Société Arabe Internationale de Banque. Annual Report

Transcription

1 1

2 2

3 Table of Contents Vision- Mission Objective 4 Chairman s letter 5 Shareholding 6 Board of Directors 7 Executive Committee 8 General Management 9 Services and Products 10 Head Office and Branches 11 Financial Highlights 12 The Global Economy 14 The Egyptian Economy 15 Financial Statement & Auditors Reports 16 3

4 VISION Best performance and pricing by applying the most advanced technological systems to reach a top position in the market. MISSION Undertaking all balking, financial and commercial operations to meet & exceed our customers expectations and fulfill our shareholders ambitions. Preparing & providing our staff with the best specialized training programs to perform according to international standards. Being an effective member to the community. OBJECTIVES To be our customers prime choice. 4

5 Chairman s Letter Our shareholders Pleased to present SAIB s 2009 financial results, which indicate a very solid performance that contributed enhancing the Bank s position in the Egyptian market as well as within the banking sector. In FY 2009, the bank reported a profit available for distribution $ 22.6 million versus $21.3 million, illustrating an increase of $ 1.3 million (+6%), this is due to the success of the bank's management in optimizing the resources uses, which generate the highest return that led to increase the net income by $ 3 million (+10%) after tax deduction, as well as efforts and good follow-up made for the collection of debts. The total footing increased in to record $1785 MM compared to $1615 MM in the previous year 2008, with an increase of $170 MM. Customers deposits increased by $ 100MM as it reached $ 1418 MM against $1318 MM in the previous year. The loans portfolio reached $661MM in 2009 compared to 534 MM in the previous year, with an increase of 127 million representing a growth rate of 24%. The bank is adopting a policy of successful horizontal expansion and increasing its branch network to reach all the vital areas in all governorates of the Republic to provide better banking services to clients, so it opened during 2009 branches in Tanta, Damietta, Suez, sharm el sheikh and Katameya, beside the branches that will be opened in 2010 in Mahalla al-kubra, Assiut, Nasr City, and Marsa Alam to reach 26 branches covering most parts of the Republic. The Bank is adopting a policy focusing on the customer satisfaction as all employees are geared to present the best service possible and to offer the most advanced and appropriate tools to accommodate the customers needs. In this respect credit cards had an important role as well as the development of infrastructure of the communication systems and by training the employees in the customer service area, as the Bank has updated the methods of communication with customers by using many modern technological means such as notifying customers immediately after usage of their credit cards through an SMS alert, which has led to mitigate the risks of cards fraud. For supporting the government's efforts in the area of electronic government, the bank strengthened its cooperation with the Ministry of Finance in the area of government payroll scheme, and customs payment. The Bank continued its policy promoting the concept of the cashless society by introducing plastic cards as a substitute for money, as well as through the modernization of the ATM machines with the most up to date generation that can accept deposits from credit cards holders on a 24 / 7 basis, facilitating the repayment process directly to the customer account, also it handles the FX transactions. The good foresight to the global financial markets and prices trends as well as the rapid decision-making and the high flexibility in the adjustment of trends in a timely manner, were the main factors in avoiding the global financial crisis and their negative effects on the banking sector. As a result of the effective management of the assets and liabilities and the diversity of the banking services and investment tools available to match between resources and utilizations, the profit indicators showed positive signs. Believing of the importance of the certificates of deposit in securing a medium to long term funding stability, the bank issued several certificates of deposit, for a 3 years maturity with daily rate of 8 %, 8.25% for the 3 months (all variable), and quarter rate of 9.25% (fixed), This besides the 7 years certificate with cumulative rate of 11.50%, and the 5 years certificate with cumulative rate of 11%. Finally, prior to presenting 2009 financials, I would like to extend my sincere thanks to our precious clients and all our correspondents for their ongoing support and trust. Furthermore, gratitude is due to SAIB s management and dedicated staff members whose experience are the key factors behind our past success and future aspirations. Final thanks to the Central Bank of Egypt for its true cooperation and continuous support and may the almighty always guide us to the best of deeds. Chairman & Managing Director Dr. Hassan Abbas Zaki 5

6 Shareholders Structure Arab International Bank, Cairo % Misr Insurance Company, Cairo % The Arab Contractors Investment Company, Cairo % Public Subscription % الûشركة العربية للتمويل الدولى Companie Arabe De Financement Internationale 4.90 % 6

7 Board of Directors Dr. Hassan Abbas Zaki Mr. Hassan Ibrahim Abdel Meguid Chairman & Managing Director Managing Director & Board Member Board Members Mr. Mohamed Ibrahim Abd El Gawad Mr. Mohamed Hussein Layas Mr. Maged Salem El-Remeithi Mr. Adel Salah ElDin Amin Ezzat Mr. Khalifah Saeed Kanah Ms. Zeinab Khalil Eshak Ms. Adel Fatouh Hamad Ms. Nagwa Ibrahim Mansour Mr. Faisal Dawoud Saleh Mortada Mr. Nouh Ahmed Mosharaf Mr. Nouh Ahmed Mosharaf Arab International Bank Arab International Bank Arab International Bank Arab International Bank Arab Company for International Funding Misr Insurance Co. Misr Insurance Co. Misr Insurance Co. The Arab Contractors for Investments Co. The Arab Contractors for Investments Co. Representing Individuals 7

8 Executive Committee Dr. Hassan Abbas Zaki Chairman & Managing Director Mr. Hassan Ibrahim Abdel Meguid Managing Director Mr. Hassan Mohamed Sherif Senior General Manager Supervision & Control Mr. Magdy Mohamed El Dakroury Senior General Manager Marketing & Investment Mr. Yehia Nour Head of Risk Management Sector Mr. Alaa Mohamed Amin Head of Credit & Marketing Sector Mr. Khaled Abdel Moniem Setouhy Head of Legal Affairs Mr. Sherif Abdel Gelil Kasem Head of Administration Sector 8

9 Chairman, Managing Director, and Management Dr. Hassan Abbas Zaki Mr. Hassan Ibrahim Abdel Meguid Mr. Hassan Mohamed Sherif Mr. Magdy Mohamed El Dakroury Mr. Mohammed Farid Hosni Mr. Attia Abdel Meguid El Morshedy Mr. Yehia Ezz El Din Nour Mr. Alaa Mohamed Amin Mr. Mahmoud Ezzat Ismail Mr. Hamdy Ghazy Ibrahim Mr. Salah El Din Allam Halbas Mr. Wael Mostafa Badr Mr. Khaled Abdel Moniem Setouhy Mr. Mohamed Hesham Nour Mr. Shawkat Mohamed Zohair Mr. Sherif Abdel Gelil Kasem Chairman & Managing Director Managing Director Senior General Manager Supervision & Control Senior General Manager Marketing & Investment Head of Internal Control Sector Head of Investments Sector Head of Risk Management Sector Head of Credit & Marketing Sector Head of Branches Sector Head of Financial Sector Head of Compliance Sector Head of Debt Recovery Sector Head of Legal Affairs Head of Small & Medium Enterprises Head of Internal Audit Sector Head of Administration Sector 9

10 Services and products Undertaking all investment, Banking, Financial and commercial operations. Contribution in financing Egypt s Foreign Trade. Contribution in finance of Real Estate, Agricultural and Industrial projects in Egypt. Providing medium term Loans Project finance. Acceptance of deposits, issuance of certificate of deposits. Dealing in stock Exchange activities in the Egyptian capital Market. Personal Loans Cash Loan up to L.E Equal installments up to 48 Months. Lower interest & fees. Car Loan Equal installments up to 60 Months. Lower Competitive interest & fees. Special offers for car insurance. Loan up to L.E Mortgage Finance Financing possession of residential and business units up to L.E. 2 million. Several payment schemes matching all levels up to 10 years. Financing the units in new urban areas. competitive interest rate. Credit cards Accepted over 1200 ATM s & point of sale. 24 Hours, 7 Days a week. 10

11 Head Office and Branches Branches Telephone Fax Head Office 56 Gameat Al Dowal Al Arabia street, Mohandessin, Giza P.O Box 54 El Mohandessin Cairo Branches: Mohandessin Branch: 56 Gameat Al Dowal Al Arabia Street, Mohandessin, and P.O Box 124 Mohandessin Al Azhar Branch: 84 / 86 Al Azhar Street P.O Box 27 Al Azhar Heliopolis Branch: 6a El Hegaz Street, Heliopolis, P.O Box 5991 Heliopolis Merghany Branch: 12 Ahmed Tayseer Street, Heliopolis th of Ramadan Branch: Dawar El Asher, Cairo Ismailya Road, P.O Box th of Ramadan City th of October City Branch: 7th District Services Center, 6th of October City Dokki Branch: 26 Lotfi Hassouna Street, Dokki Katameya: 5th District, Canadian University Tanta: 2 Al Ashraf Street- Crossing Said Street Tanta, Damietta: Kornish El Nile- Misr Insurance Building Damietta, Suez: 8 Hafez Ibrahim Street- off el Shohadaa Street. Suez, Port Said Branches: El Shohadaa Branch Orabi & El Negailah Street, El Shohadaa Square, Port Said City El Nourass Branch: El Nourass Tourist Village, Tarh El Bahr Street, Port Said City Investment (El Estethmar) Branch: General Free Zone Investment Area Islamic Transactions Branch: El Gomhoreya & Hafez Ibrahim Street Alexandria Branches: Beni Abbas, Alexandria P.O Box Semoha 74 Albert Al Awal- Semoha- Alexandria Mansoura Branch: 4 Torail Street, El Mansoura, Dakahleyah Sharm El Sheikh Branch: Hilton Sharm Waterfalls Resort- Ras Um El Sid Cliff / 3 / / 28 Opening soon : Nasr City - Maadi - Elmenia - Marsa Allam - Almahala Elkobra 11

12 Financial Highlights 12

13 SAIB s Financial Highlights & Ratios Fiscal Year End Total Assets in $ Million Shareholders Equity Customers Deposits Total Loans Equity Growth % 3,73% 4,19% 28.73% Deposits Growth % 79,18% 5,02% 7.51% Loans growth % 23,91% 34,24% 21.21% Capital Adequacy Ratio % 22,34% 17,86% 17.97% NPLs / Total Loans % 9,2% 10,18% 6.00% Provisions / NPLs % 97,1% 95, % Net profit in $ thousands

14 The global economy The global economy went through a period of unprecedented financial instability in , accompanied by the worst global economic downturn and collapse in trade in many decades. No country escaped the reach of this economic storm. The seeds of the global crisis were sown during the years of high growth and low interest rates that bred excessive optimism and risk taking and spawned a broad range of failures- in market discipline, financial regulation, macroeconomic policies, and global oversight. During this period, the global financial system expanded massively, creating new instruments that appeared to offer higher rewards at lower risk. This was encouraged by a general belief in "light- touch" regulation based on the assumption that financial market discipline would root out reckless behavior and that financial innovation would spread risk, not concentrate it. Both of these assumptions proved wrong, or at least misguided. The result was an unsustainable accumulation of external imbalances; major asset price bubbles in advanced and emerging market economies, especially in housing ; a severe run-up in commodity prices; and an enormous buildup of leverage and risk in key financial systems, both inside and outside in the formal banking system. As consequence, the spreading financial crisis advanced further and faster in FY2009 than expected, leading to an unprecedented contraction in global output and trade. The ramifications of the credit crunch and the sharp drop-in asset prices were quickly passed on through banking systems to all sectors and countries in the global economy and were magnified by the collapse of consumer and business confidence. The current financial and economic crisis comes on top of the skyrocketing of food and fuel prices in 2008, which dragged an estimated million people in developing countries into poverty. By June 2009, oil prices had dropped by more than 50% from their mid peak, while non oil commodity prices had fallen by about 30%. Though these declines provided some relief to the poor in developing countries, oil prices at around $70 per barrel at the end of June 2009 remain substantially higher than their levels before the spike in In the short term, oil-exporting countries should be able to use windfall profits saved from 2008 to mitigate the effects of the global downturn on their economies. Global industrial production fell an unprecedented 13% in the 12 months ending April 2009, with the sharpest declines concentrated in countries specializing in production of durable and investment products and those with large current account deficits. The decline has led to significant layoffs, which have disproportionately affected immigrant workers, most of them from developing countries. Since the first quarter of 2009, equity markets have posted strong gains, corporate risk spread have declined, and spreads in interbank markets have fallen to levels fairly close to those prevailing before the bankruptcy of Lehman Brothers in September Investors are allocating an increasing amount of funds away from government bonds in search of higher yields. Confidence in advanced economy banking systems has received a fillip from better-than-expected earnings results and a series of successful bank capital raisings. International capital flows have recovered, including to emerging markets. Since the beginning of the year, sovereign issues are up for both advanced and emerging economies, consistent with a noticeable pickup in portfolio flows. Annual growth in 2010 is projected to be about 1.25%, following a contraction of 3.5% in The recovery of activity is more clearly evident on a fourth quarter over- fourth-quarter basis : from 2009 : Q4 to 2010:Q4, real GDP is expected to rise by about 1.75%,up from an expansion of about 0.5% (annualized) during the second half of 2009 and a 2% contraction in the first half. Nonetheless, firms are still going bankrupt at a high rate, employment continues to drop, and private consumption and investment remain anemic as households struggle with income and wealth losses, firm operate with large excess capacity, and lending conditions remain tight. In general, the fragile global economy still seems vulnerable to a range of shocks, including rising oil prices, a virulent return of H1N1 flu, geographical events, or resurgent protectionism. 14

15 The Egyptian economy Year 2009 represented a significant challenge to the economies of developed and developing world alike, which was a real test of how strong the economies could face the repercussions of the global crisis which is classified as one of the worst global financial crisis that confronted the world. On the local level the Egyptian economy has succeeded to exceed the year 2009 with a performance that was classified as (better than expected) in accordance with the estimate of several international institutions, after the expectations pointed out that the financial crisis will have a great impact on the economic growth and its confined between 3-4% However, the Egyptian economy has performed better than expected and grew by 4.7% during the year 2008 / 2009, and is one of the best growth rates achieved between similar countries and this what made (Merrill Lynch) Foundation classified the Egyptian economy as a "security shelter" to invest in the midst of the crisis. Such a strong economic growth represent a strong base for the Egyptian market, which exceeded the usual effects of the crisis quickly, and started to rise strongly since its lowest level in mid-february until the end of the year, a rise of 83% and to end the year at a growth rate of 35% and that despite the beginning of the Dubai crisis at the end of the year which affected the money market conditions in various countries around the world. Volumes of transactions in the market recorded an upward trend during 2009 despite the global crisis, where it jumped in volume to about 37 billion paper, with a rise up to 43% from the year In spite of the repercussions of the global crisis, the plans for development and modernization of the Stock Exchange continued unabated, with a year that witnessed a number of important events coming in the forefront of the establishment of the General Authority for financial control, which included the capital market and real estate finance and insurance. Net foreign assets of the banking systems increased by LE 7.6 billion worth or 3.0% during July/Sept / This was a result of the increase in net foreign assets of the CBE and banks. Net domestic assets increased by LE 9.0 billion or 1.6% during July/Sept / 2010.This was an outcome of the rise in domestic credit by LE 33.9 billion or 4.9%, on the one hand and the increase in the negative balance of net balancing item by some LE 24.9 billion or 21.1%, on the other. The increase in domestic credit was mainly a result of the rise in net claims on the government by L.E 37.5 billion, the public business sector by L.E 0.4 billion, and the household sector by L.E 0.1 billion. However net claims on the private business sector retreated by L.E 4.1 billion. The aggregate financial position of banks, excluding the CBE, rose by L.E 41.8 billion or 3.8% during July / Sept 2009 / 2010, to reach L.E billion at the end of Sept During FY 2008 / 2009 which witnessed the global financial crisis, the BOP ran an overall deficit of US $ 3.4 billion, against an overall an overall surplus of US $ 5.4 billion during the previous FY. This was ascribed to a current account deficit of US $ 4.4 billion (against a surplus of US $ million) and a net inflow in the capital and financial account of only US $ 1.4 billion (against US $ 7.6 billion) External debt decreased by about US $ 2.4 billion, to US $ 31.5 billion at the end of June2008. This was an outcome of the depreciation of most currencies of borrowing against the US dollar by US $ 1.3 billon worth, on the one hand, and the net repayment of 1.1 billion of loans and facilities (principal repayments of about 3.5 billion and disbursements of about US $ 2.4 billion), on the other. Debt service increased by million to US $ 3.0 billion during FY 2008 / 2009, compared with the preceding FY. The ratio of debt service / current receipts (including transfers) rose to 5.3% from 3.9%, due to the 13.2% decline in current receipts during FY 2008 / The debt balance as a percentage of GDP represented 17.0% at the end of June 2009 against 20.1% at the end of June Domestic public debt totaled some L.E billion at the end of June 2009, of which the government debt represented 73.8%, public economic authorities debt 6.9%, and NIB debt 19.3%. The balance of government domestic debt totaled about L.E billion at the end of June 2009, up by L.E 83.5 billion as compared with the end of June Debt of public economic authorities reached about L.E 52.3 billion, with a rise of L.E 2.2 billion. NIB debt (net) reached L.E billion, up by L.E 9.1 billion. During FY 2008 / 2009, total implemented investments reached around LE billion, down by 1.2% as compared with the previous fiscal year. Of this amount, the private business sector implemented around 57.6%, the government sector about 21.4%, economic authorities 6.7%, and public companies 14.3%. According to the CPI (urban), the annual inflation rate moderated to 10.8% in Sept from 21.5% in Sept.2008, mainly due to the decline in the of food and beverages group in the general index. Moreover, the monthly inflation rate reached 1.9% in Sept. 2009, versus 1.5% in August

16 MAZARS Mostafa Shawki Accountants & Auditors WAHID ABDEL GHAFFAR & CO. Public Accountants & Consultants INDEPENDENT AUDITORS REPORT To the Shareholders of Societe Arabe Internationale de Banque (S.A.I.B.) - S.A.E. Report on the Financial Statements We have audited the accompanying financial statements of Societe Arabe Internationale de Banque (S.A.I.B.) S.A.E. represented in the balance sheet as of December 31, 2009, and the related statements of income, cash flows and changes in shareholders equity for the year then ended, and a summary of significant accounting policies and other explanatory information. Management s Responsibility for the Financial Statements These financial statements are the responsibility of the bank s management. Management is responsible for the preparation and fair presentation of these financial statements in accordance with the basis of preparation and presentation of the financial statements for banks issued by Central Bank of Egypt issued on June 27, 2002 and its amendment related to the financial investment issued on December 16, 2008 and in the light of prevailing Egyptian laws, the management s responsibility includes designing, implementing and keeping the internal control which is relevant to the preparation and presentation of the financial statements to present fairly, clearly and free from material misstatement, whether due to fraud or error, as well as this responsibility selecting and applying the appropriate accounting policies, and making the accounting estimates that are appropriate for circumstances. Auditor s Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Egyptian Standards on Auditing and in the light of prevailing Egyptian laws. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control, an audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. 16

17 We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Arabe Internationale de Banque (S.A.I.B.) - S.A.E. as of December 31, 2009, represented in the balance sheet as of December 31, 2009, and its financial performance, and its cash flows for the year then ended in accordance with the basis of preparation and presentation of the financial statements for banks issued by Central Bank of Egypt issued on June 27, 2002 and its amendment related to the financial investment issued on December 16, 2008 and in the light of prevailing Egyptian laws and regulations. Report on Other Legal and Regulatory Requirements The bank maintains proper books of accounts, which include all that is required by the Law and the statutes of the bank, the accompanying financial statements are in agreement therewith. Nothing came to our attention, that causes us to believe the transactions undertaken by the bank during the year ended December 31, 2009 contravened any articles of Law No. 88 for The financial information included in the Board of Directors report prepared in compliance with Law No. 159 of 1981, and the executive regulations thereto, is in agreement with the bank>s accounting records within the limit that such information is recorded therein. Cairo, January 31,

18 BALANCE SHEET AS OF DECEMBER 31, 2009 (All Amounts are Expressed in US. Dollars) Notes ASSETS Cash and due from Central Bank of Egypt (4) 105,721,017 87,635,214 Due from banks (5) 239,685, ,353,695 Treasury bills (6) ,707,226 Trading investments (7) 575,067 7,479,242 Loans and advances to customers and banks (net of provision) (8-9) 661,929, ,424,857 Financial Investments: (10) Available for sale investments 468,555, ,762,119 Held to maturity investments 269,052, ,538,996 Investments in subsidiaries and associates companies (11) 251, ,134 Intangible assets (12) 985,954 1,198,430 Other assets (13) 23,778,103 30,524,813 Fixed assets (net of accumulated deprecation) (14) 15,550,368 13,974,398 Total Assets 1,786,083,782 1,614,761,124 LIABILITIES AND SHAREHOLDERS EQUITY LIABILITIES Due to banks (15) 13,350,251 17,545,526 Customers> deposits (16) 1,417,829,086 1,318,303,609 Other liabilities (17) 114,456, ,255,619 Other provisions (18) 15,307,151 12,780,047 Deferred tax liability (20) 339, ,333 Total Liabilities 1,561,281,952 1,458,199,134 SHAREHOLDERS EQUITY Paid-up capital (19 a b) 150,000, ,000,000 Reserves (19 c) 49,961,042 34,302,271 Retained earnings 2,259,719 2,259,719 Total Shareholders' Equity 202,220, ,561,990 Net profit for the year 22,581, Total shareholders equity and year profit 224,801, ,561,990 Total Liabilities and Shareholders' Equity 1,786,083,782 1,614,761,124 Contingent Liabilities and Commitments Liabilities for Letters of Guarantee, Letters of Credit and Other Commitments (21) 137,397,477 83,567,289 - Auditors' Report attached. - The accompanying notes are an integral part of these financial statements. AUDITORS Dr. HASSAN ABBAS ZAKI MOHAMED EL MOETAZ MAHMOUD ALI MOSTAFA HOZAYEN Chairman & Managing Director MAZARS Mostafa Shawki Wahid Abdel Ghaffar & Co. 18

19 INCOME STATEMENT FOR THE YEAR FROM JANUARY 1, 2009 TILL DECEMBER 31, 2009 (All Amounts are Expressed in US. Dollars) Notes Interest income from loans and similar revenues (22) 135,333, ,443,806 Interest expenses and similar costs (22) (92,981,062) (96,251,852) Net income from interest 42,352,197 33,191,954 Fees and commission income (23) 16,599,042 17,525,251 Fees and commission expenses (23) (243,146) (509,326) Net Fees and Commission Income 16,355,896 17,015,925 Add/Less: Dividends income (24) 1,065,382 1,430,317 Net Trading Income (25) 3,918,469 (1,623,631) Income from Financial Investments (26) 2,136,177 3,844,629 Impairment recovery (expenses) from credit losses (27) 26,841 (445,011) Administrative expenses (35,770,398) (32,077,112) Other operating income (28) 81,251 1,395,715 Net profit for the year before income taxes 30,165,815 22,732,786 Income taxes (expenses) (29) (7,584,746) (1,442,267) Net profit for the year after taxes 22,581,069 21,290,519 Basic Earnings per share (US. Dollar/Share) (30) Auditors Report attached. - The accompanying notes are an integral part of these financial statements. HASSAN ABDEL MEGUID Managing Director Dr. HASSAN ABBAS ZAKI Chairman & Managing Director 19

20 STATEMENT OF CASH FLOWS FOR THE YEAR FROM JANUARY 1, 2009 TILL DECEMBER 31, 2009 (All Amounts are Expressed in US. Dollars) Cash Flows from Operating Activities Net Profit before tax 30,165,815 22,732,786 Adjustments to Reconcile Net Profit to Net Cash Flows from Operating Activities Depreciation and amortization 2,558,873 2,355,080 Impairment expenses of assets 3,153,750 3,665,821 Net trading income from trading equity instruments (1,816,572) 4,304,787 Impairment (recovery) of assets (3,180,592) (3,220,810) Used from provisions other than loan provision (362,433) (5,005,029) Premium of held to maturity bonds 4,643,056 3,533,420 Discount of held to maturity bonds (225,668) (3,317) (Gains) losses from sale of financial investments (3,201,558) 186,268 (Gains) from sale of fixed assets (81,069) (290,518) Net operating profit before changes in assets and liabilities used in the operating activities 31,653,602 28,258,488 Net Decrease (Increase) in Assets: Deposits at banks (38,555,765) 488,988,624 Treasury bills 322,707,226 (305,012,305) Trading investments 8,720,747 (2,529,604) Available for sale investments (318,591,509) (12,484,859) Loans and advances to customers and banks (125,281,853) (155,762,741) Other assets 5,068,203 4,827,545 Translation differences 180, ,636 Net Increase (Decrease) in Liabilities: Due to banks (4,195,275) (45,630,938) Customers deposits 99,525,477 63,712,750 Other liabilities 15,459,113 30,808,247 Net cash flows (used in) resulted from operating activities (3,309,380) 95,330,843 Cash Flows from Investing Activities: Payment to purchase investments in held to maturity bonds -- (93,098,087) Proceeds from redemption of investments in held to maturity bonds 5,078, Payments to purchase fixed assets and for preparation of branches (2,149,320) (5,351,691) Proceeds from sale of fixed assets 81, ,803 Net Cash Flows resulted from (used in) investing activities 3,010,798 (97,978,975) 20

21 STATEMENT OF CASH FLOWS FOR THE YEAR FROM JANUARY 1, 2009 TILL DECEMBER 31, 2009 (All Amounts are expressed in US. Dollars) Cash flows from Financing Activities: Proceeds from capital increase 45,000, Dividends paid (17,839,996) (15,390,000) Net cash flows resulted from (used in) financing activities 27,160,004 (15,390,000) Net increase (decrease) in cash and cash equivalents during the year 26,861,422 (18,038,132) Cash and cash equivalents at the beginning of the year 95,958, ,996,414 Cash and cash equivalents at the end of the year 122,819,704 95,958,282 Cash and Cash Equivalents at Year-End are Represented as follows: Cash and due from Central Bank of Egypt 105,721,017 87,635,214 Due from banks 239,685, ,353,695 Treasury bills ,707,226 Deposits at banks (222,586,392) (184,030,627) Treasury bills with maturities of more than 3 months from the acquisition date -- (322,707,226) Cash and cash equivalents at year-end 122,819,704 95,958,282 - Auditors' Report attached. - The accompanying notes are an integral part of these financial statements. * The statement of cash flows was prepared using the indirect method, translation differences related to some assets and liabilities are shown in the statement of cash flows to suit its intended purpose. Dr. HASSAN ABBAS ZAKI Chairman & Managing Director 21

22 22 STATEMENT OF CHANGES IN SHAREHOLDERS EQUITY FOR THE FINANCIAL YEAR FROM JANUARY 1, 2009 TILL DECEMBER 31, 2009 (All Amounts are Expressed in US. Dollars) Total Net Profit Retained Earnings Issuance premium for capital increase allocated to reserves Fair value reserve/ Available for Sale investment Capital Reserve General Reserve Legal Reserve Paid under Capital Increase account Paid up Capital 2008 Balance at the beginning of the year 120,000, ,348,816 4,330, , ,809, ,759,056 Net Investments change Available for sale ,352, ,352,415 Net profit for the year ,290, ,290,519 Transferred to reserves ,100, , , (3,000,000) Dividends (17,840,000) -- (17,840,000) Balance at year-end 120,000, ,448,816 4,939, ,558 1,352, ,259, ,651, Balance at the beginning of the year 120,000, ,448,816 4,939, ,558 1,352, ,259, ,561,990 Paid under Capital rise account -- 30,000, ,000,000 Suspended Premium of issuing new shares to the reserve account ,000, ,000,000 Capital Increase 30,000,000 (30,000,000) Transferred to legal reserve ,000, (15,000,000) Settlement for redemption of bonds (Note 10) (134,619) (134,619) Net change in financial investments available for sale (Note 10) , ,279 Translation differences , ,111 Net profit for the current year ,581,069 22,581,069 Balance at year-end 150,000, ,448,816 4,939, ,558 2,011, ,259,719 22,581, ,801,830 - Auditors Report attached - The accompanying notes are an integral part of these financial statements. HASSAN ABDEL MEGUID Dr. HASSAN ABBAS ZAKI Managing Director Chairman & Managing Director 22

23 PROPOSED STATEMENT OF PROFIT APPROPRIATION FOR THE FINANCIAL YEAR ENDED DECEMBER 31, 2009 (All Amounts are Expressed in US. Dollars) Net profit for the year 22,581,069 21,290,519 Less: Gain from sale of fixed assets transferred to capital reserve according to the law (81,069) (290,518) Profit available for distribution Add: 22,500,000 21,000,001 Retained earnings at beginning of the year 2,259,719 1,809,200 Total 24,759,719 22,809,201 Appropriated as follows: Legal reserve 2,250,000 2,100,000 General reserve 668, ,482 Shareholders' dividends 10,500,000 9,600,000 Employees profit share 7,500,000 7,200,000 Board of Directors' remuneration 1,170,000 1,040,000 Retained earnings at year-end 2,670,788 2,259,719 Total 24,759,719 22,809,201 HASSAN ABDEL MEGUID Managing Director Dr. HASSAN ABBAS ZAKI Chairman & Managing Director 23

24 NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED DECEMBER 31, 2009 (All Amounts are Expressed in US. Dollars) 1. THE BANK S ACTIVITY Societe Arabe Internationale de Banque (S.A.I.B.) - S.A.E. was established on March 21, in accordance with Law No. 43 for 1974 and its executive regulation subsequently amended by Law No. 230 for 1989 and Law No. 8 for The objective of the bank is to carry out all banking operations in both local and foreign currencies, and to finance external and internal trade through its head office in Cairo and 22th. Branches in Egypt. 2. SIGNIFICANT ACCOUNTING POLICIES APPLIED a. Basis for Preparation of Financial Statements The bank s financial statements were prepared in accordance with the basis of preparing and presentation of the financial statements for banks and valuation basis issued by Central Bank of Egypt. b. Foreign Currencies Translation Transactions are recorded during the year in their original currency. For reporting the financial statements of the bank in US. Dollars, at the end of each fiscal period, all assets, liabilities, shareholders equity and expenses and revenues recorded in a currency other than the US. Dollar (except those recorded in Egyptian pounds), are translated to US. Dollars using the average international exchange rates (buy sell). Balances shown in Egyptian pounds are translated to US. Dollars using the official exchange rates. This translation has no effect on the income statement. c. Revenue Recognition Income is recognized on an accrual basis except for the interest income on doubtful loans and advances to customers, which ceases when the recovery of the outstanding interest or principal is in doubt. Investments and mutual fund dividends are recorded when declared. 24

25 d. Treasury Bills Treasury bills are recorded at nominal value while the issuance discount is recorded under Credit Balances and Other Liabilities. Treasury bills are presented on the balance sheet net of issuance discount (deferred revenue). e. Valuation of Trading Investments Shares and bonds listed on the Stock Exchange, which meet the conditions of being classified as a financial asset held for trading, also mutual funds certificates listed on the Stock Exchange, are valued at the end of the financial period at their fair value, which represents their market value. Shares and bonds, which no longer meet the conditions of being classified as trading investments, are valued at their book value. In case the value of such investments are decreased by any decline in the market value (for shares) or the net present value for the incoming future cash flow (for bonds). The book value is amended to reflect the decrease, which charged to the income statement under the item of Impairment expenses from credit losses. In case the value is increased, the increment is added to the same item (for bonds only) within the limits of what has been previously charged to the income statements, during prior financial periods. Trading investments including investments portfolios managed by others and trading mutual funds certificates not issued by banks or insurance companies are valued at period-end at fair market value. Mutual funds certificates that are not listed on the Stock Market Exchange are valued at their fair values, which represent their redemption values as at the valuation date. The differences in the valuation which result from the change in the fair value and the change in the exchange rates are recorded in the income statement under the item of trading investments net income / Gains (losses) from revaluation of assets and liabilities for trading purpose 25

26 f. Valuation of Available for Sale Investments The financial investments available for sale listed on the Stock Market Exchange, which are actively traded, are valued at their fair value representing the market value for each investment separately. After adjusting the book value by the premium/discount on the issuance and the difference in the changes in foreign currency exchange rate for the investments available for sale in the debit instrument that is affecting the items on the income statement by recording the differences which result from changing the fair value within the owner s equity under the item of fair value reserve/financial investments available for sale. The financial investments available for sale not listed on the Stock Market Exchange and there is no active trading on it are valued using a technical acceptable method for identifying the fair value, in case of inability to indicate the fair value for such securities by reliable method, they are being valued at cost for the owner s equity instruments or valued at the modified cost for the debts instruments after being adjusted by the differences of change in the exchange rate including all related costs particularly the impairment losses to its value and charging these losses to the income statement. In the event of a temporarily decrease in the value of the financial investment available for sale, the value of these assets will be decreased directly through the unrealized profits included within the owner s equity for previous periods, and in case that the unrealized profits are not adequate to cover these losses, the difference will be recognized within the owner s equities except the impairment losses in the values of these investments which must be recorded in addition to the accumulated losses for previous periods in the income statement, in case the fair value is increased for an asset previously included its difference in revaluation in the owners equity, there should be a clearance between these differences as any increase in the value of losses that are resulting from the impairment in the value are charging on the income statement.. In the event of an increase in the value of the financial investments available for sale during the preceding period to the period in which the impairment losses are recognized in the income statements, these profits are recognized within the income statement at the limit of the previously recognized amounts as losses, any subsequent increase in the fair value of these assets are recorded within the owners equities, as these losses cannot be returned through the income statement except in the case of sale or disposal of these instruments. 26

27 On excluding any of the financial investments available for sales, which were previously included the profit resulting from the evaluation with the fair value in the owners equity; the unrealized accumulated profits (losses) are charged to the income statements for each investment separately. g. Valuation of Held to Maturity Investments Bonds purchased from the primary market upon initial issue, are valued at modified cost, which represents the face value, plus the bond premium, or minus the bond discount. Such premium/discount is amortized using the straight-line method. The amortization appears in the income statement under revenue from treasury bills and bonds. The same treatment is used for bonds purchased from the secondary market by fair value more or less than their face value and reducing the cost by earning before the date of purchase. Bonds which are purchased in a foreign currency, there should revaluate the balances of bonds using the official exchange rates, Valuation differences are recorded in the income statement under the item of other non operating revenues/ (expenses) before making adjustments to bond premium or the bond discount or defining impairment losses. At the end of each fiscal period, the bank management should estimate any indicator of impairment of held to maturity investments. In the case of a decline in the fair value below the book value of the bonds, then the losses will be the difference between the book value and the present value for the incoming future cash flow (excluding the future credit losses that not recorded yet) that are discounted with the original real interest rate for each investment. The book value is reduced directly; losses are e recorded in the income statement under the item of impairment expense from credit losses. In any subsequent period and in the event of a decrease or increase in the impairment losses, this is linked to an event occurring subsequent to the impairment losses. The impairment losses previously recorded are added to the same item and the book value of the financial instrument must not exceed the modified cost as at the date of disposal of impairment losses, which are not recorded. In the event of a decline in the fair value below the book value of the bonds, the book value is modified and the difference is charged to the income statement under revaluation of other financial investments. Any subsequent increase in their values is added to the income statement to the same line item limited to any previously recorded decreases. 27

28 Mutual funds certificates held by the bank up to the end of the fund s life (as the fund s establishing bank) are valued at cost. In the case of any decline in the redemption value of these certificates below their cost, the difference is reported in the income statement under revaluation of other investments. Any subsequent increase in their values, is added to the same line item, limited to any previously recorded decrease in the income statement related to previous financial periods. h. Valuation of Investments in Subsidiaries and Common Interest Companies Investments in subsidiaries and common interest companies, are valued at cost; however, should a decline occur to their fair value, compared to their book value, the latter value will be amended in respect of each investment separately, and then the difference is charged to the income statement under revaluation of other financial investments ; and should a rise occur to their fair value, such rise is added to the same item within the limits of what has been previously charged to income statements over previous financial periods. i. Valuation of Assets Assigned to the Bank in Settlement of Debts These assets are listed in the balance sheet as a debit balance and other assets with the value it was assigned to the bank. Any decline in their value compared to their assigned value, the difference is charged to the income statement. Any subsequent appreciation in their value is added to the income statement, limited to what had been previously charged to the income statement in previous years. j. Loans and Contingent Liabilities Provision A provision is computed for specific loans and contingent liabilities, in addition to percentages computed from loans and other contingent liabilities according to basis standards of credit competency valuation for customers issued from Central Bank of Egypt on June 6, Loans are written off when no longer feasible to collect such loans by debiting the provision while the proceeds from the previously recorded bad debts are added thereto. k. Contingent Liabilities and Commitments Contingent liabilities and commitments, in which the bank is a party, are presented as an off-balance sheet item under contingent liabilities and commitments as these do not represent actual assets or liabilities on the balance sheet date. 28

29 l. Cash and Cash Equivalents For preparing the statement of cash flows, cash and cash equivalents includes cash, due from the Central Bank of Egypt, banks current accounts and treasury bills and other governmental bills discountable at CBE maturing during 3 months from the acquisition date. m. Depreciation and Amortization Fixed assets are depreciated by the straight-line method using appropriate annual depreciation rates determined based on the estimated useful life for each type of asset as follows: Depreciation rate Buildings and construction 5 % Automated systems / Computers 20 % Vehicles 20 % Fixtures 20 % Machinery and equipment 20 % Furniture 20 % n. Income Tax Income tax on the profit for the year comprises current and deferred tax. Income tax is recognized in the income statement except to the extent that it relates to items recognized directly in equity, in which case it is recognized in equity. Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantially enacted at the balance sheet date, 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 and liabilities for financial reporting purposes and the amounts used for taxation purposes. The amount of deferred tax provided is based on 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 probable that future taxable profits will be available against which the asset can be utilized. Deferred tax assets are reduced to the extent that it is no longer probable that the related tax benefit will be realized. 29

30 3. FINANCIAL INSTRUMENTS AND MANAGING RELATIVE RISKS 3/1 Financial Instruments A. The bank s financial instruments are represented in financial assets and liabilities. Financial assets include cash balances, current accounts, deposits with banks, financial investments and customer and bank loans. Financial liabilities include customer deposits and due to banks. Financial instruments also include rights and obligations included in contingent liabilities and commitments. Note No. (2) To the financial statements includes the accounting policies adopted regarding the basis of the measurement and valuation of the related financial instruments and any revenue or expenditure related thereto. B. Fair Value of Financial Instruments According to the valuation basis adopted by the bank to value its assets and liabilities as mentioned in the notes to the financial statements, the fair values of the financial instruments do not materially differ from their book values at the date of the financial statements. As for financial investments recorded at cost, notes No. (10) And (11) to the financial statements disclose their fair values as of the balance sheet date. 3/2 Managing Risks Related to Financial Instruments A. Interest rate risk The values of some financial instruments are subject to changes due to interest rate variances. The bank follows certain procedures to decrease the effects of this risk to a minimum level, such as: - Incorporating the interest rate on lending with the interest rate on borrowing. - Using the discount rates for several currencies as a guide to determine interest rates. Note No. (33) To the financial statements depicts the most important interest rates applied throughout the year on these financial assets and liabilities. B. Credit risk Loans to customers and banks, financial investments in the form of bonds, current account balances and deposits with banks and other rights and obligations are considered financial assets subject to the credit risk, which is defined as the inability of these parties to fully or partially pay their obligations at maturity. The bank follows certain procedures to decrease the effects of credit risk to their minimum level, such as: 30

31 - Prepares a credit analysis for customers and banks before engaging in any business with them, and determines credit risk. - Obtains sufficient guarantees to decrease the impact of risk that might arise in the event of the default, of clients or banks. - Periodical and on-going analytical studies of customers and banks in order to evaluate their financial and credit positions and to assess any required provisions for non-regular balances. - Distribute the loans portfolio and balances due from banks over different sectors to avoid risk centralization. Note No. (35) To the financial statements relates to the distribution of the loans portfolio over different economic sectors C. Exchange rate risk Because the bank deals in several foreign currencies according to its nature of business, this might subject it to the exchange rate risk of foreign currencies. In order to decrease the effects of such risk to its minimum level, the bank considers the balancing of its foreign currencies positions according to the instructions issued by the Central Bank of Egypt in this regard. Note No. (36) To the financial statements details the significant foreign currencies positions as of the balance sheet date. 4. CASH AND DUE FROM CENTRAL BANK OF EGYPT Cash in hand 17,107,780 26,914,798 Due from Central Bank of Egypt (within the reserve percentage) 88,613,237 60,720, ,721,017 87,635,214 31