Efg-hold.gdr S Regulatory News (EFGD)

9 May 2006 13:41

EFG-Hermes Holdings SAE09 May 2006 EFG-HERMES INVESTOR RELATIONS 1Q2006 Earnings Release - 09 May 2006 STRONG QUARTER DESPITE WEAKENING FINANCIAL MARKETS Operating Revenues up 192% to EGP303* million from EGP104 million in 1Q2005 Net Operating Profit up 262% to EGP228 million from EGP63 million Net Operating Margin up to 75% from 60% Net Income up five folds to EGP208 million up from EGP41.4 million *Excluding unrealized asset management incentive fees of EGP27 million EFG-Hermes continues to report record revenues, operating profits and netincome. The substantial increase in operating indicators is a function of theincrease in the volume of business across divisions: - AUM grew to a record of EGP9 billion as of March 2006. - Brokerage executions for the quarter reached EGP28 billion in Egypt and EGP8.5 billion in UAE. - Investment banking delivers record revenues of EGP117 million. Current backlog stands at over USD4.5 billion. - Private equity AUM reach USD500 million Strategic Focus EFG-Hermes main focus is to offer significant growth opportunities to itsshareholders and at the same time decrease the risk profile of its operations.This is being achieved through: 1. Diversifying regionally without losing focus on core business: Our main goals are to continue focusing on our core operations (brokerage, investment banking, asset management and private equity), penetrate several markets in the region and establish local operations in those markets. So far, our arm in UAE has been a success story that boosts the confidence in our business model which could be easily replicated in other countries in the region given the similarity of their business environments. 2. Maintaining high quality revenue stream: EFG-Hermes revenues are mainly agency fees rather than revenues generated from risky proprietary trading positions or margin lending. We follow stringent accounting policies to assure that our numbers are a true reflection of our financial position and adhere to international accounting standards. 3. Acquiring supporting operations: The first step in this direction was acquiring a current portion of 23% of Banque Audi in Lebanon, which is a commercial bank that has similar regional aspirations as those of EFG-Hermes. Our share in the bank's profits will be consolidated to our financial statements using the equity method and acts as a cushion to smooth the cyclicality of our revenue stream. The company's goal now is to leverage its ownership in the bank for synergies. 4. Rapidly deepening infrastructure: One of the company's main targets is to strengthen its infrastructure to smoothly absorb the rapid growth phase that we are currently undertaking. Such infrastructure includes information technology, risk management, internal compliance, investor relations, public relations, corporate governance, human resources etc..... Impact of Our Strategy on First Quarter Performance Diversification... The benefits of diversification in business divisions and countries were clearlydemonstrated in the strong performance of our investment banking team in Dubaiwho closed two high profile deals during the first quarter amounting to USD950million. Although revenues generated from the two deals were not booked duringthe first quarter, they will help compensate for the negative impact of thedeclining financial markets in the UAE on the brokerage operation. Thus, theoverall performance of the UAE arm will continue to be very strong. Revenue quality... Our strategy of preserving the quality of our revenues was clearly reflected inthe strong financial performance delivered during the first quarter despite theturbulences witnessed by the majority of markets in the region during the sameperiod. This was mainly delivered due to our high quality fee-based revenuestream that did not suffer from any fluctuations arising from declines in thevalues of proprietary positions or margin lending to customers. Acquisitions... The acquisition of 23% of Banque Audi paid off this quarter as the consolidationof our stake in the bank's first quarter profits using the equity methodparticipated in adding EGP41.8 million to our total revenues. It is worth notingthat our ownership in Banque Audi currently stands at 23% rather than theoriginally announced 20% because the employee-related portion of the bank'scapital increase will be executed over several quarters by the end of which ourshare in the bank will decline to the original share of 20%. All of the above is supported by our deepening infrastructure... Financial Highlights Throughout this document, comparisons are conducted after excluding assetmanagement incentive fees unrealized during the first three quarters of 2005 andrealized in 4Q05, the unrealized incentive fees for 1Q06 and the one-offemployee-related expense booked in 4Q05. Revenues from Operations EFG-Hermes revenues witnessed an increase of 39%, from EGP218 million to EGP303million in 1Q06. The revenue figure of EGP303 million in 1Q06 records a 192%increase when compared to the same period of last year. It is worth highlightingthat asset management's unrealized incentive fees for 1Q06 amount to EGP27million. Table 1: Contribution of Respective Divisions to Total Operating Revenues Source: EFG-Hermes Figure 2: Breakdown of Quarterly Operating Revenue by Division in 1Q2006 andPrevious Quarters Source: EFG-Hermes Other Revenues - Equity Consolidation of Banque Audi Other revenues surged almost five folds to EGP62 million due to the equityconsolidation of our 23% share in Banque Audi resulting in EGP41.8 millionadditions to our total revenues for the quarter. Profitability EFG-Hermes recorded profits of EGP208 million in 1Q06 up 126% when compared to4Q05 profits and up five folds when compared to the same period of last year(EGP41.4 million). On the other hand, profitability continued to improve dramatically where NOPmargin increased 13 points from 62% during 4Q05 to 75% during this quarter. Onthe other hand, NOP increased 68% to EGP228 million compared to the previousquarter and 262% compared to the same period of last year. The main reasonbehind the improvement in profitability was the decline in operating expensesinduced by the drop in consultant and service fees as well as the growth inoperating revenues at a higher rate compared to the growth in operatingexpenses. Operating Expenses The first quarter of 2006 witnessed a decline of operating expenses to 24.8% ofoperating revenues down from 38% during the last quarter of 2005 to reach EGP75million. In absolute terms, operating expenses decreased 8.5% compared to theprevious quarter. Consultant and service fees (5.5% of operating expenses in1Q06 compared to 15% in 4Q05), an item highly correlated to our deal flow andlicense applications, dropped 80% and it was the main reason behind the declinein OPEX during the quarter. This was mainly due to the limited deal flow bookedduring the first quarter as opposed to the last quarter of 2005 which wasrelatively more active. In addition, expenses related to submitting theapplication for the Saudi license and acquiring the DIFC and DIFX licenses wereall booked to the fourth quarter, further increasing this figure. Financing Expenses This quarter shows us as net borrowers for the period. This is mainlyattributable to the bridge financing we resorted to in order to meet ourdeadline requirement to acquire the 20% stake of Banque Audi until the proceedsof the capital increase were collected to finance our obligations. However, the'other income' figure in our financials includes around EGP7 million in interestincome generated from our cash balances that were deposited during the processof the capital increase of Banque Audi at the bank. This explains the surge inthe other income account compared to last year. Investments Our current 23% stake in Banque Audi is now recorded on our balance sheet at itsacquisition cost of EGP2.6 billion. Our investments in SODIC and Nile City Buildings amount to a total of aroundEGP210 million and are recorded in available for sale investments and propertyinvestments accounts respectively. Capital Increase The first tranche of our capital increase, 16 million shares at EGP115 pershare, was completed during the first quarter and was reflected in an increasein our paid-in capital to EGP485.4 million up from EGP405.4 million as well asan increase of EGP1.76 billion in our reserves (total increase was EGP1.84billion). However, the procedures of the second tranche, rights issue of 194.15 millionshares at par value of EGP5, were initiated during the same quarter but were notfinalized. Accordingly, only the amount collected during this quarter appears onour shareholders equity amounting to EGP57.7 million from a total of EGP970.7million to be added to the paid-in capital after the finalization of the capitalincrease. The full amount of the second tranche of the capital increase will berecorded during the second quarter of the year. The finalization of the first tranche and the partial collection of the secondtranche of the capital increase, in addition to the profits for the period ofEGP 208 million, increased our total shareholders equity from EGP848.7 millionin December 2005 to EGP2.78 billion in March 2006. Taxes The company is subject to 20% tax rate under the new tax law. By the time wepublished our year-end financials, our offshore subsidiaries were subject totax. Accordingly, our tax bill for the full year amounted to around EGP98million. The good news during this quarter is that the tax law was modified to exemptconsolidated offshore subsidiaries (whether full or proportionate consolidation)from taxes; however, it is worth noting that dividends paid by thosesubsidiaries are still subject to tax. Accordingly, our tax bill for the fullyear 2005 declines by around EGP8 million. The significance of the change in the tax law is not only the reduction of theprevious tax bill, but the positive effect on our effective tax rate goingforward as the weight of revenues generated from the region increases. PERFORMANCE OF BUSINESS DIVISIONS Brokerage Egypt Markets in the region witnessed a turbulent quarter which reflected its darkshadows on the performance of the Egyptian market. However, total marketexecutions (net of special transactions) climbed around 67% as opposed to theprevious quarter to record EGP178 billion, thanks to the increased involvementof retail investors after Telecom Egypt's IPO and the resulting surge inliquidity. EFG-Hermes total executions (net of special transactions) climbed 35% comparedto the previous quarter to reach EGP28 billion. Revenues climbed 25% to recordEGP131 million in 1Q06 compared to the previous quarter and 181% compared to theyear ago period to represent 43% of operating revenues up from 31% during lastquarter. The increase in revenues was at a slower rate compared to the increasein executions due to the fact that executions were biased towards retail clientswho are charged lower commissions compared to institutional clients as a resultof their relatively lower settlement cost. Our market share declined to 15.73% of total market executions as opposed to19.42% in the previous quarter, after excluding values associated to theexecutions of Telecom Egypt's IPO during the previous quarter and any otherspecial transactions. The main reason behind the decline in our market share isthe expansion of the market itself, especially on the retail clients' side wherecompetition is more fragmented compared to that on the institutional clients'side where we are the market leader. We believe that the introduction of onlinetrading will boost our capacity to cater to retail clients and help us maintain,if not increase, our market share even if the market expands further. It is worth noting that in our previous earnings releases we used to reportmarket shares as a percentage of daily traded values. Starting this release wewill report market shares as a percentage of total market executions. Figure 3: EFG-Hermes Executions and Market Share of Total Market Executions 4Q05 and 1Q06 figures are net of special transactions Source: EFG-Hermes UAE GCC markets suffered from a sharp decline starting 2006. Abu Dhabi's marketdeclined 14% during the 1st quarter while Dubai's declined 32% during the sameperiod. However, YTD performance (till May 7th, 2006) shows a further declinewhere the Abu Dhabi market lost around 35% of its value and the market in Dubailost almost half of its value. Nonetheless, to a brokerage operation, whatmatter most are the values executed and the market shares. Dubai's total marketexecutions remained almost constant at USD27 billion during this quartercompared to the last quarter of 2005. Our operation in UAE suffered a minorglitch during this quarter due to moving our premises from the previous officebuilding to the DIFC office buildings. Accordingly, our executions in Dubaideclined slightly from USD1.33 billion representing 4.9% of the market toUSD1.09 billion representing 4% of the market. It is worth noting that despitethe decline in its index, Dubai's market started the second quarter with evenhigher total market executions compared to the first quarter, thanks to thelisting of du, the second telecom operator in the UAE, the first deal executedby our regional investment banking team based in Dubai. On the other hand, Abu Dhabi's total market executions slumped from USD9.3billion during the previous quarter to USD5.9 billion during this quarterdragging down our executions to USD400 million this quarter from USD682 millionlast quarter. Market share slightly declined to 6.7% down from 7.3% lastquarter. As a result of the decline in market values in Abu Dhabi in addition to thetemporary instability arising from the move, thus the slightly lower marketshares, UAE brokerage revenues declined 27% to EGP12 million compared to EGP16million during the last quarter of 2005, to represent 4% of total operatingrevenues down from 6% last quarter. Figures 4: UAE Brokerage Market Shares on DFM and ADSM Source: EFG-Hermes Investment Banking Egypt Revenues from the investment banking division recorded EGP117 million, 161% upfrom previous quarter and 200% up compared to the same period of last year,representing 39% of total operating revenues. A number of transactions closedduring the quarter, OCI capital increase, EFG-Hermes capital increase,acquisition of the Egyptian can making company and Solidere. UAE Our strategy of diversifying sources of revenues to be generated from differentlines of business as well as from different countries paid off this quarter. Theslight decline in the performance of our brokerage arm in UAE was more thancompensated by the great success of our regional investment banking team inDubai who closed two very high profile deals, du, the second telecom operator inthe UAE and Al Thuraya, the first Arab satellite telecom company, with acombined amount of USD950 million. Al Thuraya deal was a private placement ofUSD300 million while du was a USD650 million IPO that was 167x oversubscribed.However, none of the revenues associated with du or Al Thuraya that wereconducted during the first quarter were recorded. The total amount will bebooked during the second quarter of the year which should help in supporting thefinancial performance of our UAE brokerage arm should stock markets in the UAEcontinue to decline. The firm currently has a back log of around USD4.5 billion in Egypt and UAE. Asset Management Revenues from asset management recorded EGP16 million, 115% up compared to thesame period of last year, representing 5% of total operating revenues of thegroup. QoQ revenues witnessed a drop of 66% as 4Q05 revenues of EGP47 millionincluded EGP32 million realized incentive fees attributed to the fourth quartercompared to EGP1.2 million for 1Q06. When we exclude the previous quarter'sincentive fees, management fees would show an increase of 6%. AUM witnessed a 34% increase to reach EGP9 billion up from EGP6.7 billion.Eighty six percent of the increase was attributed to cash injections with thebalance generated from the increase in net asset value. It is worth noting thatby the end of 1Q06, EGP1.13 billion of our total asset base was money marketfunds. EFG-Hermes launched a money market fund for Bank of Alexandria during Aprilwhich raised EGP200 million upon closing subscription. Another Islamic fund waslaunched during May for Egyptian Saudi Finance Bank. Our asset management teammanaged to land a fund in the GCC that is currently in the making. Several otherdeals are currently being negotiated and should be launched during 2006. Our asset management division's strategy is to grow institutional portfolioslocally, regionally and internationally. This will help us fulfil our mandate ofgrowing our AUM base to EGP12 billion by year-end. Figure 5: AUM Broken Down Into Start of Period Assets, New Subscriptions andPerformance-related Growth Source: EFG-Hermes Private Equity Revenues from private equity demonstrated a 126% increase compared to theprevious quarter and a whopping seven fold increase compared to the same periodof last year to reach EGP27.6 million, representing 9% of revenues. It is worthnoting that this impressive performance resulted from a lucrative exit conductedduring the quarter. The Horus II Fund, an off-shore closed-end fund investing primarily in Egyptiancompanies and bolt-on MENA acquisitions serving Egyptian companies, was closedduring the last quarter of 2005, for a total value of USD155 million. EHPE alsoclosed Horus Agri Business Fund during the first quarter of 2006 at USD46million. Horus Agri Fund focuses primarily on medium-sized investments withinthe regional agribusiness sector. Total private equity assets under management are currently stable at USD500million. Several deals are currently being negotiated to raise more funds, thusincreasing our asset base and further stabilizing our revenue stream generatedfrom management fees. EFG - Hermes Holding Company (Egyptian Joint Stock Company) Consolidated Financial Statements As of March 31, 2006 & Review Report Thereon REVIEW REPORT To The Board of Directors of The EFG - Hermes Holding Company We have reviewed the accompanying consolidated statement of financial positionof EFG - Hermes Holding Company and Subsidiaries as of March 31, 2006, and therelated consolidated statements of income, changes in equity and cash flows forthe three months then ended. These financial statements are the responsibilityof the Company's management. Our responsibility is to issue a report on thesefinancial statements based on our review. we conducted our review in accordance with the Egyptian Standard on Auditingapplicable to review engagements. This standard requires that we plan andperform the review to obtain moderate assurance as to whether the consolidatedfinancial statements are free of material misstatement. A review is limitedprimarily to inquiries of Company's personnel and analytical procedures appliedto financial data, and thus provides less assurance than an audit. We have notperformed an audit and, accordingly, we do not express an audit opinion. Based on our review, nothing has come to our attention that causes us to believethat the accompanying consolidated financial statements do not give a true andfair view in accordance with the Egyptian Accounting Standards. KPMG Hazem HassanCairo, April 30,2006 EFG - Hermes Holding Company (Egyptian Joint Stock Company) Consolidated Statement of Financial Position As of March 31,2006 Note No. 3/31/2006 12/31/2005 LE. LE.Current AssetsCash on hand and with banksCash on hand 1 504 821 1 053 267Cheques under collection 2 740 557 7 830 516Banks - current accounts (5) 828 288 027 892 181 590Banks - time deposits 269 191 158 11 639 509Saving certificates 4 800 000 4 800 000 _____________ _____________Total cash on hand and with banks 1 106 524 563 917 504 882Treasury Bills (6) 39 576 674 59 057 199Trading investments 97 537 619 18 878 888Accounts receivable (net of accumulated impairment) (10) 498 986 469 641 672 937Other brokerage companies 123 869 966 225 820 716EFG- Hermes Employee Trust (current tranche) 23 831 090 23 831 090Other debit balances (7,10) 99 233 457 66 398 785 _____________ _____________Total current assets 1 989 559 838 1 953 164 497 _____________ _____________Non - Current AssetsFixed assets (net) (11) 46 784 408 28 983 463Available -for- sale investments (12) 119 110 472 123 703 401Investment in subsidiaries & associates (13) 2 642 369 291 15 289 500Property Investment (14) 139 973 492 139 973 492Settlement Guarantee Fund (15) 13 515 634 8 346 578EFG- Hermes Employee Trust (non-current tranche) 108 444 618 67 503 694Goodwill (net) 68 189 190 69 365 547Deferred tax assets (22) 2 720 537 2 771 186 _____________ _____________Total non - current assets 3 141 107 642 455 936 861 _____________ _____________Total assets 5 130 667 480 2 409 101 358 _____________ _____________Current LiabilitiesShort term loans (8) 630 300 000 -Accounts receivable - credit balances 1 141 372 859 1 166 563 804Creditors and other credit balances (9) 202 334 267 243 903 626Provisions (10) 59 789 234 53 972 847 _____________ _____________Total current liabilities 2 033 796 360 1 464 440 277 _____________ _____________Shareholders' equityIssued & paid - in capital (17) 485 370 050 405 370 050Legal reserve 245 208 522 108 978 135General reserve 158 271 158 271Special reserve 1 645 387 663 20 391 205Retained earnings 370 539 614 24 576 713 _____________ _____________Total shareholders' equity 2 746 664 120 559 474 374Deduct: Treasury shares (18) (20 681 201) (60 944 470)Payment under capital increase (17) 57 700 175 - _____________ _____________ 2 783 683 094 498 529 904Net profit for the period/year 208 507 149 350 139 955 _____________ _____________Total shareholders' equity including net profit 2 992 190 243 848 669 859Minority interest 42 953 593 35 538 938 _____________ _____________Total shareholders' equity and minority interest 3 035 143 836 884 208 797 _____________ _____________ Non - Current LiabilitiesLong term loans (19) 60 786 072 59 511 072Other liabilities 941 212 941 212 _____________ _____________Total non - current liabilities 61 727 284 60 452 284 _____________ _____________Total shareholders' equity and liabilities 5 130 667 480 2 409 101 358 _____________ _____________ The accompanying notes from No. (1) to No. (23) form an integral part of the financial statements and are to be read therewith . Review Report "Attached" Yasser El Mallawany Hassan Heikal Chairman & CEO Co- Chairman & CEO EFG - Hermes Holding Company (Egyptian Joint Stock Company) Consolidated Income Statement for the period ended March 31, 2006 For the For the Note period ended period ended No. 31/3/2006 31/3/2005 L.E. L.E. Income from fees, commission and management of investments 302 574 485 105 220 286Share of profit of associates (Bank Audi) 41 813 129 -Interest income 9 625 266 915 151Dividend income 177 886 -Gain (loss) arising from sale of investments 2 185 956 (2 117 639)Foreign currency differences 300 769 218 608Other income 8 348 202 585 692 _____________ _____________Total revenues 365 025 693 104 822 098 _____________ _____________Deduct:General administrative expenses 75 037 411 41 728 061Interest expense 24 126 022 4 148 713Provisions (10) 5 928 275 602 329Fixed assets depreciation (11) 1 527 868 1 064 038Unrealized loss (gain) on trading investments 4 368 519 (3 850 627)Goodwill impairment 1 176 358 1 176 358Deferred expenditure amortization - 873 632Impairment of available -for-sale investments - 3 042 813Loss arising from sale of fixed assets 1 951 - _____________ _____________Total expenses 112 166 404 48 785 317 _____________ _____________Net profit before income tax 252 859 289 56 036 781 Deduct:Current income tax (36 233 542) (12 793 362)Deferred income tax (22) ( 50 649) -Net profit before minority interest 216 575 098 43 243 419Deduct: minority interest (8 067 949) ( 860 359) _____________ _____________Net profit for the period 208 507 149 42 383 060 _____________ _____________ _____________ _____________ The accompanying notes from No. (1) to No. (23) form an integral part of thefinancial statements and are to be read therewith . EFG - Hermes Holding Company (Egyptian Joint Stock Company) Consolidated Statement of Changes in Equity For the period ended March 31,2006 Issued and Legal General Special reserve ___________________________________________ Paid - in Reserve Reserve Share Revaluation valuation Capital Issuance difference of Premium Differences available -for-sale investments L.E. L.E. L.E. L.E. L.E. L.E. Balance as at 31/12/2004 405 370 050 103 764 279 158 271 4 755 384 (761 762) ( 677 689)Purchasing of treasury shares - - - - - -Selling of treasuryshares - 4 090 345 - 7 717 108 - -Special reserve -revaluation differences - - - - (536 271) -Valuation differencesof available-for-sale investments - credit - - - - - 9 894 435Transfer to reserves & retained earnings - 1 123 511 - - - - ______________________________________________________________________________________Balance as at 31/12/2005 405 370 050 108 978 135 158 271 12 472 492 (1 298 033) 9 216 746Increase in capital 80 000 000 129 574 400 - 1 628 609 600 - -Purchasing of treasury shares - - - - - -Selling of treasuryshares - 4 815 050 - - - -Special reserve- revaluation differences - - - - 367 328 -Valuation differencesof available-for-sale investments - debit - - - - - (3 980 470)Transfer to reserves & retained earnings - 1 840 937 - - - - ______________________________________________________________________________________Balance as at 31/3/2006 485 370 050 245 208 522 158 271 1 641 082 092 (930 705) 5 236 276 ______________________________________________________________________________________ ______________________________________________________________________________________ Retained Treasury Payment Total (Losses) Shares under capital Earnings increase L.E. L.E. L.E. L.E. Balance as at 31/12/2004 ( 25 978 635) ( 46 232 310) - 440 397 588Purchasing of treasury shares - ( 109 069 996) - ( 109 069 996) Selling of treasury shares - 94 357 836 - 106 165 289Special reserve - revaluation differences - - - ( 536 271)Valuation differences of available-for-sale investments - credit - - - 9 894 435Transfer to reserves & retained earnings 50 555 348 - - 51 678 859Balance as at 31/12/2005 24 576 713 ( 60 944 470) - 498 529 904 _________________________________________________________________________________Increase in capital - - 57 700 175 1 895 884 175Purchasing of treasury shares - ( 7 862 257) - ( 7 862 257)Selling of treasury shares - 48 125 526 - 52 940 576Special reserve- revaluation differences - - - 367 328Valuation differences ofavailable-for-sale investments - debit - - - ( 3 980 470)Transfer to reserves & retained earnings 345 962 901 - - 347 803 838 _________________________________________________________________________________Balance as at 31/3/2006 370 539 614 ( 20 681 201) 57 700 175 2 783 683 094 _________________________________________________________________________________ _________________________________________________________________________________ The accompanying notes from No. (1) to No. (23) form an integral part of the financial statements and are to be read therewith. EFG - Hermes Holding Company (Egyptian Joint Stock Company) Consolidated Cash Flow Statement For the period ended March 31, 2006 For the For the period ended period ended 31/3/2006 31/3/2005 L.E. L.E.Cash Flows from Operating ActivitiesNet profit before income tax 252 859 289 56 036 781Adjustments to reconcile net profit to netcash provided by operating activities Fixed assets depreciation 1 527 868 1 064 038Provisions 5 928 275 602 329Amount used from provisions ( 113 004) -Deferred expenditures amortization - 873 632Goodwill impairment 1 176 358 1 176 358Loss arising from sale of fixed assets 1 951 -Loss arising from sale of available -for- sale investments - 2 679 481Unrealized loss (gain) on trading investments 4 368 519 ( 3 850 627)Impairment of available -for- sale investments - 3 042 813Foreign currency translation differences 1 210 395 577 578Share of profit of associates (Bank Audi) ( 41 813 129) - ____________ _____________Operating profit before changes in working capital 225 146 522 62 202 383Increase in other debit balances ( 38 682 865) ( 5 851 005)(Decrease) increase in creditors and other credit balances ( 71 705 325) 25 506 499Decrease (increase) in accounts receivable -debit balances 142 848 704 ( 228 790 693)(Decrease) increase in accounts receivable - credit balances ( 25 851 993) 232 335 293Increase in affiliated companies (debit balances) ( 721 327 627) ( 176 068 723)Increase in affiliated companies (credit balances) 724 133 817 195 047 214Increase in trading investments ( 82 738 768) ( 22 110 585)Decrease in EFG- Hermes Employee Trust (current tranche) - 3 297 500Increase in EFG- Hermes Employee Trust (non current tranche) ( 40 940 924) -Decrease (increase) in other brokerage companies 103 670 936 ( 96 652 081)Increase in short term loans 630 300 000 - ____________ _____________Net cash provided from (used in) operating activities 844 852 477 ( 11 084 198) ____________ _____________Cash Flows from Investing ActivitiesPayments to purchases of fixed assets ( 19 331 664) ( 2 829 885)Proceeds from sale of fixed assets 900 -Proceeds from redemption of treasury bills 19 480 525 1 972 585Payments to purchase of available -for- sale investments - ( 5 099 896)Payments to purchase of investments in subsidiaries and associates (2 596 806 833) ( 151 461)Proceeds from sale of available -for- sale investments - 5 963 554Payments to increase/proceeds from redemption of the company's sharein Settlement Guarantee Fund ( 5 169 056) 811 492Payments to purchase of property investment - ( 1 950 000) ____________ _____________Net cash used in investing activities (2 601 826 128) ( 1 283 611) ____________ _____________Cash Flows from Financing ActivitiesIncrease in paid - in capital 91 460 000 7 850 000Payments under capital increase 57 700 175 -Payments to purchase treasury shares ( 7 862 257) -Proceeds from sale of treasury shares 48 125 526 38 866 348Increase in retained earnings 61 048 576 11 700 000Paid dividends ( 68 752 738) ( 14 812 596)Decrease in banks - overdraft - ( 30 168 443)Increase in long term loans 1 275 000 -Decrease in other liabilities - ( 63 177)Increase in reserves 1 762 999 050 - ____________ _____________Net cash provided from financing activities 1 945 993 332 13 372 132 ____________ _____________Net change during the period 189 019 681 1 004 323Cash and cash equivalent at the beginning of the period 917 504 882 133 095 279 ____________ _____________Cash and cash equivalent at the end of the period 1 106 524 563 134 099 602 ____________ _____________Cash & Cash Equivalent are represented in:Cash on hand 1 504 821 1 183 487Cheques under collection 2 740 557 2 322 436Banks- current account 828 288 027 105 630 989Banks- time deposits 269 191 158 24 962 690L/G's margin 4 800 000 - ____________ _____________ 1 106 524 563 134 099 602 ____________ _____________ The accompanying notes from No. (1) to No. (23) form an integral part of the financial statements and are to be read therewith . EFG - Hermes Holding Company (Egyptian Joint Stock Company) Notes to the Consolidated Financial Statements for the period ended March 31, 2006 1. Purpose of Preparation The consolidated financial statements and accompanying notes were prepared for the purpose of submitting them to the Egyptian Stock Exchange and London Stock Exchange as one of the requirements of local laws and Global Depositary shares (GDS). 2 . General - EFG - Hermes Holding Company -Egyptian Joint Stock Company- was founded in pursuance of decree No. 106 of 1984. - The company's extraordinary general meeting held on July 22, 1997 resolved to adjust the company's status and convert it in pursuance to the provisions of law No. 95/1992 and its executive regulation and amend the company's purpose to become participation in the companies' establishment which issue securities or in increasing their share capitals. - The company's extraordinary meeting held on March 14,2004 decided to add the Custody Activity to the purpose of the company. - EFG- Hermes holding company, the parent company, owns the following subsidiaries: Direct ownership Indirect ownership % % Financial Brokerage Group (FBG) 99.76 0.04Egyptian Fund Management Group (EFMG) 88.51 11.49Egyptian Portfolio Management Group (EPMG) 66.33 33.67Hermes Securities Brokerage 97.58 2.42Hermes Fund Management 89.95 10.05Hermes Corporate Finance 99.37 0.53EFG - Hermes Advisory Inc. 100 -EFG- Hermes Financial Management Ltd. 100 -EFG - Hermes for Promoting & Underwriting 99.88 -Bayonne Enterprises Ltd. -- 100EFG- Hermes Fixed Income 99 1EFG- Hermes Private Equity (Egypt) 96.3 3.7EFG- Hermes Private Equity (BVI) 65 --EFG- Hermes Brokerage - UAE Ltd. -- 90Flemming CIIC Holdings 100 --Flemming Mansour Securities -- 99.33Flemming CIIC Securities -- 96Flemming Corporate Finance -- 74.92EFG- Hermes UAE Ltd. 100 -- 3 . Significant Accounting Policies Applied The significant accounting policies adopted in the preparation of these consolidated financial statements are set out below: 3-1 Basis of Preparation of Financial Statements The financial statements were prepared in accordance with Egyptian Accounting Standards, and applicable local laws and regulations. 3-2 Basis of Consolidation The consolidated financial statements include all subsidiaries that are controlled by the parent company. Basis of the consolidation are as follows: - All intragroup balances and transactions are eliminated. - Minority interest, in the equity and results of the entities that are controlled by the parent company , is shown as a separate item in the consolidated financial statements . - The cost of acquisition is allocated as follows: a) The fair value of the assets and liabilities acquired as of the date of the exchange to the extent of the parent's interest obtained in the exchange, and b) The minority's proportion of the pre-acquisition carrying amounts of the assets and liabilities of the subsidiary. C) Goodwill represents amounts arising on acquisition of subsidiaries and represents the difference between the cost of acquisition and the fair value of the net identifiable assets acquired. Goodwill is stated at cost less impairment losses. 3-3 Foreign Currencies Transactions - The company maintains its accounts in Egyptian Pounds. Transactions denominated in foreign currencies are recorded at the prevailing exchange rate at the dates of transactions. Balances of monetary assets and liabilities denominated in foreign currency at the financial position are translated at the prevailing exchange rates. The exchange differences are recorded in the income statement. - Assets and liabilities of financial statements for foreign companies were translated using the prevailing exchange rates on the financial position date, shareholders' equity items are translated using historical rates, while revenues and expenses were translated using an average of the prevailing rates during the financial year. The resulted translation differences were included within the shareholders' equity in the financial position as a special reserve- foreign currency translation differences. 3-4 Revenues Recognition - Gains (losses) resulted from sale of investments are recognized on transaction date and measured by the difference between cost and selling price less selling commission and expenses. - Dividend income is recognized when declared. - Deposits and bonds interest are recognized on accrual basis. - Brokerage commission resulting from purchase of and sale of securities operations in favour of clients are recorded according to the accrual basis (when the invoice is issued). - Management fee is calculated as determined by the management contract of each investment fund & portfolio and recorded on accrual basis. - Incentive fee is calculated based on certain percentages of the annual return realized by the fund and portfolio, however these incentive fee will not be recognized untill revenue realization conditions are satisfied and there is adequate assurance of collection. 3-5 Fixed Assets Depreciation Fixed assets are recorded at the historical cost and are depreciated by the straight line method over the estimated productive life for each type of asset as the following: Estimated Useful Life - Buildings 33.3 Years- Office furniture, equipment & electrical appliances 2-16.67 Years- Computer equipment 3.33 - 5 Years- Transportation Means 3.33 - 4 Years 3-6 Amortization of deferred expenditure The cost of obtaining long term loans is capitalized and amortized over the loan year (Note No. 19). 3-7 Treasury Bills Treasury bills are recorded at nominal value, and the issuance discount is recorded under the item of "credit balances and other liabilities". Treasury bills are presented on the financial position net of the issuance discount 3-8 Trading Investments Trading investments are valued on the basis of prevailing market value at the financial position date and the revaluation differences are recorded in the income statement. 3-9 Investments in Subsidiaries Investments in subsidiaries are recorded at cost. However, when there is an impairment in the market or computed value of the investments compared to book value, the book value should be adjusted with the impairment value and charge the impairment to the income statement. 3-10 Investment in Associates Investments in associates are accounted for using equity method. Under the equity method, the investment in an associate is initially recognized at cost and the carrying amount is increased or decreased to recognize the company's share of the profit or loss of the associate after the date of acquisition. The company's share of the profit or loss of the associate is recognized in the company's income statement. The company computes its share of profits or losses after adjusting for the dividends of preferences shares whether or not the dividends have been declared. 3-11 Available -for- sale Investments - Available -for- sale investments are recorded at cost. Quoted investments are revalued at fair value (market value) and non quoted investments are revalued at computed value of the investments (based on latest certified financial statements) and the valuation differences will be recorded as a special reserve revaluation difference of available-for- sale investments in the shareholder's equity. When selling the investments, its interest in the special reserve will be added to the income statement. - Concerning the non active available -for- sale securities (have no market value in an active market) and the fair value of which can not be determined reliably, such investments are recognized at cost, the book value of these investments is to be amended by any impairment concerning the value of these investments and the impairment value is to be charged to income statement for every investment individually. 3-12 Property Investment Property investment is recorded at cost. Any decline in the fair value (impairment) is charged to income statement. 3-13 Treasury Shares Treasury shares are recorded at its acquisition cost and deducted from the total shareholders' equity in the statement of financial position. 3-14 Income Tax - Income tax on the profit or loss for the year comprises current and deferred tax. Income tax is recognized in the income statement except to the extent that it relates to items recognized directly in equity, in which case it is recognized in equity. - Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantially enacted at the financial position date, and any adjustment to tax payable in respect of previous years. - Deferred tax is provided using the financial position liability method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the financial position date. - A deferred tax asset is recognized only to the extent that it is probable that future taxable profits will be available against which the asset can be utilised. Deferred tax assets are reduced to the extent that it is no longer probable that the related tax benefit will be realised. 3-15 Cash Flow Statement For the purpose of preparing the Cash Flow Statement, cash and cash equivalent are represented in the cash on hand, cheques under collection, current accounts, time deposits with banks, saving certificates, margin of letters of guarantee and treasury bills maturing within 3 months or less from its acquisition date. 4. Financial Instruments and management of related risks: The Company's financial instruments are represented in the financial assets and liabilities. Financial assets include cash balances with banks, investments and debtors while financial liabilities include banks - overdraft and creditors. Note (No. 3) of notes to financial statements includes significant accounting policies applied regarding basis of recognition and measurement of the important financial instruments and related revenues and expenses by the company to minimize the consequences of such risks. 4/1 Market Risk: Market risk is represented in the factors which affect values, earnings and profits of all securities negotiated in stock exchange or affect the value, earning and profit of a particular security. According to the company's investment policy, the following procedures are undertaken to reduce the effect of this risk. - Performing the necessary studies before investment decision in order to verify that investment is made in potential securities. - Diversification of investments in different sectors and industries. - Performing continuous studies required to follow up the company's investments and their development. 4/2 Foreign currencies risk - The foreign currencies exchange risk represents the risk of fluctuation in exchange rates, which in turn affects the company's cash inflows and outflows as well as the value of its assets and liabilities in foreign currencies. As at the financial position date, the company has assets and liabilities in foreign currencies equivalent to LE. 1 809 188 206 and LE. 2 100 183 735 respectively. The company's net exposures in foreign currencies are as follows: Surplus/ (Deficit) LE.U.S. Dollar (294 082 027)Euro (126 948)GBP 47 671UAE Derham 3 130 497BHD 15 825SAR 19 453 - As disclosed in note 3-3, the company has used the prevailing exchange rates to revaluate monetary assets and liabilities at the financial position date. - As disclosed in note no. (20) the company has executed Currency SWAP agreements to cover its deficit and required needs of foreign currencies and meet the risks of exchange and interest rates related thereto. 4/3 Financial Instruments' Fair Value The financial instruments' fair value do not substantially deviated from their book value at the financial position date. According to the valuation basis applied, in accounting policies to the assets and liabilities, which included in the notes to the financial statements, note No. (12, 13) of the notes to financial statements disclose the fair values of investments, which are, reported at cost. 5. Banks - Current Accounts The banks - current accounts item stated in the financial position includes blocked amount of LE. 10 million in the name of the subsidiaries, Financial Brokerage Group company and Hermes Securities Brokerage company represents the value of the deposit of One Day Operations settlement which takes place in the Egyptian Stock Exchange (LE. 5 million each). Both companies are not entitled to use this amount without prior approval from Misr Clearance company. 6. Treasury Bills 31/3/2006 31/12/2005 LE. LE. Treasury bills 182 days maturity 37 000 000 57 800 000Treasury bills 364 days maturity 2 825 000 2 825 000 _________ __________ 39 825 000 60 625 000Less: Unearned income (248 326) (1 567 801) _________ __________Net 39 576 674 59 057 199 ======== ======== 7. Other Debit Balances 31/3/2006 31/12/2005 LE. L.E Deposits with others 1 745 314 1 037 058Down payments to suppliers 412 358 23500Prepaid expenses 4 807 675 5 111 344Employees advances 1 700 069 1537913Accrued revenues 5 673 564 2341781Taxes withheld by others 30 470 973 20670474Commercial International InvestmentCompany (CIIC) 43 760 1 204 652Payment under purchasing investments * 12 200 080 12152880Payment under purchasing of fixed assets 2 685 355 --Unrealized SWAP Losses (gains) 241 635 (416 252)EFG- Hermes Employee Trust 24 226 278 --Sundry debtors 16 179 446 23 888 485 __________ _________ 100 386 507 67 551 835Less: impairment of other debit balance (1 153 050) (1 153 050) __________ _________ Net 99 233 457 66 398 785 ========= ======== * The balance represents the amount paid to purchase stakes in the sharecapital of Suez Cement Company and Al Ahly for Development and Investment. 8. Short Term Loans On January 3, 2006 a loan agreement has been signed with CitiBank whereby, the company is entitled to obtain short term loan with an amount of USD 150million (the equivalent of LE. 859 Million). The purpose of the loan is topartially finance the acquisition of a stake in the share capital of Audi Bank -Lebanon. The loan will due on April 12,2006 with monthly interest rate ofLibor+2. An amount of USD 40 million (the equivalent of LE. 229.2 million) hasbeen paid to Citibank on March 3, 2006. Accordingly, the loan balance amountedto USD 110 Million on March 31, 2006 (the equivalent amount of LE. 630.3million). The loan's due date was postponed till May 12, 2006. 9. Creditors and Other Credit Balances 31/3/2006 31/12/2005 LE. L.E Tax Authority 93 648 499 103 096 753Social Insurance Association 191 857 189 058Unearned revenues 4 460 208 7 854 875Interest & commission payable 5 070 884 1 698 905Suppliers 1 360 000 1 360 000Accrued expenses 71 585 129 72 754 380Dividend payable 601 510 601 510Clients' coupons- Custody Activity 5 916 241 7 123 277Credit Suisse Securities (Europe) Limited -- 31 156 933Sundry creditors 19 499 939 18067935 __________ __________ 202 334 267 243903626 ========= ========= 10. Provisions * Accumulated Contingent Impairment of Liabilities Severance Total accounts receivable provision pay provision And other debit balance L.E L.E L.E L.E Balance as at 1/1/2006 65 951 885 53 747 564 225 283 119 924 732Formed during the period -- 5 928 275 -- 5 928 275Amounts used during the period -- (60 785) (52 219) (113 004)Foreign currency differences -- -- 1 116 1 116 ------------- --------------- ------------- --------------Balance as at 31/3/2006 65 951 885 59 615 054 174 180 125 741 119 ======== ========= ======== ========= * It is deducted from accounts receivable item and other debit accounts inthe financial position. 11 . Fixed Assets Office Furniture, equipment & Lease Hold Electrical Computer Transportation Particulars Land Buildings Improvements Appliances Equipment Means Total LE LE LE. LE LE LE LE Balance as of 1/1/2006 5 360 000 13 685 823 1 698 820 18 728 069 12 539 757 4 708 229 56 720 698 Additions during the period -- -- -- 13 264 282 3 069 402 2 997 979 19 331 663 Disposals during the period -- -- -- (3 391) -- -- (3 391) ________ _________ _________ ________ _________ _________ _________ Total cost as of 31/3/2006 5 360 000 13 685 823 1 698 820 31 988 960 15 609 159 7 706 208 76 048 970 ________ _________ _________ ________ _________ _________ _________Accumulated depreciation asof 1/1/2006 -- 2 751 494 1 461 770 13 053 555 7 889 694 2 580 721 27 737 234 Depreciation during the period -- 102 644 84 940 630 965 381 282 328 037 1 527 868 Disposals' accumulated Depreciation -- -- -- (540) -- -- (540) ________ _________ _________ ________ _________ _________ _________Accumulated depreciation asof 31/3/2006 -- 2 854 138 1 546 710 13 683 980 8 270 976 2 908 758 29 264 562 ________ _________ _________ ________ _________ _________ _________Net cost as of 31/3/2006 5 360 000 10 831 685 152 110 18 304 980 7 338 183 4 797 450 46 784 408 ======= ======== ======= ======= ======= ======= =========Net cost as of 31/12/2005 5 360 000 10 934 329 237 050 5 674 514 4 650 063 2 127 507 28 983 463 ======= ======== ======= ======= ======= ======= ========= 12. Available - for- sale investments 31/3/2006 31/12/2005 LE. LE. Quoted investments 8 799 775 12117704 Non - quoted investments 110 310 697 111585697 __________ __________ 119 110 472 123703401 ========= ========= 13. Investments in subsidiaries & Associates Ownership 31/3/2006 31/12/2005 % LE. LE. Arab Visual Company * 74.99 3 749 500 3 749 500 EFG-Hermes UAE Ltd. 100 -- 11 540 000 Bank Audi Sal (Lebanon Bank) 23.052 2 638 619 791 -- ____________ _________ 2 642 369 291 15289500 =========== ======== * The investee company's has not started its activities and no financialstatements have been issued. 14- Property Investment - The balance of property investment stated in the statement of financial position with an amount of LE. 492 973 139 represents the value of 9 318.57 square meters of the building owned by Nile City Investment Company. - The fair value of this property investment amounted LE. 141 497 826 as of March 31,2006. 15- Settlement Guarantee Fund The Settlement Guarantee Fund balance stated in the statement of financialposition amounting LE. 13 515 634 represents the Brokerage Companies' shares inthe Settlement Guarantee Fund. 16- European Investment Bank Contract: According to the contract signed with the European Investment Bank dated March1, 2001. The Company purchases investments in its name in favor of the bank in arange of 5 Million Euro for each investment individually. The total amount ofthese investments is limited to 25 Million Euro and the participation ofEuropean Investment Bank is limited to 50% of total investment. This contractis valid until August 30, 2013. The European Investment Bank pays the value ofthese investments. The proceeds are reported as a liability on the companyversus the investments reported as an asset. An off-setting is made between theasset and liability at the balance sheet date. The investments purchasedaccording to this contract as at March 31,2006 amounted LE.8 104 041 (the equivalent amount of Euro 1 171 104) which are as follows: Company's Name Balance as of 31/3/2006 31/12/2005 LE. LE. Gas & Energy Group Limited 8 104 041 8 104 041 EFG- Hermes Holding Company -- 13 028 400 __________ _________ 8 104 041 21 132 441 ========= ======== 17. Capital - The company's authorized capital amounts 700 million and issued and paid in capital amounts LE. 405 370 050 distributed on 81 074 010 shares of par value LE 5 per share. - On February 2,2006 the Company's Extraordinary General Assembly approved the following decisions: - Increasing the issued capital of the Company from LE. 405 370 050 to LE. 485 370 050 through a First Tranche by issuing 16 million shares at the fair value of LE. 115 approved by the Company's Board of Directors and validated by the Company's auditor. - Offering the First Tranche of the capital increase to qualified investors in a private placement at the fair value (to be paid in USD + $1 per share as placement fee). This will include the waiving of the pre-emptive rights of the current shareholders in subscribing to the First Tranche. The minimum subscription was set at $10 million; - Inviting existing shareholders to participate in the private placement each according to his percentage of ownership according to the rules of private placement while waiving the minimum requirements of $10 million subscription; The capital increase has been fully paid and accordingly, the company's issuedand paid in capital amounted to LE. 485 370 050 distributed on97 074 010 shares. - Increasing the Company's authorized capital from LE. 700 million to LE. 3 200 million and the issued capital from LE. 485 370 050 to LE. 1 456 110 150 through a second trnache by issuing 194 148 020 shares at the par value of the share (LE. 5) through a 1:2 right issue. An amount of LE. 57 700 175 was paid under this capital increase till March 31, 2006 and an amount of LE 910 902 730 was paid in the subsequent period. 18. Treasury Shares The balance of Treasury Shares stated in the statement of financial positionrepresents a number of 590 174 shares of the company's shares which representsapproximately 0.61% of company's issued capital with total cost of LE. 20 681201. 19- Long term loans A- A loan contract has been signed on March 28,2001 with International Finance Corporation (IFC), this contract provides for that the company borrows a long term loan amounting to USD 30 Million for five years ending on May 31,2006 with two years as a grace period and annual floating interest rate over Libor based on the return rate on equity. This loan will be used in financing the company's expansions in the Middle East and North Africa besides new activities. According to the loan contract the company has received the first installment amounting to US$ 15 Million on May 15, 2001. The loan principal is payable on 7 semi annual installments amounted to US$ 4 285 700 each starting from May 15,2003 and interest is due semi annually on 15 May and 15 November, the first interest was due on 15 November 2001. The loan contract stipulated to provide the following guarantees. - An irrevocable power of attorney from the Borrower and the borrower's subsidiaries to IFC enabling IFC to create at will (a) a first - ranking real estate mortgage over the land and the building owned by Financial Brokerage Group S.A.E. (a subsidiary company 99.76 %) at 58 El Tahrir Street, Dokki - Giza, Arab Republic of Egypt and (b) a first - ranking commercial mortgage on the tangible and intangible assets of the Borrower and Borrower's subsidiaries. Including such asset as may be acquired after the signature of this agreement. - An irrevocable and unconditional guarantee by the Egyptian guarantors except Egyptian portfolio management group company in a form acceptable to IFC for the benefit of IFC, payable on first demand by IFC to guarantee the Borrower's payment obligations to IFC under this agreement. - A pledge of the shares that the Borrower holds in Egyptian Portfolio Management Group S.A.E. to IFC (with par value of LE. 1 990 000). On March 13, 2002, the Company paid an amount of US$ 4 144 630 to the IFC as a partial repayment of the loan. The company has paid an amount of US$ 1 550 762 on May 15,2003, November 12,2003, May 13,2004, November 10,2004 and May 12,2005 and November 14,2005. Accordingly, the loan balance as of March 31,2006 amounted to US$ 1 550 798. (Equivalent amount of LE. 8 886 072). - On December 28,2005, a loan agreement has been signed with International Finance Corporation " IFC" where by the company is entitled to obtain long term loan with an amount of USD 20 Million to Finance Regional expansion of the company. The loan will be repaid on 10 equal semi Annual installment with USD 2 million for each installment and the first installment will due on May 15,2007 and the last installment will due on November 15,2011 and the interest is due on may 15, and November 15 and the first interest will due on May 15,2006. - The loan agreement provides for that the company's subsidiaries will guarantee the loan repayment through an irrevocable unconditional guarantee and the company has not obtained any amounts from this loan till financial position date. B- On January 4,2002, a loan contract has been signed with the Foundation of (DEG)- DEUTSCHE INVESTITIONS- UND ENTWICKLUNGSGESELLSCHAFT MBH. The said contract provides for that EFG- Hermes Holding Company borrows a long term loan with amount of EURO 15 Million with an applied annual floating interest rate. The loan principal is to be repaid on 12 semi annual installments of 1.25 million EURO each. The first installment was due on May 15, 2003 and the loan interest is due semi annually on 15 May, and 15 November, The company is committed to render some guarantees to the lender as stipulated by the contract. On July 4, 2002 the company has received an amount of EURO 10 420 000 , and EURO 4 580 000 on December 24,2002 representing the full amount of the mentioned loan. The company has paid an amount of EURO 1,25 million to DEG on May 15,2003, and November 12,2003. The company has paid 2 500 000 EURO on May 13,2004, 1 250 000 EURO on May 12,2005 and November 14,2005. Accordingly, the loan balance as of March 31,2006 amounted EURO 7.5 million (Equivalent amount of LE. 51 900 000). - On December 29,2005 a loan agreement has been signed with (DEG)- DEUTSCHE INVESTITIONS- UND ENTWICKLUNGSGESELLSCHAFT MBH whereby the company is entitled to obtain a long term loan with an amount of Euro 10 million with a variable annual interest rate. The loan's purpose is to finance the regional expansion of the company. The loan will be repaid on 10 equal semi annual installments with an amount of one million Euro per installment. The first installment will due on may 18,2008 and the last installment will due on November 15, 2012 and the interest will due on May 15. The loan agreement provides for that the company's subsidiaries will guarantee the loan repayment through an irrevocable unconditional guarantee and the company has not obtained any amounts from this loan till financial position date. 20. Contingent Liabilities - The company undertakes its subsidiaries - Financial Brokerage Group, Hermes Securities Brokerage against the credit facilities granted from banks and EFG- Hermes Brokerage - UAE. against letters of guarantee amounting to AED 86 Million (the equivalent amount of LE. 134 160 000) issued by banks upon the request of Financial Brokerage Group Company (one of company's subsidiaries - 99.76%) in favour of Dubai and Abo Dhabi Market Authorities to guarantee the brokerage activity of the subsidiary EFG- Hermes Brokerage Company - UAE Ltd. - The company and its subsidiaries have executed SWAP contract with banks which will be settled according to specific rates for the foreign currencies implied in such contracts. The mentioned contracts are as follows. Transaction Transaction Amount currency Expiry Date operation Date 29/3/2006 Buying LE. 7 Million Selling USD 3/5/2006 29/3/2006 Buying USD 2.7 Million Selling Euro 10/5/2006 29/3/2006 Buying USD 4.8 Million Selling Euro 5/4/2006 - Hermes Corporate Finance Company ( a subsidiary - 99.37%) issued through a bank a letter of guarantee in an amount of LE. 292 500 in favor of Egyptian Electricity Authority. The issuer bank has blocked the company's time deposit which amounts LE. 479 949 on March 31,2006 as a margin for this letter of guarantee. 21. Incentive Fee Revenues Due to inadequate assurance concerning the revenue recognitionconditions and collections of the incentive fee on managing investment funds andportfolios, the company deferred the recognition of Incentive Fee with an amountof LE. 27 092 576 for the period ended March 31,2006 versus LE. 56 596 259 forthe same period last year as no revenues are recognized if there are anyuncertainties regarding the recovery of the consideration due. Subsidiary's Name Amount LE. 31/3/2006 31/12/2005 EFG- Hermes Financial Management (Egypt) Ltd. 14 679 584 21 520 718Egyptian Portfolio Management Group Company 6 059 636 18 306 023Hermes Fund Management Co. 6 353 356 16 769 518 _________ __________ 27 092 576 56 596 259 ======== ========= 22. Deferred Tax Assets And Liabilities Deferred tax assets and liabilities are attributable to the following: 31/3/2006 31/12/2005Deferred Tax Assets Liabilities Assets Liabilities LE. LE. LE. LE. Fixed assets -- (528 123) 1 491 (386 901)Capital losses (gains) 5 933 -- 12 036 (8 054)Provisions 3 242 727 -- 3 152 614 -- ________ __________ _________ __________Total deferred tax assets (liabilities) 3 248 660 (528 123) 3 166 141 (394 955) ________ __________ _________ _________Net deferred tax assets 2 720 537 2 771 186 ======== ======== 23. Corresponding figures Certain Corresponding figures have been reclassified to conform with the currentperiod classification. This information is provided by RNS The company news service from the London Stock Exchange