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Booz & Company This document is confidential and is intended solely for the use and information of the client to whom it is addressed. Abu Dhabi, October, 2011 Market Overview A Decade of Opportunity The Coming Expansion of the Private School Market in the GCC

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Booz & Company

This document is confidential and is intended solely forthe use and information of the client to whom it is addressed.

Abu Dhabi, October, 2011 Market Overview

A Decade of OpportunityThe Coming Expansion of the Private School Market in the GCC

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20111024-BFE Presentationfor CNM v12CNM.ppt

Booz & Company

The GCC private school market today has 1.4M students, projected

 to

grow to 2.6M students by 2020

10/28/2011

Source: Booz & Company analysis

2010 GCC K-12 Private School Enrollment(000’s, Nationals and Expatriates)

76(6%)

Qatar

177(13%)

Abu Dhabi

191(14%)

Dubai

198(14%)

Kuwait

725(53%)

Saudi Arabia

Total = 1.4M

Projected 2020 GCC K-12 Private School Enrollment(000’s, Nationals and Expatriates)

Total = 2.6M

120(5%)

Qatar

Dubai

Kuwait

Abu Dhabi

290(11%)

255(10%) 1,680

(64%)

Saudi Arabia

271(10%)

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20111024-BFE Presentationfor CNM v12CNM.ppt

Booz & Company

The GCC private school market’s tuition spend is currently US$5.2

billion, projected to grow to US $16.8 billion by 2020

10/28/2011

Source: Booz & Company analysis

1,210(7%)

Qatar

1,610(10%)

Abu Dhabi

2,143(13%)

Dubai

2,562(15%)

Kuwait

9,280(55%)

Saudi Arabia

Projected 2020 GCC Private School Tuition Spend(US $M)

Total = US $16.8B

433

(8%)

Qatar

550(11%)

Abu Dhabi

843(16%)Dubai

1,109(21%)

Kuwait

2,241(43%)

Saudi Arabia

2010 GCC Private School Tuition Spend(US $M)

Total = US $5.2B

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Population growth, higher national enrollment rates, and shifts to

higher fee segments will drive the market’s growthGCC Private School Market Growth

ILLUSTRATIVE

10/28/2011

Increasing share of total enrollment going to private schoolsdue to regulatory and policy shifts in key markets

12.5% CAGR

Expatriates

Nationals

Natural population growth amongst Nationals

K-12 Population Private School Enrollment Rate

Tuition fee increases due to economic growth andresourcing pressures

Inflation

Migration of Nationals from public and low-fee privateschools to higher-fee private schools

Increased share of knowledge economy expatriates

seeking highly-resourced schools

Shift to Higher Fee Segments

Market Growth Drivers

2.4

10.3

0

5

10

15

20

US$ B

2020

16.8

6.5

Inflation

2.7

Shift to Higher-

Fee Segments

4.8

Private School

Enrollment Rate

2.4

K-12 Population

1.7

2010

5.2

2.8

3

Source: Booz & Company analysis

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30.5%

The GCC private school landscape is not homogeneous -

 there is a wide

variety of curricula and tuition fees

10/28/2011

Note: Low-Fee schools offer tuition levels of <$US 3.2K; Mid Range schools offer fees of $US 3.2K- $US 8.1K; Top Range schools offer fee levels of >US $ 8.1KSource: Booz &Company/YouGov Siraj survey, Booz & Company analysis

GCC Private School Landscape(Segment by Curricula, Tuition Fee Level)

   T  u   i   t   i  o  n   F  e  e   R  a  n

  g  e

TopRange

MidRange

Low-Fee

MoE Western Asian

Curricula

7.9%

1.8% 30.4% 1.3%

25.9% 10.1% 22.6%

Abu Dhabi Market Overview(Enrollment by Segment)

Dubai Market Overview(School Distribution by Segment)

0.8%

0.8% 28.2 % 2.3%

10.7% 9.9% 16.8%

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Individual markets are at varying stages of maturity

10/28/20115

Factor

Source: Booz & Company analysis

GCC Private School Market Life Cycle

AD

USA

Australia

Kuwait

Qatar

Dubai

ILLUSTRATIVE

KSA

Introduction Growth Maturity

Low demand

Fragmented supply

Emerging regulatory system

Rapid demand growth

Products maturing, networks evolving

Evolving regulatory system

Stable demand

Differentiation of products

Mature regulatory system

Demand

Supply

Regulations

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GCC governments have taken several significant steps to support the

private school market in recent years

10/28/2011

Source: Booz & Company analysis, relevant ministries

NON-EXHAUSTIVE

6

UAE (Dubai)

Private School Market Support from GCC Governments

Direct equity investment in private school market Provision of inspection information

Kuwait Land provision for selected schools Free textbooks for selected schools

Qatar Voucher program for Qatari Nationals Free textbooks, stationery, health services, electricity and water

Saudi Arabia Regulation enabling Nationals to attend international schools Financing support for new schools Support for national teacher salaries

Market  Market Support Developments 

UAE (Abu Dhabi)

Business development promotion Licensing process development Land provision

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The emergence of school networks within the GCC Private School

market highlights two distinct geography-based operator strategies

10/28/2011

Source: Booz & Company analysis

GCC Private School Networks(by Market Scope and Geography)

SaudiArabia

UAE

Kuwait

   G  e  o  g  r  a  p

   h  y

Pan-RegionalLocal Players

National Curricula

Local Players

International Curricula

Market Scope

Qatar

NON-EXHAUSTIVE

GEMS

SABIS

Ma’arif Al Rowad

Taaleem

IPESAMA

ALDAR

Newton

ENSUniversal Future Education

7

Pan-Regional Operators Single-Geography Operators

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GCC Parents are clear in what they want from private schools

10/28/2011

Most Critical School Attributes(August 2011 Parental Survey, n = 1,016)

Note: Attributes rated as “Very Important” by 70% or more of respondentsSource: Booz &Company/YouGov Siraj survey, Booz & Company analysis

Quality Teachers(90%)

Curriculum(81%)

Reputation(81%)

1 2 3

Environment forChildren

(80%)

Preservation ofCulture

(74%)

Value for Money(70%)

4 5 6

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GCC National Parents demonstrate a clear preference for single-gender

education and specific curricula

10/28/2011

GCC National School Gender Preference(August 2011 Parental Survey)

Note: Answers to Questions 6B, 6C, 12, and 13 from Booz&Company/YouGov Siraj survey; sample size = 555Source: Booz &Company/YouGov Siraj survey, Booz & Company analysis

Current Considered

GCC National School Curricula Preference(August 2011 Parental Survey)

Current Preferred

4%

2%

52%

41%

1%

26%

12%

54%Single Gender

No Reply 9%

Mixed Gender

 /SeparateClassrooms

Mixed Gender

65%

26%

8%

4%

36%

Indian

2%

6%No Reply

Western

1%

Other

56%Arabic/Gov’t

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Significant obstacles must be overcome for the market to reach its full

potential

10/28/2011

GCC Private School Market Challenges

Source: Booz & Company analysis

Insert Text Here

National teachers preferencefor Government schools limitsteacher supply

Competition for talentedexpatriate teachers limitsquality and increases cost

Lack of Scale andProfessional Management

Fragmented markets impedescale necessary forefficiencies

Sole operators often lackmanagement capabilities

Shortage of QualifiedTeachers

Human Capital 

Difficult Access to Land

Difficult FinancingEnvironment

Lending practices impedeoperator ability to secureleverage necessary to financecapital expenditures

Lack of debt financing

increases cost of capital

Land prices in freeholdmarkets reduce investmentreturn

Land process is often timelyand complex in non-freeholdmarkets

Inputs 

Opaque Regulations

Lack of Market Data

Lack of accurate market dataincreases investors’ risk

Lack of informationconcerning school qualityhampers parental choice

Unclear regulatoryenvironment and inconsistentapplication of regulations in

some jurisdictions chillsinvestor appetite

Regulatory Environment 

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The GCC Private School market can realize its full potential –

 If

stakeholders work together

10/28/2011

GCC Private School Market Recommendations

Source: Booz & Company analysis

Proactively engage regulatorsto directly communicateneeds and challenges

Engage Regulators

Market roll-up to consolidateexisting players to realizeefficiencies

Consolidate multiple smallschools into larger single

schools to achieve necessaryscale

Consolidate Market

Institute best practicemanagement structures andprocedures

Identify strategic model andalign offerings

Professionalize Management

Investors &Operators

Government

Work with financialinstitutions to increase debtcapital available to investors

Consider direct intervention ifmarket unable to providesufficient capital

Facilitate Capital Access

Engage potential investors topromote market opportunitiesand address regulatoryuncertainties

Increase market informationavailable to parents

Increase Regulatory andMarket Transparency

Provide clarity surroundingproperty ownershiprequirements and zoning

Coordinate with urbanplanning agencies to ensuresufficient quantity, location,

and size of land plots

Provide Access to Land

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