Efg-hold.gdr S Regulatory News (EFGD)

3 Apr 2006 07:00

EFG-Hermes Holdings SAE02 April 2006 EFG - Hermes Holding Company (Egyptian Joint Stock Company) Consolidated Financial Statements As Of December 31, 2005 & Auditor's Report Thereon AUDITOR'S REPORT TO THE BOARD OF DIRECTORS OF THE EFG - HERMES HOLDING COMPANY We have audited the accompanying consolidated Balance Sheet of EFG - HermesHolding company and subsidiaries as of December 31, 2005 and the relatedconsolidated statements of income, changes in equity and cash flow for the yearthen ended. These financial statements are the responsibility of the Company'smanagement. Our responsibility is to express an opinion on these financialstatements based on our audit We conducted our audit in accordance with Egyptian Standards on Auditing and inthe light of provisions of applicable Egyptian Laws and regulations. Thosestandards require that we plan and perform the audit to obtain reasonableassurance about whether the financial statements are free of materialmisstatement. An audit includes examining, on a test basis, evidence supportingthe amounts and disclosures in the financial statements. An audit also includesassessing the accounting principles used and significant estimates made bymanagement, as well as evaluating the overall financial statement presentation.We have obtained the information and explanations which we deemed necessary forour audit. We believe that our audit providesa reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above presentfairly, in all material respects, the financial position of the group as ofDecember 31, 2005 and of the results of its operations and its cash flows forthe year then ended in accordance with Egyptian Accounting Standards and complywith applicable Egyptian laws and regulations. KPMG Hazem Hassan Cairo, March 28, 2006 EFG - Hermes Holding Company (Egyptian Joint Stock Company) Consolidated Balance Sheet As of December 31,2005 Note No. 31/12/2005 31/12/2004 LE. LE.Current AssetsCash on hand and with banksCash on hand 1 053 267 555 041Cheques under collection 7 830 516 1 212 853Banks - current accounts (5) 892 181 590 36 207 443Banks - time deposits 11 639 509 95 107 451Saving certificates 4 800 000 -L/G's margin - 22 977Total cash on hand and with banks 917 504 882 133 105 765Treasury Bills (6) 59 057 199 8 494 880Trading investments 18 878 888 24 387 752Accounts receivable (net of accumulated impairment) (9) 641 672 937 228 218 360Other brokerage companies 225 820 716 47 536 321EFG- Hermes Employee Trust (current tranche) 23 831 090 13 190 000Other debit balances (7,9) 66 815 037 39 888 165 Total current assets 1 953 580 749 494 821 243 Long Term AssetsFixed assets (net) (10) 28 983 463 24 040 353Available -for- sale investments (11) 123 703 401 102 443 923Investment in subsidiaries (12) 15 289 500 11 339 418Property Investment (13) 139 973 492 138 023 492Settlement Guarantee Fund (14) 8 346 578 9 757 382Deferred expenditure (net) - 873 632EFG- Hermes Employee Trust (non-current tranche) 67 503 694 49 760 000Goodwill (net) 69 365 547 74 070 982Deferred tax assets (22) 2 771 186 - Total Long Term Assets 455 936 861 410 309 182Total assets 2 409 517 610 905 130 425 Current LiabilitiesBanks - overdraft - 32 572 864Accounts receivable - credit balances 1 166 563 804 200 586 572Creditors and other credit balances (8) 244 319 878 25 036 071Provisions (9) 53 972 847 28 920 848 Total current liabilities 1 464 856 529 287 116 355 Shareholders' equityIssued & paid - in capital (16) 405 370 050 405 370 050Legal reserve 108 978 135 103 764 279General reserve 158 271 158 271Special reserve 20 391 205 3 315 933Retained earnings (losses) 24 576 713 (25 978 635)Total shareholders' equity 559 474 374 486 629 898Deduct: Treasury shares (3-10& (60 944 470) (46 232 310) 17) 498 529 904 440 397 588Net profit for the year 350 139 955 52 552 219 Total shareholders' equity including net profit 848 669 859 492 949 807Minority interest 35 538 938 11 591 718 Total shareholders' equity and minority interest 884 208 797 504 541 525 Long term liabilitiesLong term loans (18) 59 511 072 112 458 301Other liabilities 941 212 1 014 244Total long term liabilities 60 452 284 113 472 545Total shareholders' equity and liabilities 2 409 517 610 905 130 425 The accompanying notes from No. (1) to No. (25) form an integral part of the financial statements and are to be read therewith. Dr. Mohamed Taymour Yasser El Mallawany Hassan Heikal Chairman Deputy Co- CEOChairman & CEO Auditor's Report "Attached" EFG - Hermes Holding Company (Egyptian Joint Stock Company) Consolidated Income Statement for the year ended December 31, 2005 For the For the Note year ended year ended No. 31/12/2005 31/12/2004 L.E. L.E.Income from fees, commission and management of investments 795 763 047 181 604 875Interest income 13 165 308 2 882 847Dividend income 5 576 094 6 096 896Gains arising from sale of investments 14 276 575 14 432 441Foreign currency differences 880 786 (8 352 503)Other income 1 575 306 1 403 299 Total revenues 831 237 116 198 067 855Deduct:General administrative expenses 271 720 896 93 588 068Interest expense 22 960 301 17 598 508Provisions (9) 27 353 953 12 281 538Fixed assets depreciation (10) 4 350 733 3 724 294Unrealized losses on trading investments 4 480 937 1 129 263Goodwill impairment 4 705 435 3 272 064Deferred expenditure amortization 873 632 473 728Impairment of available -for-sale investments 3 535 741 -Impairment of accounts receivable & debit accounts (9) 16 886 261 1 346 619Losses (gains) arising from sale of fixed assets 21 107 ( 40 932) Total expenses 356 888 996 133 373 150Net profit before income tax 474 348 120 64 694 705Deduct: current income tax (21) (97 727 774) (4 712 510)Add: Deferred tax assets (22) 2 771 186 -Net profit before minority interest 379 391 532 59 982 195Deduct: minority interest (29 251 577) (7 429 976)Net profit for the year 350 139 955 52 552 219 Earnings per share (23) 4.46 0.75 The accompanying notes from No. (1) to No. (25) form an integral part of the financial statements and are to beread therewith . EFG - Hermes Holding Company (Egyptian Joint Stock Company) Consolidated Statement of Changes in Equity For the year ended December 31,2005 To read this table, please paste the URL below into your web browser The accompanying notes from No. (1) to No. (25) 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 year ended December 31, 2005 For the For the year ended year ended 31/12/2005 31/12/2004 L.E. L.E.Cash Flows from Operating ActivitiesNet profit for the year before current income tax 474 348 120 64 694 705Adjustments to reconcile net profit to netcash provided by operating activitiesFixed assets depreciation 4 350 733 3 724 294Provisions 27 353 953 12 281 538Impairment of accounts receivable & debit accounts 16 886 261 1 346 619Amount used from provisions (2 300 000) (3 775 247)collected amounts which previously impaired ( 71 811) - Deferred expenditures amortization 873 632 473 728Goodwill impairment 4 705 435 3 272 064Losses (gains) from selling fixed assets 21 107 ( 40 932)Gains from selling available -for- sale investments (6 852 495) (14 680 004)Unrealized losses on trading investments 4 480 937 1 129 263Impairment of available -for- sale investments 3 535 741 - Foreign currency translation differences ( 641 669) ( 71 410)Income tax paid (4 696 976) - Losses from sale of investments subsidiaries - ( 199 083) Operating profit before changes in working capital 521 992 968 68 155 535Increase in other debit balances (36 938 104) (17 735 897)Increase in creditors and other credit balances 124 225 374 3 779 440(Increase) decrease in accounts receivable -(debit balances) (421 615 886) 3 627 833Increase in accounts receivable - (credit balances) 973 825 281 37 535 794Increase in affiliated companies (debit balances) (326 443 278) (178 962 891)Increase in affiliated companies (credit balances) 323 881 143 208 414 102Increase in trading investments ( 552 485) (5 611 868)Increase in EFG- Hermes Employees Trust (current tranche) (10 641 090) (13 190 000)Increase in EFG- Hermes employees trust (non current tranche) (17 743 694) (49 760 000)Increase in other brokerage companies - Misr Clearance (179 771 700) (14 463 763) Net cash provided from operating activities 950 218 529 41 788 285 Cash Flows from Investing ActivitiesFixed assets purchases (9 592 491) (4 021 301)Proceeds from sale of fixed assets 167 551 416 245Purchase of treasury bills (51 155 667) (7 901 532)Purchases of available -for- sale investments ( 154 576 836) (3 867 666 195)Purchases of investments in subsidiaries and associates (18 732 922) ( 15 967 472)Proceeds from sale of available -for- sale investments 146 386 747 3 903 311 986Proceeds from sale of investments in subsidaries and associates - 455 353Payments to increase /proceeds from redemption of the company's sharein Settlement Guarantee Fund 1 410 690 ( 1 167 490)Purchases of property investment ( 1 950 000) -Proceeds from redemption of held -to- maturity investments - 501 500 Net cash (used in) provided from investing activities (88 042 928) 7 961 094 Cash Flows from Financing ActivitiesIncrease in paid - in capital 16 183 242 61 710 010Payments to purchase treasury shares (109 069 996) -Proceeds from sale of treasury shares 106 165 289 -Increase in retained earnings 37 736 742 6 872 571Paid dividends (43 855 161) (13 727 500)Decrease in banks - overdraft (32 572 864) (212 921 806)Decrease in long term loans (52 947 229) (32 573 904)Decrease in other liabilities ( 9 855) ( 44 406) Net cash used in financing activities (78 369 832) (190 685 035) Net change during the year 783 805 769 ( 140 935 656)Cash and cash equivalent at the beg. of the year 133 699 113 274 634 769 Cash and cash equivalent at the end of the year 917 504 882 133 699 113 Cash & Cash Equivalent are represented in:Cash on hand 1 053 267 555 041Cheques under collection 7 830 516 1 212 853Banks- current account 892 181 590 36 207 443Banks- time deposits 11 639 509 95 107 451L/G's margin - 22 977Saving certificates 4 800 000 -Treasury bills 59 057 199 8 494 880treasury bills (more than three months maturity) (59 057 199) (7 901 532) 917 504 882 133 699 113 The accompanying notes from No. (1) to No. (25) form an integral part of the financial statements and are to be readtherewith . EFG - Hermes Holding Company (Egyptian Joint Stock Company) Notes to the Consolidated Financial Statements for the year ended December 31, 2005 1. Purpose of Preparation The consolidated financial statements and accompanying notes wereprepared for the purpose of submitting them to the Egyptian Stock Exchange andLondon Stock Exchange as one of the requirements of local laws and GlobalDepositary shares (GDS). 2 . General - EFG - Hermes Holding Company -Egyptian Joint Stock Company- was foundedin pursuance of decree No. 106 of 1984. - The company's extraordinary general meeting held on July 22, 1997resolved to adjust the company's status and convert it in pursuance to theprovisions of law No. 95/1992 and its executive regulation and amend thecompany's purpose to become participation in the companies' establishment whichissue securities or in increasing their share capitals. - The company's extraordinary meeting held on March 14,2004 decided toadd the Custody Activity to the purpose of the company. - EFG- Hermes holding company, the parent company, owns the followingsubsidiaries: 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 ofthese consolidated financial statements are set out below: 3-1 Basis of Preparation of Financial Statements The financial statements were prepared in accordance with EgyptianAccounting Standards, and applicable local laws and regulations. 3-2 Basis of Consolidation The consolidated financial statements include all subsidiaries that arecontrolled 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 arecontrolled by the parent company , is shown as a separate item in theconsolidated financial statements . - The cost of acquisition is allocated as follows: a) The fair value of the assets and liabilities acquired as of the date ofthe 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 theassets and liabilities of the subsidiary. C ) Goodwill represents amounts arising on acquisition of subsidiaries andrepresents the difference between the cost of acquisition and the fair value ofthe net identifiable assets acquired. Goodwill is stated at cost less impairmentlosses. 3-3 Foreign Currencies Transactions - The company maintains its accounts in Egyptian Pounds. Transactionsdenominated in foreign currencies are recorded at the prevailing exchange rateat the dates of transactions. Balances of monetary assets and liabilities denominated in foreigncurrency at the balance sheet are translated at the prevailing exchange rates.The exchange differences are recorded in the income statement. - Assets and liabilities of financial statements for foreign companieswere translated using the prevailing exchange rates on the balance sheet date,shareholders' equity items are translated using historical rates, while revenuesand expenses were translated using an average of the prevailing rates during thefinancial year. The resulted translation differences were included within theshareholders' equity in the balance sheet as a special reserve- foreign currencytranslation differences. 3-4 Fixed Assets Depreciation Fixed assets are recorded at the historical cost and are depreciatedby the straight line method over the estimated productive life for each type ofasset 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 3-5 Amortization of deferred expenditure The cost of obtaining long term loans is capitalized and amortizedover the loan year (Note No. 18). 3-6 Trading Investments Trading investments are valued on the basis of prevailing market value at thefinancial position date and the revaluation differences are recorded in theincome statement. 3-7 Investments in Subsidiaries & Associates Investments in Subsidiaries & associates are valued at cost. However, when thereis an impairment in the market or computed value of the investments compared tobook value, the book value should be adjusted with the impairment value andcharge the impairment to the income statement. 3-8 Available -for- sale Investments - Available -for- sale investments are recorded at cost. Quotedinvestments are revalued at fair value (market value) and non quoted investmentsare revalued at computed value of the investments (based on latest certifiedfinancial statements) and the valuation differences will be recorded as aspecial reserve revaluation difference of available-for- sale investments in theshareholder's equity. When selling the investments, its interest in the specialreserve will be added to the income statement. - Concerning the non active available -for- sale securities (have no marketvalue in an active market) and the fair value of which can not be determinedreliably, such investments are recognized at cost, the book value of theseinvestments is to be amended by any impairment concerning the value of theseinvestments and the impairment value is to be charged to income statement forevery investment individually. 3-9 Property Investment Property investment is recorded at cost. Any decline in the fair value(impairment) is charged to income statement. 3-10 Treasury Shares - Treasury shares are recognized at par value. Other shareholders'equity items are affected with the difference between par value and cost oftreasury shares. The treasury shares are presented in the balance sheetdeducted from company's issued capital. - Effectively from the current year, the company has changed therecognition policy of treasury shares by recording it at its acquisition costand deducted from the total shareholders' equity in the balance sheet. 3-11 Income Tax - Income tax on the profit or loss for the year comprises current anddeferred tax. Income tax is recognized in the income statement except to theextent that it relates to items recognized directly in equity, in which case itis recognized in equity. - Current tax is the expected tax payable on the taxable income for theyear, using tax rates enacted or substantially enacted at the balance sheetdate, and any adjustment to tax payable in respect of previous years. - Deferred tax is provided using the balance sheet liability method,providing for temporary differences between the carrying amounts of assets andliabilities for financial reporting purposes and the amounts used for taxationpurposes. The amount of deferred tax provided is based on the expected manner ofrealisation or settlement of the carrying amount of assets and liabilities,using tax rates enacted or substantively enacted at the balance sheet date. - A deferred tax asset is recognized only to the extent that it is probablethat future taxable profits will be available against which the asset can beutilised. Deferred tax assets are reduced to the extent that it is no longerprobable that the related tax benefit will be realised. 3-12 Cash Flow Statement For the purpose of preparing the Cash Flow Statement, cash and cashequivalent are represented in the cash on hand, cheques under collection,current accounts, time deposits with banks, saving certificates, margin ofletters of guarantee and treasury bills maturing within 3 months or less fromits acquisition date. 4. Financial Instruments and management of related risks: The Company's financial instruments are represented in the financialassets and liabilities. Financial assets include cash balances with banks,investments and debtors while financial liabilities include banks - overdraftand creditors. Note (No. 3) of notes to financial statements includessignificant accounting policies applied regarding basis of recognition andmeasurement of the important financial instruments and related revenues andexpenses 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 affectthe value, earning and profit of a particular security. According to the company's investment policy, the following proceduresare undertaken to reduce the effect of this risk. - Performing the necessary studies before investment decision in order toverify that investment is made in potential securities. - Diversification of investments in different sectors and industries. - Performing continuous studies required to follow up the company'sinvestments and their development. 4/2 Foreign currencies risk - The foreign currencies exchange risk represents the risk of fluctuationin exchange rates, which in turn affects the company's cash inflows and outflowsas well as the value of its assets and liabilities in foreign currencies. As atthe balance sheet date, the company has assets and liabilities in foreigncurrencies equivalent to LE. 1 698 217 857 and LE. 1 749 915 657 respectively.The company's net exposures in foreign currencies are as follows: Surplus/ (Deficit) LE.U.S. Dollar (52 908 046)Euro 643 673GBP 3 313UAE Derham 563 260 - As disclosed in note 3-3, the company has used the prevailing exchange ratesto revaluate monetary assets and liabilities at the balance sheet date. - As disclosed in note no. (19) the company has executed Currency SWAPagreements to cover its deficit and required needs of foreign currencies andmeet the risks of exchange and interest rates related thereto. 4/3 Financial Instruments Fair Value The financial instruments fair value do not substantially deviatedfrom their book value at the balance sheet date. According to the valuationbasis applied, in accounting policies to the assets and liabilities, whichincluded in the notes to the financial statements, note No. (12, 13) of thenotes to financial statements disclose the fair values of investments, whichare, reported at cost. 5. Banks - Current Accounts The banks - current accounts item stated in the balance sheet includesblocked amount of LE. 10 million in the name of the subsidiaries, FinancialBrokerage Group company and Hermes Securities Brokerage company represents thevalue of the deposit of One Day Operations settlement which takes place in theEgyptian Stock Exchange (LE. 5 million each). Both companies are not entitledto use this amount without prior approval from Misr Clearance company. 6. Treasury Bills 31/12/2005 31/12/2004 LE. LE.Treasury bills 91 days maturity -- 600 000Treasury bills 182 days maturity 57 800 000 3 250 000Treasury bills 364 days maturity 2 825 000 5 000 000 __________ __________ 60 625 000 8 850 000Less: Unearned income (1 567 801) (355 120) __________ __________Net 59 057 199 8 494 880 ======== ======== 7. Other Debit Balances 31/12/2005 31/12/2004 LE. L.E Deposits with others 1 037 058 875 437 Down payments to suppliers 23 500 23 500 Prepaid expenses 5 111 344 1 137 890 Employees advances 1 537 913 908 812 Accrued revenues 2 341 781 5 574 903 Taxes withheld by others 20 670 474 5 712 655 Commercial International InvestmentCompany (CIIC) 1 204 652 1 204 652 Payment under purchasing investments * 12 152 880 9 301 600 Sundry debtors 23 888 485 16 301 766 __________ _________ 67 968 087 41 041 215 Less: impairment of other debit balance (1 153 050) (1 153 050) __________ _________ 66 815 037 39 888 165 ========= ======== * The balance represents the amount paid to purchase stake in the sharecapital of Suez Cement Company. 8. Creditors and Other Credit Balances 31/12/2005 31/12/2004 LE. L.E Tax Authority 103 096 753 7 295 354 Social Insurance Association 189 058 159 606 Unearned revenues 7 854 875 2 068 875 Interest & commission payable 1 698 905 798 495 Suppliers 1 360 000 1 360 000 Accrued expenses 72 754 380 9 150 927 Dividend payable 601 510 601 510 Clients' coupons- Custody Activity 7 123 277 -- Unrealized SWAP gains (losses) 416 252 (577 256) Credit Suisse Securities (Europe) Limited 31 156 933 -- Sundry creditors 18 067 935 4 178 560 __________ __________ 244 319 878 25 036 071 ========= ========= 9. 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 1/1/2005 49 137 435 28 868 629 52 219 78 058 283 Formed during the year -- 27 178 935 175 018 27 353 953 Impairment during the year 16 886 261 -- -- 16 886 261 Amounts used during the year -- (2 300 000) -- (2 300 000) Collected amounts whichpreviously impaired (71 811) -- -- (71 811) Foreign currency difference -- -- (1 954) (1 954) ------------- --------------- ------------- -------------- Balance as at 31/12/2005 65 951 885 53 747 564 225 283 119 924 732 ========== ======= ======== ========= * It is deducted from accounts receivable item and other debit accounts inthe balance sheet. 10 . Fixed Assets Office Furniture, equipment & Lease Hold Electrical Computer TransportationParticulars Land Buildings Improvements Appliances Equipment Means Total LE LE LE. LE LE LE LE Balance as of 1/1/2005 5 360 000 13 685 823 1 582 791 14 671 940 9 727 270 2 940 684 47 968 508 Additions during the year -- -- 116 029 4 246 326 3 368 615 1 861 521 9 592 491 Disposals during the year -- -- -- (190 197) (556 128) (93 977) (840 302) ________ _________ _________ ________ _________ _________ _________ Total cost as of 5 360 000 13 685 823 1 698 820 18 728 069 12 539 757 4 708 228 56 720 69731/12/2005 ________ _________ _________ ________ _________ _________ _________ Accumulated depreciation as of 1/1/2005 -- 2 340 920 1 220 981 11 052 933 7 248 576 2 174 734 24 038 144 Depreciation during -- 410 574 240 789 2 102 601 1 180 316 416 453 4 350 733the year Disposals' accumulated Depreciation -- -- -- (101 979) (539 198) (10 466) (651 643) ________ _________ _________ ________ _________ _________ _________ Accumulated depreciation as of 31/12/2005 -- 2 751 494 1 461 770 13 053 555 7 889 694 2 580 721 27 737 234 ________ _________ _________ ________ _________ _________ _________ Net cost as of 5 360 000 10 934 329 237 050 5 674 514 4 650 063 2 127 507 28 983 46331/12/2005 ======= ======= ====== ======= ======= ======= ========= 11. Available - for- sale investments 31/12/2005 31/12/2004 LE. LE. Quoted investments 12 117 704 1 349 000 Non - quoted investments 111 585 697 101 094 923 __________ __________ 123 703 401 102 443 923 ========= ========= 12- Investments in subsidiaries Ownership 31/12/2005 31/12/2004 % LE. LE. Arab Visual Company * 74.99 3 749 500 3 749 500 EFG- Hermes Brokerage - UAE Ltd. -- -- 7 589 918 EFG-Hermes UAE Ltd. * 100 11 540 000 -- _________ _________ 15 289 500 11 339 418 ======== ======== * The investee companies have not started its activities and no financialstatements have been issued. 13- Property Investment - The balance of property investment stated in the balance sheet with anamount of LE. 492 973 139 represents the value of 9 318.57 square meters of thebuilding owned by Nile City Investment Company as the investment of the Holdingcompany was transferred from shares to the said number of square meters in thebuilding according to the contract dated 12 August 2004 between EFG- HermesHolding Company and Nile City Investment Company. Accordingly, the balances oftrading investments and available for sale investments of the holding companywith amounts of L.E 86 023 492 and LE. 52 million in EFG- Hermes RealEstate-Limited Company have been transferred to property investment with thewhole amount. - The fair value of this property investment amounted LE. 145 677 205 as ofDecember 31,2005. 14- Settlement Guarantee Fund The Settlement Guarantee Fund balance stated in the balance sheet amounting LE.8 346 578 represents the Brokerage Companies' shares in the Settlement GuaranteeFund. 15- European Investment Bank Contract: According to the contract signed between EFG- Hermes - Holding Company and theEuropean Investment Bank dated March 1, 2001, EFG- Hermes Holding Companypurchases investments in its name in favor of the bank in a range of 5 MillionEuro for each investment individually. The total amount of these investments islimited to 25 Million Euro and the participation of European Investment Bank islimited to 50% of total investment. This contract is valid until August 30,2013. The European Investment Bank pays the value of these investments. Theproceeds are reported as a liability on the company versus the investmentsreported as an asset. An off-setting is made between the asset and liability atthe balance sheet date. The investments purchased according to this contractamounted LE. 21 132 441 as of December 31,2005 (the equivalent amount of Euro 2521 771) which are as follows: Company's Name Balance as of 31/12/2005 31/12/2004 LE. LE. Gas & Energy Group Limited 8 104 041 8 104 041 EFG- Hermes Holding Company 13 028 400 13 028 400 __________ _________ 21 132 441 21 132 441 ========= ========= 16. Capital - The company's authorized capital amounts LE. 200 Million. Issued andpaid up capital amounts LE. 205 370 050 distributed on 41 074 010 shares withpar value LE. 5 each. - The company's extraordinary general assembly approved in its session held on August 28, 2003 to increase the company's authorized capital from LE.200 Million to LE. 700 Million. - The company's board of directors approved in its session held onOctober 16,2003 to increase the company's issued capital with an amount of LE.200 Million within the company's authorized capital which amounts LE. 700million via issuing 40 million shares with par value LE. 5 per share. Thementioned increase was limited to old shareholders only. This increase has beenfully paid during January 2004. Accordingly, the issued and paid up capitalamounted LE. 405 370 050 distributed on 81 074 010 shares. 17- Treasury Shares The balance of Treasury Shares stated in the balance sheet represents a numberof 2 053 520 shares of the company's shares (treasury shares) which representsapproximately 2.53% of the company's issued capital with total cost of LE. 60944 470. 18- Long term loans A- A loan contract has been signed on March 28,2001 between EFG- HermesHolding Company and International Finance Corporation (IFC), this contractprovides for that EFG- Hermes Holding borrows a long term loan amounting USD 30Million for five years ending on May 31,2006 with two years grace year andannual floating interest rate over Libor based on the return rate on equity. This loan is used to finance the company's expansions in the Middle East andNorth Africa besides new activities. According to the loan contract the companyhas received the first installment amounting to US$ 15 Million on May 15, 2001. The loan principal is payable on 7 semi annual installments with an amount ofUS$ 4 285 700 each starting from May 15,2003. The interest will be due semiannually on 15 May and 15 November, the first interest was due on 15 November2001. The loan contract stipulated to provide the following guarantees. - An irrevocable power of attorney from the Borrower and the borrower'ssubsidiaries to IFC enabling IFC to create at will (a) a first - ranking realestate mortgage over the land and the building owned by Financial BrokerageGroup 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 onthe 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 guarantorsexcept Egyptian portfolio management group company in a form acceptable to IFCfor the benefit of IFC, payable on first demand by IFC to guarantee theBorrower's payment obligations to IFC under this agreement. - A pledge of the shares that the Borrower holds in Egyptian PortfolioManagement 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 apartial repayment of the loan. The company has paid an amount of US$ 1 550 762on May 15,2003,November 12,2003 , May 13,2004, November 10,2004, May 12,2005 andNovember 14,2005. Accordingly, the loan balance as of December 31,2005 amountedto US$ 1 550 798. (Equivalent amount ofLE. 8 886 072). B- On January 4,2002, a loan contract has been signed between EFG - HermesHolding Company and the Foundation of (DEG)- DEUTSCHE INVESTITIONS- UNDENTWICKLUNGSGESELLSCHAFT MBH. The said contract provides for that EFG- HermesHolding Company borrows a long term loan with amount of EURO 15 Million with anapplied annual floating interest rate. The loan principal is to be repaid on 12semi annual installments of 1.25 million Euro each. The first installment wasdue on May 15, 2003 and the loan interest is due semi annually on 15 May, and15 November, The company is committed to render some guarantees to the lender asstipulated by the contract. On July 4, 2002 the company has received an amountof EURO 10 420 000 , and Euro 4 580 000 on December 24,2002 representing thefull amount of the mentioned loan. The company has paid an amount of Euro 1.25 million to DEG on May15,2003, and November 12,2003. The company has paid 2.5 million Euro on May13,2004. The company has paid an amount of Euro 1.25 million on May 12,2005 andNovember 14,2005. Accordingly, the loan balance as of December 31,2005 amountedEuro 7.5 million (Equivalent amount ofLE 50 625 000). 19. Contingent Liabilities - The company undertakes the credit facilities granted from banks to itssubsidiaries - Financial Brokerage Group, Hermes Securities Brokerage and EFG-Hermes Brokerage - UAE. The letters of guarantee amounting to AED 86 Million(the equivalent amount of LE. 133 300 000) issued by banks upon the request ofFinancial Brokerage Group Company (one of company's subsidiaries - 99.76%) infavour of Dubai and Abo Dhabi Market Authorities to guarantee the brokerageactivity of the subsidiary EFG- Hermes Brokerage Company - UAE Ltd. - The company and its subsidiaries have executed SWAP contract with bankswhich will be settled according to specific rates for the foreign currenciesimplied in such contracts. The mentioned contracts are as follows. Transaction Transaction Amount currency Expiry Date Date operation 28/12/2005 Buying USD 19.8 Million Selling LE. 26/1/2006 28/12/2005 Selling Euro 4.80 Million Buying USD 26/1/2006 28/12/2005 Selling Euro 2.70 Million Buying USD 26/1/2006 - Hermes Corporate Finance Company ( a subsidiary - 99.37%) issued througha bank a letter of guarantee in an amount of LE. 292 500 in favor of EgyptianElectricity Authority. The issuer bank has blocked the company's time depositwhich amounts LE. 468 084 on December 31,2005 as a margin for this letter ofguarantee. 20. Change in accounting policies (Incentive Fee) Effectively from January 1,2005 the Assets Management Companies(subsidiaries) have changed the revenue recognition policy of the Incentive Feedue to inadequate assurance concerning the recognition conditions andcollections of such fees. In previous financial years, these fees wererecognized during the year and amended based on the realized return on assetsmanaged by such companies till it becomes definite and revenue recognitionconditions have been fulfilled at the end of the financial year. As a result,the Assets Management Companies (subsidiaries) deferred the recognition ofIncentive Fee with an amount of LE. 7 142 035 for the year ended December31,2005 versus LE. 223 030 for the last year as follows: Subsidiary's Name Amount LE. 31/12/2005 31/12/2004EFG- Hermes Financial Management (Egypt) Ltd. 5 728 012 --Egyptian Portfolio Management Group Company 1 414 023 223 030 __________ _________ 7 142 035 223 030 ========= ======== 21. Reconciliation Of Effective Tax Rate 31/12/2005 LE. LE. Profit before tax 474 348 120 Tax rate 20% __________ Income tax using the domestic corporate tax rate 94 869 624 Non deductible expenses 4 431 096 Tax exemptions (1 751 730) Effect of provisions 3 152 614 Fixed assets depreciation (385 410) Capital losses 3 982 Other items (2 592 402) __________ Total tax differences 2 858 150 _________ Income tax according to tax return 97 727 774 ======== Effective tax rate 20.60% ======== 22. Deferred Tax Assets And Liabilities Deferred tax assets and liabilities are attributable to the following: 2005 Deferred Tax Assets Liabilities LE. LE. Capital losses (gains) 12 036 (8 054) Provisions 3 152 614 -- Fixed assets 1 491 (386 901) ___________ __________ Total deferred tax assets (liabilities) 3 166 141 (394 955) ___________ __________ Net deferred tax assets 2 771 186 -- ========= ========= 23. Earnings per share 31/12/2005 31/12/2004 LE. LE. Net profit for the year 350 139 955 52 552 219 The weighted average number of shares 78 552 225 70 014 386 __________ __________ Earnings per share 4.46 0.75 ========= ========= 24. Events Subsequent to Balance Sheet Date On February 2,2006 the Company's Extraordinary General Assemblyapproved the following decisions: - Increasing the issued capital of the Company from LE. 405 370 050 toLE. 485 370 050 through a First Tranche by issuing 16 million shares at the fairvalue of LE. 115 approved by the Company's Board of Directors and validated bythe Company's auditor. - Offering the First Tranche of the capital increase to qualifiedinvestors in a private placement at the fair value (to be paid USD + $1 pershare as placement fee). This will include the waiving of the pre-emptiverights of the current shareholders in subscribing to the First Tranche. Theminimum subscription was set at $10 million; - Inviting existing shareholders to participate in the private placementeach according to his percentage of ownership according to the rules of privateplacement while waiving the minimum requirements of $10 million subscription; - 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 150through a second trnache by issuing 194 148 020 shares at the par value of theshare (LE. 5) through a 1:2 right issue. 25. Corresponding figures Certain Corresponding figures have been reclassified to conform with the currentyear classification. This information is provided by RNS The company news service from the London Stock Exchange