The Shareholders ARAMEX International Limited and subsidiaries Report of the Auditors We have audited the accompanying consolidated balance sheet of ARAMEX International Limited and subsidiaries ("the Group") as of 31 December 2004 and the related consolidated statements of income, cash flow and changes in shareholders’ equity for the year then ended. Respective responsibilities of the Group's Management and the Auditors These consolidated financial statements are the responsibility of the Group’s Management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit. Basis of opinion We conducted our audit in accordance with International Standards on Auditing. Those Standards require that we plan and perform the audit to obtain reasonable assurance that the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. Opinion In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of ARAMEX International Limited and its subsidiaries as of 31 December 2004 and the results of their operations and cash flows for the year then ended in accordance with International Financial Reporting Standards. 1 ARAMEX International Limited and subsidiaries Consolidated income statement for the year ended 31 December 2004 Note 2004 2003 USD’000 USD’000 Revenue 3 188,736 151,549 Cost of services 4 (102,820) (78,104) --------- --------- Gross profit 85,916 73,445 Other operating expenses (25,495) (20,676) Selling expenses (10,084) (8,532) General and administrative expenses 5 (34,567) (31,378) --------- --------- Profit from operations 15,770 12,859 --------- -------- Other income / (expense) Interest income 242 208 Interest expense (233) (341) Loss on sale of assets (4) (26) Exchange loss (159) (613) Other income 170 5 ------ ------ 16 (767) ------ ------ Net profit before income tax 15,786 12,092 Income tax 6 (882) (456) --------- -------- Net profit after income tax 14,904 11,636 Minority interest 7 (1,947) (1,589) -------- -------- Net profit for the year 12,957 10,047 ===== ===== The notes on pages 6 to 18 form part of these consolidated financial statements. The report of the Auditors is set out on page 1. 2 ARAMEX International Limited and subsidiaries Consolidated balance sheet as at 31 December 2004 Note 2004 2003 Assets USD’000 USD’000 Current assets Cash and cash equivalents 8 14,714 14,901 Receivables (net) 9 33,478 30,040 Inventories 622 378 Other current assets 10 5,653 4,324 -------- --------- Total current assets 54,467 49,643 -------- --------- Non-current assets Property, plant and equipment (net) 11 12,122 10,615 Goodwill (net) 12 8,949 8,769 Due from holding company - 13,085 Deferred tax assets 6 441 380 Other non-current assets 758 1,861 -------- -------- Total non-current assets 22,270 34,710 -------- -------- Total assets 76,737 84,353 ===== ===== Liabilities, minority interest and shareholders’ equity Current liabilities Due to banks 13 346 389 Current portion of long-term debt 14 941 952 Trade payables 17,670 12,912 Other current liabilities 15 12,139 9,684 --------- --------- Net current liabilities 31,096 23,937 -------- --------- Non-current liabilities Long term debt 14 706 898 Deferred tax liabilities 6 3 6 Employee termination indemnities 5,236 4,420 ------- ------- Total non-current liabilities 5,945 5,324 ------- -------- Minority interest in subsidiaries 7 3,267 2,699 ------- -------- Shareholders’ equity Issued and paid-up capital 16 52 52 Contribution to surplus 17 12,441 12,441 Accumulated other comprehensive loss 18 (475) (914) Retained earnings 19 24,411 40,814 -------- --------- Total shareholders’ equity 36,429 52,393 -------- --------- Total liabilities, minority interest and shareholders’ equity 76,737 84,353 ===== ===== The notes on pages 6 to 18 form part of these consolidated financial statements. The Board of Directors approved these consolidated financial statements on _________________ _______________ Fadi Ghandour Emad Shishtawi (President & CEO) (Vice President Finance) The report of the Auditors is set out on page 1. 3 ARAMEX International Limited and subsidiaries Consolidated statement of cash flows for the year ended 31 December 2004 2004 2003 Operating activities USD’000 USD’000 Net profit for the year 12,957 10,047 Adjustments to reconcile net profit before tax and minority interest to net cash from operating activities Depreciation 4,016 3,363 Amortisation - 625 Provision for doubtful debts 1,893 2,368 Provision for employee termination indemnities 1,203 992 Interest expense 233 341 Loss on sale of property, plant and equipment 4 26 Income tax expense 882 456 Minority Interests 1,947 1,589 ----------- ---------- Operating profit before working capital changes 23,135 19,807 Increase in receivables (5,331) (2,017) Increase in inventories (244) (49) Decrease/(increase) in due from holding company 13,085 (9,690) Increase in other current assets (1,329) (85) Increase in trade payables 4,758 1,710 Payment of employee terminal indemnities (340) (411) Increase in other current liabilities 1,985 377 Other 135 145 ---------- --------- Cash generated from operations 35,854 9,787 Income tax paid (475) (725) ----------- ---------- Cash flows from operating activities 35,379 9,062 ---------- ---------- Investing activities Purchase of property, plant and equipment (4,949) (3,527) Proceeds from sales of property, plant and equipment 382 228 Acquisition of investments in subsidiaries (180) (481) Decrease/(increase) in other non current assets 1,103 (105) --------- --------- Cash flows used in investing activities (3,644) (3,885) --------- --------- Financing activities Payment of due to banks (43) (200) Payment of interest expense (233) (343) Net proceeds from long term debt - 99 Repayment of long term debt (354) (132) Payment of capital lease obligations (631) (396) Dividend paid (29,360) - Payments to minority interest (1,379) (1,678) ---------- -------- Cash flows used in financing activities (32,000) (2,650) ---------- -------- Effect of exchange rate changes on cash held 78 (88) --------- -------- Net (decrease)/ increase in cash and cash equivalents (187) 2,439 Cash and cash equivalents at beginning of the year 14,901 12,462 ----------- --------- Cash and cash equivalents at end of the year 14,714 14,901 ====== ====== The notes on pages 6 to 18 form part of these consolidated financial statements. The report of the Auditors is set out on page 1. 4 ARAMEX International Limited and subsidiaries Consolidated statement of changes in shareholders’ equity for the year ended 31 December 2004 Accumulated Total other share- Share capital Share Contribution comprehensive Retained holders’ Shares Amount premium to surplus (loss)/income earnings equity Number USD’000 USD’000 USD’000 USD’000 USD’000 USD’000 At 1 January 2003 5,181,068 52 12,441 - (940) 30,767 42,320 Comprehensive income: - Net profit - - - - - 10,047 10,047 - Translation adjustment - - - - 26 - 26 Transfer to contribution to surplus - - (12,441) 12,441 - - - ------------ ------ --------- -------- -------- --------- ---------- At 1 January 2004 5,181,068 52 - 12,441 (914) 40,814 52,393 Comprehensive income: - Net profit - - - - - 12,957 12,957 - Translation adjustment - - - - 439 - 439 Dividend paid - - - - - (29,360) (29,360) ------------ --- ----- --------- ----- --------- ---------- At 31 December 2004 5,181,068 52 - 12,441 (475) 24,411 36,429 ======= == === ===== === ===== ===== The notes on pages 6 to 18 form part of these consolidated financial statements. 5 ARAMEX International Limited and subsidiaries Notes (forming part of the consolidated financial statements) 1 Legal status and principal activities ARAMEX International Limited (“AIL”) (“the Company”) is a limited liability company incorporated under the laws of Bermuda on 31 October 1996 to be the successor to ARAMEX International Limited, a Hong Kong company that was incorporated in February 1986 (ARAMEX Hong Kong). AIL is the wholly owned subsidiary of ARAMEX Holding Company (“AHL”). AIL has an authorized share capital of 15,000,000 shares of common stock with a par value of USD 0.01 per share. The Company is also authorised to issue 5,000,000 shares of preferred stock with a par value of USD 0.01 per share, none of which has been issued or is outstanding. The principal activity of the Company is to provide express delivery and freight forwarding services from its main stations (hubs) in Dubai, London and New York primarily to, from and within destinations in the Middle East and India. AIL’s operations are controlled through a regional office, which was registered in Jordan on 15 March 1988 under the name of AIL (the Regional Office) pursuant to the foreign companies law No. (58) of 1985. The operations of the Regional Office are facilitated by the hubs of the ARAMEX network. Effective 1 January 1996, the Company formally inaugurated its direct marketing and mail order catalogue service at certain stations in the Middle East. The service, called catalogue shopping services, provides assistance to customers in selecting, ordering and delivering merchandise through catalogs of retail companies based principally