Commercial International Bank (CIB) Egypt
Annual Report 2007

Plain-text annual report

ANNUAL REPORT 2007 TABLE OF CONTENTS Capacity building Financial Highlights A Letter from the Chairman Board of Directors’ Report 2007 Overview Financial Position Establishing the Retail Banking Achieved Quality Growth & Driving Future Growth Alternative Growth Strategies Appropriation of Income Corporate Social Responsibility Corporate Governance Our Mission and Purpose 2007 Review of Operations Strategic Subsidiaries and Affiliates Corporate Social Responsibility Financial Statement A. CIB Stand-alone Financial Statement B. Consolidated CIB & CI-CH Branches & Public Units 04 05 09 10 11 12 12 12 12 13 15 19 21 31 36 38 66 96 Financial Highlights FY 07 Consolidated FY 07 FY 06 FY 05 FY 04 FY 03 US$ Dec. 07 Consolidated US$ Dec. 07 (1) Common Share Information Per Share -Earning per share (EPS) (2) -Dividends (DPS) 6.61 1.00 6.32 1.00 4.11 1.00 3.13 1.00 3.89 2.00 3.17 1.50 -Book Value (BV/No of Share) 22.47 22.05 17.06 13.99 18.53 16.54 Share Price - High - Low - Closing Shares Outstanding (millions) 95.00 53.61 91.77 195 95.00 79.00 63.50 42.25 49.30 53.61 42.11 39.91 22.66 22.00 91.77 57.87 58.68 38.96 22.02 195 195 130 130 130 Market Capitalization (millions) 17,895 17,895 11,285 7,628 5,065 2,863 4 Value Measures Price to Earnings Multiple (P/E) Dividend Yield (Based on closing share price) Dividend Payout Ratio Market Value to Book Value Ratio Financial Results (millions) Net Operating Income(3) Provision for Credit Losses -Specific -General Total Non Interest Expense Net Profits Financial Measures Efficiency Ratio Cost : Income 13.9 1.09% 15.1% 4.08 14.5 14.1 12.5 10.0 6.9 1.09% 1.73% 2.56% 5.13% 6.81% 15.8% 24.3% 21.3% 51.4% 47.3% 4.16 3.39 1.86 2.10 1.33 2,484 2,351 1,741 1,450 1,273 1,012 193 57 250 776 193 57 250 714 1,289 1,232 176 17 193 668 802 197 43 240 474 610 224 32 257 444 506 200 23 222 296 413 1.17 0.18 4.07 17.23 9.72 16.64 195 3,245 13.9 1.09% 15.1% 4.08 441 34 10 44 138 229 1.12 0.18 4.00 17.23 9.72 16.64 195 3,245 14.5 1.09% 15.8% 4.16 417 34 10 44 127 219 27.05% 30.36% 32.32% 28.07% 27.05% 34.73% 29.32% 25.82% 25.29% 28.07% 31.21% 30.36% 38.38% 32.72% 34.92% 29.25% 31.21% Return on Average Common Equity 33.22% 32.32% 26.49% 23.76% 22.19% 20.09% 33.22% Net Interest Margin (NII /average interest earn- ing assets) 2.85% 3.27% 3.14% 3.50% 3.10% 3.00% 2.85% 3.27% Return on Average Assets 3.02% 2.90% 2.37% 2.09% 1.94% 1.88% 3.02% Regular Workforce Headcount 3279 2,946 2,477 2,301 2,109 1,760 3279 Balance Sheet and Off Balance Sheet information (millions) Cash Resources and Securities 22,444 22,516 14,539 11,718 10,783 9,571 Net Loans and Acceptances 20,376 20,376 17,465 14,039 13,394 12,505 Assets Deposits 47,763 47,521 37,422 30,390 27,977 24,153 39,476 39,515 31,600 24,870 23,979 20,415 Common Shareholders Equity (2) 4,382 4,299 3,327 2,727 2,409 2,151 Average Assets 42,658 42,472 33,906 29,183 26,065 21,956 Average Interest Earning Assets 42,052 36,603 29,277 25,619 22,897 19,320 Average Common Shareholders Equity 3,879 3,813 3,027 2,568 2,280 2,053 4,070 3,695 8,661 7,159 795 7,571 7,464 689 Balance Sheet Quality Measures 2.90% 2,946 4,083 3,695 8,617 7,166 780 7,538 6,497 677 Common Equity to Risk-Weighted Assets 16.81% 16.49% 14.14% 13.83% 12.71% 12.71% 16.81% 16.49% Risk-Weighted Assets (billions) Tier 1 Capital ratio Total Capital Ratio Adjusted Capital Adequacy Ratio Net Impaired Loans after General Allowances (millions) 26 N/A N/A N/A 26 24 20 19 17 10.20% 11.55% 9.78% 10.07% 10.76% 11.73% 12.80% 11.73% 11.41% 12.08% 14.70% 13.60% 13.10% 12.50% 12.60% 5 N/A N/A N/A 5 10.20% 11.73% 14.70% (448) (448) (333) (113) (175) (106) (79) (79) Net Impaired Loans to Net Loans and Acceptance -2.20% -2.20% -1.90% -0.81% -1.31% -0.85% -2.20% -2.20% (1) Represents the translation of Egyptian pound financial information into US$ using the rate of December 2007 of $ 0.1813 for balance sheet figures and the average YTD December 2007 rate of $ 0.1775 for average balance and income Statements Items (2) Common Shareholders Equity Starting 2002 including total Net Profit as per new CBE regulation (3) Starting 2005 Income Statement was amended to aggregate all Market & FCY investment revaluations in one figure. (4) Per Share ratios for 2005 were adjusted by 2006 number of Shares ( 195 million Share ) General Comment: All ratios have been amended based on net profit figure before appropriation of income; except for the Capital Ad equacy Ratios. A Letter from the Chairman A Letter from the Chairman 2007 was another record year for CIB. The Bank grew its earnings per share for the 30th year of its 32 year history, and has now experienced a compounded annual EPS growth rate of 25% over the last five years. 2007 brought continued impressive growth in both Corporate Banking market share and overall profit margins. The year also marked a period of significant investment in our Retail Banking business, which is well-positioned to take advantage of Egypt’s burgeoning retail market. Additionally, the Bank maintained its position as one of the safest banks in the emerging markets, with continued high levels of Capital Adequacy and provision coverage. As we move through the first part of 2008, I would like to take a moment to highlight a few important points that best summarize the current characteristics of the Bank: • • • Largest market capitalization in the Egyptian banking sector Most profitable commercial bank in Egypt Superior management, high operating standards and premier training programs Successful investment in infrastructure over the past few years that will allow the Bank to ex- • pand its regional presence 6 The strongest brand equity in Corporate Banking in Egypt and the third strongest in Consumer • Banking • Internationally recognized as the Best Bank in Egypt – The Banker, Global Finance, Euromoney and Emerging Markets • • Adoption of international best practices regarding Corporate Governance and Disclosure Tremendous growth opportunities in Retail and SME banking Furthermore, not only is CIB well-situated to continue to take advantage of favorable local market condi- tions, it is also well-equipped to weather any potential economic downturn. This second point is particu- larly important in light of concerns about a possible global recession. The past year has undoubtedly been unkind to financial services companies in developed markets. Emerging market banks and their regulators should not dismiss this crisis as unrelated to their own situations. There are many lessons to be learned. This crisis also provides an excellent opportunity for us to explain to CIB shareholders why we believe we will continue to be successful in the coming years. So, what happened? By November 2007, US and EU financial sector companies had already underperformed the FTSE by 18% and 12%, respectively, year-to-date. AA-rated US mortgage-backed securities, which have tra- ditionally been considered “safe” investments, had lost more than 50% of their value (as per the ABX index) during the prior 5-month period. Meanwhile, the cost of insuring against credit defaults had in- creased from less than 0.5% to 6%. The sum effect of all of this was that EU and US banks were facing trading losses of between 8% and 12% of their total Tier-1 Capital, or approximately US$ 2 trillion. In the EU, thousands of miles away from the root of the problem in the US, several banks struggled to avoid bankruptcy, and the UK banking sector suffered the humiliation of the first run on deposits since the 1800s. In the midst of this predicament, it became clear that the markets had failed, a stark reminder that liquidity often dries up at the most inopportune moments. This put public companies, regulators, and auditors in a morally-challenging position, as they at- tempted to quantify and disclose the extent of trading losses. One key issue was that no one could accurately estimate the trading losses associated with mortgage-backed securities in the absence of liquid trading on those securities. The models which banks used to predict theoretical values in their trading book (what are known as “mark to model” as opposed to “mark to market”) also proved unreli- able. What lessons can emerging market banks extract from this crisis? It is obvious that banks’ business models and economic transactions have become exceedingly complicated. This has hindered the ac- counting industry from performing its duties with a high level of efficiency and reliability. Regulators in emerging markets should, therefore, seek to enforce methods that prevent, or at least discourage, practices leading to changes in banks’ revenue generating activities, to the extent these practices are too complicated for regulators to analyze. On the other hand, banks should also revisit their risk manage- ment processes and revise their business models in light of the lessons learnt from this crisis. No bank A Letter from the Chairman should invest in any financial instrument that the bank’s officers and risk managers cannot understand. Banks in emerging markets lack the proper resources and technical skills, and therefore should not in- dulge in taking positions in overly sophisticated instruments, even if such instruments appear to promise excellent returns. Another valuable lesson can be drawn from the way banks across the Atlantic differed in their approach to disclosing the methodology behind their valuation of crisis-related assets. There is no doubt that the more transparent approach more recently adopted by US banks will benefit them greatly in the longer term. At CIB, we have always advocated that a high degree of disclosure and transparency is beneficial for shareholder value. It is also good for the economy as a whole, leading to greater efficiency in the man- agement of assets industry-wide. CIB is indeed an investor’s “safe haven” among emerging market banks, in good as well as troubled times. Our prudent risk management policies and adherence above and beyond the Central Bank of Egypt’s strict regulations have enabled us to maintain a high quality loan portfolio and an adequate coverage ratio. In fact, we strongly believe in the regulator’s stringent provisioning policies, as operating in emerging markets necessitates such prudent rules. CIB has continuously demonstrated that conser- vative provisioning policies, even in periods of economic boom, are accretive to long term shareholder value. 7 On the local scene, the banking industry has benefited from one of the best years on record in terms of economic performance. Rather than being driven by consumption expenditure, as was the case in preceding years, economic growth in the last couple of years has been fuelled by the industrial sector as well as by domestic and foreign new investment. Previous cycles were driven by services, trade and agriculture as opposed to the industrial sector, and by consumption as opposed to investment. Further- more, this all came during a year in which Egypt was ranked “the most reforming country in the world” by the World Bank. The competitive dynamics in the banking industry in 2007 confirmed our view of the positive effect of consolidation and foreign ownership of Egyptian banks on the profitability of all banks. CIB experienced expanding margins across all client segments in 2007, with the exception of large syndications in corpo- rate banking, where competition remains intense. By end of 2007, both investor and consumer confidence in Egypt were very strong, and the country’s economic resilience has continued into 2008. Our clients are talking of strong capital expenditure in 2008 and showing significant appetite for both debt and equity capital. There are more reasons to be optimistic about the local market, even if a developed markets reces- sion materializes. Egypt’s recent growth is relatively less dependent on exports to developed countries versus other emerging economies. Additionally, the country’s corporate balance sheets have never been more liquid and solvent, with the private sector enjoying more than EGP 150 billion of deposits with the banking sector, compared to less than EGP 270 billion of bank debt and negligible public debt. This illus- trates that corporate Egypt has learned from the excess leverage that marked the last cycle during the late nineties. Therefore, we believe that even if Egypt experienced a slowdown due to global conditions, it would likely be short and mild. Going forward, we intend to solidify our ongoing strategy of capacity building. This strategy is composed of the following key elements: • Focus on customer-centric relationship management to improve service quality Build and maintain the widest and most customer-friendly physical and electronic delivery chan- • nels and network of all of the private and multinational banks • Continue to upgrade execution, service quality and customer satisfaction inside the branch Build the widest product portfolio among the Egyptian banks to attract clients who enjoy one- • stop-shop services which save both time and money The Bank aims to continue its focus on what clients tell us we do best, which is servicing the local needs of clients better than our competitors. We also intend to attract for our retail banking business talented leaders who have already experienced success globally and seek to participate in our vision of becoming Egypt’s foremost regional bank. A Letter from the Chairman In addition, the Bank will continue its pursuit of viable entry strategies into regional markets where we believe our core competences can be replicated to achieve a sustainable competitive advantage. This will require a tailored entry strategy for each country. For example, in Algeria, we have developed an entry strategy focused on corporate banking for the private sector and specific state-owned enterprises, as well as retail banking services that consist primarily of liability products. We continue to liaise with the Algerian Central Bank to acquire a license there. In the GCC, we continue to pursue a low cost entry strategy, and intend to adopt a distribution model based on the targeting of non-resident Egyptians. Carefully designed products are being developed to satisfy the unique requirements of these individuals. Within corporate banking, we aim to target specific wholesale/syndicated transactions that make sense for us. Before I end this year’s letter, I also want to honor the lifetime achievements of Mr. Aly Dabbous, who passed away in 2007. Mr. Dabbous was an individual to whom CIB, and indeed, the entire Egyptian banking sector, will always be indebted for his visionary leadership and true friendship. 8 The business review section of this report will shed light on the Bank’s key revenue generating busi- nesses. I am especially pleased with the progress we have made since the reorganization of our Board in early 2006. I draw special notice to the sections regarding information technology, risk management and human resources. Hisham Ezz Al Arab Chairman and Managing Director Board of Directors’ Report Innovation Board of Directors’ Report 2007 Overview Introduction The Board of Directors is pleased to review the results for the year ending 31/12/2007 at the Annual General Assembly Meeting. On a consolidated basis, CIB and CI-CH achieved EGP 2,480 million of Net Operating Income and EGP 1,289 million of Net Profit, representing 35.6% and 51.1% growth, respectively. These earnings results include a one time capital gain of EGP 148 million related to the sale of a stake in CI Capital. Excluding this one time item, Net Profit growth would have been 33.7% year-over-year. Despite strong competition within the banking sector during 2007, CIB not only grew its market share, but also enhanced its profit margins. This was the result of prudent executive management and efficient operations. 10 To further enhance our competitiveness and efficiency, as well as improve our delivery of services to our corporate banking clients, in 2007 we commenced our migration to T-24, the top ranked universal bank- ing system. In addition, we made significant advances in our retail banking business, including impor- tant investments in IT and risk management infrastructure, proper segmentation of our client base, and the development of a more customer-centric model. During 2007, CIB sustained its position as the market leader and best bank in Egypt. The Bank was recognized by Banker magazine as “Bank of the Year 2007” as well as for the execution of the “Deal of the Year 2007.” The Bank was also selected as Global Finance Magazine’s “Best Bank in Egypt” for the tenth consecutive year, “Best Foreign Exchange Bank in Egypt” for the seventh straight year, “Best Trade Finance Bank in Egypt” for the third consecutive year, and “Best Provider of Money Market Funds in Af- rica.” In addition, the Bank received the “Straight Through Processing Excellence” Award from Deutsche Bank, and was dubbed the “Strongest Brand in Corporate Banking as well as [the] Third Strongest Brand in Consumer Banking in Egypt,” as per AC Nielson. Major credit rating agencies continued to rate CIB at the country’s sovereign ceiling, BB+/Stable/B, while emphasizing that the Bank’s rating is capped by Egypt’s sovereign rating. In order to avoid any possible conflict of interest with the Bank’s strategy to launch its own branded auto-finance business, CIB decided in 2007 to sell its stake in Contact, the Bank’s auto loan affiliate. This divesture, amounting to a 38.4% ownership position, came as part of the Bank’s policy of continuous development and expansion in our retail banking and consumer finance businesses. In 2007, we remained focused on our main growth strategies. Our two-fold strategy is based on both organic growth and expansion via mergers and acquisitions. Although most of the organic growth is still driven by our corporate and institutional clients, we have also effectively achieved organic growth through the build-up of our retail banking business via branch expansion and re-engineering. We con- tinue to examine opportunities for mergers and acquisitions growth and will aggressively pursue those opportunities that create shareholder value. The Board believes that the Bank is in an excellent position to meet the challenges of the future, and that it enjoys significant competitive advantages in its strategy to capture opportunities in the under- penetrated Egyptian market. Macro Overview During 2007, the Egyptian economy witnessed one of its most impressive performances over the past forty years. Egypt achieved a real GDP growth rate of 7.1%, which is the highest rate since the year of 1985. This strong growth was generated by reforms and solid macro-economic conditions, and illustrat- ed by Egypt’s increase in rank to 85th from 127th in the economic freedom index. More significant was the honour bestowed by the World Bank, which ranked Egypt the top reformer in the world during 2007 in its annual Doing Business report. The nation’s economic growth has been driven by productivity increases. Egypt’s GDP growth has tradi- tionally been driven by the mining, oil, agriculture and services sectors; for the first time in many years, though, the Egyptian manufacturing sector became a major growth contributor. As a result of economic reforms, total investment grew by almost 34%, reaching EGP 155 billion for the Board of Directors’ Report year 2006/2007, compared to EGP 116 billion in 2005/2006. Even more encouraging was the fact that the private sector was the largest contributor of these investments, a result of the government’s reform efforts and its privatization program. Consequently, this led to the attraction of all-time high FDI net inflows, reaching US$ 11 billion, an 80% increase compared to 2006. Despite this, we remain somewhat concerned regarding the country’s high budget deficit, its high levels of sovereign debt, and its above average level of inflation, as well as with the sustainability of growth in investments. The economy has started to reap the benefits of the banking reform program, evidenced by the increase in total bank borrowings of EGP 382 billion in 2007 compared to EGP 344 billion in 2006, a growth rate of 11%. Private corporate borrowings were EGP 246 billion in 2007 versus EGP 225 billion in 2006, rep- resenting a growth rate of 9%. Private corporate FCY borrowing in particular served as an important catalyst for growth, with an in- crease of 22% to a record US$ 14.8 billion. More impressively, this major increase was anchored by lending to both the private industrial (13%) and services sectors (10%). As a natural result of CIB’s focus on private industrial and service businesses, the Bank’s average monthly market share of total bank borrowings climbed to 5.7% in 2007, versus 4.9% in 2006. On the FCY lending market side, CIB’s average monthly market share increased slightly to 9.2% in 2007, up from 8.1% in 2006. 11 On the deposits front, the Egyptian banking sector remains very liquid, as evidenced by a 54% utilization ratio. Banks hold significant funding bases that can be injected into the economy to achieve even higher growth rates. In fact, total deposits surged by 19.5% to reach EGP 709 billion in 2007, compared to EGP 594 billion in 2006. Financial Position At CIB, we analyze our performance against a broad spectrum of measures, including growth, asset quality, risk management, marketing, collaboration, operations, controls and compliance. We continue to make significant progress on all these fronts. Although we have not yet reached many of our absolute performance goals, the rapid pace of our improvement has made us very positive about the future. On a consolidated basis, CIB and CI-CH achieved EGP 2,480 million of Net Operating Income and EGP 1,289 million of Net Profit in 2007. The Bank itself contributed EGP 2,347 million of Net Operating Income and EGP 1,232 million of Net Profit, representing 33.5% and 53.7% year-over-year growth, respectively, while CI-CH contributed EGP 133 million of Net Operating Income and EGP 57 million of Net Profit. On a consolidated basis, CIB and CI-CH achieved a Return on Average Assets of 3.0% and a Return on Average Equity of 33.1%. On a standalone basis, Total Shareholder’s Equity and Net Profit increased significantly by 29.2% to EGP 4.3 billion (before appropriation) in 2007, representing 9% of total assets. Furthermore, CIB’s equity base remained extremely solid, evidenced by a conservative Capital Adequacy Ratio of 11.7% at the end of 2007, prior to the appropriation of profits. If we account for the proposed appropriation of profits, the Capital Adequacy Ratio was 14.7%. CIB also continued its persistent efforts to maintain a high quality loan portfolio. Local and international credit risk concerns highlight the urgency of employing prudent risk management policies, capacity building, transparency and full compliance with regulatory capital requirements. The high level of quality of CIB’s loan portfolio reflects the seriousness with which we take these principles, and represents one of the major sources of value we offer to our shareholders. CIB’s Non Performing Loans to Total Exposure Ratio was only 3.0% as of FYE 2007, down from 3.8% as of FYE 2006. Our overall Loan Loss Provisions Coverage Ratio was 195.7%. Management’s focus on efficiency was reflected in the decrease of the Cost to Income Ratio from 38.4% in 2006 to 30.4% in 2007. Despite increased competition in the market, CIB managed to improve its Net Interest Margin from 3.14% in 2006 to 3.27% in 2007. CIB’s Return on Average Equity (ROAE) and Return on Average Assets (ROAA) have continued to im- prove, reaching 32.3% and 2.9% in 2007, compared to 26.5% and 2.4%, respectively, in 2006. These results, produced with the support of a still-favorable credit environment, are promising but may be difficult to maintain. Increasing inflation pressures and the government’s budget deficit are still major concerns. 12 Board of Directors’ Report During 2007, the Bank hired two key officers from top financial institutions in Compliance and Retail Risk Management to further enhance our management strength. Both individuals bring significant experience in their fields to CIB and will work to build our capabilities in their respective areas. The Board of Directors is optimistic about the Bank’s outlook. This optimism is substantiated by CIB’s strong financial, operational and market position, and we are confident that the Bank will continue to maintain its leading position. Establishing the Retail Banking CIB’s Corporate Banking division has historically been the prime contributor of the Bank’s earnings and market share. However, we aggressively expanded our Retail Banking business in 2007. The Bank’s management team understood the need for building its retail capabilities as a crucial prerequisite to pro- tecting our asset quality and ensuring sustainable growth. In 2007, we focused on market research, the creation of the retail business plan, branch re-engineering, human capital recruitment, the construction of appropriate IT infrastructure, and the drafting of operational procedures and manuals. In collaboration with an international retail banking consultant, all business and support areas’ managers re-examined and re-tooled their mission and vision, operational and service models, and target customer base. During 2007, the retail business experienced significant developments in its delivery and distribution channels. Since we believe that attracting new clients is the catalyst for our growth and expansion, we decided to open 45 new outlets, initiated a sales team recruitment process, and enhanced our product offering. Despite a number of recent branch expansions in the banking sector, we believe that Egypt’s population is still under-banked. This is evidenced by the consistency of banking density over the past eight years of approximately 21,000 per branch. Total bank branches nationwide reached 3,116 branches in Septem- ber 2007 (including 1,036 village banks), while the economically active population increased to approxi- mately 29 million individuals. Achieved Quality Growth & Driving Future Growth CIB’s strategy and vision is to accomplish real, sustainable growth, but not growth at any cost. In the financial services world, it is easy to stretch for growth by reducing underwriting standards or taking on increasingly higher levels of risk. However this runs counter to our principles. The Bank continues to grow its earnings, but not at the expense of smart, longer-term investments. We continue to invest in the areas that will drive our future growth. Last year CIB opened 19 new outlets, added more than 700 staff, logged 75,000 hours of employee training, and spent over EGP 50 million on IT platform modernization. We have a significant investment plan with respect to our systems and operating infrastructure, while simultaneously focusing on the reduction of operating expenses. Al- though there is obviously a short-term cost associated with these investments, we believe the long-term benefits will be a significant increase in efficiency and improved quality of our services. Alternative Growth Strategies In July 2007, CIB officially applied for a banking license from the Central Bank of Algeria. The Algerian subsidiary is expected to benefit from the booming Algerian economy, especially with many of our corpo- rate customers expanding their operations to Algeria. In 2007, we also continued to act upon the mandate approved by the General Assembly in March 2006 to pursue the growth of our institution through mergers and acquisitions. Appropriation of Income The Board of Directors has proposed the distribution of a dividend per share of EGP 1.00, in addition to increasing both the Legal Reserve by EGP 61.6 million to reach EGP 432.9 million and the General Re- serve by EGP 834 million to reach EGP 1,382.5 million after approval by the shareholders at the Annual General Meeting. These actions reinforce the Bank’s solid financial position as evidenced by a Capital Adequacy Ratio of 14.7 %. Board of Directors’ Report 13 Corporate Social Responsibility Given the sense of duty and gratitude CIB feels towards our society, and in continuation of the Bank’s history of initiatives within Egypt, we made a number of donations and spearheaded several fundraising efforts in 2007. CIB defines corporate responsibility as the continuing commitment by our business to behave ethically and contribute to Egypt's prosperity while improving the quality of life of the workforce, their families and the local community and society at large. Our organization seeks to build meaningful relationships between the corporate sector and the rest of society. The function of Corporate Social Responsibility is an important component of CIB's business and is con- sistent with our mission statement’s objective ‘to grow and help others grow.’ It also supports our objec- tive of contributing to the sustainable development of Egypt's economic growth. Our community service covers various types of charitable organizations classified into three major fields: Healthcare, Education, and Social Support & Commitment. Social Involvement: • Misr El Khair Foundation An organization that promotes education, healthcare services, and food for Egyptians under the poverty line in Upper Egypt. • Yahya Arafa Children’s Charity Foundation A foundation dedicated to helping children who require surgical operations related to the bones and heart. • Arafa Charity Foundation A foundation dedicated to the provision of healthcare services for impoverished citizens in the Delta region. • Ein Shams University Hospital A public hospital that serves disadvantaged individuals. • Mahmoud Hospital A hospital that serves individuals who travel into Cairo from surrounding towns and seek medi- cal attention. • Khayrazad Organization for Social Care An organization that provides financial support for public hospitals within Cairo. • Lung Diseases Center - Faculty of Medicine Menoufeya University A public university hospital that serves underprivileged individuals in Menoufeya. • Center for Social & Preventive Medicine, Faculty of Medicine, Cairo University Our donation will be utilized for the renovation of this under-equipped hospital, including an X- ray unit and a dentistry unit. • Three public schools Three schools have been chosen for renovation in disadvantaged communities in Upper Egypt. Corporate Governance Transparency Corporate Governance Corporate governance issues rate high within CIB, both in terms of aligning the interests of sharehold- ers and managers and in terms of the monitoring of management through information disclosure and transparent reporting. CIB adopted a sound and effective system of corporate governance best practice, comprising highly professional executive directors and senior management, competent board commit- tees, independent non-executive directors of experience and integrity, an internal audit and control de- partment equipped with the best qualified and well-trained staff, an efficient investor relations program and two reputable audit firms with an impeccable record of accounting and auditing practice. Our corporate governance framework ensures that timely and accurate disclosure occurs with respect to material matters regarding the Bank, its ownership, operations and financial performance. It also advocates the equal treatment of all shareholders with sound protection to their voting rights. CIB has a practice of changing auditors every five years to ensure objectivity and to benefit from new practices. Another important strength is CIB’s board composition. The Board is comprised of a majority of non-ex- ecutive directors who play key roles. The varied expertise of the non-executive directors has created an unusually strong combination of directors, all with relevant knowledge and balanced skills and experi- ence. 16 The Board of Directors The Bank’s management structure is based upon centralization of controls at the head office and at the top management level. The management of the Bank’s business takes guidance from the Board of Direc- tors, which sets the overall strategy and approves all operating policies. Our Board consists of eight members. The Directors are elected by the shareholders at the General As- sembly for a period of three years and meet at least four times per annum. During 2007, the Board of Directors convened 6 times. A group of experienced business leaders representing Ripplewood Holdings L.L.C., Eton Park Capital Management, RHJ International and International Finance Corporation remains from 2006, as part of the Board, including Robert Willumstad, the former President and Chief Operating Officer of Citigroup, Lucio Noto, the former Chairman and Chief Executive Officer of Mobil Corporation, and Tim Collins, Chief Executive Officer of Ripplewood Holdings. Paul Volcker, former Chairman of the Federal Reserve Bank, serves as Senior Advisor to the Board. Accordingly, the Board of Directors in its new and expanded form consists of the following individuals: Hisham Ezz Al-Arab Chairman and Managing Director Hisham Ezz Al-Arab joined CIB in 1999 as Deputy Managing Director and was elected Chairman and Managing Director in September 2002. He has had a wide experience of more than 20 years in global banking activities gained in senior positions at JP Morgan, Merrill Lynch and more recently Deutsche Bank throughout the United Kingdom, Middle East and the United States. He holds a degree in Commerce from Cairo University in 1977. Sahar El-Sallab Vice Chairman & Managing Director Sahar Sallab is currently Vice Chairman & Managing Director, as well as member of the High Policies Committee. She joined CIB in 1981 from Citibank and has close to 30 years of local and international banking experience. She is also the Chairperson of Com- mercial International Brokerage Company (“CIBC”). Ms. Sallab is a graduate in Business Administration from the American University in Beirut in 1974. Mahmoud Fahmy Member Counselor Fahmy is a renowned Egyptian lawyer and international arbitrator. Previously, he was the Chairman of Egyptian Capital Markets Authority, the General Authority for Investments and the Secretary General of the National Counsel. William Mikhail Member and Chairman of the Audit Committee Dr. Mikhail is currently professor of econometrics at the American University in Cairo (AUC), and has been member of CIB’s Board since 1997. He obtained his Ph.D. from the London School of Economics, Corporate Governance London University, in 1969. Together with his academic career, Dr. Mikhail also worked with international consulting firms and as a U.N. consultant on econometric modelling and economic policy analysis in many countries for more than two decades. He published extensively in econometric theory and applied econometrics in international journals, and supervised many Ph.D. and M.A. theses both in Cairo Univer- sity and the American University in Cairo. Dr. Nadia Makram Ebeid Member Dr. Nadia Makram Ebeid is the Executive Director of the Center for Environment and Development for the Arab Region and Europe (CEDARE), an international diplomatic position she assumed since Janu- ary 2004. For a period of five years starting 1997, Dr. Ebeid was Egypt’s first Minister of Environment becoming the first woman to assume this position in the Arab World. During her earlier career, Dr. Ebeid assumed several managerial posts with the United Nations Development Program (UNDP), the United Nations Food and Agriculture Organization's Regional Office for the Near East, Council for Environment and Development Research. In support of her role in environmental policy and advocacy, Dr. Ebeid was awarded numerous awards of recognition and distinctions from local and international NGOs, leading institutions and associations. Robert Willumstad Member 17 Robert Willumstad is the Chairman of AIG and until recently served as President and Chief Operating Officer of Citigroup and was a member of its Board of Directors. After 20 years with Chemical Bank, and 11 years with Commercial Credit and its successor companies, in October 1998, Mr. Willumstad played a critical role in creating Citigroup, a history making combination of the former Travelers Group and Citicorp. After serving as the Head of Global Consumer Lending, Mr. Willumstad was the Chairman and CEO of Citigroup’s Global Consumer Group from 2000 to 2003, where he led all consumer businesses, including credit cards, consumer finance and retail banking. In addition, he had oversight of Citigroup’s consumer operations in Western Europe, Japan and Mexico. Mr. Willumstad was named President of Citigroup in 2002, and joined its Board of Directors in 2003; he became Citigroup’s Chief Operating Officer in October 2003. He is a Director of MasterCard Incorporat- ed/MasterCard International Incorporated and Habitat for Humanity International. He is a trustee of the American Scandinavian Foundation and Adelphi University. Tim Collins Member Timothy C. Collins is the Chairman and Chief Executive Officer of Ripplewood Holdings, L.L.C., which he founded in 1995. From 1991 to 1995, Mr. Collins managed the New York office of Onex Corporation, a Toronto-based investment company. Previously, Mr. Collins was a Vice President at Lazard Freres & Company. Mr. Collins received an M.B.A. degree from Yale University's School of Organization and Man- agement and a B.A. degree in Philosophy from DePauw University. Lucio Noto Member Lucio Noto is the Managing Partner of Midstream Partners, L.L.C., an energy investment company. Mr. Noto assumed his current position in March 2001. He retired as Vice Chairman of Exxon Mobil Corpo- ration in January 2001, a position he had held since the merger of the Exxon and Mobil companies in November 1999. Mr. Noto has been a director of Altria Group since 1998. Before the merger, Mr. Noto was Chairman and Chief Executive Officer of Mobil Corporation. Mr. Noto had been employed by Mo- bil continuously since 1962. Mr. Noto is a director of International Business Machines Corporation and United Auto Group Inc. He also serves on the International Advisory Councils of Mitsubishi Corp. (Tokyo) and Temasek (Singapore). The Board of Directors’ Committees Following the expansion of the Board of Directors during the first quarter of 2006, the Board will over- see the Bank through the Board Committees and the reports generated to evaluate the Bank’s periodic performance regarding all aspects of operations. As such, the Board will meet around six times per year, physically or through video or tele-conferencing, in Egypt, with one meeting in New York City. In addition to the Board’s Audit Committee, CIB has recently established Governance & Compensa- tion and Risk Committees. The structure of each committee ensures the highest standards of corporate governance, e.g., the Governance & Compensation Committee is only composed of independent directors Corporate Governance and meets exclusively without the attendance of the Bank’s executive officers, unless the need arises to invite one or more of them. Audit Committee CIB was one of the first banks in Egypt to set up an audit committee of the Board in compliance with the basic principles of corporate governance. In September 1998, the Bank’s Board decided to form the committee in order to ascertain the soundness of the Bank’s internal audit system and compliance with the rules specified by regulatory authorities. The Committee’s mandate was extended and articulated in greater detail in the years that followed, especially in light of the Central Bank of Egypt’s issuance in June 2002 of a number of rules to be ob- served and guidelines to be followed. Accordingly, the role of the committee was redefined in September of the same year to emphasize its independent nature. Its scope was also modified to be more specific, especially in relation to risk management, Basel II compliance, money laundering, as well as internal and external audit practices. 18 Three independent board members sit on the audit committee. They meet exclusively and regularly with the Bank’s external auditors. Bank executives are regularly invited to attend certain meetings when relevant issues are discussed. The Governance and Compensation Committee The Committee is to be responsible for the development and review of a set of Corporate Governance Guidelines, which are then recommended to the Board. The Committee is to review the remuneration of the Board of Directors (both executive and non-execu- tive members). This will also incorporate any stock option proposals to the Bank’s Executive and Se- nior Management Staff. The committee is also to act as a nomination committee when a board seat is vacated. The Risk Committee On the macro level, this committee will set the Bank’s “Credit Risk Strategy” and the portfolio mix (concentration and limits) for corporate, retail, banks, countries, etc. to be approved by the Board. Expo- sures according to risk rating, amount & tenor are approved by other committees led by the High Policies Committee. Our Mission and Purpose Teamwork Our Mission and Purpose “To grow and help others grow” “To grow our status as the best financial services partner for our clients anywhere in the world, while creating outstanding value for both our shareholders and people” In achieving our mission & purpose, we make decisions that are consistently guided by the following set of core values: Integrity: Exemplify the highest standards of personal and professional ethics in all aspects of our busi- • ness. • • Be honest and open at all times. Stand up for one’s convictions as well as accepting responsibility for one’s own mistakes. Comply fully with the letter and spirit of the laws, rules and practices that govern CIB work in • Egypt and abroad. 20 Client Focus: • Say what we do and do what we say. • Our clients are at the center of our activities and are the reason behind all that we do. Our clients are the force behind our excellence and we are committed to individually help them • achieve their goals and be the best at what they do. Innovation: Pioneer is not a word to us; it is an action and a track record since our inception as the first • joint venture bank in Egypt. We are leading the Egyptian financial services industry to the next level of performance in serv- • ing the millions of Egyptian clients who are underserved or who are not banked at all. Hard Work: Discipline and perseverance govern our actions to achieve outstanding returns for our stake- • holders. • Seeking service excellence drives our commitment to better serve our clients. We endeavor to satisfy our clients’ current demands and to anticipate and plan for their future • needs. Teamwork: We collaborate, listen and share information candidly within CIB and with our partners, clients • and shareholders. • • • Each one of us consistently presents CIB’s total corporate image. There is only one CIB in the eyes of our clients. We value and cherish one another’s different cultural backgrounds. Respect to the Individual: We respect the individual whether an employee, a client, a shareholder, or a member of the • communities in which we live and operate. We treat each other with dignity and respect and take time to answer questions and respond to • concerns. • Each individual must feel free to make suggestions and offer constructive criticism. CIB is a meritocracy, where all employees have equal opportunity for development and ad- • vancement based only on their merits. 2007 Review of Operations Hard work 2007 Review of Operations Corporate Banking Group The year 2007 witnessed remarkable achievements in the corporate banking business, whereby the loan portfolio surged reflecting an increase in average utilization throughout the year of 27% over last year. Year on year growth rate reached 20% surpassing the credit market growth rate that reached 11% dur- ing 2007. The Bank played a leading role in promoting business in various diversified sectors, namely oil, gas, petrochemicals, fertilizers, telecommunication, agri-business, contracting, real estate development and other sectors. The expertise and specialized premium services provided by CIB as an Arranger, Underwriter, Agent and Security Agent have been well recognized by major Project Financiers and has established CIB’s position as a leading bank in mobilizing large ticket transactions in the syndication market. CIB’s total mandated syndicated arrangements in 2007 witnessed significant growth over the year 2006, reaching EGP 37.5 billion compared to EGP 19.6 billion in 2006. In fact, the syndication team initiated and contributed in major landmark deals, whereby it played several vital roles such as, but not limited to, Mandated Lead Arranger, Egyptian Facility Agent, Underwriter, Onshore Account Bank, Book-Runner, Security Agent, and Financial Advisor. The key sectors that the syndicated department covered during 2007 were mainly petrochemicals, telecommunication, oil and gas, construction and food. 22 CIB continued to enhance the introduction of new financing schemes in the market. We were successful- ly mandated to act as a Financial Advisor and Lead Arranger for four securitization transactions in 2007 totalling EGP 1.2 billion. Recognizing our lead role in securitization, CIB was awarded “Deal of the Year” for 2007 by The Banker for its securitization deal. CIB has hence established itself as the leading bank in Egypt in terms of number of transactions arranged, having successfully closed five securitization deals in Egypt to date. The Structured Trade Finance Group continued to secure sizeable trading transactions, reaching a no- table portfolio of EGP 9 billion in 2007. Total Trade Finance Transactions in Corporate Banking reached EGP 27.5 billion. CIB was, thus, awarded the "Best Trade Finance Bank in Egypt" by Global Finance for the second consecutive year. In the Shipping business, CIB maintained its position as the market leader in the Suez Canal Tolls, with a market share of approximately 86% and aggregate transfers of nearly USD 3.4 billion. The division also expanded its financing activities to include local and foreign cargo, tanker & RORO vessels, in addition to extending financing to the new and existing ports in Egypt. The division’s new finance commitments in these fields recorded EGP 748 million. Based on such strong performance in 2007 and CIB’s excellent position as the prime Egyptian private sector bank operating with international standards, we are confident that CIB's corporate activities will maintain their growth momentum. Retail Banking CIB foresees a breakthrough in the retail banking market in the near future. This expected surge in the bankable population will likely be the result of sustained growth in Egypt’s GDP and the associated job creation. In order to allow CIB to fully leverage this opportunity and to further enhance its market share, our Retail Banking strategy was revamped in 2007. In order to enhance our delivery and distribution channels, the following actions were taken: • In 2007, we approved the opening of 45 branches in order to expand our customer acquisition channels. 19 of those branches were opened in 2007, while the remaining 24 will be opened dur- ing 2008. Our branch network has expanded to reach a total of 131 outlets. CIB commenced the hiring of a dedicated Sales Team within our existing/new branches to • complement the sales efforts exerted by the existing Customer Service Team. The operational process in the branch network was re-engineered to allow branches to focus • more on sales and to ensure superior quality service for our clients. In terms of product offering, CIB revisited its product range in order to ensure our ability to provide each customer segment with the products that suit its needs at competitive terms & conditions. 2007 Review of Operations The Retail Risk Management Division was founded in 2007 (in line with the international best practices) in order to mitigate the inherent credit risk associated with the strong growth in our retail asset portfolio. Alternative Delivery Channels In 2007, the ATM network was expanded to reach a total of 435 ATMs providing customers with 24/7 banking services. Furthermore, cash withdrawals from our ATMs during 2007 reached an impressive EGP 8.2 billion. Our Call Center, which responds to customer inquiries, has extended its hours of operation to 24/7. Furthermore, during the 1st quarter of 2008, the activities of the call center were extended to include financial transaction execution, such as internal transfers, credit cards settlements, and the issuance of debit & credit cards. The introduction of online E-Banking registration in June 2007 has led to an increase in the number of our E-Banking subscribers of 33%, with existing subscribers accounting for approximately 4 million hits during the year. Credit Cards: 23 In 2007, CIB made its entrance into the Acquiring Business with the deployment of POS machines (which clear card payments) at merchant sites. In tapping into this market, CIB is committed to employing state of the art technology and superior customer service. The initial results are extremely promising and signal that CIB is poised to capture market leadership in this sector in 2008. CIB also invested heavily in the enhancement of the infrastructure of its Credit Issuing Business. Signifi- cant focus has been channelled into refinement and automation of the credit assessment process, as well as added staffing and automation of the central collections function. Finally, CIB paid considerable attention to managing the existing portfolio of cards in order to simultane- ously increase customer satisfaction and the Bank‘s profitability. Residential Property Finance The Residential Property Finance Group was established during 2007 as a separate business line to seize leadership in the Egyptian Housing Finance market. The group mission is to provide top quality, well packaged and tailor-made residential loan services to meet varying financial needs. Our solid business infrastructure and our unique product offering allowed the Residential Property Fi- nance Group to successfully carve its niche within the Egyptian Housing finance market. The business framework is developed to achieve maximum efficiency, volume and profitability. CIB incor- porated international expertise, highly experienced and well-trained professionals, as well as a custom- ized and state of the art IT system to design loan products and financing methods that harmonize with local market conditions. SME Only one year post inception, the SME Banking Group successfully penetrated the untapped SME market in 2007. CIB’s penetration of this segment of the local market occurred in several areas, resulting in a diversified loan portfolio with particular focus on the small-medium manufacturing sector, exports, and suppliers under national programs. This led to the creation of a solid base composed of direct loans which are well funded by a strong deposit base and a growing contingent business. The SME group’s objective is to become Egypt’s leading SME banking provider and contribute positively to the growth and development of Egypt’s economy. Therefore, based on our best-practice infrastruc- ture, our pioneer penetration of the SME market, and our highly skillful and trained team, we are confi- dent that the business will continue to grow its profitability in 2008. 2007 Review of Operations Direct Investment Division During 2007, the Direct Investment Team carefully maintained its primary task of properly allocating in- vestment funds into specific industries where CIB’s return on investment would be optimally maximized. The mission of the division is as follows: • Add value to CIB’s shareholders. Provide a unique opportunity for equity or quasi-equity financing to promising businesses in • Egypt and the region. Provide financial advice to our partners, thereby helping them to realize their growing ambi- • tions. Our mission is accomplished through a hybrid of methods comprising, but not limited to, dividend distri- bution, capital gains, and entering into new investments whereby the synergies for CIB is the focus. 24 In 2008, the Direct Investment Team will focus on expanding in profitable industries such as fertilizers, cement, oil and gas, and consumer finance, among others. Investment in locally listed equities is pur- sued based on a combination of fundamental analysis and market research. Market research is conduct- ed through alliance with various regional entities in order to gain thorough knowledge of such markets. Financial Institutions and Correspondent Banking The FI & Correspondent Banking Group, through its six divisions as well as CIB’s Representative Office in Dubai, has expanded its diversified activities to include trade finance, cross-border allocation, fundrais- ing, marketing products, clearing services, custody services and donor programs. Correspondent Banking is the first point of contact with CIB for financial institutions. It cov- • ers mainly: securing outgoing business for CIB, attracting bonding business (LGs), marketing and cross-selling. The International Presence was established to penetrate new markets overseas and to market • and sell CIB’s and its affiliates’ products to Non Resident Egyptians. • Non-Bank Financial Institutions provides services and products to insurance, leasing, invest- ments and brokerage companies. The loan growth within this division has increased more than ten fold over the last two years. Cross-Border Allocation covers syndications of financial institutions and discounts of trade pa- • pers related to financial institutions (banks and non-banks). CIB has maintained its position as the number one custodian in the local market since 2000. In • fact, assets under custody reached a total of EGP 252.21 billion in 2007, accounting for approxi- mately 40% of market capitalization with a customer base of over 46,000. • Finance Programs and International Funds is regarded as a unique division within the entire banking sector. The division mainly handles funds and finance programs provided by international donors (e.g., USAID, European Union, World Bank, UN, KFW, etc.), with an overall objective of creating sustainable develop mental funds. In addition, the division offers services including, but not limited to, fund administration, optimum investment alternatives, disbursement / repayment mechanisms, technical assessment and monitoring, fund promotional activities and full reporting services. • Our Dubai based Representative Office has acted as CIB's gateway to the GCC. In 2007 the branch introduced several leading GCC based corporate clients to the Bank, providing syndicated facilities, investment opportunities, Islamic Sukuk and trade related paper to financial institutions and corporates operating in the MENA region. These achievements were the result of the estab- lishment of strong relationships with several reputable financial institutions operating out of Dubai. On the retail front, the branch focuses on a niche market, providing private banking services to the Egyptian community working in the UAE. Furthermore, the branch works closely with CI-Capi- tal, our investment banking arm. 2007 Review of Operations Treasury Group The Treasury Group’s strategic priority is the management of Assets and Liabilities of the Bank in terms of interest rate, liquidity and concentration risk. This is achieved through proactive balance sheet man- agement with an emphasis on hedging risk. In addition, the Treasury Group is responsible for managing the proprietary investment portfolio of the Bank. Treasury diversifies its proprietary investment in traditional and alternative asset classes. CIB’s mutual funds offer not only a cash management solution to our clients, but also a maximization of their returns, at a time during which proper liquidity management is viewed as a difficult task. Consequently, CIB was rewarded with Global Finance Magazine’s “Best Money Market Fund Provider in Africa” award. During 2007, CIB strengthened its position as a mutual fund provider by widening its client base, becom- ing a market leader in the offering of mutual fund solutions to Egyptian clientele and contributing to the Bank’s fee income. In addition, as demand for Islamic products has increased globally, CIB has introduced an Islamic Fund jointly with Faisal Islamic Bank, becoming the first bank in Egypt to offer a joint fund. The fund has proven to be very successful, and other banks have followed the same route. 25 Starting in 2007, CIB adopted new market risk modelling techniques and interest rate management methodologies that reflect the latest developments in the market place and abide by Basel Committee recommendations. It is worth highlighting that Treasury implements a balanced and flexible pricing strategy to support CIB’s expansion plan, simultaneously maximizing our profits and maintaining our competitive edge. Dealing Room For the seventh consecutive year, CIB won the Global Finance Award for the Best Foreign Exchange Bank in Egypt. The award acknowledged the market’s appreciation of CIB’s pioneer role in providing tight and competitive market making quotes for banks, corporations and retail clients. Furthermore, CIB expanded its volumes by nearly 110% compared to last year to reach a total of EGP 200 billion. The impressive volume and profits resulted from CIB’s ability to respond to the Foreign Exchange needs of both corporations and large investors. Furthermore, our ability to structure tailor-made hedging and yield enhancement products has significantly increased our customer base and subsequently our market share. Despite the increase of the primary dealers to fifteen members at the beginning of 2007, the CIB Pri- mary Dealers desk has managed to increase its secondary market bond trading volume by more than 300% and its treasury bills volume by more than 250%. Consequently, CIB successfully acquired a 20% market share in the secondary market bond trading and a market share of 5.3% in treasury bills. Moreover, CIB was a co-manager for Egypt’s first dollar dominated bond issue (which matures in 2012). CIB also offers to its clients a variety of tailored products, structure products, repos, reverse repos and tailored maturities. Finally, CIB has always maintained its focus on developing a well-trained Sales force to target new cli- ents (corporations and individuals) and satisfy existing ones. Strategic Relations “Client Focus” being at the core of its activities, CIB takes pride in being the sole bank with a dedicated Strategic Relations Group (SRG), whose main priority is to nurture its relationship with its major institu- tional depositors. With a portfolio of over 170 strategic clients, whose deposits contribute substantially to CIB’s stable funding, the SRG mimics the function of “Private Banking” for its corporate accounts. Of- fering preferential tailor-made services and innovative products, packaged to meet the unique business needs of each individual client, is the very essence of the SRG. The success of the SRG as a function is evidenced by the long-standing client relationships that, despite fierce competition, date as far back as the 1980s, while maintaining the delicate balance between client satisfaction and account profitability. 2007 Review of Operations Risk Management CIB is currently in the process of procuring a Risk Management Application, not only for the purpose of Data Management pertaining to Basel II compliance purposes, but also for Portfolio Management and as well as the upgrade of the Management Information System and Risk Analysis. The Portfolio Man- agement process focuses on the analysis of risks related to the Bank’s banking book from a portfolio perspective. The Department is also responsible for identifying, assessing, monitoring, reporting and controlling / mitigating Operation Risks, through maintaining a robust Risk Management System and effective policies and procedures that reflect international best practices. Risk Exposure Management has made several enhancements to the Approval Process, whereby the involvement of the Credit Administration / AFU as a risk division is currently included in all levels of the Retail Approval Process to ensure compliance with CIB’s Policies and Procedures. These enhancements were a prerequisite for CIB’s expanding strategy in retail. 26 Credit Risk: The bank has a Statistical Rating Model developed to estimate the PD (Probability of Default) risk param- eter for every Corporate Obligor within the Corporate Asset Class, in line with the Foundation Internal Rating Based Approach. The model has currently been used to rate the entire Corporate Banking Portfo- lio for the last two years. Validation for said model will subsequently take place. On the other hand, the data collection process has started, for the other two risk parameters namely; LGD (Loss Given Default) and EAD (Exposure at Default) in order to ultimately adapt the Advanced IRB Approach. The bank has an expert scoring model for the SME (Small and Medium Enterprises) portfolio, which has been in current use to score the relevant portfolio for the last two years. The model will be subsequently validated and calibrated into a PD model once the portfolio reaches a certain size. Pertaining to retail banking, the Bank has recently developed two expert Scorecards for Credit Cards and Consumer Loans. The said scorecards will be used to collect data on the Bank’s retail portfolio for the coming two years and the collected data will then be used to develop models for their risk parameters, namely: PD, LGD and EAD. Market Risk: CIB has developed internally: Market Risk Modules that measure the CoVariance and Historical VaR estimates of its FOREX • and directly managed Equities Positions, An enhanced module that measures the Interest Rate Exposure in the Banking Book in terms of • Expected Loss. • Quarterly Stress Test reports on the Market Risk Exposure. Risk Asset Management: The primary goal of CIB’s Risk Asset Management is to monitor and handle problem loans at an early stage before they develop into Non-Performing Loans and convert the maximum possible amounts to higher credit quality brackets whenever possible. The Department also determines the optimal recovery prospects that can be achieved from the accounts and constantly strives to maximize the recovery rates. A detailed Loan Portfolio Quality Analysis Report summarizing movement of accounts and adequacy of provisioning is prepared monthly by the Risk Asset Management Department. The Bank’s prudent Risk Rating and Provisioning Policy has enabled CIB to build up substantial provisions against possible loan losses. Total Loan Loss provisions reached EGP 1.26 billion in December 2007, compared to EGP 1.15 billion in 2006, despite the write off of EGP 178 million in 2007, compared to EGP 228 million in 2006. Due to CIB’s prudent Credit and Provisioning Policies and its ability to restructure a significant amount of Non-Performing Loans, the Bank has improved its General Ratio for both Direct and Contingent Exposure to 2.74%. The Department continues to make valuable contributions to the Bank’s bottom line with ag- gregate Recoveries of EGP 251.2 million as of December 2007, up from EGP 206.7 million in 2006. 2007 Review of Operations 27 The tabulation hereunder illustrates some key figures and ratios: 2005 2006 2007 Gross Loans (000's of EGP) 14,988,037 18,503,584 21,465,494 NPL (%of loans) 5.6% 3.8% 3.0% Charge Offs to Date (000's of EGP) 1,041,294 1,269,741 1,447,577 Recoveries to Date (000's of EGP) General Ratio 106,680 2.49% 206,742 2.49% 251,214 2.74% Recoveries to Date / Charge-offs to Date 10.2% 16.3% 17.4% Human Resources The main purpose of the HR Department is to provide the best professional services to attract, develop, and retain a motivated and diverse workforce within a supportive work environment, in order to ensure the successful delivery of CIB’s Business Plans & Growth Aspirations. During 2007, CIB's Recruitment Team remained focused on fulfilling the Bank's manpower requirements, hiring the best caliber candidates – young and experienced – to ensure that business plans are met. Along this line, the Recruitment and Selection Team has successfully automated significant portions of the recruitment process, allowing us to fill 729 vacancies within the Bank. Moreover, the revision in the structure of compensation packages has resulted in a large decrease in the Bank's overall turnover rate; as well as enabling the Recruitment Team to excel in recruiting the best caliber employees. The Training and Development Team strongly believes in investing in CIB's human capital. Consequently, the team utilizes the most reputable and prestigious training institutions, both locally and internationally, in order to provide the best and highest quality training to CIB employees at all levels. During 2007, 320 training events (135 overseas, 122 local and 63 in-house courses) were held, which benefited a large number of staff throughout the Bank with a total training hours of 75,000, which represents 62% of the Bank’s employees. Courses have been carefully and professionally selected, based on the assessment of employees’ needs, starting from introductory banking level up to the highest technical and specialized levels in all banking and management fields. During 2007, and in coordination with the Egyptian Banking Institute, the Training and Development Division organized the “Bank Risk Game,” which was attended by all the Bank Directors. The Risk Game provides a stimulating learning experience by giving its participants the opportunity to make decisions that are similar to those that might be made by the general manager of a commercial bank. Also, the Training and Development Division continued the Branch Head Certificated Program, covering 11 mod- ules in Management, Banking Technicalities and other job related subjects. Moreover, 40 Branch Heads and their Deputies completed the Modules of the Branch Heads Certificate, making the total number of Certified Branch Heads and Deputies in the Bank 147. On the Organization Development and Career Planning front during 2007, the focus was on reviewing all job descriptions bank-wide and improving the synergies between different levels. Also during 2007, the Team pursued the finalization of different Organization Charts, with special emphasis on emerging strategic business lines. During 2007 the department, for the first time, compiled all Human Resources Policies that covered all HR activities, and made them available on CIB’s Intranet for greater availability to all employees. This act was supported by the establishment of an HR Information Focal Point, which acted as the first stop for queries and clarifications regarding HR Policies and Procedures. Finally the department in 2007 launched the Performance Management Process, which includes the Annual Performance Appraisal process, in addition to complementary processes that support employee evaluation and development. The process emphasized the importance of incorporating CIB Core Values in all of our dealings, the necessity of identifying employees’ competence gaps, and the implementation of plans to close them out and ensure employee skill development. Personnel The primary goal of the Personnel Department is to provide a full range of personnel services to all CIB employees. This aim is achieved through the implementation of the latest and most up-to-date trends in 2007 Review of Operations the field, as well as by recommending new and enhancing existing benefits, with the objective of main- taining and retaining CIB’s most vital asset – Our Staff –. Among the major achievements, during 2007, were improvements in the structure of compensation packages, as well as staff loans and job allowances for the different departments, which improved CIB’s retention rate as well as its ability to attract top talent. Another achievement was the activation of Oracle system applications through which all pay slips are issued. Consistent with our goal, the Personnel Department is in the process of launching an Employee Benefits and Services interactive web page, aiming to make self-service available to all CIB staff. This project is expected to be finalized during the 2nd quarter of 2008. The Personnel Department also continuously conducts salary surveys to benchmark various jobs and positions within CIB to those in the market. Information and Communication Technology 28 The IT Department has expanded on its state of the art infrastructure and facilities, continuing to provide services internally and for our customers. The main IT achievements during 2007 were: Core Banking System: CIB is currently migrating to T-24, the No. 1 Ranked Universal Banking • System (both Retail and Corporate) featuring: o Enhanced business cycles and shortened time requirements for the fulfilment of important tasks. o 24 x 7 non-stop operations with multiple time zones, eliminating the previously required End of Day (EOD) constraints. o Integrated environment for business applications, eliminating most of the interfacing/integra- tion restrictions The Interactive Voice Response (IVR) System was upgraded to feature the latest technology. Upgrading CIB's core network, and applying the "wired speed" concept. • • o 435 Automatic Teller Machines (ATM) machines installed, forming the largest widely available ATM net work in Egypt. • E-Security, which provides the vehicle for CIB's initiative of being the first bank in Egypt to abide by the newly introduced Electronic Signature Law, utilizing PKI, which is an online infrastruc- ture using encryption, digital signatures and digital certificates to secure applications, communica- tions and transactions: o First Installation in the banking sector in Egypt. o Governorate by ITIDA. o Implemented on Internet Banking and Corporate Internet. Personalization Center: Adding VISA to the previously existing MasterCard, and extending our • leading setup capabilities for mass production of SIM chip cards (Smart Cards). • Introducing Anti Money Laundering (AML) infrastructure, the first in Egypt. Fraud Monitoring: Added functionality for debit cards beyond existing credit cards, utilizing an • active online system. Acquiring Business: Introduction of CIB as a new strong player in the credit card acquisition • market (for both VISA & MasterCard). • CIB Printing Center: Featuring the most advanced full colour printing technology. 2007 Review of Operations Compliance Department The Compliance Department was set up in March 2007 to perform as an independent function report- ing to the Chairman of the Board to protect the Bank against any possible Regulatory, Reputation, Anti Money Laundering and Fraud Risks. It originally operated under the Audit Department, focusing on Anti Money Laundering. The new structure of the Compliance Department covers three divisions: Compliance with Regulations, Policies and Procedures responsible for ensuring the availability of updated Procedures in compliance with the prevailing Regulatory, Local Banking Laws, International Standards and Best Practices and their proper implementation. During 2007, the division assessed potential new business and products in terms of the level of compli- ance risk, especially for non professional customers. It also focused on the escalation and identification of corrective measures for customer complaints to ensure non-recurrence and that customer protection is maintained. It reviewed a number of new and updated different policies, procedures and workflows and followed proper implementation to ensure tight controls are in place. Anti Money Laundering responsible for the Bank’s Financial Security by ensuring that we know our customers (“KYC”) through adequate and sufficient customer information, in addition to monitoring transactions with the branch network and other business areas to be satisfied that our customers only engage in legitimate business. 29 In 2007 the division updated the individual account opening documentation and the “KYC” form for new clients to be simpler and concise yet just as informative and clear. Compliance started a project to up- date the customer information for the entire Bank’s client base that will be finalized by the end of 2008. This data will also be a strong marketing and cross-selling tool to enable lines of businesses to cater to different customer segments’ needs. The division also tailored a more user-friendly in-house means of transaction monitoring. A more sophisticated automated AML solution and filtration system will soon be in place during 2008 to comply with international standards. Corporate Governance and Code of Conduct responsible for ensuring that the Bank complies with the Corporate Governance Code that CIB Board and Management have undertaken to adopt. In addi- tion, it ensures the Bank’s staff awareness and compliance with corporate ethics governed by the Code of Conduct. It coordinates with the Board’s Governance Committee to ensure that CIB complies with all aspects of the Governance Code. Compliance updated the Bank’s Code of Conduct governed by CIB’s standards of ethics and CIB’s set of core values in October 2007. In an effort to encourage staff to speak up and report misconduct, viola- tions or breaches, the concept of “Whistle Blowing” has been introduced among employees, ensuring confidentiality and not allowing retaliation for staff reporting of such incidents. Compliance Department in turn, acts as a focal point for internal reporting of suspicious activities such as policy breaches, law violations, staff misconduct, and external fraud, and works closely with Senior Management. It presents a quarterly report to the Audit Committee of the Board on such findings, with recommendations and corrective measures. It cooperates with CBE Anti Money Laundering Unit on any cases of suspicion of Money Laundering. The Compliance Department also ensures the availability of employee training programs to raise staff awareness of such issues, thus helping them report identified cases through the proper channels. Finally Compliance, in coordination with Human Resources and Personnel, has conducted a risk assess- ment process for all positions in the Bank. They were segmented to high, medium and low. According to this assessment, staff is to rotate or assume other positions after a specific period of time, depending on the level of risk of each area and position. In parallel, the team has reviewed the functions to ensure that there is no conflict of interest. Strategic Subsidiaries and Affiliates Client focus Strategic Subsidiaries and Affiliates CI Capital Holding Capitalizing on its strength as Egypt’s leading private bank, CIB orchestrated its entry into the market of financial flows, investment and securities trading with the incorporation of CI Capital Holding in the year 2004 to become CIB’s full fledged investment banking arm. The entity offers a wide plethora of investment services such as retail and institutional brokerage, in- vestment banking, asset management, private equity and research to local, regional and international clients. Commercial International Brokerage Company 32 Through its brokerage arm, CI Capital offers a wide range of securities brokerage services for both retail and institutional investors, with a presence in ten of CIB’s branches. In its pursuit of regional expansion, CI Capital Holding acquired a 50% stake in United Brokerage Com- pany (UBC) to accentuate the group’s brokerage operations in United Arab Emirates. UBC is a joint ven- ture company between CI Capital Holding and Oman and Emirates Investment Holding (which is jointly owned by both the Government of Abu Dhabi and the Government of Oman), creating a cross platform execution in the Emirates, Egyptian and Omani markets. Investment Banking CI Capital Investment Banking activities includes equity capital market products (e.g., private place- ments, IPO, ADR/GDR listing, and valuation advisory), Merger & Acquisition activities (e.g., buy-side advisory, sell-side advisory, asset disposal programs & divestitures, and MBOs & LBOs), and debt capital markets products (e.g., bond issuance, acquisition finance, and debt restructuring advisory). The investment banking arm successfully concluded privatizations in the Tobacco, Oil & Gas, Telecom and Retail industries. Commercial International Asset Management The asset management division was started in late 2004 to benefit from the fast growing financial wealth management market in Egypt and the MENA region. The asset management arm became one of the main investment managers in Egypt in 2007, with arguably one of the strongest reputations, and more than EGP 8 billion assets under management. The division serves a variety of clients through mutual funds as well as segregated portfolios. In its portfolio management operation, the division offers full discretionary services to high net-worth individu- als and institutional investors. Clients are provided with comprehensive personalized services, which are tailored to their investment and reporting requirements. The list of existing and targeted clients includes Egyptian banks, insurance companies and financial institutions as well as pension funds. Research Originally, the research department operated as part of the brokerage arm up until 2005, when it was spun off into a separate entity, serving CIB-wide affiliates with equity, industry, and economic research. The equity research team includes certified analysts covering the various sectors and companies traded in the Egyptian stock market. In fact, the industry research team supports investors in their investment- decision process in the Egyptian market through in-depth studies that cover several sectors. Moreover, the economic research team tracks, analyzes and projects macroeconomic indicators in the Egyptian market, which feed into equity and industry research analysis. Strategic Subsidiaries and Affiliates Commercial International Life Insurance Company (CIL) Commercial International Life Insurance Company was formed in 1999 as an Egyptian joint stock com- pany offering international value-for-money life insurance products. CIB owns 40% of the company’s stock, the UK’s leading insurer Legal & General owns 40% and the International Finance Corporation and Mansour & Maghraby for Investment and Development own 10% each. CIL was the first bancassurer in Egypt and its products are available through the branch network of CIB and other banks. After 8 years of operations, CIL now occupies a dominant position in the life insurance sector in Egypt, with around 40% market share measured by new business and total premiums. CIL has received re- gional awards for its contribution to the development of the insurance industry. CIL provides long term savings, protection and investment products for both individual and corporate customers, and it has recently added new investment funds which give customers still more investment choices. In 2007, CIL’s total Funds under Management exceeded EGP 1.4 billion, which reflects the con- tinued significant growth of the business and CIL’s capacity to bring new products to market. CIL’s impressive growth and market leading position is built on a reputation for providing innovative value-for-money products and superior customer service. 33 Corporate Leasing Company (Egypt) S.A.E Corplease has successfully operated since 2004 and has become one of the leading leasing and asset finance companies in Egypt. The company provides a wide range of leasing products and services includ- ing vendor finance, I.T. leasing, equipment finance, transportation finance as well as large ticket struc- tured leasing transactions. Corplease has built up a strong client base of mid and large cap corporations in various segments of the economy. CIB owns 40% of Corplease’s shares and is joined by the CIB Social Insurance Fund with 12%, Germa- ny’s DEG, part of KfW Bank, with 22% and France’s U.B.A.F., an affiliate of the Credit Agricole Group, with 16%. Corplease achieved strong growth in 2007, whereby the company’s lease portfolio grew by a rate of 125% from 2006. The company continues to benefit from highly favorable asset quality, a controlled cost structure and conservative liquidity and capitalization levels. Corplease is actively investing in its human resources, expanding its product offering and diversifying its funding base. Haykala Investment Managers Established in August 2005 as a private equity firm, Haykala is engaged in buyout and turnaround activities. CIB is the largest shareholder with a 40% stake of the company’s capital, while the remaining 60% is owned by high net-worth individuals, institutional investors and the Haykala management team. During 2007, Haykala continued its investment, reaching 85% utilization of its first fund under the name of “Middle East Turnaround Investments Limited” (Haykala Turnaround Fund). Since inception of the fund, Middle East Turnaround Investments Limited is considered the only turnaround fund in Egypt, of which the portfolio comprises 5 investments in different industries/business lines, with 46% in Dairy and Juice, 17% in confectionery, 32% in steel and 5% in Oil Services. In all its acquisitions, Haykala Fund takes a stake of between 50 and 100%. Strategic Subsidiaries and Affiliates Cotecna Trade Support (CTS) CTS was established in 2005 to provide Collateral Management and Stock Monitoring services to the business community in Egypt. 40% of CTS’s shares are owned by CIB, with the remaining 60% owned by the Swiss Company Cotecna Inspection Services S.A., a market leader in trade finance related services. The services provided by CTS allow the use of commodities and other goods as collateral security in the context of a loan. Additionally, the imported goods can be inspected and monitored at origin until the ar- rival to final destination, to ensure their compliance and conformity with the agreed specifications. CTS studies and considers carefully each case, in order to apply the services in a manner that meets the needs and requirements of both the client and the lender. At the end of 2007, the company had more than USD 15 million value of goods under management, in- cluding soft commodities, livestock, vehicles, grain and others. The company has a considerable pipeline and can confidently expect further growth in 2008. 34 Egypt Factors Licensed by GAFI in 2007, Egypt Factors has become the first factoring company in Egypt. The company’s authorized capital of USD 15 million and issued capital of USD 5 million is shared among CIB Group and the Maltese based bank Fimbank, with 40% each, as well as the IFC, with a 20% holding. With a clear focus on trade finance instruments, Egypt Factors is committed to supporting and promoting Egyptian cross-border trade, i.e. exports and imports as well as domestic trade. The elements of its service - packages including Receivables Administration, Bad Debt Protection, and Funding, are designed to cater to the needs of suppliers both for domestic as well as international deliv- eries. Also, buyers from domestic or foreign sources are delighted to realize that their purchasing power increases without the utilization of their banking facilities. Supported by state of the art systems, Egypt Factors SAE will provide a superb service combined with access to nearly 70 countries spanning the globe. International Appraisal & Collection Company. (IACC) IACC was established in 2007 as an Egyptian joint stock company. CIB is the largest shareholder with 40% stake of the company’s capital, while the National Bank of Egypt owns 20%, CIB Social Insurance funds 16% and other investors own 24%. IACC specializes in the evaluation of real estate and movable assets, including the machines, equip- ments, ships, touristic villages, vehicles & products. The company also conducts inquiries & field inves- tigations on the individuals and companies, in addition to collecting all debts from debtors. Moreover, the company performs the ownership research procedures for real estate and movable assets, as well as taking the necessary procedures to legalize in kind rights (registration & mortgaging of lands & build- ings) and incorporation of companies. Finally, IACC sells real estate and movable assets through public auctions or closed proposals. During 2007, IACC managed to increase collection of criticized debts from 15% to 75%. The company serves a variety of clients and companies, especially prime local and foreign banks. Strategic Subsidiaries and Affiliates Falcon for international Security & Services Company International Security and Services Company (Falcon) was established during 2006 as a subsidiary en- gaged in the provision of various security services for the Bank, its affiliated companies, as well as third party entities. Directly and indirectly through its affiliates, CIB holds a majority stake in the company’s capital. The company’s services consist of securing & protecting facilities and VIPs, providing High-Tech industrial and non-industrial security systems, and offering security consultation as well as physical funds transfer. The company’s vision is to become the leading local and regional provider of security and security-re- lated services to all outlets, companies and individuals. According to well-defined geographical segmen- tation, Falcon penetrated the security and cash transfer market, which was evidenced by the increase in the number of signed contracts by 57% and 269% respectively in 2007 compared to 2006, to become the market leader, with an outstanding 40% market share. During 2007, Falcon received the ISO 9001, the first time in Egypt a security related Services Company has received this certificate. Furthermore, the company was dubbed by many reputable customers as the #1 company among all security agencies operating in Egypt. 35 Looking forward, and capitalizing on the company’s 1400 employees, its reputation, and experience gained in Egypt, the company aims to offer its services abroad, given the high level of demand for secu- rity services in the Gulf region. Corporate Social Responsibility Respect to the individual Corporate Social Responsibility The promotion of Corporate Social Responsibility (CSR) is an important component of our business in its overarching of our mission statement’s objective ‘to grow and help others grow’. In addition, CSR supports other policy priorities, which include contributing to the sustainable development of Egypt's economic growth. We believe that a real commitment to CSR unites an organization, strengthens its reputation, and builds meaningful relationships between the corporate sector and the community in which our institution operates. CIB is proudly engaged in several activities of social responsibility, includ- ing fundraising campaigns, sponsorships, social involvement and offering funds with competitive pricing to create new job opportunities and increase living standards. CIB regards corporate responsibility as the long-lasting dedication by our business to perform ethically and participate in economic development, while providing better quality of life for the workforce, their families, the local community and the society at large. Fund Raising Management Campaigns CIB is expanding its charitable fundraising services with the goal of becoming a major contributor to positive societal change, contributing to a better future for the country and its people. The reach of our fundraising services has once again been expanded to attract both local and regional donations, using different channels such as the telephone, internet, automatic teller machines, Bank’s branch network and swift transfers. CIB also enjoys several alliances with financial institutions in Qatar, Saudi Arabia and the United Arab Emirates. 37 In fact, CIB has helped in raising funds for the following entities during 2007: Health and Social Engagements: Providing direct financial contributions to Ein Shams University Hos- pital (public hospital), Mahmoud Hospital (non-profit hospital), Khayrazad Organization for Social Care (private sector organization that provides financial support for public hospitals within Cairo), Faculty of Medicine Menoufeya University – Lung Diseases Center (public university hospital), Faculty of Medicine Cairo University - Center for Social & Preventive Medicine (major medical hub that provides health treat- ment for the under the poverty line segment) Education: Allocating a fund for the renovation of three public schools. The 3 schools have been chosen in disadvantaged areas in Upper Egypt. CIB will supervise the renova- tion process, utilizing our projects and purchasing departments, in addition to providing financial sup- port. Sponsorships and Social Involvement CIB’s financial sponsorships and donations are focused on projects that help communities achieve their goals. Art Sponsorship: CIB regularly sponsors art galleries organized by the Ministry of Culture, with the aim of encouraging painters in different levels of their apprenticeship. CIB is also recognized as a significant collector of Egyptian art. Our Employees and the Community: CIB encourages its employees to actively participate in commu- nity development. In fact, the Bank provides the staff with the necessary resources in terms of funding and training, in order to make a positive contribution within the community. Funds Directed to Social Development CIB has a specialized division which handles developmental funds and finance programs provided by governmental and international donors. These funds are known for their low interest rates and simple application procedures. The program aims to create new job opportunities and higher income amongst rural populations with special emphasis on women and small farmers. Moreover, CIB is engaged in envi- ronmentally friendly projects designed for the preservation of natural resources. Financial Statement A. CIB Stand-alone Attention to details Financial Statement A. CIB Stand-alone 39 Financial Statement A. CIB Stand-alone Balance Sheet Unconsolidated as of Dec. 31, 2007 Assets Cash & Due From Central Bank Due From Banks Treasury Bills and other Notes Discountable at the CBE Trading Financial Investments Available for Sale Financial Investments Note No. Dec. 31, 2007 EGP Dec. 31, 2006 EGP (4) (5) (6) (7) (8) 4,953,205,430 3,742,876,516 13,782,062,043 5,432,677,413 2,948,674,319 4,058,745,805 588,473,270 887,142,138 2,382,992,007 3,178,163,512 Loans & Overdrafts (10&9) 20,375,525,133 17,464,675,855 40 (Net Of Provision for Doubtful Debts) Held to Maturity Financial Investments Financial Investments in Subsidiary and Associated Co. Debit Balances & Other Assets Deferred Tax Fixed Assets (Net) Total Assets Liabilities & Shareholder's Equity Liabilities Due to Banks Customers Deposits Dividends & Profit Sharing Credit Balances & Other Liabilities Long Term Loans Other Provisions Total Liabilities Shareholders' Equity Issued & Paid - in Capital Reserves Reserve for employee stock ownership plan (ESOP) Total Shareholders' Equity Net Profit of the Year (11) (12) (14) (26) (15) (16) (17) (18) (19) (20) (29) (21) 443,894,166 822,284,338 365,723,936 475,836,460 1,020,565,573 821,707,644 52,819,475 40,632,719 607,104,820 497,753,223 47,521,040,172 37,422,495,623 2,377,082,435 1,212,524,120 39,514,539,992 31,600,227,198 - 287,235,147 773,862,137 843,634,576 161,356,219 99,166,861 395,332,813 339,825,378 43,222,173,596 34,382,613,280 1,950,000,000 1,950,000,000 1,087,294,215 1,089,882,343 29,159,584 3,066,453,799 3,039,882,343 1,232,412,777 Total Shareholders' Equity & Net Profit 4,298,866,576 3,039,882,343 Total Liabilities & Shareholders' Equity 47,521,040,172 37,422,495,623 Contingent & Commitments Liabilities (22) 11,529,010,709 6,864,843,585 The Accompanying Notes are an integral part of the Financial Statements " Auditors Report Attached " . Financial Statement A. CIB Stand-alone Income Statement Unconsolidated as of Dec. 31, 2007 Note No. Dec. 31, 2007 EGP Dec. 31, 2006 EGP Interest Received from Clients & Banks 2,592,817,080 1,749,822,089 Interest Received from Treasury Bills & Bonds 400,845,143 567,945,991 Deduct Interest Paid to Clients & Banks (1,796,702,031) (1,378,162,881) Net Interest Income 1,196,960,192 939,605,199 Banking Fees & Commissions Shares Dividends Foreign Exchange Profits 547,669,248 399,573,750 66,158,925 47,206,917 41 (23) 167,687,637 108,888,845 Profits From Selling Financial Investments 174,061,817 145,447,016 Profits From Dispose pat of Subsidiaries (24) 148,393,558 - Trading Financial Investments Revaluation Differences 7,680,871 16,534,014 Other Income Total Fee Income Net Operating Income Deduct Provisions 38,433,610 99,613,908 1,150,085,666 817,264,450 2,347,045,858 1,756,869,649 (250,416,667) (194,312,750) Other Financial Investments Revaluation Differences (25) 4,185,378 (15,812,507) General & Administrative Expenses & Depreciation (636,363,618) (604,812,445) Other Expenses Net Operating Profits Non_Operating Income Net Profit Before Tax Income Tax Deferred Tax Net Profit After Tax (77,832,699) (63,627,935) (960,427,606) (878,565,637) 1,386,618,252 878,304,012 1,269,870 418,000 1,387,888,122 878,722,012 (27) (167,662,101) (83,778,952) (27& 26) 12,186,756 7,101,704 1,232,412,777 802,044,764 Earning Per Share (28) 5.59 3.64 42 Financial Statement A. CIB Stand-alone Unconsolidated Cash Flow as of Dec. 31, 2007 Cash Flow From Operating Activities Net Income before tax 1,387,888,122 878,722,012 Dec. 31, 2007 EGP Dec. 31, 2006 EGP Adjustments To Reconcile Net Income To Net Cash Provided by operating activities Depreciation 120,918,839 93,436,004 Provisions (Addition during the Year) 250,416,667 194,312,750 Trading financial investments evaluation differences (7,680,871) (16,534,014) Other financial investments evaluation differences (4,185,378) 15,812,507 Utilization Of Provisions (except provision for doubtful debts) Provisions No Longer Used FCY revaluation Differences of Provisions Balances except doubtful debts - (330,916,414) (7,036,600) - (1,904,981) (333,197) Gains From Selling Fixed Assets (1,269,870) (418,000) Profit From Selling financial Investments (174,061,817) (145,447,016) Profits From Dispose part of a Subsidiary (148,393,558) - Income tax paid (80,317,367) (34,049,494) FCY revaluation diff. of Long Term Loans 1,733,674 1,928,090 Reserve for employee stock ownership plan (ESOP) 29,159,584 Operating Profits Before Changes in Operating Assets & Liabilities Net Decrease (Increase ) in Assets 1,365,266,444 656,513,228 Due From Banks (7,960,703,701) (1,983,839,488) Treasury Bills and other Notes Discountable at the CBE 2,266,818,190 (651,338,798) Trading financial Investments 306,349,739 968,521,368 Available for sale financial investments 1,121,812,258 (865,453,240) Loans & Overdrafts (3,054,288,046) (3,591,677,947) Debit Balances & Other Assets (198,443,941) (351,932,559) Net Increase (Decrease) In Liabilities Due to Banks Customers Deposits 1,164,558,315 492,844,016 7,914,312,794 6,729,969,165 Credit Balances & Other Liabilities (150,080,573) (231,362,804) Net Cash Provided from Operating Activities 2,775,601,479 1,172,242,941 Financial Statement A. CIB Stand-alone Unconsolidated Cash Flow as of Dec. 31, 2007 Dec. 31, 2007 EGP Dec. 31, 2006 EGP Cash Flow From Investment Activities Sells (purchase) of subsidiaries & associated companies 107,524,396 (363,430,845) Prepaid for Fixed Assets , Premises (278,980,037) (262,195,650) and Fitting- out of Branches Redemption Of Held to maturity financial Investments 378,390,172 276,026,346 Net Cash (Used in ) Investment Activities Cash Flow From Financing Activities Increase in Long - Term Loans Dividends Paid 206,934,531 (349,600,149) 60,455,684 (1,032,231) (287,235,147) (200,165,754) 43 Reserve for financial investments revaluation Diff. - - Net Cash (Used in) Financing Activities (226,779,463) (201,197,985) Net cash & cash equivalent changes 2,755,756,547 621,444,808 Beginning Balance of cash & cash equivalent 4,023,396,001 3,401,951,193 Cash & Cash Equivalent Balance At the End of the year 6,779,152,548 4,023,396,001 Cash & Cash Equivalent are Represented as Follows : Cash and Due from Central Bank 4,953,205,430 3,742,876,516 Due from Banks 13,782,062,043 5,432,677,413 Treasury Bills and other Notes Discountable at the CBE 2,948,674,319 4,058,745,805 Due from Banks (Time Deposits) (13,264,218,534) (5,303,514,833) Treasury Bills with maturity more than three months (1,640,570,710) (3,907,388,900) Total Cash & Cash Equivalent 6,779,152,548 4,023,396,001 Financial Statement A. CIB Stand-alone 44 l a t o T P G E r o f e v r e s e R e e y o p m e l i p h s r e n w o k c o t s P G E ) P O S E ( n a l p s t fi o r P r a e Y e h t f o P G E r o f e v r e s e R t n e m t s e v n i n o i t a u l a v e R P G E . f f i D e v r e s e R l a i c e p S e v r e s e R l a r e n e G e v r e s e R l a g e L P G E P G E P G E l a t i p a C P G E 6 0 0 2 t a e c n a a B l 7 0 0 2 , 1 3 . c e D f o s a d e t a d i l o s n o c n U y t i u q E l ' s r e d o h e r a h S n i s e g n a h c f o t n e m e t a t S 6 0 0 , 6 4 6 , 9 3 0 9 , 9 0 7 , 2 6 1 5 5 5 , 5 7 7 , 3 2 7 4 3 6 , 8 2 1 , 1 3 3 0 0 0 , 0 0 0 , 0 0 3 , 1 e h T f o i g n n n g e b i ) 0 0 0 , 0 0 0 , 0 5 6 ( - 0 0 0 , 0 0 0 , 0 5 6 e s a e r c n I l a t i p a C r a e Y 8 9 0 , 0 6 2 , 7 2 5 , 2 - - 4 6 7 , 4 4 0 , 2 0 8 ) 7 4 1 , 5 3 2 , 7 8 2 ( ) 2 7 3 , 7 8 1 , 2 ( 3 4 3 , 2 8 8 , 9 3 0 , 3 - - - - - - - - - - - ) 7 1 6 , 9 0 8 , 4 1 5 ( ) 7 4 1 , 5 3 2 , 7 8 2 ( 4 6 7 , 4 4 0 , 2 0 8 l a t o T P G E r o f e v r e s e R k c o t s e e y o p m e l i p h s r e n w o * ) P O S E ( n a l p P G E e h t f o s t fi o r P r a e Y P G E 4 8 5 , 9 5 1 , 9 2 4 8 5 , 9 5 1 , 9 2 - 3 4 3 , 2 8 8 , 9 3 0 , 3 ) 8 2 1 , 8 8 5 , 2 ( 7 7 7 , 2 1 4 , 2 3 2 , 1 - - - - - 7 7 7 , 2 1 4 , 2 3 2 , 1 - - - - ) 2 7 3 , 7 8 1 , 2 ( - - - - - - - - - - - 9 7 3 , 7 0 7 , 4 7 4 8 3 2 , 2 0 1 , 0 4 - - - - s e v r e s e r o t r e f s n a r T s t fi o r p d e t u b i r t s i D e h t f o s t fi o r P t e N r a e y f o t r a p e g a s U e v r e s e r d n e e h t t a e c n a l a B r a e Y e h T f o 4 3 6 , 8 5 4 , 7 3 0 9 , 9 0 7 , 2 6 1 4 3 9 , 2 8 4 , 8 4 5 2 7 8 , 0 3 2 , 1 7 3 0 0 0 , 0 0 0 , 0 5 9 , 1 r o f e v r e s e R t n e m t s e v n i . f f i D n o i t a u l a v e R e v r e s e R l a i c e p S e v r e s e R l a r e n e G e v r e s e R l a g e L P G E P G E P G E P G E l a t i p a C P G E 7 0 0 2 - - ) 8 2 1 , 8 8 5 , 2 ( - - - - - - - - - - - 4 3 6 , 8 5 4 , 7 3 0 9 , 9 0 7 , 2 6 1 4 3 9 , 2 8 4 , 8 4 5 2 7 8 , 0 3 2 , 1 7 3 0 0 0 , 0 0 0 , 0 5 9 , 1 k c o t s e e y o p m e l r o f e v r e s e R ) P O S E ( n a p l i p h s r e n w o i - n g e b t a e c n a a B l r a e Y e h T f o g n n i - e r f o t r a p e g a s U e v r e s e h t f o s t fi o r P t e N r a e Y 6 7 5 , 6 6 8 , 8 9 2 , 4 4 8 5 , 9 5 1 , 9 2 7 7 7 , 2 1 4 , 2 3 2 , 1 6 0 5 , 0 7 8 , 4 3 0 9 , 9 0 7 , 2 6 1 4 3 9 , 2 8 4 , 8 4 5 2 7 8 , 0 3 2 , 1 7 3 0 0 0 , 0 0 0 , 0 5 9 , 1 r a e Y e h T f O d n E e h T t A e c n a l a B ) 9 2 ( r e b m u n e t o n o t r e f e R * Financial Statement A. CIB Stand-alone Notes to Unconsolidated Financial Statement as of December 31, 2007 (1) Organization and Activities Commercial International Bank (Egypt) S.A.E was formed as a join stock company on August 7, 1975 under the Investment Law No. 43 for 1974. The Bank is licensed to carry out all commercial banking activities in Egypt through its Head Office and eighty eight branches, in addition to forty three units. (2) Significant Accounting Policies A) Basis of Preparing Financial Statements The Unconsolidated Financial Statement is prepared in accordance with Central Bank of Egypt Financial Statements regulations issued on 27 June 2002 and its adjustments. B) Transactions in Foreign Currencies - The Accounting records of the bank are maintained in Egyptian pounds. Transactions in foreign currencies conducted during the year are recorded at the foreign exchange rates prevailing at the time such transactions take place . Assets & Liabilities are revalued at the foreign exchange rates prevailing at the end of year , generated gain and losses are recorded in “Foreign Exchange Income“ in the income statement. 45 - Forward contracts are evaluated at the end of the financial year at its fair value on this date using the forward rates for the remaining periods until maturity dates of these contracts. The revaluation differences are recorded in “ Foreign Exchange Income “ in the income statement. - Currency SWAP contracts are recorded on the date of commitment under contingent liabilities accounts. The difference between the two parts of the contract is recorded in other liabilities or other assets as unrealized gain /loss on the date of commitment . The said difference is amortized by crediting / debiting the “ Foreign Exchange Income“ in the income statement. - Premium paid for foreign currencies option contracts is recorded in the Balance Sheet under “ Debit Balances & Other Assets “ such premium is settled in the unconsolidated income statement according to the evaluation of these contracts at fair value. The difference between premium received and paid concern the customers hedging option contracts recorded in the Balance Sheet under “ credit balances & other liabilities “ category and settled in “ foreign exchange income” on accrual basis. C) Realization of Income The bank applies the accrual basis in recording interest received from Loans & Overdrafts, Due from Banks, Treasury Bills , reverse repose and Bonds. Interest on past due Loans & Overdrafts are not recorded on the unconsolidated income statement. Dividends income are recognized when declared. D) Treasury Bills Treasury Bills are recorded at face value. The issuance discount is recorded in Other Liabilities and deducted from the Gross Treasury Bills balance on the Balance Sheet. E) Repos & (Reverse Repos )Transactions Repos (Reveres Repos) transactions are eliminated (recorded) on the Unconsolidated Balance Sheet under “ Treasury Bills and Other Notes Discountable at the CBE “ whereas its cost (revenue) is recorded on the income statement mate term “interest paid to clients & Banks“ (“interest received from treasury Bills & Bonds “) F) Evaluation of Trading Investments - Trading investments including portfolios managed by other party are evaluated at the end of the financial year at its fair market value and the evaluation difference is recorded in income statement. - Trading investments not satisfying the trading investment classification condition are evaluated at their book value. Such value is subject to be reduced in case of a continual decrease based on the comprehensive objective study of the latest unconsolidated financial statements for the company issued the securities. The evaluation difference is recorded in the income statement. Financial Statement A. CIB Stand-alone - Mutual fund certificates which have issued by the bank are evaluated at the end of the financial period at their fair market value and the evaluation difference is recorded in income statement. G) Evaluation of Available for Sale Investments Available for Sale Investments are evaluated at the lower of cost (taking in consideration the evaluation of Foreign Currency ) or fair value for each investment and the differences are recorded in “other investments evaluation differences “ in Income Statement. In case of increase in the value , such increase is added to the same category within the limit of amounts previously charged to income statement for previous financial periods. Except the difference related to prior years which up to the end of the year 2002 should be recorded as a special reserve in shareholders’ equity. In case of decreases in the investment value its share in the special reserve will be utilized , and the remaining balance should be transferred to income statement. In case of selling the investment, it’s share in the special reserve should be transferred to income statement . 46 H) Evaluation of Held to Maturity Investments Bonds purchased from the primary market are evaluated at cost, representing the nominal value adjusted by the issuing premium/ discount which is amortized using the straight line method. The amortization value is recorded in the interest received from treasury bills and bonds in the income statement. The same treatment is applied to bonds purchased from the secondary market at a value higher or lower than the nominal value, and the cost is reduced by the gains related to the previous period of the purchasing date. In case of downfall of the fair value of each bond the book value shall be adjusted and the difference is recorded in “other investments revaluation difference” in the unconsolidated income statement. In case of increase in fair value such increase is added to the same category within the limit of amounts previously charged to the income statement for previous financial periods. The book value of foreign currency bonds is amended by the difference resulting from the revaluation of the foreign currency at the exchange rate prevailing at the evaluation date. Such differences are recorded in foreign exchange income in the income statement. - Mutual fund certificates which must be held till maturity date as the bank is the issuer, are evaluated at cost and in case of downfall of its fair value the book value is adjusted by such downfall and charged to “Other Investments Revaluation Difference” in the unconsolidated income statement. In case of an increase in the fair value, such increase will be added to the same category in the income statement within the limit of the amounts previously charged. I) Investments in Subsidiaries and Associated Companies These investments are evaluated at cost and in case of downfall of its fair value, the book value of each investment is adjusted by such downfall and charged to “Other investments evaluation difference“ in the income statement. In the case of an increase in the fair value, such increase will be added to the same category in the income statement within the limit of the amounts previously charged. J) Assets Acquired for settlement of Debits These Assets are recorded in the Financial Statement under “ debit balances & Other Assets “ at cost and in the case of a decrease of the fair value of these assets at the Balance Sheet date, the difference is charged to the income statement and the increase of the fair value should be credited to the income statement within the limit of amounts charged in previous financial periods. K) Provision for Doubtful Debts and Contra Accounts Provision For Doubtful Debts is established on the basis of an appraisal of the identified risk for specific facilities and loans in addition to one to five percent for General risk based on the risk inherent in any loan portfolio which is not specifically identified. Provision for Doubtful Debts is decreased by loans written off and is increased by recoveries of loans previously written off. In addition to taking all the necessary legal action required, a continuous follow up Financial Statement A. CIB Stand-alone is performed for the recovery of all or part of the written-off amounts. L) Contingent Liability Accounts Contingent Liability Accounts include transactions in which the Bank is involved as a third party, forward foreign exchange contracts, SWAP transaction, Option. Such transactions do not represent actual bank’s assets or liabilities at the Balance Sheet date. M) Cash & Cash Equivalent In the Statement of Cash Flow, the Cash and Cash Equivalent item includes balances of cash and due from Central Bank, current account balances with Banks and Treasury Bills with maturities of three months. N) Depreciation and Amortization Depreciation of Fixed Assets ( Except the land ) is calculated on the basis of the estimated useful life of each asset using the straight-line method. Improvement and renovation expenses for the bank’s leased premises are amortized over the period of the lease contract or the estimated useful life whichever is lower. 47 O) Income Tax Income Tax on the profit or loss for the year comprises current and deferred tax is recognized in the Income statement. 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. Deferred tax is provided for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes . The amount of deferred tax provided is based on the expected manner of realization or settlement of the carrying amount of assets and liabilities , using tax rates enacted or substantively enacted at the balance sheet date. A deferred tax asset is recognized only to the extent that it is 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. (3) Financial Instruments and their risk management (3/1) Financial Instruments A) The bank’s financial instruments are represented in the financial Assets and Liabilities. The financial assets include cash, due from banks, investments and loans to customers and banks. The financial liabilities include customers’ deposits, due to banks and long-term loans. Financial investments also include rights and obligations stated under “contingent liabilities and commitments”. Note No. (2) of the notes to the unconsolidated financial statements includes the accounting policies applied to measure and recognize significant financial instruments and the revenues and expenses related thereto. B) Financial Instruments Fair Value Using the valuation basis of the bank’s assets and liabilities, as referred to the notes to the Unconsolidated Financial Statements, the financial instruments’ fair value do not substantially deviate from their book values at the Balance Sheet date. The notes No. (8),(11),(12) are showing the fair value for all investment (except Trading Investment) in the date of unconsolidated financial statement. C) Forward Contract According to Central Bank of Egypt instruction the bank doesn’t execute deferred contracts except to the necessary limit of short term transaction to cover its requirements of Foreign currencies or the bank’s customers’ requirements to fulfill their obligations resulting from short-term transactions. Financial Statement A. CIB Stand-alone (3/2) Risk Management A) Interest rate risk The value of some financial instruments fluctuate due to the fluctuation in interest rates related thereto. The bank follows some procedures to minimize this risk such as: - Correlating between the interest rates on borrowing and lending. - Determining interest rates in consideration with the prevailing discount rates on various currencies. - Monitoring the maturities of financial assets and liabilities with its related interest rates. The notes No. (30 & 31) of the notes to the Unconsolidated Financial Statements disclose maturities of the assets and liabilities and the average interest rates applied to assets and liabilities during the year . B) Credit risk 48 Loans to customers and Banks, financial Investments (Bonds), due from banks, rights and obligations from others, are financial assets exposed to credit risk which result in these parties’ inability to repay in part or in full the loan granted to them at maturity. The bank adopted the following procedures to minimize the credit risk. - Preparing credit studies about the customers before dealing with them and determining credit risk rates related thereto. - Obtaining adequate guarantees to reduce the risks resulting from insolvency of customers. - Monitoring and preparing periodic studies about customers in order to evaluate their financial and credit positions and estimate the required provisions for non - performing loans. - Distribution of loans portfolio and due from banks over various sectors to avoid concentration of risk. Note No. (33) discloses the distribution of loans portfolio over various sectors. C) Foreign Currency Risk The nature of the bank’s activity requires the bank to deal in many foreign currencies which exposes the bank to the risk of fluctuation in exchange rates. To minimize this risk, the bank monitors the balancing of foreign currency positions according to Central Bank of Egypt instructions in that respect. Note No. (34) of the unconsolidated financial statements discloses significant foreign currency positions at the Balance Sheet date. Financial Statement A. CIB Stand-alone Dec. 31, 2007 EGP Dec. 31, 2006 EGP 1,081,319,202 684,845,076 1,996,073,908 1,489,221,888 1,875,812,320 1,568,809,552 4- Cash And Due From Central Bank Cash & Cash Items Reserve Balance with CBE (A) Current Accounts (B) Time Deposits Total Cash & Due From Central Bank 4,953,205,430 3,742,876,516 5- Due from Banks (A) Central Bank Time Deposits Total Due from central bank (B) Local Banks Current Accounts Time Deposits Total Due from Local Banks (C) Foreign Banks Current Accounts Time Deposits Total Due From Foreign Banks 7,391,521,850 120,102,850 7,391,521,850 120,102,850 49 8,788,772 14,364,909 155,000,000 85,620,000 163,788,772 99,984,909 . 509,054,737 114,797,671 5,717,696,684 5,097,791,983 6,226,751,421 5,212,589,654 Total Due From Banks 13,782,062,043 5,432,677,413 6- Treasury Bills and other Governmental Notes Discountable At the CBE CBE CD'S 91 Days Maturity 182 Days Maturity 364 Days Maturity Issuance Discount Total - 3,315,000,000 1,313,750,000 152,950,000 748,800,000 137,150,000 970,750,000 544,825,000 3,033,300,000 4,149,925,000 (84,625,681) (91,179,195) 2,948,674,319 4,058,745,805 Financial Statement A. CIB Stand-alone 7- Trading Financial Investments Portfolio Managed By Other Parties Mutual Funds Bonds Shares Dec. 31, 2007 EGP Dec. 31, 2006 EGP 64,370,759 478,500,215 371,832,610 239,839,987 51,603,627 95,195,095 100,666,274 73,606,841 Total Trading Financial Investments 588,473,270 887,142,138 The Financial Trading Investments are represented as follows : 50 Financial Investments listed in Stock Exchange 216,640,660 647,302,151 Financial Investments Unlisted in Stock Exchange 371,832,610 239,839,987 588,473,270 887,142,138 8- Available for Sale Financial Investments (A) Shares Bank's Shares Corporate Shares (B) Bonds Governmental Bonds Bank's Bonds Corporate Bonds 5,031 11,046,621 837,747,721 1,108,735,974 855,848,389 1,477,526,784 103,065,708 85,321,689 586,325,158 495,532,444 2,382,992,007 3,178,163,512 Available for sale financial investments are represented as follows : Financial Investments listed in Stock Exchange 1,301,157,343 1,941,629,448 Financial Investments unlisted in Stock Exchange 1,081,834,664 1,236,534,064 2,382,992,007 3,178,163,512 The market Value of Available for Sale Investments listed in the Capital market reached EGP 1,617,946,351 On December 31, 2007, compared to EGP 2,288,247,619 on December 31,2006 Financial Statement A. CIB Stand-alone Dec. 31, 2007 EGP Dec. 31, 2006 EGP 369,367,153 345,178,132 20,979,609,432 17,719,608,802 398,371,745 652,533,908 21,747,348,330 18,717,320,842 (33,299,487) (6,134,160) (1,089,969,238) (1,038,908,021) 9- Loans and Overdrafts Discounted Bills Loans & Overdrafts to Customer Loans & Overdraft to Banks Unearned Bills discount Provision For Doubtful Debts Unearned Interest & commission (248,554,472) (207,602,806) 51 Net Loans & Overdrafts 20,375,525,133 17,464,675,855 Dec. 31, 2007 Specific EGP General EGP Total EGP 10- Provision For Doubtful Debts Balance at beginning of the Year 551,958,000 486,950,021 1,038,908,021 Addition during the Year 91,524,201 101,480,050 193,004,251 written off debts recoveries Foreign currency revaluation diff. 44,472,711 (8,580,249) - - 44,472,711 (8,580,249) 679,374,663 588,430,071 1,267,804,734 Usage during the Year (177,835,496) - (177,835,496) Transferred from specific to general (10,008,945) 10,008,945 - Balance at the end of the Year 491,530,222 598,439,016 1,089,969,238 Dec. 31, 2006 Specific EGP General EGP Total EGP Balance at beginning of the year 583,672,503 365,228,009 948,900,512 Addition during the year 53,833,428 121,722,012 175,555,440 written off debts recoveries Foreign currency revaluation diff. 100,062,106 (1,264,639) - - 100,062,106 (1,264,639) 736,303,398 486,950,021 1,223,253,419 Usage during the Year (228,447,476) Transferred from provision of contingent liability 44,102,078 - - (228,447,476) 44,102,078 Balance at the end of the Year 551,958,000 486,950,021 1,038,908,021 Financial Statement A. CIB Stand-alone 11- Held to maturity Financial Investments A- Bonds Housing Bonds (maturity Dec.2019) Corporate Bonds Treasury Bonds B- Mutual Funds Dec. 31, 2007 EGP Dec. 31, 2006 EGP 215,000 215,000 411,179,166 789,569,338 - - 250,000 Osoul Fund Certificates with market value 25,000,000 25,000,000 52 LE 126.17 per certificate 50,000 Istethmar Fund Certificates with market value 5,000,000 5,000,000 LE 139.87 per certificate 25,000 Aman Fund Certificates with market value 2,500,000 2,500,000 LE 126.42 per certificate 443,894,166 822,284,338 The held to maturity Financial Investments are represented as follows :- Financial Investments listed in Stock Exchange 311,279,817 667,740,018 Financial Investments Unlisted in Stock Exchange 132,614,349 154,544,320 443,894,166 822,284,338 The market value of Held to Maturity Financial Investments reached EGP 337,511,601 on 31 December ,2007, while reached EGP 672,356,231 on 31 December 2006 Financial Statement A. CIB Stand-alone Dec. 31, 2007 EGP % Dec. 31, 2006 EGP % 12- Financial Investments in Subsidiary and Associated Companies A- Subsidiary Companies: CI Capital Holding co. * 275,511,540 %50.09 368,390,000 %67 B- Associated Companies: Contact for Cars Trading 31,000,000 %38.4 31,000,000 %38.4 Commercial International life insurance co. 32,000,000 %40 32,000,000 %40 Corplease co. Giro-Nil Cotecna Trade Support Haykala For Investment Royal & Sun Alliance Egypt Factors 18,400,000 %40 12,240,000 %40 - - 12,390,000 %30 53 48,750 %40 48,750 %40 600,000 %40 600,000 %40 - - 10,872,000 %20 3,763,646 %39 3,895,710 %39 International. Co. for Appraisal & Collection. 400,000 %40 400,000 %40 International Co. for Security & Services 4,000,000 %40 4,000,000 %40 365,723,936 475,836,460 The Financial Investments in subsidiary companies are represented as follows :- Financial Investments listed in Stock Exchange 275,511,540 - Financial Investments Unlisted in Stock Exchange 90,212,396 475,836,460 365,723,936 475,836,460 * According to the shareholders agreement dated 29. october 2006 : - CIB share will be diluted to 47.5% after excuting of a shareholders swap. - The company is jointly controled by CIB and other investores. Financial Statement A. CIB Stand-alone Investments value EGP Paid EGP Remaining EGP 13-Capital Commitments (Financial Investments): The capital commitments for the financial investments reached on the date of Financial position EGP 251,673,787 as follows : Available for sale Financial investments 424,746,619 184,608,711 240,137,908 Financial Investments in subsidiaries co. 34,748,275 23,212,396 11,535,879 54 14- Debit Balances and Other Assets Accrued Interest receivable Prepaid Expenses Advances for Purchase of Fixed Assets Assets Acquired for Settlement of Debts Accounts receivable & Other Assets Accrued Balances of Customers Loans * Deduct Dec. 31, 2007 EGP Dec. 31, 2006 EGP 460,512,142 52,588,918 204,554,366 29,361,646 275,561,186 241,625,336 286,829,442 28,645,872 154,574,895 78,927,129 271,731,041 252,458,000 1,264,203,594 1,073,166,379 Provision for General Risk & Risk Insurance ** (243,638,021) Total Debit Balances and Other Assets 1,020,565,573 (251,458,735) 821,707,644 * These balances carried forward from previous year represent certain advances to customers that were made at one of the branches in violation of the bank's standard operating procedures, resulting in reclassifying these balances under "other debit balances". Conservative provisions were adequately reallocated from other provisions to meet the relevant operation risk ** Refer to Note No. 20. Financial Statement A. CIB Stand-alone 55 . s s e c o r p n i e r a s e r u d e c o r p s n o i t a r t s i g e r r i e h t e l i h w s t e s s a d e r e t s i g e r n o n 9 3 4 , 2 2 0 , 8 7 P G E s e d u l c n i e t a d n o i t i s o p l a i c n a n fi e h t n o e u a v l s t e s s a d e x fi t e N - 0 2 8 , 4 0 1 , 7 0 6 8 6 4 , 9 2 8 , 2 4 1 3 3 , 3 7 6 , 5 8 1 8 2 , 9 8 7 , 0 5 4 9 7 , 2 7 9 , 2 8 6 3 , 3 4 2 , 8 5 1 8 1 5 , 0 1 8 , 6 0 2 0 6 0 , 6 8 7 , 9 5 ) 2 - 1 ( s e t s s a t e n r a e Y f o d n E 0 1 % 5 . 2 1 % 3 . 3 3 % 0 2 % 0 2 % 5 % 3 2 2 , 3 5 7 , 7 9 4 7 7 0 , 1 9 7 , 2 3 3 8 6 , 3 3 9 , 1 7 6 4 2 , 2 7 2 , 6 3 3 6 4 , 3 7 9 , 4 0 0 9 , 3 1 5 , 5 6 1 7 7 2 , 8 4 5 , 9 7 1 7 7 5 , 0 2 7 , 6 - s a t e n r a e Y f o g n n n g e B i i s e t a r n o i t a i c e r p e D ) 4 - 3 ( s t e s l a t o T P G E & e r u t i n r u F i g n h s i n r u F & s e n h c a M i t n e m p u q E i P G E P G E t u O - g n i t t i F s e l c i h e V P G E P G E T I P G E s e s i m e r P P G E d n a L P G E 9 5 5 , 3 6 5 , 0 4 9 3 9 2 , 1 4 6 , 7 5 0 8 1 , 1 1 9 , 8 3 1 5 1 0 , 3 4 5 , 1 0 1 7 6 2 , 1 7 7 , 0 2 0 5 3 , 0 6 8 , 6 5 3 7 7 8 , 5 1 1 , 8 5 2 7 7 5 , 0 2 7 , 6 ) 3 ( e c n a a B l i g n n e p O 7 0 0 2 , 1 3 . c e D f O s A ) n o i t a i c e r p e D d e t a l u m u c c A f o t e N ( s t e s s A d e x i F - 5 1 6 3 4 , 0 7 2 , 0 3 2 1 3 8 , 0 8 1 , 9 1 5 0 4 , 2 0 5 , 0 3 4 2 8 , 0 0 1 , 8 3 - 8 7 5 , 6 3 3 , 9 4 5 1 3 , 4 8 0 , 0 4 3 8 4 , 5 6 0 , 3 5 r a e Y e h t g n i r u d l a n o i t i d d A 5 9 9 , 3 3 8 , 0 7 1 , 1 4 2 1 , 2 2 8 , 6 7 5 8 5 , 3 1 4 , 9 6 1 9 3 8 , 3 4 6 , 9 3 1 7 6 2 , 1 7 7 , 0 2 8 2 9 , 6 9 1 , 6 0 4 2 9 1 , 0 0 2 , 8 9 2 0 6 0 , 6 8 7 , 9 5 ) 1 ( e c n a l a B g n i s o C l t a n o i t a i c e r p e D . u c c A 6 3 3 , 0 1 8 , 2 4 4 6 1 2 , 0 5 8 , 4 2 7 9 4 , 7 7 9 , 6 6 9 6 7 , 0 7 2 , 5 6 4 0 8 , 7 9 7 , 5 1 0 5 4 , 6 4 3 , 1 9 1 0 0 6 , 7 6 5 , 8 7 9 3 8 , 8 1 9 , 0 2 1 0 4 4 , 2 4 1 , 9 7 5 7 , 2 6 7 , 6 1 9 8 7 , 3 8 5 , 3 2 9 6 6 , 0 0 0 , 2 0 1 1 , 7 0 6 , 6 5 4 7 0 , 2 2 8 , 2 1 5 7 1 , 9 2 7 , 3 6 5 6 5 6 , 2 9 9 , 3 3 4 5 2 , 0 4 7 , 3 8 8 5 5 , 4 5 8 , 8 8 3 7 4 , 8 9 7 , 7 1 0 6 5 , 3 5 9 , 7 4 2 4 7 6 , 9 8 3 , 1 9 - - - ) 4 ( r a e Y e h t f o i g n n n g e b i n o i t a i c e r p e D r a e Y t n e r r u C t a n o i t a i c e r p e D . u c c A ) 2 ( r a e Y e h t f o d n e Financial Statement A. CIB Stand-alone 16- Due to Banks (a) Central Bank - Current Accounts - Time Deposits Dec. 31, 2007 EGP Dec. 31, 2006 EGP 80,028,494 20,044,409 2,012,792,500 867,616,000 Total Due to Central Bank 2,092,820,994 887,660,409 56 (b) Local Banks - Current Accounts - Time Deposits Total Due to Local Banks (c) Foreign Banks - Current Accounts - Time Deposits 24,932,808 15,860,437 28,480,310 107,541,554 53,413,118 123,401,991 199,834,891 201,260,025 31,013,432 201,695 Total Due to foreign Banks 230,848,323 201,461,720 Total Due to Banks 2,377,082,435 1,212,524,120 17- Customers' Deposits - Demand Deposits - Time & Notice Deposits - Saving & Deposit Certificates - Saving Deposits - Other Deposits 11,586,418,467 8,836,825,720 13,622,910,338 11,033,225,620 5,957,646,007 5,190,298,212 6,517,256,544 5,349,962,762 1,830,308,636 1,189,914,884 Total Customer Deposits 39,514,539,992 31,600,227,198 18- Credit Balances and Other Liabilities Accrued Interest Payable Accrued Expenses Accounts Payable Income Tax Other Liabilities Total Credit Balances And Other Liabilities Financial Statement A. CIB Stand-alone Dec. 31, 2007 EGP Dec. 31, 2006 EGP 140,677,147 109,691,056 31,856,339 34,131,526 387,694,032 569,480,973 167,662,101 82,305,727 45,972,518 48,025,294 773,862,137 843,634,576 57 19- Long Term Loans F.I.S.C. K.F.W UNIDO Rate % Maturity date Maturing through next year Balance as of Dec-07 Balance as of Dec-06 7 3-5 years 40,125,600 40,565,200 - 9-10.5 10 YEARS 4,733,269 15,195,955 9,461,379 1 2011 2,866,393 8,038,908 10,483,577 Ministry of Agriculture (F.S.D.P) Ministry of Agriculture (V.S.P) Social Fund Total 3.5 - 5.5 depends on maturity date 3.5 - 5.5 depends on maturity date 3 months T/D or 9% which more 3-5 years 54,935,674 92,594,906 70,617,084 3-5 years 10,000 10,000 30,000 2010 1,900,000 4,951,250 8,574,821 104,570,936 161,356,219 99,166,861 Financial Statement A. CIB Stand-alone 58 g n i s o C l e c n a l a B o T d e r r e f s n a r T & s e c n a l a B t i b e D s t e s s A r e h t O r e f s n a r T e g a s U e c n a l a B Y C F n o i t i d d A r a e Y e h t g n i r u D r a e Y e h t g n i r u D e c n e r e f f i D . l a v e R r a e Y e h t g n i r u D i g n n e p O e c n a l a B P G E 7 0 0 2 , 1 3 . c e D 5 9 6 , 3 7 1 , 7 2 2 8 1 1 , 3 2 1 , 1 0 0 0 , 6 3 0 , 7 6 1 3 1 8 , 2 3 3 , 5 9 3 - - - - - - - - - - - - - ) 6 7 6 , 3 ( - - 4 9 7 , 6 2 1 , 1 5 9 6 , 3 7 1 , 7 2 2 P G E 6 0 0 2 , 1 3 . c e D ) 5 0 3 , 1 0 9 , 1 ( 6 1 4 , 2 1 4 , 7 5 9 8 8 , 4 2 5 , 1 1 1 t n e g n i t n o c r o f n o i s i v o r P ) 1 8 9 , 4 0 9 , 1 ( 6 1 4 , 2 1 4 , 7 5 8 7 3 , 5 2 8 , 9 3 3 s n o i s i v o r P r e h t O l a t o T g n i s o C l e c n a l a B o T d e r r e f s n a r T & s e c n a l a B t i b e D s t e s s A r e h t O r e f s n a r T e g a s U e c n a l a B Y C F n o i t i d d A r a e Y e h t g n i r u D e c n e r e f f i D . l a v e R r a e Y e h t g n i r u D i g n n e p O e c n a l a B - - 5 9 6 , 3 7 1 , 7 2 2 4 9 7 , 6 2 1 , 1 9 8 8 , 4 2 5 , 1 1 1 - - - ) 2 7 3 , 0 4 3 , 8 2 2 ( 0 0 0 , 0 0 0 , 5 6 ) 8 7 0 , 2 0 1 , 4 4 ( - - ) 3 9 5 , 4 2 3 ( 0 6 5 , 3 7 0 , 7 1 0 0 0 , 8 7 8 , 8 3 1 t n e g n i t n o c r o f n o i s i v o r P - 0 0 0 , 5 0 5 , 1 2 7 3 , 5 3 8 , 1 6 1 * k s i r l a r e n e G r o f n o i s i v o r P ) 3 6 3 , 8 1 1 , 3 2 ( - ) 0 7 3 , 0 4 6 ( ) 5 0 5 , 1 2 1 ( - 8 3 2 , 0 8 8 , 3 2 k s i R k n a B r o f n o i s i v o r P * e c n a r u s n i ) 0 0 0 , 0 0 0 , 5 6 ( ) 4 6 8 , 3 0 5 , 9 2 3 ( - - 9 5 5 , 7 7 6 , 1 2 6 x a T e m o c n I r o f n o i s i v o r P s m a l c i - ) 0 8 1 , 2 7 7 ( ) 4 0 6 , 8 ( 0 5 7 , 8 7 1 8 2 8 , 8 2 7 , 1 i s m a C l l a g e L r o f n o i s i v o r P 8 7 3 , 5 2 8 , 9 3 3 ) 5 3 7 , 8 5 4 , 1 5 2 ( ) 8 7 0 , 2 0 1 , 4 4 ( ) 4 1 4 , 6 1 9 , 0 3 3 ( ) 2 0 7 , 4 5 4 ( 0 1 3 , 7 5 7 , 8 1 7 9 9 , 9 9 9 , 7 4 9 s n o i s i v o r P r e h t O l a t o T s ' k n a b e h t f o l n o i t a o v m o r f i g n i t l u s e r s t e s s a i n a t r e c n i e u a v l f o s s o l l e b i s s o p e h t t e e m o t " s e c n a a b l t i b e d r e h t o " r e d n u d e fi i s s a l c e r e r e w s e c n a a b l e s e h T * . s l i a t e d r e h t r u f r o f 4 1 # n o i t a c fi i r a l c o t r e f e r e s a e P l . " s r e m o t s u C o t s n a o L " m o r f d e fi i s s a l c e r e r e w t a h t s r e d u c o r p g n i t a r e p o d r a d n a t s s n o i s i v o r P r e h t O - 0 2 x a T e m o c n I r o f n o i s i v o r P s m a l c i i s m a C l l a g e L r o f n o i s i v o r P Financial Statement A. CIB Stand-alone 21- Shareholders Equity (a) Capital • The Authorized Capital reached EGP 5000 Million according to the Extraordinary General Assembly decision on 19,March,2006. • Issued and Paid - in capital reached to EGP 1950 Million divided to 195 Million shares with par value EGP 10 per each. • The Extraordinary General Assembly approved in the meeting of June,26,2006 to Activate a motivating and rewarding program for the bank's employees & managers through employee share ownership plans (ESOPs) by issuing a maximum of 5% of issued and paid-in capital at par value ,through 5 years starting 31,Dec 2006 and delegated the Board of Directors to establish the rewarding terms & conditions and increase the paid in capital according to the program. (b) Reserves • According to the bank statues 5% of net profit is to increase legal reserve until reaches 50% of the bank's issued and paid -in capital • Concurrence of Central Bank of Egypt for usage of Special Reserve is required. • According to CBE regulations, a reserve has been formed for difference revaluation for financial investment (available for sale) in foreign currency for preceding years (up to 2002) , and this reserve is used in case of sale or decrease in the value of that investment , and the income statement will be carried with the difference according to the issued instruction for such matter. 59 Dec. 31, 2007 EGP Dec. 31, 2006 EGP 22- Contingent & Commitments Liabilities Letters of Guarantee 8,710,811,993 5,636,795,144 Letters of Credit ( import & export ) 2,233,007,892 865,777,545 Customers Acceptances 616,046,795 418,344,500 Forward Foreign Exchange contracts (bought) 2,315,808,497 1,353,283,099 Forward Foreign Exchange contracts (sold) (2,314,413,012) (1,352,168,802) Swap Deals (bought) Swap Deals (sold) Option (bought) Option (sold) Total 2,031,770,686 1,048,742,044 (2,064,022,142) (1,105,929,945) 4,040,915 60,744,244 (4,040,915) (60,744,244) 11,529,010,709 6,864,843,585 Financial Statement A. CIB Stand-alone 23-Foreign Exchange Profits (losses) Profit from dealing with fore- ign currencies Profit (loss) of revaluation of Monetary assets and Liabilities * Profit (loss) of Forward deals revaluation Profit revaluation of options Dec. 31, 2007 EGP Dec. 31, 2006 EGP 155,304,325 103,752,327 13,024,355 (841,440) 200,397 3,094,818 1,254,271 787,429 60 Total 167,687,637 108,888,845 * Include an increase of EGP 29,843,292 due to the foreign currencies revaluation differences of the financial trading & available for sale investments by EGP 5,101,086 & EGP 24,742,206 respectively against decrease in financial investments revaluation differences' items in income statement . 24- Profits From Selling Financial Investments in Subsidiaries Include EGP 148,393,558 from selling 9,287,846 shares of CIB'S stake in CI.Holding Co. 25- Other Financial investments revaluation differences Available for sale financial investments Dec. 31, 2007 EGP Dec. 31, 2006 EGP 4,185,378 (15,812,507) Total 4,185,378 (15,812,507) Assets (liabilties) Dec. 31, 2007 EGP Assets (liabilties) Dec. 31, 2006 EGP 26- Deferred tax assets and liabilities Recognized deferred tax assets (liabilities) Deferred tax assets and liabilities are attributable to the following: Deferred tax Fixed assets depreciation (22,155,045) (19,762,207) Other provisions(excluded loan loss & contingent liabilities and income tax provisions) 48,952,228 50,517,106 Other items(other investments revalua- tion difference) Reserve for employee stock ownership plan (ESOP) Total deferred tax assets(liabilities) 20,190,375 9,877,820 5,831,917 52,819,475 40,632,719 Financial Statement A. CIB Stand-alone Last 12 months Dec. 31, 2007 EGP Last 12 months Dec. 31, 2006 EGP 1,387,888,122 878,722,012 20% 20% 277,577,624 175,744,402 (9,606,764) 9,773,223 (139,463,112) (127,760,292) 26,967,598 18,919,914 155,475,345 76,677,248 61 11.20% 8.73% 1,232,412,777 802,044,764 (18,486,192) (12,030,671) (123,241,278) (80,204,476) 27- Reconciliation of effective tax rate Profit Before Tax Tax Rate Income tax Add / (Deduct) Non-deductible expenses Tax exemptions Effect of provisions Income tax Effective tax rate 28- Earning per share Net profit for the year Board members’ bonus Staff profit sharing Shareholders' share in profits 1,090,685,308 709,809,616 Number of shares Earning per share 29- Share-Based Payments: 195,000,000 195,000,000 5.59 3.64 «According to the extraordinary general assembly meeting on June 26, 2006 , the bank actived a new employees share ownership plan (ESOP) scheme and issued equity-settled share-based payments. Such employees should complete a term of 3 years of service in the bank to have the right in ordinary shares at face value (right to share) that will be issued on the vesting date, otherwise such grants will be forfeited. Equity-settled share-based payments are measured at fair value at the grant date, and expensed on a straight-line basis over the vesting period (3 years) with corresponding increase in equity based on estimated number of shares that will eventually vest. the fair value for such equity insturments measured by use of Black-Scholes pricing model. Details of the rights to share outstanding during the period are as follows: Outstanding at the beginning of the period Granted During the period Forfeited during the period Exercised during the period Expired during the period Outstanding at the end of the period The estimated fair value of the Equity insturment (Right to share) granted is EGP 45.82 . - 1,909,350 - - - 1,909,350 Number of Shares Totaling LE 29,159,584 at the end of Dec. 2007 Financial Statement A. CIB Stand-alone 30- Assets & Liabilities Maturities Assets Cash and Due from Central Bank Due from Banks Treasury Bills and other Notes Discountable at the CBE 62 Trading Investments Available for sale investments Customers' Loans & Overdrafts Banks' Loans & Overdrafts Held to maturity Investments Investments in subsidiary companies Maturity Within one year Maturity Over One Year 4,953,205,430 13,782,062,043 3,033,300,000 588,473,270 2,382,992,007 - - - - - 9,858,027,721 11,242,394,392 220,529 398,151,216 - - 443,894,166 365,723,936 Debit Balances and Other Assets 1,020,565,573 - Liabilities Due to Banks Customer Deposits Long Term Loans 35,618,846,573 12,450,163,710 2,377,082,435 - 32,819,825,756 6,694,714,236 104,570,936 56,785,283 Credit Balances and Other Liabilities 773,862,137 - 36,075,341,263 6,751,499,520 31- Interest Rate • The average interest rates applied for Assets and Liabilities during the Year are 6.78 % & 3.91 % Respectively. 32- Tax Status • The bank's corporate income tax position has been examined and settled with the Tax Authority from the start up of operations up to the end of year 1984. • Corporate income tax for the years from 1985 up to 2000 were paid according to the Tax appeal Committee decision and the disputes are under discussion in the court of law. • The bank's corporate income tax position has been examined and settled with the Tax Authority from 2001 up to 2002 . • Corporate income tax for the years from 2003 up to 2004 were paid according to the internal Committee decision and the final settlement is under discussion with the tax apeal committee. • The bank pays salary tax according to concerning domestic regulations and laws, and the disputes are under discussion in the court of law. • The bank pay stamp duty tax according to concerning domestic regulations and laws, and the disputes are under discussion in the court of law. 33- Distribution of Assets, Liabilities and Contingent Accounts Assets 1- Due From Banks 2- Loans & Overdrafts Agriculture Sector Industrial Sector Trading Sector Services Sector Household Sector Other Sectors Financial Statement A. CIB Stand-alone Local Currency Foreign Currency 7,555,310,622 6,226,751,421 61,593,282 8,709,754,272 954,041,289 % .3 40. 4.4 8,112,056,815 37.3 2,063,672,092 1,846,230,580 9.5 8.5 Total Loans & Overdrafts (Including unearned interest) 21,747,348,330 100 Unearned Discounted Bills Provision for Doubtful Debts Unearned Interest & Commission Net Loans & Overdrafts Liabilities 1- Due to Banks 2- Customers' Deposits Agriculture Sector Industrial Sector Trading Sector Services Sector Household Sector Other Sector Total Customers' Deposits Contingent Accounts Letters of Guarantee Letter of Credit ( import & export ) Customers Acceptances (33,299,487) (1,089,969,238) 5.0 (248,554,472) 20,375,525,133 Local Currency Foreign Currency 49,339,486 2,327,742,949 65,997,581 5,142,043,546 2,414,487,913 7,661,870,572 20,526,954,379 3,703,186,002 39,514,539,993 % .2 13. 6.1 19.4 51.9 9.4 100 Local Currency Foreign Currency 2,684,248,902 6,026,563,091 21,925,488 2,211,082,404 103,283,915 512,762,880 Forward Foreign Exchange contracts (bought) 298,533,897 2,017,274,600 Forward Foreign Exchange contracts (sold) (4,427,418) (2,309,985,594) Swap Deals (bought) Swap Deals (sold) Option (bought) Option (sold) - 2,031,770,686 (817,334,150) (1,246,687,992) - - 4,040,915 (4,040,915) 2,286,230,634 9,242,780,075 63 64 Financial Statement A. CIB Stand-alone 34- Main Currencies Positions Egyptian Pound US Dollar Sterling pound Japanese Yen Swiss Franc Euro 35-Mutual Funds (1) Osoul Fund Dec. 31, 2007 in thousand EGP Dec. 31, 2006 in thousand EGP (13,959) (56,955) (389) (377) 821 14,449 5,550 (54,691) 2,408 27,721 369 14,894 • • • • The bank established an accumulated return mutual fund under license no.331 issued from Capital Market Authority on 22/02/2005. CI Assets Management Co.- joint stock co - manages the fund. The number of certificates reached 57,068,881 with redeemed value LE 7,200,380,716. The market value per certificate reached EGP 126.17 on 29/12/2007. The Bank portion got 3,083,666 certificates with redeemed value EGP 389,066,139 . (2) Istethmar Fund • • • • The bank established the second accumulated return mutual fund under license no.344 issued from Capital Market Authority on 26/02/2006. CI Assets Management Co.- joint stock co - manages the fund. The number of certificates reached 2,257,365 with redeemed value LE 315,737,643. The market value per certificate reached EGP 139.87 on 29/12/2007. The Bank portion got 115,132 certificates with redeemed value EGP 16,103,513. (3) Aman Fund ( CIB & Faisal Islamic Bank Mutual Fund) • • • • • The bank & Faisal Islamic Bank established an accumulated return mutual fund under license no.365 issued from Capital Market Authority on 30/07/2006. CI Assets Management Co.- joint stock co - manages the fund. The number of certificates reached 1,021,976 with redeemed value LE 129,198,206. The market value per certificate reached EGP 126.42 on 29/12/2007. The Bank portion got 26,571 certificates with redeemed value EGP 3,359,106. 36-Transactions With Related Parties All Banking transactions with related parties are conducted in accordance with the normal banking practices and regulations applied to all other customers without any discrimination. Due from Banks Loans & Overdrafts Investment in subsidiary companies Due to banks Customer Deposits Contingent Accounts EGP - 499,579,973 365,723,936 - 171,610,151 25,000,000 Financial Statement A. CIB Stand-alone Income Expenses Contact Co. 16,823,303.12 983,078.53 International Co. for Security & Services 983,078.53 3,033,819 International. Co. for Appraisal & Collection. - 566,161.67 Corplease co. 54,969,523.64 10,051,223.24 Commercial International life insurance co. 860,674.26 3,170,677.27 Commercial International Brokerage co. 1,270,906 2,602,489 37- Comparative Figures The Comparative Figures are amended to confirm with the reclassification of the current year and General Assembly held in 19th of March, 2007 decisions, for ratifying the Appropriation account of year 2006. 65 Financial Statement B. Consolidated CIB & CI-CH Integrity Financial Statement B. Consolidated CIB & CI-CH 67 Financial Statement B. Consolidated CIB & CI-CH Consolidated Balance Sheet as of Dec. 31, 2007 Assets Cash & Due From Central Bank Due From Banks Treasury Bills and other Notes Discountable at the CBE Trading Financial Investments Available for Sale Financial Investments Brokers Debit Balances Reconcilation accounts-Debit Balances Note No. Dec. 31, 2007 EGP Dec. 31, 2006 EGP (4) (5) (6) (7) (8) 4,953,205,430 3,742,876,516 13,883,232,504 5,732,124,959 2,951,621,063 4,063,410,070 683,832,861 901,082,369 2,389,267,275 3,185,837,471 122,917,170 29,844,377 21,108,870 7,582,500 Loans & Overdrafts (Net Of Provision for Doubtful Debts) (9&10) 20,375,525,133 17,464,380,824 68 Held to Maturity Financial Investments Financial Investments in Associated Co. Debit Balances & Other Assets Goodwill Deferred Tax Fixed Assets (Net) Total Assets Liabilities & Shareholder's Equity Liabilities Liabilities Due to Banks Customers Deposits Brokers-Credit Balances Reconcilation accounts-Credit Balances Credit Balances & Other Liabilities Long Term Loans Other Provisions Total Liabilities Shareholders' Equity Issued & Paid-in Capital Reserves (11) (12) (14) (15) (27) (16) (17) (18) (19) (20) (21) 443,894,166 822,284,338 90,714,548 108,060,063 1,035,176,214 925,039,945 140,613,801 23,118,175 51,900,192 40,497,075 620,238,883 506,815,866 47,763,248,110 37,552,954,548 2,378,613,378 1,212,600,638 39,476,052,841 31,567,391,935 162,358,363 147,780,532 1,292,008 798,512,196 801,194,034 161,356,219 99,166,861 397,849,636 342,342,201 43,376,034,641 34,170,476,201 1,950,000,000 1,950,000,000 1,117,015,372 575,072,726 Reserve for employee stock ownership plan (ESOP) (30) 29,159,584 Minority Interest Total Shareholders' Equity Net Profit of the Year Total Shareholders' Equity & Net Profit 5,263,160 5,825,182 (22) 3,101,438,116 2,530,897,908 1,285,775,353 851,580,439 4,387,213,469 3,382,478,347 Total Liabilities & Shareholders' Equity 47,763,248,110 37,552,954,548 Contingent & Commitments Liabilities (23) 11,528,985,664 6,864,843,585 The Accompanying Notes are an integral part of the Financial Statements " Auditors Report Attached " . Financial Statement B. Consolidated CIB & CI-CH Consolidated Income Statement as of Dec. 31, 2007 Note No. Dec. 31, 2007 EGP Dec. 31, 2006 EGP Interest Received from Clients & Banks 2,593,957,148 1,749,323,991 Interest Received from Treasury Bills & Bonds 404,398,106 568,023,867 Deduct Interest Paid to Clients & Banks (1,797,842,883) (1,375,481,400) Net Interest Income 1,200,512,371 941,866,458 Banking Fees & Commissions Shares Dividends Foreign Exchange Profits 665,185,633 441,311,795 71,536,293 49,790,772 (24) 167,845,005 108,916,719 Profits From Selling Financial Investments 174,663,447 145,618,186 Profits From Dispose part of Subsidiaries (25) 148,393,558 Trading Financial Investments Revaluation Differences 8,210,793 16,534,014 69 Other Income Profit of acquiring Total Fee Income 43,362,321 98,205,425 25,573,096 1,279,197,050 885,950,007 Net Operating Income 2,479,709,421 1,827,816,465 Deduct Provisions (250,988,033) (194,312,750) Other Financial Investments Revaluation Differences (26) 4,185,378 (15,812,507) General & Administrative Expenses & Depreciation (697,705,207) (619,316,387) Other Expenses Net Operating Profits Non_Operating Income Net Profit Before Tax Income Tax Deferred Tax Net Profit After Tax Distripute by Minority Interest CIB Shareholders' Equity Earning Per Share (77,832,699) (63,653,792) (1,022,340,561) (893,095,436) 1,457,368,860 934,721,029 1,269,870 418,000.00 1,458,638,730 935,139,029 (28) (181,576,439) (89,552,254) (28&27) 11,459,368 7,048,958 1,288,521,659 852,635,733 2,746,306 1,055,294 1,285,775,353 851,580,439 (29) 5.84 3.86 Financial Statement B. Consolidated CIB & CI-CH 70 Consolidated Cash Flow as of Dec. 31, 2007 Dec. 31, 2007 EGP Dec. 31, 2006 EGP Cash Flow From Operating Activities Net Income before tax 1,458,638,730 935,139,031 Adjustments To Reconcile Net Income To Net Cash Provided by operating activities Depreciation Provisions (Addition during the Year) 122,518,015 93,764,839 250,917,567 194,312,750 Trading financial investments evaluation differences (8,210,793) (16,534,014) Other financial investments evaluation differences (4,185,378) 93,007,586 Utilization Of Provisions (except provision for doubtful debts) (330,276,044) Provisions No Longer Used (7,036,600) FCY revaluation Differences of Provisions Balances except doubtful debts (1,904,981) (333,197) Gains From Selling Fixed Assets (1,269,870) (418,000) Profit From Selling financial Investments (174,663,447) (145,618,187) Profits From Dispose part of Subsidiaries (148,393,558) Income tax paid FCY revaluation diff.of Long Term Loans (80,317,367) (34,049,494) 1,733,674 1,928,090 Reserve for employee stock ownership plan (ESOP) 29,159,584 Profit of acquring (25,573,096) Operating Profits Before Changes in Operating Assets & Liabilities 1,436,985,576 765,350,264 Net Decrease (Increase ) in Assets Due From Banks (7,961,652,630) (1,983,839,488) Treasury Bills and other Notes Discountable at the CBE 2,268,535,711 (656,003,063) Trading financial Investments 225,460,301 954,581,137 Available for sale financial investments 1,123,421,877 (950,151,108) Loans & Overdrafts Debit Balances & Other Assets Net Increase (Decrease) In Liabilities Due to Banks Customers Deposits Credit Balances & Other Liabilities (3,054,288,046) (3,591,382,916) (213,637,494) (453,977,899) 1,166,089,258 492,920,535 7,875,825,643 6,697,133,902 (84,436,632) (280,217,017) Net Cash Provided from Operating Activities 2,782,303,563 994,414,347 Financial Statement B. Consolidated CIB & CI-CH Consolidated Cash Flow as of Dec. 31, 2007 Dec. 31, 2007 EGP Dec. 31, 2006 EGP Cash Flow From Investment Activities Sale (Purchase) of subsidiaries & associated companies 15,148,088 4,345,553 Prepaid for Fixed Assets , Premises and Fittingout of Branches (284,632,707) (272,125,579) Redemption Of Held to maturity financial Investments 378,390,172 276,026,346 Cash results from acquisition 77,473,483 Financial Investments in Subsidiary (Goodwill) (117,495,626) Net Cash (Used in ) Investment Activities (8,590,073) 85,719,803 Cash Flow From Financing Activities Increase in Long-Term Loans Dividends Paid Reserve for financial investments revaluation Diff. Current Shareholders Debit Capital Paid 71 60,455,684 (1,032,231) (310,359,381) (200,165,754) - - - - - 181,610,000 Net Cash (Used in) Financing Activities (249,903,697) (19,587,985) Net cash & cash equivalent changes 2,523,809,794 1,060,546,165 Beginning Balance of cash & cash equivalent 4,355,564,286 3,295,018,121 Cash & Cash Equivalent Balance At the End of the year 6,879,374,080 4,355,564,286 Cash & Cash Equivalent are Represented as Follows : Cash and Due from Central Bank Due from Banks 4,953,205,430 3,742,876,516 13,883,232,504 5,732,124,959 Treasury Bills and other Notes Discountable at the CBE 2,951,621,063 4,063,410,070 Due from Banks (Time Deposits) (13,265,167,463) (5,410,447,905) Treasury Bills with maturity more than three months (1,643,517,454) (3,772,399,354) Total Cash & Cash Equivalent 6,879,374,080 4,355,564,286 Financial Statement B. Consolidated CIB & CI-CH 72 l a t o T P G E y t i r o n M i t s e r e t n I P G E r o f e v r e s e R k c o t s e e y o p m e l i n a l p p h s r e n w o P G E f o s t fi o r P r a e Y e h t P G E d e d i v i d n U t fi o r P P G E r o f e v r e s e R t n e m t s e v n i n o i t a u l a v e R P G E . f f i D 6 0 0 2 l a i c e p S e v r e s e R P G E l a r e n e G e v r e s e R P G E - e R l a g e L e v r e s P G E l a t i p a C P G E 7 0 0 2 , 1 3 . c e D f o s a y t i u q E l ' s r e d o h e r a h S n i s e g n a h c f o t n e m e t a t S d e t a d i l o s n o C 8 9 0 , 0 6 2 , 7 2 5 , 2 - 1 4 4 , 0 8 5 , 1 5 8 ) 2 7 3 , 7 8 1 , 2 ( - - - - 0 5 3 , 8 7 4 , 2 8 3 , 3 2 8 1 , 5 2 8 , 5 2 8 1 , 5 2 8 , 5 9 4 . 2 8 1 , 5 2 8 , 5 - - - - - - - - 1 4 4 , 0 8 5 , 1 5 8 - - 1 4 4 , 0 8 5 , 1 5 8 - - - - - - 4 3 6 , 8 5 4 , 7 3 0 9 , 9 0 7 , 2 6 1 5 5 5 , 5 7 7 , 3 7 4 3 6 , 8 2 1 , 1 3 3 0 0 0 , 0 0 0 , 0 5 9 , 1 - - ) 2 7 3 , 7 8 1 , 2 ( - - - - - ) 0 0 0 , 0 0 0 , 0 5 6 ( - - - - - - - - - - 6 0 0 , 6 4 6 , 9 3 0 9 , 9 0 7 , 2 6 1 5 5 5 , 5 7 7 , 3 2 7 4 3 6 , 8 2 1 , 1 3 3 0 0 0 , 0 0 0 , 0 0 3 , 1 i g n n n g e b i t a e c n a a B l r a e Y e h T f o 0 0 0 , 0 0 0 , 0 5 6 e s a e r c n I l a t i p a C l a t o T P G E y t i r o n M i t s e r e t n I P G E r o f e v r e s e R k c o t s e e y o p m e l i * n a l p p h s r e n w o P G E f o s t fi o r P r a e Y e h t P G E d e d i v i d n U t fi o r P P G E r o f e v r e s e R t n e m t s e v n i n o i t a u l a v e R P G E . f f i D 7 0 0 2 l a i c e p S e v r e s e R P G E l a r e n e G e v r e s e R P G E - e R l a g e L e v r e s P G E l a t i p a C P G E 0 5 3 , 8 7 4 , 2 8 3 , 3 2 8 1 , 5 2 8 , 5 9 5 6 , 1 2 5 , 8 8 2 , 1 6 0 3 , 6 4 7 , 2 ) 1 8 3 , 9 5 3 , 0 1 3 ( ) 9 2 3 , 8 0 3 , 3 ( - - ) 8 2 1 , 8 8 5 , 2 ( 4 8 3 , 1 4 8 5 , 9 5 1 , 9 2 - - - - - - - - - - - 1 4 4 , 0 8 5 , 1 5 8 ) 7 1 6 , 9 0 8 , 4 1 5 ( 3 5 3 , 5 7 7 , 5 8 2 , 1 ) 2 5 0 , 1 5 0 , 7 0 3 ( - - - - - - ) 2 7 7 , 9 1 7 , 9 2 ( 6 5 1 , 1 2 7 , 9 2 4 8 5 , 9 5 1 , 9 2 - - - - - - - - ) 8 2 1 , 8 8 5 , 2 ( - - - - - - - - - - 9 7 3 , 7 0 7 , 4 7 4 8 3 2 , 2 0 1 , 0 4 - - - - - - - - - - - - - - - - - - - 4 3 6 , 8 5 4 , 7 3 0 9 , 9 0 7 , 2 6 1 5 5 5 , 5 7 7 , 3 7 4 3 6 , 8 2 1 , 1 3 3 0 0 0 , 0 0 0 , 0 5 9 , 1 8 6 4 , 3 1 2 , 7 8 3 , 4 0 6 1 , 3 6 2 , 5 4 8 5 , 9 5 1 , 9 2 3 5 3 , 5 7 7 , 5 8 2 , 1 6 5 1 , 1 2 7 , 9 2 6 0 5 , 0 7 8 , 4 3 0 9 , 9 0 7 , 2 6 1 4 3 9 , 2 8 4 , 8 4 5 2 7 8 , 0 3 2 , 1 7 3 0 0 0 , 0 0 0 , 0 5 9 , 1 r a e y e h t f o s t fi o r P t e N e v r e s e r f o t r a p e g a s U d n e e h t t a e c n a l a B r a e Y e h T f o t s e r e t n I y t i r o n M i r a e Y e h t f o s t fi o r P t e N s e v r e s e r o t r e f s n a r T e v r e s e r f o t r a p e g a s U s t fi o r p d e t u b i r t s i D r a e Y e h T f o i g n n n g e b i t a e c n a a B l t fi o r P i d e d v d n U i e e y o p m e l r o f e v r e s e R n a p l i p h s r e n w o k c o t s d n E e h T t A e c n a l a B r a e Y e h T f O t s e r e t n I y t i r o n M i ) 0 3 ( r e b m u n e t o n o t r e f e R * Financial Statement B. Consolidated CIB & CI-CH Notes to Consolidated Financial Statement as of December 31, 2007 (1) Organization and Activities A) Commercial International Bank (Egypt) S.A.E. It was formed as a joint stock company on August 7th, 1975 under the Investment Law No. 43 for 1974. The Bank is licensed to carry out all commercial banking activities in Egypt through its Head Office and eighty eight branches, in addition to forty three units. B) CI Capital Holding Co S.A.E. It was formed as a joint stock company on April 9th, 2005 under the capital market law no. 95 for 1992 and its executive regulations. Financial register no. 166798 on April 4th, 2005 and the company has been licensed by the capital market authority to carry out its activities under license no. 333 on May 24th, 2006. As of Dec. 31st, 2007 the bank directly owns 27,551,154 shares represents 50.09% of CI Capital Hold- ing company’s capital . According to the shareholders’ agreement dated October 10, 2006 effective April 2007. 73 As of December 31st, 2007 CI Capital Holding Co. directly owns the following shares in its subsidiaries: Company Name No. of Shares Ownership% Indirectly Share% CIBC Co. CI Assets Management Concept Co. In Search Co Dynamic Brokerage Co. Blue Nile Co. for consultant 539.88 445.499 448.500 448.500 3.392.000 50.000 United Brokerage Co. – Dubai 5.000.000 (2) Significant Accounting Policies A) Basis of Preparing Financial Statements 89.98 89.09 89.70 89.70 99.91 100.00 49.00 45.07 44.63 44.93 44.93 50.04 50.09 24.54 The Financial Statement is prepared in accordance with the Central Bank of Egypt’s Financial Statement Regulations. And takes into consideration on 27 June 2002, and its adjustment. B) Basis of consolidation As CIB owns 50.09% of CI Capital holding which is a jointly control company between CIB and other investors, CIB management decided to follow the proportion method in preparing the consolidated Finan- cial Statement with retroactive effect in 2006. The consolidated financial statements include assets and liabilities and results of operation of the Com- mercial International Bank-Egypt and its subsidiaries which are controlled by the bank. The basis of the consolidation are as follows: - Dropping 50.09% from the balances of mutual deals between CIB and C.I. Capital Holding Co. - All intra-group balances and transactions have been eliminated - Minority interest in the equity and results of operation of the subsidiaries controlled by the bank is shown as a separate item in the consolidated financial statements and is calculated based on their share in the assets and liabilities of the subsidiaries. C) Transactions in Foreign Currencies - The Accounting records of the bank are maintained in Egyptian pounds. Transactions in foreign curren- cies conducted during the year are recorded at the foreign exchange rates prevailing at the time such transactions take place. Assets & Liabilities are revalued at the foreign exchange rates prevailing at the end of year, generated gain and losses are recorded in “Foreign Exchange Income“ in the income statement. Financial Statement B. Consolidated CIB & CI-CH - Forward contracts are evaluated at the end of the financial year at its fair value on this date using the forward rates for the remaining periods until maturity dates of these contracts. The revaluation differ- ences are recorded in “ Foreign Exchange Income “ in the income statement . - Currency SWAP contracts are recorded on the date of commitment under contingent liabilities ac- counts. The difference between the two parts of the contract is recorded in other liabilities or other as- sets as unrealized gain /loss on the date of commitment. The said difference is amortized by crediting / debiting the “ Foreign Exchange Income“ in the income statement. - Premium paid for foreign currencies option contracts is recorded in the Balance Sheet under “ Debit Balances & Other Assets “ such premium is settled in the income statement according to the evaluation of these contracts at fair value. The difference between premium received and paid concern the custom- ers hedging option contracts recorded in the Balance Sheet under “ credit balances & other liabilities “ category and settled in “ foreign exchange income” on accrual basis. D) Realization of Income 74 The bank applies the accrual basis in recording interest received from Loans & Overdrafts, Due from Banks, Treasury Bills, reverse repos and Bonds. Interest on past due Loans & Overdrafts are not record- ed on the income statement. Dividends income are recognized when declared . E) Operating revenues in the holding company: The activities income of the subsidiaries companies comes as soon as the related service is done, the services are : - Consultancy services to the group before the acquisition date. - Securities trading fees & commission for the customers. - Management fees as follows: 1- Mutual funds & investment portfolios management fees: - The management fees are calculated as a percentage “ according to the agreement terms & conditions” of the net mutual fund assets on a monthly basis and classified in the revenue on an accrual basis. - Commission calculated as a percentage of net mutual fund assets fair value on a daily basis. 2- Performance fees: performance fees calculated by specific ratios from customers portfolios annual return in case of it exceeds a specific return based on the contact terms and its calculated based on the return on the net assets such fees are excluded from revenues unless they meet the booking terms. F) Treasury Bills & Other Discountable Notes at CBE Treasury Bills are recorded at face value. The issuance discount is recorded in Other Liabilities and de- ducted from the Gross Treasury Bills balance on the Balance Sheet. G) Repos & (Reverse Repos )Transactions Repos (Reveres Repos) transactions are eliminated (recorded) on the Balance Sheet under “ Treasury Bills and Other Notes Discountable at the CBE “ whereas its cost (revenue ) is recorded on the income statement mate term “interest paid to clients & Banks“ (“interest received from treasury Bills & Bonds “) H) Evaluation of Trading Investments - Trading investments including portfolios managed by other party are evaluated at the end of the finan- cial year at its fair market value and the evaluation difference is recorded in income statement. - Trading investments not satisfying the trading investment classification condition are evaluated at their book value. Such value is subject to be reduced in case of a continual decrease based on the compre- hensive objective study of the latest financial statements for the company issued the securities. The evaluation difference is recorded in the income statement. - Mutual fund certificates which have issued by the bank are evaluated at the end of the financial period at their fair market value and the evaluation difference is recorded in income statement . 75 Financial Statement B. Consolidated CIB & CI-CH I) Evaluation of Available for Sale Investments Available for Sale Investments are evaluated at the lower of cost (taking in consideration the evaluation of Foreign Currency ) or fair value for each investment and the differences are recorded in “other invest- ments evaluation differences “ in Income Statement. In case of increase in the value , such increase is added to the same category within the limit of amounts previously charged to income statement for previous financial periods. Except the difference related to prior years which up to the end of the year 2002 should be recorded as a special reserve in shareholders’ equity. In case of decreases in the investment value its share in the special reserve will be utilized, and the remaining balance should be transferred to income statement. In case of selling the investment, its share in the special reserve should be transferred to income state- ment. J) Evaluation of Held to Maturity Investments Bonds purchased from the primary market are evaluated at cost, representing the nominal value adjust- ed by the issuing premium/ discount which is amortized using the straight line method. The amortization value is recorded in the interest received from treasury bills and bonds in the income statement. The same treatment is applied to bonds purchased from the secondary market at a value higher or lower than the nominal value, and the cost is reduced by the gains related to the previous period of the pur- chasing date. In case of downfall of the fair value of each bond the book value shall be adjusted and the difference is recorded in “other investments revaluation difference” in the income statement. In case of increase in fair value such increase is added to the same category within the limit of amounts previously charged to the income statement for previous financial periods. The book value of foreign currency bonds is amended by the difference resulting from the revaluation of the foreign currency at the exchange rate prevailing at the evaluation date. Such differences are re- corded in foreign exchange income in the income statement. - Mutual fund certificates which must be held till maturity date as the bank is the issuer , are evaluated at cost and in case of downfall of its fair value the book value is adjusted by such downfall and charged to “Other Investments Revaluation Difference” in the income statement. In case of an increase in the fair value. Such increase will be added to the same category in the income statement within the limit of the amounts previously charged. K) Investments in Subsidiaries and Associated Companies These investments are evaluated at cost and in case of downfall of its fair value, the book value of each investment is adjusted by such downfall and charged to “Other investments evaluation difference“ in the income statement. In the case of an increase in the fair value. Such increase will be added to the same category in the income statement within the limit of the amounts previously charged. Also investments in jointly controlled companies are evaluated at cost. L) Assets Acquired for settlement of Debits These Assets are recorded in the Financial Statement under “ debit balances & Other Assets “ at cost and in the case of a decrease of the fair value of these assets at the Balance Sheet date, the difference is charged to the income statement and the increase of the fair value should be credited to the income statement within the limit of amounts charged in previous financial periods. M) Provision for Doubtful Debts and Contra Accounts Provision For Doubtful Debts is established on the basis of an appraisal of the identified risk for specific facilities and loans in addition to one to five percent for General risk based on the risk inherent in any loan portfolio which is not specifically identified. Financial Statement B. Consolidated CIB & CI-CH Provision for Doubtful Debts is decreased by loans written off and is increased by recoveries of loans previously written off. In addition to taking all the necessary legal action required, a continuous follow up is performed for the recovery of all or part of the written-off amounts. N) Contingent Liability Accounts Contingent Liability Accounts include transactions in which the Bank is involved as a third party , forward foreign exchange contracts, SWAP transaction , Option. Such transactions do not represent actual bank’s assets or liabilities at the Balance Sheet date. O) Cash & Cash Equivalent In the Statement of Cash Flow, the Cash and Cash Equivalent item includes balances of cash and due from Central Bank, current account balances with Banks and Treasury Bills with maturities of three months. 76 P) Depreciation and Amortization Depreciation of Fixed Assets ( Except the land ) is calculated on the basis of the estimated useful life of each asset using the straight-line method. Improvement and renovation expenses for the bank’s leased premises are amortized over the period of the lease contract or the estimated useful life whichever is lower. Q) Income Tax Income Tax on the profit or loss for the year comprises current and deferred tax is recognized in the Income statement. 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 . Deferred tax is provided for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The amount of deferred tax provided is based on the expected manner of realization or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the balance sheet date. A deferred tax asset is recognized only to the extent that it is 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. L) Intangible Assets ( goodwill) The basis of calculation was executed primarily and temporarily at the end of the period using assets or liabilities or contingent liabilities balances for the acquired company. (3) Financial Instruments and their risk management (3/1) Financial Instruments A) The bank’s financial instruments are represented in the financial Assets and Liabilities. The financial assets include cash, due from banks, investments and loans to customers and banks . The financial liabilities include customers’ deposits, due to banks and long-term loans. Financial investments also include rights and obligations stated under « contingent liabilities and commitments Note No. (2) of the notes to the financial statements includes the accounting policies applied to measure and recognize significant financial instruments and the revenues and expenses related thereto. B) Financial Instruments Fair Value Using the valuation basis of the bank’s assets and liabilities, as referred to the notes to the Financial Statements, the financial instruments’ fair value do not substantially deviate from their book values at the Balance Sheet date. The notes No. (8),(11),(12) are showing the fair value for all investment (ex- Financial Statement B. Consolidated CIB & CI-CH cept Trading Investment) in the date of financial statement. C) Forward Contract According to Central Bank of Egypt instruction the bank doesn’t execute deferred contracts except to the necessary limit of short term transaction to cover its requirements of Foreign currencies or the bank’s customers’ requirements to fulfill their obligations resulting from short-term transactions. (3/2) Risk Management A) Interest rate risk The value of some financial instruments fluctuate due to the fluctuation in interest rates related thereto. The bank fol- lows some procedures to minimize this risk such as: - Correlating between the interest rates on borrowing and lending. - Determining interest rates in consideration with the prevailing discount rates on various currencies. - Monitoring the maturities of financial assets and liabilities with its related interest rates. The notes No. (31 & 32) of the notes to the Financial Statements disclose maturities of the assets and liabilities and the average interest rates applied to assets and liabilities during the year . 77 B) Credit risk Loans to customers and Banks, financial Investments (Bonds), due from banks, rights and obligations from others, are financial assets exposed to credit risk which result in these parties’ inability to repay in part or in full the loan granted to them at maturity. The bank adopted the following procedures to minimize the credit risk. - Preparing credit studies about the customers before dealing with them and determining credit risk rates related thereto . - Obtaining adequate guarantees to reduce the risks resulting from insolvency of customers. - Monitoring and preparing periodic studies about customers in order to evaluate their financial and credit positions and estimate the required provisions for non - performing loans. - Distribution of loans portfolio and due from banks over various sectors to avoid concentration of risk. Note No. (34) discloses the distribution of loans portfolio over various sectors. C) Foreign Currency Risk The nature of the bank’s activity requires the bank to deal in many foreign currencies which exposes the bank to the risk of fluctuation in exchange rates. To minimize this risk, the bank monitors the balancing of foreign currency posi- tions according to Central Bank of Egypt instructions in that respect. Note No. (35) of the financial statements disclos- es significant foreign currency positions at the Balance Sheet date. Financial Statement B. Consolidated CIB & CI-CH 4- Cash And Due From Central Bank Cash & Cash Items Reserve Balance with CBE (A) Current Accounts (B) Time Deposits Dec. 31, 2007 EGP Dec. 31, 2006 EGP 1,081,319,202 684,845,076 1,996,073,908 1,489,221,888 1,875,812,320 1,568,809,552 Total Cash & Due From Central Bank 4,953,205,430 3,742,876,516 5- Due from Banks 78 (A) Central Bank Time Deposits Total Due from central bank (B) Local Banks Current Accounts Time Deposits Dec. 31, 2007 EGP Dec. 31, 2006 EGP 7,391,521,850 120,102,850 7,391,521,850 120,102,850 109,010,305 313,812,455 155,948,929 85,620,000 Total Due from Local Banks 264,959,233 399,432,455 (C) Foreign Banks Current Accounts Time Deposits 509,054,737 114,797,671 5,717,696,684 5,097,791,983 Total Due From Foreign Banks 6,226,751,421 5,212,589,654 Total Due From Banks 13,883,232,504 5,732,124,959 6- Treasury Bills and other Governmental Notes Discountable At the CBE CBE CD'S 91 Days Maturity 182 Days Maturity 364 Days Maturity Issuance Discount Reverse Repos Repos Dec. 31, 2007 EGP Dec. 31, 2006 EGP 3,317,003,600 1,313,750,000 152,950,000 751,830,445 138,903,150 970,750,000 544,825,000 3,036,330,445 4,153,681,750 (84,709,382) (91,260,207) 2,951,621,063 4,062,421,543 988,527 2,951,621,063 4,063,410,070 7- Trading Financial Investments Portfolio Managed By Other Parties Mutual Funds Bonds Shares Financial Statement B. Consolidated CIB & CI-CH Dec. 31, 2007 EGP Dec. 31, 2006 EGP 64,370,759 478,500,215 465,016,024 252,017,934 51,603,627 95,195,095 102,842,451 75,369,125 Total Trading Financial Investments 683,832,861 901,082,369 The Financial Trading Investments are represented as follows : Financial Investments listed in Stock Exchange 218,816,837 649,064,435 Financial Investments Unlisted in Stock Exchange 465,016,024 252,017,934 79 683,832,861 901,082,369 8- Available for Sale Financial Investments (A) Shares Bank's Shares Corporate Shares (B) Bonds Governmental Bonds Bank's Bonds Corporate Bonds Dec. 31, 2007 EGP Dec. 31, 2006 EGP 5,031 11,046,621 844,022,989 1,116,409,933 855,848,389 1,477,526,784 103,065,708 85,321,689 586,325,158 495,532,444 2,389,267,275 3,185,837,471 Available for sale financial investments are represented as follows : Financial Investments listed in Stock Exchange 1,301,157,343 1,941,629,448 Financial Investments unlisted in Stock Exchange 1,088,109,932 1,244,208,023 2,389,267,275 3,185,837,471 The market Value of Available for sale Investments listed in the Capital market reached EGP 1,617,946,351 On Dec. 31, 2007, compared to EGP 2,288,247,619 on December 31,2006 Financial Statement B. Consolidated CIB & CI-CH 9- Loans and Overdrafts Discounted Bills Loans & Overdrafts to Customer Loans & Overdraft to Banks Unearned Bills discount Provision For Doubtful Debts Unearned Interest & commission 80 Net Loans & Overdrafts 10- Provision For Doubtful Debts Dec. 31, 2007 EGP Dec. 31, 2006 EGP 369,367,153 345,178,132 20,979,609,432 17,719,313,771 398,371,745 652,533,908 21,747,348,330 18,717,025,811 (33,299,487) (6,134,160) (1,089,969,238) (1,038,908,021) (248,554,472) (207,602,806) 20,375,525,133 17,464,380,824 Specific EGP Dec. 31, 2007 General EGP Total EGP Balance at beginning of the Year 551,958,000 486,950,021 1,038,908,021 Addition during the Year written off debts recoveries Foreign currency revaluation diff. 91,524,201 101,480,050 193,004,251 44,472,711 (8,580,249) - - 44,472,711 (8,580,249) 679,374,663 588,430,071 1,267,804,734 Usage during the Year (177,835,496) - (177,835,496) Transferred from specific to general (10,008,945) 10,008,945 - Balance at the end of the Year 491,530,222 598,439,016 1,089,969,238 Specific EGP Dec. 31, 2007 General EGP Total EGP Balance at beginning of the year 583,672,503 365,228,009 948,900,512 Addition during the year written off debts recoveries Foreign currency revaluation diff. 53,833,428 121,722,012 175,555,440 100,062,106 (1,264,639) - - 100,062,106 (1,264,639) 736,303,398 486,950,021 1,223,253,419 Usage during the Year (228,447,476) Transferred from provision of contingent liability 44,102,078 - - (228,447,476) 44,102,078 Balance at the end of the Year 551,958,000 486,950,021 1,038,908,021 Financial Statement B. Consolidated CIB & CI-CH Dec. 31, 2007 EGP Dec. 31, 2006 EGP 215,000 215,000 411,179,166 789,569,338 11- Held to maturity Financial Investments A- Bonds Housing Bonds (maturity Dec.2019) Corporate Bonds B- Mutual Funds 250,000 Osoul Fund Certificates with market value LE 126.17 per certificate 25,000,000 25,000,000 50,000 Istethmar Fund Certificates with market value LE 139.87 per certificate 5,000,000 5,000,000 81 25,000 Aman Fund Certificates with market value LE 126.42 per certificate 2,500,000 2,500,000 443,894,166 822,284,338 The held to maturity Financial Investments are represented as follows : Financial Investments listed in Stock Exchange 311,279,817 667,740,018 Financial Investments Unlisted in Stock Exchange 132,614,349 154,544,320 443,894,166 822,284,338 The market value of Held to Maturity Financial Investments reached EGP 337,511,601 on 31 December ,2007, while reached EGP 672,356,231 on 31 December 2006 Financial Statement B. Consolidated CIB & CI-CH 12- Financial Investments in Associated Companies A- Associated Companies: Contact for Cars Trading 31,000,000 %38.4 31,000,000 %38.4 Dec. 31, 2007 EGP % Dec. 31, 2007 EGP % Commercial International life insurance co. 32,000,000 Corplease co. Giro-Nil Cotecna Trade Support Haykala For Investment 82 Royal & Sun Alliance Egypt Factors International. Co. for Appraisal & Collection. International Co. for Security & Services 18,400,000 %40 %40 32,000,000 12,240,000 - - 12,390,000 48,750 %40 48,750 601,252 47.5% 712,703 %50.05 - - 10,872,000 3,763,646 400,000 4,500,900 %39 %40 45% 3,895,710 400,000 4,500,900 %46.7 %40 %40 %30 %40 %20 %39 %40 90,714,548 108,060,063 The Financial Investments in subsidiary companies are represented as follows :- Financial Investments listed in Stock Exchange - Financial Investments Unlisted in Stock Exchange 90,714,548 90,714,548 - 108,060,063 108,060,063 13- Capital Commitments (Financial Investments): The capital commitments for the financial investments reached on the date of Financial position EGP 251,673,787 as follows : Available for sale Financial investments 424,746,619 184,608,711 240,137,908 Financial Investments in subsidiaries co. 34,748,275 23,212,396 11,535,879 Investments value EGP Paid EGP Remaining EGP 14- Debit Balances and Other Assets Accrued Interest receivable Prepaid Expenses Advances for Purchase of Fixed Assets Assets Acquired for Settlement of Debts Due From Associated Companies Accounts receivable & Other Assets Accrued Balances of Customers Loans * Deduct Financial Statement B. Consolidated CIB & CI-CH Dec. 31, 2007 EGP Dec. 31, 2006 EGP 460,502,319 287,098,900 54,175,158 28,979,566 204,935,394 155,099,982 29,361,646 78,927,129 - 28,019 288,214,383 373,907,084 241,625,336 252,458,000 1,278,814,235 1,176,498,680 83 Provision for General Risk & Risk Insurance ** (243,638,021) (251,458,735) Total Debit Balances and Other Assets 1,035,176,214 925,039,945 * These balances represent certain advances to customers that were made at one of the branches in violation of the bank's standard operating procedures, resulting in reclassifying these balances under "other debit balances". Conservative provisions were adequately reallocated from other provisions to meet the relevant operation risk ** Refer to Note No. 21. 15- Intangible Asstes ( Goodwill) Represent 50.09% (CIB share) of the intangible assets results from CI capital holding Acquired 49% of united broker Co. Dubai on 17/12/2006 ,100% of Blue Nile Consultant Co. on 27/12/2006 and 99.91% of Dynamic Broker Co on 19/02/2007. According to the inability of determining the fair value for acquire intangible assets for Dynamic Broker Co only . The difference between the book value and the fair value of the assets, liabilities and Contingent Liabilities represent EGP 234,569,028 recorded as primarily and temporarily Goodwill at the end of the period till maintaning the final calcula- tion. Financial Statement B. Consolidated CIB & CI-CH 84 l a t o T P G E & e r u t i n r u F & s e n h c a M i i g n h s i n r u F t n e m p u q E i P G E P G E t u O - g n i t t i F s e l c i h e V P G E P G E T I P G E s e s i m e r P P G E d n a L P G E 7 0 0 2 , 1 3 . c e D 8 4 5 , 7 6 4 , 1 5 9 0 6 6 , 0 3 3 , 9 5 5 4 0 , 3 1 7 , 9 3 1 0 9 0 , 5 2 5 , 1 0 1 2 9 4 , 4 7 7 , 1 2 7 0 6 , 0 8 2 , 0 6 3 7 7 8 , 5 1 1 , 8 5 2 7 7 7 , 7 2 7 , 0 1 ) 3 ( e c n a a B l i g n n e p O 4 3 6 , 3 3 6 , 5 3 2 2 3 8 , 0 3 6 , 1 2 0 8 2 , 8 8 0 , 1 3 9 4 7 , 8 1 1 , 8 3 3 2 0 , 4 5 7 2 5 9 , 1 9 8 , 0 5 5 1 3 , 4 8 0 , 0 4 3 8 4 , 5 6 0 , 3 5 r a e Y e h t g n i r u d l a n o i t i d d A 2 8 1 , 1 0 1 , 7 8 1 , 1 2 9 4 , 1 6 9 , 0 8 5 2 3 , 1 0 8 , 0 7 1 9 3 8 , 3 4 6 , 9 3 1 5 1 5 , 8 2 5 , 2 2 0 6 5 , 2 7 1 , 1 1 4 2 9 1 , 0 0 2 , 8 9 0 6 2 , 3 9 7 , 3 6 ) 1 ( e c n a l a B g n i s o C l 7 0 0 2 , 1 3 . c e D f O s A ) n o i t a i c e r p e D d e t a l u m u c c A f o t e N ( s t e s s A d e x i F - 6 1 2 8 6 , 1 5 6 , 4 4 4 9 5 1 , 7 1 0 , 5 2 9 3 5 , 8 7 1 , 7 6 9 6 7 , 0 7 2 , 5 6 1 6 4 , 8 4 0 , 6 1 4 5 1 , 9 6 5 , 2 9 1 0 0 6 , 7 6 5 , 8 7 8 1 6 , 0 1 2 , 2 2 1 4 0 4 , 8 0 4 , 9 6 9 2 , 6 7 8 , 6 1 4 1 7 , 1 0 6 , 3 2 3 9 0 , 1 6 2 , 2 7 3 0 , 1 4 2 , 7 5 4 7 0 , 2 2 8 , 2 1 0 0 3 , 2 6 8 , 6 6 5 3 6 5 , 5 2 4 , 4 3 5 3 8 , 4 5 0 , 4 8 3 8 4 , 2 7 8 , 8 8 5 5 5 , 9 0 3 , 8 1 0 9 1 , 0 1 8 , 9 4 2 4 7 6 , 9 8 3 , 1 9 - - - e h t f o i g n n n g e b i t a n o i t a i c e r p e D . u c c A ) 4 ( r a e Y e h t f o d n e t a n o i t a i c e r p e D . u c c A ) 2 ( r a e Y n o i t a i c e r p e D r a e Y t n e r r u C 3 8 8 , 8 3 2 , 0 2 6 9 2 9 , 5 3 5 , 6 4 0 9 4 , 6 4 7 , 6 8 6 5 3 , 1 7 7 , 0 5 0 6 9 , 8 1 2 , 4 9 6 3 , 2 6 3 , 1 6 1 8 1 5 , 0 1 8 , 6 0 2 0 6 2 , 3 9 7 , 3 6 ) 2 - 1 ( s e t s s a t e n r a e Y f o d n E 6 6 8 , 5 1 8 , 6 0 5 1 0 5 , 3 1 3 , 4 3 7 0 5 , 4 3 5 , 2 7 1 2 3 , 4 5 2 , 6 3 0 3 0 , 6 2 7 , 5 3 5 4 , 1 1 7 , 7 6 1 7 7 2 , 8 4 5 , 9 7 1 7 7 7 , 7 2 7 , 0 1 ) 4 - 3 ( s t e s s a t e n r a e Y f o g n n n g e B i i 0 1 % 5 . 2 1 % 3 . 3 3 % 0 2 % 0 2 % 5 % s e t a r n o i t a i c e r p e D . s s e c o r p n i e r a s e r u d e c o r p s n o i t a r t s i g e r r i e h t e l i h w s t e s s a d e r e t s i g e r n o n 9 3 4 , 2 2 0 , 8 7 P G E s e d u l c n i e t a d n o i t i s o p l a i c n a n fi e h t n o e u a v l s t e s s a d e x fi t e N 17- Due to Banks (a) Central Bank Current Accounts Time Deposits Financial Statement B. Consolidated CIB & CI-CH Dec. 31, 2007 EGP Dec. 31, 2006 EGP 80,028,494 20,044,409 2,012,792,500 867,616,000 Total Due to Central Bank 2,092,820,994 887,660,409 (b) Local Banks Current Accounts Time Deposits Total Due to Local Banks (c) Foreign Banks Current Accounts Time Deposits 26,463,751 15,936,955 28,480,310 107,541,554 54,944,061 123,478,509 85 199,834,891 201,260,025 31,013,432 201,695 Total Due to foreign Banks 230,848,323 201,461,720 Total Due to Banks 2,378,613,378 1,212,600,638 18- Customers' Deposits Demand Deposits Time & Notice Deposits Saving & Deposit Certificates Saving Deposits Other Deposits Dec. 31, 2007 EGP Dec. 31, 2006 EGP 11,566,831,688 8,822,372,913 13,612,928,991 11,023,762,189 5,948,726,982 5,181,379,187 6,517,256,544 5,349,962,762 1,830,308,636 1,189,914,884 Total Customer Deposits 39,476,052,841 31,567,391,935 19- Credit Balances and Other Liabilities Accrued Interest Payable Accrued Expenses Accounts Payable Dec. 31, 2007 EGP Dec. 31, 2006 EGP 140,677,147 109,691,056 34,419,304 35,125,589 576,182,550 604,311,441 Due to Associated & Subsidiries Companies 598,907 514,815 Dividends & Profit Sharing Other Liabilities 2,300,783 46,634,289 49,250,350 Total Credit Balances And Other Liabilities 798,512,196 801,194,034 Financial Statement B. Consolidated CIB & CI-CH 20- Long Term Loans F.I.S.C. K.F.W UNIDO Ministry of Agriculture (F.S.D.P) Ministry of Agriculture (V.S.P) 86 Social Fund Total Rate % Maturity date Maturing through next year Balance as of Dec-07 Balance as of Dec-06 7 3-5 years 40,125,600 40,565,200 9-10.5 10 YEARS 4,733,269 15,195,955 9,461,379 1 2011 2,866,393 8,038,908 10,483,577 3.5 - 5.5 depends on maturity date 3.5 - 5.5 depends on maturity date 3 months T/D or 9% which more 3-5 years 54,935,674 92,594,906 70,617,084 3-5 years 10,000 10,000 30,000 2010 1,900,000 4,951,250 8,574,821 104,570,936 161,356,219 99,166,861 Financial Statement B. Consolidated CIB & CI-CH g n i s o C l e c n a l a B o T d e r r e f s n a r T & s e c n a l a B t i b e D s t e s s A r e h t O r e f s n a r T e g a s U r a e Y e h t g n i r u D r a e Y e h t g n i r u D e c n a l a B Y C F - r e f f i D . l a v e R e c n e n o i t i d d A r a e Y e h t g n i r u D i g n n e p O e c n a l a B P G E 7 0 0 2 , 1 3 . c e D g n i s o C l e c n a l a B o T d e r r e f s n a r T & s e c n a l a B t i b e D s t e s s A r e h t O r e f s n a r T e g a s U r a e Y e h t g n i r u D r a e Y e h t g n i r u D e c n a l a B Y C F - r e f f i D . l a v e R e c n e n o i t i d d A r a e Y e h t g n i r u D i g n n e p O e c n a l a B P G E 7 0 0 2 , 1 3 . c e D s n o i s i v o r P r e h t O - 1 2 2 7 2 , 2 9 4 6 4 2 , 8 9 1 , 9 2 2 8 1 1 , 3 2 1 , 1 0 0 0 , 6 3 0 , 7 6 1 6 3 6 , 9 4 8 , 7 9 3 ) 6 7 6 , 3 ( 4 9 7 , 6 2 1 , 1 i s m a C l l a g e L r o f n o i s i v o r P ) 5 0 3 , 1 0 9 , 1 ( 6 1 4 , 2 1 4 , 7 5 9 8 8 , 4 2 5 , 1 1 1 t n e g n i t n o c r o f n o i s i v o r P 2 7 2 , 2 9 4 g n i t a r e p O r o f n o i s i v o r P ) 1 8 9 , 4 0 9 , 1 ( 6 1 4 , 2 1 4 , 7 5 1 0 2 , 2 4 3 , 2 4 3 s n o i s i v o r P r e h t O l a t o T 6 4 2 , 8 9 1 , 9 2 2 s m a l c i x a T e m o c n I r o f n o i s i v o r P 6 4 2 , 8 9 1 , 9 2 2 4 9 7 , 6 2 1 , 1 9 8 8 , 4 2 5 , 1 1 1 2 7 2 , 2 9 4 ) 2 7 3 , 0 4 3 , 8 2 2 ( 0 0 0 , 0 0 0 , 5 6 0 0 0 , 5 0 5 , 1 2 7 3 , 5 3 8 , 1 6 1 * k s i r l a r e n e G r o f n o i s i v o r P ) 3 6 3 , 8 1 1 , 3 2 ( ) 0 7 3 , 0 4 6 ( ) 5 0 5 , 1 2 1 ( 8 3 2 , 0 8 8 , 3 2 * e c n a r u s n i k s i R k n a B r o f n o i s i v o r P ) 8 7 0 , 2 0 1 , 4 4 ( ) 3 9 5 , 4 2 3 ( 0 6 5 , 3 7 0 , 7 1 0 0 0 , 8 7 8 , 8 3 1 t n e g n i t n o c r o f n o i s i v o r P 2 7 2 , 2 9 4 g n i t a r e p O r o f n o i s i v o r P ) 0 0 0 , 0 0 0 , 5 6 ( ) 4 6 8 , 3 0 5 , 9 2 3 ( 0 1 1 , 2 0 7 , 3 2 6 s m a l c i x a T e m o c n I r o f n o i s i v o r P ) 0 8 1 , 2 7 7 ( ) 4 0 6 , 8 ( 0 5 7 , 8 7 1 8 2 8 , 8 2 7 , 1 i s m a C l l a g e L r o f n o i s i v o r P 1 0 2 , 2 4 3 , 2 4 3 ) 5 3 7 , 8 5 4 , 1 5 2 ( ) 8 7 0 , 2 0 1 , 4 4 ( ) 4 1 4 , 6 1 9 , 0 3 3 ( ) 2 0 7 , 4 5 4 ( 0 1 3 , 7 5 7 , 8 1 0 2 8 , 6 1 5 , 0 5 9 s n o i s i v o r P r e h t O l a t o T d r a d n a t s s ' k n a b e h t f o l n o i t a o v m o r f i 87 g n i t l u s e r s t e s s a i n a t r e c n i e u a v l f o s s o l l e b i s s o p e h t t e e m o t " s e c n a a b l t i b e d r e h t o " r e d n u d e fi i s s a l c e r e r e w s e c n a a b l e s e h T * . s l i a t e d r e h t r u f r o f 4 1 # n o i t a c fi i r a l c o t r e f e r e s a e P l . " s r e m o t s u C o t s n a o L " m o r f d e fi i s s a l c e r e r e w t a h t s e r u d e c o r p g n i t a r e p o Financial Statement B. Consolidated CIB & CI-CH 22- Shareholders Equity (a) Capital • • • The Authorized Capital reached EGP 5000 Million according to the Extraordinary General Assembly decision on 19,Mar,2006. Issued and Paid in capital reached to EGP 1950 Million divided to 195 Million shares with par value EGP 10 per each. The Extraordinary General Assembly approved in the meeting of June,26,2006 to Activate a motivating and rewarding program for the bank's employees & managers through employee share ownership plans (ESOPs) by issuing a maximum of 5% of issued and paid-in capital at par value ,through 5 years starting 31,Dec 2006 and delegated the Board of Directors to establish the rewarding terms & conditions and increase the paid in capital according to the program. (b) Reserves • • • 88 According to the bank statues 5% of net profit is to increase legal reserve until reaches 50% of the bank's issued and paid-in capital. Concurrence of Central Bank of Egypt for usage of Special Reserve is required. According to CBE regulations, a reserve has been formed for difference revaluation for financial investment (available for sale) in foreign currency for preceding years (up to 2002) , and this reserve is used in case of sale or decrease in the value of that investment , and the income statement will be carried with the differ- ence according to the issued instruction for such matter . 23- Contingent & Commitments Liabilities Letters of Guarantee Letters of Credit ( import & export ) Customers Acceptances Dec. 31, 2007 EGP Dec. 31, 2006 EGP 8,710,786,948 5,636,795,144 2,233,007,892 865,777,545 616,046,795 418,344,500 Forward Foreign Exchange contracts (bought) 2,315,808,497 1,353,283,099 Forward Foreign Exchange contracts (sold) (2,314,413,012) (1,352,168,802) Swap Deals (bought) Swap Deals (sold) Option (bought) Option (sold) Total 2,031,770,686 1,048,742,044 (2,064,022,142) (1,105,929,945) 4,040,915 60,744,244 (4,040,915) (60,744,244) 11,528,985,664 6,864,843,585 Financial Statement B. Consolidated CIB & CI-CH 89 24- Foreign Exchange Profits (losses Dec. 31, 2007 EGP Dec. 31, 2006 EGP Profit from dealing with foreign currencies 155,304,325 103,752,327 Profit (loss) of revaluation of Monetary assets and Liabilities * 13,181,723 3,122,692 Profit (loss) of Forward deals revaluation Profit revaluation of options Total (841,440) 1,254,271 200,397 787,429 167,845,005 108,916,719 * Include an increase of EGP 29,843,292 due to the foreign currencies revaluation differences of the financial trad- ing & available for sale investments by EGP 5,101,086 & EGP 24,742,206 respectively against decrease in financial investments revaluation differences' items in income statement. 25- Profits From Selling Financial Investments in Subsidiaries Include EGP 148,393,558 from selling 9,287,846 shares of CIB'S stake in CI.Holding Co. 26- Other Financial investments revaluation differences Available for sale financial investments 4,185,378 (15,812,507) Total 4,185,378 (15,812,507) Dec. 31, 2007 EGP Dec. 31, 2006 EGP 27- Deferred tax assets and liabilities Assets (liabilities) Dec. 31, 2007 EGP Assets (liabilities) Dec. 31, 2006 EGP Recognized deferred tax assets (liabilities) Deferred tax assets and liabilities are attributable to the following: Deferred tax Fixed assets depreciation (23,074,328) (19,897,851) Other provisions(excluded loan loss & contingent liabilities and income tax provisions) 48,952,228 50,517,106 Other items(other investments revaluation difference) 20,190,375 9,877,820 Reserve for employee stock ownership plan (ESOP) 5,831,917 Total deferred tax assets(liabilities) 51,900,192 40,497,075 Financial Statement B. Consolidated CIB & CI-CH 28- Reconciliation of effective tax rate Profit Before Tax Tax Rate Income tax Add / (Deduct) Non-deductible expenses Tax exemptions Effect of provisions Dec. 31, 2007 EGP Dec. 31, 2006 EGP 1,458,638,730 935,139,029 20% 20% 291,727,746 187,027,806 (2,453,094) 9,939,347 (146,125,178) (129,112,668) 26,967,598 18,919,914 90 Settlement of tax for profit before acquiring (4,271,103) Income tax Effective tax rate 29- Earning per share Net profit for the year Board member's bonus Staff profit sharing 170,117,071 82,503,296 11.66% 8.82% Dec. 31, 2007 EGP Dec. 31, 2006 EGP 1,285,775,353 851,580,439 (19,286,630) (12,773,707) (128,577,535) (85,158,044) Shareholders' share in profits 1,137,911,187 753,648,689 Number of shares Earning per share 30- Share-Based Payments: 195,000,000 195,000,000 5.84 3.86 According to the extraordinary general assembly meeting on June 26, 2006 , the bank actived a new employees share ownership plan (ESOP) scheme and issued equity-settled share-based payments .Such employees should complete a term of 3 years of service in the bank to have the right in ordinary shares at face value(right to hare) that will be issued on the vesting date, otherwise such grants will be forfeited. Equity-settled share-based pay- ments are measured at fair value at the grant date, and expensed on a straight-line basis over the vesting period (3 years) with corresponding increase in equity based on estimated number of shares that will eventually vest. The fair value for such equity insturments is measured by use of Black-Scholes pricing model. Details of the rights to share outstanding during the period are as follows: Number of Shares Outstanding at the beginning of the period - Granted During the period 1,909,350 Forfeited during the period Exercised during the period Expired during the period - - - Outstanding at the end of the period 1,909,350 The estimated fair value of the Equity insturment (Right to share) granted is EGP 45.82, Totaling LE 29,159,584 at the end of Dec. 2007 31- Assets & Liabilities Maturities Assets Cash and Due from Central Bank Due from Banks Treasury Bills and other Notes Discountable at the CBE Trading Investments Available for sale investments Customers' Loans & Overdrafts Banks' Loans & Overdrafts Held to maturity Investments Investments in subsidiary companies Debit Balances and Other Assets Liabilities Due to Banks Customer Deposits Long Term Loans Credit Balances and Other Liabilities Financial Statement B. Consolidated CIB & CI-CH Maturity Within one year Maturity Over One Year 4,953,205,430 13,883,232,504 3,036,330,445 683,832,861 2,389,267,275 - - - - - 9,858,027,721 11,242,394,392 220,529 398,151,216 - - 443,894,166 90,714,548 1,035,176,214 - 35,839,292,979 12,175,154,322 91 2,378,613,378 - 32,781,338,604 6,694,714,236 104,570,936 56,785,283 798,512,196 - 36,063,035,114 6,751,499,520 32- Interest Rate The average interest rates applied for Assets and Liabilities during the Year are 6.78 % & 3.91 % Respectively . 33- Tax Status (A) Commercial International Bank • • • • • • The bank's corporate income tax position has been examined and settled with the Tax Authority from the start up of operations up to the end of year 1984. Corporate income tax for the years from 1985 up to 2000 were paid according to the Tax appeal Committee decision and the disputes are under discussion in the court of law. The bank's corporate income tax position has been examined and settled with the Tax Authority from 2001 up to 2002. Corporate income tax for the years from 2003 up to 2004 were paid according to the internal Committee decision and the final settlement is under discussion with the tax apeal committee. The bank pays salary tax according to concerning domestic regulations and laws, and the disputes are under discussion in the court of law. The bank pay stamp duty tax according to concerning domestic regulations and laws, and the disputes are under discussion in the court of law. (B) CI Capital Holding Co. • • CI Capital Holding company was established on April 9,2005 according to the law # 95 for year 1992 & its regulations and as for taxation law the company goes under law # 91 for year 2005 & its regulations. The company did not receive any tax claim concerning income tax , salaries , and stamp duty . Financial Statement B. Consolidated CIB & CI-CH 34- Distribution of Assets, Liabilities and Contingent Accounts Asset 1-Due From Banks 2- Loans & Overdrafts Agriculture Sector Industrial Sector Trading Sector Services Sector Household Sector Other Sectors Local Currency Foreign Currency 7,656,481,083 6,226,751,421 61,593,282 8,709,754,272 954,041,289 % .3 40. 4 8,112,056,815 37.2 2,063,672,092 1,846,230,580 9.5 8.5 92 Total Loans & Overdrafts (Including unearned interest) 21,747,348,330 100 Unearned Discounted Bills Provision for Doubtful Debts Unearned Interest & Commission Net Loans & Overdrafts Liabilities 1- Due to Banks 2- Customers' Deposits Agriculture Sector Industrial Sector Trading Sector Services Sector Household Sector Other Sector (33,299,487) (1,089,969,238) 5.0 (248,554,472) 20,375,525,133 Local Currency Foreign Currency 50,870,429 2,327,742,949 65,997,581 5,142,043,546 2,414,487,913 % .2 13. 6.1 7,623,383,420 19.3 20,526,954,379 3,703,186,002 52. 9.4 Total Customers' Deposits 39,476,052,840 100 Contingent Accounts Letters of Guarantee Letter of Credit ( import & export ) Customers Acceptances Local Currency Foreign Currency 2,684,223,857 6,026,563,091 21,925,488 2,211,082,404 103,283,915 512,762,880 Forward Foreign Exchange contracts (bought) 298,533,897 2,017,274,600 Forward Foreign Exchange contracts (sold) (4,427,418) (2,309,985,594) Swap Deals (bought) Swap Deals (sold) Option (bought) Option (sold) - 2,031,770,686 (817,334,150) (1,246,687,992) - - 4,040,915 (4,040,915) 2,286,205,589 9,242,780,075 Main Currencies Positions Egyptian Pound US Dollar Sterling pound Japanese Yen Swiss Franc Euro 36- Mutual Funds (1) Osoul Fund Financial Statement B. Consolidated CIB & CI-CH Dec. 31, 2007 in thousand EGP Dec. 31, 2006 in thousand EGP (13,959) (56,955) (389) (377) 821 14,449 5,550 (54,691) 2,408 27,721 369 14,894 93 • • • • • • • • • • • • The bank established an accumulated return mutual fund under license no.331 issued from Capital Market Author- ity on 22/02/2005. CI Assets Management Co.joint stock co manages the fund. The number of certificates reached 57,068,881 with redeemed value LE 7,200,380,716. The market value per certificate reached EGP 126.17 on 29/12/2007. The Bank portion got 3,083,666 certificates with redeemed value EGP 389,066,139 . (2) Istethmar Fund The bank established the second accumulated return mutual fund under license no.344 issued from Capital Market Authority on 26/02/2006. CI Assets Management Co.joint stock co manages the fund. The number of certificates reached 2,257,365 with redeemed value LE 315,737,643. The market value per certificate reached EGP 139.87 on 29/12/2007. The Bank portion got 115,132 certificates with redeemed value EGP 16,103,513. (3) Aman Fund ( CIB & Faisal Islamic Bank Mutual Fund) The bank & Faisal Islamic Bank established an accumulated return mutual fund under license no.365 issued from Capital Market Authority on 30/07/2006. CI Assets Management Co.joint stock co manages the fund. The number of certificates reached 1,021,976 with redeemed value LE 129,198,206. The market value per certificate reached EGP 126.42 on 29/12/2007. The Bank portion got 26,571 certificates with redeemed value EGP 3,359,106. 37- Transactions With Related Parties All Banking transactions with related parties are conducted in accordance with the normal banking practices and regula- tions applied to all other customers without any discrimination. Due from Banks Loans & Overdrafts Investment in subsidiary companies Due to banks Customer Deposits Contingent Accounts Contact Co. International Co. for Security & Services International. Co. for Appraisal & Collection. Corplease co. Commercial International life insurance co. EGP 499,579,973 90,714,548 - 149,823,536 25,000,000 - - - - - - Income Expenses 16,823,303 983,079 983,079 3,033,819 - 566,162 54,969,524 10,051,223 860,674 3,170,677 Financial Statement B. Consolidated CIB & CI-CH 38- Comparative Figures Consolidated balance sheet comparative figures has been adjusted as follows : 1) According to the shareholders agreement dated October 10,2006 . CIB share in CI Capital Holding has been adjusted to be 50.09 % instead of 67.6% which was previously used in preparing 2006 consolidated Financial statement. 2) CIB management decided to follow the proportion method in preparing the consolidated financial statement with retroactive effect in 2006 comparative figures. - The Comparative figures were amended to cope with the reclassification of the current year . 94 10 years Historical Pro Forma Financial Statements 95 Branches & Public Units Branches & Public Units 97 Mohandessein Branches & Public Units Total Branches 98 Al Haram Branches & Public Units 99 Dandy Mall Mansoura For more detailed information, please visit: www.cibeg.com 

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