Paints&ch.gdr Regulatory News (PCLD)

15 May 2006 17:50

Paints and Chemical Industries Co.15 May 2006 Review Report to the Board of Director of Paints and Chemical Industries CompanyS.A.E. We have reviewed the accompanying consolidated balance sheet of Paints andChemical Industries Company as at 31 March 2006, and the related statements ofconsolidated income, cash flows and change in equity for the period then ended.These financial statements are the responsibility of the company's management.Our responsibility is to issue a report on these financial statements based onour 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 that the financial statementsare free of material misstatement. A review is limited primarily to inquiries ofcompany personal and analytical procedures applied to financial data and thusprovides less assurance than an audit. We have not performed 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 all material respects in accordance with Egyptian AccountingStandards. Cairo, May 11, 2006 Kamel M. Saleh ACAF.E.S.A.A (RAA 8510)SBA-DELOITTE Original 2of 2 PAINTS & CHEMICAL INDUSTRIES COMPANY S.A.E.(PACHIN)INTERIM CONSOLIDATED FINANCIAL STATEMENTS FOR THE PERIOD ENDED31 March 2006 PAINTS AND CHEMICAL INDUSTRIES COMPANY S.A.E.Consolidated Balance Sheet As at 31 March Holding Consolidated company Notes 2006 2005 2006 2005 L.E. L.E. L.E. L.E.Fixed AssetsFixed Assets 8 183,076,377 187,985,884 21,160,641 21,912,575Projects underconstructions 19,214,395 6,321,351 1,697,555 1,121,500Investment insubsidiarycompany 9 - - 212,395,000 169,915,500Other investments 10 774,906 774,906 774,906 774,906Other long-term assets - - - - ----------- ----------- ----------- ----------- 203,065,678 195,082,141 236,028,102 193,724,481 ----------- ----------- ----------- -----------Current AssetsInventories 11 137,588,948 149,536,140 69,522,655 75,358,530Letters of Credit 2,096,064 2,419,456 1,242,960 1,555,502Accounts andnotes receivables 12 74,506,814 73,304,348 34,134,405 31,956,920Amounts owingfrom subsidiaries 0 0 5,979,438 964,937Other debitbalances 13 45,608,630 40,941,268 44,249,580 100,704,673Short-terminvestments 14 39,115,536 56,415,978 10,093,357 56,415,978Cash and cashequivalents 15 57,679,635 55,926,483 24,217,897 26,938,808 ----------- ----------- ----------- ----------- 356,595,627 378,543,673 189,440,292 293,895,348 ----------- ----------- ----------- -----------Total assets 559,661,305 573,625,814 425,468,394 487,619,829 =========== =========== =========== =========== Liabilities and Shareholders Equity Current LiabilitiesBanks - overdraft 16 9,248,866 29,946,958 3,138,173 3,377,842Accounts andnotes payable 40,733,338 33,369,247 10,060,220 9,365,643Other creditbalances 17 32,137,003 34,873,985 17,814,696 19,451,159Amounts owing tosubsidiaries 0 0Dividends payable 257,986 257,986 257,986 257,986 ----------- ----------- ----------- ----------- 82,377,193 98,448,176 31,271,075 32,452,630Provisions 18 29,635,309 29,945,448 27,754,702 27,780,077Long-termliabilities 21 1,967,726 1,967,726 -- -- ----------- ----------- ----------- -----------Total Liabilities 113,980,228 130,361,350 59,025,777 60,232,707 ----------- ----------- ----------- -----------Share Capital and ReservesShare capital 19 200,000,000 200,000,000 200,000,000 200,000,000Legal reserve 20 96,092,967 89,256,263 84,195,014 80,818,518Other reserves 20 78,415,035 78,401,014 78,415,035 78,401,014Retained earnings 20 3,063,606 1,781,129 1,043,741 637,661Profit for theperiod/year 67,964,916 73,702,171 2,788,827 67,529,929 ----------- ----------- ----------- -----------Total ShareCapital andReserves 445,536,524 443,140,577 366,442,617 427,387,122Minority interest 144,553 123,887 -- -- ----------- ----------- ----------- -----------Total Liabilitiesand Shareholders'Equity 559,661,305 573,625,814 425,468,394 487,619,829 =========== =========== =========== =========== - The attached notes form an integral part of the financial statements. Financial Managing directorController PAINTS AND CHEMICAL INDUSTRIES COMPANY S.A.E.Consolidated Profit & Loss Accounts Year ended 31 March Consolidated Holding company 2006 2005 2006 2005 Notes L.E. L.E. L.E. L.E. Net sales 3 341,207,218 326,759,181 101,981,610 112,836,165Cost of Sales (266,718,185) (258,957,845) (94,432,022) (101,754,516) ----------- ----------- ----------- -----------Gross profit 74,489,033 67,801,336 7,549,588 11,081,649 ----------- ----------- ----------- -----------General andadministrativeexpenses (8,738,895) (7,820,821) (7,137,246) (6,590,886)Interestexpenses (2,572,596) (2,185,634) (1,405,161) (723,158)Other Income 37,000 393,433 34,269 320,087Interest income 1,433,397 1,082,388 692,481 884,333Profit on saleof investment 1,332,010 0 1,079,567 0Investmentincome 2,282,715 3,940,680 2,081,156 3,940,681 ----------- ----------- ----------- -----------Profit fromoperations 68,262,664 63,211,382 2,894,654 8,912,706 ----------- ----------- ----------- -----------Profits/Lossesfrom foreigncurrencytranslation (299,718) (1,032,979) (105,827) (567,257)Capital gain 34,561 0 0 0 ----------- ----------- ----------- -----------Profit onordinaryactivitiesbefore taxes 67,997,507 62,178,403 2,788,827 8,345,449Taxation 4 - - - - ----------- ----------- ----------- -----------Profit after tax 5 67,997,507 62,178,403 2,788,827 8,345,449Minorityinterest (32,591) (26,916) - - ----------- ----------- ----------- -----------Profit after taxand minorityinterest 5 67,964,916 62,151,487 2,788,827 8,345,449Employees' andDirectors' bonus (4,266,667) (5,879,166) (2,441,667) (3,255,556) ----------- ----------- ----------- -----------Profitattributable toshareholders 63,698,249 56,272,321 347,160 5,089,894 =========== =========== =========== ===========ConsolidatedEarnings pershare 6 3.18 2.81 0.02 0.25 Financial Managing director Chairman of the BoardController PAINTS AND CHEMICAL INDUSTRIES COMPANYS.A.E.Consolidated Cash flows Statement Year ended 31 March Consolidated Holding company 2006 2005 2006 2005Cash flows from L.E. L.E. L.E. L.E.operating activities Net profitbefore tax 67,997,507 62,178,404 2,788,827 5,089,894Adjustments:Depreciation 7,014,978 6,946,355 1,607,364 1,855,853Amortization - -Net provisionsformed and(utilized) (351,971) - (67,207) -Profit on saleof fixed assets (34,561) - - -Profit on saleof investments (1,332,010) (3,940,680) (1,079,567) (3,940,680) --------- -------- -------- --------Operatingprofit beforeworking capitalchanges 73,293,943 65,184,079 3,249,417 3,005,067 (Increase ) ordecrease indebtors (5,869,828) (6,235,679) 49,263,107 62,956,685(Increase ) ordecrease ininventories 12,228,752 (42,299,289) 6,190,249 (17,808,559)Increase or(decrease) increditors 4,753,531 26,273,136 (951,566) 9,473,107 --------- -------- -------- --------Net cash fromoperatingactivities 84,406,398 42,922,247 57,751,207 57,626,299 --------- -------- -------- -------- Cash flows frominvestingactivitiesPurchase offixed assetsand otherlong-termassets (15,065,376) (2,074,110) (1,431,485) (1,230,327)Proceeds fromsale of fixedassets 101,422 24,370 0 24,370Proceeds fromsale ofinvestments 134,570,528 59,813,164 115,347,087 59,813,164Purchase ofinvestments (115,938,075) (45,748,965) (67,944,898) (45,748,965)Purchase ofinvestments insubsidiary - - (42,479,500) - --------- -------- -------- --------Net cash fromin investingactivities 3,668,499 12,014,459 3,491,204 12,858,242 --------- -------- -------- --------Cash flows fromfinancingactivities Cash flows fromfinancingactivitiesactivitiesDividends paid (65,623,653) (65,271,395) (63,723,653) (63,722,170) --------- -------- -------- --------Net cash usedin financingactivities (65,623,653) (65,271,395) (63,723,653) (63,722,170) --------- -------- -------- -------- Net (decrease)in cash & cashequivalents 22,451,244 (10,334,689) (2,481,242) 6,762,371Net cash & cashequivalents atbeginning ofperiod 25,979,525 2,837,702 23,560,966 10,769,046 --------- -------- -------- --------Net cash & cashequivalents atend of period 48,430,769 (7,496,987) 21,079,724 17,531,417 ========= ======== ======== ======== PAINTS AND CHEMICALINDUSTRIES COMPANY S.A.E.Cosolidated Changes inShareholders' EquityStatement Share Legal Other Retained Profit Total Capital Reserve Reserves Earnings For the year Balance at 1July 2004 200,000,000 82,895,829 78,271,164 4,316,269 69,237,703 434,720,965Transfer toreserves - 6,360,434 129,850 - (6,490,284) -Dividends - - - (2,535,140) (62,747,419) (65,282,559)Current yearprofit - - - - 73,702,171 73,702,171 --------- --------- ----------- ---------- ---------- ----------Balance at30 200,000,000 89,256,263 78,401,014 1,781,129 73,702,171 443,140,577June 2005Transfer toreserves - 6,836,704 14,021 (6,850,725) -Dividends - 1,282,477 (66,851,446) (65,568,969)Current yearprofit - 67,964,916 67,964,916 --------- --------- ----------- ---------- ---------- ----------Balance at31 200,000,000 96,092,967 78,415,035 3,063,606 67,964,916 445,536,524March 2006 ========= ========= =========== ========== ========== ========== PAINTS AND CHEMICAL INDUSTRIES COMPANY S.A.E.Notes to the Consolidated Financial Statements 1- The Group Paints and Chemical Industries Company S.A.E. (PACHIN) is an Egyptian JointStock Company. Following the sale by the Holding Company for Chemical Industriesof part of its holding via a GDR offer, has reduced its share to less than 50 %, and the company has become subject to the Companies Law No. 159 for 1981. The objective of the company is to manufacture various kinds of paints,varnishes, printing inks, animal extract products and related products.Purchasing and dividing land for the purpose of using or reselling andperforming specialized construction works. El-Obour for Paints and Chemicals Industries Company S.A.E is an Egyptian JointStock Company established under law 8 for 1997.The Company was registered on 14 January 1999 at the CommercialRegistry. The objective of the company is to manufacture various kinds ofpaints, varnishes, printing inks, animal extract products and related products. 2- Significant accounting policies Basis of accounting The financial statements are prepared in accordance with the Egyptian AccountingStandards. Basis of consolidation The consolidated financial statements include subsidiaries under control ofPaints and Chemicals Industries Company, which owns 99.95% of El Obour forPaints and Chemicals Industries Company. -- All material intercompany transaction are eliminated in the consolidatedfinancial statement. -- Acquisition of subsidiaries are accounted for by the purchase method. -- The consolidated income statement reflects the subsidiary's results ofoperations starting from the date of acquisition, and the minority interest share of profit is eliminated. Sales Sales are stated net of sales tax. Revenue recognition Sales of goods are recognized when goods are dispatched to customers. Foreign currency transactions Group companies maintain their records in Egyptian pounds. Transactionsdenominated in foreign currencies are recorded at exchange rates prevailing atthe date of the transaction. At year-end, monetary assets and liabilitiesdenominated in foreign currencies are translated to Egyptian pounds at theexchange rate of the financial statements date. Exchange differences are takeninto the income statement. Net profit attributable to shareholders Net profit after tax attributable to the shareholders, is stated after deductingall claims against it other than those of the shareholders. The followingamounts, treated in the local accounts as profit distributions, (based on thecompany's statutes and the Egyptian companies law) have been charged in thesefinancial statements, to profits before arriving at the net profit attributableto shareholders as follows: i- Board of Directors profit related bonuses. ii- Employees bonuses that are calculated as a percentage of the dividendsdeclared to shareholders in any specific year. (See Note 5) PAINTS AND CHEMICAL INDUSTRIES COMPANY S.A.E. Notes to the Consolidated Financial Statements Earnings per Share Earnings per share figures are calculated by dividing net profit attributable tothe shareholders by the weighted average number of shares outstanding during theperiod (see Note 6). Fixed assets Fixed assets are recorded at historical cost and are depreciated over theirestimated useful lives using the straight line method as follows: Buildings 2-5%Plant & equipment 4.9-7.5%Vehicles 10-20%Tools 7.5%Furniture & office equipment 10% Investments Long-term investments are stated at cost, permanent diminution in values arewritten off. Amounts deposited with the National Bank for Investment forpurchasing Government bonds, are treated as long term investments, an equivalentamount is credited to a special reserve. Inventories Inventories are stated at the lower of cost or net realizable value. Costs aredetermined as follows: raw materials, packing materials, spare parts and fuelcosts, which are calculated on moving average basis. Work in progress costsinclude direct and indirect manufacturing costs of partially completed stages.Finished products costs include all manufacturing costs. Financial instrument Financial assets The company's principal financial assets are bank balances, cash, tradereceivable and equity investments. Trade receivable are stated at their nominal value as reduced by appropriateallowance for estimated irrecoverable amounts. Financial liabilities Financial liabilities are classified according to the substance of thecontractual arrangements entered into. Significant financial liabilities include bank loans and overdrafts and tradeand other payables. Finance charges are accounted for on accrual basis. Trade and other payables are stated at their nominal value. Short term investments Short term investments are stated at cost or market value. The issuance premiumof governmental bonds will be amortized within 3 years.PAINTS AND CHEMICAL INDUSTRIESCOMPANY S.A.E.Notes to the ConsolidatedFinancial Statements 3- Turnover analysis by Consolidated Holding companydivision 2006 2005 2006 2005 LE'000 LE'000 LE'000 LE'000 Land 5,731 5,731Paints 301,978 280,007 62,753 66,084Printing Inks 28,230 38,582 38,230 38,582Animal ExtractProducts 999 2,439 999 2,439 331,207 326,759 101,982 112,836 4- Taxation Paints and ChemicalsIndustries CompanyThe Corporation Tax rate in Egypt is 32% for industrial companies, in addition to devolopment charge of 2 %. El-Obour for Paints and ChemicalsThe company currently enjoys a tax holiday starting from the fiscal year following the date of commenced production.(9 November 2000) 5- Profit attributable to shareholders Consolidated Holding companyReconciliation to profitsafter taxes 2006 2005 2006 2005according to statutory LE LE LE LEaccounts * Profit after taxesper local accounts 67,964,916 62,151,487 2,788,827 8,345,449 * Provision for Directors' profit related bonuses, and employees profit share treated as distribution in statutoryaccounts. (4,266,667) (5,879,166) (2,441,667) (3,255,556) Profit attributable toshareholders per attachedprofit and loss account 56,272,321 347,160 5,089,894 6- Earnings per share Consolidated Consolidated earnings per share figures are calculated by dividing the profitattributable to the shareholders by the weighted average number of shares in issue. For 2006, profits amounted to L.E 63,698,249 (2004:L.E. 56,272,321) by 20,000,000 shares. Holding company Earnings per share figures are calculated by dividing the profit attributable tothe shareholders by the weighted average number of shares in issue. For 2006 profits amounted to L.E 347,160 (2004:L.E.5,089,894)by 20,000,000 shares for two years. 7- Dividends In respect to the year ended 30 June 2005, a dividend of L.E 2.85 per share isproposed by Board of Directors and approved by the Annual General Meeting held on 13 november 2005.PAINTS AND CHEMICAL INDUSTRIES COMPANY S.A.E.Notes to the consolidated financial statements 8- Fixed AssetsConsolidated Land Building Machinery and Equipments Tools Furniture & office equipment LE LE LE LE LE LE LECost 1 July 39,818,434 79,528,981 100,301,041 11,997,169 11,530,423 10,778,263 253,954,3112005Addition /Transfers - 355,604 536,210 566,104 88,038 626,376 2,172,332Disposals - - (66,861) (594,899) 597.00 - (661,163) -------- ------- -------- ------- ------- -------- ---------31 March 39,818,434 79,884,585 100,770,390 11,968,374 11,619,058 11,404,639 255,465,4802006 -------- ------- -------- ------- ------- -------- ---------AccumulatedDepreciation1 July - 14,028,693 32,256,258 8,501,486 4,854,102 6,327,888 65,968,4272005DepreciationCharge - 1,528,652 3,348,407 991,065 564,471 582,383 7,014,978Disposals - - - (594,899) 597.00 - (594,302) -------- ------- -------- ------- ------- -------- ---------31 March - 15,557,345 35,604,665 8,897,652 5,419,170 6,910,271 72,389,1032006 -------- ------- -------- ------- ------- -------- ---------NBV @ 31March 2006 39,818,434 64,327,240 65,165,725 3,070,722 6,199,888 4,494,368 183,076,377 ======== ======= ======== ======= ======= ========== ========NBV @ 30June 39,818,434 65,500,288 68,044,783 3,495,683 6,676,321 4,450,375 187,985,8842005 ======== ======= ======== ======= ======= ========== ======== The Holding Company Land Building Machinery and Equipments Tools Furniture & office equipment LE LE LE LE LE LE LECost 1 July 173,143 19,337,271 28,657,752 6,433,100 4,186,836 5,929,919 64,718,0212005Addition /Transfers - 335,076 - 259,884 52,743 207,727 855,430Disposals - - - (461,694) (597) - (462,291) -------- ------- -------- ------- ------- -------- ---------31 March 173,143 19,672,347 28,657,752 6,231,290 4,238,982 6,137,646 65,111,1602006 -------- ------- -------- ------- ------- -------- ---------AccumulatedDepreciation1 July - 8,472,706 20,872,553 5,773,251 3,041,235 4,645,701 42,805,4462005DepreciationCharge - 378,738 661,831 205,756 151,395 209,644 1,607,364Disposals - - - (461,694) (597.00) - (461,694) -------- ------- -------- ------- ------- -------- ---------31 March 0 8,851,444 21,534,384 5,517,313 3,192,033 4,855,345 43,951,1162006 ======== ======= ======== ======= ======= ======== =========NBV @ 31March 2006 173,143 10,820,903 7,123,368 713,977 1,046,949 1,282,301 21,160,641 ======== ======= ======== ======= ======= ======== =========NBV @ 30June 173,143 10,864,565 7,785,199 659,849 1,145,601 1,284,218 21,912,5752005 ======== ======= ======== ======= ======= ======== ========= PAINTS AND CHEMICAL INDUSTRIES COMPANY S.A.E.Notes to the Consolidated Financial Statements Consolidated Holding company March 2006 June 2005 March 2006 L.E L.E L.E L .E.9- Investments in subsidiary companiesEl-Obour for Paints andChemicals IndustriesCompany 199,900,000 164,917,500PACHIN for - - 12,495,000 4,998,000Inks 212,395,000 169,915,500 10- Other investmentsGovernment Bonds viaNational InvestmentBank 774,906 774,906 11- InventoriesRaw materials,packaging materials and spare parts 56,484,433 64,448,055Work in progress 4,706,398 3,101,355 2,128,398 1,488,704Finished products 22,491,272 18,869,191 10,673,272 9,044,240Scraps 277,355 466,724 28,789 137,740Inventories for thepurpose of resale 207,763 239,791 207,763 239,791 Total 137,588,948 149,536,140 69,522,655 75,358,530 The above figures are shown net of provisions for slow moving and obsolete items amounting to LE 1,421,650. 12- Accounts and notes receivables Accounts receivables 32,027,401 27,275,249 26,024,386 22,416,667*Notes receivables 42,479,413 46,029,099 8,110,019 9,540,253 74,506,814 73,304,348 34,134,405 31,956,920 *Includes notes receivable due within more than one year The above figures are shown net of provisions for doubtful debts amounting to LE 20,899,340. 13- Other debit balance Accrued 281,078 548,986 5,771,180 63,517,486incomeSuppliers debit 2,440,379 1,865,882 1,565,343 1,069,864balancesEmployees 2,437,932 2,216,190 771,033 734,390loansDeposits withheld 2,710,349 2,490,862 2,210,298 2,010,393Corporate 24,857,954 24,857,954 24,857,954 24,857,954taxWithholding 5,525,333 4,915,940 5,525,333 4,915,940taxOthers 7,355,605 4,045,454 3,548,439 3,598,646 45,608,630 40,941,268 44,249,580 100,704,673 14- Short-term investmentsTreasury 33,540,493 18,340,935 4,518,314 18,340,935BillsGovernmentalbonds(USD)* 5,402,542 5,402,542 5,402,542 5,402,542Mutual funds 172,501 172,501 172,501 172,501Certificatesof deposits 0 32,500,000 0 32,500,000 39,115,536 56,415,978 10,093,357 56,415,978 * Include issuance premium amounting to L.E.214,768 after current year's amortization amounting to L.E. 429,536. PAINTS AND CHEMICAL INDUSTRIES COMPANY S.A.E.Notes to the Consolidated Financial Statements Consolidated Holding company March 2006 June 2005 March 2006 L.E L.E L.E L.E.15- Cash and cashequivalents Cash 5,241,016 2,114,689on handCurrent 5,327,680 20,482,077 1,624,754 6,137,582accountsTime deposits(see Note 16) 43,673,383 31,332,304 18,108,796 18,298,450Checks under 3,437,556 4,112,102 2,369,658 2,502,776collection 57,679,635 55,926,483 24,217,897 26,938,808 16- Bank overdraft Bank overdrafts are secured by time deposits amounting to LE 36,316 million. 17- Other credit balances Advance receipts fromcustomers 11,400,637 8,778,072 4,792,299 2,218,314Accrued 4,875,408 6,795,490 4,328,315 6,410,291expensesSales 5,558,405 5,594,105 857,952 703,923taxDeposit 2,415,352 3,041,709 843,482 1,365,978withheldEmployees share 37,370 27,690 37,370 27,690in profitOtheremployees 4,082,370 4,082,370 4,082,370 4,082,370benefitsFixedassets 447,279 429,001 260,195 258,506creditorsTax 482,962 1,320,054 315,635 416,134withheldCurrent portion of long termliabilities 103,125 426,657 0 0Other 2,734,095 4,378,837 2,297,078 3,967,953creditors 32,137,003 34,873,985 17,814,696 19,451,159 18- Provisions Tax 22,749,283 22,749,283 22,749,283 22,749,283provisionOther 6,886,026 7,196,165 5,005,419 5,030,794provisions 29,635,309 29,945,448 27,754,702 27,780,077 19- Share Capital Authorized 200,000,000 200,000,000 200,000,000 200,000,000Issued and 200,000,000 200,000,000 200,000,000 200,000,000fully paidNominal value 10 10 10 10per shareNumber of 20,000,000 20,000,000 20,000,000 20,000,000shares 20- ReservesLegal 96,092,967 89,256,263 84,195,014 80,818,518ReserveOther 78,415,035 78,401,014 78,415,035 78,401,014ReservesRetained 3,063,606 1,781,129 1,043,741 637,661Earnings 177,571,608 169,438,406 163,653,790 159,857,193 PAINTS AND CHEMICAL INDUSTRIES COMPANY S.A.ENotes to the Consolidated Financial Statements Consolidated Holding company March 2006 June 2005 March 2006 June 200521- Long term liabilitiesSales tax relating tofixed assets 1,390,526 1,390,526 - -Differed revenue 577,200 577,200 - - 1,967,726 1,967,726 - - 22- Contingent liabilities Comprised of Letters of Credit amounting to L.E. 2.024 million. March 2006 March 2005 March 2006 March 200523- Net cash and cash equivalentsCash and cash equivalents 57,679,635 32,976,869 24,217,897 20,588,368Banks -overdrafts (9,248,866) (40,473,856) (3,138,173) (3,056,951) 48,430,769 (7,496,987) 21,079,724 17,531,417 24- Tax situation Corporate income tax (Paints and Chemicals Industries Company) The Tax Authority inspected the company's books, and the taxes were settled andpaid for the years till June 30, 1993. For the years 1994/1997, the final resolution regarding the taxable income hasnot yet been determined. Whereas the argument between the company and TaxAuthority is currently under assessment by the court. For the years 1998/2001, the Tax Authority inspected the company's books whichresulted an additional tax claim. The company objected to this claim and anumber of disputed points discussed with an Internal Committee from the TaxAuthority. The claims became EGP 26.5 million according to the InternalCommittee. The company objected to a number of points and the final resolutionhas not yet been determined. Whereas the argument between the company and TaxAuthority is currently under assessment by the Appeal Committee. For years ending June 30, 2002 , 2003 , 2004 and 2005 the company's books havenot been inspected by the Tax Authority. However, income tax due to the TaxAuthority was paid as per the company's tax return. 25- Management of financial instrument risk Credit risk The group's credit risk is primarily attributable to its trade and notesreceivables. The amount presented in the balance sheet are net of allowance fordoubtful receivable (if any), estimated by the company. Risk of changes in foreign exchange rates The group's expenditures and its proceeds are affected by the risk of changes inforeign exchange rates as well as the retranslation of its monetary assets andliabilities denominated in foreign currencies. 26- Capital commitment Represents the unpaid portion of Paints and Chemicals Industries Company(PACHIN) share in PACHIN for inks which amounted to L.E. 37,485,000. This information is provided by RNS The company news service from the London Stock Exchange