and the A-Plus catering and
laundry service. Both were on track to
grow revenues strongly by year-end.
Since the acquisition of an initial stake
in August 2007, Abraaj has been working
with management on a strategy to expand
into other markets in the Middle East.
Possible ventures in Saudi Arabia, Kuwait
and India are already being assessed.

Acibadem Middle Eastern governments are increasingly
responding to demand for widely available,
2007 Acquisition high quality healthcare. They are
encouraging private sector participation
50
in the sector by creating an environment
up to and regulatory framework conducive to
investment. Private sector organisations,
such as Acibadem, will play an important
role in providing healthcare services.
stake
Abraaj will work with Acibadem as it expands
provision across Turkey and the region. Our
investment is an important diversification
of our portfolio and demonstrates the
importance we place on Turkey, an increasingly
Our Year
Private Equity
empowering potential
Our investments
prosperous nation of more than 71 million,
and the healthcare sector. Acibadem’s
partnership with Abraaj will provide both
expansion capital and the benefit of an
unparalleled regional knowledge and network.
Together, we can help the people of the
region live longer, healthier lives.
In January 2008, Almond AS, a 50:50 joint
holding company formed by Abraaj Capital
and Mehmet Ali Aydinlar, one of the
founders and the chief executive officer
of Acibadem, acquired additional shares
in Acibadem, bringing the holding
company’s stake up to 69.6%.
THOUGHT LEADERSHIP
 Abraaj Buyout Fund II LP (ABOF II)
Continuing investment
Aviation Fund Holdings Ltd (AFHL)

Post-acquisition strategy NAS is also seeing exciting transformation

Country Saudi Arabia
Sector Aviation alongside funding from Abraaj has
Investment date May 2006
Transaction size US$75 million
Stake 100%
www.nasaviation.com
Acquisition structure
The fund structured a transaction whereby
US$75 million was committed to the
regional aviation sector and set up AFHL
to deploy these funds. Abraaj identified
this unique opportunity in the regional
aviation sector and has acted as the
catalyst for this transaction, which has
been structured as a subscription totalling
US$250 million (including recapitalisations),
by a consortium of investors into National
Air Services (NAS).
The capital raised from the consortium
provided NAS with the necessary
resources to expand its existing activities
and complete its investment in identified
new business lines. An initial focus on
the growth and strategic development
for existing brands and renewal of the
fleet was followed by the recruitment
of key individuals to help with the launch
of Nas Air. The medium-term aim is to
position the business for a public listing,
possibly during 2008/09.
Highlights of the year
NAS launched Nas Air, Saudi Arabia’s
first low-cost airline, in February 2007.
The business has expanded to add
more than 300 weekly flights, more
than 20 routes, and signed orders for
58 new aircraft. NetJets Middle East
ordered 60 new aircraft and won the
franchise rights to expand into new
markets across the region.
in its NetJets Middle East private aviation
operation. The business was restructured
and the franchise was renegotiated during
the year.
The NetJets fleet is being transformed,
with orders and options signed during
the year for 60 new executive jets from
three manufacturers; Gulfstream, Dassault
and Hawker. Deliveries from these and
previous orders started during the second
half of the year, more than doubling the
core fleet size by year-end.
The Al Khayala executive airline and
charter business continues to operate
well from its Riyadh base and NAS
remains Saudi Arabia’s leading aircraft
management business.

Profile Nas Air’s inaugural flight from Riyadh

NAS is an established aviation business
in Saudi Arabia. It operates a range of
businesses including the private aviation
service, NetJets Middle East, the Al
Khayala luxury shuttle and charter service
and the low-cost airline Nas Air.
Investment rationale
A growing demand for air travel,
combined with the opportunities afforded
by the liberalisation of the Saudi aviation
market means there is huge potential to
grow a profitable airline business.
to Jeddah marked a new chapter in the
history of flying in the Kingdom, giving
travellers the choice of using a modern
and efficient low cost carrier. The
total number of passengers carried was
approaching 500,000 by year-end, and
international routes are expected to be
added in 2008.
One facet of Abraaj’s involvement
with NAS has been to help in recruiting
key professionals to guide the business
forward. Ed Winter, former COO of low
cost pioneer easyJet joined NAS as
chief executive officer during the year.
He and president Taher Agueel, formerly
of Deutsche Bank, have drafted an
exciting new strategy for the business.

68 | 69 abraaj Capital annual review 2007

 Our Year
Abraaj Buyout Fund II LP (ABOF II)
2007 acquisition
Egyptian Fertilizers Company (EFC)

Highlights of the year Management has also already started

Country Egypt
Sector Urea production
Investment date June 2007
Transaction size US$1.46 billion
Stake 100%
Acquisition structure
US$75 million investment by
EFC’s performance continues to exceed
projections driven by a better than
projected urea selling price and lower
costs. Revenues have exceeded
expectations and EBITDA is 20%
higher than forecast. This will enable
the company to pay down a larger
portion of its outstanding debt and
will enhance returns.
A hunger for environmentally-friendly
fuels in the US helped drive world
fertiliser prices to record levels, creating
an excellent year for the company.
Private Equity
on a more fundamental overhaul of
the production process. This will involve
removing production ‘bottlenecks’,
increasing output by up to 220,000
tons a year. The German company that
originally installed the production lines
has been commissioned to advise and
has already submitted an engineering
study for the project, which should be
complete in 2010.
EFC is also continuing to explore
opportunities to expand in other locations
where low-cost energy is available. It

ABOF II, US$300 million by IGCF
plus co-investment and debt.
Profile
Largest private urea manufacturer
and exporter in Egypt, producing
1.3 million tons annually.
Investment rationale
Global demand for fertiliser for food
crops continues to increase, while an
emerging demand for biofuel crops is
providing a secondary growth market.
There is limited manufacturing of urea
in Africa, creating a further market
empowering potential
owns a 20% stake in Notore Chemical
The business, which exports more Industries, a urea and ammonia plant in
than 90% of its output, saw big rises in Nigeria, where production of ammonia
market prices for granulated urea, valued started at the end of the year. EFC has
by farmers for its high nitrogen content. also been shortlisted for a joint venture
Part of the growth in demand has come to create a new fertiliser production plant
from the US ethanol industry, which on a greenfield site in Algeria.
relies on corn as its feedstock. Biodiesel
producers, meanwhile, are increasingly
buying soya beans, encouraging farmers
to boost output.
Higher world prices have given a
flying start to Abraaj’s ownership of
the business. The initial investment

opportunity. Low production costs
are locked in through long-term gas
contracts at favourable rates.
Post-acquisition strategy
Abraaj’s involvement with EFC will focus
on both further increasing the capacity
production of the current facility as well
as expanding into new markets, including
Nigeria, Algeria, Bangladesh, Pakistan and
Kazakhstan. Other opportunities include
diversification into related products, such
as melamine, urea ammonium sulphate,
nitrogen phosphate potassium and urea
Our investments
was based around long-term wholesale
price forecasts of US$230 per ton but
they have actually been in excess of
US$400 per ton. Extra revenues from
the higher than predicted prices will
allow for early repayment of some of
the debt associated with the buyout,
enhancing returns for investors.
Such extra returns have not distracted
Abraaj or EFC’s management from the
need to make the business more efficient,
or to plan for future growth. Essential
maintenance on both production lines
THOUGHT LEADERSHIP

ammonium nitrate. at EFC’s site in the Northwestern Suez

Economic Zone near the port of Sokna
was finished in the second half of the
year, allowing the plant to operate at
110% of design capacity.
 Abraaj Buyout Fund II LP (ABOF II)
2007 acquisition
Gulf Marine Maintenance & Offshore Company (GMMOS)
Country UAE
Sector Oil and gas services
Investment date May 2007
Transaction size US$69 million
Stake 100%
www.gmmos.com
Acquisition structure
Equity investment, with co-investor.
Profile
The GMMOS group is a regional oil and
gas services group, operating in the Gulf
and Caspian markets. Divisions include
the Grandweld shipyard, a leader in
offshore supply vessels, and GMMOS
Fabrication, which makes pressure vessels.
The group also contains an offshore
charter business and a crane hire division.
Investment rationale
High energy prices are supporting
unprecedented levels of spending on oil
and gas production and exploration. As a
key supplier, the group is well positioned
to benefit from this growth, as well as
from growth in general construction
projects in the region.
Post-acquisition strategy
An increase in capacity through an
expansion of the workforce and extra shifts
was an immediate first step. Abraaj is now
helping develop new talent from within
the business to take on more day-to-day
management responsibilities, freeing up
senior executives to consider strategic
expansion, including new operations
elsewhere in the MENASA region.
70 | 71 abraaj Capital annual review 2007
Highlights of the year
Sales were up almost 40% on 2006,
with new capacity for Grandweld repair
operations coming on stream in Dubai.
Ship charter and crane hire utilisation
was above 95%, with rates up to 20%
higher than those seen in 2006. The
fair valuation of investment is already
showing substantial gains.
High oil prices and continued investment
by the oil and gas sector helped propel
GMMOS to a spectacular performance
in 2007.
Group revenues increased sharply. Profits
in the first three quarters of the year
were up by more than a third, despite
major investment in new facilities.
Following the acquisition in May, Abraaj
has been helping the GMMOS group
to manage the challenges of growing
a business that is already running at
near full capacity.
GMMOS has grown its operational
knowledge at group level, with recruitment
in support areas such as human resources,
legal services and procurement. There
has been a focus on developing talented
second level managers to take more
responsibility for day-to-day decisions,
freeing time for each division’s executives
to work on strategic projects.
Extra shifts have been added at Grandweld
and GMMOS Dubai to speed production
and an extra 400 workers are being hired.
Grandweld, the region’s leading aluminium
shipbuilder is operating at full capacity,
with 13 vessels under construction. A
highlight in 2007 was a significant order
from Bourbon of France for four tugs and
two crew boats. GMMOS secured a US$75
million syndicated loan facility from 11
regional banks to finance production of
this order. Grandweld also made good
progress on its planned move to a new
site at Dubai Maritime City during 2008,
which will double capacity.
GMMOS Fabrication too continues to
benefit from high levels of investment by
oil producers. It delivered US$15 million
of pressure vessels in the first half of
the year alone, winning orders for a
similar amount. It achieved this while
successfully managing a move to a new
workshop at Jebil Ali.
Its sister business GMMOS Kazakhstan,
operating from the Caspian port of Aktau,
is close to breaking even only two years
after being set up. The potential oil
infrastructure market in Kazakhstan is
estimated at US$140 billion and GMMOS
won important contracts for Petrogaz and
Dragon Oil this year.
GMMOS’s charter division Stanford
focused on keeping its fleet busy,
typically now earning revenue more than
95 days out of 100 on every boat. Rates
also increased by more than 20% during
the year. Stanford acquired two new
crew boats in September, taking the fleet
to 20 vessels; both have already been
chartered on a three-year contract.
The ongoing construction boom has
seen demand remain high at Gallagher
International, GMMOS’s crane rental
business. Hire-out rates have exceeded
96% and Gallagher expanded its fleet
to 54 cranes during the year.
 Our Year
Abraaj Buyout Fund II LP (ABOF II)
Continuing investment
Mannan Shahid Forgings (MSF)

Highlights of the year The international automotive market

Country Pakistan
Sector Steel forging
Investment date November 2006
Transaction size US$16.3 million
Stake 80%
www.msforgings.com
Acquisition structure
US$16.3 million investment.
MS Forgings has enjoyed its fifth successive
year of increasing sales. Satisfyingly, this
growth was translated into higher profits
with net income for the 2007 fiscal year
up by almost one fifth.
MSF clients include Pakistan’s leading
motorbike and tractor manufacturers as
well as suppliers to some of the biggest
names in the world automotive industry.
MSF remains cost-competitive against
global rivals for car companies wishing to
outsource manufacturing. Abraaj worked
closely with management during the year
Private Equity
is fiercely competitive and maintaining
high quality production is essential.
The business has recruited a new
head of forging and has also invested
in new forging simulation software
to keep MSF at the leading edge.
Management has also successfully
addressed inefficiencies in the
production process as part of a
programme to boost capacity by one
third without significant expense.
Enhancements adopted over recent
months include induction heating

Profile
MS Forgings is Pakistan’s largest steel
forging house, catering mostly to the
booming automotive industry, with
strong shares of both the domestic
and export markets.
Investment rationale
MS Forgings is well placed to benefit
from the dynamic growth in Pakistan’s
own automotive sector. It also identified
the global outsourcing trend early
and operates at international quality
standards. Almost 45% of its production
empowering potential
to identify its most profitable customers processes and the use of flood welding
and focus efforts on deepening and to produce component dies.
expanding these relationships.
One of the most important tasks in
2007 has been to develop a succession
plan for chief executive officer Shahid
Khan, who retires in 2008. After a
rigorous search, Saeed Zaman accepted
the company’s offer to be COO and
CEO designate and joined in December.
The two will work side by side prior
to Shahid Khan’s retirement. As well
as this key position, the management
team has been strengthened by hiring

is exported to clients in Europe, the US
and South America.
Post-acquisition strategy
Abraaj is streamlining production, which
is forecast to improve capacity by more
than one third. Improved marketing
and sales processes will boost sales to
both existing and new customers. The
management team is actively evaluating
strategies to expand through acquisitions,
both domestic and internationally.
Our investments
experienced professionals such as the
new chief financial officer and new
head of human resources.
During the year, MS Forgings invested
in a new enterprise resource planning
system to better integrate its information
and process planning, so giving the
management a clearer day-to-day
perspective on performance.
THOUGHT LEADERSHIP
 Abraaj Buyout Fund II LP (ABOF II)
2007 acquisition
Saudi Tadawi Health Care Company (Tadawi)

Country Saudi Arabia
Sector Healthcare
Investment date Deal agreed
December 2007
Transaction size US$177 million
Stake 40%
Post-acquisition strategy
There is a strategy for expansion, building
up scale in both the pharmacies and the
distribution network. This could also see
Tadawi grow into other GCC markets, with
Abraaj able to help the business bridge
national boundaries. Abraaj has identified
scope for operational improvements and
for improvement of operating margins.
The ambition is to grow Tadawi towards
an eventual IPO.

Highlights of the year

Acquisition structure The company’s growth continued with
Direct equity investment including the purchase of Saggaf, a well-established
co-investors. chain of 47 pharmacies in Riyadh.
DarMarwa has constructed two new
Profile warehouses, increasing its capacity and
Tadawi is a premier retailer and wholesaler improving its geographic reach.
of pharmaceuticals and personal care
products in the Kingdom of Saudi Arabia.
It has an integrated business, made up
of DarMarwa, the Kingdom’s largest
pharmaceutical wholesaler, and Tadawi
Pharmacies, a retail pharmaceutical
business with the widest footprint in the
country. It also owns Pharma Tech, an
agency that helps suppliers to register,
promote and distribute their products.

Investment rationale
Both the population and the demand
for healthcare in the Kingdom is
growing, with spending on drugs and
pharmaceuticals projected to grow by
more than 10% annually. Tadawi is ideally
positioned to take a substantial share of
this market, by expanding and developing
its retail chain. The group is also a leader
in the growing sector of managed
pharmacies, in locations such as clinics
and hospitals.

72 | 73 abraaj Capital annual review 2007

 Our Year
Infrastructure and Growth
Capital Fund LP (IGCF)

Private Equity
IGCF’s mandate spans the MENASA region, investing in a broad range of industries
integral to bringing the economy to its next level of development, including
education, healthcare, aviation, petrochemicals, power and ports, among others.
The fund’s first closing was in December 2006 at US$500 million; its second was a
record closing in September 2007, with additional commitments of US$1.2 billion,
with a fund closing of US$2 billion in December 2007. It has a target IRR of 20%
on invested capital contributions.

Ongoing investments the Abraaj Buyout Fund II, was In June the fund invested in GEMS
at start of 2008 the largest ever private equity-led Education, acquiring a 25% stake

empowering potential
leveraged buyout transaction in in the company’s MENASA business.
Air Arabia
the Middle East and North Africa. GEMS MENASA owns or manages
Aviation, UAE
55 schools across MENASA and is
Acibadem
Abraaj has already put in place well placed to grow its share of
Healthcare, Turkey
a long term engineering programme the US$10 billion market for private
EFC
to enhance production at EFC education in the region.
Urea production, Egypt
by removing bottlenecks. Extra
Global Education
maintenance has raised capacity Other key deals during 2007 included
Management Systems
in the short term, allowing EFC to the purchase of a strategic minority
Education, MENASA
capitalise to the full on high world stake in low-cost airline Air Arabia,
fertiliser prices. In another significant ahead of its IPO in March 2007. This
Fund year in review deal, the fund agreed to buy up to transaction is already yielding positive
2007 was quite simply a spectacular 50% of Acibadem Healthcare, Turkey’s returns, as Air Arabia shares have near
year for IGCF. Two further rounds leading private healthcare business. doubled in price since listing on the
of fundraising attracted another

US$1.5 billion of commitments.
At US$2 billion, this is now the
largest private equity fund focused
on the MENASA region. Almost one
third of the money committed has
come from institutions outside the
region, significantly broadening
Abraaj’s investor base. Even while the
fundraising was taking place, Abraaj
used its own capital to commit to
investments worth US$1.4 billion,
with IGCF’s stake in these worth
US$800 million. This gave investors
This stake was increased to 69.6% in
January 2008 and a related 50% stake
was acquired in leading Turkish health
insurance company, Acibadem Sigorta.
Acibadem owns its own hospital
network, as well as providing health
insurance and management services,
and is already enjoying strong growth
as the sector expands, in part due to
health regulation reforms enacted by
the Turkish Government.
> A record closing, making IGCF the biggest MENASA
Our investments
Dubai Financial Market. Abraaj has
also been partnering the airline through
its rapid expansion plans, including a
management agreement with a
Moroccan carrier which will allow Air
Arabia to open a second hub in Rabat.
IGCF is witnessing a strong deal pipeline,
and it is expected that the fund will be
fully invested within two years of launch.
THOUGHT LEADERSHIP

an early opportunity for upside gains.

A highlight was the fund’s acquisition
in June of the Egyptian Fertilizers
Company. The US$1.46 billion deal,
completed with co-investors including
private equity fund
> Lead investor in the region’s largest leveraged buyout deal
> Key stakes in profitable education, healthcare and
transport companies
> Exciting deal pipeline to provide further investments in 2008
 Infrastructure and Growth Capital Fund LP (IGCF)
2007 acquisition
Air Arabia
Country UAE The investment made by Abraaj will
Sector Aviation
Investment date March 2007
Transaction size US$113.2 million
Stake 16.6% prior to IPO,
diluted to 6.4% in
public offering
www.airarabia.com
Acquisition structure
Pre-IPO subscription to 300 million
founder shares with minority rights,
including board appointees.
Profile
Air Arabia is the Middle East’s first and
leading low cost carrier (LCC). Founded
in 2003, it operates to 35 destinations
from a main hub at Sharjah in UAE. It
has already carried more than 3.5 million
passengers. The airline raised an extra
US$700 million of capital to fund future
development through an IPO in March.
Investment rationale
Air Arabia is a pioneering LCC, with
focused plans for expansion in a rapidly
growing regional aviation market. Costs
are kept low by the use of a single aircraft
type – the Airbus A320 – and high
utilisation rates. It has been operating
profitably since its second year in business.
74 | 75 abraaj Capital annual review 2007
Post-acquisition strategy
support the airline’s regional expansion
plans and aircraft acquisition strategy, as
well as provide capital for infrastructure
development at Sharjah Airport, where
passenger traffic increased more than 36%
last year. Abraaj will also support Air Arabia
by conducting detailed assessments of each
potential investment. Deals in the pipeline
include investment opportunities in aviation
and airport infrastructure sectors.
Highlights of the year
IPO completed in July. Third-quarter profits
were up 244%. Expansion plans were
underlined in November with an order
for up to 49 more Airbus A320 aircraft.
Air Arabia shares were listed on the
Dubai Financial Market in July and
investors saw the price almost double
in value by the year-end.
Operationally, 2007 was another year
of growth. The route network expanded
from Air Arabia’s Sharjah hub to serve 35
destinations and extra flights were added
on established routes. New destinations
include Chittagong in Bangladesh,
Bangalore and Coimbatore in India, and
Karachi and Peshawar in Pakistan.
Air Arabia continues to change the
perception of travel in the region.
Passenger numbers grew strongly, up
55% to 1.9 million in the first nine
months. The airline celebrated its
five-millionth passenger in October.
Unlike rivals, Air Arabia is not growing
at the expense of profit. Net profits for
the first nine months of the year were
US$76 million, up 331% on the same
period in 2006.
Net income in the three months to
December 31 surged to 89.52 million
dirhams (US$24.38 million) from
32.65 million dirhams in the year-earlier
period. The number of passengers rose
almost 50% to 745,000 pushing revenue
up 62% to 349.3 million dirhams. Average
load factor for the year – the percentage
of seats occupied on each flight – was
86% compared to 81% in 2006.
In November, Air Arabia took another
transforming step forward, signing a deal
with Moroccan carrier Regional Air Lines
(RAL). Air Arabia will take on management
control of RAL, applying its low cost
business model, and will invest to develop
Rabat as its second hub. The venture opens
up development of new routes across
North Africa and into Europe.
The business’s growth plans were
underlined by placing an order with
Airbus for 34 new A320 aircraft, with
options signed on a further 15. The
US$3.5 billion deal will ultimately
triple the size of Air Arabia’s fleet.
The airline is also diversifying its income,
investing in improving infrastructure at
Sharjah airport. It is building a 300-room
hotel at the airport, to be managed by
Rotana Hotels. Air Arabia is also setting up
a joint venture aviation academy to train
the next generation of pilots for the region.
Air Arabia’s achievements have not gone
unnoticed. It was named Low Cost Airline
of the Year at the Aviation Business
Awards in November, with chief executive
officer Adel Ali named Airline CEO of the
Year at the same event.
This follows Skytrax’s award for Best Low-
Cost Airline in the Middle East, given in
August – especially gratifying as it is based
on an independent survey of passengers.

air arabia Intra-regional passenger traffic in the Middle
East is predicted to grow by 7%, annually,
2007 Acquisition until 2010. In particular, the low-cost carrier
(LCC) model is set to repeat its global
success story and achieve strong and rapid
In Q4 regional growth. As an established airline
Profits
with world-class management, Air Arabia,
is especially well positioned to benefit as
an LCC pioneer.
tripled
Our Year
Private Equity
empowering potential
Our investments
The company offers a simple and efficient
service at affordable and competitive ‘value
for money’ fares. By offering flights of less
than five hours, best practice operational
reliability and high aircraft utilisation, Air
Arabia keeps its planes in the air, not on the
ground. Even more importantly, the airline is
able to elevate its financial performance to
equal heights. Abraaj will work with Adel Ali,
Air Arabia’s chief executive officer, to ensure
that the company remains the leading LCC
in the region.
THOUGHT LEADERSHIP
 Infrastructure and Growth Capital Fund LP (IGCF)
2007 acquisition
Acibadem Healthcare
Country Turkey
Sector Healthcare
Investment date Deal agreed
August 2007
Transaction size Up to US$585 million
Stake Up to 50%
www. acibadem.com
Acquisition structure
Investment by ABOF II, IGCF,
co-investors and additional
acquisition finance.
Profile
Acibadem was founded in 1991 and is
the only healthcare institution to have
shares traded on the Istanbul Stock
Exchange. It is part of a premium
integrated healthcare platform that
provides secondary and tertiary private
healthcare services, laboratory services,
health and life insurance, hospital project
management and hospital facilities
management services. It is the only
hospital group worldwide to be accredited
by Joint Commission International (JCI),
which certifies private hospitals, and is
affiliated with Harvard Medical
International. Acibadem Healthcare
Services operates six premium hospitals
with a bed capacity in excess of 700,
two outpatient clinics, a central laboratory,
a genetic and cell therapy lab, an
ophthalmology centre and five specialised
medical centres. It is currently building
another eight hospitals, which will take
the total number of beds to 1,595.
76 | 77 abraaj Capital annual review 2007
Investment rationale
Acibadem is a world-class health provider
already operating in an attractive market.
Regional demand for healthcare services
is being driven by a range of factors,
including high levels of population
growth, changing socio-economics,
prevalence of health risk factors, medical
innovations and increasing insurance
spend. In response to this growing
demand, governments in the Middle East
are increasingly focused on the provision
of broadly available, high-quality services.
Post-acquisition strategy
Abraaj’s strategic support will accelerate
the development of the healthcare group
in Turkey and facilitate the long-term
expansion of its healthcare services in
the MENASA region, where the existing
supply of high-quality medical services is
generally insufficient. There are currently
twice as many physicians per 1,000
people in the 30 countries within the
OECD than there are in Turkey and
in the GCC, and nearly three times the
available hospital beds. In the GCC states
alone, demand for treatment is expected
to grow more than twofold by 2025, to
approximately US$60 billion per annum.
Highlights of the year
The increased demand for private medical
care is already feeding through to
Acibadem’s performance and profitability.
There was a positive market reaction
to the Abraaj investment, with a ‘Buy’
recommendation on Acibadem from
KBC Securities.
This was a landmark year for the health
market in Turkey as the state-backed
General Health Insurance (GHI) Fund was
launched. This initiative gives patients a
wider choice of where they are treated,
using public money to pay for up to half
the cost of selected private treatment. It
has also helped to drive an exciting year
of growth for Acibadem, the nation’s
premier private health group.
The hospitals business continued its
expansion, with the construction of
two new hospitals in 2007, including
a joint venture with Besiktas Sports
Club in Istanbul and a wholly owned
hospital in the Maslak district of Istanbul.
Development plans were announced for
hospitals at Izmir, Eskisehir and Bodrum.
The medical laboratories division also
expanded with the opening of two stem
cell laboratories in April.
The arrival of the GHI is increasing the
scope for private medical insurance
as companies start offering voluntary
top-up plans which pay the difference
between the GHI contribution and the
total cost of treatment. This will benefit
Acibadem’s A-Insurance business, Turkey’s
fifth largest health insurer.
Overall growth in the healthcare market
is also leading to new business for the
Acibadem healthcare project management
division and the A-Plus catering and
laundry service. Both were on track to
grow revenues strongly by year-end.
Since the acquisition of an initial stake
in August 2007, Abraaj has been working
with management on a strategy to expand
into other markets in the Middle East.
Possible ventures in Saudi Arabia, Kuwait
and India are already being assessed.
 Our Year
Infrastructure and Growth Capital Fund LP (IGCF)
2007 acquisition
Egyptian Fertilizers Company (EFC)

Highlights of the year Management has also already started

Country Egypt
Sector Urea production
Investment date June 2007
Transaction size US$1.46 billion
Stake 100%
Acquisition structure
US$300 million investment by IGCF,
EFC’s performance continues to exceed
projections driven by a better than
projected urea selling price and lower
costs. Revenues have exceeded
expectations and EBITDA is 20%
higher than forecast. This will enable
the company to pay down a larger
portion of its outstanding debt and
will enhance returns.
A hunger for environmentally-friendly
fuels in the US helped drive world
fertiliser prices to record levels, creating
an excellent year for the company.
Private Equity
on a more fundamental overhaul of
the production process. This will involve
removing production ‘bottlenecks’,
increasing output by up to 220,000
tons a year. The German company that
originally installed the production lines
has been commissioned to advise and
has already completed an engineering
study for the project, which should be
complete in 2010.
EFC is also continuing to explore
opportunities to expand in other locations
where low-cost energy is available. It

US$75 million investment by ABOF II,
plus co-investment and debt.
Profile
Largest private urea manufacturer
and exporter in Egypt, producing
1.3 million tons annually.
Investment rationale
Global demand for fertiliser for food
crops continues to increase, while an
emerging demand for biofuel crops is
providing a secondary growth market.
There is limited manufacturing of urea
in Africa, creating a further market
empowering potential
owns a 20% stake in Notore Chemical
The business, which exports more Industries, a urea and ammonia plant in
than 90% of its output, saw big rises in Nigeria, where production of ammonia
market prices for granulated urea, valued started at the end of the year. EFC has
by farmers for its high nitrogen content. also been shortlisted for a joint venture
Part of the growth in demand has come to create a new fertiliser production plant
from the US ethanol industry, which on a greenfield site in Algeria.
relies on corn as its feedstock. Biodiesel
producers, meanwhile, are increasingly
buying soya beans, encouraging farmers
to boost output.
Higher world prices have given a
flying start to Abraaj’s ownership of
the business. The initial investment

opportunity. Low production costs
are locked in through long-term gas
contracts at favourable rates.
Post-acquisition strategy
Abraaj’s involvement with EFC will focus
on both further increasing the capacity
production of the current facility as well
as expanding into new markets, including
Nigeria, Algeria, Bangladesh, Pakistan and
Kazakhstan. Other opportunities include
diversification into related products, such
as melamine, urea ammonium sulphate,
nitrogen phosphate potassium and urea
Our investments
was based around long-term wholesale
price forecasts of US$230 per ton but
they have actually been in excess of
US$400 per ton. Extra revenues from
the higher than predicted prices will
allow for early repayment of some of
the debt associated with the buyout,
enhancing returns for investors.
Such extra returns have not distracted
Abraaj or EFC’s management from the
need to make the business more efficient,
or to plan for future growth. Essential
maintenance on both production lines
THOUGHT LEADERSHIP

ammonium nitrate. at EFC’s site in the Northwestern Suez

Economic Zone near the port of Sokna
was finished in the second half of the
year, allowing the plant to operate at
110% of design capacity.
 Infrastructure and Growth Capital Fund LP (IGCF)
2007 acquisition
Global Education Management Systems (GEMS)
Country MENASA
Sector Education growth in excess of 28%. New school
Investment date June 2007
Transaction size US$124 million
Stake 25%
www.gemseducation.com
Acquisition structure
Equity investment with a meaningful
portion of the deal conditional on
profitability and exit targets.
Profile
GEMS is a long-established operator of
private schools throughout the MENASA
region and is currently educating more
than 58,000 students across 55+ schools.
In addition, GEMS has a growing
business managing schools on behalf of
third parties, including state authorities.
Investment rationale
A market leader, with a strong brand
built over 39 years of successful
operation, GEMS is well placed to gain
from an increasing demand for private
education in the region. There is also
potential to earn significant revenues
from managing public schools and
growing the brand into new markets.
Post-acquisition strategy
There is an aggressive expansion plan
to grow the business across the region,
involving running as many as 350 schools
and boosting student numbers by up to
500,000. Growth will come in a variety
of ways, including joint ventures and
partnerships with real estate developers.
78 | 79 abraaj Capital annual review 2007
Highlights of the year High standards are at the heart of
Revenues are already showing year-on-year the schools GEMS runs. Several pupils
won international awards for their
openings are under way in UAE. Detailed performance in public exams this year.
expansion plans have been finalised for new Meanwhile, Cambridge International
openings in India, Egypt, KSA and Pakistan. School in Dubai was awarded Fellowship
status by University of Cambridge
GEMS strengthened its position in 2007 International Examinations (CIE). This
as the region’s top provider of high recognises the high quality of education
quality education. given at the school to candidates
preparing for the CIE exams.
The business saw revenues grow 28%
as it expanded its network of schools. High profile guests at GEMS schools
GEMS now owns 30 schools across the during 2007 included José María Figueres,
Middle East, North Africa and South Asia, former president of Costa Rica and, from
and has contracts to manage another the UK, HRH Princess Michael of Kent.
25. It is responsible for educating almost In May a group of pupils from the Dubai
60,000 students. Modern High School visited New Delhi
as the personal guests of India’s president,
Among schools to open in the year was Dr APJ Abdul Kalam.
the first GEMS World Academy in Dubai
in September. This school, catering for In a proud moment for the company,
ages 4 –18, is the first school from Sunny Varkey, founder and chairman of
GEMS based around the teaching of the GEMS, was named Outstanding Asian
International Baccalaureate qualification. Businessman of the Year at the Asian
Business Awards, Middle East in December.
The GEMS American Academy in Abu
Dhabi, a venture endorsed by the
government of Abu Dhabi, was also
opened in September. Just a month
earlier, GEMS announced a new specialist
school in partnership with the Dubai
Silicon Oasis Authority, which is
developing a high-technology hub. The
GEMS DSO Smart School, due to open in
September 2008, will focus on developing
essential technology skills alongside a
core curriculum.
Managing schools on behalf of state
and national governments is expected to
represent a growing market for GEMS. At
the start of the year it agreed to collaborate
with Edison Schools, the largest manager of
public schools in the US, which has licensed
GEMS the right to use its proprietary school
management systems across the MENASA
region. This makes GEMS a compelling
proposition as it competes for school
management contracts.

GEMS GEMS plays a vital role in providing primary
and secondary quality education throughout
2007 Acquisition MENASA. It offers a range of internationally
recognised curriculum programmes,
25
including International Baccalaureate,
National Curriculum for England, American
Curriculum, and various Indian curricula.
In its continued efforts to enrich the lives of
stake students and teachers at GEMS schools, the
organisation also undertakes various not-for-
profit initiatives. These include, among
others, the GEMS Scholar programme, the
provision of career counselling, and teacher
Our Year
Private Equity
empowering potential
Our investments
training services. GEMS also participates
in the MENA Learning & Leadership
Programme, a three-year initiative designed
to develop and deliver sustainable solutions
for learning and development in the Middle
East and North Africa region.
Abraaj’s entry into the education sector,
as one of the first investments by IGCF,
strengthens GEMS growth potential and
the region’s education infrastructure. It
also contributes significantly to the stability
and diversification of our own portfolio:
a case of doing well by doing good.
THOUGHT LEADERSHIP
Our responsibility to
thought leadership
Spreading the highest standards of corporate governance
and social responsibility will help our region flourish.
 A beacon for good
corporate governance
Good corporate governance is essential to the way we work.
Open and transparent standards of governance reinforce trust
and reduce business risk. Abraaj leads by example and – by
insisting on similar high standards in every business that we
invest in – we are helping to raise the bar across the region.
Abraaj’s success is built on trust: of
our investors, of the governments in
the countries in which we operate,
of the media, and of the wider
community. Such trust reflects the
integrity and honesty that has
always been part of our culture.
We instil change in all of the businesses
that we invest in across the region by
improving their operating processes,
governance and systems. This allows them
to perform better in their marketplace
vis-à-vis their competitors – performance
which is ultimately recognised by all
stakeholders. In any efficient marketplace,
market participants always strive to adopt
‘best practices’. Both Abraaj and its portfolio
companies have played, and will continue
to play, a meaningful role in establishing
best practices across our region.
82| 83 abraaj Capital annual review 2007
In March 2006, Abraaj voluntarily
came under the regulation of the Dubai
Financial Services Authority, and in doing
so became one of the first private equity
firm to be regulated anywhere in the
world. Our reasoning for doing so was
simple: without constricting our business
practices in any way, being regulated by
the DFSA would help to further strengthen
our governance system and demonstrate
the transparency of our business model.
In 2007, we further institutionalised our
corporate governance system to ensure
that such qualities become a formal,
mandatory part of the way we work.
Following the 2006 appointment of a
compliance officer, we put in place new
processes and developed a wide-ranging
holistic compliance and governance
framework. This covers such matters as
our board of directors, committees, internal
controls and procedures, and risk strategy.
The framework is based on the UK’s
Combined Code of Corporate Governance
– an internationally recognised standard.
It was also shaped by guidance from the
UK Institute of Chartered Secretaries
and Administrators.
We also laid the groundwork for
the publication of our Principles of
Governance, which sets out our corporate
governance policy. The Principles outline
our shared values, objectives, processes
and procedures. In line with our strong
commitment to transparency and
open communication, the Principles are
accessible to all on our website. We believe
their dissemination will promote common
standards among our staff and inspire trust
and confidence among stakeholders.
The Principles represent the practical
foundation of the way we work: not
just a theoretical document. To ensure
our people keep the Principles in mind,
we have linked certain declarations (arising
from our corporate governance system) to
the computer system. In order to log on, and
so start work, staff must (once a month)
confirm that they are aware of, understand
and agree to adhere to our procedures.
Staff members must also confirm that
there is no undisclosed information that
might affect their fit and proper status.
These self-directed steps build on
Abraaj’s track record of voluntarily
pursuing best practice. In addition to
our voluntary regulation, our Advisory
Board maintains a direct dialogue with
our regulator, the DFSA.
Our strong commitment to corporate
governance goes right to the top of the
company. Our compliance officer reports
directly to the CEO, who ensures that the
compliance officer has full resources to
perform his duties objectively. These duties
include documenting our compliance
function; monitoring processes and
procedures, and keeping records of any
breaches of legislation – all proof of our
desire to govern Abraaj according to the
highest possible standards.
Our Board and committee system
The structure of Abraaj’s Board and
committee system also formalises the
ethical conduct that underpins our work
and reflects global best practice in
corporate governance.

The Board of Directors
Leading the company is, of course,
the Board of Directors. Significantly
from a corporate governance perspective,
we have always kept the functions of
Chairman of the Board and CEO separate.
The Board has the job of maintaining
Abraaj’s prosperity and balancing the
interests of all our stakeholders. It
provides entrepreneurial leadership,
sets our strategic aims, and reviews
management performance. It is required
to meet at least four times a year (but
meets more frequently in practice) and
is limited by statute to 17 members,
each serving an initial three-year term.
One third of the Directors retires every
year according to the articles but can be
re-elected for another term. Currently,
the Board consists of 15 members
including two executive directors.
Responsibility for investments by
the Funds and the day-to-day running
of Abraaj rests with the CEO assisted
by executive management. There are
also a number of committees:
>A
 n executive committee, chaired
by the CEO and composed of up
to five senior executive directors.
On the recommendations of the
investment committee, the final
investment decisions are approved
by the CEO. It meets at least once a
month, and decisions are by majority
(the quorum is three, to include the
CEO). The CEO may decide to refer
some decisions up to the Board level.
Our Year
Private Equity
>A
 n audit and corporate governance
committee, composed of three non-
executive directors appointed by the
Board, meets at least four times a year.
It continually reviews our internal
controls, recommends appointment
of external auditors and receives their
reports, reviews the performance of
Empowering potential
internal audit function, advises the
Board on meeting the highest standards
of corporate and financial governance
and ensures we meet all our regulatory
requirements. The quorum is two, plus
the attendance of the CEO, CFO and
compliance officer.
“In 2007, we further institutionalised
our corporate governance system
to ensure that such qualities
Our investments
become a formal, mandatory
part of the way we work.”
>A
 compensation committee,
composed of the Chairman, CEO
and a non-executive director, advises
on all compensation, including that
of the CEO (who abstains from
discussion of, and voting on, his own
remuneration package). It meets at
least once a year, with a quorum of
two, to include the CEO (unless the
THOUGHT LEADERSHIP
business concerns his remuneration).
 A beacon for good corporate governance
Continued
> An investment committee, composed
of all executive directors, recommends
investments to the Executive
Committee. Our head of compliance,
chief risk officer, and chief financial
officer attend (but do not have a vote).
Individual investment teams evaluate
opportunities and present their findings
and recommendations to the committee
at various stages of the investment
process. The committee meets on a
regular basis and has a quorum of five
directors. Executive committee approval
is needed for all investments.
> A portfolio review committee,
composed of all executive directors
evaluates the performance of the
investments on a monthly basis.
In-depth analysis of at least three
investments is undertaken in each
meeting and the actual performance
is compared with the original investment
case. The progress against the value
creation plans is measured and issues
are thrashed out. The exit strategy and
synergies between various businesses are
regularly evaluated by this committee.
>A
 n Advisory Board, composed of
five (currently) external independent
experts, advises the Board of Directors
and Chief Executive Officer of Abraaj
Capital Limited on global best practice
in the private equity industry, as well
as risk management and compliance
issues in respect of the company’s
business and the Funds managed by it.
84| 85 abraaj Capital annual review 2007
Our holding company
Abraaj Capital Limited (ACLD) is a wholly
owned, licensed and regulated subsidiary “In its development
of Abraaj Capital (Cayman) Limited, which of a world-class
in turn is a wholly owned subsidiary of
Abraaj Capital Holdings Limited (ACHL),
corporate
the group’s holding company. ACHL has governance system,
an issued share capital of US$1 billion as in many other
and a shareholder base that includes cases, Abraaj has
some of the most influential people
and institutions in the region. shown itself as a
best practice-inspired
ACLD is incorporated in the Dubai pioneer.”
International Finance Centre, a financial
free zone and is regulated and licensed
by the Dubai Financial Services Authority
(DFSA). ACLD holds a Category 3
Authorisation, enabling it to deal in
investments as agent, manage assets,
arrange credit or deals in investments
and advise on financial products or
credit. ACLD is also authorised to provide
fund administration services to any fund
established by the Abraaj group.
In its development of a world-class
corporate governance system, as in many
other cases, Abraaj has shown itself as a
best practice-inspired pioneer. We derive
enormous satisfaction from seeing the
numerous companies we own move to a
higher level of governance and profitability.
Moreover, it is very pleasing to see how
such success boosts national and regional
economies: acting as a catalyst for
development and employment; helping
to bring the Middle East into the global
economy and equipping the young
leaders of tomorrow. We believe our
corporate governance is of the highest
importance in our success, now – and
that it will continue to be so in the future.

Our Advisory Board
Sean Cleary Sir Paul Judge
Sean Cleary
Sean Cleary is Chairman of Strategic
Concepts, Managing Director of the
Centre for Advanced Governance and
Chairman of Atlantic Holdings. A former
South African diplomat and naval officer,
he is a member of the faculty of the
Parmenides Foundation and lectures
on global corporate strategy at leading
universities and business schools.
Mr Cleary is a research associate of the
South African Institute of International
Affairs, a Fellow of the World Economic
Forum and Strategic Adviser to the
executive chairman, a member of WEF’s
African Task Force and a senior adviser
to the Arab Business Council.
Sir Paul Judge
Sir Paul was a director with Cadbury
Schweppes plc where he led the buyout
of its food companies to form Premier
Brands Ltd. He was subsequently a
ministerial adviser at the UK Cabinet
Office and director general of the
Conservative Party.
He is currently Chairman of Teachers TV
and of Schroder Income Growth Fund
plc. Sir Paul also chairs the UK Marketing
Standards Setting Board, the Enterprise
Education Trust, Digital Links International
and the British-North American Committee
and is President of the Association of MBAs
and Deputy Chairman of the American
Management Association and of the Royal
Society of Arts.
Stephen Kobrin Professor Josh Lerner
Stephen Kobrin
Stephen Kobrin is the William H Wurster
Professor of Multinational Management
at the Wharton School of Business and
was the Director of the Lauder Institute
of Management and International
Studies from 1994 to 2000.
His recent professional awards include
selection as a Fellow of the Academy
of International Business Professional
Leadership from 2001 to 2005
and President of the Academy of
International Business from 2001
to 2002. He has been a Fellow of the
World Economic Forum since 1995.
Professor Josh Lerner
Josh Lerner is the Jacob H. Schiff
Professor of Investment Banking at
Harvard Business School, with a joint
appointment in the Finance and the
Entrepreneurial Management Units.
Much of his research focuses on the
structure and role of venture capital
and private equity organisations. (This
research is collected in The Venture
Capital Cycle and The Money of
Invention.) He also examines the impact
of intellectual property protection,
particularly patents, on the competitive
strategies of firms in high-technology
industries, as addressed in his new book
Innovation and its Discontents. In the
mid-1990s, Prof Lerner introduced an
elective course for second-year MBAs
on private equity finance.
Our Year
Private Equity
José María Figueres
José María Figueres
José María Figueres was President of
Costa Rica from 1994 -1998, creating
a sustainable development strategy
combining strategic investment in
human development and innovative
environmental policies. Mr Figueres
helped create and lead the United
Empowering potential
Nations Information and Communication
Technologies Task Force (ICT). In 2000,
he joined the World Economic Forum,
ultimately serving as its first CEO. He is
currently CEO of Grupo Felipe IV, in Spain,
promoting development and democratic
values around the world. He recently
worked with former US Vice President Al
Gore on the Oscar-winning environmental
documentary, An Inconvenient Truth.
He holds an industrial engineering
degree from the US Military Academy
at West Point and a Masters in Public
Administration from the John F. Kennedy
Our investments
School of Government at Harvard.
THOUGHT LEADERSHIP
 Sustainable development
Abraaj aims to be among the top private equity firms in the
world in adopting and promoting sustainability management.
That is, in running our organisation in a way that meets
the needs of today’s generation without compromising
the ability of future generations to meet theirs.

Creating value for investors Abraaj also believes that sustainability-

Abraaj has a uniquely influential
position in the region. We can change
and evolve not only our own
business but, through our influence,
the businesses that we invest in.
In 2007, an assessment of sustainability
trends on Abraaj’s business strategy
highlighted the links between sustainability
and performance excellence. Subsequently,
we concluded that embedding sustainability
principles within Abraaj would help
maximise value from our investments,
reinforce the reputation and trustworthiness
of our brand and enhance our ability to
attract future funds. Going forward, we
will focus on eight priority areas:
We will play a thought leadership role
to encourage the widespread take-up
of sustainability management. By May
2008, we expect that at least four of our
portfolio companies will have committed
to adopting sustainability management.
To our knowledge they will be the first in
their sectors in the Arab world to adopt
sustainability. We will also continue to
integrate sustainability messaging into
all of our major forums.
Incorporating sustainability
into all investments
We will integrate sustainability
considerations in our investment decision-
making criteria. As well as reducing risk and
identifying new avenues for value creation,
there is the opportunity to attract the fast-
growing body of investors who support a
sustainable investment philosophy.
oriented innovation will be a major
catalyst for growth. We have the
opportunity to invest in companies that
will excel in a sustainability economy.
We will consider the merit of a focused
investment fund in a specific area of this
emerging sustainability economy.
Fostering good governance
We will be a leader in good governance,
setting an example for our portfolio
companies. In 2007 we made significant
governance strides in-house. We
introduced ‘The Abraaj Group’s Holistic
Compliance and Governance Framework’
which builds upon our existing code of
conduct and incorporates principles of
governance. In 2008 we will ensure that
sustainability issues are integrated into the
boardroom agenda for both Abraaj and our
majority-owned portfolio companies.

We have approached three majority- Improving accountability to stakeholders

owned portfolio companies – Egyptian
Fertilizers Company, GMMOS and JorAMCo
– to request that each undertake a
sustainability benchmarking and
assessment, followed by the establishment
of a sustainability strategy and a baseline
sustainability report. This work will take
place in 2008. If results are positive, we
will actively expand the adoption of
sustainability management across our
majority-owned portfolio companies.
We recognise that there are increasing
pressures on private equity to increase
accountability and transparency. In
addition to our own sustainability
reporting three of our portfolio
companies will issue sustainability
reports in the first half of 2008,
with others to follow later in 2008
and early 2009.

86| 87 abraaj Capital annual review 2007


Generating broad economic value
We create wide-reaching economic value
by strengthening the companies in which
we invest. As part of the sustainability
reporting efforts of our portfolio
companies, in 2008 they will begin
reporting on their economic impacts
following the suggested direct economic
Developing environmental sustainability
In 2007 we conducted a preliminary
assessment of our own environmental
impact and carbon footprint. We have
set a goal of a 15% reduction in 2008,
becoming carbon neutral by end of 2010.
In 2008 we will initiate paper recycling
and water conservation schemes as we
Our Year
Private Equity
Above left
Four members of the Abraaj investment team
completed a sponsored climb of Kenya’s Mount
Kilimanjaro to raise funds for children in Africa.
Above right
Richard Geary, Director of Family Education
Services, with members of the deaf community
who will benefit from a new school sponsored
by Abraaj in Hyderabad, Pakistan.

impact indicators of the Global Reporting
Initiative. This includes data such as
salaries paid, procurement, taxes paid
and investments in communities.
We will evaluate in 2008 whether a macro
indicator would aid stakeholder analysis
of our overall economic value creation.
Attracting, developing and retaining
the best people
Our success as a business is primarily
a product of the quality and talents of
our people. During the year we began
Empowering potential
move into our new offices.
Clearly, we can leverage our impact
by influencing the environmental
performance of our majority-owned
companies. We aim to have all of these
reducing real carbon emissions by 2010.
Community Partnership Programme (CPP)
We have a long-standing history of
supporting the communities in which
we operate. In 2007, we made significant
donations to charity, focusing our
investment on helping children through

Our investments
introducing systematic human resource social, educational and health initiatives.
management systems. We increased We also established guidelines for our
training and financial assistance and other majority-owned companies to invest
support for employees seeking specific a minimum of 1% pre-tax profit in
certifications. An online survey by a third community initiatives, in line with
party confirmed 98% of our employees international best practice.
were happy and proud to be working at
Abraaj. We want the employees of our
portfolio companies to feel the same
way. During 2008/2009 we will assess
the health, safety and human rights
performance of all majority-owned
portfolio companies, beginning with
any that may have a higher level of risk.
THOUGHT LEADERSHIP
 Sustainable development
Continued
The mandate of the CPP was developed
with the input of the entire Abraaj team
“Charitable and is funded by Abraaj and employee
contributions contributions. The CPP is run by an
independent, volunteer staff committee,
have been central representing various levels across the firm,
to Abraaj’s culture and is headed by an elected chairperson.
since it was first Committee members seek out
established. ” opportunities to fund the education,
medical care and social development of
children in the MENASA region as well
as assisting individual cases of need and
responding to natural disasters.
In 2007, donations were made to a wide
range of causes, including the Dubai Cares
initiative. The CPP supported holistic
educational improvement initiatives in
Egypt, India, Sri Lanka and Nepal, through
the international organisations Save the
Children and Room to Read. It also
sponsored individual scholarships for
young girls, who would otherwise have
abandoned their schooling due to
financial hardship, through the Dominic
Simpson Memorial Trust. In another
initiative, the CPP joined forces with
the Palestinian Children’s Relief Fund
to sponsor multiple medical missions,
focusing on open-heart surgery, cleft lip
and palate operations, and spinal health
treatment. The Programme also identified
a project with the Family Education Services
Foundation in Karachi to open a new
school for deaf education in Hyderabad.
88| 89 abraaj Capital annual review 2007
In Dubai, computer equipment was
donated to Al Manzil, a non-profit centre
for individuals with special needs, and
a children’s physiotherapy machine and
pediatric wheelchair were presented to
Al Noor, a centre for children with special
needs run under the auspices of the
Dubai Ministry of Social Affairs.
In addition to the CPP’s work with
regional and international charities,
it has helped individuals facing urgent
healthcare needs. Donations have ranged
from life-saving operations and simple
medicines to funds for life-enhancing
equipment and therapies.
Charitable contributions have been central
to Abraaj’s culture since it was first
established. As the business continues
to grow, we are committed to expanding
our corporate responsibility programme
at the same meteoric rate.
For more comprehensive coverage of
our sustainability performance, please
see our 2007 Sustainability Summary,
downloadable at www.abraaj.com.

Connecting with
our stakeholders
Transparent and open communication
is at the heart of all our relationships.
Effective communication is
fundamental to the way we
operate. It is at the heart of
our close relationships with our
investors, portfolio companies,
governments, the media and all
the stakeholders that form part
of our world. Our Limited Partners
are at the core of this universe;
we stay in regular contact, always
seeking to provide value to their
objectives. Transparency, openness
and dedication underpin all our
relationships, as we believe that
the more private equity and our
firm are understood, the greater
the value we can deliver to our
Limited Partners.
Abraaj wants to stay ahead of the curve
in increasing transparency in our industry.
We believe open communication
encourages understanding of our growing
industry, raises regulatory standards and,
critically, satisfies global best practice
trends. In our communication with
investors, we voluntarily abide by the
European Venture Capital Association’s
reporting guidelines. By linking our firm
with innovative thinking and best practice,
our communication strategy has also
established Abraaj as thought leaders
in our region and beyond.
Our corporate communications
department, which was established
over two years ago, is responsible for
implementing our communications
strategy. But every employee at Abraaj
has a role to play.
Each of our Limited Partners receives
quarterly reports (as per EVCA Guidelines)
to keep them up to date with the progress
of our portfolio of investments, the fund
performance and deals in the pipeline.
Audited financial and internal due diligence
documents are also always available to
our Limited Partners on request. Detailed
information on our investments, exits
and portfolio companies are sent out on
a real-time basis, ensuring that investors
are informed of any developments ahead
of the wider world. We use technology to
its fullest extent, giving investors secure
online access to investments and providing
potential investors with virtual data rooms
which contain all our due diligence and
valuation methodologies to transactions.
Our Year
Private Equity
Stakeholders benefit from our regular
newsletter Engineering Success, which
is a platform for updates on our work,
developments within the firm and our views
on interesting sectors of growth. We also
hold an Annual Investors’ Conference, to
which we invite all those that we touch
and work with in one way or the other. This
Empowering potential
annual event gathers a powerful network
of decision makers from the MENASA
region, which forms the foundation of our
stakeholders. In-depth information sessions
on our funds, investments and corporate
strategy allow our investors to meet face-
to-face with portfolio company CEOs,
financial services executives, government
leaders and the entire Abraaj team. Panel
discussions take place with regional industry
leaders about critical developments in our
region that may impact our business or that
of our Limited Partners. Plenty of time is set
aside for questions, bilateral meetings and
Our investments
networking, allowing a new investor to feel
rapidly part of the Abraaj community.
THOUGHT LEADERSHIP
 Connecting with our stakeholders
Continued
“We believe that the
breadth and depth
of the information
we offer provides a
valuable window on
Abraaj, our region
and our industry.”
90| 91 abraaj Capital annual review 2007
Our website demonstrates that our
commitment to communication extends
beyond regional or industry groups. We
freely offer an unrivalled amount of
information on Abraaj and our industry:
speeches, presentations and research are
all available and constantly updated.
Issues covered range from the investment
opportunities in Jordan to China-Middle
East economic relations.
Visitors from all parts of the world can
also find out about what funds we offer,
what our current investments are (and
what we plan to do with them) and what
our track record demonstrates about our
expertise and abilities. Our performance,
both in the past and in the present, is
also openly shown – though we do, of
course, take confidentiality very seriously.
Client identities and investment in the
funds are kept confidential, as are co-
investors in the portfolio companies.
We believe that the breadth and depth
of the information we offer provides a
valuable window on Abraaj, our region
and our industry.
Investor relations and
business development
Traditionally, our investor base comprised
leading family groups, pension funds,
financial institutions and high net worth
individuals from the MENASA region.
During 2007 this has been augmented to
include large institutional investors from
Asia, Europe and North America, due to
the increasing global appetite for exposure
to our region.
Our investor coverage team drives our
investor relations efforts, although every
Abraaj employee has a responsibility
to be accessible to our investors. We
fundamentally believe that our Limited
Partners are much more than a source of
capital for our funds; we seek to establish
long term, value added partnerships with
every investor. They represent our best
ambassadors in their countries and
networks, and their understanding of
what we do, how we do it and what we
look for is a critical factor behind our
success. In addition, due to the unique
social and economic fabric of our region,
Limited Partners represent a formidable
source of regional insight; access routes
to highest-level government officials
and, ultimately, deal flow.
Throughout 2007, the investor coverage
team paid regular visits to investors,
introducing them to senior members
of our investment teams, explaining
our recent acquisitions and deals in
the pipeline, offering co-investment
opportunities and discussing ways in
which to strengthen relationships.

An important investment of time was
also made by our business development
team throughout the year to introduce
the MENASA region and our track record
to 200 international fund managers,
pension funds and financial institutions
in Asia, North America and Europe, kick-
starting new relationships that will
flourish over the years to come.
In 2007 the business development team
also led in depth industry trips to Turkey,
Algeria, Nigeria and Azerbaijan, meeting
key business and government leaders.
Another innovation launched in 2007
was a monthly Abraaj Private Equity
Forum, gathering together decision
makers in MENASA from all walks of
life, such as lawyers, diplomats, real
estate developers, industrialists and the
media, because they are stakeholders in
our success, and continuing to broaden
the understanding of the industry in
our region.
Each Forum gathers 50 participants
from the MENASA region for a focused
information session. The informal
atmosphere we create allows us to
present effectively the case for private
equity in our region and to demystify
the asset class on many occasions.
We also share and discuss forthcoming
business opportunities we see in our
region and, in some instances, ask our
portfolio companies to speak about their
strategic objectives and challenges.
Our Year
Private Equity
“we fundamentally believe that our
limited partners are much more
than a source of capital for our
funds; we seek to establish long
term, value added partnerships
Empowering potential
with every investor.”
The Forums are proving to be extremely
useful, allowing the business development
and investor coverage teams to establish
new relationships and gain new insights
on developments in our vast region. We
also invite a diverse group of speakers
which has included global warming expert
José María Figueres, former President
of Costa Rica; Dr Nasser Saidi, Chief
Economist of the Dubai International
Finance Centre, Harvard Business School
Our investments
Professor Josh Lerner, Mark Gallagher,
Formula 1 expert and team building
coach, and Robin Sharma, author of the
bestselling spiritual awakening novel
The Monk Who Sold His Ferrari.
THOUGHT LEADERSHIP
 Our people
Our exceptional team is the key to our success.
Private equity, as we see it, is a people business.
It is our people who interact with
the region’s leadership, who find the
deals and who partner with senior
management of our portfolio
companies to take them to the next
level. It is thanks to our collective
efforts that we are able to provide
our Limited Partners with risk-
adjusted returns well above global
industry benchmarks.
In 2007, our team continued to grow,
rising from 96 to 135. We sourced our
new colleagues from a global pool of
talent, cherry-picking the best and
brightest to work alongside our existing
team. As our reputation grows and as the
region continues to develop, increasingly
we are finding that people are seeking us
out ahead of other, longer-established
names in the West. We have thus been
able to create an international success
story, blending long-serving team players
with knowledge and contacts in our region
and fresh thinkers with the appetite to
shape our company’s future.
Our diversity is one of our key features:
25% of our people are Arab, but we have
27 nationalities represented on our staff.
Among us we speak 16 languages including
all those most relevant to regional business
relationships. This wide range is a valuable
asset; it gives us a deep pool of contacts,
cultures, opinions and experience.
92| 93 abraaj Capital annual review 2007
Our team members have degrees from
educational establishments such as the
London School of Economics, Harvard
and the Sorbonne. They have worked for
major blue chip companies – Citigroup,
EFG-Hermes, Goldman Sachs, Coca-Cola
and McKinsey – and learnt their trade
in the Middle East, Hong Kong,
New York and London.
The representative quality of our people
was demonstrated last year when Mustafa
Abdel-Wadood, Chief Executive Officer of
Abraaj Investment Management Limited
was named a Young Global Leader by the
World Economic Forum. He joins a
prestigious group of 416 exceptional
individuals from 90 countries. A number of
our team have published works on private
equity. Executive Director Tom Speechley
has written various pieces for industry
publications on infrastructure investment
and private equity in the GCC, including
a practitioner’s guide to acquisition
finance. Tom was recently named as one
of ‘40 rainmakers’ in the UK by Legal
Business magazine. Vice President Saqib
Rashid was a founding member of the
Wharton Private Equity Review publication
and received a US Fulbright Scholarship to
study the Egyptian private equity industry.
However, our success comes not only from
individual experience, but also from inspired
teamwork. Our executive directors have
a long history of working together on
some of the most successful leveraged
acquisitions in the region, both before
and after the founding of Abraaj in 2002.
These have included deals such as the
leveraged buyout of Inchcape’s Middle East
businesses; the de-listing from NASDAQ of
Aramex International (and its subsequent
IPO on the Dubai Financial Market); and
the US$1.41 billion buyout of Egyptian
Fertilizers Company. We are committed to
developing our people: to stretching them
professionally and empowering them to
build on their existing skills and talents.
Our company is a meritocracy. We like
to delegate authority, giving our people
responsibility early; but we also provide
support with best practice performance
reviews (this year has seen the introduction
of 360-degree reviews, with feedback from
colleagues both above and below) and
informal feedback on their work. Clear
reporting lines are in place, so our staff
know where senior responsibility lies.

In terms of training and self-development,
Abraaj has strong academic links. We
offer general management and leadership
training via partnerships with the London
School of Economics, Harvard University
and the IMD business school in Switzerland.
Our investment analysts are provided with
regular updates and courses on the latest
valuation tools and techniques. We also
hold regular workshops and sessions
reserved for our employees with various
authoritative experts such as this year’s
presentations by IMD Professor Peter
Killing on ‘Must Win Battles’, global
warming expert and former President of
Costa Rica, José María Figueres, Silicon
Valley computer security guru, cyber
terrorism expert and bestselling author,
Ankit Fadia, and virtuoso violinist Miha
Pogacnik who has pioneered a unique
business development methodology,
bringing music to business to
enhance understanding.
Attracting talent means maintaining
world-class employment contracts. We set
compensation at a competitive level, with
benefits and packages to attract and retain
the best in class. There are also long-term
compensation incentives to help maintain
the quality of work over time. Incentive
schemes reward success directly, with
clear targets for teams to meet and clear
personal returns as a result.
Our Year
Private Equity
To maintain our reputation we are
committed to personal and professional
integrity. Avoiding conflicts of interest “In 2007, our team
and sticking to the highest ethical continued to grow,
standards is extremely important.
(For further details, see the corporate
rising from 96 to
governance section of this review.) 135. We sourced
our new colleagues
Empowering potential
In 2007, we continued to develop our from a global
organisation to ensure that we have the
right structure and processes to support
pool of talent.”
our growing business. As part of this, we
have created centres of expertise within
the firm, organised along nine sectors,
five regions and 18 functions. We
also created three investment teams
integrating portfolio managers and
investment professionals, giving each
team the resources for the entire
deal cycle – seeing it through from
origination to exit. This innovative
approach gives us greater synergies
Our investments
and speed of execution; the teams
are flexible and agile, but also able
to develop both depth and breadth
of understanding of any sector.
The focus of our investment
teams, alongside our deep regional
understanding, helps explain why we
have been so successful in sourcing
a long line of proprietary deals ahead
of our competitors.
With outstanding employees and
experience, constantly developing skills
and innovative investment structures,
THOUGHT LEADERSHIP
we have the right human resources
formula in place to continue grow.
 Management team
Executive Directors

Syed Farrukh Abbas Sari Maher Anabtawi Yaser Gamali Tabish Gauhar
Chief Executive Officer Abraaj
Investor Coverage Limited

Jonathan Hall Omar Lodhi Arif Masood Naqvi Frederic Sicre

Vice Chairman and
Group Chief Executive Officer

Waqar Siddique Tom Speechley Mustafa Abdel-Wadood ­ Selcuk Yorgancioglu

Chief Executive Officer Abraaj Managing Director Abraaj Capital
Managers Limited Chief Executive Officer Abraaj
Investment Management Limited

94| 95 abraaj Capital annual review 2007

 Our Year
Senior Vice Presidents

Private Equity
Zulfiqar Ali Achmed A Al-Shahrabani David Donaldson Sameh Hassan Teegan Lindsay

Empowering potential
Marwan Lutfi Hilton McCann Brett Morris Talat Naseer Marc Philippe

Our investments
Nadir Qureshi Narayanan Rajagopalan Purshotam Ramchandani Mohamed Semary
THOUGHT LEADERSHIP

Abdullah Shahin Adnan H Siddiqui Omar Syed Michael Wright

 Our shareholders
Alongside Abraaj Capital’s management, our
shareholders include prominent institutions, business
groups, leading entrepreneurs and business people.

Our shareholders include:

Nasser Bin Khalid & Sons Al Qudra Holdings P.J.S.C.

Holdings Company
Zabeel Investments
Al Jaber Energy Services LLC
Mashreqbank
GIBCA Limited
General Retirement and
Sheikh Abdulrahman Ali Al Turki Pension Authority

Hamid D Jafar Hussain Jasim Al Nowais

Arif M Naqvi Emirates Bank International PJSC

Deutsche Bank Abraaj Capital Co-Investor Limited*

AG London Branch
Citicorp International
DIFC Investments LLC FInance Corporation

Wafra International Sanabria Holdings Inc

Investment Company
Abdul Aziz Abdulla Al Ghurair

* This company is a holding vehicle for equity interests of

37 Limited partners who invest actively through Abraaj funds.

96 abraaj Capital annual review 2007