Paints and Chemical Industries Company Pachin S.A.E. The Consolidated Financial Statements and Limited Review Report For the Financial Period from

Transcription

1 Paints and Chemical Industries Company Pachin S.A.E. The Consolidated Financial Statements and Limited Review Report For the Financial Period from July 1, 2010 until March 31, 2011

2 LIMITED REVIEW REPORT To: The Board of Directors of Paints and Chemical Industries Company "Pachin" Introduction We have reviewed the accompanying consolidated balance sheet of Paints and Chemical Industries Company for the period from July 1, 2010 until March 31, 2011, and the related statements of consolidated income, cash flows and changes in equity for the nine month period ending on that date, and the summary of significant accounting polices and the disclosure thereto. These financial statements are the responsibility of the company s management. Our responsibility is to issue a report on these financial statements based on our review.scope of Limited Review We conducted our review in accordance with the Egyptian Standard No. (2410), applicable to the review engagements. This standard requires that we plan and perform the review to obtain moderate assurance that the financial statements are free of material misstatement. A review is limited primarily to inquire of the company s personal and analytical procedure applied to the financial data and thus provides less assurance than an audit. We have not performed an audit and, accordingly, we do not express an audit opinion. Conclusion Based on our review, nothing has come to our attention that causes us to believe that the accompanying consolidated financial statements as of March 31, 2011, do not give a true and fair view of the company s financial position and the results of its operations and cash flows for the nine month period ending on that date according to the Egyptian Accounting Standards. Cairo, May 3, 2011 Kamel M. Saleh ACA F.E.S.A.A (RAA 8510)

3 Paints and Chemical Industries Company "Pachin" S.A.E. Consolidated Balance Sheet As of March 31, 2011 Notes 31/03/ /6/ /03/ /6/2010 Consolidated Pachin Non - Current Assets EGP EGP EGP EGP Property, plant and equipment (net) (2b, 4) Projects under construction (2c, 5) Other Non - Current Assets Investment in subsidiaries (2f, 6) Available for sale investments (2f, 7) Other long-term assets (2d, 8) Total Non - Current Assets Non current assets held for sale (2r, 10) Current Assets Inventories (net) (2g, 9, 17b) Letters of credit Debtors and Accounts Receivable Accounts receivable (net) (2h, 11, 17b) Notes receivable (net) (12, 17b) Due from subsidiaries (13) Other debit accounts (14) Investments for trading purposes (2i, 15) Cash and cash equivalents (2j, 16) Total Current Assets Current Liabilities Provisions (2K, 17 a)

4 - 2 - Banks' overdraft Accounts and notes payable (2L, 18) Due to El-Obour for Paints (19) Other credit accounts (20) Total Current Liabilities Working Capital Total Investment financed by : Shareholders Equity Issued and paid-up capital (21) Reserves (22) Foreign currency translation profit (losses) Retained earnings Profits for the period / year ( ) Total Shareholders Equity Minority interest Total Sharholders Equity and Minority Interest Long-term liabilities (23) Deferred tax (2Q, 24) Total Financing of Working Capital and Long-Term Assets The accompanying notes from (1) to (29), form an integral part of the financial statements. Chief Financial Officer Manager Director Chairman Accountant: Ashraf Moustafa El Kahky Eng.: Mohy Eldeen Abdelrazik Dr.: Hoda Ahmed Salah Eldeen - Auditor's Report attached.

5 - 3 - Paints and Chemical Industries Company "Pachin" S.A.E. Consolidated Income Statement From July 1, 2010 until March 31, 2011 Period from 1/1/2011 to 31/3/2011 Period from 1/7/2010 to 31/3/2011 Period from 1/1/2010 to 31/3/2010 Period from 1/7/2009 to 31/3/2010 Period from 1/1/2011 to 31/3/2011 Period from 1/7/2010 to 31/3/2011 Period from 1/1/2010 to 31/3/2010 Period from 1/7/2009 to 31/3/2010 Consolidated Pachin Sales (net) (2N, 3) Less: Cost of sales Notes EGP EGP EGP EGP EGP EGP EGP EGP ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( ) Gross Profit General and administrative expenses ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( ) Provisions ( ) ( ) Impairment (29) ( ) ( ) Impairment in investments in subsidiary Allowance for attending the Board of Directors ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( ) Profit (losses) from Operations Interest expenses ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( 2 283) ( 6 531) Revenue from investements in subsidiary Profit on sale of investments Gain on revaluation of investments held for trading ( )

6 - 4 - Treasury bills revenue Investment income Interest income Capital gain Other income Currency evaluation differences ( ) ( ) ( ) ( ) ( ) Profit before discontinued operation losses ( ) Discontinued operation losses (25) ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( ) Profit before Tax and Minority Interest ( ) Current tax ( ) ( ) ( ) ( ) -- ( ) Deferred tax (2Q, 24) ( ) ( ) ( ) ( ) ( ) ( ) Profit after Tax and before minority interest ( ) Minority interest ( 6 246) Profit after Tax and Minority Interest ( ) The accompanying notes from (1) to (29), form an integral part of the financial statements. Chief Financial Officer Managing Director Chairman Accountant: Ashraf Moustafa El Kahky Eng.: Mohy Eldeen Abdelrazik Dr.: Hoda Ahmed Salah Eldeen

7 - 5 - Paint and Chemical Industires Company "Pachin" S.A.E. Consolidated Cash Flows Statement From July 1, 2010 until March 31, 2011 Note 31/3/ /3/ /3/ /3/2010 Consolidated Pachin EGP EGP EGP EGP Cash Flows from Operating Activities Net Profit before tax and minority interest Adjusted by Depreciation of fixed assets Net provisions formed and used Capital gain ( 5 550) ( ) ( 5 550) ( ) Impairment Impairment in investments in subsidiary Gain on revaluation of investments for trading purposes ( ) ( ) ( ) ( ) Profit on the sale of investments ( ) ( ) ( ) -- Operating Profit before Working Capital Changes (Increase) in receivables and other debit balances ( ) ( ) (Increase) decrease in inventories and letters of credit ( ) ( ) ( ) Increase (decrease) in creditors and other credit balances ( ) ( ) Net Cash Provided from Operating Activities

8 - 6 - Cash Flows from Investing Activities Purchase of investments for trading purposes ( ) ( ) ( ) ( ) Purchase of investments in subsidiary companies ( ) Proceeds from the sale of investments for trading purposes Purchase of fixed assets and other non-current assets ( ) ( ) ( ) ( ) Proceeds from the sale of fixed assets Net Cash Provided from (used in) Investing Activities ( ) ( ) Cash Flows from Financing Activities Payments of banks overdraft and long term loans ( ) ( ) ( 6 343) ( ) Dividends paid ( ) ( ) ( ) ( ) Net Cash (used in) Financing Activities ( ) ( ) ( ) ( ) Net change in cash and cash equivalents during the period ( ) ( ) ( ) Net cash and cash equivalents at beginning of the period (2j,16) Net cash and cash equivalents at end of the period (2j,16) The accompanying notes from (1) to (29), form an integral part of the financial statements. Chief Financial Officer Managing Director Chairman Accountant: Ashraf Moustafa El Kahky Eng.: Mohy Eldeen Abdelrazik Dr.: Hoda Ahmed Salah Eldeen

9 - 7 - Paints and Chemical Industries Company "Pachin" S.A.E. Consolidated Statement of Changes in Equity From July 1, 2010 until March 31, 2011 Capital Reserves Foreign Currency Translation Losses Retained Profits for the Earnings Year / period Minority Interest Total EGP EGP EGP EGP EGP EGP EGP Balance as of June 30, 2009 Minority interest for Pachin for Paints - Libya Transferred to reserves Foreign currency translation losses Dividends for shareholders, employees, and Board of Directors Net profits as of June 30, 2010 Balance as of June 30, 2010 Transferred to retained earnings Transferred to reserves Foreign currency translation revenue Dividends for shareholders, employees, and Board of Directors Net profits as of March 31, ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( )

10 - 8 - Balance as of March 31, 2011 Balance as of March 31, ( ) The accompanying notes from (1) to (29), form an integral part of the financial statements. Chief Financial Officer Managing Director Chairman Accountant: Ashraf Moustafa El Kahky Eng.: Mohy Eldeen Abdelrazik Dr.: Hoda Ahmed Salah Eldeen

11 - 9 - Paints and Chemical Industries Company Pachin (S.A.E.) Notes to the Consolidated Financial Statements As of March 31, The Group s Background Paints and Chemical Industries Company Pachin The company was established according to the Ministerial Decree No. 751 for On October 3, 1997, the Extraordinary General Assembly agreed to circulate 27% of its share via GDR offer in the Stock Markets of London and New York accordingly, the Holding Company s share was reduced to less than 50 %, and the company became subject to the Companies Law No. 159 for 1981 and its executive regulation. The Commercial Register was issued after this modification on October 15, On October 31, 2000, the Extraordinary General Assembly agreed to amend some articles in the Articles of Incorporation. The company s objective is to manufacture various kinds of paints, varnishes, printing inks, animal extract products and related products, in addition to purchasing and dividing land for the purpose of using or reselling, and performing specialized construction works. El-Obour for Paints and Chemicals Industries Company Pachin The company was established according to the General Authority for Investment and Free Zones Decree No. 78 for 1999, and the provisions of Investment Guarantee and Incentives Law No. 8 for The company was registered at the Commercial Register on January 14, On September 19, 2006, the Extraordinary General Assembly agreed to amend Article No. (2) of the company s Articles of Incorporation by adding the trademark Pachin to the company s name. Therefore, the company s name became El-Obour for Paints and Chemical Industries Company Pachin. The company s objective is to manufacture various kinds of paints, varnishes, printing inks, animal extract products and related products and also, to manufacture other chemical products and special packages for the company s products. Pachin for Inks The company was established according to the General Authority for Investment and Free Zones Decree No for 2005, and Law No. 8 for 1997 and its executive regulation. The company was registered at the Commercial Register on April 27, The company s objective is to manufacture and pack printing inks and related products and to manufacture other chemical products and special packages for the company s products.

12 Pachin for Paints and Chemical Industries Company The company was established pursuant to a contract certified by the General Committee of Justice at the Arab Republic of Libya and according to the provisions of Law No. (5) for 1997 concerning investment of foreign capital and its executive regulation and amendments, and the decree of the General Committee s Treasurer No. 86 for 2006 concerning amending the executive regulation provisions for Law No. 5 for The company s objective is to: - Establish and operate a factory for manufacturing paintings and supplementary products with its various types, and other chemical materials and its packaging. - Import various materials required for the project from abroad in the form of tools or equipments or in the form of spare parts, or the material required for operation such as the primary production material. - Sell the project s products locally and abroad. - Bring labor and foreign technical expertise required for the project. - Open bank accounts locally and abroad and its management and the right to obtain loans and facilities. - Transfer the profits. - Own property and deliverables required for the activity. 2. Significant Accounting Policies The consolidated financial statements have been prepared according to the Egyptian Accounting Standards and applicable laws and regulations. The Egyptian Accounting Standards require referral to the International Financial Reporting Standards IFRS, when no Egyptian Accounting Standard or legal requirement exist to address certain types of transactions and their treatment. The principal accounting policies adopted in the preparation of the financial statements are set out below: a. Basis for Preparing the Consolidated Financial Statements The consolidated financial statements incorporate the financial statements of the subsidiary companies under the control of the Holding Company (Paints and Chemical Industries Company Pachin (SAE). The subsidiaries are represented in El-Obour for Paints and Chemical Industries Company where the Holding Company's share is 99.95%, and Pachin for Inks where the Holding Company's share is 99.96%, and Pachin for Paints and Chemical Industries Company where the Holding Company's share is 50%. The consolidated financial statements are prepared on the following basis: All inter-company transactions and balances are eliminated. The unrealized profits resulting from the inter-company transactions are eliminated.

13 The cost method is used to account for the ownership in subsidiaries. The consolidated income statement includes the results of operation for all subsidiary companies starting from the date of ownership, and the minority interest is eliminated. b. Property, Plant and Equipment Property, plant and equipment are recorded at historical cost and are depreciated over their estimated useful life on a straight-line basis at the rates stated below: Type of Asset Depreciation Rate Buildings and constructions 2 5 % Machinery and equipments % Vehicles % Tools 7.5 % Furniture and office equipments 10 % The machinery and equipments item included a coloring machine depreciated over 3 to 5 years then granted to the dealers according to the contracts concluded with them. c. Projects under Construction Projects under construction are carried at cost, less any recognized impairment loss. Costs include all costs associated with acquiring the asset and bringing it to ready for use condition. The depreciation of these assets follows the same basis of similar fixed assets. The projects under construction are charged with the costs of new projects, and the purchased equipments that are not used yet. The amounts paid as advances for purchasing property, plant and equipment are recorded as projects under construction. When the asset is received and is ready for use, it is transferred to fixed asset and is depreciated on the same basis as similar fixed assets. d. Other Long-Term Assets The other long-term assets (Patent) are recognized according to acquisition cost. On the balance sheet date, the book value of assets is reviewed and in the case that there are indications that the recoverable amount of these assets is lower than its book value, then the carrying value of assets will be reduced to its recoverable amount, and the impairment loss is recognized immediately and charged to the income statement.

14 e. Impairment of Assets On the balance sheet date, the book value of assets owned by the company is reviewed (except for inventory), and in the case that there are indications that the recoverable amount of these assets is lower than its book value, then the carrying value of assets will be reduced to its recoverable amount, and an impairment loss is recognized immediately and charged to the income statement. On the balance sheet date, the company s management (periodically) revaluates, the existence of indications of impairment in the losses value, which were previously recognized resulting from the impairment of the assets book value in the previous periods. In case of existence of these indications, this impairment is revaluated and reflected so that the book value of these assets does not exceed the original net book value before recording the impairment loss. f. Investments in Subsidiaries and Available for Sale Investments - Investments in subsidiary companies and long-term investments are stated at cost. The company assesses whether there is any indication that the value of each investment is impaired. If such indication exists, the value of the related investment is reduced by the impairment loss and this loss is charged to the income statement, for each investment separately. - The available for sale financial investments, with no reliable fair value, are recognized according to all its related costs, less the impairment losses of its value. These losses are charged to the income statement. g. Inventories Inventories are stated at the lower of cost or net realizable value as follows: Raw Materials, Packaging, Spare Parts and Fuel Cost is calculated using the weighted average method. Work in-progress The cost includes direct and indirect manufacturing costs of partially completed stages in addition to the material, direct wages costs of the completed production stage. Goods Available for Sale Goods available for sale are stated at cost. Finished Goods Finished goods are stated at manufacturing cost.

15 h. Accounts Receivable Accounts receivable are carried at nominal value as reduced by appropriate Impairment for estimated irrecoverable amounts. Impairment for accounts receivable are formed when there is evidence that the company will not be able to recover the amounts due according to the original terms of receivables. The provision represents the difference between the book value and the recoverable as stated in the expected cash flows. i. Investments for Trading: Investments certificates which are issued by banks are stated at fair value, representing its recoverable value as of evaluation date. The resulting differences are stated in the income statement, while the investment certificates are evaluated at their nominal value. j. Cash and Cash Equivalents Cash and bank balances are stated at nominal value. k. Provisions Provisions are recognized when the company has a present obligation (legal or constructive) as a result of past events and that it is probable that an outflow of economic resources will be required to settle the obligation. The amount recognized as a provision is the best estimate of the consideration required to settle the present obligation at the balance sheet date. When the effect of the time value of money is material, the amount of a provision shall be the present value of expected expenditures, required to settle the obligation. l. Accounts Payable Accounts payable are stated with the total goods and service received from others. m. Foreign Currencies Transactions The company maintains its accounts in Egyptian pound. Transactions denominated in foreign currencies are recorded using the exchange rates prevailing at the transaction date. On the financial statements date, balances of monetary assets and liabilities denominated in foreign currencies are translated at the exchange rate prevailing on that date. Differences arising from revaluation are stated in the income statement. n. Revenue Recognition - Revenue is recognized on an accrual basis upon delivery of goods to customers and the issuance of the sales invoice. - Interest income is recognized on an accrual basis. o. Borrowing Cost Borrowing cost is recorded in the income statement in the period it was incurred as financing expenses.

16 p. Cash Flows Statement The cash flows statement is prepared using the indirect method. For the purpose of preparing the cash flows statement, cash and cash equivalents are comprised of cash on hand and at banks and checks under collection. q. Taxation The company s tax is calculated based on the prevailing tax laws and regulations in Egypt; a provision is formed for tax liabilities after performing sufficient studies and in light of the tax assessments. Deferred tax is recognized on the temporary differences between the assets and liabilities tax bases set by the new Egyptian tax law, and their reported amounts per the accounting principles used in the preparation of the financial statements. Accordingly, the income statement for the reporting period is to be charged by the tax burden represented by the current tax (calculated on taxable profit based on local tax laws, regulations, instructions and tax rates ruling at the financial statements date), as well as the deferred tax. Generally, the recognized deferred tax liabilities on taxable temporary differences are reported as long-term liabilities, whereas deferred tax assets reported as long-term assets shall not be recognized for deductible temporary differences except to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilized or there is convincing evidence that sufficient taxable profit will be available in the future. r. Non-Current Held for Sale Assets Non-current assets (or the assets to be disposed) are stated as held for sale if its book value is expected to be recovered on the basis of sale transaction and not on the basis of its use. These assets stated as held for sale are measured at the least of the book value or the fair value less sale costs. The impairment losses are stated at the income statement upon the initial recognition of the held for sale assets. s. Financial Instruments A financial instrument is any contract that gives rise to both a financial asset of one enterprise and a financial liability or equity instrument of another enterprise. Financial assets and liabilities are recognized on the company s balance sheet when the company becomes a party to the contractual rights and obligations of the financial instrument. Financial Assets: (are represented in cash on hand and at banks, accounts and notes receivable, and other debit accounts). Financial Liabilities: (are represented in banks overdraft, accounts and notes payable and other credit accounts).

17 t. Accounting Estimates The preparation of financial statements in conformity with the Egyptian Accounting Standards requires the company s management to make estimates and assumptions about the carrying amounts of assets and liabilities at the balance sheet date, and the reported amounts of revenues and expenses during the reporting period. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from those estimates used in the preparation of the financial statements. The estimates and underlying assumptions are reviewed on an ongoing basis. 3. Sales Analysis Consolidated Pachin Quantity (Ton) Amount 000 EGP Quantity (Ton) Amount 000 EGP Paints Inks Net sales from continuing operations Sales from discontinuing operation (Animal extract product) Total Sales

18 4. Fixed assets Consolidated Items Lands Buildings and construction Machinery and Equipments Vehicles Tools Furniture and Office Equipments Total Cost EGP EGP EGP EGP EGP EGP EGP As of July 1, Additions Disposals ( ) ( ) ( 4 765) ( 3 902) ( ) Cost as of March 31, Accumulated Depreciation As of July 1, ( ) ( ) ( ) ( ) ( ) ( ) Depreciation charge -- ( ) ( ) ( ) ( ) ( ) ( ) Disposals Impairment for assets of Pachin Libya * -- ( ) ( ) ( ) ( ) ( ) ( ) Acc Depreciation as of March 31, ( ) ( ) ( ) ( ) ( ) ( ) March 31, NBV June 30, NBV * Refer to note (29)

19 - 8 - Pachin Items Lands Buildings and construction Machinery and Equipments Vehicles Tools Furniture and Office Equipments Total EGP EGP EGP EGP EGP EGP EGP Cost As of July 1, Additions Disposals ( ) ( ) ( 4 765) ( 3 902) ( ) Cost as of March 31, Accumulated Depreciation As of July 1, ( ) ( ) ( ) ( ) ( ) ( ) Depreciation charge -- ( ) ( ) ( ) ( ) ( ) ( ) Disposals Acc Depreciation as of March 31, ( ) ( ) ( ) ( ) ( ) ( ) March 31, NBV June 30, NBV The cost for fully depreciated assets which are still used amounted to EGP 11.5 million, and the cost for fully depreciated assets and which are not used amounted to EGP 4.9 million.

20 Projects under Construction Consolidated Pachin 31/3/ /6/ /3/ /6/2010 EGP EGP EGP EGP Machinery and equipments Buildings Tools and equipments Software and programs Advances for purchasing fixed assets Impairment in projects under construction * ( ) Investment in Subsidiaries Stand alone Company Name Obour for Paints and Chemical Industries Issued Capital Currency Ownership % Ownership Amount Paid % 31/3/2011 Paid Amount EGP 30/6/2010 Paid Amount EGP % % Pachin for Inks EGP % % Pachin Libya for Paints and Chemical Industries Less: LYD 50 % % Impairment in investments in subsidiary ( ) -- EGP

21 Available for Sale Investments Consolidated Pachin 31/3/2011 EGP 30/6/2010 EGP 31/3/2011 EGP 30/6/2010 EGP Governmental bonds at the National Investment Bank Other Long-Term Assets Other long-term assets as of March 31, 2011 amounting to EGP , and equivalent to Euro , represent the amounts paid to the Danish Company Deroup A/S for the final cession of the trademarks according to the contract dated December 4, 2006, taking into consideration that there is no indication of impairment in this balance.

22 Inventories Consolidated Pachin 31/3/ /6/ /3/ /6/2010 EGP EGP EGP EGP Raw materials and packaging Less: Provision for scrap materials ( ) ( ) ( ) ( ) Finished products Less: Provision for finished goods ( ) ( ) ( ) ( ) Fuel and spare parts Less: Provision for spare parts ( ) ( ) ( ) ( ) Work in-progress Inventories for sale purpose Scrap Impairment in inventory * ( ) * Refer to Note No. (29)

23 Assets Held for Sale 31/3/ /6/2010 EGP EGP Factory at old Cairo The company s management decided to dispose of some assets that were not used in the main company s operations. Therefore, the company started the sale procedures for the assets intended for disposal. The evaluation of these assets was finalized however, due to the current economic situation, the sale procedures were not finalized yet. These assets are represented by the animal coal factory at old Cairo with an area of m 2, including an area of 267 m 2 which is seized by hand. On January 4, 2011, the company performed an auction and sold some of these assets with net book value amounting to EGP , and management will reconcile this transaction in April 2011, to be removed from the books. 11. Accounts Receivable (net) Consolidated Pachin 31/3/ /6/ /3/ /6/2010 EGP EGP EGP EGP Accounts receivable Less: Impairment ( ) ( ) ( ) ( ) Notes Receivable (Net) Consolidated Pachin 31/3/ /6/ /3/ /6/2010 EGP EGP EGP EGP Notes receivable Less: Impairment ( ) ( ) ( ) ( )

24 Due from Subsidiary Stand-alone Financial Statements Pachin 31/3/ /6/2010 Pachin for Inks Pachin Company - Libya Other Debit Accounts EGP Consolidated Pachin EGP /3/ /6/ /3/ /6/2010 EGP EGP EGP EGP Accrued income Suppliers advance payments Employees loans Deposits with others Corporate tax* Withholding tax Sales tax Prepaid expenses Permanent custodies Other debit balances Less Impairment in debit balances ( ) ( ) ( ) ( ) Impairment in debtors ** (24 217)

25 * This balance represents the amount of EGP million, which represents the amount paid to the Tax Authority for the years , according to the decisions of the Internal Committee and the Appeal Committee. This amount will be settled against the provision available for this purpose, upon receiving the court decision. (Refer to Note No. 28), and the amount of EGP million, paid on the due tax account for the years ** Refer to Note No. (29) 15. Investments for Trading Purposes Consolidated Pachin 31/3/ /6/ /3/ /6/2010 EGP EGP EGP EGP Investment certificates Treasury bills Cash and Cash Equivalents Consolidated Pachin 31/3/ /6/ /3/ /6/2010 EGP EGP EGP EGP Cash on hand Banks current accounts Banks time deposits Checks under collection* * Represents outstanding checks with due dates before 31/3/2011, collected after this date.

26 Provisions A-Provisions-Current Liabilities Balance as of 1/7/2010 Provision Formed during the Period Transfers during the Period Provision Utilized during the Period Balance as of 31/3/2011 EGP EGP EGP EGP EGP Provision for tax disputes Provision for claims ( ) Other provisions B- Impairment & Provisions-Current Assets ( ) Impairment in accounts receivable Impairment in notes receivable ( ) (29 488) Impairment in other debit balances Raw materials provision (61 377) Finished goods provision Spare parts provision (90 865)

27 Accounts and Notes Payable Consolidated Pachin 31/3/ /6/ /3/ /6/2010 EGP EGP EGP EGP Accounts payable Notes payable Due to Subsidiary Stand-alone Financial Statements The balance of this account amounting to EGP , listed in the stand-alone balance sheet of Paints and Chemicals Industries Company (Pachin), represents the operations result between Paints and Chemicals Industries Company (Pachin) and El-Obour for Paints and Chemicals Industries Company (purchase and sale of raw materials), against EGP as of June 30, 2010.

28 Other Credit Accounts Consolidated Pachin 31/3/ /6/ /3/ /6/2010 EGP EGP EGP EGP Accrued expenses Accounts receivable credit balances Sales tax Fixed assets - creditors Deposit to others Employees share in profits Withholding tax Current portion of sales tax settlements Salary tax Other employees benefits Corporate tax Tax Authority Other credit balances Capital The company s authorized capital amounted to EGP 200 million, and the issued and paid-up capital amounted to EGP 200 million, distributed among 20 million shares with par value of EGP 10 each.

29 Reserves Consolidated Pachin 31/3/ /6/ /3/ /6/2010 EGP EGP EGP EGP Legal reserve Reserve invested in governmental bonds Fixed assets reserve Other reserves Long-Term Liabilities The long-term liabilities are represented as the deferred revenue related to El-Obour for Paints and Chemicals Industries Company granted assets, which will be recorded as revenue over the estimated useful lives of these assets in the amount of EGP

30 Deferred Tax The balance of this account amounting to EGP represents deferred tax liabilities resulting from the temporary differences between the net book value of fixed assets based on tax basis, and their net book value based on accounting basis as follows: Consolidated Pachin 31/3/ /6/ /3/ /6/2010 EGP EGP EGP EGP Opening balance at the beginning of period/year Deferred tax during the period/year ( ) Balance as of end of the period/year Discontinued Operation Losses Animal extract product factory Inks factory Total 31/3/ /3/ /3/ /3/ /3/ /3/2010 EGP EGP EGP EGP EGP EGP Discontinued operation revenue Less:- Discontinued operation expenses Net Discontinued Operation Losses

31 Contingent Liabilities and Capital Commitments The uncovered portion of the Letters of Credit for purchasing inventory amounted to EGP as of March 31, 2011 and the capital commitments for Letters of Credit amounted to EGP as of March 31, Managing the Risks Related to Financial Instruments a. Foreign Exchange Risk Foreign currency risk represents the change in currency rates which affects the receipts, disbursements and the translation of assets and liabilities in foreign currencies. The company exerts all efforts to avoid having a net foreign currency open position. b. Credit Risk This risk represents some customers' failure to pay their debts on due dates. The company forms a provision for doubtful debts to meet this risk. c. Interest Rate Risk This risk represents the changing of interest rates which affects the operations results. The company's management exerts all efforts to obtain the best conditions in the market for banking facilities and performs periodic review on the interest rates. d. Fair Value The fair value of financial instrument does not differ from the book value as of the balance sheet date. 28. Tax Position Paints and Chemicals Industries Company First: Corporate Tax The company is subject to corporate tax according to Law No. 91 for The company submits its tax returns on its due date and pays the due taxes. The Taxpayers Center reconciled the years until 2000/2001. This resulted in a credit balance for the company amounting to EGP The Tax Authority inspected and assessed the company's books for years 2001/2002 until 2004/2005, and the company received a tax claim amounting to EGP , which the company objected. The disputed points were transferred to the Internal Committee and management believes that these claims will be greatly reduced. For years 2005/2006 until 2006/2007, the Tax Authority is currently scheduling the inspection time for the period from 2005 until 2007.

32 Second: Sales Tax The Tax Authority inspected and assessed the company s books until June 30, Third: Salary Tax The Tax Authority inspected and assessed the company s books until Fourth: Stamp Tax The Tax Authority inspected and assessed the company s books from the inception date until 31/8/1998 and the due tax was paid. The Tax Authority inspected and assessed the company's books for the period from 1/9/1998 until 30/4/2002. The inspection resulted in due tax in the amount of EGP The company did not pay this amount since there is due tax in favor of the company amounting to EGP This amount represents the value of stamp tax for which a final ruling was issued in the company s favor. This amount is currently being settled with the Tax Authority. The Tax Authority inspected the period from 1/5/2002 until 31/3/2005, and the inspection resulted in due tax in the amount of EGP The Tax Authority inspected the period from 1/4/2005 until 31/7/2006, and the inspection resulted in due tax in the amount of EGP These items were discussed at the Internal Committee and the tax was reduced by the amount of EGP El-Obour for Paints and Chemicals Industries Company Pachin First: Corporate Tax The company is enjoying a tax exemption starting from the first year of operation according to Law No. 8 for 1997 and its executive regulation. This exemption will end on June 30, The Tax Authority inspected and assessed the company's books from inception date until 2004/2005. The company received a tax claim amounting to EGP , which the company objected, and the disputed points were transferred to the Internal Committee. Second: Sales Tax The Tax Authority inspected the company's books for sales tax until June 30, 2008, and the due tax was paid, and the company s complaint is still under discussion. Third: Salary Tax The company's books where not inspected for salary tax yet.

33 Fourth: Stamp Tax The Tax Authority inspected and assessed the company s books for the period from 11/1/1999 until 31/12/2000. The inspection resulted in due tax in the amount of EGP , which the company has objected. The Tax Authority inspected and assessed the company's books for the period from 1/1/2001 until 31/7/2006. The inspection resulted in due tax in the amount of EGP , which the company has objected, and the disputed points were transferred to the Internal Committee. Pachin for Inks First: Corporate Tax The company is subject to the provisions of Law No. 8 for 1997 and its executive regulation. The company started its operation on May 8, 2008, and the company was not inspected by the Tax Authority yet. Second: Salary Tax The salary tax are submitted to the Tax Authority on due date, and the company was not inspected by the Tax Authority yet. Third: Sales Tax Tax returns are submitted on a monthly basis, and the company was not inspected by the Tax Authority yet.

34 Investments in Pachin Libya The Arab Republic of Libya has been exposed during the period to significant political events that had an impact on the country s activities as a whole and therefore, the company`s investments in Pachin Libya located in Musrata City have been exposed to a risks that had a negative impact on the company`s performance, and the company was shutdown since last February. Therefore, many assets have been impaired as there is no information to determine if there is any economic benefit or cash flow from these assets at the current period. The total assets were impaired amounted to EGP as follows: Item Fixed assets Project under construction Inventory Letter of credit Other debit accounts EGP Chief Financial Officer Accountant: Ashraf El Kahky Managing Director Eng.: Mohy Eldeen Abdelrazik Chairman Dr.: Hoda Ahmed Salah Eldeen