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Dubai Financial Market

Dubai Financial Market. International Investor Conference. London 2008. Table of Contents. Introduction DFM: Market Highlights DFM: Company Highlights. Recent oil boom has helped GCC economies achieve compelling GDP growth rates, creating a pool of liquidity in excess of USD 3 T.

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Dubai Financial Market

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  1. Dubai Financial Market International Investor Conference London 2008

  2. Table of Contents • Introduction • DFM: Market Highlights • DFM: Company Highlights

  3. Recent oil boom has helped GCC economies achieve compelling GDP growth rates, creating a pool of liquidity in excess of USD 3 T Regional Strengths GCC Nominal GDP (USD Billion) • Strong growth potential supported by high oil prices • Large regional GDP size with relatively high per capita income • Access to a pool of liquidity of US$ 3 trillion • High financing requirements to support investment needs • The region is under-going structural transformation CAGR 16.6%

  4. Differently from other GCC countries, Dubai has a well-diversified economy that experienced 21% annual growth from 2001 to 2006 Dubai Nominal GDP (USD Billion) Dubai 2006 GDP Breakdown (%) Oil&Gas Sector as a % of GDP CAGR 20.6%

  5. Financial services is expected to be a major contributor to the Dubai future growth story Globally fast growing industrieswith strong Dubai position Financial services Tourism Trade Oil and gas Globally fastergrowing sectors Professionalservices Communication Transportation and storage Manufacturing Future globalgrowth 2005– 2015 (%pa) Average globalGDP growth Construction Electricity/Water Globally slowergrowing sectors Agriculture Governmentservices Very weak Average Strong Dubai’s strength by international standards $ 3B DubaisectorialGDP 2005 Sectors qualified to be part of futuregrowth path Source: Dubai 2015 Plan

  6. Dubai aims to become a regional hub of capital market activity and play an active role in regional and international consolidation… Dubai Capital Market Strategy Vision • Leading emerging markets exchange • Regional hub of capital market activity • Active player in regional and international consolidation • Connector of liquidity pool Portfolio Strategy • Pursue attractive regional harmonization and integration opportunities and line-up based on strategic fit • Expand footprint in terms of geography and capabilities Business Strategy • Prioritize cash equity market development • Focus on attracting Institutional investors and become member of major global and/or emerging market indices • Enhance awareness and increase access for regional retail investors and, in long term, pursue regional and local institutional investors

  7. … which has been a trend over the past years moving from mature markets towards emerging economies Consolidation in mature markets Growth in emerging markets (CAGR 06-08E) Madrid SE Valencia SE Barcelona SE Bilbao SE Iceland SE Copenhagen SE Vilnius SE Stockholm SE Helsinki HEX Boston SE NASDAQ Strike Brut Island Instinet BVLP LIFFE Brussels SE Amsterdam SE Bourse de Paris NYSE PCX Arc Redibook GlobeNet Borsa Italiana London SE Deutsche Börse SWX Group Bolsas y Mercados Españoles NASDAQ-OMX Euronext NYSE Euronext Kuwait 7.3% India 8.6% UAE 8.6% Turkey 5.8% Pakistan 6.4% Kazakhstan 9.6% Egypt 7.0% Libya 5.5% Saudi Arabia 4.6% London Stock Exchange Jordan 5.9% Turkmenistan 8.0% 2000 2001 2002 2003 2004 2005 2006 2007 Source: Celent Report, The Economist Intelligence Unit

  8. Dubai Financial Market (DFM) is already one of the biggest exchanges in terms of market capitalization Market Capitalization By Exchange (in USD Billion) (March 31, 2008)

  9. Table of Contents • Introduction • DFM: Market Highlights • DFM: Company Highlights

  10. DFM DFM Index has outperformed other GCC indices DFM General Index Performance GCC Indices Performance Comparison (Base 1000) -44% +44% +195% MSM KSE ADSM TSE +152% DSM BSE

  11. DFM was the best performer in GCC even in terms of total trading volume, due to the substantial growth in 2007… Trading Value (USD Billion) Trading Volume (2007, Billion Shares) Trading Volume (B Shares) 8.6 23.2 20.6 52.9 26.3 Average Daily Trade (USD Million) Daily Trading Volume (M Shares) 138 358 312 896 432

  12. … which is testament that DFM is a highly liquid exchange DFM Traded Value and Listings Market Cap (USD billion) Comments • DFM is a highly liquid exchange as is supported by its high turnover velocity figures • Turnover velocity ratio was at its highest in 2006 during the market correction • Turnover velocity in 2007 was impacted by • Reducing the number of trading days per week from 6 to 5 days • Low trading volume earlier in the year DFM Turnover Velocity* (%) * Turnover velocity is defined as the ratio of Annual Traded Value to Market Cap

  13. Real Estate and Financial Services are the key sectors in terms of trading value – Institutions are increasing their trading activities Trading Activity By Sector (%, Q1 2008) Trading Activities By Category (%)

  14. The share of Non-UAE and Non-GCC investors has strongly increased over the past years Trading Activities By Nationality (%) Trading Activities By Nationality (%) 36% 31% 30% 22% 11%

  15. The number of Non-UAE investors has increased to 190k in Q1 2008, representing 30% of the total Number of Investors By Nationality (‘000) Comments 630 627 • Number of investors has strongly increased from 126k in 2003 to 627k in 2007 (50% 2003-2007 CAGR) • The share of Non-UAE investors has reached 190k by Q1 2008, 30% of total investors • GCC investors represents 50% of Non-UAE ones 533 UAE 297 155 Others 126 GCC 30% Other Arabs Non-UAE

  16. Foreign ownership is increasing, mainly due to greater involvement of international institutions(1) Foreign Ownership Development By Nationality(2) ($ Billion) Foreign Ownership By Category (%) 15.1 13.0 10.7 6.9 1.8 4.8% 10.4% 9.9% 13.1% 12.6% % of Total Market Cap Note (1): As can be observed from the combination of both graphs, the “Other” foreign investors are mostly international institutions Note (2): The term “GCC” under “Foreign” implies non-UAE GCC investors

  17. Potential Size of IPO Pipeline ~ 2,000 Total No of Listings: 56 No of employees < 100 101 - 500 501 -1,000 5,000+ (potential anchor issuers) < 1,001 – 5,000 Total DFM listings stood at 56 at the end of 2007 and the exchange is still facing a large untapped market Number of Listings on DFM No of Companies in UAE by Ownership and Size(1) 1,497 15 38 12 11 5 257 218 15 16 52 115 23 12 30 48 UAE Foreign Note (1): Estimated by number of employees

  18. Airline Semi-governmental Real estate Semi-governmental Natural resources Semi-governmental Properties, financial services, industrial goods Semi-governmental Construction Private Consumer, industrial goods, building and construction Private The following list is illustrative of some of the major IPOs in the pipeline Potential future issuance Sector Ownership Source: Market interviews, literature search

  19. Table of Contents • Introduction • DFM: Market Highlights • DFM: Company Highlights

  20. The Dubai Financial Market started its operations in 2000 and has established significant growth over a short period of time DFM Timeline Start-up Business Establish Footprint Growth 2000-2001 2002-2003 2004 2005 2006 2007 • DFM (Dubai Financial Market) began operations in March 2000 • Ten companies listed on DFM during first year of operations • DFM licensed by ESCA in October 2000 • First bond listing in July 2001 • In 2003 the number of investors exceeded 100,000 • DFM foreign investment traded value recorded a YOY growth level of above 70% • DIFC (Dubai International Financial Center) opened in September 2004 • DFM listings market cap exceeded USD 100 Billion • DFM number of employees exceeded 100 • DIFX (Dubai International Financial Exchange) was opened in September 2005 • 20% of DFM’s shares were offered for sale to the public through an IPO in November 2006 • DFM listing in March 2007 • Borse Dubai, the holding company for DFM and DIFX, was created on 6 August, 2007, located in DIFC Key Facts and Figures

  21. DFM is regulated by the Securities and Commodities Authority… UAE Capital Market Structure Securities & Commodities Authority Dubai Financial Market Abu Dhabi Securities Exchange Dubai Gold and Commodities Exchange

  22. Public Borse Dubai 80% 19.99% 20% DFM NASDAQ-OMX LSE 20% 66.7% 33.3% NASDAQ-DIFX … and is 80% owned by Borse Dubai, the Exchange holding company DFM Shareholder Structure Comments • Borse Dubai in turn has 3 shareholders, mainly • ICD (International Corporation of Dubai): 60% • DIFCI (Dubai International Financial Center Investments): 20% • DFG (Dubai Financial Group): 20%

  23. UAE nationals and retail customers are the main shareholders of the 20% public stake in DFM 20% Public Ownership Breakdown by Category (%, Q1 2008) DFM Ownership (%, Q1 2008) Institutions 34% Retail 66% 20% Public Ownership Breakdown by Nationality (%, Q1 2008) Others 28% GCC 2% UAE 66% Arabs 4% Non-UAE=34%

  24. DFM is focusing on 4 key pillars to achieve its targets DFM Key Pillars Offer All Products Specific Segments Focus on Trade and Post-Trade Strong Governance 1 2 3 4 • Investors • Foreign institutional • Local retail • Hybrid trading mechanism • Adherence to G30 guidelines and best practices • Develop CSD value added products • Best practice SRO capabilities • Robust risk controls, especially in CSD operations Equity • Issuers/Listings • UAE • Large and mid-cap • Government-owned Other Products • Diversification of products and services • Bonds/ Sukuks • Derivatives • ETFs • Data Services • Technology

  25. Over the past years DFM has developed strong operational capabilities DFM Operational Capabilities Trading system • Continuous, order-driven, fully automated trading system • Tight coupling with depository system, enabling validation of sell orders against depository inventory prior to trading • Transparent, automated and cost-effective information dissemination • Upgrading to a high performance OMX X-Stream system Clearing, settlement and depository • T+2 rolling settlement with multilateral netting • Same-day turnarounds (back-to-back transactions) • Corporate actions (cash dividends, stock splits, bonus issues, etc.) • Undertaking an operational review to ensure compliance with G30 recommendations Risk management • Trades once executed are final and irrevocable • Trading limits for market participants commensurate with posted collateral • Immediate suspension of trading for defaulting brokers • Established business continuity and contingency plans

  26. Compelling advantages are offered to international investors Description Accessibility • DFM is open to all international investors Existing international investment • Significant existing investment presence by regional, international firms on DFM Taxation • No capital gains tax Repatriation of capital • No restrictions on repatriation of capital Exchange Rate • Exchange rate pegged to US Dollar Foreign ownership • Foreign ownership allowed for most actively traded companies Regulation • One of the strongest regulatory frameworks in the Middle East and North Africa; with continued progress Dubai vision • Dubai government commitment to growing capital markets as part of strategic growth plans

  27. In particular, regulatory developments should further attract international investors DFM Regulatory Developments 2007 - 2008 ( completed ) 2008 (expected) Federal Regulatory Developments • Companies Law • Reduction of minimum floatation from 55% to 30% for family business. • Capital Markets Regulations • - Allowing GCC citizens to be treated as UAE national. • Companies Law • - New rules being added • Corporate Governance Guidelines • All listed companies should implement the guidelines by April 2010. • Capital Adequacy • Custodians – drafted • Margin Trading – Brokers training phase • ETF - drafted ESCA Regulatory Developments

  28. Table of Contents • Introduction • DFM: Market Highlights • DFM: Company Highlights • Financials

  29. DFM is a highly profitable exchange where total profits constitute around 90% of total revenues DFM Revenue and Profits (USD millions) Comments Does not include IPO profits of USD 126 Million • High profit margin is reflective of the scalability business of the exchange • 2006 revenue dip reflects a reduction in commission charges by 30% • 2003-2004 revenue figures reflect the startup phase of the exchange • In 2007 IPO revenue of $126 million was realized rendering profits greater than revenues 350.6 307.0 231.8 94.9 45.5 5.4 Profit Margin (%) -30% 88% 97% 93% 85% 89% EBITDA Margin (%) 22% 90% 97% 94% 93% 96%

  30. DFM revenues are driven primarily by trading, clearing, and increasingly by investment revenue Revenue Breakdown (%) Other CSD Revenue Comments Membership Investment Revenue • Trading and clearing constitute around 70%-80% of total revenue • More revenue coming from investments Clearing Fees Trading Fees Total Revenue (USD M) 232 306 95

  31. DFM share price increased by more than 500% since the IPO, and the company had a dividend payout ratio of 80% in 2007 DFM Share Price (AED) Comments • DFM’s market cap is $12.7 billion, 2007 P/E is 33x & 2008 is 24x • Share price increased substantially at the end of 2007 as the stock market recovered from the 2006 correction • DFM is one of the most liquid stocks on the exchange • 2006 EPS reflects a reduction in a commission charges • 2007 dividend payout ratio amounted to 80%(2) Listing date EPS(1) (USD) Note (1): EPS for 2007 excludes the one-off IPO proceeds Note (2): Excludes the one-off IPO proceeds Exchange rate: AED 3.67/$

  32. DFM Balance Sheet Exchange rate: AED 3.67/$

  33. DFM will move to a new fascinating building in Dubai Business Bay DFM: Design of the New Building • Dubai Government granted DFM a Land plot in the Business Bay in November 2007 • The land measuring 390,000 square feet was booked at $ 76mn (that time market value) • The plot oversees the Business Bay’s waterfront from three angles

  34. CONTACTS Dubai Financial Market Dubai - UAE • Phone +971 4 305 5555 • Fax +971 4 305 5566 • P.O.Box 9700 Dubai, UAE • Email helpdesk@dfm.ae • Web site: www.dfm.ae • Voice portal +971 4 312 8000 Contact Person : Mrs. Fahima Al Bastaki falbastaki@dfm.ae Mrs. Areej Al Saeed aalsaeed@dfm.ae

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