Booz & Company

Abu Dhabi, October, 2011

Market Overview

A Decade of Opportunity

The Coming Expansion of the Private School Market in the GCC

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

The GCC private school market today has 1.4M students, projected to grow to 2.6M students by 2020
2010 GCC K-12 Private School Enrollment
(000s, Nationals and Expatriates) Total = 1.4M

Projected 2020 GCC K-12 Private School Enrollment

(000s, Nationals and Expatriates) Total = 2.6M

Qatar Abu Dhabi Qatar Abu Dhabi 76 177 (6%) (13%) 725 (53%) 255 Kuwait (10%) 1,680 (64%) Saudi Arabia 290 (11%) Dubai 271 (10%) 120 (5%) Saudi Arabia

191 Dubai (14%) 198 (14%) Kuwait

Source: Booz & Company analysis

Booz & Company 10/28/2011 20111024-BFE Presentation for CNM v12CNM.ppt

The GCC private school markets tuition spend is currently US$5.2 billion, projected to grow to US $16.8 billion by 2020
2010 GCC Private School Tuition Spend
(US $M) Total = US $5.2B

Projected 2020 GCC Private School Tuition Spend

(US $M) Total = US $16.8B

Qatar Qatar Abu Dhabi 433 550 (8%) (11%) Saudi Arabia 2,241 (43%) Abu Dhabi 1,610 (10%) 1,210 (7%)

843 Dubai (16%) 1,109 (21%) Kuwait

Dubai 2,143 (13%) 9,280 (55%) 2,562 (15%) Kuwait Saudi Arabia

Source: Booz & Company analysis

Booz & Company 10/28/2011 20111024-BFE Presentation for CNM v12CNM.ppt

Population growth, higher national enrollment rates, and shifts to higher fee segments will drive the markets growth
US$ B
20 15

ILLUSTRATIVE

GCC Private School Market Growth

16.8 2.7 12.5% CAGR 4.8 2.4 1.7 6.5
K-12 Population Private School Enrollment Rate Shift to HigherFee Segments Inflation 2020
Expatriates

10.3
Nationals

10 5 0

5.2 2.4 2.8

2010

Market Growth Drivers

K-12 Population Natural population growth amongst Nationals Private School Enrollment Rate Increasing share of total enrollment going to private schools due to regulatory and policy shifts in key markets Inflation Tuition fee increases due to economic growth and resourcing pressures

Shift to Higher Fee Segments Migration of Nationals from public and low-fee private schools to higher-fee private schools Increased share of knowledge economy expatriates seeking highly-resourced schools
Source: Booz & Company analysis
Booz & Company 10/28/2011 20111024-BFE Presentation for CNM v12CNM.ppt

The GCC private school landscape is not homogeneous - there is a wide variety of curricula and tuition fees
GCC Private School Landscape
(Segment by Curricula, Tuition Fee Level)

Abu Dhabi Market Overview

(Enrollment by Segment)

7.9%

Top Range Tuition Fee Range

1.8%

30.4%

1.3%

25.9%
Mid Range

10.1%

22.6%

Dubai Market Overview

(School Distribution by Segment)

30.5%

0.8%

Low-Fee

0.8%
MoE Western Curricula Asian

28.2 %

2.3%

10.7%

9.9%

16.8%

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 $ 8.1K Source: Booz &Company/YouGov Siraj survey, Booz & Company analysis
Booz & Company 10/28/2011 20111024-BFE Presentation for CNM v12CNM.ppt

Individual markets are at varying stages of maturity

ILLUSTRATIVE

GCC Private School Market Life Cycle

USA Australia

Dubai

AD

Qatar Kuwait KSA

Factor Demand Supply Regulations

Introduction Low demand Fragmented supply Emerging regulatory system

Growth Rapid demand growth Products maturing, networks evolving Evolving regulatory system

Maturity Stable demand Differentiation of products Mature regulatory system

Source: Booz & Company analysis

Booz & Company 10/28/2011 20111024-BFE Presentation for CNM v12CNM.ppt

GCC governments have taken several significant steps to support the private school market in recent years
NON-EXHAUSTIVE

Private School Market Support from GCC Governments

Market Market Support Developments

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 Regulation enabling Nationals to attend international schools Financing support for new schools Support for national teacher salaries Business development promotion Licensing process development Land provision Direct equity investment in private school market Provision of inspection information

Saudi Arabia

UAE (Abu Dhabi)

UAE (Dubai)
Source: Booz & Company analysis, relevant ministries
Booz & Company 10/28/2011 20111024-BFE Presentation for CNM v12CNM.ppt

The emergence of school networks within the GCC Private School market highlights two distinct geography-based operator strategies
NON-EXHAUSTIVE

GCC Private School Networks

(by Market Scope and Geography)

Saudi Arabia
Maarif Al Rowad

Geography

UAE
GEMS

Universal Future Education

ENS

ALDAR

Taaleem

Kuwait
SAMA IPE

Qatar

SABIS

Newton

Pan-Regional
Pan-Regional Operators Source: Booz & Company analysis
Booz & Company 10/28/2011 20111024-BFE Presentation for CNM v12CNM.ppt

Local Players National Curricula

Local Players International Curricula

Single-Geography Operators

Market Scope 7

GCC Parents are clear in what they want from private schools
Most Critical School Attributes
(August 2011 Parental Survey, n = 1,016)

Quality Teachers
(90%)

Curriculum
(81%)

Reputation
(81%)

Environment for Children

(80%)

Preservation of Culture
(74%)

Value for Money

(70%)

Note: Attributes rated as Very Important by 70% or more of respondents Source: Booz &Company/YouGov Siraj survey, Booz & Company analysis
Booz & Company 10/28/2011 20111024-BFE Presentation for CNM v12CNM.ppt

GCC National Parents demonstrate a clear preference for single-gender education and specific curricula
GCC National School Gender Preference
(August 2011 Parental Survey)
Current Considered

GCC National School Curricula Preference

(August 2011 Parental Survey)
Current Preferred

Single Gender

54%

65%

Arabic/Govt

56%

41%

Mixed Gender /Separate Classrooms

Western 26% 26% Indian 1%

36%

52%

1%

Mixed Gender 12%

8% Other 2% 2%

No Reply 9%

4%

No Reply

6%

4%

Note: Answers to Questions 6B, 6C, 12, and 13 from Booz&Company/YouGov Siraj survey; sample size = 555 Source: Booz &Company/YouGov Siraj survey, Booz & Company analysis
Booz & Company 10/28/2011 20111024-BFE Presentation for CNM v12CNM.ppt

Significant obstacles must be overcome for the market to reach its full potential
GCC Private School Market Challenges Human Capital Shortage of Qualified Teachers National teachers preference for Government schools limits teacher supply Competition for talented expatriate teachers limits qualityInsertincreases cost and Text Here Lack of Scale and Professional Management Fragmented markets impede scale necessary for efficiencies Sole operators often lack management capabilities
Source: Booz & Company analysis
Booz & Company 10/28/2011 20111024-BFE Presentation for CNM v12CNM.ppt

Inputs Difficult Access to Land Land prices in freehold markets reduce investment return Land process is often timely and complex in non-freehold markets Difficult Financing Environment Lending practices impede operator ability to secure leverage necessary to finance capital expenditures Lack of debt financing increases cost of capital

Regulatory Environment Opaque Regulations Unclear regulatory environment and inconsistent application of regulations in some jurisdictions chills investor appetite

Lack of Market Data Lack of accurate market data increases investors risk Lack of information concerning school quality hampers parental choice

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The GCC Private School market can realize its full potential If stakeholders work together
GCC Private School Market Recommendations Professionalize Management Institute best practice management structures and procedures Identify strategic model and align offerings Consolidate Market Market roll-up to consolidate existing players to realize efficiencies Consolidate multiple small schools into larger single schools to achieve necessary scale Provide Access to Land Provide clarity surrounding property ownership requirements and zoning Coordinate with urban planning agencies to ensure sufficient quantity, location, and size of land plots Engage Regulators Proactively engage regulators to directly communicate needs and challenges

Investors & Operators

Increase Regulatory and Market Transparency Engage potential investors to promote market opportunities and address regulatory uncertainties Increase market information available to parents

Facilitate Capital Access Work with financial institutions to increase debt capital available to investors Consider direct intervention if market unable to provide sufficient capital

Government

Source: Booz & Company analysis

Booz & Company 10/28/2011 20111024-BFE Presentation for CNM v12CNM.ppt

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