Orascom Iannualreport2008

ANNUAL REPORT 2008

Overview

Operational review

01

06

34

CONSTRUCTION GROUP

01 2008 highlights 02 Letter to shareholders 04 The business

06 08 10 16 20 22 24 26 28 28 28

CONSTRUCTION

Summary of operations Orascom Construction BESIX Group Contrack International CONSTRUCTION MATERIALS

FERTILIZER GROUP

34 36 38 40 42 42 42

FERTILIZER

Summary of operations Egyptian Fertilizers Company Egypt Basic Industries Corporation Notore Chemical Industries Sorfert Algérie Gavilon

National Steel Fabrication Alico Egypt United Paints and Chemicals National Pipe Company SCIB Chemical

30 PROPERTY MANAGEMENT 32 Suez Industrial Development Company 33 Contrack FM

Orascom Construction Industries is a leading international construction contractor and fertilizer producer based in Cairo. We are one of Egypt’s largest corporations with projects and investments across North Africa, the Middle East and Europe. We aspire to be a company that our clients are proud to work with, our customers can rely on and our employees are proud to work for. A company committed to delivering quality work and products, safely and on schedule. A company with an open mind ready to embrace new opportunities and driven to deliver exceptional value.

Governance

Financial statements

Additional information

46

61

104

46 50 52 55

Board of Directors Report of the Directors Corporate governance Management’s discussion and analysis of financial condition and results of operations 60 Report of the Audi Committee of the Board of Directors

63 Auditor’s report 64 Director’s statement in respect of responsibility for financial reporting 65 Consolidated income statement 66 Consolidated balance sheet 68 Consolidated statement of changes in equity 70 Consolidated cash flow statement 71 Notes to the consolidated financial statements 100 Selected financial data

104 Management and corporate information Business segments and activities

2008 $

2007 $

2008 LE

2007 LE

Revenue

3,717.1

2,322.6

20,252.6

13,147.9

EBITDA Net income without discontinued cement operations Net income including discontinued cement operations Earnings per share Total assets Cash and cash equivalents Total debt Minority interest Shareholders' equity

881.1 719.8 985.0 3.5 7,823.1 1,503.5 2,077.3 41.2 3,155.5

422.8 212.1 11,662.8 0.9 17,127.0 706.5 2,107.3 189.2 13,139.8

4,800.5 3,921.8 5,366.7 18.9 43,025.5 8,268.7 11,424.7 226.7 17,354.7

2,393.4 1,200.4 66,020.9 5.1 94,952.0 3,917.0 11,682.6 1,048.8 72,847.0

Egyptian Pounds (LE) and US Dollars ($) figures in millions except per share data. Growth percentages calculated based on US Dollar figures. Amounts include discontinued operations.

• New construction awards totaled $5.5 billion (LE 29.8 billion), an increase of 14.4% over the same period last year. • Year end construction backlog totaled 6.9 billion (LE 37.7 billion). • Produced and sold 1.3 million tons of granular urea at an average price of $488 per ton. • Fertilizer group contributed to 50.2% of net income. ORASCOM CONSTRUCTION INDUSTRIES 1 ANNUAL REPORT 2008

Overview

LETTER TO SHAREHOLDERS

EBITDA $881.1 MILLION IN 2008 COMPARED WITH $349.8 MILLION IN 2007

881.1M AN INCREASE OF 151.1%

DEAR SHAREHOLDERS,

During 2008, the world experienced unprecedented swings in commodity prices and a global economic crisis of substantial proportions. Both of our business groups, construction and fertilizer, benefited from the wave of optimism during the first half of the year and weathered the economic storm during the second half. At year end, Orascom Construction Industries remains financially strong, with a healthy balance sheet, and more than $1.5 billion of cash, after paying record dividends and launching a share buyback program.

“WE START 2009 ARMED WITH A HIGH QUALITY

CONSTRUCTION BACKLOG NEAR ITS RECORD LEVEL, THE MOST COST-EFFICIENT FERTILIZER PRODUCTION PLANTS IN THE WORLD, AND A PIPELINE OF ORGANIC GROWTH PROJECTS UNDER EXECUTION WHICH DO NOT REQUIRE FURTHER EQUITY CONTRIBUTIONS OR DEBT FINANCING. WE WILL CONTINUE TO MONITOR OUR RECEIVABLES AND LIQUIDITY, REDUCE OUR PRODUCTION COSTS AND OVERHEADS, AND LOOK FOR EXCEPTIONAL INVESTMENT OPPORTUNITIES IN ORDER TO RESPONSIBLY DELIVER AND CREATE SHAREHOLDER VALUE.“

For the year, consolidated revenue from continuing operations was up 56.2% to $3.7 billion and consolidated EBITDA rose by 151.1% to $878.1 million. Our consolidated EBITDA margin was 23.6% and our construction group margin was 12.9% for the year. Net income from continuing operations increased 229.9% to $719.8 million. Net Income including the gain on sale of our stake in Sokhna Port Development Company was $985.0 million. Based on our results, the Board of Directors has approved an additional cash dividend of $1 per ordinary share ($2 per global depository receipt). CONSTRUCTION GROUP

During 2008, our construction group secured a record $5.5 billion in new orders and ended the year with a consolidated construction backlog of $6.9 billion, 31.7% higher than last year. Although we are active in 20 countries, 62% of our backlog was in Algeria, Qatar, and Abu Dhabi, with another 16% in Egypt. We continue to serve a diversified client base including regional sovereign clients which accounted for 60% of our backlog at year end. During the year, we handed over the Nagaa Hammadi barrage and hydro power plant after six years of work on site in partnership with Vinci from France and Bilfinger Berger from Germany. Work progressed on the El Tebbin, Sidi Krir, and

2 ORASCOM CONSTRUCTION INDUSTRIES ANNUAL REPORT 2008

REVENUE

CONSTRUCTION BACKLOG

NET INCOME

$3.7 BILLION IN 2008 COMPARED WITH $2.4 BILLION IN 2007

$6.9 BILLION AT 31 DECEMBER 2008 COMPARED WITH $4.7 BILLION IN 2007

$719.8 MILLION IN 2008 COMPARED WITH $218.2 MILLION IN 2007

3.7BN

6.9BN

AN INCREASE OF 56.2% OVER LAST YEAR

AN INCREASE OF 31.7% OVER THE SAME PERIOD LAST YEAR

Kuraymat power plants in Egypt and on the Terga power plant in Algeria. We completed hand over of a cement plant in Nigeria to Lafarge and look forward to completing work on their plants in Syria and Saudi Arabia during 2009. The BESIX Group completed work on The Address, a 63 story hotel and apartment building in Dubai, and continued work on the Burj Dubai tower, the tallest building in the world. It also completed construction work on Ajman wastewater treatment plant, which it will operate under a 25 year BOOT (build, own, operate and transfer) concession in partnership with Veolia from France. BESIX was also awarded a contract to construct the new Abu Dhabi and Al Ain wastewater treatment plants, which it will operate under similar 25 year BOOT concessions in partnership with Veolia.

term growth fundamentals of this sector and our ability to generate exceptional returns in the fertilizer industry. All of our production plants utilize state-of-the-art technologies and have long-term natural gas supply agreements ranking them among the world’s lowest cost producers. During Q4 export prices for Egyptian granular urea dropped from a record high of $900 per ton to below $200 per ton as traders and wholesalers experienced difficulties in obtaining trade finance and were reluctant to clear existing higher cost inventories at discounted prices. As fertilizer prices spiraled downward, our low cost production plants continued to operate at full capacity gaining market share while our competitors in Europe, Ukraine and the USA announced plant shutdowns. CORPORATE SOCIAL RESPONSIBILITY

Contrack International made steady progress on the construction of the Sidra Medical and Research Center in Qatar working in partnership with OHL from Spain. The Sidra project is the single largest project our construction group has ever undertaken, valued at more than $2.4 billion. FERTILIZER GROUP

Following the divestment of our cement group to Lafarge, we took the strategic decision to expand our investments in the fertilizer industry by acquiring Egyptian Fertilizer Company (EFC) from Abraaj Capital in February and purchasing a 20% stake in Gavilon Group alongside Ospraie Management in July. We also increased our ownership in Egypt Basic Industries Corporation (EBIC) up to 60% from various minority investors throughout the year. Combined with our majority stake in Sorfert Algérie, our new fertilizer group is well on its way to be ranked among the world’s top five producers of nitrogen-based fertilizers, with a total combined annual capacity of 4.65 million tons by 2010. Despite record low inventories for several commodities, the agriculture sector was not immune to the global economic upheaval at the end of the year. We believe strongly in the long

As one of the largest businesses in North Africa and the Middle East, we are committed to improving the communities where we live and work. We do this in many ways including reinvesting our capital in new plants and businesses in the region which provide essential supplies or services and provide employment opportunities both direct and indirectly. We are committed to maximizing the use of local resources whenever possible – bringing local people into our company and developing their skills, choosing local partners to supply materials and other services. This differentiates us from our competitors, increases our operational efficiency, and ensures our ability to operate uninterrupted in the communities we serve.

719M AN INCREASE OF 229.9% OVER LAST YEAR FIGURES EXCLUDE DISCONTINUED OPERATIONS

Regional governments must invest in the upgrade of public infrastructure and services to cope with growing populations. Some of these investments will take the form of public private partnerships. We also believe there will be large number of power, water, transportation, and petrochemical projects over the next few years which will enable our construction businesses to grow and prosper. While we expect a challenging market environment for the foreseeable future, our existing backlog of construction contracts should benefit from declining construction material costs and a generally more timid inflation environment. In fertilizer, our goal over the coming two years is to execute our organic growth business plan, which includes bringing the greenfield plants of EBIC and Sorfert Algérie to full production capacity on schedule and developing our channels of distribution to ensure maximum sales volumes and prices. EBIC will have an annual production capacity of 700,000 tons of ammonia and is scheduled to begin full scale production in May 2009. Construction work on our Sorfert plant was 47% complete at year end and is scheduled to begin urea production in late 2010. Our Sorfert plant will be able to produce 2 million tons of nitrogen fertilizer annually making it one of the largest plants in the world. Despite the uncertainties of the current global economy, we are confident that our businesses will generate exceptional returns for shareholders.

FUTURE OUTLOOK

In construction, we will continue to focus on infrastructure projects in our core geographic markets both as an EPC (engineering, procurement and construction) contractor and as a developer. We believe opportunities for our construction businesses will be driven by accelerated public sector spending on infrastructure projects, which will offset slowing private sector investment on residential, commercial, and industrial projects.

ONSI SAWIRIS

Chairman

NASSEF SAWIRIS

Chief Executive Officer

ORASCOM CONSTRUCTION INDUSTRIES 3 ANNUAL REPORT 2008

Overview

THE BUSINESS

THE GROUP

Orascom Construction Industries is a leading international construction contractor and fertilizer producer based in Cairo. We are one of Egypt’s largest corporations with projects and investments across North Africa, the Middle East and Europe. Our construction group ranks among the world’s top global contractors and operates under three distinct and separate brands. Orascom Construction targets large industrial and infrastructure projects principally in North Africa and the Middle East. The BESIX Group undertakes major commercial, industrial and infrastructure projects throughout Europe, northern and central Africa and the Middle East. Contrack International pursues institutional projects in the Middle East.

REVENUE BY GEOGRAPHY

NORTH AMERICA 3.8% AFRICA 4.6% NORTH AFRICA 6.6% CENTRAL ASIA 4.6% EGYPT 19.3% EUROPE 23.8% MIDDLE EAST 37.3%

NET INCOME CONTRIBUTION

CONSTRUCTION GROUP 49.8%

To complement our construction businesses, we have investments in manufacturers of fabricated steel products, glass curtain walling, paints and concrete pipes, as well as investments in two property management companies. Our fertilizer group specializes in the production of nitrogen-based fertilizers. We have investments in facilities in Egypt and Nigeria, with one fertilizer plant under construction in Algeria. These operations alone will rank us among the region’s largest fertilizer producers. We are actively looking for new investment opportunities to grow this business into a global leader.

FERTILIZER GROUP 50.2%

EBITDA CONTRIBUITON

CONSTRUCTION GROUP 43.2%

FERTILIZER GROUP 56.8%

4 ORASCOM CONSTRUCTION INDUSTRIES ANNUAL REPORT 2008

“WE WILL WORK TO CREATE EXCEPTIONAL VALUE

FOR OUR SHAREHOLDERS BY FOLLOWING A COHERENT AND CONSIDERED STRATEGY ENABLING US TO STRENGTHEN AND GROW BOTH OUR CONSTRUCTION AND FERTILIZER BUSINESSES.“

OUR STRATEGY

OUR VALUES

OUR CORE STRENGTHS

Targeting large, complex construction projects in emerging markets.

Excellence in every aspect – premium quality and performance resulting from our expertise, efficiency, attention to detail and passion.

Ultimately it is for others to judge our strengths, but we believe that these factors set us apart from our competitors:

Exceptional value – value based on our strong financial position, our local knowledge, our resources and our technical expertise.

Our people – their expertise, hunger for knowledge and passion to excel. Above all, their loyalty and commitment to Orascom Construction Industries.

Expanding investments in fertilizer production and selected down stream activities. Working in partnership with local and global leaders. Investing in the best people and technologies. Maintaining our commitment to quality and safety. Being a good corporate citizen wherever we operate. Providing products and services for people in developing economies. Searching for new opportunities in order to deliver exceptional value.

Constructive partnerships – strong, enduring relationships with clients, customers and partners based on trust, transparency and results. Safety focused – an important consideration in every aspect of our operations. Setting global standards and respecting local sensitivities – putting our expertise and experience to work for our clients, customers, partners and host communities. Developing our people to match global standards and maintaining a commitment to use local materials and suppliers.

Our resources – capital resources that enable us to respond faster than our construction competitors’, raw materials that enable us to trade fertilizers at market leading prices. Our experience – a tradition for excellence and achievement reaching back over 50 years; an ability to share our clients’ perspective that gives us a unique understanding of their needs throughout the project cycle. Our investment capability – financial resources that allow us to partner with clients as an investor and a contractor. The ability to self perform and to diversify into new industries. Our entrepreneurial attitude – a strong appetite for investment and diversification to grow our business and increase revenue streams.

ORASCOM CONSTRUCTION INDUSTRIES 5 ANNUAL REPORT 2008

Operational review

08 10 16 20

Construction group Orascom Construction BESIX Group Contrack International

CONSTRUCTION Construction has been at the heart of our business for over 50 years. We offer engineering, procurement and construction services to public and private clients in four continents primarily under three distinct and separate brands. Our companies offer complete building solutions for large, complex and demanding projects.

Picture caption TEN YEARS OF SUCCESS

In 2001 Orascom Construction and the BESIX Group completed construction of the El Ferdan Rail Bridge – the longest double swing bridge in the world.

6 ORASCOM CONSTRUCTION INDUSTRIES ANNUAL REPORT 2008

ORASCOM CONSTRUCTION

BESIX GROUP

CONTRACK INTERNATIONAL

A leading engineering, procurement and construction contractor targeting large industrial, commercial and infrastructure projects for public and private customers primarily in Egypt. Orascom Construction is based in Cairo, Egypt and was founded in 1950.

A collection of companies active in construction and real estate development. BESIX is the largest construction company in Belgium and is active on projects primarily in Europe and the Middle East. The BESIX Group is based in Brussels, Belgium and was founded in 1909.

A major international engineering and construction contractor focusing on institutional projects in the Middle East. Contrack is based in Virginia, USA and was founded in 1985.

MARKETS

MARKETS

MARKETS

Active across emerging markets in North Africa and the Middle East.

Active across Europe, northern and central Africa, the Middle East and the Caribbean.

Active in Afghanistan, Egypt, Jordan, Lebanon, Qatar, Bahrain and the UAE.

EMPLOYEES

EMPLOYEES

EMPLOYEES

44,000

20,000

3,100

OWNERSHIP

OWNERSHIP

OWNERSHIP

100%

50%

100%

ORASCOM CONSTRUCTION INDUSTRIES 7 ANNUAL REPORT 2008

Operational review

CONSTRUCTION GROUP

NEW CONTRACTS GROWTH $ BILLIONS 5.5 4.8

2.3

2.6

1.2

04

8 ORASCOM CONSTRUCTION INDUSTRIES ANNUAL REPORT 2008

05

06

07

08

ORDER BACKLOG GROWTH

BACKLOG BY SECTOR

BACKLOG BY REGION

$ BILLIONS ALGERIA 22.8% 6.9 INDUSTRIAL 13.6%

4.7

COMMERCIAL 30.8%

2.7 2.2

INFRASTRUCTURE 55.7%

1.8

04

05

06

07

DURING 2008 OUR CONSTRUCTION GROUP SECURED A RECORD $5.5 BILLION IN NEW CONTRACT ORDERS AND ENDED THE YEAR WITH A CONSOLIDATED BACKLOG OF $6.9 BILLION OF WHICH 85% SPANS EGYPT, ALGERIA, QATAR, THE UAE AND SAUDI ARABIA. WE CONTINUE TO SERVE A DIVERSIFIED CLIENT BASE, OF WHICH 60% OF THE CONSOLIDATED BACKLOG IS FROM REGIONAL SOVEREIGN CLIENTS. Our construction group operations are focused on infrastructure projects in the Middle East, North Africa and Gulf regions. We believe opportunities for our construction businesses will be driven by accelerated government spending in this sector in an effort to curb slowing private investment. Our business will also benefit from declining construction material costs and from a generally more timid inflation environment.

and mitigate the impact of any cost increase on profitability. However, we expect construction costs to ease further following the recent significant drop in cement and steel prices. This combined with our high-margin infrastructure and industrial projects should improve our operation margins over the next two years. We have a strong balance sheet with low capex needs.

Growth in non-residential and commercial construction should remain strong over the medium term to cater for pent-up demand built over the past oil boom. We think the current drop in project costs may well encourage project awards to contractors.

Middle Eastern governments remain committed to investing in infrastructure. They continue to invest in the upgrade of public packages to be spent on ready to go infrastructure projects of confirmed higher overall expenditure. Despite the significant drop in oil prices, we believe infrastructure spending in North Africa, the Middle East and Gulf regions, which contributes to 55.7% of our current consolidated backlog, will remain relatively high.

Our high level of vertical integration allows for better cost management versus our peers. Over half of our projects are negotiated on fixed price contracts and we have favorable payment terms on our construction backlog. The deflationary environment should give cost relief to the portion of our backlog based on fixed prices of raw materials, as these estimates were based on higher prices of raw material. Contracts negotiated include cost escalation formulas, which we expect to streamline margins

DUBAI 6.8% ABU DHABI 19.5%

SAUDI ARABIA 1.0% QATAR 19.3% EGYPT 15.6%

08

The strength of our construction group is demonstrated by several factors; most clearly by a 14.4% increase in new awards for the year ending 31 December 2008. We believe project cancellation risks are low, 60% of our backlog is sovereign-backed. Our exposure to real estate and commercial property developers is only 30%. Even if some projects were to be cancelled, all of our contracts have compensation clauses, including cover for demobilization costs.

EUROPE & OTHER 15.0%

A POSITIVE OUTLOOK

In Algeria GDP growth is expected to fall to 2.2% in 2009 from an average of 4.6% annual growth in the last three years. The government has devoted a large portion of the $160.0 billion public investment program introduced in 2005 to upgrading the transport, power and utilities sectors from 2009-13. Projects being tendered include $11.0 billion for a 1,216 kilometer EastWest highway and $2.0 billion upgrade of 1,200 miles of railway. The situation is similar in Egypt, with the Ministry of Housing and Urban Development having an urgent need to provide low income housing, requiring significant investment in supporting power generation and other utilities. GDP growth is expected to fall to 3.3% in 2009 and 3.9% in

2010 from an average of around 7.0% annual growth in the last three years. The Egyptian government’s public private partnerships program is moving in a positive direction, with a $3.0 billion stimulus package earmarked mainly for infrastructure spending and an additional $2.4 billion to be spent during the first half of 2009. The government plans to award construction contracts for two to three power plants a year, in addition to large-scale road, metro and airport expansion projects. There are also plans to develop six wastewater treatment plants across the country through public private partnerships. In Qatar GDP growth expected to fall to 9.8% in 2009 from an average 12.7% annual growth in the last three years. We expect strong spending on general public services including utilities, hospitals and business tourism, including $2.0 billion for Ras Laffan Port and $3.0 billion for a 40 kilometer causeway and rail line to Bahrain. Saudi Arabia increased its 2009 spending budget by 16% as part of economic stimulus policy. GDP growth is expected to fall to 0.8% in 2009 and 2.6% in 2010 from an average 3.6% annual growth in the last three years. Continuation of the government’s five year public spending stimulus plan, worth $200.0 billion includes $12.0 billion for the Riyadh Women’s University, $8.0 billion for the Dammam-Jeddah railway and $1.0 billion for the Medina expansion project. Across the UAE GDP growth expected to fall to 9.8% in 2009 and 2.9% in 2010 from an average of 7.2% in the last three years. Although many real estate projects, particularly in Dubai are under threat, the demand for infrastructure across the region remains high. The government of Abu Dhabi plans to spend around $275.0 billion in the next five years on infrastructure projects. Across the UAE, funds have been committed for projects including $1.0 billion for the Ras Al Khaimah Education Park, $1.0 billion for eleven new bridges and roads, $1.1 billion for the expansion of the Dubai Metro and $40.0 billion upgrades to airports. ORASCOM CONSTRUCTION INDUSTRIES 9 ANNUAL REPORT 2008

Operational review

ORASCOM CONSTRUCTION

www.orascomci.com

ORASCOM CONSTRUCTION IS A LEADING ENGINEERING, PROCUREMENT AND CONSTRUCTION CONTRACTOR ACTIVE IN EMERGING MARKETS ACROSS NORTH AFRICA AND THE MIDDLE EAST. WE TARGET LARGE, COMPLEX AND DEMANDING PROJECTS IN THE REGION, WHICH BY THEIR NATURE HAVE FEWER COMPETITORS AND HIGHER MARGINS. WE HAVE EARNED A REPUTATION FOR DELIVERING QUALITY WORK UNDER DIFFICULT CONDITIONS ON SCHEDULE AND AT COMPETITIVE PRICES.

In order for us to meet demand for our foundation unit’s services we have heavily invested in specialist equipment for operations in Egypt and Algeria. Over the past two years we have invested approximately LE 500.0 million ($91.8 million) in equipment. During 2008, we spent LE 55.0 million ($10.1 million) in Algeria on specialist pile drivers and other piling equipment for new projects. We have also invested heavily in recruiting and training a skilled team of over 1,200 people to work for our foundations unit across the three countries in which it currently operates.

During the year new contract awards for Orascom Construction totaled LE 6.87 billion ($1.25 billion), a decrease of 34% on 2007. Seventy-two percent of new awards and 42% of Orascom Construction’s turnover was from outside Egypt. At 31 December our order backlog was LE 15.82 billion ($2.76 billion), an increase of 0.73% on the same period last year.

Our foundations unit executes all foundation works on Orascom Construction mega projects, giving us a strong competitive advantage. We are one of the largest specialist foundation contractors in Egypt. Our foundations unit supplies services to third party clients across Egypt and we have recently expanded activities into Algeria and the UAE.

ORASCOM ROAD CONSTRUCTION

For a number of years it has been our strategy to offer specialist construction services to clients where we see opportunities in the market. During 2008 we have seen demand increase in specialist infrastructure services – particularly in roads and in foundation works. Despite the economic turndown, we predict that this trend will continue over the coming years.

In Algeria, we were able to leverage the credibility of Orascom Construction Industries and secure major projects including foundation work for the Skikda LNG Plant. In June 2008 we established a new joint venture company in Abu Dhabi under the name of The Arabian Sea Foundation. This partnership links us with three leading Abu Dhabi based developers: Sorouh Real Estate, Hydra Commercial Investments and Capital Investment.

During 2008 revenue increased to LE 213.0 million ($39.1 million), up 145% on 2007. New project awards totaled LE 301.0 million ($55.2 million), an increase of 82% on the previous year. Orascom Road Construction continues to reinvest in resources to capitalize on the surge in road construction. In the year under review it invested LE 100.0 million ($18.4 million) in new specialist equipment including dozers, graders, compactors and asphalt plants.

The Arabian Sea Foundation is specialized in geotechnical engineering and foundation works including piling, grouting and D-walls. It can also perform sub-structure works up to ground level. During the year it invested Dhs 220.0 million ($59.8 million) in buying specialist equipment to execute most foundation works, including diaphragm walls, secant pile walls, sheet piles for excavation retaining/shoring, large diameter bored piles, micro piles and ground anchors. At the end of 2008, Arabian Sea Foundation was working on two major city developments in Abu Dhabi.

Owning a specialist road company has enhanced our capabilities and has enabled us to offer clients a better, more inclusive service. We have a longstanding relationship with the Egyptian Air Force and are one of the primary contractors involved in the upgrade of its military airports. Work on public transport infrastructure is also an important revenue stream.

SPECIALIST FOUNDATION SERVICES

In response to the lack of specialist foundation and geotechnical engineering services across North Africa and the Middle East (particularly the Gulf territories), in Egypt we established a specialist foundations unit within Orascom Construction. Since 2007, our knowledge and resources have helped to kick start many largescale projects where progress were hindered due to the noticeable shortage of these specialist services.

10 ORASCOM CONSTRUCTION INDUSTRIES ANNUAL REPORT 2008

Since its establishment in 1999, Orascom Road Construction has grown rapidly. It is employed on the road and paving element of all Orascom Construction projects and has proved its excellence in executing road construction projects for third parties, including the New Assuit Road in Egypt.

TURNOVER BY SECTOR

TURNOVER BY REGION

COMMERCIAL 12.1%

OTHER 2% EUROPE 9% EGYPT 16%

INDUSTRIAL 27.0%

AFRICA 24%

INFRASTRUCTURE 60.9%

MIDDLE EAST 49%

ORASCOM CONSTRUCTION INDUSTRIES 11 ANNUAL REPORT 2008

Operational review

ORASCOM CONSTRUCTION

BUSINESS FOCUS

Our strategic positioning in the construction market place should enable us to benefit from the visible pipeline of power and infrastructure projects across North Africa and the Middle East over the coming years. For more than 10 years, we have played a leading role in energy projects intended to support growth in emerging markets – completing an impressive list of power plants and energy storage facilities across North Africa. Our list of transport and utilities infrastructure projects is equally impressive. With a global focus on the need to reduce carbon emissions, governments in North Africa and the Middle East are exploring opportunities to develop renewable energy. Billions of dollars are being poured into research and development of wind, solar, water, nuclear and hydrogen generated power supplies. Egypt, Algeria, Morocco, the UAE and Qatar are all planning to develop such schemes. In the case of North Africa, plans are in place to export power to Europe. Algiers has a target of producing 10% of its electricity from renewable sources by 2020, while Cairo is aiming for 20% within the same time frame. Plans for solar energy complexes that cover vast swathes of desert and feed power to Europe are now being taken seriously by governments in the European Union, who are backing the initiative, called Desertec. With increasing demand for sustainable energy solutions we are focusing resources in this area. Our recent experiences at the Kuraymat solar power and Naga Hammadi hydro power plants demonstrate the beginning of our commitment to this growing industry. We are well positioned to work on new renewable energy projects as they arise across the region.

12 ORASCOM CONSTRUCTION INDUSTRIES ANNUAL REPORT 2008

In the Gulf, the UAE is leading the way in developing renewable and alternative energy. The government predicts the country’s power requirements will increase from 15,500 mega watts to more than 40,000 mega watts in 2020, with only enough gas to meet half of the additional demand. Our regional operations in Abu Dhabi and Dubai are strategically positioned to take on such projects. POWER PLANTS

Work on the solar island of the Kuraymat solar power plant in Egypt proceeds ahead of schedule. Site leveling, construction of temporary access roads and storm water drainage for the 625,000 square meter ‘island’ commenced late in 2007. In January 2008 concrete works for the support system started, in parallel with leveling of the rock strata. Work on the underground cables and permanent open storm drainage ditches commenced in Q4. By the end of the year, actual progress was approaching 50% completion. The plant is due for commissioning in March 2010. We are also subcontracted for civil and underground utility works on the combined cycle power plant at Kuryamat, an integral part of the solar power plant complex. The first concrete was poured in July. By year end 50% of the concrete work was complete, two of six buildings were ready for final finishes and 15% of the underground utilities were in place. Actual progress on site was almost 35% complete. In January, the West Delta Electricity Production Company awarded us the civil works package for the Sidi Krir combined cycle power plant in Alexandria, Egypt. The award is for the construction of two 250 mega watt combustion turbine generators and one 250 mega watt steam turbine generator. Our scope covers piping for the onshore cooling system, construction of the pump house and seal well structures, including installation of the cranes, stop logs, steel structure and the water filtration system. The contract also includes civil works and structural steel relating to the power block and

main control building. Work on all underground piping, the duct bank, irrigation and sanitary systems, in partnership with BESIX, commenced in November 2007 and is scheduled to last for 31 months. Our share of the contract is valued at LE 554.7 million ($101.8 million). During the year over 2 million cubic meters of earthworks were completed to clear and level the site for the Terga combined cycle power plant in Algeria. Our contract for the 1,200 mega watt plant is valued at €560.0 million ($826.1 million). In October we commenced civil works, including the marine works for the intake structure. We also achieved 30% progress on the engineering, ahead of our contract schedule. At year end overall progress was 10% complete. The plant is due for commissioning in September 2011. In Egypt, construction work at the El Tebbin thermal power plant is on schedule to allow commissioning in September 2010. During the year major works focused on completing the piping for the cooling system, including jacking works under the main road outside of the plant, as well as civil works for the off-site intake pump house and discharge structures, including cofferdam sheet piles, cranes, water filtration system, stop logs and steel structure. Other priorities were the civil works for the power block area, steel structure, water treatment area, and main control, electrical and ancillary buildings. At year end overall progress was 67.4% complete. Work on the Naga Hammadi barrage and hydro power plant for the Ministry of Water Resources and Irrigation was completed in Q2 2009 after six years on site. The barrage consists of a seven bay sluiceway, a 64 mega watt hydro power plant and two navigation locks. The project also included the diversion of the river Nile and the construction of a high road bridge. We completed the project in partnership with Vinci and Bilfinger Berger, our share of the contract was worth LE 336.0 million ($61.7 million).

PETROCHEMICALS

MANUFACTURING FACILITIES

In Oran, construction at the fertilizer plant of Sorfert Algérie proceeds ahead of schedule and is due for commissioning in Q4 2010. One hundred percent commercial production is scheduled in Q1 2011. At year end overall progress was 47.1% complete. All long lead and critical items were ordered early in 2008, by the end of December all procurement was 92.8% complete. On site at Sorfert, civil works commenced in Q1 2008 and during the year 83.9% of all basic and detailed engineering was completed. The first bulk shipment of piping was delivered allowing fabrication to start. At year end steel structure fabrication was approximately 22% complete with approximately 15% of the steel structure erected.

During the year we worked on four cement plant contracts for Lafarge. Construction work on line one of the United Cement Company of Nigeria was completed and the plant was commissioned in February 2009. Work on the second line of the Arab Union Cement Company in Libya was completed in March 2009. Line one at Al Safwa Cement Company in Saudi Arabia and line one of the Syrian Cement Company are both due for completion at the end of 2009. The combined value of these projects is LE 3.0 billion ($550.0 million).

Construction work, in conjunction with KBR at the fertilizer plant of Egypt Basic Industries Corporation (EBIC) was completed in Q4 2008. Our scope covered all civil works. We poured 30,000 cubic meters of concrete, supplied and erected 1,900 tons of steel structure, installed 206 pieces of mechanical equipment, welded and erected 55,000 meters of piping above ground level. We calibrated and fitted 1,471 instruments, laid 400 kilometers of cables and wires in trays above ground. We also laid an 8 kilometer ammonia export pipeline connecting EBIC to Sokhna Port and constructed two 30,000 ton ammonia storage tanks within the port grounds. Our work on the 400 kilometer Skikda LNG Train in Algeria is divided into four contracts: buildings, LNG storage tank, civil works and piling. The combined value of the contracts, awarded between March and August 2008 by KBR, is valued at €1.8 billion ($331.5 million). The project will be completed by the end of 2011 when the LNG storage tank is handed over.

Construction of the factory of the Algerian Emirati Tobacco Company in Kolea, Algeria, continues and is due for completion in Q3 2009. Our contract, valued at €22.0 million ($32.5 million), includes the civil works package, finishing and electromechanical installations for six production lines. In Egypt work on the expansion of a factory for the Eastern Tobacco Company is also due for completion in Q3 2009. The factory extension consists of a basement and two floors, with a combined are of 51,000 square meters. The contract also includes construction of four 14,400 square meter storage warehouses, each with a storage capacity of 9,000 tons of tobacco. WATER & MARINE INFRASTRUCTURE

Work on the Al Maleh Lock Extension is due for completion in Q2 2010. The lock connects Al Nubaria Canal with the Mediterranean Sea in Egypt. We are doubling the length of the small lock to 120 meters, which will match the length of the existing large lock. We are also carrying out rehabilitation of the electro-mechanics on the large lock. As the main contractor our scope includes all civil works for the 60 meter extension, on and offshore soil investigation and topographic survey, verification of design, piling, construction of the diaphragm wall and dewatering, installation of the new main and side gates and installation of navigation aids, monitoring devices and the new control system. The contract is valued at LE 89.0 million ($16.0 million). ORASCOM CONSTRUCTION INDUSTRIES 13 ANNUAL REPORT 2008

Operational review

ORASCOM CONSTRUCTION

TRANSPORT INFRASTRUCTURE

In December we completed our €110.0 million ($162.3 million) contract on the Méchéria – Behar Rail Link in Algeria. We worked in partnership with TSO and Contrack International on the 360 kilometer stretch of track, which included ancillary buildings, stations and all telecommunications. We laid all tracks and installed associated supplies and maintenance equipment. Orascom Road Construction is on schedule to complete phase one of the New Assuit Road by the end of Q3 2009. Phase one of the 112 kilometer road is divided into three contracts: excavation and backfilling, construction of the base course and batching for the road slopes, construction of the asphalt pavement. By December 2008 40% of all contracted work had been completed. In Alexandria work on the Borg El Arab International Airport modernization continues on schedule for completion in Q1 2010. In partnership with BESIX we are contracted to construct a new passenger terminal building with a capacity of 1,000 passengers per hour, a cargo terminal building with a capacity of 10,000 tons of freight per year, aircraft parking and taxiways, an administration building, service buildings, car parking, aircraft fuel station, metrological data centre and air traffic control towers. We are employed by Alstom, as subcontractor on the Algiers Tramway project. Our contract is to execute all civil works on the Bordj El Kiffan stretch and the terminal building. Valued at €32.0 million ($47.2 million), our contract also includes installation of underground utilities, electromechanical and finishing works for the terminal building and construction of ancillary buildings. Work is due for completion in Q4 2009. At year end progress was 35% complete.

14 ORASCOM CONSTRUCTION INDUSTRIES ANNUAL REPORT 2008

The new air traffic control tower at Cairo International Airport is due for completion at the end of 2009. The contract, for which we are employed as the main contractor, was awarded June 2007 and is valued at LE 162.5 million ($29.8 million). The state of the art, 120 meter tower is situated in the center of the airport’s three runways; construction has proceeded without any disruption to airport operations. Work for the National Authority for Tunnels on the Greater Cairo Metro line three extension is valued at LE 493.3 million ($90.5 million) and is divided over three contracts: electromechanical, track and civil works. Our work on the extension is due for completion in Q4 2011. At year end we had completed 52% of the civil works contract and 9% of the electromechanical contract. Track works are due to start in Q3 2009. CITY INFRASTRUCTURE

In Q1 2008, we were awarded a Dhs 765.0 million ($209.5 million) share of a contract awarded by Bunya for Al Reem Island in Abu Dhabi. The joint contract, with Contrack International, is for the construction of regional roads and the island’s central utilities infrastructure over a site of approximately 2 kilometers square. By March 2009 the combined contract value had increased from Dhs 765.0 million ($207.9 million) to Dhs 1.2 billion ($315.8 million). The Al Reem Island mega city development is located on a natural island to the north of Abu Dhabi City. Three developers, commissioned by the government, are involved: Tamouh Investments, Sorouh Real Estate and Al Reem Investments. Each developer controls one of the three districts that make up the 8 kilometer square island. Development of the area at the centre, where utilities are fed onto the island and out to each district is managed by Bunya Enterprises – an independent partnership between all three developers.

The combined contract includes delivering: • A 10,030 kilometer road network, including traffic control systems • Underground power, water and telecommunication networks • Storm water collection, irrigation and force main networks • Fire fighting and security systems • A Traffic control system, including a satellite traffic control tower • A 500 meter tunnel entrance to the underground car park of Tamouh Towers, part of the Tamouh North development Management of the project, including logistics and materials supply is being handled from our Abu Dhabi office, with support from head offices in Cairo and Virginia (USA). At year end the project was approximately 20% complete and on target for completion in March 2010. During 2008 the first major project milestone, completion of all earthworks, was met on time. The priority for 2009 is to meet all requirements to enable the opening of the Paris-Sorbonne University in September – an event being attended by the presidents of the UAE and France. In Q1 Sorouh Real Estate awarded Orascom Construction a Dhs 149.0 million ($40.5 million) contract for Corniche infrastructure and landscaping works on the Saraya Abu Dhabi development. At year end we had replaced the old sheet piling in the lagoon area and completed all underground infrastructure works including: storm water drainage, sewer drainage, water supply, irrigation network, power and lighting and the installation of telecommunications networks.

AL REEM ISLAND 0.5 km

Al Reem Investments Tamouh Investments Sorouh Real Estate

In June, the Arabian Sea Foundation announced its first contract award. Valued at Dhs 593.0 million ($161.0 million), it is for enabling works for towers three to eight of The Gate Towers, Shams Abu Dhabi on Al Reem Island. The contract, awarded by a Sorouh Real Estate and Tameer Holdings Investments joint venture, includes shoring, piling, dewatering, earthworks and materials supply. Work is due for completion in September 2009. At year end 18.5% of the work had been completed. The second contract awarded to the Arabian Sea Foundation, again by Sorouh Real Estate and Tameer Holdings Investments is for enabling works for Central Park, Shams Abu Dhabi. The contract, awarded in August, is valued at Dhs 99.4 million ($27.0 million) and includes shoring, piling, excavation, dewatering and materials supply. Work is due to be complete in June 2009, however due to site possession and building permit issues only 6% was completed at the end of December. BUILDINGS

In Cairo, work on the Nile Corniche Towers development for Qatari Diar is due for completion in December 2009. Our contract, a joint venture with BESIX is valued at LE 323.8 million ($59.4 million), and includes earthworks, construction of diaphragm walls, dewatering, concrete pile foundations, raft foundation and four basements below ground level for three towers buildings on a 9,361 square meter plot on the east bank of the River Nile. During 2008 work, in partnership with BESIX, on the 25 storey Fairmont Hotel at the landmark Nile City Towers complex in Cairo continued and is scheduled for client handover in Q2 2009.

At the Smart Village Cairo, we continue to be awarded new contracts. The combined value of these contracts in 2008 was LE 1.0 billion ($183.9 million). During the year we were awarded seven new buildings contracts as well as the contract for the infrastructure development for the business park’s new financial district. This contract, awarded by the Smart Village Company, is valued at LE 255.0 million ($41.3 million) and is due for completion in Q4 2010. New building contract awards at the Smart Village Cairo were for the offices of Sphinx Real Estate, Commercial International Capital Holding Company, HC Securities, Beltone Financial, Bank of Alexandria, Corplease and EFG-Hermes. In 2008, we received the largest amount of contract awards by any contractor on the site. During the year we completed work on new offices for Oracle and Mobinil. Work continued on the headquarters building of the Piraeus Bank. In the year under review we were awarded major buildings contracts in Egypt, including the Mall of Africa and Cairo Festival City developments. The Mall of Africa project was awarded in February and is due for completion in Q2 2010. The contract is valued at LE 1.1 billion ($201.9 million). Work on the Cairo Festival City started in May. The contract is valued at LE 1.9 billion ($348.7 million). Other buildings contracts awarded in Egypt include the Embassy of Oman (Zamalek Tower) and the residence of the Ambassador of Oman. We were also awarded a LE 103.0 million ($18.9 million) contract to construct the skeleton frames of 54 villas at the Marassi Sidi Abdul Rahman waterfront development. During the year, work in New Cairo continued for the new headquarters of Misr for Clearing, Depository and Registry (MCDR) and for BNP Paribas.

ORASCOM CONSTRUCTION INDUSTRIES 15 ANNUAL REPORT 2008

Operational review

BESIX GROUP

www.besix.com

THE BESIX GROUP HAS BEEN IN OPERATION FOR 100 YEARS. IT IS A MULTI-SERVICE GROUP OPERATING IN THE CONSTRUCTION, REAL ESTATE AND CONCESSION SECTORS IN 19 COUNTRIES. IN CONSTRUCTION THEIR FOCUS IS ON BUILDINGS, INFRASTRUCTURE AND ENVIRONMENTAL PROJECTS, INDUSTRIAL CIVIL ENGINEERING, MARITIME AND PORT WORKS AND REAL ESTATE DEVELOPMENT.

Financially, 2008 was a very good year for the BESIX Group. New contract awards totaled €2.1 billion ($3.1 billion), an increase of 34% on 2007, and a record for the Group. Its order backlog grew from €2.3 billion ($3.4 billion) to €3.6 billion ($5.3 billion) of which 74.6% was from outside of Benelux-France region. The international market continues to be a major strength, with projects in the United Kingdom, Central Europe, Central and North Africa, the Middle East, Central Asia and the Caribbean. Due to its presence in the Gulf region for over 40 years, BESIX and its regional entities (including Six Construct) have been awarded various high profile projects, including the Burj Dubai (the tallest building in the world), Yas Island (home to F1’s new Grand Prix in Abu Dhabi) and the Jumeirah Golf Estate Sewerage Treatment Plant (the world’s largest membrane biological reactor plant). Gulf region contracts accounted for 53% of the group’s turnover in 2008. In recent years BESIX has consolidated its presence in existing markets and targeted new markets, most recently Trinidad & Tobago and the Republic of Azerbaijan. It is the group’s strategy to continue to target new markets, but focusing on niche clients and undertaking more contracts which use its core skills i.e. the construction of large buildings and marine works.

16 ORASCOM CONSTRUCTION INDUSTRIES ANNUAL REPORT 2008

BUSINESS UNITS

The BESIX Group reviewed its organizational structure in order to meet new objectives, as well as local and world market requirements. It now operates under three business units: • ‘Contracting’ is responsible for construction and its related resources, with a view to establishing synergies between its constituent divisions: ‘Construction’, ‘Construction Middle East’ and ‘Contracting New Developments’. • ‘Real Estate’ enables BESIX to promote residential, office and commercial projects. • ‘Concessions’ enable the group to provide total solutions to its clients. It can design, finance, manage and maintain infrastructure or civil engineering structures. This business develops synergies between the companies of the group. In March, BESIX signed a partnership agreement with Suez Energy Services, and its Belgian subsidiary Axima Services, to jointly develop engineering maintenance, energy management and facility management activities in the Middle East. In May, Coentunnel Company, a concession company in which BESIX holds a stake, signed a design, build, finance and maintain contract with Rijkswaterstaat for extending the capacity of the Coentunnel in Amsterdam.

In July, BESIX, as part of a consortium, signed a BOOT (build, own, operate and transfer) contract with the Emirate of Abu Dhabi, relating to the financing, design, construction and operation of two waste water treatment plants for the cities of Abu Dhabi and Al Ain. In December, BESIX announced an agreement for the acquisition of the Franki Foundations Group Belgium and its subsidiaries. Franki offers total solutions for numerous types of foundations, from engineering, consultancy and design to the execution of a wide range of techniques for pile foundations and slurry walls, deep excavations and soil improvement. It is a renowned leader in this industry and is widely known for its technical robustness and engineering capabilities. Franki is an innovator in the ‘deep foundations’ market. The deal was concluded in January 2009. INVESTMENT

BESIX are in the process of developing a common technology platform to run across all of its businesses. The strategic benefits of such a system include: a faster management decision process, real-time transparency on the profit and loss of each contract, optimization of supplier management, improved workforce planning, better management of human capital, improved financial control and visibility of cash flow. The first pilot of the new system is scheduled during Q4 2009. During the year, BESIX made a net investment of approximately €40.0 million ($59.0 million) in new equipment, specifically for its marine and land based fleet. The most significant investment, a new pedestal crane for the ‘Self Elevating Platform Pauline’, will be used primarily for large marine projects. The crane, valued at €4.2 million ($6.2 million) was ordered in 2008, and its installation is due for completion in Q2 2009. The new crane will allow Pauline to lift loads that are double the capacity of its former ringer crane, allow it to work faster and to work in more difficult weather conditions (particularly heavier seas).

GULF STATES BUILDING AWARDS

TURNOVER BY SECTOR

TURNOVER BY REGION

BEST INFRASTRUCTURE PROJECT BUILDINGS 47%

1ST

OTHER 2% ENVIRONMENTAL 2% QUARRIES 3% CONSTRUCTION MANAGEMENT 5%

GULF REGION 53% NETHERLANDS, LUXEMBURG & FRANCE 12% NORTH AFRICA 3%

MARINE WORKS 10% CENTRAL AFRICA 2% CIVIL WORKS 31%

AWARDED FOR AL GARHOUD BRIDGE

BELGIUM 27%

EASTERN EUROPE 1% OTHER 2%

ORASCOM CONSTRUCTION INDUSTRIES 17 ANNUAL REPORT 2008

Operational review

BESIX GROUP

TRANSPORT INFRASTRUCTURE

BESIX is involved in many significant transport infrastructure projects across Europe, North Africa and the Middle East. Despite the downturn in building development projects, specifically in the UAE, construction of government supported infrastructure development continues and BESIX projects proceed as planned. Work on Yas Island, BESIX’s flagship city infrastructure project proceeds as scheduled, driven by the arrival of the F1 Grand Prix in November 2009. Aldar Properties and BESIX (50/50 partnership) have set up a management contracting company to carry out the contracts awarded to them on Yas Island. ALDAR-BESIX is responsible for logistics, planning, supply, design and management of the site and general project supervision. BESIX also has the contract for the construction of infrastructure services across the island including a marina, a shopping centre, the Ferrari Theme Park and all the access routes to the island. In February, work on Al Garhoud Bridge in Dubai was completed, for which BESIX was awarded ‘Best Infrastructure Project’ at the ‘Gulf States Building Awards’. The bridge is a combination of two independent decks each with seven lanes, spanning 520 meters over Dubai Creek. With the help of more than 2,000 engineers, technicians and workers, the project team completed the complex project in two years without interruption to daily traffic in the busiest area of the city. A consortium of Six Construct and Alstom received a contract from the Roads and Transport Authority to design, construct and maintain the Al Safooh Transit System in Dubai. The contract represents phase one of the project, which will span 9.5 kilometers and have 13 stations. BESIX expects additional work on phase two, a 4 kilometer extension with six more stations. Upon completion the transit system will link Madinat Jumeirah, Mall of the Emirates, Dubai Marina and Jumeirah Beach Residence.

18 ORASCOM CONSTRUCTION INDUSTRIES ANNUAL REPORT 2008

A number of BESIX’s transport infrastructure projects in the UAE are outside of Dubai, including the Shahama – Saadiyat Freeway in Abu Dhabi, which was completed for Aldar Properties in November. The scope included the construction of a ten kilometer highway with three interchanges and 17 bridges, each with ten lanes and all associated utilities and lighting. In Equatorial Guinea, BESIX worked on two major bridge projects. The Timbabe Bridges involved the construction of two 134 meter pre-stressed concrete bridges each to carry three traffic lanes. Work was completed at the end of 2008. The Riaba Bridges are due for completion mid 2010. This project involves the construction of three pre-stressed reinforced concrete bridges of 185, 139 and 192 meters long, spread over a distance of 5 kilometers. The combined value of both projects is €78.0 million ($115.1 million). In Europe, where BESIX are involved in numerous transport infrastructure projects, the company led the construction of the Bijlmer Railway Station near Amsterdam’s Arena Stadium. This €109.0 million ($160.8 million) contract involved the design and construction of a new station, including two metro lines and six national rail lines, as well as the Schiphol – Frankfurt high speed rail link. Work was completed in early 2008. MARINE INFRASTRUCTURE

The BESIX Group has built up a solid reputation for marine works – jetties, quay walls and the like – in Belgium and abroad. In the United Kingdom BESIX was involved in a complex project involving renovation, demolition and reconstruction of the South Hook LNG jetty to enable large LNG tankers to dock. In Qatar, Six Construct is working on the civil engineering package and construction of pontoons for the expansion of the Ras Laffan Port for Qatar Petroleum. The three year project, due for completion in 2011 is valued at €101.0 million ($149.0 million). In the UAE, BESIX are working on the construction of the inner harbor

of Hamriyah Port. Phases three and four involve the construction of the quay wall as well as dredging and excavation of approximately 4 million cubic meters. WATER TREATMENT

BESIX continues to develop their recurrent long-term income streams by strategically positioning themselves in the rapidly growing water treatment market. The following projects highlight some of their most prestigious water treatment contracts. In August the Abu Dhabi Water and Electricity Authority awarded BESIX and Veolia Water a €525.0 million ($774.5 million) contract to build, own and operate the new Abu Dhabi and Al Ain wastewater treatment plants. The operational contract is to last 25 years before it is due to transfer. Work on the Emirate of Ajman sewer and wastewater treatment scheme in the UAE was completed. The ambitious project involved the construction of a sewer system to serve 380,000 citizens and a wastewater treatment plant to process 48,000 cubic meters per day. ‘Moalajah’, a BESIX-Veolia Water company, has now commenced their 25 year operational contract. The Jumeirah Golf Estate Sewerage Treatment Plant in Dubai is the largest membrane biological reactor plant in the world. BESIX, through Six Construct and BESIX Sanotec, are involved in the construction of the plant, they also have a ten year operation and maintenance contract. When fully operational the plant will have the capacity to treat 220,000 cubic meters every day.

BUILDINGS

BESIX have the privilege to work on many landmark buildings across Europe and the Middle East, the most significant of which is the Burj Dubai tower in Dubai. The Burj Dubai tower is the world’s tallest, standing at more than 800 meters. When complete it will house a 42 floor hotel, 98 floors of residential accommodation and 21 office levels, including an observatory. BESIX have been involved in the project since February 2005. During 2008 the focus was on completing the structural works, facades and finishes. Building a tower of this magnitude has created many technical, financial and resourcing challenges on top of strict deadlines, but despite all the challenges work proceeds on schedule for completion by the end of 2009. Adjacent to the Burj Dubai, BESIX were involved in the construction of two more exclusive developments for Emaar Properties. First to be completed was The Address, a 63 storey five star hotel and serviced apartment building. Still under construction is the Burj Dubai Development, two high rise residential towers which are due to be completed in 2010. In Abu Dhabi, construction of the complex and sculptural Sheikh Zayed Bin Sultan Al Nahyan Mosque was completed in 2008. BESIX was main contractor and project manager for the three year project. The mosque, which covers a total area of 22,412 square meters, is the third largest in the world. It boasts four minarets, each rising 115 meters above ground level and 57 white marble domes. It has the capacity to hold 40,000 worshippers across several rooms – the largest has the capacity for 9,000 people.

The structural works of the iconic Tornado Tower in Doha, Qatar, were finished in November 2008. The uniquely designed tower is now one of the highlights on the city horizon due to its distinctive shape, outer steel structure and lighting system. BESIX’s contract included full fit-out of the central core, basement, ground and first floors, as well as shell and core works. Across North Africa towns and cities are undergoing much needed development for local and visiting tourists. In Morocco, BESIX are contracted to build the Magazan Resort, a 500 room hotel set over 5 hectares inspired by traditional Moroccan architecture. The project, valued at €115.0 million ($169.6 million) is due for completion in August 2009 and includes the construction of roads and utilities networks, a waste water treatment and recycling plant and landscaping. In Europe landmark building projects include the Schiecentrale in Rotterdam, Netherlands – a former power station which BESIX are converting into an office complex for creative industries. In Brussels renovation of the Palais des Congrès proceeds on schedule for completion in July 2009 and will include three auditoriums, a 4,000 square meter, 5.5 meter high multifunctional exhibition space and twenty meeting rooms. The €60.0 million ($88.5 million) contract includes demolition, structural, finishing, mechanical and electrical works as well as preservation and restoration of the ‘Monts des Arts’ garden and streets. POWER AND INDUSTRIAL PLANTS

BESIX Benelux-France is active in industrial projects. During the year work for AREVA progressed well on the Georges Besse II uranium enrichment plant in the South of France. Also in France, civil works for the Pontsur-Sambre combined cycle power plant, a 400 mega watt facility proceeded on schedule to be completed in June 2009.

ORASCOM CONSTRUCTION INDUSTRIES 19 ANNUAL REPORT 2008

Operational review

CONTRACK INTERNATIONAL

TURNOVER BY SECTOR INSTITUTIONAL 45.1% INFRASTRUCTURE 13.8%

www.contrack.com OPERATION & MAINTENENCE 17.4%

GOVERNMENT 23.7%

CONTRACK INTERNATIONAL IS A LEADING INTERNATIONAL CONSTRUCTION CONTRACTOR. IT PROVIDES ENGINEERING, PROCUREMENT AND CONSTRUCTION SERVICES PRIMARILY ON INSTITUTIONAL AND INFRASTRUCTURE PROJECTS THROUGHOUT THE MIDDLE EAST, THE GULF AND CENTRAL ASIA, AS WELL AS OPERATION AND MAINTENANCE SERVICES.

In April 2008, Emaar Properties awarded Contrack three contracts at the Marassi Sidi Abdul Rahman waterfront development on the north coast of Egypt. Contrack will construct 199 villas, 64 townhouses, a beach club house and associated facilities. The combined value of the contracts was LE 252.0 million ($46.2 million). However, at the request of the client, the beach club house was expanded from 2,500 square meters to 9,400 square meters and the contract value increased by LE 73.1 million ($13.4 million). At year end all projects were approximately 35% complete. HUMANITARIAN AND DEFENSE

Against an adverse global construction climate, Contrack International’s performance during 2008 was exceptionally strong. New contract awards totaled $1.4 billion up 515.7% from $0.2 billion in 2007. Revenue increased to $0.4 billion from $0.3 billion last year. Contrack ended the year with a record backlog of orders totaling $1.3 billion, an increase of 334.7% over the same period last year. Its strength comes from a well diversified program, which includes infrastructure development in the UAE and institutional programs in Qatar. Added stability comes from working with the US Government on significant rebuilding projects in Afghanistan. CITY INFRASTRUCTURE

Late in 2007, Sorouh Real Estate awarded a joint contract to Contrack and Orascom Construction for infrastructure and landscaping works on the Saraya Abu Dhabi development. In February, both companies were awarded a second joint contract, also in Abu Dhabi. This contract, for Al Reem Island, was awarded by Bunya Enterprises for the construction of regional roads and the island’s central utilities infrastructure over a site of approximately 2 kilometers square.

20 ORASCOM CONSTRUCTION INDUSTRIES ANNUAL REPORT 2008

BUILDINGS

Soon after the completion of the QAR 1.2 billion ($337.0 million) Science and Technology Park in Qatar, Contrack was awarded another contract by the Qatar Foundation. This contract, for the design and construction of the Sidra Medical and Research Center is valued at QAR 8.8 billion ($2.4 billion) and is a joint venture with OHL of Spain. Contrack’s share is valued at QAR 4.0 billion ($1.1 billion). The medical centre, part of the Education City development in Doha, will offer clinical care as well as education and biomedical research facilities. The design features three-zones, for patient, family, and staff. The all-digital, wireless clinical care facility will house approximately 412 beds with infrastructure to enable expansion to 550 beds. The biomedical research component will house five core facilities. Construction at Sidra started in February 2008 and is scheduled for completion in 2012. Work includes the construction of the main hospital, the outpatient clinic, an underground car park, a multi-storey car park and the central services building, as well as numerous ancillary buildings and facilities.

In the year under review, the US Army Corps of Engineers awarded Contrack with approximately $64.0 million of new contracts in Afghanistan. They also received a third year option to continue operation and maintenance contracts for Afghan National Army Bases throughout Afghanistan. This contract covers over 50 different facilities located across extremely volatile parts of the country and regularly employs over 1,350 people including US, local and third country nationals. Work for the US Army at Bagram Air Base continues on the new tanker truck fuel offloading facility, the perimeter fence, guard towers and bulk fuel storage facility. The air base, which runs over 100,000 flight operations per year, has been the US stronghold in the region for the last six years. Contrack have had a regional presence at the airfield since 2003. At Kabul International Airport work on the new fuel storage facility proceeded well during the year and was completed on schedule in February 2009. Other completed projects include the class three fuel line and a fuel point facility near the airport in Kabul. Work progressed well on the construction of new facilities for ‘special aircraft operations’ at Al Udeid Air Base in Qatar as well as the renovations to the Mudeirej Bridge in Lebanon. Both projects should be completed at the close of 2009.

TURNOVER BY REGION

AFGHANISTAN 30.7% EGYPT 8.3% QATAR 43.5%

UAE 8.2% LEBANON 3.8% JORDAN 5.4% IRAQ 0.1%

ORASCOM CONSTRUCTION INDUSTRIES 21 ANNUAL REPORT 2008

Operational review

24 26 28 28 28

National Steel Fabrication Alico Egypt United Paints and Chemicals National Pipe Company SCIB Chemical

NATIONAL STEEL FABRICATION

ALICO EGYPT

Manufacturers of fabricated steel products primarily for energy, petroleum, industrial and construction clients.

Fabrication and installation of aluminum and glass curtain walls, doors and windows as well as architectural aluminum works primarily for building projects.

MARKETS

MARKETS

The company operates from three plants in Egypt and one in Algeria, supplying customers primarily in North Africa, the Middle East and Europe.

The company operates from a plant in Egypt, supplying products to customers across North Africa, primarily in Egypt, Libya, and Sudan.

EMPLOYEES

EMPLOYEES

3,650

560

OWNERSHIP

OWNERSHIP

100%

50%

CONSTRUCTION MATERIALS We invest in complimentary construction materials to broaden our offer and increase our value to our clients. Value comes from being able to provide sought after products and services inclusively, within market leading prices and delivery times from companies that have a proven track record.

Picture caption TEN YEARS OF SUCCESS

In 2000 National Steel Fabrication supplied the fabricated steel structure for the 55 towers of the wind farm at Zafarana, Egypt.

22 ORASCOM CONSTRUCTION INDUSTRIES ANNUAL REPORT 2008

UNITED PAINTS & CHEMICALS

NATIONAL PIPE COMPANY

SCIB CHEMICAL

Manufacturers of cement based, ready mix mortars for the construction industry.

Manufacturers of precast concrete pipes and pre-stressed concrete cylinder pipes primarily for infrastructure projects.

Manufacturers of decorative paints and industrial coatings primarily for the construction industry.

MARKETS

MARKETS

MARKETS

The company operates from a site in Egypt, supplying products to customers primarily in Egypt, Libya, Saudi Arabia, Lebanon and Syria.

The company operates from two sites in Egypt, supplying customers across Egypt and in neighboring countries.

The company operates from a site in 6th October City and sells to customers across Egypt and in neighbouring countries.

EMPLOYEES

EMPLOYEES

EMPLOYEES

200

500

345

OWNERSHIP

OWNERSHIP

OWNERSHIP

50%

40%

15%

ORASCOM CONSTRUCTION INDUSTRIES 23 ANNUAL REPORT 2008

Operational review

NATIONAL STEEL FABRICATION www.nsfegypt.com

24 ORASCOM CONSTRUCTION INDUSTRIES ANNUAL REPORT 2008

THE CORE BUSINESS OF NATIONAL STEEL FABRICATION IS THE FABRICATION AND ERECTION OF HEAVY STEEL STRUCTURE FOR THE CONSTRUCTION INDUSTRY. THEY SHIP PRODUCTS TO CUSTOMERS ACROSS NORTH AFRICA, THE MIDDLE EAST AND EUROPE – INCLUDING THE UNITED KINGDOM. BY THE END OF Q2 2009, CAPACITY WILL INCREASE TO 120,000 TONS OF FABRICATED STEEL ANNUALLY.

The skills and services of National Steel Fabrication (NSF) are essential in maintaining Orascom Construction’s position as Egypt’s leading contractor for power generation projects in both Egypt and Algeria, and to enable us to embark on major new projects being tendered in the UAE. The capability of NSF gives Orascom Construction a competitive edge when tendering for such demanding projects. National Steel Fabrication is investing in specialist equipment and developing the skills of their employees, particularly to meet requirements on renewable energy projects. Orascom Construction has have been looking at ways to maximize that investment and develop synergies between both businesses.

condensers and heat exchangers which serve as integral components in power plants and industrial projects. In collaboration with Babcock-Hitachi, NSF and Orascom Construction are targeting contracts for the construction of Egypt’s new super critical power plants. Bidding has started on the contracts for two new 260 mega watt plants to be built in Ain Sokhna, Egypt. PROJECT UPDATES

During Q4, NSF completed major contracts in Egypt for the El Tebbin thermal power plant, Egyptian Cement Company (line five) and Misr Beni Suef Cement Company with a total combined contract value of LE 135.7 million ($24.6 million).

In September NSF announced the signing of an agreement with Babcock-Hitachi KK of Japan for the future cooperation on the design, manufacture and erection of super critical technology boilers for power projects in Egypt. Babcock-Hitachi will be working closely with NSF to transfer technology, and share knowledge and experience. Together we aim to maximize the localization of their products and to establish a strong base for power boilers in the region.

Ongoing work in 2008 totaled the supply of over 49,000 tons of fabricated steel works from cement plants to power stations and factories to liquefied natural gas plants. NSF’s healthy backlog from early in 2008 has minimized the affects of the global credit situation and completion of these projects will take NSF billing well into 2009 with a further 45,000 tons to be supplied.

The Babcock-Hitachi agreement reflects the visions of National Steel Fabrication and Orascom Construction to continue expanding core competences in the power sector. This precedes the acquisition in 2007 of IBSF, designers and manufactures of boilers, pressure vessels,

In Egypt projects due for completion in 2009 include the Nubaria III combined cycle power plant, Cairo West thermal power plant and the Kuryamat solar power plant – the first of its kind in Egypt and a landmark contract for NSF. In Algeria, supply of steel for the construction of the fertilizer plant of Sorfert Algerié is due to be completed in June.

NEW CONTRACTS

New contract awards in 2008 totaled 40,400 tons over over 13 months. The most significant contracts being: • Supply and fabrication of locally manufactured equipment and fabrication of the steel structure for the factories of El Safwa Cement Company (Saudi Arabia) and the Syrian Cement Company. The contracts, awarded in January are worth a combined total of LE 129.6 million ($23.5 million). • Fabrication of steel structure, plate works and mechanical parts for the process building, lime kiln and pulp dryer for the sugar beet factory of the Nile Sugar Company in Alexandria. The contract was awarded in July and is valued at LE 43.6 million ($8.0 million). • Supply, fabrication and erection of steel structure, plate works, tank materials and accessories for the Terga combined cycle power plant for Sonelgaz in Algeria. The contract was awarded in August and is valued at LE 82.4 million ($15.0 million). EXPANSION

In April the Suez Industrial Development Company signed over 500,000 square meters of land in its industrial park in Ain Sokhna. The land, purchased for LE 50.0 million ($9.1 million) is now home to NSF’s new state-of-the-art workshop facility. The plant has a total capacity of 60,000 tons annually and will produce structural steel and plate works. A priority for 2009 is to get the new facility running at full capacity. Construction and equipment installation are running on schedule. Recruitment and staff training are progressing well. The facility commenced partial operation in Q4 2008, with a capacity of 1,000 tons a month. The plant should be running at full capacity by the end of Q2 2009. Total capacity, when Ain Sokhna is at full capacity, will be 120,000 tons annually.

ORASCOM CONSTRUCTION INDUSTRIES 25 ANNUAL REPORT 2008

Operational review

ALICO EGYPT

www.alicoegypt.com

DURING 2008, THE FACTORY LOCATED IN AIN SOKHNA, EGYPT, WAS REDESIGNED TO INCREASE PRODUCTIVITY AND CAPACITY AS WELL AS CREATING SPACE FOR NEW MACHINERY DUE IN 2009. IN 2008, REVENUE INCREASE BY 35% AND SALES TURNOVER INCREASED BY 10%.

Due to a healthy backlog of projects, Alico have over LE 165.0 million ($30.0 million) of contracts in progress taking them through to Q1 2010. However it is their intention to improve on the original delivery times quoted following the reorganization of their business in 2008. Projects in Egypt due for completion in 2009 include the new terminal building at Borg El Arab International Airport in Alexandria, a new headquarters building for the Arab Bank, the new regional processing centre for HSBC and new buildings for the Kuwaiti Embassy and the Embassy of the Sultanate of Oman. NEW CONTRACTS

Improving the financial and operational management of the business in 2008 was a key focus. Management teams for both areas were bolstered with the appointments of a new Chief Financial Officer, a new Technical Director and a new Operations Director. Following a review of company operations and procedures Alico have in place ambitious plans to further increase revenues by 80% in 2009. This will be done through stricter compliance with schedules, maximizing the productivity of the labor force, improvements on project and cost control procedures, increasing production capacity and expanding their product range. Alico will also be more aggressive in developing export opportunities – particularly in Algeria and Libya. EXPANSION

Alico plans to expand its product range for the industrial glass sector to meet growing demand and secure a larger market share. To aid expansion they are purchasing new machinery for aluminum and glass fabrication at a total cost of LE 5.5 million ($1.0 million). The new machinery is to add additional capacity and enhance quality. Also on order for 2009 is a new computerized numerical control machine for aluminum fabrication. This will enhance quality and production capabilities, enabling Alico to

26 ORASCOM CONSTRUCTION INDUSTRIES ANNUAL REPORT 2008

tackle more complicated projects. A new dryer for glass processing, also on order, will increase production capacity for the industrial glass sector. Alico is preparing to develop new products, including new window systems for the residential sector, to aid the construction of villas and compounds. Production of these products is expected to start in April 2009 when equipment orders and reorganization work are complete. PROJECT UPDATES

During 2008 Alico completed a prestigious contract for the new terminal three building at Cairo International Airport. This contract worth LE 60.0 million ($10.9 million) includes the supply of 20,000 square meters of glazed curtain walls, 10,000 square meters of internal partitions and more than 30,000 square meters of external aluminum cladding. At the Smart Village Cairo works were completed on the office buildings of Oracle, Mobinil, Raya Holdings, Delta Securities and the Kipling School. Also in Egypt work was completed on HSBC’s new headquarters and the French Embassy in Cairo. During the year Alico completed their first export order to Libya, for aluminum doors and windows to the Swani Hospital.

During 2008 new contracts were awarded totaling LE 120.0 million ($22.0 million) an increase of 20% on 2007. Most significantly contracts were awarded for: • February: curtain walls and windows for the new headquarters building of Beltone Financial. Value: LE 7.7 million ($1.4 million). • April: curtain walls, windows and suspended glass walls for the regional processing centre of HSBC. Value: LE 7.0 million ($1.2 million). • May: curtain walls, cladding, automatic entrance doors and architectural canopies for the Mall of Africa – a 260,000 square meter retail complex in Cairo. Value: LE 37.0 million ($6.8 million). • June: curtain walls, doors and windows for the new headquarters of EFG-Hermes. Value: LE 12.0 million ($2.2 million). • November: curtain walls, cladding and suspended glass walls for the new headquarters of BNP Paribas. Value: LE 12.6 million ($2.3 million). • December: curtain walls, decorative stainless steel structure, doors and windows for the new headquarters of the Royal Embassy of Saudi Arabia. Value LE 32.0 million ($5.8 million).

EXPANSION CAPACITY INCREASE FROM 2004–2009 (1000m2)

240 205

126 100

04

100

05

06

07

08

ORASCOM CONSTRUCTION INDUSTRIES 27 ANNUAL REPORT 2008

Operational review

CONSTRUCTION MATERIALS

www.drymixegypt.com www.scibpaints.com

28 ORASCOM CONSTRUCTION INDUSTRIES ANNUAL REPORT 2008

UNITED PAINTS AND CHEMICALS

NATIONAL PIPE COMPANY

SCIB CHEMICAL

United Paints and Chemicals manufacture and sell cement based ready mix mortars under the brand name Dry Mix. The company also has investments in Egyptian Gypsum Company, BASF CC Egypt, manufactures of chemicals for the construction industry and A-Build Egypt, a waterproofing contractor.

The National Pipe Company (NPC) is Egypt’s leading manufacturer of precast and pre-stressed concrete pipes. Pipes are primarily for water transmission pipelines and wastewater force mains applications in infrastructure projects. They have an annual capacity of 38 kilometers.

SCIB Chemical manufactures decorative paints and industrial coatings primarily for contractors across Egypt. From their factory in 6th October City they produce up to 70,000 kiloliters of paint annually. Materials are provided for projects across the country, often in conjunction with Orascom Construction.

Significant contracts awarded in 2008 include the supply of products to the Porto Marina, Porto Sokhna and El Gouna resorts in Egypt, the American University in Cairo and the Palm Hills compound in 6th October City, as well as Al Rehab City and Madinat City, both major new urban developments in New Cairo. During the year, United Paints and Chemicals launched new retail sales and distributor channels, contributing LE 12.0 million ($2.2 million) to revenue. With the appointment of a dedicated retail sales team – driving forward this side of the business is a priority. We expect to see an improvement on export sales throughout 2009 due to the appointment of a new Regional Export Manager. Business priorities for 2009 include rebranding and new marketing for Dry Mix, including specific product marketing for putty. There are also plans to improve the sales of Dry Mix decorative facade renders, as well as expanding the wider product range. Productivity will be improved in May following the installation of new mixing and packing machines, delivering small pack sizes faster will better serve the retail market.

In November, NPC was awarded a major contract by Arab Contractors for the water supply to Belbees City. During the year they were also awarded two significant contracts by the El Amr Construction Company, for the supply of piping for the water lines at the Tanta and Zefta Water Stations. Total new contract awards during 2008 were valued at LE 31.5 million ($5.8 million). In the year under review, work was ongoing for significant projects including the Al Ayat Sewage Plant and the New Cairo Water Mains. At El Sheroook City the main irrigation network was completed, as well as the intake pipelines for the Sidi Krir, El Tebbin and Nubaria power plants. In 2008 NPC supplied approximately 10.9 kilometers of concrete piping to Egyptian power plants. In August 2009 NPC will open a new production line at Badre City, Egypt. This will increase annual capacity to 86 kilometers of concrete piping annually.

ORASCOM CONSTRUCTION INDUSTRIES 29 ANNUAL REPORT 2008

Operational review

32 Suez Industrial Development Company 33 Contrack FM

PROPERTY MANAGEMENT Our investments in property management, facilities and in infrastructure concessions enable us to capitalize on business synergies across the companies that we have investments in. Orascom Construction Industries as a whole benefits from money and investment staying within the group.

30 ORASCOM CONSTRUCTION INDUSTRIES ANNUAL REPORT 2008

SUEZ INDUSTRIAL DEVELOPMENT COMPANY

Owner, developer, operator and utility facilitator of an 8.75 million square meter industrial park located in Ain Sokhna, Egypt.

CONTRACK FM

Integrated property and facilities management company providing full hard (engineering) and soft services in Egypt.

MARKETS

MARKETS

Light, medium and heavy industries, services and commercial clients.

High asset value clients operating in the financial, corporate, commercial, public, residential, academic and industrial industries.

EMPLOYEES

EMPLOYEES

91

2,200

OWNERSHIP

OWNERSHIP

60.5%

100%

Picture caption TEN YEARS OF SUCCESS

Orascom Construction has built over 50% of the Smart Village Cairo since 2000. Contrack FM now provides services to over 90% of the buildings.

ORASCOM CONSTRUCTION INDUSTRIES 31 ANNUAL REPORT 2008

Operational review

SUEZ INDUSTRIAL DEVELOPMENT COMPANY

REVENUE 2008 TOTAL REVENUE LE 141.7MILLION ($26.0 MILLION) SERVICES & UTILITIES 7%

www.sidc.com.eg LAND SALE 93%

THE SUEZ INDUSTRIAL DEVELOPMENT COMPANY OWNS AN 8.75 MILLION SQUARE METER INDUSTRIAL PARK IN AIN SOKHNA, EGYPT. DURING 2008 A TOTAL OF 991,359 SQUARE METERS OF LAND WAS SOLD, WITH 3,264,185 SQUARE METERS REMAINING FOR SALE. BASED ON CLIENT NUMBERS AND LAND SOLD, THEY LEAD THE MARKET IN THE SUEZ AREA.

Clients operating from the industrial park include four Orascom Construction Industries’ companies: Egyptian Fertilizers Company (EFC), Egypt Basic Industries Company (EBIC), Alico Egypt and National Steel Fabrication. The workshop for Orascom Construction’s precast concrete products is also located at the Suez Industrial Development Company (SIDC), as well as our mobilization unit, warehousing and workshops for all Ain Sokhna based projects. By having these companies and facilities based within SIDC’s industrial park it can benefit from business synergies. Orascom Construction Industries as a whole benefits from money staying within the group. During the year contracts were negotiated and signed with six new clients for land totaling 991,359 square meters at a combined value of LE 83.4 million ($15.3 million). The new clients, all freeholders, include DETAC (manufactures of ready mix concrete), the Egyptian Financial & Industrial Company (manufactures of phosphate-based fertilizers), Verdi for Ceramic and Porcelain Tiles and Ideal Home for Steel Fabrications (manufactures steel containers and structures).

32 ORASCOM CONSTRUCTION INDUSTRIES ANNUAL REPORT 2008

As the developer and utilities facilitator SIDC is responsible for all onsite facilities, from irrigation, roads and street lighting to water, gas, electricity and telecommunications networks. Client’s annual maintenance fee includes the provision and upkeep of all these services. Housing for employees of SIDC and its clients is also available at an additional cost.

In 2009 further improvements are planned, including landscaping, which will enhance the industrial park’s image. Water pumping station number one and electricity distributer number two will come into operation during 2009. SIDC is also preparing for construction of its new non-hazardous solid waste landfill. LOOKING AHEAD

SITE DEVELOPMENT

During the year major site developments were initiated and/or completed, including: • Phase one of the main electrical cables tunnel for new and existing clients. This was completed in January and will save future excavation, time and cost. • In February, design and coordination for the tie-ins between EBIC and EFC started. • Excavation and construction of phase two of the electrical cables tunnel started in March. • SIDC purchased a new 25 mega volt ampere electricity distributor to increase available capacity to new clients. This was installed in December. • In July, SIDC started the construction of a 500 cubic meter water tank for pumping station number one to increase water capacity. • The pipe tunnel between EBIC and EFC was completed in December – enabling ammonia and other commodities to be transferred between plants.

The current global financial situation is putting strains on the business and they expect some delays or defaults on tenants land payment installments. Minimal land sale is expected and accounted for during 2009-10. In addition SIDC’s ten year tax holiday ends in 2009 and they will start paying 20% income tax. SIDC is aiming to increase income from services and utilities, and is working on an expenses versus cash flow budget.

CONTRACK FM

REVENUE 2008 TOTAL REVENUE LE 52.7 MILLION ($9.7 MILLION) FINANCIAL 9% INDUSTRIAL 5% RESIDENTIAL 1% MEDICAL 4%

www.contrackfm.com CORPORATE 81%

CONTRACK FM PROVIDES TOTAL PROPERTY AND FACILITIES MANAGEMENT SERVICES FOR PUBLIC AND PRIVATE CLIENTS. THEY PROVIDE A RANGE OF SERVICES TO 40 CLIENTS ACROSS EGYPT. DURING 2008 THEY ACQUIRED NEW CONTRACTS TOTALING LE 70.0 MILLION ($13.0 MILLION) ANNUALLY AND TOTAL REVENUE INCREASED BY 52%.

When Contrack FM was established in 2004 to serve the Nile City Towers Investment Company and the tenants of Nile City Towers, minimal capital was invested. The company started operations with 150 employees servicing one complex. At the end of 2008 it employed 2,200 people at sites across Egypt. Most of Contrack FM’s growth has been financed from its own cash flow, which is reflected in bottom line earnings. After four years of operation, it is still reinvesting all earnings back into the business as it works to achieve its long term goal to be the leading facilities management company in Egypt and the number one facilities management choice for companies in the financial sector. Contrack FM offers total property and facility management; services include operation and maintenance of technical systems, housekeeping, janitorial, cleaning and catering services, security, landscaping and gardening and pest control, security and risk management. At a time when finances are tight, their services will maintain and add value to the physical assets of their clients.

CLIENTS AND NEW CONTRACTS

INVESTMENT

Contrack FM provides services to 40 client companies in Egypt including international clients based in the Nile City Towers complex – two 34 storey office towers with over 200,000 square meters of office space.

Contrack FM is currently working to achieve ISO 9001 accreditation for quality management and ISO 18001 accreditation for health and safety. Significant investment is taking place in the business and its employees to meet the standards required, including the implementation of Archibus, a new building management system which will improve the service offered to clients.

At the Smart Village Cairo, a 300-acre site for offices of high tech and financial businesses, Contrack FM provides services to 25 clients in 33 buildings, including the Smart Village Company which owns the site. The business park is still under construction; at year end 36 buildings were complete and inhabited. In 2008 new contracts at the Smart Village Cairo were awarded for total facility management of the new head offices of ABN-Amro Delta Bank and Egypt Post. The combined value of all Smart Village contracts is LE 3.3 million ($0.6 million) annually, and represents 20% of Contrack FM’s total revenue.

LOOKING AHEAD

A key target area in Egypt is the area of New Cairo to the south of the city, where many companies are likely to relocate head offices and commercial units. Contrack FM are also considering expansion into the Gulf region to capitalize on the business moving there.

During 2008 Contrack FM signed its first total property and facility management contract. This landmark contract was agreed with the African Export-Import Bank located in Giza. Facilities contracts were also signed for the African Development Bank and the first Egyptian offices of Mashreq Bank – a leading UAE based financial institution.

ORASCOM CONSTRUCTION INDUSTRIES 33 ANNUAL REPORT 2008

Operational review

36 38 40 42 42 42

Summary of operations Egyptian Fertilizers Company Egypt Basic Industries Corporation Sorfert Algérie Notore Chemical Industries Gavilon Group

EGYPTIAN FERTILIZERS COMPANY

EGYPT BASIC INDUSTRIES CORPORATION

The plant has capacity to manufacture 1.3 million tons of granular urea annually, increasing to 1.45 million tons in 2010. Located by Sokhna Port, it is one of the largest fertilizer exporters on the Gulf of Suez.

The plant has capacity to manufacture 700,000 tons of ammonia annually. Located by Sokhna Port, it is one of the largest fertilizer exporters on the Gulf of Suez.

MARKETS

MARKETS

Principally in Europe, North America, Africa, South America and South East Asia.

Off take agreement with Transammonia – a global fertilizer trader.

EMPLOYEES

819 OWNERSHIP

100%

EMPLOYEES

300 OWNERSHIP

60%

FERTILIZER Our fertilizer group has the most cost efficient production assets in the world and is on its way to being ranked among the world’s top five producers of nitrogen-based fertilizers. We own and operate plants located in Egypt, Algeria and Nigeria, which will have an annual combined capacity of 4.65 million tons in 2010. We also have an investment in a global fertilizer trading company.

Picture caption TEN YEARS OF SUCCESS

Extensive planning over the past six years has resulted in a reassuringly good first year of operation selling all urea produced.

34 ORASCOM CONSTRUCTION INDUSTRIES ANNUAL REPORT 2008

SORFERT ALGÉRIE

NOTORE CHEMICAL INDUSTRIES

GAVILON

When completed, the complex will have capacity to manufacture 800,000 tons of ammonia and 1.2 million tons of granular urea annually. Located in the industrial zone of Arzew, it is set to become one of the largest fertilizer exporters on the Mediterranean Sea.

The plant has capacity to manufacture 500,000 tons of granular urea annually and to blend NPK. Located in Onne, Cross Rivers State in Nigeria, it has direct access to Atlantic Ocean.

The largest independent importer of fertilizer into the USA. They provide distribution, merchandising and trading across basic agricultural commodities globally.

MARKETS

MARKETS

MARKETS

Sales strategy in progress.

Principally Nigeria and export markets.

Principally in the USA, Mexico and Africa.

EMPLOYEES

EMPLOYEES

EMPLOYEES

Staffing strategy in progress.

Staffing strategy under review.

930

OWNERSHIP

OWNERSHIP

OWNERSHIP

51%

20%

20%

ORASCOM CONSTRUCTION INDUSTRIES 35 ANNUAL REPORT 2008

Operational review

GRANULAR UREA PRICES MIDDLE EAST, FREIGHT ON BOARD ($/TON)

Q1 07

36 ORASCOM CONSTRUCTION INDUSTRIES ANNUAL REPORT 2008

Q2 08

Q3

321

324

281

302

306

387

577

752

FERTILIZER

Q4

AMMONIA PRICES

Q1 07

Q2

419 Q3

252

232

285

297

418

460

707

ARAB GULF, FREIGHT ON BOARD ($/TON)

Q4

08

ORASCOM CONSTRUCTION INDUSTRIES IS NOW A LEADING PRODUCER OF NITROGEN-BASED FERTILIZERS WITH CUSTOMERS AROUND THE WORLD. DESPITE THE GLOBAL COMMODITY SLOWDOWN, OUR FERTILIZER GROUP HAD A REASSURINGLY GOOD YEAR – SELLING ALL UREA PRODUCED AT AN AVERAGE PRICE OF $488 PER TON.

During the year, we expanded our investments in the fertilizer industry positioning ourselves to become a global leader in the sector. In February, we acquired the remainder of the Egyptian Fertilizers Company (EFC) from Abraaj Capital in a transaction which valued the enterprise at $2.7 billion. In addition to its principal urea production plant in Egypt, EFC owned a 20% stake in Notore Chemical Industries, which will operate an ammonia and urea plant in Nigeria. In July, we purchased a 20% stake in the Gavilon Group, which is a leading distributor and trader of agricultural, fertilizer and energy products based in the United States. Throughout the year, we increased our ownership stake in Egypt Basic Industries Corporation (EBIC) up to 60% from various minority shareholders. During the first half of 2008, export prices for Egyptian granular urea marched upwards to set a record high of $900 per ton. During the second half of the year, export prices dropped to below $200 per ton as traders and wholesalers experienced difficulties in obtaining trade finance and were reluctant to clear existing higher cost inventories at discounted prices. As fertilizer prices spiraled downward, our low cost production plants continued to operate at full capacity gaining market share while our competitors in Europe, Ukraine and North America announced plant shutdowns. In its first year of operation, our fertilizer group contributed 50.2% of overall net income. We are confident that our new, state-of-the-art production plants, with long term gas supply agreements at competitive prices will enable our fertilizer group to continue to outperform its peers in the current economic climate.

STRATEGY

Our goal is to become a global leader in the fertilizer industry, without losing our focus on the bottom line. It is not our strategy to become the biggest producer, or to be active in every market, or to produce every product. Our strategy is purely to become the most profitable fertilizer producer. By investing in new plants utilizing the latest production technologies in countries with competitively priced raw materials or feed stocks, we intend to position our fertilizer group as a high quality, low cost producer. By developing our distribution channels in key countries, we hope to create long term customer relationships and build a recognizable brand identity. Through implementing this strategy, we will be able to deliver value to all our stakeholders and generate exceptional returns for shareholders. BUSINESS DEVELOPMENT

Greenfield fertilizer projects leverage our construction capabilities, reducing the time and cost of development and maintenance. During 2009, we will focus on commissioning our greenfield ammonia plant in Egypt and on the timely construction of our greenfield ammonia and urea plant in Algeria. EBIC will have an annual production capacity of 700,000 tons of ammonia and is scheduled to begin full scale production in early May. Construction work on Sorfert Algérie was 47% complete at year end and is scheduled to begin urea production in late 2010. Sorfert will be able to produce 2 million tons of nitrogen fertilizer annually making it one of the largest plants in the world. It was established in partnership with Sonatrach,

Algeria’s state-owned oil and gas company, which has signed an agreement to supply gas to the plant for the next 20 years at competitive prices. We are exploring opportunities to expand activities, considering all stages of the production chain, from mining and gas supply to the manufacture of specialized fertilizer products and trading. Expansion will enable us to respond to changing market demands and maximize our production capacity. Specialized fertilizer products will allow us to capture significantly higher returns on our ammonia sales. Each of these opportunities must be highly profitable on a standalone basis before any investment is approved. As part of our product diversification strategy, we are considering downstream business opportunities using products from our existing facilities. Proposals under consideration include the production of ammonium sulphate and phosphate rock mining in Egypt, for which requests for concessions and licenses were submitted to authorities. We are also considering other opportunities in North Africa. CAPITALIZING ON BUSINESS SYNERGIES

Following the acquisition of EFC, we immediately embarked on synergy-building and cost-saving activities leveraging the proximity and location of both plants. Among other things, this integration will give EFC excess CO2 produced by EBIC, leading to an additional 100,000 tons of urea production annually by EFC. We continue to explore new debottlenecking opportunities at both EBIC and EFC in close discussion with our equipment suppliers. As our business develops, we will continue to seek further tie-ins between our facilities where geographically and economically it makes sound business sense.

ORASCOM CONSTRUCTION INDUSTRIES 37 ANNUAL REPORT 2008

Operational review

EGYPTIAN FERTILIZERS COMPANY

THE EGYPTIAN FERTILIZERS COMPANY IS THE LARGEST PRIVATE SECTOR INTEGRATED NITROGEN FERTILIZER PRODUCER IN EGYPT AND THE LARGEST EGYPTIAN EXPORTER OF FERTILIZER. WE WERE INVOLVED IN THE CONSTRUCTION OF BOTH ITS PRODUCTION LINES IN 2000 AND 2006, WE PURCHASED A 20% STAKE IN 2007 AND ACQUIRED THE ENTIRE COMPANY FROM ABRAAJ CAPITAL IN 2008.

Abraaj Capital is a leading private equity firm based in the UAE. In February, we agreed to acquire the Egyptian Fertilizers Company (EFC) for a total enterprise value of $2.7 billion and paid a combined cash and shares equity consideration of $1.59 billion. As part of that deal, we assumed $1.1 billion in net debt. Arif Naqvi, Vice Chairman and Chief Executive Officer of Abraaj Capital, also accepted a place on our Board of Directors. This investment secured us 100% ownership of EFC as well as a 20% stake in Notore Chemical Industries, which had previously been purchased by EFC. We also gained a strategic alliance with UAE based Dana Gas PJSC – the Middle East’s largest private sector natural gas company. EFC has a total annual production capacity of 1.3 million tons of urea, which is sold to customers in Europe, North America and Africa. Despite the global commodity slowdown, EFC had a record year selling all of its 1.3 million tons of urea production capacity at an average price of $488 per ton. In 2008, EFC’s production accounted for approximately 4% of the global urea traded supply.

38 ORASCOM CONSTRUCTION INDUSTRIES ANNUAL REPORT 2008

BUSINESS SYNERGIES

The EFC plant is located adjacent to the industrial park of Suez Industrial Development Company (SIDC) in Ain Sokhna and only a short distance from the Egypt Basic Industries Corporation (EBIC) plant. The close proximity of both plants enabled the management team at EFC to undertake a variety of studies to explore potential synergies with EBIC. The EFC management team identified several cost-cutting initiatives including bulk purchase of raw materials, products and services, as well as shared utilities and equipment. There are also benefits to be made in tie-ins between human resources and technology functions. Most importantly they were also able to maximize how the products and by-products of both plants are produced and used. EFC constructed an ammonia pipeline to link both plants so excess ammonia from EBIC can be supplied to EFC to boost urea production when demand requires it. It will also enable essential maintenance of EFC’s ammonia plant, without disruption of urea production. During maintenance shutdowns, EFC will temporarily get all of its ammonia supply from EBIC.

A second pipeline has been made to supply ‘waste’ CO2 from EBIC to EFC. EFC requires CO2 to produce urea. Historically the plant has extracted CO2 from natural gas. In manufacturing ammonia, EBIC would have vented its CO2 into the atmosphere. The EFC management team negotiated an agreement with EBIC to purchase its ‘waste’ CO2 in order to produce additional urea at EFC. This pipeline will reduce EFC’s gas bill, making urea cheaper to produce, and it will also reduce pollution from the EBIC plant. In addition, both plants are currently being tuned to share some utilities, primarily electricity and waste water. This not only generates savings in capital expenditure, but also allows each plant to depend on the other for backup in case of a malfunction, making our operations at both plants even more reliable.

GRANULAR UREA

2008 AVERAGE SELLING PRICE

ANNUAL CAPACITY

GRANULAR UREA

1.3MT 1.3 MILLION TONS

$

488

$488 PER TON OF UREA FREIGHT ON BOARD

ORASCOM CONSTRUCTION INDUSTRIES 39 ANNUAL REPORT 2008

Operational review

EGYPT BASIC INDUSTRIES CORPORATION

40 ORASCOM CONSTRUCTION INDUSTRIES ANNUAL REPORT 2008

ANHYDROUS AMMONIA ANNUAL CAPACITY

0.7MT 0.7 MILLION TONS

EGYPT BASIC INDUSTRIES CORPORATION WILL START FULL COMMERCIAL PRODUCTION AT ITS GREENFIELD AMMONIA PLANT IN MAY 2009. UPON COMPLETION, THE EBIC PLANT WILL BE THE LARGEST OF ITS KIND IN THE WORLD.

Egypt Basic Industries Corporation (EBIC) is constructing an export-focused greenfield $650.0 million state-of-the-art 2,000 ton per day anhydrous ammonia production plant at Ain Sokhna, Egypt. The plant utilizes Kellogg Brown & Root’s (KBR) latest and commercially proven KBR Advanced Ammonia Process (KAAP) technology. The project reached financial close in Q1 2006 and is genuinely considered to be a case study in limited recourse project finance.

Orascom Construction Industries is a 60% stakeholder in EBIC, with the balance of the equity held by KBR, government-owned EGAS, and a number of private investors.

The participation of the Export-Import Bank of the United States as guarantor for 65% of the loan facilities is considered a precedent in Egypt and gives a clear indication of the soundness of EBIC as a project model.

• The supply of natural gas was introduced to the facility in Q3 2008, which enabled six months of testing and pre-commissioning. • Major construction work was completed Q4 2008. • The plant produced its first 2,000 tons of ammonia in March 2009. • Full commercial production will commence in May 2009. • Overall project completion is due in Q3 2009 when the plant’s 60 day operational performance test is completed.

EBIC has been constructed and will be operating in partnership with some of the most reputable businesses in their respective area of expertise: • KBR: engineering, procurement and construction contractor • Transammonia: off-taker of the product • Egyptian Natural Gas Holding Company (EGAS): supplier of natural gas feedstock • DP World: export terminal operator • Société Générale: financial advisor • White and Case: project counsel • Suez Industrial Development Company: landlord and utilities’ facilitator

Orascom Construction, in partnership with KBR constructed the plant over 32 months. KBR supplied the process technology and will be responsible for the operations and maintenance of the plant.

UAN (urea ammonium nitrate), as well as many others. Marketing of the ammonia will be handled through Transammonia, which commands a 30% market share in the global ammonia trade. In the spirit of cost effectiveness and extracting synergies, EBIC and Egyptian Fertilizers Company (EFC) have concluded a product and raw materials tie-in. Among other things, this integration will allow EBIC to supply EFC with the excess CO2 produced in the manufacture of ammonia. This will be beneficial to the environment and should enable EBIC to earn carbon credits. During the first half of 2008, Orascom Construction completed the infrastructure needed at Sokhna Port to enable the shipment of liquid ammonia direct from the plant. The ammonia will be transported from the plant to two 40,000 ton port storage tanks via an 8 kilometer pipeline. The storage tanks of EBIC are unique in the region giving it marketing and vessel logistics flexibility to take advantage of scale economies in the global freight market. The geographic location of the plant and its logistics infrastructure give EBIC a unique advantage in the market place as it is a cost effective exporter to the east and west of the Suez Canal having a competitive reach from the US Gulf Coast to Japan.

At capacity, EBIC’s production will constitute approximately 5% of the global ammonia traded supply. Merchant ammonia uses include industrial fibers such as caprolactam and acrylonitrile and fertilizer uses such as urea, di ammonium phosphate, ammonium sulphate,

ORASCOM CONSTRUCTION INDUSTRIES 41 ANNUAL REPORT 2008

Operational review

FERTILIZER

www.gavilon.com www.notore.com

NOTORE CHEMICAL INDUSTRIES GRANULAR UREA, ANNUAL CAPACITY

0.5MT 0.5 MILLION TONS

42 ORASCOM CONSTRUCTION INDUSTRIES ANNUAL REPORT 2008

SORFERT ALGERIE

SORFERT ALGERIE

GRANULAR UREA, ANNUAL CAPACITY

ANHYDROUS AMMONIA, ANNUAL CAPACITY

1.2MT

0.8MT

1.2 MILLION TONS

0.8 MILLION TONS

NOTORE CHEMICAL INDUSTRIES

SORFERT ALGÉRIE

GAVILON GROUP

In February, we acquired a 20% stake in Notore Chemical Industries when we purchased all remaining shares in Egyptian Fertilizers Company.

We have a 51% stake in Sorfert Algérie in partnership with state-owned oil and gas conglomerate Sonatrach. When the $1.6 billion plant is fully operational, it will be North Africa’s largest fertilizer production facility. Anhydrous ammonia and granular urea will be exported primarily to Western Europe, North and South America.

In July we announced our investment in the acquisition of the ConAgra Trade Group, subsequently renamed the Gavilon Group LLC. We invested a total consideration of $340.0 million for an effective 20% equity stake in the business alongside Ospraie Management.

Notore Chemical Industries will manufacture granulated urea as well as specialized bulk blended NPK fertilizers – compositions of Nitrogen (N), Phosphate (P) and Potassium (P) – the three main plant nutrients. Strategically located in Onne, the plant has an abundant supply of natural gas and has enough gas allocation for an additional two production lines. Its location close to the Atlantic Ocean makes it easy to both import raw materials and service the export market. It will be the only fertilizer manufacturer in Nigeria. Notore was formed in 2005 when the company bought the assets of the National Fertilizer Company of Nigeria. During 2008 the plant has undergone a rehabilitation program to upgrade the facility and increase production capacity. Production is due to recommence during the second half of 2009.

The plant of Sorfert Algérie is scheduled for commissioning during Q4 2010. Orascom Construction, in partnership with Uhde is constructing the new complex, which is located 35 kilometers west of Oran, near three Algerian ports. Uhde is supplying the process technology. An engineering and procurement contract with Uhde GmbH and a construction contract with Orascom Construction in Algeria was signed in April 2008. However, engineering, procurement and work on site started from July 2007 through an early works agreement signed with both contractors. At year end overall progress was 47.1% complete, with engineering at 83.9%, procurement at 92.8% and construction at 23.9%.

Gavilon is headquartered in Omaha, Nebraska with 930 employees worldwide and 144 facilities on six continents. They provide physical distribution, merchandising and trading across basic inputs and outputs, including grains, feed ingredients, fertilizer and energy products. They also provide comprehensive logistical and risk-management services to customers in the agriculture and energy markets including commodity infrastructure for agricultural activities. Gavilon is the largest independent importer of fertilizer into the United States. We believe our investment in Gavilon will enable us to respond better to market price volatility by using their infrastructure to move our fertilizer products to customers around the world. We are already exploring a number of opportunities with them to ship our products to Mexico, Canada and the United States.

During the year Sonatrach entered into a 20 year gas supply agreement with Sorfert Algérie, securing the plant with competitively priced gas. The agreement will commence with the start of production, scheduled for the end of 2010. In April, Sorfert Algérie secured an Algerian Dinar denominated loan for the equivalent of €1.06 billion. The loan, with a tenor of 15 years and a grace period of three years (from the date of signing) will be used to finance 70% of the project investment cost, including the issue of a letter of credit to Uhde GmbH for the engineering and procurement contract.

ORASCOM CONSTRUCTION INDUSTRIES 43 ANNUAL REPORT 2008

Governance

46 50 52 55

Board of Directors Report of the Directors Corporate governance Management’s discussion and analysis of financial condition and results of operations 60 Report of the Audi Committee of the Board of Directors

ORASCOM CONSTRUCTION INDUSTRIES 45 ANNUAL REPORT 2008

Governance

BOARD OF DIRECTORS

46 ORASCOM CONSTRUCTION INDUSTRIES ANNUAL REPORT 2008

01

02

03

04 09

07

08

05

06 10

08 ONSI SAWIRIS CHAIRMAN 02 NASSEF SAWIRIS DIRECTOR 01 SALMAN BUTT DIRECTOR 07 OSAMA BISHAI DIRECTOR 04 KARIM CAMEL-TOUEG DIRECTOR 05 JÉRÔME GUIRAUD DIRECTOR 10 SAMI HADDAD INDEPENDENT DIRECTOR 06 ALADDIN SABA INDEPENDENT DIRECTOR 09 ARIF NAQVI INDEPENDENT DIRECTOR 03 HASSAN ABDALLA INDEPENDENT DIRECTOR

ORASCOM CONSTRUCTION INDUSTRIES 47 ANNUAL REPORT 2008

Governance

BOARD OF DIRECTORS

ONSI SAWIRIS CHAIRMAN

SALMAN BUTT DIRECTOR

Onsi Sawiris was the founder and President of Orascom Onsi Sawiris & Co, the original family partnership involved in trading and contracting. Following the Group’s incorporation the company was renamed Orascom Construction Industries and Mr Sawirs became Chairman. He is also Chairman of Orascom Trading Co and serves on the Board of Directors for Orascom Telecom Holding, Orascom Hotels and Developments and Orascom Technology Systems.

Salman Butt has held the position of Chief Financial Officer since 2005. He is an international banker with over 20 years of banking experience.

He is Chairman of AIG Egypt and Misr Exterior Bank. In May 2008, Mr Sawiris was made Commander in the Order of the Crown by His Majesty King Albert II, King of Belgium. In April 2008, he was awarded the Swedish Royal Order of the Polar Star in the presence of HRH Princess Victoria of Sweden. He has held L’Order de Léopold since November 1998, also awarded by His Majesty King Albert II, King of Belgium.

Mr Butt holds an MBA from the University of Texas at Austin, USA, and a BSc in Industrial Engineering from the Middle East Technical University, Ankara, Turkey. He was born in 1959 and is a citizen of Pakistan. He was appointed as Board Director in August 2008.

Mr Sawiris originally formed a construction company in Egypt in 1950. He founded Orascom Onsi Sawiris & Co in 1976 as a general contracting and trading company. By the early nineties, he had established Orascom as a leading private sector contractor by working in partnership with international companies pursuing projects in Egypt. He oversaw the diversification of the business and oversaw its enormous growth, creating Egypt’s largest conglomerate operating under three major brands: Orascom Construction Industries, Orascom Telecom Holding and Orascom Hotels and Developments. Onsi Sawiris holds a BSc in Engineering from Cairo University. He was born in 1930, is an Egyptian citizen and has been Chairman of the Board of Orascom Construction Industries since its incorporation in April 1998. NASSEF SAWIRIS DIRECTOR

He was Head of Investment Banking for the Samba Financial Group in Saudi Arabia from 2003-05. For 18 years prior to this he worked with Citibank in Pakistan, Hong Kong, United Kingdom, Egypt and Saudi Arabia.

OSAMA BISHAI DIRECTOR

Osama Bishai has worked for Orascom Construction Industries since 1985 and has held the position of Managing Director of the Construction Group since 1998. He played a key role in the establishment of Contrack International and in developing Orascom Construction’s business, particularly in the oil and gas sector. He led the development of the strategic construction services businesses and was heavily involved in the establishment of National Steel Fabrication. He also led the development of the company’s investments in the fertilizer industry in Egypt and Algeria. Mr Bishai holds a BSc in Structural Engineering from Cairo University and a Construction Management Diploma from the American University in Cairo. He was born in 1962 and is an Egyptian citizen. He has been a Director of Orascom Construction Industries since its incorporation in April 1998.

Nassef Sawiris is the major shareholder and the Chief Executive Officer of Orascom Construction Industries. He is a Director of the BESIX Group and of NNS Holding, a privately-owned investment group.

KARIM CAMEL-TOUEG DIRECTOR

Mr Sawiris joined the Orascom Group in 1992 and became the Chief Executive Officer of Orascom Construction Industries in 1998 ahead of its initial public offering, which was successfully completed in the second quarter of 1999. He leads the company in devising its investment strategies. He led the establishment of its cement business, investments in natural gas industries and significant geographic expansion of the construction group. Through investment in complimentary businesses, Mr Sawiris has grown the family business into an international corporation.

He is a Board member of the United States Egypt Friendship Society, one of the founding members of the United States Bahrain Business Council and a Board member and President of the Council on Egyptian American Relations.

He was appointed to the Board of Directors of Lafarge in January 2008, a company in which he has a major shareholding. Mr Sawirs served on the Board of Directors of the Cairo & Alexandria Stock Exchanges from 200407. He is now a Director of the Dubai International Financial Exchange (Nasdaq DIFC) and is a member of the Business Secretariat of the National Democratic Party, the German-Arab Chamber of Industry & Commerce and the Young President’s Organization. Nassef Sawiris holds a BA in Economics from the University of Chicago, USA. He was born in 1961 and is an Egyptian citizen. He has been a Director of Orascom Construction Industries since its incorporation in April 1998. 48 ORASCOM CONSTRUCTION INDUSTRIES ANNUAL REPORT 2008

Karim Camel-Toueg is President of Contrack Group and a Director of the BESIX Group. He joined Contrack International in 1987, became Vice President in 1990 and was appointed President in 1998.

Mr Camel-Toueg holds a BA in International Business Administration from the American University in Washington DC. He was born in 1960 and is an American citizen. He was appointed to the Board of Orascom Construction Industries in April 2003.

JÉRÔME GUIRAUD DIRECTOR

Jérôme Guiraud is the Chief Executive Officer of NNS Capital Ltd, a London based investment management company. He also serves on the Board of the French cement group, Lafarge. Prior to joining NNS Capital, he held various managerial positions within the Société Générale Group across Europe and the Mediterranean. Positions included co-Head of Equity Corporate Finance for the EEMEA region (Eastern Europe, Middle East and Africa) in London, Managing Director of NSGB (National Société Générale Bank) in Cairo and Chairman of the Executive Board of Société Générale Marocaine de Banques in Casablanca. Mr Guiraud holds an MBA from Le École des Hautes Etudes Commerciales (HEC Paris). He was born in 1961 and is a French citizen. He was appointed to the Board of Orascom Construction Industries in August 2008 and serves on the Audit Committee. SAMI HADDAD INDEPENDENT DIRECTOR

Sami Haddad is the Chairman and Chief Executive Officer of Byblos Invest Bank and a Board member of Byblos Bank. He has decades of experience in both the private and public sectors, specifically in finance, politics and academia. Mr Haddad started his career at Société Générale in Beirut, Lebanon and undertook training at the bank’s head offices in Paris, London and Brussels. In 1979 he became a part-time lecturer in Economics at the American University in Beirut while also working at the Central Bank of Lebanon. In 1981 Mr Haddad joined the International Finance Corporation, part of the World Bank Group. For more than 20 years he held a variety of positions around the world, most recently as Director of the Middle East and North Africa regions based in Cairo. In 2005 he became Minister of Economy and Trade in Lebanon, a position which he held for three years. Sami Haddad holds an MA in Economics from the American University in Beirut. He pursued his postgraduate studies as the University of WisconsinMadison. Mr Haddad was born in 1950 and is a Lebanese citizen. He was appointed to the Board of Orascom Construction Industries in August 2008. ALADDIN SABA INDEPENDENT DIRECTOR

Aladdin Saba is the founder and Chairman of Beltone Financial, an investment bank based in Cairo, operating in the fields of asset management, corporate finance, private equity, brokerage and custody. He co-founded Hermes Financial (now EFG-Hermes) and was a Senior Portfolio Manager at Kidder Peabody & Co in New York. Mr Saba is a founding member of the Egyptian Investment Management Association and the Egyptian Capital Markets Association. In addition to several international funds, he serves on the Board of Directors for several Egyptian institutions, including the Egyptian Stock Exchange, the Central Bank of Egypt and Orascom Hotels and Developments. He is also a member of the American Chamber of Commerce, the British Egyptian Business Association and the Egyptian Businessmen’s Association.

Aladdin Saba holds an MBA from The Wharton School of Business at the University of Pennsylvania, a Masters in Biomedical Engineering from the University of Pennsylvania and a BSc in Biomedical Engineering from Cairo University. He was born in 1960 and is an Egyptian citizen. Mr Saba was appointed to the Board of Orascom Construction Industries in April 2003 and is Chairman of the Audit Committee. ARIF NAQVI INDEPENDENT DIRECTOR

Arif Naqvi is the founder and Group Chief Executive Officer of Dubai based Abraaj Capital, the largest private equity firm in the Middle East, North Africa and South Asia. Previously he worked with Arthur Andersen & Co, American Express Bank, Saudi Arabia’s Olayan Group and The Cupola Group, which he founded in 1994. Mr Naqvi is a member of the Young President’s Organization, where he was the Emirates Chapter Chairman from 2002-03. He is a member of numerous think-tanks and policy groups, including the WEF Arab Business Council. He is a Board Member of the Pakistan Human Development Fund, the King Abdullah II Award for Youth Innovation & Achievement in Jordan and the Dubai Government Education Endowment Fund in the UAE. Mr Naqvi is a member of the EMPEA Advisory Council and the IMD Foundation Board. In 2007, he was awarded Pakistan’s highest civilian honor, the Sitara-e-Imtiaz, by the Republic’s President. Arif Naqvi holds a Bachelors degree from the London School of Economics. He was born in 1961 and is a citizen of Pakistan. He was appointed to the Board of Orascom Construction Industries in August 2008. HASSAN ABDALLA INDEPENDENT DIRECTOR

Hassan Abdalla is the Vice Chairman and Managing Director of the Arab African International Bank, an international bank based in Egypt. He is also a part-time faculty member of Finance at the American University in Cairo. Mr Abdalla holds positions on the Board of Directors for the Central Bank of Egypt and the Cairo and Alexandria Stock Exchanges. For the National Democratic Party in Egypt, he is Chairman of the Economic Committee and a member of the High Council for Policies. He is also a Board member of the Washington based Institute of International Finance (IIF), Vice Chairman of the German Arab Chamber of Commerce, Chairman of the Middle East, Far East and Africa Region at the International Capital Markets Association (ICMA) and member of the Executive Committee and Board of Directors of UBAF Bank, Hong Kong. Hassan Abdalla holds a BA and MA in Business Administration from the American University in Cairo. He was born in 1960 and is an Egyptian citizen. He was appointed to the Board of Orascom Construction Industries in August 2008 and serves on the Audit Committee.

ORASCOM CONSTRUCTION INDUSTRIES 49 ANNUAL REPORT 2008

Governance

REPORT OF THE DIRECTORS

The Directors of Orascom Construction Industries (OCI) present their Annual Report, together with the audited consolidated financial statements for the year ended 31 December 2008.

The dividend policy of the company is to distribute profits, after deducting the legal reserve and legally mandated employees share, in accordance with the following criteria:

PRINCIPAL ACTIVITIES AND BUSINESS REVIEW OCI is a leading construction contractor and fertilizer producer based in Cairo, Egypt. It undertakes large industrial, commercial and infrastructure construction projects for public and private customers, principally in North Africa and the Middle East. OCI also produces nitrogen-based fertilizers in Egypt for export to customers around the world.

• There should be a dividend distribution every year, and periodical

OCI is one of Egypt’s largest corporations. Shares are listed on The Egyptian Exchange (OCIC.CA/ORCI ERY) and on the London Stock Exchange (OCICql/ORSD LI) through a global depository receipts program. A review of the group business, investing activities, financial performance and future outlook, and the growth of fertilizer operations, is contained in ‘letter to shareholders’ by the Chairman and the Chief Executive Officer on pages 2-3, and in ‘management’s discussion and analysis’ on pages 55-59. EXPANSION OF FERTILIZER OPERATIONS In 2008, OCI substantially increased its investment in the fertilizer industry by acquiring 100% of Egyptian Fertilizers Company (EFC), 20% of the Gavilon Group, and increasing ownership of Egypt Basic Industries Corporation (EBIC) up to 60%. As a fertilizer producer, OCI will own and operate plants located in Egypt, Algeria and Nigeria which will have an annual combined production capacity of 4.65 million tons in 2010. At that time, OCI will become ranked among the world’s top five producers of nitrogen-based fertilizers. PROFITS AND DIVIDENDS The consolidated income statement is shown on page 65. Net income from continued operations in 2008 was $734.0 million (LE 3,998.8 million). In 2007 it was $245.0 million (LE 1,386.5 million). The net income for 2008 was $985.1 million (LE 5,366.7 million) including the gain on sale of Egyptian Container Handling Company of $265.0 million (LE 1,443.5 million). In 2007, it was $11,662.8 million (LE 66,020.9 million) including the gain on sale of cement operations of $11.001.1 million (LE 62,274.8 million). In March and June 2008, the company paid dividends totaling $11,112.7 million (LE 61,672.6 million), $55.00 (LE 305.00) per share as extraordinary dividends following the divestment of cement operations. In September 2008, the company paid another dividend in the amount of $214.8 million (LE 1,176.7 million), $1.00 (LE 5.48) per share. The Board of Directors proposed payment of a dividend in 2009 amounting to $206.9 million (LE 1,164.7 million), $1.00 (LE 5.63) per share based on 2008 results.

50 ORASCOM CONSTRUCTION INDUSTRIES ANNUAL REPORT 2008

dividends could be considered.

• There should be sufficient earnings to be retained for future operating and expansion purposes.

• There should be sufficient cash to discharge liabilities before dividend payments.

SHARE BUYBACK PROGRAM On 18 September 2008, the Board of Directors approved the launch of a share buyback program for up to 10.7 million ordinary shares representing approximately 5% of the total outstanding shares. The aim is to optimize the capital structure and to increase the earnings per share, with limited impact on the company’s ability to pursue and execute new investment opportunities. Under the share buyback program, the company had acquired 7,168,225 shares for a total amount of $280.9 million (LE 1,557.6 million) as of 31 December 2008. CORPORATE GOVERNANCE The company endeavors to observe and conducts its affairs in accordance with best corporate governance practices. A summary of the company’s policies is shown on pages 52-54. CORPORATE SOCIAL RESPONSIBILITY Information on the company’s corporate social responsibility will be presented in a separate Sustainability Report. DIRECTORS The Directors of the company who served during 2008 are listed on pages 48-49. In August 2008, Hassan Abdalla, Sami Haddad and Arif Naqvi were elected as Independent Directors, and Salman Butt (Chief Financial Officer) and Jérôme Guiraud (non-executive) were elected as Directors.

EMPLOYEES In respect of the parent company, the number of permanent employees as of 31 December 2008 was 16,482, including 747 women. The aim of the company is to attract highly qualified expertise, and to retain and reward the employees with proven skills and performance. In support of its commitment to quality and equality in employment, OCI continues to develop and implement a comprehensive compensation and benefits system based on equal pay for equal work. In addition to the basic competitive pay scheme, the company has the following employee benefits:

• An end-of-service pension plan: Effective 1 January 2008, the

•

•

•

•

•

•

company established a fund aiming at paying an end-of-service bonus to the employee upon retirement. The fund, which is in addition to the statutory pension scheme, was established with a start up contribution by the company in the amount of $11.3 million (LE 62.5 million). A training and development program: In addition to the on-the-job training, the cash payment for the structured portion of the training program amounted to $0.8 million (LE 4.5 million) (In 2007, $0.4 million (LE 2.4 million)) A medical insurance plan: All employees are covered medically inside Egypt. The company contributes 75% and the employee contributes 25%. The employees’ monthly contribution is calculated according to their grades and gender. The medical insurance cost in 2008 amounted to $1.9 million (LE 10.7 million). (In 2007, $1.1 million (LE 6.0 million)) Social insurance government-sponsored program: In 2008, the company’s share of the cost was $4.2 million (LE 23.0 million). (In 2007, $3.7 million (LE 21.0 million)) Life insurance scheme: To cover all permanent employees under 65 with life insurance protection against financial loss resulting from death or disability. The coverage is calculated as 36 times the gross salary in case of normal death, and 72 times the gross salary in case of accidental death or total disability. In 2008, the cost to the company amounted to $1.1 million (LE 6.0 million). (In 2007, $0.9 million (LE 5.0 million)) Profit sharing scheme: Employees will be granted a share in the company’s profit in accordance with legislation. The profit share in 2008, based on 2007 profits, amounted to $30.7 million (LE 172.9 million). (In 2007, $20.7 million (LE 117.0 million)) Share-based payments: The OCI stock option plan provides key employees of the parent and subsidiaries with incentive for continuity and high performance. The cost to the company up to 31 December 2008 amounted to $3.0 million (LE 16.5 million). (In 2007, $8.0 million (LE 45.1 million))

SHAREHOLDERS The shareholding structure as at 31 December 2008 was: Sawiris family 54%, Abraaj Capital 5% and public ownership 41%. The company is authorized to issue shares of up to 1% of the issued and paid in capital to implement its employee share-based payment incentive program. Information on this program is shown in note 28 to the consolidated financial statements on page 95-96. CHARITABLE DONATIONS Payments for charitable purposes made by the group during the year ended 31 December 2008 amounted to $8.5 million (LE 47.0 million). (In 2007, LE 9.0 million ($1.6 million)) The primary beneficiaries of these charitable donations were public sector institutions for building schools and qualified non-governmental organizations for social development projects. ANNUAL GENERAL MEETING The Annual General Meeting will be held at noon on 30 April 2009 at Nile City Towers, 2005A Corniche El Nil, Cairo 11221, Egypt. AUDITOR Resolution to reappoint KPMG (Hazem Hassan) as auditor and to authorize the Directors to determine its remuneration will be proposed at the Annual General Meeting. Approved by the Board ADEL BISHAI CORPORATE GOVERNANCE DIRECTOR April 2009

ORASCOM CONSTRUCTION INDUSTRIES 51 ANNUAL REPORT 2008

Governance

CORPORATE GOVERNANCE

Orascom Construction Industries (OCI) is committed to the principles of good corporate governance and has adopted Corporate Governance Guidelines in compliance with applicable laws and stock exchange regulations. The Board of Directors (“Board”) believes that good corporate governance practices align the interests of management and shareholders, thereby maximizing the profitability and long-term value of the company for shareholders, and discharges the corporate social responsibilities. The company is subject to the disclosure rules and the new listing rules set by The Egyptian Exchange* (“EGX”) and approved by the Egyptian Capital Markets Authority on 18 June 2002. The company has been in compliance with the corporate governance, financial reporting and disclosure provisions of the EGX listing rules throughout the year ended 31 December 2008. The US Securities and Exchange Commission (“SEC”) approved EGX as “designated offshore securities markets” within the meaning of rule 902(b) under regulation S of the US Securities Act of 1933 on 16 April 2003. The global depositary receipts (GDRs) of the company are listed on the London Stock Exchange (“LSE”) and the company is therefore subject to the rules of the LSE as well as the rules of the United Kingdom Listing Authority (“UKLA”) and the Financial Services Authority (“FSA”). The company has been in compliance with its continuing obligations under the UKLA listing rules throughout the year ended 31 December 2008. In July 2003, the revised Combined Code on Corporate Governance (“Combined Code”) was issued and the FSA and the UKLA have determined that the revised Combined Code will apply for reporting years beginning on or after 1 November 2003. UKLA listing rules require that companies incorporated in the United Kingdom include in their annual report and accounts an additional disclosure statement in relation to how the company applies the principles in section 1 of the Combined Code and an explanation of any non-compliance. As an overseas company with a secondary listing by the UKLA, the company is not required to present this additional disclosure statement. The shares and global depositary receipts of the company are not registered under the US Securities Act of 1933 and the company is not subject to US securities laws or the rules and listing standards of the SEC or the New York Stock Exchange (“NYSE”). In July 2002, the US Government passed the Sarbanes-Oxley Act which has introduced a number of changes to the corporate governance, disclosure and reporting requirements of US domestic and non-US registered issuers. The Sarbanes-Oxley Act codifies the view that company management should be aware of material information that is filed with regulatory authorities and released to investors, and should be held accountable for the fairness, thoroughness and accuracy of that information. In November 2003, the NYSE issued new corporate governance rules for listed companies which were approved by the SEC. The corporate governance rules issued by the NYSE allow certain exemptions for foreign private issuers and controlled companies. The company is not required to comply with the provisions of the SarbanesOxley Act or the NYSE corporate governance rules.

The Board continues to monitor developments in corporate governance and the actions taken by regulators worldwide to improve financial reporting and disclosure. The Board has reviewed the recent changes in applicable securities laws and stock exchange regulations and has concluded that the company is in compliance with all those provisions which are currently in force. In addition, the Board has chosen to make the following voluntary disclosure to assist shareholders in their evaluation of the corporate governance practices of the company. BOARD OF DIRECTORS At an Ordinary General Meeting held on 30 August 2008, the shareholders approved the election of five new Directors. The new Directors are Hassan Abdalla (Independent), Sami Haddad (Independent), Arif Naqvi (independent), Salman Butt (executive), and Jérôme Guiraud (nonexecutive). The Board, therefore, consists of ten Directors, including five non-executives of whom four are independent. The Board maintains an orientation program for new Directors. This program includes briefings by senior management to familiarize the new Directors with the company’s strategic plans, financial statements and key policies and practices. The Board also maintains a continuing education program for all Directors to assist them in carrying out their duties and responsibilities. The Board has reviewed the status of all the Directors and has determined who is to be regarded as independent. The Board has adopted a definition of “independent” which complies with the provisions set out in the Combined Code and section 303A.02 of the NYSE listing rules. The process and criteria used by the Board to determine the independence of each Director is detailed in the Corporate Governance Guidelines of the company. The Non-executive Directors are encouraged to meet privately in regular executive sessions without management participation during the year. The Non-executive Directors have elected Aladdin Saba to serve as the Senior Independent Director and lead non-management Director. The Board met eight times during the year. The Board has a formal schedule of matters reserved to them for decision which includes approval of the long-term strategic objectives and business plans of management, major corporate transactions including significant capital allocations and expenditures, and compensation of the Chief Executive Officer and Executive Officers of the company. The Directors were given appropriate documentation in advance of each Board Meeting. All Directors have had access to the services of the Company Secretary and have been empowered to seek independent professional advice at the company’s expense.

* Formally known as the Cairo and Alexandria Stock Exchanges (“CASE”).

52 ORASCOM CONSTRUCTION INDUSTRIES ANNUAL REPORT 2008

CORPORATE GOVERNANCE GUIDELINES The Board has adopted Corporate Governance Guidelines (“Guidelines”) to provide a framework for the effective governance of the company in an effort to enhance long-term shareholder value. The company has appointed a Corporate Governance Director to ensure compliance with the Guidelines. The Guidelines address several key governance issues and principles including Board responsibilities, director qualifications, director responsibilities, Board structure and operations, Board committees, executive sessions, access to management and independent advisors, director compensation, director orientation and continuing education, management evaluation and succession, Board performance evaluation, and relations with shareholders. The Guidelines are publicly available from the company’s website www.orascomci.com and a copy may be requested by shareholders from the company’s Investor Relations Officers. The Board believes the Guidelines adopted generally comply with the provisions set out in the Combined Code and Section 303A of the NYSE listing rules. BOARD COMMITTEES The Board has established three committees to assist it in discharging its oversight responsibilities: Audit, Compensation, and Nominating and Corporate Governance. The purpose and responsibilities of each committee are described in their respective charters. Members of the committees meet the independence and experience requirements to the extent required under applicable securities laws and stock exchange regulations. Committee members have access to the services of the company secretary and have been empowered to seek independent professional advice at the company’s expense. The Audit Committee consists of three Non-executive Directors and is chaired by Aladdin Saba. The Board has determined that all committee members have recent and relevant financial experience and shall be regarded as financial experts. The Audit Committee met five times during the year. the primary purpose of the Audit Committee is to (a) to assist the Board in its oversight of (i) the integrity of the company’s financial statements, (ii) the company’s compliance with legal and regulatory requirements, (iii) the independent auditor’s qualifications and independence, and (iv) the performance of the company’s internal audit function and independent auditors, and (b) to prepare and publish an annual committee report and such other reports to the extent required under any applicable securities laws and stock exchange regulations. The role and responsibilities of the Audit Committee are set out in written terms of reference, the Audit Committee Charter, and includes the appointment, compensation and retention of the independent auditor, review of the company’s interim and annual financial statements with management and the independent auditor, and review of the company’s internal control and risk management systems. The Compensation Committee consists of three Directors and is chaired by Onsi Sawiris. The Compensation Committee met three times during the year. The primary purpose of the Compensation Committee is (a) to assist the Board in its oversight of all matters relating to director and executive officer compensation and (b) to prepare and publish an annual committee report on director and executive compensation and such other reports to the extent required under any applicable securities laws and stock exchange regulations. The role and responsibilities of the Compensation

Committee are set out in written terms of reference, the Compensation Committee Charter, and includes the review, evaluation and approval of director and executive officer compensation, incentive-compensation plans and equity-based plans. In determining the compensation of the Directors and executive officers of the company, the Compensation Committee considers the company’s performance and relative shareholder return, the compensation level of Directors and executive officers at comparable companies, and the compensation of the Directors and executive officers in past years. No director is solely involved in deciding their own compensation. Executive officers do not receive additional compensation for their service as an Executive Director. Non-executive Directors receive an annual stipend and may participate in the share-based incentive program of the company. The Nominating and Corporate Governance Committee consists of three Directors and is chaired by Onsi Sawiris. The nominating and Corporate Governance Committee met three times during the year. The primary purpose of the nominating and Corporate Governance Committee is to assist the Board in (a) identifying individuals qualified to become Board members and recommending to the Board the director nominees for the next annual meeting of shareholders, (b) recommending to the Board the Director nominees for each committee of the Board, (c) developing and recommending to the Board a set of Corporate Governance Guidelines applicable to the company, (d) overseeing the evaluation of the Board and management, and (e) preparing and publishing an annual committee report on corporate governance and such other reports to the extent required under any applicable securities laws and stock exchange regulations. The role and responsibilities of the nominating and Corporate Governance Committee are set out in written terms of reference, the nominating and Corporate Governance Committee Charter, and includes determining on an annual basis the independence of each Director as may be required under any applicable securities laws and stock exchange regulations, the compliance of each Director and executive officer with the company’s code of business conduct and ethics, and such other activities as the Board may assign to the committee from time to time.

INTERNAL CONTROL AND RISK MANAGEMENT The Board confirms that there is an ongoing process for identifying, evaluating and managing the significant risks faced by the company, that the process has been in place for the year under review and up to the date of approval of the annual report and accounts, that the process is regularly reviewed by the Board and accords with the Turnbull Guidance on internal control contained in the Combined Code. The company maintains a sound system of internal controls and risk management which is embedded in its operations, is capable of responding quickly to evolving risks to the business arising from factors with the company and to changes in the business environment, and includes procedures for reporting immediately to appropriate levels of management any significant control weaknesses that are identified together with corrective action being undertaken. The company’s system is designed to manage rather than eliminate the risk of failure to achieve business objectives and can only provide reasonable and not absolute assurance against material misstatement or loss.

ORASCOM CONSTRUCTION INDUSTRIES 53 ANNUAL REPORT 2008

Governance

CORPORATE GOVERNANCE CONTINUED

INTERNAL CONTROL AND RISK MANAGEMENT CONTINUED The business of the company is conducted by its employees, managers and executive officers, under the direction of the Chief Executive Officer and the oversight of the Board, to enhance the long-term value of the company for its shareholders, and to discharge its social responsibility. The Board is elected by shareholders to oversee and counsel management. The Board acknowledges that it is responsible for the company’s system of internal controls and for reviewing its effectiveness to safeguard shareholders’ investment and the company’s assets. The Audit Committee of the Board reviews the company’s internal control and risk management systems, monitors the effectiveness of the company’s internal audit function, identifies matters in respect of which it considers that action or improvement is needed, and makes recommendations to the Board as to the steps to be taken. The Audit Committee relies on periodic reports from the company’s executive officers, senior financial managers, internal audit staff, and external auditors to obtain reasonable assurance that appropriate controls are in place and functioning effectively. The Chief Executive Officer (CEO), the Chief Financial Officer (CFO) and the General Managers of the company and its Subsidiaries are responsible for the day-to-day control of the company’s operations and for the design of internal control and risk management systems. The CEO and CFO are responsible for the disclosure of all significant deficiencies and materials weaknesses in the internal control over financial reporting and any fraud, whether or not material, which involves management to the Audit Committee and External Auditors. These executive officers also are held responsible for the preparation and integrity of the company’s published financial statements which shall fairly present in all material respects the financial condition and results of operations of the company. CODE OF BUSINESS CONDUCT AND ETHICS The Board has adopted a code of business conduct and ethics which contains the policies that relate to the legal and ethical standards of conduct that the Directors, executive Officers and employees of the company are expected to comply with while carrying out their duties and responsibilities on behalf of the company. This code is intended to focus the Board and management on areas of ethical risk, provide guidance to personnel to help them recognize and deal with ethical issues, provide mechanisms to report unethical conduct, and help to foster a culture of honesty and accountability. No code or policy can anticipate every situation that may arise. The company expects each Director, executive Officer and employee to act with honesty and integrity, to exercise independent professional judgment and to deter wrongdoing in the conduct of all duties and responsibilities on behalf of the company.

54 ORASCOM CONSTRUCTION INDUSTRIES ANNUAL REPORT 2008

RELATIONS WITH SHAREHOLDERS The Board believes that communication with shareholders, institutional investors, the financial community, the media, and other third parties is best handled by the Chief Executive Officer and designated management representatives of the company. The company operates a structured program of investor relations, based on formal announcements and publications relating to significant events and financial results, in compliance with applicable securities laws and stock exchange regulations. To ensure fair disclosure to all stakeholders at the same time, the company refrains from disclosing any information specifically designated to financial analysts, financial institutions or other parties before disclosing the information to the market as a whole. Directors, executive Officers and employees are required to maintain the confidentiality of information entrusted to them by the company or its customers, except when disclosure is authorized or legally mandated. The company has appointed Investor Relations Officers whose responsibility is to provide information and answer queries of stock exchange officials, shareholders and institutional investors. Information about the company including interim and full year financial results and other major announcements is also published on the company’s website www.orascomci.com The Chairman of the Board, Chief Executive Officer, Senior Independent Director and other authorized Directors and investor relations personnel maintain a dialogue with representatives of institutional and other shareholders regarding long-term business strategies, financial performance and corporate governance in order to establish a mutual understanding of objectives. The annual general meeting also provides an opportunity for individual shareholders to meet and communicate with the Board to develop a better understanding of the company’s operations and prospects. All Directors are expected to attend the Annual General Meeting absent exceptional cause. Shareholders who wish to communicate with the Board may correspond in writing with the Senior Independent Director at the principal office of the company. The Senior Independent Director will notify the Board or the chairperson of the relevant committee of the Board regarding those matters that are appropriate for further action or discussion. GOING CONCERN After making enquires, the Directors have formed a judgment, at the time of approving the accounts, that there is a reasonable expectation that the company has adequate resources to continue in operational existence for the foreseeable future. For this reason, the Directors continue to adopt the going concern basis in preparing the accounts.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis should be read in conjunction with the audited consolidated financial statements of Orascom Construction Industries (OCI) for the year ended 31 December 2008. These consolidated financial statements have been prepared in accordance with Egyptian Accounting Standards (EAS), which are identical to International Financial Reporting Standards (IFRS), except in the two instances indicated on page 57. OVERVIEW OCI is a leading construction contractor and fertilizer producer based in Cairo, Egypt. It undertakes large industrial, commercial and infrastructure construction projects for public and private customers, principally in North Africa and the Middle East. OCI also produces nitrogen-based fertilizers in Egypt for export to customers around the world. On 9 December 2007, the company signed an agreement with Lafarge SA (“Lafarge”) for the divestment of the OCI cement group (the “cement group”). Until 2008, OCI owned and operated cement plants in Egypt, Algeria, Turkey, Pakistan, Northern Iraq, and Spain which had a combined annual production capacity approaching 21 million tons. The cement group also made new investments in northern Iraq, Turkey, Nigeria, Algeria, the UAE, Saudi Arabia, Syria, DPRK and South Africa in order to increase its annual production capacity to 44 million tons. As part of the divestment transaction, Lafarge and OCI have agreed upon a cooperation agreement whereby both groups can continue to benefit from mutual synergies in connection with the construction and expansion of new and existing cement plants in geographic areas where OCI has a competitive advantage by virtue of its existing operational infrastructure. In addition, OCI will continue to procure its supply of basic materials at competitive prices. In 2008, we have substantially increased our investment in the fertilizer industry by acquiring 100% of Egyptian Fertilizers Company, 20% of the Gavilon Group, and increasing our ownership of Egypt Basic Industries Corporation up to 60%. As a fertilizer producer, OCI will own and operate plants located in Egypt, Algeria and Nigeria which will have an annual combined production capacity of 4.65 million tons in 2010. At that time, we will become ranked among the world’s top five producers of nitrogenbased fertilizers. The comparative figures for the year ended 31 December 2007, the results of operations of the cement group and net assets of the cement business are presented in the consolidated financial statements as “discontinued operations”. The company generates revenue from continued operations primarily from its construction services and from the sale of fertilizers. The primary expenses of the company include direct materials used in construction, natural gas used for the production of fertilizers, raw materials, labor and overheads. The major factors which have had, and are expected to continue to have, a significant impact on the results of operations and financial condition of the company are:

• The demand for construction services on large commercial, industrial and infrastructure projects in the geographical markets served.

• Changes in global fertilizer supply and demand and its impact on the selling price of our products.

• Foreign currency exchange rates. • The amount of taxes payable. Demand for construction services on large projects is affected by changes in the general state of economic activity, foreign direct investment flows, foreign aid flows and government investment incentives. The timing of awards of major construction projects can result in significant fluctuations in the company’s revenues and earnings between periods. During 2008, in spite of the global economic conditions, the company continued to have significant growth in the number and total value of projects undertaken solely by OCI or with other partners in the form of joint ventures. The backlog continues to grow, especially in the Middle East. OCI will focus on accelerating the development of its construction operations and investment in infrastructure projects. OCI has an operating urea plant in Egypt (Egyptian Fertilizers Company) and has investments in an ammonia plant in Egypt (Egypt Basic Industries Corporation), an ammonia and urea complex in Algeria (Sorfert Algérie), and a urea plant in Nigeria (Notore Chemical Industries), which are currently under construction. Selling prices of fertilizers fluctuated significantly during the year resulting in an uneven distribution of earnings. Profitability margins remained strong as production costs remained low. The People’s Assembly’s decision in May 2008 to increase the price of natural gas for energy-intensive industries will not have an impact on the company’s plants’ existing natural gas contracts, which constitute long-term gas sales agreements with prescribed gas volumes and price formulas. Senior cabinet members in the Egyptian Government confirmed that all existing contractual agreements related to natural gas supply will be honored. Thus, OCI has been assured that existing gas contracts for its subsidiaries will be honored. A substantial proportion of the company’s consolidated revenue, operating expenses and long-term debt is denominated in foreign currencies. Significant decreases in the exchange rate of the Egyptian Pound against other currencies therefore can have a materially positive effect on the reported and actual financial performance of the company. The company manages its foreign exchange cash flow risk on a consolidated basis by matching its foreign currency-denominated liabilities with continuing sources of foreign currencies. The amounts of taxes payable remained favorable as the profit tax rate in Egypt is 20%, and higher allowable depreciation rates allow the company to defer taxes. The elimination of the tax exemption on earnings at EFC and EBIC will have a material effect on future consolidated results.

ORASCOM CONSTRUCTION INDUSTRIES 55 ANNUAL REPORT 2008

Governance

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS CONTINUED

FORWARD LOOKING STATEMENTS AND RISK MANAGEMENT We discuss expectations regarding future performance, events and outcomes, such as our business outlook and objectives, in annual and quarterly reports, press releases and other written and oral communications. All such statements, except for historical and present factual information, are “forward looking statements,” and are based on financial data and our business plans available only as of the time the statements are made, which may become out of date or incomplete. We assume no obligation to update any forward looking statements as a result of new information, future events or other factors. Forward looking statements are inherently uncertain, and investors must recognize that events could be significantly different from our expectations. Highlights of our risk management are as follows: ABILITY TO ACHIEVE BUSINESS PLANS We are primarily a construction company and rely on continued demand for our services. We are also producers of fertilizers and rely on distribution of our products at favorable prices. To achieve business goals, we must develop and provide services that appeal to our customers and sell at competitive prices. Our continued success is dependent on the quality and pricing of services and operations, and on our continued positive reputation. This means we must be able to obtain and manage our resources at competitive cost. Our success is also dependent on effective marketing programs in an increasingly difficult environment and conditions. Our ability to obtain and execute contracts will determine the extent to which we are able to grow existing operations profitably, especially with respect to the types of projects and geographic markets (including developing markets) in which we have chosen to focus. There are high levels of competitive activity in the environments in which we operate. To address these challenges, we must respond to competitive factors, including pricing and industry terms, and carefully select our partners. We must manage each of these factors, as well as maintain mutually beneficial relationships with our key customers, in order to effectively compete and achieve our business plans. Since our goals include a growth component tied to acquisitions, we must manage and integrate key acquisitions, including achieving the cost and growth synergies in accordance with stated goals. COST PRESSURES Our costs are subject to fluctuations, particularly due to changes in building materials prices, raw materials, and cost of labor and foreign exchange. Therefore, our success is dependent, in part, on our continued ability to manage these fluctuations through pricing actions, cost savings, sourcing decisions and sound contracting practices. We also must manage our debt and currency exposure, especially in volatile countries. We need to maintain key manufacturing and supply arrangements, including subcontracting and sole supplier arrangements. We must implement, achieve and sustain cost improvement plans, including our outsourcing projects and those related to general overhead and workforce rationalization.

56 ORASCOM CONSTRUCTION INDUSTRIES ANNUAL REPORT 2008

GLOBAL ECONOMIC CONDITIONS Economic changes, terrorist activity and political unrest may result in business interruption, inflation, deflation or decreased demand for our products. Our success will depend in part on our ability to manage continued global political and/or economic uncertainty, especially in our significant geographic markets, as well as any political or economic disruption due to terrorist and other hostile activities. Emerging countries were not immune from the credit crisis and economic recession which began in the United States. It is almost impossible to assess the implications of the current global crisis in the near and medium-term which has resulted in volatile currencies, constraints on liquidity, credit and access to capital, decreased demand for most goods and services, and fluctuations in energy and resource prices. Banking systems in countries around the world continue to face extreme difficulties and inevitably regulators will respond by changing some of the rules of banking and finance. Our business strategies will need to be adapted in order to address the greater uncertainty and risk inherent in the current market environment. The financial condition of our company may also be affected by constraints on liquidity, tight credit and more difficult or expensive access to capital, which in turn could likely impact business operations or result in projects that cannot be pursued as planned. REGULATORY ENVIRONMENT Changes in laws, regulations and the related interpretations may alter the environment in which we do business. This includes changes in environmental, competitive and product-related laws, as well as changes in accounting standards and taxation requirements. Accordingly, our ability to manage regulatory, tax and legal matters (including product liability, and project performance), and to resolve pending matters within current estimates may impact on our results. KEY MANUFACTURING FACILITES Our fertilizer operations are reliant on a limited number of key manufacturing facilities that involve significant risks and hazards against which we may not be fully insured. Our operations are also subject to hazards inherent in the manufacturing, transportation, storage and distribution of chemical fertilizers, including ammonia, which is highly toxic and corrosive. We maintain property, business interruption and casualty insurance policies to mitigate the financial impact of unforeseen events, but we are not fully insured against all potential hazards and risks incident to our business.

PRINCIPAL ACCOUNTING POLICIES In compliance with EAS, and IFRS, we adopt the following principal accounting policies: REVENUE RECOGNITION Revenue from construction contracts is recognized in the statement of income under the percentage of completion method of accounting. In applying the percentage of completion method, the company does not recognize the value of contract change orders until these have been formally agreed to in writing with the customer, even if the actual work requested is commenced prior to the execution of such written change order. CONSTRUCTION COSTS Construction project costs include all direct material, equipment, labor, subcontract and indirect costs related to contract performance, such as indirect labor, maintenance, and applicable administrative costs. Materials, labor and equipment provided by subcontractors or joint ventures are included in revenues and costs when management believes that the company is responsible for the ultimate acceptability of the project. Changes in job performance, conditions, estimated profitability and final contract settlements may result in revisions to costs and revenue and are recognized in the period in which the facts requiring such revisions become known. Provisions for estimated losses on incomplete contracts are made in the period in which such losses are determined. Claims for additional contract revenue are recognized when realization is assured and the amount can reasonably be determined. Costs and estimated earnings in excess of billings on incomplete contracts are presented as construction projects in progress in the consolidated balance sheet. CONSTRUCTION JOINT VENTURES Construction projects, which are performed by joint ventures, are accounted for under the proportionate consolidation method. Under this method, the company’s separate financial statements include the company’s pro rata interest in the assets, liabilities, revenues and expenses of joint ventures through consolidation of these items on an item-by-item basis in the financial statements of the company. Agreements concluded between the company and the other partner in every joint venture stipulate that each party should be jointly responsible for the activities of that venture. ACQUISITION OF SUBSIDIARIES The company accounts for its investments in subsidiaries and associated companies in accordance with the purchase method of accounting. IMPACT OF INFLATION AND INTEREST RATE FLUCTUATIONS During the year under review, the consolidated results of operations and financial position of the company have not been materially affected by inflation or interest rate fluctuations.

SEASONALITY Major construction projects are not generally affected by seasonal demand fluctuations. In addition, because of the generally warm and dry climate in the areas of operations, the construction activity levels are not significantly affected by weather conditions. DIFFERENCES BETWEEN EAS AND IFRS “EAS 20” requires that, with some exceptions, all leases should be accounted for as operating leases and therefore annual lease payments by the lessee are charged to the income statement as rent expense. “IFRS 17” requires that leases which transfer substantially the benefits and risks of ownership related to the leased properties from the lessor to the lessee should be accounted for as finance leases and therefore recorded as assets of the lessee, with the lease obligations included as a liability in the balance sheet. Another difference between EAS and IFRS relates to accounting for the employees share of profits. Egyptian law requires that 10% of distributable profits are set aside for distribution to the employees, with a maximum of one year’s total salaries. While EAS treats this as a charge to equity, IFRS requires that such employee benefits are to be expensed as charges in the income statement.

RESULTS OF OPERATIONS REVENUE Consolidated revenue from continuing operations increased by 55.9% to LE 20,231.8 million ($3,713.3 million), as compared to LE 13,481.7 million ($2,381.6 million) in 2007. This growth in revenue is attributable to the increased revenue in Egypt from construction activities and from fertilizer exports, but also due to the expansion of international activities by the BESIX Group, Contrack International, OCI Algeria, and Cementech. Revenue during the year was primarily from the following major contracts: Orascom Construction projects in Egypt, Contrack projects in the Gulf area, Cementech projects, and BESIX projects in Europe, Gulf area and Africa. In 2008, OCI activities in Egypt contributed LE 3,904.7 million ($716.6 million) to the consolidated revenue from continuing operations, as compared to LE 2,567.0 million ($453.5 million) in 2007, representing 19.3% of the group’s revenue as compared to 19.0% in 2007. In 2008, revenue from fertilizer operations was LE 3,511.2 million ($644.4 million). GROSS PROFIT Gross profit from continuing operations increased by 129.0% to LE 5,090.1 million ($934.2 million), as compared to LE 2,309.3 million ($408.0 million) in 2007. The gross profit percentage of revenue increased to 25.1% in 2008, as compared to 17.1% in 2007, reflecting the type of construction contracts undertaken during the year, and higher margins of fertilizer business. Depreciation and amortization expenses are a significant component of the cost of construction and fertilizer operations. In 2008, depreciation and amortization expenses increased by 87.4% to LE 728.0 million ($133.6 million), as compared to LE 403.7 million ($71.3 million) in 2007.

ORASCOM CONSTRUCTION INDUSTRIES 57 ANNUAL REPORT 2008

Governance

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS CONTINUED

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES Selling, general and administrative expenses increased by 36.1% to LE 1,112.1 million ($204.1 million), as compared to LE 849.1 million ($150.0 million) in 2007. Selling, general and administrative expenses as a percentage of revenue increased to 5.5% in 2008, as compared to 6.3% in 2007. OPERATING PROFIT Profit from continuing operations of the company increased by 166.9% to LE 4,049.9 million ($743.3 million) in 2007, as compared to LE 1,576.2 million ($278.5 million) in 2007. The operating margin increased to 20.0% for the year, as compared to 11.7% during 2007. The increase was due principally to the higher margins of fertilizer business. NET FINANCE INCOME (COST) In 2008, the company’s net finance income amounted to LE 511.7 million ($93.9 million), as compared to net financing cost of LE 236.7 million ($48.8 million) in 2007. Net finance income (cost) consists of interest income, gain or loss on foreign exchange, and interest expense. Interest income increased by 117.9% to LE 677.8 million ($124.4 million), in 2007 LE 323.2 million ($57.1 million). Interest expense increased by 14.2% to LE 665.0 million ($122.1 million), in 2007 LE 604.8 million ($106.9 million). In 2008, the gain on foreign currency exchange increased to LE 498.9 million ($91.6 million), in 2007, LE 44.9 million ($7.9 million) primarily as a result of the gain in exchange of the US Dollar and Euro, as these currencies constitute a significant part of the group revenues. The exchange rates of LE 5.50 and LE 7.69 were used to value the monetary assets and liabilities denominated in US Dollars and Euro respectively as at 31 December 2008, as compared to LE 5.54 and LE 8.09 in 2007.

NET INCOME As a result of the foregoing, the company’s net income from continuing operations increased by 200.0% to LE 3,999.1 million ($734.0 million) in 2008 (19.8% of revenue), as compared to LE 1,386.5 million ($245.0 million) in 2007 (10.3% of revenue). Net income from discontinuing operations decreased to LE 11.4 million ($2.1 million) in 2008, as compared to LE 2,359.6 million ($416.9 million) in 2007. The consolidated net income for the year amounted to LE 5,367.1 million ($985.1 million), compared to LE 66,020.9 million ($11,664.5 million) in 2007 (which included the gain on disposal of cement operations). FINANCIAL LIQUIDITY AND CONDITION The company and its subsidiaries have three principal sources of short term liquidity: (i) existing cash and cash equivalents which at 31 December 2008 totaled LE 8,268.7 million ($1,503.4 million), as compared to LE 3,917.0 million ($706.5 million) at 31 December 2007; (ii) cash generated by operations; and (iii) short-term borrowings under credit facilities. For long-term investments, the group has access to long-term financing from international financial institutions. The company also increased its share capital during 2008. Cash is used to meet continuing operating obligations, investing activities, payment of long and short-term debt, and for distribution of profit to shareholders. The following table sets forth certain consolidated financial data concerning the liquidity and capital resources as at and for the periods indicated. Year ended 31 December 2008 In millions

INCOME FROM INVESTMENTS Income from investments decreased by to LE 2.6 million ($0.5 million), in 2007, LE 129.0 million ($22.8 million) due to lower profits of companies accounted for by the equity method. INCOME TAXES The company’s income tax expense on profit from continuing operations in 2008 amounted to LE 565.1 million ($103.7 million), as compared to LE 82.0 million ($14.5 million) in 2007. These taxes, which include current and deferred liabilities, are attributable to the continuing construction activities and to taxes on EFC profit. The effective tax rate in 2008 was 12.4%, as compared to 5.6% in 2006. The low effective rates are due primarily to the exemptions granted to the company’s foreign subsidiaries.

LE

$

LE

$

Cash and cash equivalents Beginning of year End of year

3,917.0 8,268.7

707.0 1,503.4

2,738.1 3,917.0

478.9 707.0

Net increase

4,351.7

796.4

1,178.9

228.1

3,254.6 63,839.6 (62,742.5)

595.6 11,683.7 (11,482.9)

927.1 (7,653.8) 7,905.6

179.4 (1,481.0) 1,529.7

4,351.7

796.4

1,178.9

228.1

Net cash provided by (used in) Operating activities Investing activities Financing activities Net provided

DISCONTINUED OPERATIONS Profit from discontinued operations decreased to LE 11.4 million ($2.1 million), as compared to LE 2,511.0 million ($443.6 million) in 2007. In 2007, revenue from the discontinued cement group operations was LE 8,450.5 million ($1,493.0 million), attributable primarily to sales at Egyptian Cement Company, at Algerian Cement Company, and in northern Iraq. In 2007, the gain on sale of discontinued cement operations amounted to LE 62,274.8 million ($11,001.1 million).

58 ORASCOM CONSTRUCTION INDUSTRIES ANNUAL REPORT 2008

Year ended 31 December 2007

Cash provided by continuing activities in 2008 was principally generated from income from operations and from increases in receivables, inventories and construction in progress, which were reduced by increases in payables and in billings in excess of costs and estimated profits on incomplete contracts. Cash used in investing in continuing activities in 2008 was attributable principally to the investments in the Egyptian Fertilizers Company, Gavilon Group, and expansion of steel fabrication capacity at National Steel Fabrication.

Cash provided by financing continuing activities in 2008 consisted principally of bank borrowings to finance the investments and the capital expenditures. On 19 October 2008, OCI announced that it has signed and finalized a $736.5 million five-year syndicated loan facility. The facility is structured on two equal tranches of $368.25 million. Tranche A will be a medium-term loan and tranche B a revolving credit facility. The facility will help finance future company investments.

CONSTRUCTION BACKLOG The company considers as “backlog” the revenues that the company expects to receive under contracts that have been awarded and signed. Backlog consists of uncompleted portions of engineering and construction contracts, including the company’s proportionate share of construction joint-venture contracts. 2008

The long-term and short-term debts are disclosed in note 23 to the consolidated financial statements. In June 2005, the credit rating of OCI was raised from A+ to AA-. The company’s financial instruments risks are disclosed in note 34 to the consolidated financial statements. The exchange rates used to revaluate the main foreign currency balances were as follows: Average rates

US Dollar Euro

Rates as at 31 December

US Dollar Euro

2008

2007

5.4485 8.0377

5.6608 7.7416

2008

2007

5.4998 7.6894

5.5440 8.0898

DIVIDENDS The declaration or payment of dividends by OCI is dependant in part on OCI’s financial condition, results of operations, prospects, cash flow, capital requirements and reserves, the level of dividends received from the subsidiaries, and the effect of such dividend on OCI’s tax position. In March and June 2008, the company paid dividends totaling LE 61,608.7 million ($11,112.7 million), LE 305.00 per share ($55.00 per share) as extraordinary dividends following the divestment of cement operations. In September 2008, the company paid another dividend in the amount of LE 1,176.9 million ($214.8 million), LE 5.48 per share ($1.00 per share) based on 2007 results.

In billions

2007

LE

$

%

LE

$

%

Egypt Middle East Africa Europe Asia

6.1 18.7 9.2 3.4 0.8

1.1 3.4 1.7 0.6 0.1

16 49 24 9 2

4.9 8.1 9.2 3.8 1.0

0.8 1.4 1.6 0.7 0.2

18 30 34 14 4

Total

38.1

6.9

100

27.0

4.7

100

At 31 December 2008, the construction group had unbilled work in its consolidated backlog worth LE 38.0 billion ($6.93 billion). The construction group added LE 30.3 billion ($5.5 billion) in new work during the year due in part to additional work added by OCI Algeria, Cementech and the BESIX Group. Construction work backlog which will be undertaken outside Egypt reached 84.4% at the end of the year. Of the total backlog at year end, industrial construction work represents 13.6%, commercial construction work 30.8%, and infrastructure work 55.7%. FUTURE OUTLOOK Management believes that the company will continue to demonstrate the OCI group’s ability to achieve sustainable growth in spite of the challenging market environment. Management believes it is better placed than most of its competitors to capitalize on infrastructure construction work in the emerging markets and that it will continue to outperform its peers. By continuing to forge strategic partnerships with industry leaders, investing in modern technologies, and developing the company’s human resources, management believes the company will be able to maintain its competitive advantage in its core and growth businesses and will continue to record positive financial results. Factors contributing to a positive outlook include:

• Near record construction backlog valued at $6.9 billion, 56% of which is infrastructure contracts with little risk of cancellation.

• Increased government spending on infrastructure projects in the region to stimulate their economies.

• Commissioning of our fertilizer plant of Egypt Basic Industries Corporation (EBIC) and an expected rebound of global fertilizer prices.

• Strong cash position which could be deployed for investments or acquisitions.

ORASCOM CONSTRUCTION INDUSTRIES 59 ANNUAL REPORT 2008

Governance

REPORT OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS

The Audit Committee assists the Board in fulfilling its responsibilities for general oversight of the integrity of the company’s consolidated financial statements, compliance with legal and regulatory requirements, the independent auditors’ qualifications and independence, the performance of the company’s internal audit function and independent auditors, and risk assessment and management. The Audit Committee manages the company’s relationship with its independent auditors (who report directly to the Audit Committee). The Audit Committee acts under a written charter adopted and approved by the Board, and has authority to obtain advice and assistance from outside legal, accounting or other advisors as the Audit Committee deems necessary to carry out its duties. The company’s management has responsibility for preparing the consolidated financial statements and financial reporting process, including the system of internal control. The company’s independent auditors, KPMG (Hazem Hassan), are responsible for expressing an opinion as to whether those financial statements present fairly, in all material respects, the financial position, results of operations and cash flows of the company in accordance with Egyptian Accounting Standards, which are not materially different from International Financial Reporting Standards. In this context, the Audit Committee hereby reports as follows: 1. The Audit Committee has reviewed and discussed the audited consolidated financial statements for the year ended 31 December 2008 with the company’s management. 2. The Audit Committee discussed with the independent auditors the conduct of their audit in accordance with Egyptian Auditing Standards, and compliance with legal and regulatory requirements. 3. The Audit Committee has received written confirmation of the independent auditors’ independence. 4. Based on the review and discussions referred to above, the Audit Committee recommended to the Board, and the Board has approved, that the audited consolidated financial statements be included in the 2008 Annual Report for filing with the Capital Market Authority. AUDIT COMMITTEE ALADDIN SABA JÉRÔME GUIRAUD HASSAN ABDALLA

60 ORASCOM CONSTRUCTION INDUSTRIES ANNUAL REPORT 2008

Financial statements

63 Auditor’s report 64 Director’s statement in respect of responsibility for financial reporting 65 Consolidated income statement 66 Consolidated balance sheet 68 Consolidated statement in changes in equity 70 Consolidated cash flow statement 71 Notes to the consolidated financial statements 100 Selected financial data 104 Management and corporate information Business segments and activities

ORASCOM CONSTRUCTION INDUSTRIES 61 ANNUAL REPORT 2008

62 ORASCOM CONSTRUCTION INDUSTRIES ANNUAL REPORT 2008

Financial statements

AUDITOR’S REPORT

TO THE SHAREHOLDERS OF ORASCOM CONSTRUCTION INDUSTRIES We have audited the accompanying consolidated financial statements of Orascom Construction Industries (OCI) “Egyptian Joint Stock Company”, which comprise the consolidated balance sheet as at 31 December 2008, and the consolidated income statement, statement of changes in equity and cash flows statement for the year then ended, and a summary of significant accounting policies and other explanatory notes. MANAGEMENT’S RESPONSIBILITY FOR THE FINANCIAL STATEMENTS Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with the Egyptian Accounting Standards and in the light of provisions of applicable Egyptian laws. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. AUDITOR’S RESPONSIBILITY Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We did not audit the financial statements of some of the company’s subsidiaries, which statements reflect total assets amounted to approximately LE 7.7 billion and total revenues amounted to approximately LE 10.0 billion, of the related consolidated totals. Those statements were audited by other auditors whose reports have been furnished to us, and our opinion, in so far as it relates to the amounts included for the said subsidiaries, is based solely on the reports of those auditors. We conducted our audit in accordance with Egyptian standards on auditing and in the light of provisions of applicable Egyptian laws. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Company’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained and the reports of other auditors are sufficient and appropriate to provide a basis for our audit opinion. OPINION In our opinion, based on our audit and the reports of the other auditors, the consolidated financial statements referred to above present fairly, in all material respects the consolidated financial position of Orascom Construction Industries “Egyptian Joint Stock Company” as of 31 December 2008, and of its financial performance and its consolidated cash flows for the year then ended in accordance with Egyptian Accounting Standards and comply with the related applicable Egyptian laws and regulations relating to the preparation of these financial statements.

KPMG HAZEM HASSAN PUBLIC ACCOUNTANTS & CONSULTANTS 14 April 2009

ORASCOM CONSTRUCTION INDUSTRIES 63 ANNUAL REPORT 2008

Financial statements

DIRECTORS’ STATEMENT IN RESPECT OF RESPONSIBILITY FOR FINANCIAL REPORTING

The Directors are responsible for the preparation and integrity of the Annual Report and the consolidated financial statements of Orascom Construction Industries (OCI), in accordance with applicable laws and regulations. Company law requires the Directors to prepare consolidated and company financial statements for each year. The consolidated financial statements have been prepared in accordance with Egyptian Accounting Standards, which are not materially different from International Accounting Standards. These consolidated the financial statements present fairly the financial position and results of operations of the group. As such, the consolidated financial statements include certain amounts that are estimates based upon currently available information and management judgment of current conditions and circumstances. The Directors are responsible also for the other information included in the annual and interim reports and for their accuracy and consistency with the consolidated financial statements. The annual financial statements have been audited by the independent accounting firm, KPMG (Hazem Hassan), which was given unrestricted access to all financial records and recorded data, including minutes of all the meetings of the Board of Directors and committees of the Board. The company maintains a system of internal control over financial reporting, which is intended to provide reasonable assurance to the company’s management and Board of Directors regarding the preparation of the consolidated financial statements. The system includes a documented organizational structure and division of responsibility, established policies and procedures, and the careful selection and development of staff. Internal auditors monitor the operation of the internal control system and report findings and recommendations to management and the Audit Committee of the Board of Directors. Corrective actions are taken to control deficiencies and other opportunities for improving the system as they are identified.

64 ORASCOM CONSTRUCTION INDUSTRIES ANNUAL REPORT 2008

The Audit Committee, which is composed of majority independent directors, meets periodically with management, the internal auditors and the independent auditors to review the manner in which these groups are performing their responsibilities and to carry out the Audit Committee’s oversight role with respect to auditing, internal controls and financial reporting matters. There are inherent limitations in the effectiveness of any system of internal control, including the possibility of human error and the circumvention or overriding of controls. Accordingly, even an effective internal control system can provide only reasonable assurance with respect to financial statement preparation. Furthermore, the effectiveness of an internal control system may change over time. Management assessed the company’s internal control system in relation to criteria for effective internal control over financial statement preparation. Based upon that assessment, the Directors believe that, as of 31 December 2008, its system of internal control over financial statement preparation met those criteria.

CONSOLIDATED INCOME STATEMENT YEARS ENDED 31 DECEMBER

2008

2007

LE million

LE million

20,252.6 (14,952.4) 5,300.2

13,147.9 (10,975.0) 2,172.9

64.1 (1,092.8) (201.1) 4,070.4

119.4 (740.7) (82.2) 1,469.4

676.9 (668.4) 494.0 502.5 1.8 4,574.7 (575.9) 3,998.8

323.0 (576.7) 46.5 (207.2) 129.0 1,391.2 (82.0) 1,309.2

11.4 1,433.5 1,444.9 5,443.7

2,545.7 62,274.8 64,820.5 66,129.7

Attributable to: Minority interest Equity holders of the Company

77.0 5,366.7

108.8 66,020.9

Net profit for the year

5,443.7

66,129.7

Notes

Continuing operations Revenue Cost Gross profit Add (less) Other operating income Selling, general and administrative expenses Provision for claims and doubtful debts Operating profit Interest income Interest expense Gain on foreign currency exchange Net finance income (cost) Investments income Income before taxes Income tax expense Net profit from continuing operations Discontinued operations Results from discontinued operations (net of tax) Gain on sale of investment Net profit from discontinued operations Net profit for the year

(26)

(27)

(6) (6)

Earnings per share (LE)

(30)

25.8

327.7

EPS from continuing operations (LE)

(30)

18.9

5.1

The accompanying notes form an integral part of the financial statements.

ORASCOM CONSTRUCTION INDUSTRIES 65 ANNUAL REPORT 2008

Financial statements

CONSOLIDATED BALANCE SHEET YEARS ENDED 31 DECEMBER

ASSETS Non-current assets Property, plant and equipment Payments for purchase of investments Intangible assets Investment in associated companies Investments available for sale Deferred tax assets Long-term receivables Total non-current assets Current assets Inventories Marketable securities Trade and other receivables Receivable on sale of discontinued cement operations Due from clients Cash on hand and at banks Assets held for sale Total current assets Total assets

The accompanying notes form an integral part of the financial statements.

66 ORASCOM CONSTRUCTION INDUSTRIES ANNUAL REPORT 2008

2008

2007

Notes

LE million

LE million

(9) (11) (12) (13)

9,912.3 2,784.8 9,910.0 135.6 132.6 36.0 255.2 23,166.5

3,473.4 554.8 64.8 1,013.1 8.3 21.5 76.3 5,212.2

(14)

1,462.1 163.2 8,236.2 1,193.8 8,268.7 535.0 19,859.0

734.3 72.2 5,410.2 77,266.8 766.0 3,917.0 1,573.3 89,739.8

43,025.5

94,952.0

(15) (6) (16) (17)

CONSOLIDATED BALANCE SHEET CONTINUED YEARS ENDED 31 DECEMBER

EQUITY Shareholders' equity Share capital Legal reserve Other reserves Retained earnings Cumulative adjustment on translation of foreign companies Treasury stock Total shareholders' equity

2008

2007

Notes

LE million

LE million

(18) (19) (19)

1,073.9 505.0 5,678.4 11,851.0 (85.7) (1,667.9) 17,354.7

1,010.0 505.0 1,774.6 69,640.0 11.8 (94.4) 72,847.0

(21)

Minority interest in subsidiary companies

226.7

1,048.8

17,581.4

73,895.8

(22) (23) (24)

7,754.1 1,891.4 613.4 506.6 10,765.5

1,034.9 1,982.3 586.0 103.2 3,706.4

(22) (25) (16) (23)

3,670.6 8,317.9 1,599.7 633.7 456.7 -

10,647.7 4,621.1 907.4 324.8 87.5 761.3

Total current liabilities

14,678.6

17,349.8

Total liabilities

25,444.1

21,056.2

Total equity and liabilities

43,025.5

94,952.0

Total equity LIABILITIES Non-current liabilities Long-term loans Provisions Other long-term liabilities Deferred tax liabilities Total non-current liabilities Current liabilities Bank overdraft and current portion of long-term loans Trade and other payables Due to clients Provisions Income taxes payable Liabilities related to assets held for sale

The accompanying notes form an integral part of the financial statements.

ONSI SAWIRIS CHAIRMAN

NASSEF SAWIRIS CHIEF EXECUTIVE OFFICER

SALMAN BUTT CHIEF FINANCIAL OFFICER

ORASCOM CONSTRUCTION INDUSTRIES 67 ANNUAL REPORT 2008

Financial statements

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY YEAR ENDED 31 DECEMBER 2008

Share capital

Legal reserve

LE million

LE million

Balance at 31/12/06 Amounts related to discontinued cement operations Net income for the year 2007 Transactions of treasury stock by OCI ESOP Limited Hedge reserve Deficit in ESOP share option plan Adjustments Distribution of cash dividends to shareholders Employees share of profits 2006 Changes in translation of foreign companies Net change in minority interest in subsidiaries during the year

1,010.0 -

505.0 -

Balance at 31/12/07 Amounts related to Egyptian Container Handling Company discontinuation Change to proportionate consolidation of a subsidiary Capital increase at fair value Net income for the year 2008 Hedge reserve Adjustments Dividends to shareholders Transactions of treasury stock by OCI and OCI ESOP Limited Profits from sale of treasury stock Employees share of profits 2007 Changes in translation of foreign companies Net change in minority interest in subsidiaries during the year

1,010.0 63.9

505.0 -

-

-

Notes

Balance at 31/12/08

The accompanying notes form an integral part of the financial statements.

68 ORASCOM CONSTRUCTION INDUSTRIES ANNUAL REPORT 2008

(20) (29)

-

-

-

-

1,073.9

505.0

Other reserves

Retained earnings

Cumulative adjustment on translation of foreign companies

Treasury stock

Total shareholders’ equity

Minority interest

Total equity

LE million

LE million

LE million

LE million

LE million

LE million

LE million

1,804.2 (29.6) -

5,336.4 66,020.9 (457.1) (32.2) (1,111.0) (117.0) -

152.6 (151.4) 10.6 -

(136.5) 42.1 -

8,671.7 (151.4) 66,020.9 42.1 (29.6) (457.1) (32.2) (1,111.0) (117.0) 10.6 -

2,488.4 (1,060.3) 151.4 (875.5) 344.8

11,160.1 (1,211.7) 66,172.3 42.1 (29.6) (457.1) (32.2) (1,986.5) (117.0) 10.6 344.8

1,774.6 3,869.9 (54.0) 87.9 -

69,640.0 5,366.7 (445.2) (62,549.0) 18.0 (179.5) -

11.8 (97.5) -

(94.4) (1,573.5) -

72,847.0 3,933.8 5,366.7 (54.0) (445.2) (62,549.0) (1,573.5) 18.0 (179.5) (9.6) -

1,048.8 (232.8) (567.4) 77.0 (98.9)

73,895.8 (232.8) (567.4) 3,933.8 5,443.7 (54.0) (445.2) (62,549.0) (1,573.5) 18.0 (179.5) (9.6) (98.9)

5,678.4

11,851.0

(85.7)

(1,667.9)

17,354.7

226.7

17,581.4

ORASCOM CONSTRUCTION INDUSTRIES 69 ANNUAL REPORT 2008

Financial statements

CONSOLIDATED CASH FLOW STATEMENT YEARS ENDED 31 DECEMBER

2008

2007

LE million

LE million

5,366.7

66,020.9

730.5 245.3 (8.5) (1.8) (15.0) (1,433.5) (9.6) 575.9 5,450.0 (20.6) (549.1) (2,593.9) (427.8) (142.9) 838.1 692.3 (668.4) 676.9 3,254.6

924.0 198.2 281.6 (129.0) (9.1) (62,274.8) (124.4) 82.0 4,969.4 (667.9) (2,249.5) (84.0) 137.5 (917.9) 21.1 (604.8) 323.2 927.1

Cash flows from investing activities Proceeds from sale of property, plant and equipment Payments for the purchase of property, plant and equipment Payments for purchase of intangible assets Proceeds from sale of Egyptian Container Handling Company Proceeds from sale of cement segment* Payments for purchase of long-term investments, net Net cash provided by (used in) investing activities

243.3 (3,198.4) (77.1) 1,741.5 77,266.8 (12,136.5) 63,839.6

244.1 (6,728.2) (1,169.7) (7,653.8)

Cash flows from financing activities (Payment of) proceeds from treasury stock, net (Payments of) proceeds from bank overdraft and loans Increase (decrease ) in long-term liabilities, net Changes in minority interest Cash dividends to shareholders Injection of capital (at fair value) Net cash (used in) provided by financing activities Net increase in cash and cash equivalents Cash on hand and at banks at the beginning of the year Cash on hand and at banks at the end of the year Blocked funds

(1,573.5) (2,693.1) 161.1 (21.8) (62,549.0) 3,933.8 (62,742.5) 4,351.7 3,917.0 8,268.7 (598.1)

166.5 8,575.5 (43.1) 317.7 (1,111.0) 7,905.6 1,178.9 2,738.1 3,917.0 (31.3)

7,670.6

3,885.7

Notes

Cash flows from operating activities Net income attributable to equity holders Adjustments to reconcile net income for the year to net cash provided by operating activities Depreciation and amortization Increase in provisions for claims and impairment of debts Interest expenses (income) Income from investments Gain on sale of property, plant and equipment Gain on sale of investment in discontinued operations (Gain) loss on translation of foreign companies and translation adjustments Income tax expense Income from operating activities before changes in working capital Provisions used Changes in inventories Changes in trade and other receivables Changes in due from clients Changes in assets held for sale Changes in trade and other payables Changes in due to clients Interest expenses paid Interest income received Net cash provided by operating activities

Cash and cash equivalents at the end of the year

* Includes net cash flow of discontinued operations as explained in note 6. The accompanying notes form an integral part of the financial statements. 70 ORASCOM CONSTRUCTION INDUSTRIES ANNUAL REPORT 2008

(26) (6) (27)

(29) (18)

(17) (17)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEAR ENDED 31 DECEMBER

1 GENERAL Orascom Construction Industries Company was recorded in the commercial register as an Egyptian Joint Stock company on 30 March 1998 according to Law number 159 for the year 1981. The Company’s articles of association were published in the Companies Gazette issue number 658 in April 1998. The Company’s purpose is contracting, manufacturing, supply and installation of machinery, equipment, tools, materials and supplies required for construction activities, the undertaking of infrastructure works and the engineering and technical consultation required for projects being implemented by the Company as well as importing necessary equipment and instruments. The Company’s purpose also includes import and export activities, and leasing equipments. Orascom Construction Industries Company – hereafter referred to as the “Company” or “OCI” – consolidated financial statements of the Company comprise the Company and its subsidiaries (together referred to as the “Group”) and the Group’s interest in associates and jointly controlled entities. The Group is involved primarily in construction and fertilizer industries as the cement business was sold as described in note 6 to the consolidated financial statements. OCI owns directly the following consolidated subsidiaries: Subsidiary

OCI International Cyprus OCI Finance Limited Orascom Construction Industries Algeria Orascom Construction Industries Nigeria Orascom Industrial Investments Orascom Construction Industries Egypt National Steel Fabrication Egyptian Fertilizers Company Orascom Roads Company Suez Industrial Development Company Sorfert Algérie Company OCI BESIX Alico Egypt

31/12/2008

31/12/2007

% of ownership

% of ownership

100.0% 100.0% 99.9% 99.9% 99.9% 99.9% 49.9% 99.9% 99.9% 60.5% 50.9% 50.0% 50.0%

100.0% 100.0% 99.9% 99.9% 99.9% 99.9% 49.9% 89.9% 60.5% 50.9% 50.0% 50.0%

ORASCOM CONSTRUCTION INDUSTRIES 71 ANNUAL REPORT 2008

Financial statements

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

2 BASIS OF PREPARATION STATEMENT OF COMPLIANCE The consolidated financial statements include the financial statements for all subsidiaries that are controlled by Orascom Construction Industries Company (“the Group”). The financial statements of the parent and its subsidiaries are prepared in accordance with Egyptian Accounting Standards and applicable Egyptian laws and regulations. The consolidated financial statements were authorized for issuance by the Board of Directors on 14 April 2009. BASIS OF MEASUREMENT The consolidated financial statements have been prepared on the historical cost basis except for derivative financial instruments, financial instruments at fair value through profit and loss, and available for sale financial assets, which are measured at fair values. The methods used to measure fair values are discussed further in the notes below. FUNCTIONAL AND REPORTING CURRENCIES These consolidated financial statements are presented in Egyptian Pounds (LE); the company’s Board of Directors changed the Company’s functional currency to US Dollars ($) starting 01/10/08. The change was made as the US Dollar is now the currency that influences the revenues of the Company and its financing. The presentation currency remains the Egyptian Pounds as the local regulations require the Company to maintain its share capital in Egyptian Pounds. All the amounts presented to the nearest million Egyptian Pounds. USE OF ESTIMATES AND JUDGMENTS The preparation of the financial statements requires management to make judgments, estimates and assumptions that affect reported amounts of assets and liabilities, income and expenses during the financial years. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised and in any future periods affected. In particular, information about significant areas of estimation uncertainty and critical judgments in applying accounting policies that have the most significant effect on the amount recognized in the financial statements are described in the following notes: Note 10 Note 12 Note 16 Note 23 Note 28 Note 31 Note 34

Leased assets Intangible assets Construction contracts in progress Provisions Share-based payments Contingent liabilities Financial instruments risks

3 SIGNIFICANT ACCOUNTING POLICIES The following accounting policies are applied constantly in the preparation of the consolidated financial statements and during all financial years in which the consolidated financial statements are presented. The same accounting policies are also applied constantly in the subsidiaries’ and associates’ financial statements.

72 ORASCOM CONSTRUCTION INDUSTRIES ANNUAL REPORT 2008

3.1 BASIS OF CONSOLIDATION SUBSIDIARIES Subsidiaries are entities controlled by the Group. Control exists when the Group has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing the extent of control, current and potential voting rights that presently are exercisable are taken into consideration. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases. The accounting policies of the subsidiaries are modified where necessary to conform to the accounting policies of the Group. ASSOCIATES Associates are those entities in which the Group has significant influence, but not control, over the financial and operating policies. Significant influence exists when the Company owns 20%-50% of the voting shares of any company. Associates are accounted for using the equity method; but recorded initially at cost. The consolidated financial statements include the Group’s share of the income and expenses of equity accounted investees, after adjustments to align the accounting policies with those of the Group, from the date that the significant influence commences until the date that significant influence ceases. JOINT VENTURES Joint ventures are those entities over whose activities the Group has joint control, established by the contractual agreements and requiring unanimous consent for strategic financial and operating decisions. Joint ventures are accounted for using the proportionate consolidation method. TRANSACTIONS ELIMINATED ON CONSOLIDATION Intra-Group balances, and any unrealized income and expenses arising from intra-Group transactions, are eliminated in preparing the consolidated financial statements. Unrealized gains arising from transactions with equity accounted investees are eliminated against the investment to the extent of the Group’s interest in the investee. Unrealized losses are eliminated in the same way as unrealized gains, but only to the extent that there is no evidence of impairment.

3.2 FOREIGN CURRENCY FOREIGN CURRENCY TRANSACTIONS Transactions in foreign currencies are translated to the respective functional currencies of Group entities at the exchange rates at the transaction date. Monetary assets and liabilities denominated in foreign currencies, at the reporting date are retranslated to the functional currency at the exchange rate at that date. Foreign currency differences arising on retranslation are recognized in profit or loss. FOREIGN OPERATIONS The assets and liabilities of foreign operations are translated to US Dollars at exchange rates at the reporting date. The income and expenses of foreign operations are translated to US Dollars at the exchange rates at the dates of transactions. Foreign currency differences are recognized directly in equity.

ORASCOM CONSTRUCTION INDUSTRIES 73 ANNUAL REPORT 2008

Financial statements

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

3.3 FINANCIAL INSTRUMENTS NON DERIVATIVE FINANCIAL INSTRUMENTS Non-derivative financial instruments comprise cash and cash equivalents, investments in equity, trade and other receivables, loans and borrowings, and trade and other payables. Short-term debtors and creditors are recognized at their nominal value. Non-derivative financial instruments are recognized initially at fair value, plus for instruments not at fair value through profit or loss, any directly attributable transactions costs. After initial recognition the non-derivative financial instruments are re-measured as discussed later. CASH AND CASH EQUIVALENTS Cash and cash equivalents comprise cash balances, balances of banks current accounts, and time deposits with banks for less than three months. Bank overdrafts that are repayable on demand and form an integral part of the Group’s cash management are included as a component of cash and cash equivalents for the purpose of preparing the statement of cash flows. INVESTMENT IN ASSOCIATED COMPANIES Investments in associated companies are recognized at cost and recorded by the equity method. In case of impairment, the carrying amount of the investment is reduced and the impairment loss is charged to the consolidated income statement. When the Group’s share of losses exceeds its interest in an equity accounted investee, the carrying amount of that interest (including any long-term investments) is reduced to nil and the recognition of further losses is discontinued except to the extent that the Group has an obligation or has made payments on behalf of the investee. INVESTMENTS AVAILABLE FOR SALE The Group’s investments in equity securities, other than investment in associated companies, which are classified as available for sale, are recorded initially at cost. Investments available for sale that are listed in a stock exchange are re-measured at fair values at the end of each reporting period; and changes therein, other than impairment losses, are recognized in equity. When the investment is derecognized, the cumulative gain or loss in equity is transferred to the consolidated income statement. Investments which are not listed at stock exchanges are re-measured at historical value after reducing any impairment losses. INVESTMENT IN MARKETABLE SECURITIES Investments held for trading or is designated as such are recorded initially at cost. After initial recognition, transaction costs are recognized in profit or loss when incurred. These investments are re-measured at fair values (market values) at the end of each reporting period, and changes therein are recognized in the consolidated income statement. DERIVATIVE FINANCIAL INSTRUMENTS The Group is exposed to risks relating to currency exchange fluctuations, and to changes in interest rates. The Group does not use derivative financial instruments for speculative purposes. Derivative financial instruments are recognized initially at fair value. Changes in the fair value of hedging financial instruments are recognized directly in equity to the extent that the hedge is effective. Financial assets are derecognized if the Group’s contractual rights to the cash flows from the financial assets expire or if the Group transfers the financial asset to another party without retaining control or substantially all risks and rewards of the asset. SHARE CAPITAL Share capital is recorded at cost in shareholders’ equity. TREASURY STOCK Repurchased shares of the Company are classified as treasury shares and are presented as a deduction from shareholders’ equity at their acquisition cost. When treasury shares are sold or reissued subsequently, the amount received is recognized as an increase in equity net of surplus or deficit on the transaction.

74 ORASCOM CONSTRUCTION INDUSTRIES ANNUAL REPORT 2008

3.4 PROPERTY, PLANT AND EQUIPMENT RECOGNITION AND MEASUREMENT Items of property, plant and equipment are measured at cost less accumulated depreciation and impairment loss at the reporting date (see note 3.10). Cost includes expenditure that is directly attributable to the acquisition of the asset. The cost of self constructed assets include material, direct labor and other cost incurred to bring the asset ready to its intended use, as well as any expected cost to remove the asset at the end of its useful lives and restore the site to its original condition. When parts of property, plant and equipment have different useful lives, they are accounted for as separate items (major components) of property, plant and equipment. GAIN AND LOSS ON DISPOSAL Gain and loss on disposal of property, plant and equipment, resulting from the difference between the proceeds of disposal and the net book values, are recognized net within “other operating income (expense)” in the consolidated income statement. SUBSEQUENT COSTS The cost of replacing part of an item of property, plant and equipment is recognized in the carrying amount of the item if it is probable that the future economic benefits embodied within the part will flow to the Group and its cost can be measured reliably. The carrying amount of the replaced part is derecognized. The costs of day to day servicing of property, plant and equipment are recognized in the consolidated income statement as incurred. DEPRECIATION Depreciation is recognized in profit or loss on a straight line basis over the estimated useful lives of each part of property plant and equipment. Assets leased to third parties are depreciated over the shorter of the lease term and their useful lives. The estimated useful lives for the current and comparative years are as follows: Type of Asset Buildings Machinery and equipment Furniture and office equipment Vehicles Information systems Tools and supplies

Years

2.0-50.0 3.0-25.0 2.0-16.0 4.0-5.0 2.0-7.0 1.5-10.0

Depreciation methods, useful lives and residual values are reviewed at each reporting date. LEASED ASSETS Agreements for assets leased from third parties are accounted for as operating leases in accordance with Egyptian Accounting Standards. Rent payable on operating leases is charged in the income statement on a straight line basis over the term of the lease. BORROWING COSTS CAPITALIZATION Interest and commissions on credit facilities and loans that are directly attributable to the acquisition, construction or production of qualifying assets are capitalized as part of the cost of those assets till the date of availability for use. All borrowing costs that do not meet the capitalization criteria are recognized as expense in the consolidated income statement as incurred.

ORASCOM CONSTRUCTION INDUSTRIES 75 ANNUAL REPORT 2008

Financial statements

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

3.5 INTANGIBLE ASSETS GOODWILL Goodwill arises on the acquisition of subsidiaries, associates and joint ventures. Goodwill represents the excess of the cost of acquisition over the Group’s interest in the net fair value of identifiable assets, liabilities and contingent liabilities of the entity acquired. Goodwill is recorded at cost less any accumulated impairment losses. When the excess is negative, it is recognized in the consolidated income statement. In respect of accounting for investment in associated companies, the carrying amount of goodwill is included in the carrying amount of the investment.

3.6 OTHER INTANGIBLE ASSETS Other intangible assets that are acquired by the Group, which have finite useful lives, are measured at cost less accumulated amortization and accumulated impairment losses. Costs incurred subsequent to acquisition are capitalized when there is sufficient evidence of future benefit from the acquisition; other costs are expensed in the income statement as incurred. Amortization is recognized in the income statement on a straight line basis over the estimated useful lives, other than goodwill, from the date they are available for use.

3.7 INVENTORIES Inventories are measured at the lower of cost and net realizable value. An inventory of raw materials, spare parts and supplies cost are based on weighted average principle or the first in first out method, and includes expenditure incurred in acquiring the inventories and bringing them to their existing location and condition. In case of manufactured inventories and work in progress, cost includes an appropriate share of production overheads based on normal operating capacity. Net realizable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses.

3.8 CONSTRUCTION CONTRACTS Construction project costs (due from clients) are costs of completed work but not billed to clients awaiting approval and expected to be collected in accordance with the contract. Construction project costs include all direct costs, such as materials, supplies, equipment depreciation and labor, as well as indirect costs of the Group such as indirect labor and maintenance. Construction project costs also include general and administrative expenses directly related to these projects. Provisions for estimated losses on incomplete contracts are made in the period in which such losses are determined. The excess of construction project costs and estimated profits over billings is recognized as (due from clients) under current assets in the consolidated balance sheet. Billings in excess of cost of estimated earnings on incomplete contracts are recognized as (due to clients) under current liabilities.

3.9 ASSETS HELD FOR SALE Properties held for sale that are expected to be principally recovered through the sale rather than through the continuing use are classified as assets held for sale. Immediately before classification as held for sale, the assets are re-measured in accordance with the Group accounting policies. Thereafter, generally the assets are measured at the lower of their carrying amount and fair value less cost to sell. Impairment loss on initial recognition as held for sale are allocated at first to goodwill and the balance proportionately to other assets and liabilities, except inventories, financial assets, deferred tax assets, and assets related to employee pensions. Subsequent impairment losses are charged to the income statement. Subsequent gains are not credited in the income statement to the extent that the gain is in excess of cumulative impairment losses.

76 ORASCOM CONSTRUCTION INDUSTRIES ANNUAL REPORT 2008

3.10 IMPAIRMENT OF ASSETS FINANCIAL ASSETS A financial asset is assessed at each reporting date to determine whether there is any objective evidence that it is impaired. A financial asset is considered to be impaired if objective evidence indicates that one or more events have had a negative effect on the estimated future cash flows of that asset. An impairment loss in respect of a financial asset measured at amortized cost is calculated as the difference between its carrying amount, and the present value of the estimated future cash flows discounted at the original effective interest rate. Individually significant financial assets are tested for impairment on an individual basis. The remaining financial assets are assessed collectively in groups that share similar credit risk characteristics. All impairment losses are recognized in profit or loss. Any cumulative loss in respect of an available for sale financial asset recognized previously in equity is transferred to profit or loss. An impairment loss is reversed if the reversal can be related objectively to an event occurring after the impairment loss was recognized. NON-FINANCIALS ASSETS The carrying amounts of non-financial assets of the Group, except inventories, assets held for sale and deferred tax assets and assets resulted from construction contracts, are reviewed at the date of the financial statements to ascertain whether there is an event or changes in circumstances indicating that the carrying amount of an asset exceeds its recoverable amount. When such an indicator exists, the recoverable amount of the asset is estimated. The recoverable amounts of goodwill, and other intangible assets with indefinite useful life or not yet available for use, are estimated each financial period. The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less cost to sell. The impairment calculated as the difference between the carrying amount and estimated recoverable amount, discounted by the effective interest rate. A cash-generating unit is the smallest identifiable asset group that generates cash flows that largely are independent from other assets and groups. Impairment losses recognized in respect of cash-generating units are allocated first to reduce the carrying amount of any goodwill allocated to the units and then to reduce the carrying amount of other assets in the unit on a pro rata basis. Impairment losses in respect of goodwill are not reversed. Impairment losses in respect of other intangible assets in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exist. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortization, if no impairment loss had been recognized.

3.11 FAIR VALUES Certain accounting policies and financial statement presentation require determination of fair values of financial and non-financial assets and liabilities. The fair values are determined for the purposes of recognition or measurement as follows; and in the respective notes to the consolidated financial statements. PROPERTY, PLANT AND EQUIPMENT The fair value of property, plant and equipment recognized as a result of a business combination is based on market values. The market value of property is the estimated amount for which a property could be exchanged on the date of valuation between a willing buyer and a willing seller. INTANGIBLE ASSETS Fair values of intangible assets are determined according to future cash flows deducted and expected from using those assets or from its disposal. INVENTORIES The fair values of inventory acquired in a business combination is determined based on its estimated selling price in the ordinary course of business less the estimated cost of completion and sale, and a reasonable profit margin based on the effort required to complete and sell the inventory.

ORASCOM CONSTRUCTION INDUSTRIES 77 ANNUAL REPORT 2008

Financial statements

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

3.11 FAIR VALUES CONTINUED INVESTMENTS IN SECURITIES The fair value of financial assets at fair value through profit or loss, investments and available for sale financial assets are determined by reference to their quoted bid price at the reporting date. TRADE AND OTHER RECEIVABLES Fair values of customer accounts receivable and other debit balances are their present values of future cash flows discounted at the reporting date. FINANCIAL INSTRUMENTS Fair values non-derivatives for financial instruments traded in an active market are their current market values. Where an active market does not exist, estimates may be used based on present value or other analytical techniques. DERIVATIVES The fair value of forward exchange is based on their listed market price or if not available the difference between the contractual forward price and the current forward price for the residual maturity of the contract. The fair value of interest rates swaps is based on broker quotes tested for reasonableness by discounting estimated future cash flows using market interest rates for similar instrument at the measurement date. SHARE-BASED PAYMENTS Fair values of share-based payments are determined by using specialized valuation models.

3.12 PROVISIONS A provision is recognized, if as a result of past event the Group has a present legal or constructive obligation that can be estimated reliably and it is probable that an outflow of economic benefits will be required to settle the obligation. Management reviews the provisions at the balance sheet date and makes adjustments to the provisions, if necessary, to reflect the best estimate.

3.13 REVENUE CONSTRUCTION CONTRACTS As soon as the outcome of the construction contract is estimated reliably, contract revenues and expenses are recognized in profit or loss in proportion to the stage of completion of the contract. Contract revenue includes the initial amount agreed in the contract plus any variations in contract work, claims and incentive payments to the extent that is probable that they will result in revenue and can be measured reliably. The stage of completion is assessed by reference to surveys of work performed. When the outcome of a construction contract cannot be estimated reliably, contract revenue is recognized only to the extent of contract costs incurred that are likely to be recoverable. An expected loss on contract is recognized immediately in profit or loss. GOODS SOLD Revenue from sale of goods is measured at the fair value of the consideration received or receivable, net of returns and allowances, trade discounts and volume rebates. Revenue is recognized when the significant risks and rewards of ownership have been transferred to the buyer, recovery of the consideration is probable, the associated costs and possible return of goods can be estimated reliably, and there is no continuing management involvement with the goods. Transfers usually occur when the products are received by the customer; however for some international shipments transfer occurs upon loading the goods onto the relevant carrier. RENTAL INCOME Rental income is recognized in the profit or loss on a straight line basis over the term of the lease.

78 ORASCOM CONSTRUCTION INDUSTRIES ANNUAL REPORT 2008

3.14 FINANCING COST AND INCOME INTEREST EXPENSE AND INCOME Interest expense and income are recognized in the consolidated income statements using the effective interest rate method. INVESTMENT INCOME Dividends from investments are recognized when the Group is entitled to such income. FOREIGN EXCHANGE DIFFERENCES Differences on foreign exchange are presented net in the consolidated income statements.

3.15 EMPLOYEES’ BENEFITS COMPANY’S CONTRIBUTION IN SOCIAL INSURANCE AND PENSION PLANS Payments to defined contribution schemes are expensed as they become due. For defined benefit pension plans adopted the benefit obligation is determined using the Projected Unit Credit Method, with actuarial valuations being carried out at each consolidated balance sheet date. Actuarial gains and losses are recognized in profit and loss in full in the period in which they occur. SHARE-BASED PAYMENT TRANSACTIONS The grant date fair value of options granted to employees is recognized as an employee expense, over a period in which the employees become unconditionally entitled to the options. The amount recognized as expense (in wages and salaries at profit and loss) is adjusted to reflect the actual number of share options that vest.

3.16 INCOME TAX Income tax comprises current and deferred tax payable on taxable income. Income tax expense is recognized in profit or loss to the extent that it relates to items recognized directly in equity, in which case it is recognized in equity. Current tax expense is the expected tax payable on taxable income for the period, using the prevailing tax rates or substantively enacted at the reporting date, and any adjustment in tax payable in respect of previous years. Deferred tax expense is recognized using the balance sheet method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognized for the following temporary differences: the initial recognition of goodwill and differences relating to investments in subsidiaries and jointly controlled entities to the extent that they probably will not reverse in the foreseeable future. Deferred tax is measured at the tax rates that are expected to be applied to the temporary differences when they reverse, based on the laws that have been enacted or substantively enacted at the reporting date. A deferred tax asset is recognized only to the extent that it is probable that future taxable profits will be available against which temporary difference can be utilized. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realized.

3.17 EARNINGS PER SHARE The Group presents earnings per share (EPS), which is calculated by dividing the profit or loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during the year.

ORASCOM CONSTRUCTION INDUSTRIES 79 ANNUAL REPORT 2008

Financial statements

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

3.18 DISCONTINUED OPERATIONS A discontinued operation represents a separate major line of business or geographical area of operations or a subsidiary acquired exclusively with a view to resale. Discontinued operations are presented in a single amount in the income statement upon disposal or when the operation meets the criteria to be classified as held for sale. The income statement is presented as if the discontinued operations occurred at the beginning of the comparative year.

3.19 SEGMENT REPORTING A segment is a distinguishable component of the Group that is engaged either in providing related products or services (business segment), or in providing products or services within a particular economic environment (geographic segment), which is subject to risks and rewards that are different from those of other segments. The Group primary format for segment reporting is based on business segment.

4 FINANCIAL RISK MANAGEMENT OVERVIEW The Group is exposed to risks in respect of credit, liquidity, currency, and interest rates (market risk). The Group’s management assesses and analyses these risks, and implements the policies and necessary controls to manage these risks. Policies and procedures have been established to determine, analyze and control its risks and periodical follow up and reviews are carried out in accordance with operations and changes in market conditions. These controls continue to be developed through training, development and administrative procedures that allow the employees to better understand their roles and responsibilities. The Audit Committee of the Board ensures that management complies with the risk control policies and procedures, and that the framework for risk management is effective. CREDIT RISK Credit risk is the probability of financial loss from the inability of counterparty to meet contractual obligations related to a financial transaction or instrument. Credit risk includes customer balances, due from related parties and investments. CUSTOMER RISK Customer risk, or counterparty risk, is risk of loss from their inability to pay their debts. To limit this risk, the Group provides credit only to government entities, associated companies, and a large number of creditworthy private sector customers. LIQUIDITY RISK Liquidity risk is the risk that arises when the maturity of assets and liabilities does not match or when the Group is unable to liquidate its assets with values that approximate their fair values to meet the Group’s liabilities. While an unmatched position may enhance profitability, it can also increase the risk of losses. To manage the liquidity risk, the Group’s management aims to have sufficient amounts of cash, available finance and credit facilities to discharge the liabilities when due and minimizes potential losses. MARKET RISK Market risk is the risk that changes in market prices, such as foreign exchange rates and interest rates that will affect the Group’s income or the value of its holding of financial instruments. The objective of market risk management is to manage and control market risk exposure with acceptable parameters, while optimizing the return. CURRENCY RISK The Company is exposed to currency risk on construction revenues, construction cost, loans and bonds that are denominated in a currency other than the respective functional currencies of Company primarily in Egyptian Pounds and Euros. The Group manages this risk by monitoring the exchange rates fluctuations on a continuous basis, by matching its liabilities in foreign currencies with its source of funds in foreign currencies and by currency SWAP agreements with financial institutions. INTEREST RATE RISK Interest rate risk is the risk that the value of financial instruments will fluctuate due to changes in market interest rates. The Group is exposed to interest rate risk in relation to its interest-bearing assets, liabilities and borrowings.

80 ORASCOM CONSTRUCTION INDUSTRIES ANNUAL REPORT 2008

5 GROUP SEGMENT REPORTING The Group’s primary format for segment reporting is based on business segments. The secondary format is geographical segments. The risk and returns of the Group’s operations are primarily determined by different products and services that the Group produces or provides rather than the geographical location of the Group’s operations. This is reflected by the Group’s organizational structure and financial reporting system. The Group had two segments of operations, construction and fertilizer. The cement segment was sold in December 2007 to Lafarge SA (France). Operating segments

Construction

Fertilizer

Elimination

Consolidated

LE million

LE million

LE million

LE million

Revenue December 2008 external revenue December 2008 intra-Group revenue

16,741.4 112.9

3,511.2 -

(112.9)

20,252.6 -

Total December 2008

16,854.3

3,511.2

(112.9)

20,252.6

December 2007 external revenue December 2007 intra-Group revenue

13,147.9 -

-

-

13,147.9 -

Total December 2007

13,147.9

-

-

13,147.9

1,538.4 1,469.4

2,532.0 -

-

4,070.4 1,469.4

486.4 924.0

244.1 -

-

730.5 924.0

1,910.2 712.4

1,050.9 616.4

-

2,961.1 1,328.8

38,657.6 93,336.8

4,367.9 1,615.2

-

43,025.5 94,952.0

23,180.1 20,088.5

2,264.0 967.7

-

25,444.1 21,056.2

Operating profit December 2008 December 2007 Depreciation and amortization December 2008 December 2007 Capital expenditures December 2008 December 2007 Total assets December 2008 December 2007 Total liabilities December 2008 December 2007

ORASCOM CONSTRUCTION INDUSTRIES 81 ANNUAL REPORT 2008

Financial statements

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

5 GROUP SEGMENT REPORTING CONTINUED Geographical segments

Revenues excluding intraGroup revenues December 2008 December 2007 Total assets December 2008 December 2007 Capital expenditures December 2008 December 2007

Egypt

Africa

Asia

Europe and other

Elimination

Consolidated

LE million

LE million

LE million

LE million

LE million

LE million

6,893.3 1,701.3

852.5 1,200.1

1,971.9 2,391.7

10,534.9 7,854.8

-

20,252.6 13,147.9

27,777.9 79,814.4

1,451.2 1,235.1

4,628.1 7,811.7

9,168.3 6,090.8

-

43,025.5 94,952.0

1,012.4 297.7

1,036.7 451.9

287.4 29.3

624.6 549.9

-

2,961.1 1,328.8

6 DISCONTINUED OPERATIONS A SALE OF THE CEMENT SEGMENT On 9 December 2007, Orascom Construction Industries signed an agreement with Lafarge SA (“Lafarge”) for the investment of the OCI cement group through the sale of 1,277,721.0 shares presenting its investment in 99.9% of the issued share capital of Orascom Building Materials Holding Company SAE (“OBMH”), from 31 December 2007, the effective date of the contract, which encompasses all cement related businesses. On 29 December 2007, OCI shareholders approved the agreement of sale at an Extraordinary General Meeting. The sale price was €8.8 billion (LE 71.107 billion). The agreement included the assumption by Lafarge of OBMH total debt to a maximum of $2.013 billion (LE 11.160 billion) due to OCI and lending banks to OBMH and its subsidiaries, of which $1,111.0 million (LE 6.159 billion) was due to OCI as of 31 December 2007. The Company received $1.2 billion (LE 6.652 billion) on 24 January 2008 from Lafarge SA on account till final settlement. The Company initially estimated the total liabilities, which were born initially by Lafarge SA on 31 December 2007, based on the consolidated financial statements prepared by Orascom Building Materials Holding, at $1.924 billion (LE 10.666 billion). The Company expected to return $89.0 million (LE 493.4 million) to Lafarge SA from the amount which had been collected under the account. However, determining the total outstanding actual liabilities as of 31 December 2008 show that the Company must instead return $173.2 million (LE 949.8 million), resulting in a difference of $84.2 million (LE 456.4 million), which was charged to retained earnings (note 20). This was the final completion adjustment with Lafarge SA. SALE TRANSACTION APPROVAL AND PROFIT DISTRIBUTION On 29 December 2007, the Extraordinary General Meeting approved the following contracts which were signed with Lafarge SA (France) at 9 December 2007, according to the following: (a) Agreement for sale of the company shares in OBMH to Lafarge SA France. (b) Subscription shares agreement in Lafarge’s capital increase which will be subscribed in by Nassef Sawiris and other members of Sawiris Family. The subscribers pay the dividends they receive from OCI. The subscription agreement states that OCI should subscribe partially or fully in Lafarge capital increase in case the subscribers under the subscription agreement not fully or partially subscribe in Lafarge capital increase. The dividends were distributed as planned and the subscription was carried out as planned. The amount due from Lafarge was collected during the year.

82 ORASCOM CONSTRUCTION INDUSTRIES ANNUAL REPORT 2008

6 DISCONTINUED CEMENT OPERATIONS CONTINUED RESULTS OF DISCONTINUED CEMENT OPERATIONS A summary of the results of discontinued operations (cement segment), of comparative figures as follows: 2007 LE million

Revenue Cost of sales Gross profit Other expenses Results from operating activities before tax Income tax Results from operating activities, net of income tax Minority interest share in net profit of the cement segment for the year 2007

8,450.5 (4,474.1) 3,976.4 (492.6) 3,483.8 (39.5) 3,444.3 (933.3) 2,511.0

PROFIT FROM SALE OF DISCONTINUED CEMENT OPERATIONS The gain on sale of discontinued cement operations (cement segment) during the year ended 31 December 2007 (comparative year) amounted to LE 62,274.8 million. COMMITMENTS AND GUARANTEES The sale agreement is subject to a number of commitments and guarantees by OCI as detailed in note 31; the maximum liability for these commitments and guarantees is €1.8 billion. These warranties expire 18 months after the date of completion, except for those related to longer periods; especially warranties regarding ownership of the shares of the companies subject to sale. In addition, environmental warranties shall expire on the fourth anniversary of the date of completion, and tax warranties shall expire according to the applicable statute of limitations.

B RESULTS OF DISCONTINUED OPERATION: THE EGYPTIAN CONTAINER HANDLING COMPANY The Company’s Board of Directors initially decided on 1 November 2007 to sell the entire investment in the Egyptian Container Handling Company (ECHCO) to an international company operating in the field of port management, subject to approval by local governing bodies. The sale value is LE 2.0 billion which was made on 18 February 2008 and the sale price collected on 19 February 2008. The results of discontinued operations during the financial year ended 31 December 2008, and the net assets of ECHCO operations are as follows:

Revenue Cost of sales Gross profit Other expenses Net operating profit Minority interest share in net profit of the year Shareholders’ share in net profit of discontinued operations

2008

2007

LE million

LE million

48.0 (17.6) 30.4 (5.1) (13.9)

333.9 (197.5) 136.4 (59.0) 77.4 (42.6)

11.4

34.8

25.3

ORASCOM CONSTRUCTION INDUSTRIES 83 ANNUAL REPORT 2008

Financial statements

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

6 DISCONTINUED CEMENT OPERATIONS CONTINUED CASH FLOWS PROVIDED BY (USED IN) DISCONTINUED OPERATION: ECHO

Net cash flows (used in) provided by operating activities Net cash flows (used in) investing activities Net cash flows provided by financing activities Net cash flows

2008

2007

LE million

LE million

(248.2) (41.6) 304.6

74.3 (187.1) 105.4

14.8

(7.4)

DETERMINING THE PROFITS ON SALE OF DISCONTINUED OPERATION: ECHO The net profits from the sale of the Egyptian Container Handling Company amounting to LE 1.4 billion were determined as follows: 2008 LE million

Total value for sale The cost of investment and expenses of the sale Net profit realized from the sale shown in the unconsolidated financial statements Less Retained earnings at the beginning of the year (net assets) Net income for the period available to shareholders till the date of the sale Goodwill eliminated balance

2,044.2 (434.3) 1,609.9

Net profit realized from the investment sale in the consolidated financial statements

1,433.5

(157.0) (11.4) (8.0)

7 JOINT VENTURES A summary of the Group’s share in the assets, liabilities, revenues, and expenses in the joint ventures relating to the construction activities according to percentage of participation are as follows:

Share in net assets Assets Liabilities Company's share in net assets

Share in net operating results Revenue Cost Company’s share in net profit

84 ORASCOM CONSTRUCTION INDUSTRIES ANNUAL REPORT 2008

2008

2007

LE million

LE million

1,971.0 (1,679.5)

1,042.5 (819.9)

291.5

222.6

2008

2007

LE million

LE million

2,608.5 (2,429.5)

2,229.2 (2,076.4)

179.0

152.8

8 ACQUISITION OF EGYPTIAN FERTILIZERS COMPANY On 21 February 2008, the Company acquired 99.9% of the shares of the Egyptian Fertilizers Company. The goodwill was calculated as the difference between the cost of acquisition and the book value of net assets acquired as follows:

Notes

Property, plant and equipment Other intangible assets Investments Trade and other receivables Inventories Cash at banks and on hand Trade and other payables Long-term liabilities Net identifiable assets and liabilities Profits from sale of the share of a subsidiary in Egyptian Fertilizers Company Goodwill on acquisition Total cost of acquisition Cash acquired at acquisition date Profits from sale of the share of a subsidiary in Egyptian Fertilizers Company Net cash outflow

(13) (12)

(13)

Pre-acquisition carrying amounts

Fair value adjustments

Recognized values on acquisition

LE million

LE million

LE million

2,972.6 1,528.9 193.4 437.5 178.7 687.2 (1,596.4) (2,435.2)

1,404.5 (269.7)

4,377.1 1,528.9 193.4 437.5 178.7 687.2 (1,596.4) (2,704.9)

1,966.7

1,134.8

3,101.5 944.0 8,247.2 12,292.7 (687.2) (944.0) 10,661.5

ORASCOM CONSTRUCTION INDUSTRIES 85 ANNUAL REPORT 2008

Financial statements

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

9 PROPERTY, PLANT AND EQUIPMENT

Land

construction

Machinery and equipment

173.0 77.2 93.2 -

741.8 162.4 136.0 -

1,745.1 1,240.4 4,464.7 (2.8)

112.0 32.9 9.3 (1.5)

244.5 152.4 16.4 (0.8)

66.5 10.6 (1.2)

45.8 62.7 6.5 (1.1)

3,128.7 1,738.6 4,726.1 (7.4)

(30.7) (1.8)

27.1 (75.0)

(52.3) (259.0)

(2.6) (10.5)

(13.9) (24.9)

15.2 (2.9)

(4.6) (15.0)

(61.8) (389.1)

310.9

992.3

7,136.1

139.6

373.7

88.2

94.3

9,135.1

8.5 1.0

141.3 111.4

857.4 518.6

54.6 19.7

124.9 54.6

34.6 14.4

23.2 10.8

1,244.5 730.5

-

16.4

300.2

5.9

7.3

-

2.6

332.4

-

-

(1.3)

(0.9)

(0.2)

(0.9)

(0.4)

(3.7)

(5.1) (0.4)

(3.1) (4.0)

(41.3) (119.6)

(3.1) (6.0)

(11.3) (24.8)

1.2 (2.6)

(2.0) (7.1)

(64.7) (164.5)

4.0

262.0

1,514.0

70.2

150.5

46.7

27.1

2,074.5

Net book value at 31/12/08

306.9

730.3

5,622.1

69.4

223.2

41.5

67.2

7,060.6

Net book value at 31/12/07

164.5

600.5

887.7

57.4

119.6

31.9

22.6

1,884.2

Buildings and

Cost Balance at 01/01/08 Additions Acquisition through business combination Disposals through business combination Effect of movements in exchange rates/ adjustments Disposals Balance at 31/12/08 Accumulated depreciation Balance at 01/01/08 Depreciation for the year Subsidiaries accumulated depreciation at acquisition Subsidiaries accumulated depreciation at disposal Effect of movements in exchange rates/ adjustments Disposals accumulated depreciation Balance at 31/12/08

Furniture and office equipment

Vehicles

Information systems

Tools and supplies

Total

31/12/2008

31/12/2007

LE million

LE million

Fixed assets Assets under construction

7,060.6 2,851.7

1,884.2 1,589.2

Total

9,912.3

3,473.4

86 ORASCOM CONSTRUCTION INDUSTRIES ANNUAL REPORT 2008

9 PROPERTY, PLANT AND EQUIPMENT CONTINUED Property, plant and equipment include the following assets which have been acquired and accounted for under finance lease transactions:

Cost 31/12/08

Accumulated depreciation 31/12/08

Net 31/12/08

LE million

LE million

LE million

Machinery and equipment Vehicles Buildings

20.7 10.5 44.5

(13.6) (2.8) (7.3)

7.1 7.7 37.2

Total

75.7

(23.7)

52.0

Assets under construction includes machinery and equipment under installation amounted to LE 510.9 million belongs to Sorfert Algérie.

10 LEASED ASSETS OCI and other subsidiaries leased equipment from others. The rental value of the leased assets amounted to LE 147.7 million to be paid over periods ranging from 36 to 108 months in annual rent up to LE 83.2 million. The sales value of these leased assets at the end of the term of the contracts amounted to LE 5.2 million.

11 PAYMENTS FOR PURCHASE OF INVESTMENTS These items which amounted to LE 2,784.8 million at 31 December 2008 represent payments by the Group for establishing new companies or acquiring companies located in some Arabian and European countries, (2007, LE 554.8 million).

12 INTANGIBLE ASSETS 2008

2007

LE million

LE million

Initial goodwill* Other

9,907.4 2.6

55.0 9.8

Total

9,910.0

64.8

* The balance amounted to LE 9.9 billion representing the goodwill of the Egyptian Fertilizers Company, included in the long-term assets as explained in note 8.

ORASCOM CONSTRUCTION INDUSTRIES 87 ANNUAL REPORT 2008

Financial statements

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

13 INVESTMENT IN ASSOCIATED COMPANIES

Egyptian Fertilizers Company* United Company for Paints and Chemicals National Pipe Company BESIX Group investments Others

2008

2007

%

Country

LE million

LE million

50% 40%

Egypt Egypt Egypt Belgium

68.1 28.9 25.0 13.6

894.6 54.0 17.5 42.1 4.9

135.6

1,013.1

Total

* The accounts for this investment have been fully consolidated as a result of acquiring control during the year. The investments, which was 20% held by a subsidiary company, was sold before acquisition of the company as explained in note 8. Profit on the sale is as follows:

LE million

The value of sale of the investment, through a subsidiary company Cost of the investment Profit on sale of investment (note 8)

1,838.6 (894.6) 944.0

14 INVENTORIES 2008

2007

LE million

LE million

Raw materials Spare parts and fuel Work in progress Finished goods Developed land for sale

1,013.2 234.8 67.4 82.9 63.8

545.0 31.2 91.4 5.1 61.6

Total

1,462.1

734.3

88 ORASCOM CONSTRUCTION INDUSTRIES ANNUAL REPORT 2008

15 TRADE AND OTHER RECEIVABLES The impairment in trade and other receivables in the amount of LE 71.4 million is eliminated from trade and other receivables in the consolidated financial statements (2007, LE 64.7 million): 2008

2007

LE million

LE million

Receivables: current accounts and notes receivables Debtors and other debit balances* Due from affiliated companies (note 33)

4,877.9 3,343.8 14.5

3,517.2 1,874.2 18.8

Total

8,236.2

5,410.2

* The debtors and other debit balances as of 31 December 2008 include advance payments and debit balances for suppliers and subcontractors amounting to LE 607.6 million (2007, LE 375.0 million).

16 CONSTRUCTION CONTRACTS IN PROGRESS The billing status of construction contracts in progress at 31 December 2008 is as follows:

Costs incurred on incomplete contracts Estimated earnings Less: billings to date

Presented in the balance sheet as follows: Due from clients: current asset Due to clients: current liability

2008

2007

LE million

LE million

23,304.7 2,143.5 25,448.2 (25,854.1)

13,322.0 919.6 14,241.6 (14,383.0)

(405.9)

(141.4)

1,193.8 (1,599.7)

766.0 (907.4)

(405.9)

(141.4)

In determining the revenue and costs to be recognized each year for work to be carried out on construction contracts, estimates are made to the final outcome on each contract. Management continually reviews these estimates and makes adjustments and provisions where necessary.

17 CASH ON HAND AND AT BANKS 2008

2007

LE million

LE million

Cash on hand Banks: current accounts Banks: time deposits*

7.3 3,349.6 4,911.8

17.1 3,517.7 382.2

Total

8,268.7

3,917.0

* Banks – time deposits include blocked deposits of LE 598.1 million held as collateral against letters of guarantee, letter of credit and short-term loans of OCI and its subsidiaries (2007, LE 31.3 million).

ORASCOM CONSTRUCTION INDUSTRIES 89 ANNUAL REPORT 2008

Financial statements

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

18 SHARE CAPITAL AUTHORIZED CAPITAL The Company’s authorized capital is LE 5.0 billion. ISSUED AND PAID IN CAPITAL As at 31 December 2007, the Company’s issued and fully-paid capital is LE 1,009,979,185.0 divided into 201,995,837 common shares at a par value of LE 5.0 each. On 15 March 2007, at the Extraordinary General Meeting, the Company approved the issue of 12,774,877 ordinary shares at the fair value of LE 3,933,767,875.0 at LE 307.93 per share (after deducting the cash dividend distribution to the shareholders for the financial year ended 31 December 2007 amounting to LE 300.0 per share in two installments). The total price of $715.5 million fully allocated to Abraaj Capital Company shareholders. The Company’s shareholders relinquished the priority right to subscribe in the increase of the share capital based on the approval of the general assembly referred to above. On 23 April 2008, the Capital Market Authority approved this increase. The fair value of the allocated shares represents the par value of shares increase of LE 63,874,385.0 at LE 5.0 per share, and the balance of LE 3,869,893,490.0 representing the difference between the fair value of the shares and the par value of such shares (premium) of LE 302.93 was included in the calculation of other reserves in the shareholders’ equity. On 29 April 2008, this increase was recorded in the commercial register of the Company. As a result, the Company’s issued and paid share capital at 31 December 2008 is LE 1,073,853,570.0 divided into 214,770,714 shares at the par value per share of LE 5.0 each. OCI’s shares have been listed in the Egyptian Stock Exchange since March 1999. In September 2002, the Company listed part of its shares (74%) on the London Stock Exchange in the form of Global Depository Receipts (GDRs), each represents two shares. The Bank of New York was appointed to act as the depository bank.

19 RESERVES LEGAL RESERVE According to the Company’s articles of incorporation, 5% of annual net income is set aside as a legal reserve. Setting aside this percentage stops when the total accumulated reserve reaches 50% of the Company’s issued capital. If the reserve falls below the defined level (50% of the issued share capital), then the company is required to resume settling aside 5% of the annual profit until it reaches 50% of the issued share capital. This reserve is used to increase the Company’s issued capital or to cover the Company’s losses. The legal reserve amounted to LE 504,989,592.0 at 31 December 2008. OTHER RESERVES According to the Company’s articles of incorporation, the General Assembly can establish and use other reserves from annual net income upon a recommendation by the Board of Directors. A summary of other reserves balances as of 31 December 2008 as follows : 2008

2007

LE million

LE million

Special reserve Hedge reserve

5,773.1 (94.7)

1,815.4 (40.8)

Total

5,678.4

1,774.6

Special reserve includes the additional paid in capital from issuance of stock amounted to LE 1,815.0 million and LE 3,869.0 million in the years 2006 and 2008 respectively.

90 ORASCOM CONSTRUCTION INDUSTRIES ANNUAL REPORT 2008

20 RETAINED EARNINGS The adjustments to retained earnings consist of the effect of the following: 2008

2007

LE million

LE million

Adjustment of the sale of cement segment (note 6) Other adjustments

456.4 (11.2)

32.2

Total

445.2

32.2

21 TREASURY STOCK At 31 December 2008, the company owned shares are 8,208,281 shares as follows: - 7,168,225 shares acquired by the parent company for an amount of LE 1,557.6 million. - 1,040,056 shares acquired by OCI ESOP Limited (a subsidiary) under employees’ share-based option. The net cost of acquisition of shares and GDRs of OCI including share dividends adjusted for the share dividends and split as follows:

Number of shares (including 128,208 GDRs)

Book value (LE millions) Average cost per share (LE) Market value (LE millions) Price per share (LE) Price per GDR (LE)

2008

2007

LE million

LE million

1,040,056.0

1,129,047.0

110.3 106.09 143.8 140.4 264.0

94.4 83.6 646.0 572.2 1,153.2

ORASCOM CONSTRUCTION INDUSTRIES 91 ANNUAL REPORT 2008

Financial statements

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

22 LOANS The Company and its subsidiaries issued bonds and obtained loans and bank facilities from various lending institutions. As of 31 December 2008, the outstanding balances which included in current and non-current liabilities were as follows:

Company responsible for loan

Lending institution

Interest rate

Orascom Construction Industries

Syndication loan (Misr Bank – others)

1.5% over LIBOR semi-annually for the long portion monthly or quarterly or semi-annually LIBOR for the current portion and 0.20% administrative commission annually for the whole loan

Different banks – overdraft and bank facilities

12.5% on the LE portion and 2.3% over LIBOR annually for the $ portion

Syndication loan (NSGB – others)

1% over LIBOR semi-annually and 0.10% administrative commission annually

BESIX Group

Different banks – overdraft and bank facilities

Variable

Orascom Construction Industries Algeria

Different banks – overdraft

Average 7% variable

Orascom Construction Industries Nigeria

Different banks – overdraft

Variable

Sorfert Algérie SPA

Different banks – overdraft

Average 5.95% variable

Alico Egypt

Different banks – overdraft

Variable

OCI Finance Limited

Various Banks and Citibank International is to be the creditors' agent to facilitate the circulation in the amount of $300.0 million

LIBOR + BPS.8 + (extra cost if any)

National Steel Fabrication

Arab Bank

11.75% fixed + 0.75% for the highest monthly debit balance

Barclays Bank

13% fixed (LE) + 2% ($) for the highest monthly debit balance

Arab African Bank

Egyptian Central Bank interest rate + 2% over LIBOR monthly + 0.1% for the highest monthly debit balance

Bank of Alexandria

13.5% fixed + 0.1% for the highest monthly debit balance

Orascom Construction Industries Egypt

Different banks – overdraft

Variable

OCI Mepco

Commercial facilities

Variable

Total 31/12/08 Total 31/12/07

During the year, the Company repaid $442.0 million (LE 2.4 billion) after acquiring the Egyptian Fertilizers Company, to settle the debt due by that company in accordance with the purchase agreement, and has taken the necessary steps to release the mortgages on production lines one and two. 92 ORASCOM CONSTRUCTION INDUSTRIES ANNUAL REPORT 2008

Outstanding amount

Long-term portion

31/12/08

31/12/08

Short-term portion 31/12/08

LE million

LE million

LE million Collateral guarantee given

1,921.0

960.5

1,136.5

-

5,179.3

5,179.3

660.6

464.3

1.4

-

17.3

-

17.3

247.9

247.9

-

2.6

-

1,237.2

-

10.4

-

10.4 Promissory notes for full amount

41.2

-

41.2 Promissory notes for full amount

34.6

-

34.6 Promissory notes for full amount

7.7

-

7.7 Promissory notes for full amount

24.9

-

902.1

902.1

11,424.7

7,754.1

3,670.6

11,682.6

1,034.9

10,647.7

960.5 Promissory notes guarantee

1,136.5 Time deposit guarantee amounted to LE 557.7 million - Promissory notes guarantee 196.3 Commercial lien on the company's assets and shares 1.4 Promissory notes for full amount

2.6 Commercial lien on Alico assets and insurance policy policy on buildings and equipment . 1,237.2 OCI guarantees and commitments

24.9 - Promissory notes for full amount

ORASCOM CONSTRUCTION INDUSTRIES 93 ANNUAL REPORT 2008

Financial statements

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

23 PROVISIONS 2008

2007

LE million

LE million

Balance at the beginning of the year Additions during the year Increase in the provision result of the acquisition of one of its subsidiaries Used during the year (including foreign exchange effect)

2,307.1 194.4 44.2 (20.6)

510.2 1,944.5 (147.6)

Balance at end of the year

2,525.1

2,307.1

Presented in the balance sheet as follow: Short-term provisions Long-term provisions

633.7 1,891.4

324.8 1,982.3

Balance at end of the year

2,525.1

2,307.1

2008

2007

LE million

LE million

Loans to subsidiaries from minority Others

157.5 455.9

199.6 386.4

Total

613.4

586.0

24 OTHER LONG-TERM LIABILITIES

25 TRADE AND OTHER PAYABLES 2008

2007

LE million

LE million

Suppliers and subcontractors and notes payable Clients: advanced payments Creditors and other credit balances Dividends payable: employees Due to affiliated companies (note 33)

3,439.3 3,361.3 1,430.1 66.7 20.5

1,934.0 1,248.1 1,435.4 3.6

Total

8,317.9

4,621.1

26 OTHER OPERATING INCOME

Gain (loss) on sale of property, plant and equipment, net Other income Other expenses

94 ORASCOM CONSTRUCTION INDUSTRIES ANNUAL REPORT 2008

2008

2007

LE million

LE million

15.0 109.9 (60.8)

9.1 123.6 (13.3)

64.1

119.4

27 INCOME TAXES Income tax expense on continuing operations recognized in the consolidated income statement as follows: 2008

2007

LE million

LE million

Current tax expense Deferred tax (revenue) expense

456.7 119.2

87.5 (5.5)

Total tax expense

575.9

82.0

The statutory and effective tax rates are as follows:

Income from continuing operation for the year before tax Statutory corporation tax rate Income tax at statutory corporation tax rate Effective tax rate

2008

2007

LE million

LE million

4,574.7 20% 914.9

1,391.2 20% 278.2

10.0%

6.3%

28 SHARE-BASED PAYMENTS OCI has a plan to provide some of its employees with stock options on its shares. According to this plan, OCI ESOP Limited, purchases OCI shares from the stock market equivalent to the value of options granted to employees. This purchase is financed by a loan guaranteed by OCI. The exercise price of the options granted to employees is equal to the fair market value of the shares on the date of grant. When the options vest, the employee has the right to exercise the options by payment of the full option price. Payment may be by cash, OCI shares owned for at least six months, delivery of an employee promissory note bearing interest and secured by a pledge of the OCI shares purchased by the note, or consideration received from OCI ESOP under a cashless exercise program implemented in connection with the plan. Payments received from employees for options exercised are used by OCI ESOP Limited to repay the outstanding loan due to OCI or to finance the purchase of other options. On 27 December 2006, the shareholders approved at an Extraordinary General Meeting to issue shares at nominal value with a ceiling of 1% of the current issued shares, in order to meet any of the Company’s obligations under share-based payments relating to the incentive programs for employees and managers, subject to the approval of the regulatory authorities.

ORASCOM CONSTRUCTION INDUSTRIES 95 ANNUAL REPORT 2008

Financial statements

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

28 SHARE-BASED PAYMENTS CONTINUED Number of shares subject to option

Average per share exercise price

Average per share market price

Shares

LE

LE

Balance at 31/12/02 Options granted 2003 Options exercised 2003

257,731 250,000 (257,731)

20.18 10.46 (20.18)

23.16 11.36 (92.75)

Balance at 31/12/03 Options granted 2004 Options exercised 2004

250,000 617,808 -

10.46 36.50 -

72.51 36.02 -

Balance at 31/12/04 Options granted 2005 Options exercised 2005 Options cancelled 2005

867,808 1,161,708 (49,767)

29.00 80.41 -

72.54 81.58 -

Balance at 31/12/05 Options granted 2006 Options exercised 2006 Options cancelled 2006

1,979,749 625,541 (37,073)

58.43 224.82 -

218.67 221.42 -

Balance at 31/12/06 Options granted 2007 Options exercised June 2007 Options exercised December 2007

2,568,217 687,594 (867,808) (307,700)

97.51 274.68 (29.0) (200.43)

275.90 273.60 (286.0) (545.0)

Balance at 31/12/07 Options granted 2008 Options exercised 2008

2,080,303 628,319 (306,272)

167.88 397.99 (96.09)

572.20 405.26 (311.12)

Balance at 31/12/08

2,402,350

237.22

140.36

Share option activities

The fair value of services received in return for share options granted are measured by reference to the fair value of share options granted.

29 DIVIDENDS On 15 March 2008 the Company General Assembly decided dividends to be in US Dollars, in accordance with the exchange rate at 23 March 2008 as follows: - LE 300.0 per share to shareholders until the end of trading 24 March 2008 in two installments for an aggregate amount of LE 60.6 billion. - LE 5.0 per share to shareholders until the end of trading 15 April 2008 for an aggregate amount of LE 1.1 billion. The Company General Assembly on 30 August 2008 decided to distribute LE 4,871.0 million to be paid in different dates and amounts, and delegate the Board of Directors to decide on the time and amount of each of the payments. The Board decided a first payment on 31 August 2008 of $1.0 per share with an aggregate dividend of LE 1,177.0 million. Also on 15 March 2009, the Board decided a dividend of $1.0 per share for an aggregate amount of LE 1,164.0 million. On 30 March 2009, the Board decided to form a statutory reserve of LE 31,937,193.0 and to delegate the Board of Directors to decide on the timing and payments to shareholders and employees of the remaining retained profits of the year 2008 amounted to LE 2,022,665,898.0 and to decide on the timing and payments of profits to shareholders on the remaining retained profits of 2007. 96 ORASCOM CONSTRUCTION INDUSTRIES ANNUAL REPORT 2008

30 EARNINGS PER SHARE Earnings per share are calculated by dividing the net income available for shareholders as dividends, after deducting the employees’ share of profits, by the weighted average number of shares outstanding during the year as follows: 2008

2007

LE million

LE million

5,366.7

66,020.9

(0.4)

(172.9) (6.0)

5,366.3

65,842.0

(1,444.9)

(64,820.5)

3,921.4

1,021.5

Millions of shares

Millions of shares

202.0 8.6 210.6

202.0 202.0

Less: Weighted average number of treasury stock during the year Adjusted weighted average number of shares outstanding during the year (in million share)

(2.8) 207.8

(1.1) 200.9

Earnings per share (LE)

25.82

327.7

Earnings per share from continuing operations (LE)

18.87

5.08

Net income available for distribution Less: Employees’ share of profits Employees’ share of subsidiaries’ profits

Less: Net profit from discontinued operations

Common shares at 1 January Weighted average number of shares issued during the year

31 CONTINGENT LIABILITIES GUARANTEES Letters of guarantee issued by banks for OCI and its subsidiaries in favor of others as at 31 December 2008 amounted to LE 8.3 billion (31 December 2007, LE 5.5 billion). Outstanding letters of credit as at 31 December 2008 (uncovered portion) amounted to LE 219.6 million (31 December 2007, LE 460.2 million). OCI guarantees loans provided to a subsidiary amounting to $224.9 million. The subsidiary has undertaken not to sell, lease, lend or transfer any assets except within the Group, and is committed not to merge, divest, or discontinue any of its operations. OCI guarantee liabilities under construction contracts carried out by a subsidiary company to a maximum of LE 20.0 million ($3.5 million). GUARANTEES UNDER THE AGREEMENT WITH LAFARGE The agreement with Lafarge for the sale of the cement business states that the parties ensure that each group company and member of OCI’s Group are to be released from all guarantees and indemnities they have given to another group company or member of OCI’s Group as the case may be. Pending such release OCI indemnifies that group company and Lafarge indemnifies that member against all liabilities under those guarantees and indemnities. Lafarge’s ability to claim against a warranty in the sale agreement is limited to certain circumstances note 6.

ORASCOM CONSTRUCTION INDUSTRIES 97 ANNUAL REPORT 2008

Financial statements

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

31 CONTINGENT LIABILITIES CONTINUED LITIGATION In the normal course of business, the Group entities and joint ventures are involved in some arbitration or court cases as defenders or claimants. These litigations are carefully monitored by the entities management and legal counsels, and are regularly assessed with due consideration for possible insurance coverage and recourse rights on third parties. Provisions are made if required and regularly updated. The major portion of the business of the Company’s US subsidiary involves contracting with departments and agencies of the US Government. Such contracts are subject to audit and possible adjustment by the respective agencies. The USAID Agency has investigated the nature of the relationship and performance of a contract with an Egyptian joint venture of which the company has 40% share. The USAID Agency have filed a suit against all partners of the joint venture contending that it is entitled to refund $332.0 million from the partners representing all the contract funds paid for these projects plus damages and civil penalties. Management has strong substantive reasons to oppose the allegations raised by the Agency. The Company management also believes that the ultimate resolution of any such claims and counter claims will not have a significant impact on reported results of operations, consolidated balance sheet and cash flows. In September 2006, a court judgment in the amount of €1.2 million (LE 9.2 million) has been pronounced against one of the jointly controlled companies and its manager relating to a construction project almost 11 years earlier in an African country where the company is currently less active. An appeal has been made against the judgment, and a provision has been recognized to an extent consistent with the external legal counsel’s opinion. OCI participates with another company in executing a project. Both parties made arbitration to settle matters of dispute with the owner which embodying the date handing over the project and the delaying penalties that the owner demand amounted LE 61.4 million. Both parties require indemnifies for the unjustified liquidation by the client of letters of guarantee which amounted LE 129.0 million, also the client’s refusal to pay price differences of imported supplies which amounted LE 8.150 million and $2.397 million, in addition to the client’s failure to meet the contracted obligation to pay 50% of completed work value in US Dollars which amounted LE 3.4 per Dollar. Both parties and the legal department of OCI believe that the parties have enough documents and justification to support their positions and reserve their rights and, therefore, collecting the total amount due from the client amounted to LE 213.9 million at 31 December 2008 with no obligation to pay any delay penalties. Based on that, the company does not form any provisions in its financial statements to meet neither the amount due from the client nor the delay penalties, which demanded by the client waiting for the final result for arbitration.

32 COMMITMENTS At 31 December 2008, capital commitments of the Group for purchasing fixed assets amounted to approximately LE 4.8 billion and for investments in securities LE 1.2 million.

33 RELATED PARTIES TRANSACTIONS The intra-Group transactions, balances and unrealized profits or losses have been eliminated. Balances as at 31 December 2008 for nonconsolidated companies and joint ventures are reported in the consolidated balance sheet as due from affiliated companies and due to affiliated companies, and included in trade and other receivables (note 15) and trade and other payables (note 25).

98 ORASCOM CONSTRUCTION INDUSTRIES ANNUAL REPORT 2008

34 FINANCIAL INSTRUMENTS RISKS CREDIT RISK As at 31 December 2008, the total financial assets of the Group, which are the maximum limit for the credit risk, amounted to LE 12.6 billion. CURRENCY RISK As at 31 December 2008, the total transactions in foreign currencies, which were the maximum limit for the currency risk, amounted to Yen 2.3 billion. A company of the Group has concluded several agreements for forward contracts were entered into to swap in the reporting date as follows: Paid

Received

Value

Currency

Value

Currency

Average conversion rate per contract

3,320,million

Yen

34,2 million

US Dollar

96.93

Fair value at 31/12/08

90.91

INTEREST RATE RISK Total financial commitments at variable rates are LE 12.0 billion. A company of the Group has concluded several agreements for interest swap contracts in the amounts of $125.9 million and $225.7 million for a commercial facility and an Ex-IM Bank facility, respectively. The fixed interest rates were 5.8975% to 5.9525% for the commercial portion of the Ex-IM Bank loans and the floating rates, based on LIBOR, on both facilities. LIQUIDITY RISK The total contractual liabilities of the Group, which were the maximum limit for the liquidity risk, amounted to LE 23.3 billion.

ORASCOM CONSTRUCTION INDUSTRIES 99 ANNUAL REPORT 2008

Financial statements

SELECTED FINANCIAL DATA YEARS ENDED 31 DECEMBER

SUPPLEMENTARY FINANCIAL INFORMATION IN EGYPTIAN POUNDS The selected consolidated financial data for the five years ended 31 December 2008 has been extracted without material adjustment from the consolidated financial statements of the Company. The selected data should be read in conjunction with the consolidated financial statements and the notes thereto reported upon by KPMG Hazem Hassan, the Company’s auditor. 31/12/04

31/12/05

31/12/06

31/12/07

31/12/08

LE ‘000

LE ‘000

LE ‘000

LE ‘000

LE ‘000

Construction revenue Fertilizer revenue Cement revenue Concessions / materials revenue Elimination of intra-group revenue

6,413,365 2,254,847 597,790 (710,208)

9,070,808 3,295,247 (999,461)

13,147,511 4,948,099 (1,620,411)

13,481,740 -

16,600,680 3,511,199 651,744 (511,069)

Total revenue

8,555,794

11,366,594

16,475,199

13,481,740

20,252,554

Cost of services and goods sold Construction cost Fertilizer cost

5,391,593 -

7,836,426 -

10,836,670 -

(11,172,459) -

(14,143,009) (807,397)

Cement cost Concessions / materials cost Elimination of intra-group cost

1,106,026 429,644 (726,331)

1,585,456 (1,020,566)

2,288,961 (1,616,518)

-

(513,080) 511,069

Total cost of services and goods sold

6,200,932

8,401,316

11,509,113

(11,172,459)

(14,952,417)

522,681

719,723

1,149,458

(849,056)

(1,293,923)

1,832,181

2,245,555

3,816,628

1,460,225

4,006,214

Other income and expenses Interest income Foreign exchange gain (loss) Income from investments Gain (loss) on sale of investments Net change in market value of investments Other income Interest expense Gain (loss) on sale of equipment Negative goodwill amortization Profit on intra-Group construction

14,889 (1,482) (117) 19,721 28,139 (329,583) 507 76,755 (59,720)

61,983 (73,089) (5,414) 27,678 100,082 20,366 (392,285) 35,279 312,968 (29,283)

106,356 210,085 13,762 51,846 21,050 72,991 (567,080) 5,475 (181,126)

323,242 44,920 129,041 116,004 (604,885) -

676,936 493,951 1,803 64,117 (668,431) -

Net other income (expense)

(250,891)

58,285

(266,641)

8,322

568,377

Income before taxes

1,581,290

2,303,840

3,549,987

1,468,547

4,574,591

(77,212) (402,790)

(114,443) (489,167)

(136,378) (742,891)

(82,036) 2,511,048 62,274,782 (151,367)

(575,841) 11,382 1,433,457 (76,894)

1,101,288

1,700,230

2,670,718

66,020,974

5,366,696

5.63 0.85

8.65 1.89

12.93 5.50

327.70 305.00

25.8 310.5

Income Statement Data

Selling, general and admin expenses Income from operations

Provision for income taxes Results from discontinued operations Gain on sale of cement group Minority interest Net income Per share information Earnings per share 1 Cash dividend per share 2 100 ORASCOM CONSTRUCTION INDUSTRIES ANNUAL REPORT 2008

Balance Sheet Data

Cash and cash equivalents Accounts receivable – customers (net) Total current assets Property, plant and equipment (net) Assets under construction Total assets Short-term debt Accounts payable Total current liabilities Total long-term liabilities Minority interest Total shareholders’ equity Total shareholders’ equity and liabilities Other Data Return on sales 3 Return on equity 4 Current ratio 5 Net debt to equity ratio 6

31/12/04

31/12/05

31/12/06

31/12/07

31/12/08

LE ‘000

LE ‘000

LE ‘000

LE ‘000

LE ‘000

1,576,363 1,653,045 5,666,664 5,518,146 1,177,638

2,168,316 1,678,902 8,182,779 6,672,420 2,134,916

2,738,067 3,196,684 11,008,340 9,104,053 6,441,241

3,917,025 765,992 89,739,810 1,883,788 1,589,625

8,268,710 8,236,229 19,858,932 7,060,618 2,851,668

12,531,126

17,610,360

28,616,330

94,951,996

43,025,494

982,983 3,132,092 4,430,462 3,569,400 1,486,917 3,044,347

1,343,855 3,353,496 5,245,180 6,135,671 1,965,285 4,264,224

2,987,693 5,868,789 9,865,069 7,591,153 2,488,380 8,671,728

10,647,706 907,399 17,349,754 3,706,422 1,048,773 72,847,047

3,670,552 8,317,906 14,678,641 10,765,669 226,736 17,354,448

11,044,209

15,645,075

26,127,950

94,951,996

43,025,494

12.87% 42.34% 1.28 0.66

14.96% 46.53% 1.56 0.85

16.21% 41.29% 1.12 0.70

10.28% 90.84% 5.17 0.11

19.7% 33.0% 1.35 0.2

1 Net income available for shareholder dividends, after deducting the employees’ profit share, divided by the weighted average number of shares outstanding during the period. 2 Total cash dividend paid for each year divided by current number of shares of 190,575,000. 3 Net income as a percentage of sales. 4 Net income as a percentage of average total shareholders’ equity. 5 Current assets to current liabilities. 6 Net debt to internal finance (shareholders’ equity plus minority interests).

ORASCOM CONSTRUCTION INDUSTRIES 101 ANNUAL REPORT 2008

Financial statements

SELECTED FINANCIAL DATA CONTINUED YEARS ENDED 31 DECEMBER

SUPPLEMENTARY FINANCIAL INFORMATION IN US DOLLARS The selected consolidated financial data for the five years ended 31 December 2008 has been extracted without material adjustment from the consolidated financial statements of the Company. The selected data should be read in conjunction with the consolidated financial statements and the notes thereto reported upon by KPMG Hazem Hassan, the Company’s auditor. 31/12/04

31/12/05

31/12/06

31/12/07

31/12/08

$ ‘000

$ ‘000

$ ‘000

$ ‘000

$ ‘000

Construction revenue Fertilizer revenue Cement revenue Concessions / materials revenue Elimination of intra-group revenue

1,058,311 372,087 98,645 (117,196)

1,558,558 566,194 (171,729)

2,286,524 860,539 (281,811)

2,381,596 -

3,046,835 644,434 119,619 (93,800)

Total revenue

1,411,847

1,953,023

2,865,252

2,381,596

3,717,088

889,702 182,513 70,898 (119,857)

1,346,465 272,415 (175,355)

1,884,638 398,080 (281,134)

(1,973,654) -

(2,595,762) (148,187) (94,169) 93,800

1,023,256

1,443,525

2,001,585

(1,973,654)

(2,744,318)

86,251

123,664

199,906

(149,989)

(237,482)

Income from operations

302,340

385,834

663,761

257,953

735,288

Other income and expenses Interest income Foreign exchange gain (loss) Income from investments Gain (loss) on sale of investments Net change in market value of investments Other income Interest expense Gain (loss) on sale of equipment Negative goodwill amortization Profit on intra-Group construction

2,457 (245) (19) 3,254 4,677 (54,387) 84 12,666 (9,855)

10,650 (12,558) (930) 4,756 17,196 3,499 (67,403) 6,062 53,775 (5,031)

18,497 36,537 2,393 9,017 3,661 12,694 (98,623) 952 (31,500)

57,102 7,935 22,796 20,492 (106,855) -

124,243 90,658 331 11,768 (122,682) -

Net other income (expense)

(41,401)

10,015

(46,372)

1,470

104,318

Income before taxes

260,939

395,849

617,389

259,424

839,606

Provision for income taxes Results from discontinued operations Gain on sale of cement group Minority interest

(12,741) (66,467)

(19,664) (84,049)

(23,718) (129,198)

(14,492) 443,585 11,001,057 (26,739)

(105,688) 2,089 263,092 (14,113)

Net income

181,731

292,136

464,473

11,662,835

984,986

0.93 0.14

1.49 0.32

2.25 0.96

57.89 55.85

4.70 57.00

Income Statement Data

Cost of services and goods sold Construction cost Fertilizer revenue Cement cost Concessions / materials cost Elimination of intra-group cost Total cost of services and goods sold Selling, general and admin expenses

Per share information Earnings per share 1 Cash dividend per share 2 102 ORASCOM CONSTRUCTION INDUSTRIES ANNUAL REPORT 2008

Balance Sheet Data

Cash and cash equivalents Accounts receivable – customers (net) Total current assets Property, plant and equipment (net) Assets under construction Total assets Short-term debt Accounts payable Total current liabilities Total long-term liabilities Minority interest Total shareholders’ equity Total shareholders’ equity and liabilities Other Data Return on sales 3 Return on equity 4 Current ratio 5 Net debt to equity ratio 6 Foreign exchange rate (LE = USD 1) Foreign exchange rate (LE = USD 1) PL

31/12/04

31/12/05

31/12/06

31/12/07

31/12/08

$ ‘000

$ ‘000

$ ‘000

US$ ‘000

US$ ‘000

260,126 272,780 935,093 910,585 194,330

376,444 291,476 1,420,621 1,158,406 370,645

478,683 558,861 1,924,535 1,591,618 1,126,091

706,534 138,166 16,186,834 339,789 286,729

1,503,456 1,497,551 3,610,846 1,283,795 518,504

2,067,843

3,057,354

5,002,855

17,126,983

7,823,102

162,208 516,847 731,099 589,010 245,366 502,367

233,308 582,204 910,622 1,065,221 341,195 740,317

522,324 1,026,012 1,724,663 1,327,125 435,031 1,516,036

1,920,582 163,672 3,129,465 668,547 189,173 13,139,799

667,397 1,512,402 2,668,941 1,957,466 41,226 3,155,469

1,822,477

2,716,159

4,567,824

17,126,983

7,823,102

12.87% 42.68% 1.28 0.66 6.06 -

14.96% 47.02% 1.56 0.85 5.76 5.82

16.21% 41.17% 1.12 0.70 5.72 5.75

10.28% 90.84% 5.17 0.11 5.5440 5.6608

19.7% 33.0% 1.35 0.2 0.1818 0.1835

1 Net income available for shareholder dividends, after deducting the employees’ profit share, divided by the weighted average number of shares outstanding during the period. 2 Total cash dividend paid for each year divided by current number of shares of 190,575,000. 3 Net income as a percentage of sales. 4 Net income as a percentage of average total shareholders’ equity. 5 Current assets to current liabilities. 6 Net debt to internal finance (shareholders’ equity plus minority interests).

ORASCOM CONSTRUCTION INDUSTRIES 103 ANNUAL REPORT 2008

Additional information

MANAGEMENT AND CORPORATE INFORMATION

BOARD OF DIRECTORS

CORPORATE OFFICERS

CONSTRUCTION GROUP

ONSI SAWIRIS Chairman

NASSEF SAWIRIS Chief Executive Officer

OSAMA BISHAI Managing Director Orascom Construction

NASSEF SAWIRIS Director

SALMAN BUTT Chief Financial Officer

SALMAN BUTT Director

NICOLAS ESTAY Executive Vice President – Europe

OSAMA BISHAI Director

KEVIN STRUVE Strategic Planning Director

KARIM CAMEL-TOUEG Director

DALIA KHORSHID Corporate Treasurer

JÉRÔME GUIRAUD Director

FADY KIAMA Corporate Controller

SAMI HADDAD Independent Director

HASSAN BADRAWI Project Development Director

ALADDIN SABA* Independent Director

SHERIF TANTAWY Project Development Director

ARIF NAQVI* Independent Director

HUSSEIN MAREI General Counsel

HASSAN ABDALLA* Independent Director

HESHAM ABDEL SAMIE Investment Research Director

* Members of the Audit Committee.

HEBA ISKANDER Corporate Development Director

JOHAN BEERLANDT Chief Executive Officer BESIX Group KARIM CAMEL-TOUEG President Contrack Group PHILIP MEGALLY President Cementech JOHN BARACAT Managing Director, Subsidiaries (NSF, NPC, Alico, UPC, SCIB, SIDC)

FERTILIZER GROUP HOSSAM KHATTAB Managing Director Egyptian Fertilizers Company AMR HASSABALLAH Managing Director Egypt Basic Industries Corporation

ADEL BISHAI Corporate Governance Director

INVESTOR RELATIONS

SHAREHOLDER INFORMATION

OMAR DARWAZAH Investor Relations Manager [email protected]

CORPORATE OFFICE Nile City Towers 2005A Corniche El Nil Cairo, Egypt 11221

ERIKA WAKID Investor Relations Officer [email protected]

Tel: +20 22 461 1111 Fax: +20 22 461 9400

Telephone:

WWW.ORASCOMCI.COM

Fax: 104 ORASCOM CONSTRUCTION INDUSTRIES ANNUAL REPORT 2008

00 202 2461 1036 00 202 2461 0727 00 202 2461 0914 00 202 2461 9409

Full Listing: The Egyptian Exchange Reuters / Bloomberg: OCIC.CA / ORCI EY GDRs Listed: London Stock Exchange Reuters / Bloomberg: OCICq.L / ORSD LI

BUSINESS SEGMENTS & ACTIVITIES

CONSTRUCTION GROUP

FERTILIZER GROUP

ORASCOM CONSTRUCTION (100%) Regional engineering, procurement and construction services

EGYPTIAN FERTILIZERS COMPANY (100%) Granular urea manufacturer, Egypt

BESIX GROUP (50%) Global engineering, procurement and construction services

EGYPT BASIC INDUSTRIES CORPORATION (60%) Ammonia manufacturer, Egypt

CONTRACK INTERNATIONAL (100%) Regional engineering, procurement and construction services

SORFERT ALGÉRIE (51%) Ammonia and granular urea manufacturer, Algeria

ARABIAN SEA FOUNDATION (50%) Joint venture with Hydra Commercial Investments, Sorouh Real Estate and Capital Investment specializing in geotechnical engineering and foundation works in Abu Dhabi

NOTORE CHEMICAL INDUSTRIES (20%) Granular urea manufacturer, Nigeria GAVILON HOLDING (20%) Grain and fertilizer trading, USA

CEMENTECH (100%) Specialized engineering, procurement and construction services on cement plants ORASCOM ROAD CONSTRUCTION (90%) Asphalt and concrete paving

CONSTRUCTION MATERIALS NATIONAL STEEL FABRICATION (100%) Steel cutting, bending, welding, and painting services ALICO EGYPT (50%) Building facade, curtain walling, and window systems UNITED PAINTS & CHEMICALS (50%) Cement based, ready mix mortars with investments in: - Egyptian Gypsum Company (50%) - BASF (50%) - A-Build Egypt (50.1%) NATIONAL PIPE COMPANY (40%) Concrete pipe manufacturer SCIB CHEMICAL (15%) Paints and building chemicals manufacturer

PROPERTY MANAGEMENT SUEZ INDUSTRIAL DEVELOPMENT COMPANY (60.5%) Industrial park developer and operator CONTRACK FM (100%) Facilities management company

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ORASCOM CONSTRUCTION INDUSTRIES NILE CITY TOWERS 2005A CORNICHE EL NIL CAIRO, EGYPT 11221 TEL: +20 22 461 1111 FAX: +20 22 461 9400 WWW.ORASCOMCI.COM