report of the auditors - aramex report of the auditors is set out on page 1. 6 aramex international...

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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 2005 and the related consolidated statements of income, cash flow and changes in 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 2005 and the results of their operations and cash flows for the year then ended in accordance with International Financial Reporting Standards.

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Aramex International Limited and subsidiaries Consolidated income statement for the year ended 31 December 2005 Note 2005 2004 USD’000 USD’000 Revenue 5 232,492 188,736 Cost of services 6 (121,799) (102,820) --------- --------- Gross profit 110,693 85,916 Other operating expenses 7 (32,434) (25,495) Selling expenses (12,651) (10,084) General and administrative expenses 8 (42,067) (34,567) --------- --------- Profit from operations 23,541 15,770 --------- -------- Other income / (expense) Interest (expense)/income (39) 9 Other miscellaneous income/charges 572 7 ----- ---- 533 16 ----- ---- Net profit before income tax 24,074 15,786 Income tax 9 (1,069) (882)

--------- -------- Net profit after income tax 23,005 14,904 Minority interest (2,746) (1,947) -------- -------- Net profit for the year 20,259 12,957 ===== ===== The notes on pages 6 to 26 form part of these consolidated financial statements. The report of the Auditors is set out on page 1.

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Aramex International Limited and subsidiaries

Consolidated balance sheet as at 31 December 2005 Note 2005 2004 Assets USD’000 USD’000

Property, plant and equipment 10 21,268 12,122 Goodwill 11 22,365 8,949 Other intangible assets 12 1,095 - Deferred tax assets 9 738 441 Other non-current assets 13 1,520 758 -------- -------- Total non-current assets 46,986 22,270 -------- --------

Cash and cash equivalents 14 23,986 14,714 Trade receivables 15 40,721 33,084 Other current assets 16 7,876 6,669 ---------- --------- Total current assets 72,583 54,467 ---------- --------- Total assets 119,569 76,737 ====== =====

Equity Share capital 17 52 52 Contribution to surplus 18 12,441 12,441 Accumulated other comprehensive loss 19 (899) (475) Statutory reserve 20 882 828 Retained earnings 35,427 23,583 -------- --------- Total equity attributable to equity holders of the parent 47,903 36,429 -------- --------- Minority interest in subsidiaries 4,181 3,267 -------- -------- Total equity 52,084 39,696 -------- -------- Liabilities Long term debt 21 1,288 706 Deferred tax liabilities 9 10 3 Employee end of service benefits 22 6,539 5,236 ------- ------- Total non-current liabilities 7,837 5,945 ------- --------

Due to banks 23 1 346 Current portion of long-term debt 21 1,499 941 Trade payables 19,429 17,670 Other current liabilities 24 17,659 12,139 Due to holding company 25 21,060 - --------- --------- Current liabilities 59,648 31,096 --------- --------- Total liabilities 67,485 37,041 ---------- --------- Total equity and liabilities 119,569 76,737 ====== ===== The notes on pages 6 to 26 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)

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The report of the Auditors is set out on page 1.

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Consolidated statement of cash flows for the year ended 31 December 2005 2005 2004 Operating activities USD’000 USD’000 Net profit before income taxes and minority interest 24,074 15,786 Adjustments to reconcile net profit before tax and minority interest to net cash from operating activities Depreciation 4,521 4,016 Amortisation 116 - Provision for doubtful debts 651 1,893 Provision for employee termination indemnities 1,859 1,203 Interest expense 244 233 (Gain) / Loss on sale of property, plant and equipment (68) 4 ----------- ---------- Operating profit before working capital changes 31,397 23,135 Increase in receivables (5,815) (5,575) Movement in amounts due to/from holding company 21,060 13,085 Increase in other current assets (903) (1,329) Increase in trade payables 490 4,758 Payment of employee terminal indemnities (591) (340) Increase in other current liabilities 4,097 1,985 Other (1,019) 135 ---------- --------- Cash generated from operations 48,716 35,854 Deferred tax (299) - Income tax paid (447) (475) ----------- ---------- Cash flows from operating activities 47,970 35,379 ---------- ---------- Investing activities Purchase of property, plant and equipment (12,846) (5,732) Proceeds from sales of property, plant and equipment 150 382 Acquisition of subsidiaries - (180) Acquisition of Info Fort Dubai & Cairo, net of cash acquired (12,618) - Acquisition of Info Fort KSA, net of cash acquired (464) - Acquisition of Priority Air Limited, net of cash acquired (1,352) - Acquisition of other subsidiaries, net of cash acquired (669) - Increase in intangible assets (335) - (Increase)\Decrease in other non current assets (762) 1,103 ---------- --------- Cash flows from investing activities (28,896) (4,427) ---------- --------- Financing activities Payment of due to banks (345) (43) Payment of interest expense (244) (233) Proceeds from long term debt 1,367 - Repayment of long term debt (227) (202) Dividend paid (8,361) (29,360) Net movement in minority interest (1,832) (1,379) ---------- -------- Cash flows used in financing activities (9,642) (31,217) ---------- -------- Effect of exchange rate changes on cash held (160) 78 --------- -------- Net increase /(decrease) in cash and cash equivalents 9,272 (187) Cash and cash equivalents at beginning of the year 14,714 14,901 ----------- --------- Cash and cash equivalents at end of the year 14 23,986 14,714 ====== ====== The notes on pages 6 to 26 form part of these consolidated financial statements. The report of the Auditors is set out on page 1.

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Consolidated statement of changes in equity for the year ended 31 December 2005 Accumulated Total other share- Minority Share capital Contribution comprehensive Statutory Retained holders’ shareholders’ Total Shares Amount to surplus (loss)/income Reserve earnings equity interest equity Number USD’000 USD’000 USD’000 USD’000 USD’000 USD’000 USD’000 USD’000 At 1 January 2004 5,181,068 52 12,441 (914) 764 40,050 52,393 2,699 55,092 Comprehensive income: - Net profit - - - - - 12,957 12,957 1,947 14,904 - Translation adjustment - - - 439 - - 439 270 709 Transfer to statutory reserve - - - - 64 (64) - - - Dividend paid - - - - - (29,360) (29,360) (1,469) (30,829) Minority interest acquired - - - - - - - (180) (180) ------------ ------ -------- -------- -------- -------- --------- ---------- -------- At 1 January 2005 5,181,068 52 12,441 (475) 828 23,583 36,429 3,267 39,696 Comprehensive income: - Net profit - - - - - 20,259 20,259 2,746 23,005 - Translation adjustment - - - (424) - - (424) 461 37 Transfer to statutory reserve - - - - 54 (54) - - - Dividend paid - - - - - (8,361) (8,361) (2,118) (10,479) Other movements - - - - - - - (175) (175) ------------ --- --------- ------ ----- --------- -------- ------- -------- At 31 December 2005 5,181,068 52 12,441 (899) 882 35,427 47,903 4,181 52,084 ======= == ===== ==== === ===== ===== ==== =====

The notes on pages 6 to 26 form part of these consolidated financial statements.

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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). On 22 June 2005, Arab International Logistics (ARAMEX) Co. (PJSC) (“Arab International”) acquired 100% shareholding in the Company from Aramex Holding Limited (“AHL”), incorporated under the laws of Bermuda. Arab International is a Public Joint Stock Company registered in the Emirate of Dubai on 15 February 2005 under UAE Federal law No 8 of 1984 (as amended). With this acquisition Arab International has become the ultimate holding Company of the Group.

AIL provides transportation solutions including express delivery and freight forwarding

services mainly to/from countries in the Middle East. For the purpose of the express business, AIL utilizes its main stations (hubs) in Dubai and London. AIL’s operations are managed 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 in the United States and Western Europe.

During 2002, the Group added the services of magazine and newspaper distribution to its

services through the acquisition of the Jordanian Distribution Agency (JDA), by Arab American Express Company (a fully owned subsidiary of AIL).

During the current year, AIL has also acquired the document retention businesses in the UAE,

Egypt and Saudi Arabia 2 Acquisition of subsidiaries

During the current period, the Company also acquired the following significant subsidiaries. The details of the subsidiaries acquired together with the percentage holding in the subsidiaries is as under: Subsidiary Acquisition date % holding Priority Air Freight Limited (“Priority”) 1 September 2005 100% Al Qalaa Warehouse Limited (“Info Fort KSA”) 1 September 2005 100% Info Fort Dubai and Cairo 1 July 2005 100% The above subsidiaries are involved with carrying on freight forwarding, logistics and document storage business.


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Notes (continued)

2 Acquisition of subsidiaries (Continued) These acquisitions had the following effect on the Company’s assets and liabilities: Info Fort Info Dubai & Cairo Priority Fort KSA Others USD’000 USD’000 USD’000 USD’000 Net assets taken over 385 1,628 103 444 Intangible assets taken over (refer note 12) 609 - 268 - Goodwill on acquisition (refer note 11) 12,450 609 132 225 --------- ------- ------- -------- Consideration paid (A) 13,444 2,237 503 669 --------- ------- ------- -------- Cash and cash equivalents (B) 826 885 39 - --------- ------- ------- -------- Net cash outflow (A)-(B) 12,618 1,352 464 669 ===== ==== ==== =====

Other subsidiaries include subsidiaries in Sudan (acquired with effect from 1 May 2005) and Oman (acquired with effect from 1 September 2005).

Since the date of acquisition Info Fort Dubai and Cairo have contributed a profit of USD 735K,

Priority Air Freight Limited has contributed a profit of USD 132K and Info Fort KSA has contributed a loss of USD 13 K to the consolidated profits of the Group for the year ended 31 December 2005.

Had the above acquisitions taken place from the beginning of the reporting period, Group revenues would have been USD 238.78 million and net profit would have been USD 20.56 million. For certain subsidiaries, in the absence of reliable and accurate financial records for the pre acquisition period, the results for the year have been annualized on the basis of actual results of the post acquisition period.

Also refer notes 12, 15 and 22. 3 Basis of preparation

Basis of consolidation The consolidated financial statements comprise a consolidation of the audited financial statements

of the Company and its subsidiaries (“the Group”), on a line-by-line basis. Intra-group balances and transactions, and any unrealised gains/ losses arising from intra-group transactions, have been eliminated in preparing these consolidated financial statements.

4 Significant accounting policies

Statement of compliance The consolidated financial statements have been prepared in accordance with the International

Financial Reporting Standards (“IFRS”) and its interpretations adopted by the International Accounting Standards Board (“IASB”).

Basis of accounting

These consolidated financial statements have been presented in US Dollars (“USD”), rounded to the nearest thousand and have been prepared under the historical cost convention.


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Notes (continued) 4 Significant accounting policies (Continued)

Basis of accounting (continued)

The preparation of these consolidated financial statements in conformity with IFRS requires

management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods. Judgments made by management in the application of IFRS that have effect on the financial statements and estimates with a significant risk of material adjustment in the next period are discussed in note 30.

Subsidiaries

Subsidiaries are those enterprises controlled by the Company. Control exists when the Company has the power, directly or indirectly, to govern the financial and operating policies of an enterprise so as to obtain benefits from its activities. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases. The results of operations and total assets and liabilities of subsidiary companies are included in the consolidated financial statements and the interest of minority shareholders, if any, in the net assets of the subsidiaries is stated separately. A listing of the subsidiaries, included in these consolidated financial statements, together with the respective ownership percentage by the Company, is as follows:

Subsidiaries (described by location) Ownership % 2005 2004 Amman (except for Arab American Clearance and Transport Company owned 90%) 100 100 Damascus 60 60 Beirut 100 100 Beirut CGO 100 100 Cairo 100 100 Casablanca 100 100 Tripoli 100 100 Dubai 100 100 Abu Dhabi 100 100 Doha 100 100 Bahrain 100 100 Jeddah* 50 50 Nicosia 100 100 Aramex International Limited and subsidiaries Notes (continued)

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4 Significant accounting policies (continued) Subsidiaries (described by location) Ownership % 2005 2004 Paris 100 100 London 100 100 Washington, D.C. 100 100 New York 100 100 Montreal* 20 20 Kuwait 100 100 Athens 100 100 Jerusalem 60 60 Palestine 100 100 Ramallah 60 60 Istanbul* 50 50 Colombo* 50 50 Mumbai 100 100 Hong Kong 100 100 Memo Express - Dubai 100 100 Prague 100 100 Info Fort-UAE 100 - Info Fort-Cairo 100 - Info Fort-KSA 100 - Sudan 60 - Slovakia 100 - Priority Air Freight Limited 100 - Muscat 100 - Iran 50 - * Controlled through shareholders’ agreements The above subsidiaries are involved in the business of freight, logistics, supply chain

management and document storage. Revenue

Revenue represents the value of services rendered to customers and is stated net of discounts and sales taxes or similar levies. Revenue recognition

Express revenue is recognized upon receipt of shipment from the customer. Freight forwarding revenue is recognized upon the delivery of freight to the destination

or to the air carrier. Catalogue shopping and shop ‘n’ ship services revenue is recognised upon the receipt of

the merchandise by the customers. Revenue from magazines and newspapers distribution are recognized when it is delivered

to the customers.

Revenue from document storage services is recognised when services are rendered.

Aramex International Limited and subsidiaries Notes (continued)

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4 Significant accounting policies (continued)

Trade and other receivables

Trade and other receivables are stated at amortised cost less impairment losses. Trade and other payables

Trade and other payables are stated at amortised cost. Liabilities are recognized for amounts to be paid for goods or services received whether or not billed to the Group.

Foreign currency transactions Transactions in foreign currencies are translated at the foreign exchange rate ruling at the date of transaction. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are translated to AED at the foreign exchange rate ruling at date. Foreign exchange differences arising on translation are recognised in the income statement. Non monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of transaction. Translation of the financial statements of foreign subsidiaries The Company’s functional currency is the United States Dollar (“USD”). The financial statements of foreign subsidiaries where the local currency is their functional currency (substantially all stations) are translated into USD using exchange rates in effect at period end for assets and liabilities and average exchange rates during the reporting period for results of operations. Adjustments resulting from translation of financial statements are reflected as a separate component of shareholders’ equity. Exchange gains and losses resulting from transactions of the Company which are made in currencies different from their own are included in the income statement as they occur. The revenue and expenses of foreign operations in hyperinflationary economies are translated to USD at the exchange rates ruling at the balance sheet date. Prior to translating the financial statements of foreign operations in hyperinflationary economies, the financial statements are restated to account for changes in the general purchasing power of the local currency.

Property, plant and equipment and depreciation

Owned assets Items of property, plant and equipment are stated at cost or deemed cost less accumulated depreciation (see below) and impairment losses, if any. Depreciation is charged to the income statement on a straight-line basis over the estimated useful lives of items of property, plant and equipment. The estimated useful lives are as follows: Life (years)

Leasehold improvements 4-7 years Building 14-15 years Furniture and fixtures 5-10 years Office equipment 3-7 years Computers 3-5 years Vehicles 4-5 years

The useful lives and residual value, if not insignificant, are reassessed annually

Aramex International Limited and subsidiaries Notes (continued) 4 Significant accounting policies (continued)

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Property, plant and equipment and depreciation (continued) Leased assets

Leases in terms of which the Group assumes substantially all the risks and rewards of ownership are classified as capital leases.

Assets held under capital leases are depreciated over the shorter of the lease terms or the

estimated useful lives of the assets.

Goodwill

Goodwill arising on an acquisition represents the excess of the cost of the acquisition over the fair value of the net identifiable assets and liabilities acquired. Goodwill is stated at cost less impairment losses, if any. Goodwill is allocated to cash generating units and is tested annually for impairment. The measurement of possible impairment is based primarily on the ability to recover the balance of the goodwill from discounted expected future operating cash flows. Negative goodwill arising on an acquisition is recognised directly in the income statement.

Provisions

A provision is recognised in the balance sheet when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.

Impairment

The carrying amounts of the Group’s assets are reviewed at each balance sheet date, whenever, there is an indication of impairment. If any such indication exists, the asset’s recoverable amount is estimated. An impairment loss is recognised whenever the carrying amount of the asset or its cash-generating unit exceeds its recoverable amount. Impairment losses, if any, are recognised in the income statement.

Income taxes

The Group provides for income taxes in accordance with IAS 12. As an offshore Company incorporated in Bermuda, profits from operations of foreign subsidiaries are not subject to taxation, however certain subsidiaries of the Company are based in taxable jurisdictions and are therefore liable to tax. Income tax on the profit or loss for the year comprises of current and deferred tax on the profits of these subsidiaries. Deferred tax is provided using the balance sheet liability method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the asset can be utilised.

Employee end of service benefits Some of the Company’s subsidiaries are required, by their labour law, to provide indemnity payments upon termination of relationship with their employees. The benefit accrues to employees on a pro-rata basis during their employment period and is based on each employee’s current salary.

Aramex International Limited and subsidiaries Notes (continued) 4 Significant accounting policies (continued)

Borrowing costs

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Interest is payable on current facilities from banks, overdrafts and long-term loans from banks at normal commercial or agreed rates. Borrowing costs are recognised as an expense in the period in which these are incurred.

Interest income

Interest income is recognized in the income statement as it accrues, using the effective interest method.

Cash and cash equivalents Cash and cash equivalents comprises cash balances, short term deposits and call deposits. Due to

banks are included as part of cash flows from financing activities for the purpose of the statement of cash flows.

Intangible assets

Intangible assets that are acquired by the Group are stated at cost less accumulated amortization and impairment losses. Amortisation is charged to the income statement on a straight line basis over the estimated useful lives of intangible assets. The estimated useful life of the intangible assets is between 3 to 10 years.

Leases

Operating leases

Payments made under operating lease are recognised in the income statement on a straight-line

basis over the terms of the lease. Lease incentives received are recognised in the income statement as an integral part of the total lease expense. The Group leases office space and transportation equipment under various operating leases, some of which are renewable annually.

Capital leases Leases in term of which the Group assumes substantially all the risks and rewards of ownership are classified as capital leases.

5 Revenue 2005 2004 USD’000 USD’000 International express* 95,617 77,809 Freight forwarding* 77,053 66,794 Domestic express* 32,912 25,348 Catalogue shopping services 2,214 1,871 Magazines & newspaper distribution 9,101 8,134 Others** 15,595 8,780 ---------- ---------- 232,492 188,736 ====== ====== *Amount includes value added tax/ postal levy where not shown separately on the face of the

invoice.

Aramex International Limited and subsidiaries Notes (continued) 5 Revenue (continued)

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** Amounts represent revenues from other special services which, the company renders, including airline ticketing and travel, logistics revenue and visa services. All related costs are reflected in cost of services.

6 Cost of services 2005 2003 USD’000 USD’000 Line haul expenses - express 23,881 19,825 Distribution expenses – express 17,032 14,125 Inbound costs – express 4,757 4,668 Freight forwarding and related expenses 56,121 48,229 Catalogue shopping services 1,525 1,473 Magazines and newspapers distribution 7,692 7,040 Others 10,791 7,460 ---------- --------- 121,799 102,820 ====== ===== Cost of service includes value added tax/ postal levy where not shown separately on the

face of the invoice. 7 Other operating expenses 2005 2004 USD’000 USD’000 Staff salaries and benefits 23,344 18,567 Vehicle running and maintenance 5,591 4,197 Stationery and supplies 2,940 2,313 Communication expenses 249 179 Others 310 239 --------- --------- 32,434 25,495 ====== ====== 8 General and administrative expenses 2005 2004 USD’000 USD’000 Staff salaries and benefits 18,557 14,148 Rentals 4,255 3,168 Depreciation charge 4,521 4,016 Communication expense 2,894 2,655 Provision for bad and doubtful debts 651 1,893 Maintenance 1,348 1,134 Others 9,841 7,553 --------- --------- 42,067 34,567 ====== ======

Aramex International Limited and subsidiaries Notes (continued) 9 Income taxes The charge for income taxes on results of operations of foreign subsidiaries comprises of

the following:

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2005 2004 USD’000 USD’000 Current 1,448 947 Deferred (379) (65) --------- ------ 1,069 882 ===== ====

Deferred income taxes are provided in accordance with the liability method under IAS 12, for the temporary differences between the financial reporting basis and the tax basis of the Group’s assets and liabilities. The composition of deferred taxes reflected on the balance sheet is as follows:

2005 2004 USD’000 USD’000 Provision for doubtful accounts 369 10 Other 7 16 Depreciation (16) (113) Termination indemnities 54 (59) Net operating losses carry forwards 325 603 Capital allowance (11) (18) ------ ----- 728 439 === === 2005 2004 USD’000 USD’000

Recognised as follows: As deferred tax assets 738 441 As deferred tax liabilities (10) (3) ----- ----- 728 438 === ===

The Group’s consolidated effective tax rate was 4% for 2005 and 2004 respectively.

In some countries the tax returns for certain years have not yet been reviewed by the tax authorities. However, the Group is satisfied that adequate provisions have been provided for potential tax contingencies.

Aramex International Limited and subsidiaries Notes (continued) 10 Property, plant and equipment At At 31 1 January Exchange December 2004 Additions Disposals differences 2004 USD’000 USD’000 USD’000 USD’000 USD’000

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Costs Land 142 - (139) - 3 Leasehold improvements 3,245 590 (191) (17) 3,627 Building 1,407 - - 1 1,408 Furniture and fixtures 2,676 360 (115) (16) 2,905 Office equipment 2,813 355 (42) 172 3,298 Computers 8,334 2,530 (98) 155 10,921 Vehicles 5,647 1,897 (703) 136 6,977 ---------- -------- -------- ----- ---------- 24,264 5,732 (1,288) 431 29,139 ====== ===== ===== === ====== At Addition on At 31 1 January acquisition of Exchange December 2005 subsidiaries Additions Disposals differences 2005 USD’000 USD’000 USD’000 USD’000 USD’000 USD’000 Cost Land 3 - 1,321 - - 1,324 Leasehold improvements 3,627 182 1,123 (19) (16) 4,897 Building 1,408 - 572 - - 1,980 Furniture and fixtures 2,905 157 566 (80) (43) 3,505 Office equipment 3,298 968 1,214 (105) (62) 5,313 Computers 10,921 132 1,416 (260) (102) 12,107 Vehicles 6,977 447 1,940 (828) (18) 8,518 Capital work in progress - - 4,694 - - 4,694 ---------- -------- ---------- --------- ------ ------------ 29,139 1,886 12,846 (1,292) (241) 42,338 ===== ==== ===== ==== === ====== At 1 At 31 January Depreciation Exchange December 2004 expense Disposals differences 2004 USD’000 USD’000 USD’000 USD’000 USD’000 Accumulated depreciation Land - - - - - Leasehold improvements 1,502 485 (93) 2 1,896 Building 207 94 - 1 302 Furniture and fixtures 1,682 269 (74) (9) 1,868 Office equipment 1,936 235 (63) 113 2,221 Computers 5,410 1,526 (67) 87 6,956 Vehicles 2,912 1,407 (605) 60 3,774 ---------- -------- ----- ----- --------- 13,649 4,016 (902) 254 17,017 -------- -------- ----- ------ --------- Aramex International Limited and subsidiaries Notes (continued) 10 Property, plant and equipment (continued) At 1 Addition on At 31 January acquisition of Depre- Exchange December 2005 subsidiaries ciation Disposals differences 2005 USD’000 USD’000 USD’000 USD’000 USD’000 USD’000

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Accumulated depreciation Land - - - - - - Leasehold improvements 1,896 74 569 (15) (10) 2,514 Building 302 - 107 - - 409 Furniture and fixtures 1,868 139 294 (87) (26) 2,188 Office equipment 2,221 354 426 (77) (54) 2,870 Computers 6,956 34 1,420 (256) (75) 8,079 Vehicles 3,774 309 1,705 (775) (3) 5,009 ----- ------ --------- --------- ------ ---------- 17,017 910 4,521 (1,210) (168) 21,070 -------- ------ --------- --------- ------- ---------- Net book value 12,122 21,268 ===== =====

Capital work in progress represents ongoing construction of a warehouse facility in Jebel Ali at 31 December 2005. Property, plant and equipment includes vehicles with a net book value of USD 1.3 million that have been obtained under capital leases. Also refer note 21.

11 Goodwill The movement in the goodwill account is as follows: 2005 2004 USD’000 USD’000 Opening balance 8,949 8,769 On acquisitions during the year (refer note 2) 13,416 180 -------- ------- Closing balance 22,365 8,949 ===== ==== The impairment test is based on the “value in use” calculation. These calculations have used

cash flow projections based on actual operating results and future expected performance. Cash flow projections beyond five years have been extrapolated using a four percent growth rate. This growth rate is considered appropriate considering the nature of the industry and the general growth in economic activity being witnessed in the location/region where these entities operate. A discount rate of ten percent has been used in discounting the cash flows projected. Also refer note 30.

Aramex International Limited and subsidiaries Notes (continued) 12 Other intangible assets Other intangible assets represents list of customers, bound by contracts, and preferential

route rights acquired by the Group. The Group is amortising these intangible assets over period between three to ten years. The movement during the period in the balance of intangible assets is as under:

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2005 2004 USD’000 USD’000 Opening balance - Customers lists acquired on acquisitions of subsidiaries (refer note 2) 877 - Preferential route rights acquired 334 - Amortisation during the year (116) - ------- ------- Closing balance 1,095 - ==== ==== 13 Other non current assets

Other current assets includes an amount of USD 840K representing advance paid by the Group for the acquisition of an interest in an entity in Pakistan. As per the Memorandum of Understanding (‘MOU’) entered into with the venture partner, the above amount, on fulfillment of certain conditions as specified in the MOU, would become the Group’s investment in the entity. As at 31 December 2005, these conditions have not been fulfilled and therefore the amount paid has been classified under other non current assets.

14 Cash and cash equivalents Cash and cash equivalents comprise of cash in hand and at bank amounting to USD 24

million. These include restricted cash amounting to USD 1.17 million as of 31 December 2005. This amount represents margin against bank guarantees.

15 Trade receivables 2005 2004 USD’000 USD’000 Trade receivables 45,265 39,665 Less: Provision for doubtful accounts (refer below) (4,544) (6,581) ---------- ---------- 40,721 33,084 ====== ======

Aramex International Limited and subsidiaries Notes (continued) 15 Trade receivables (continued) Geographic concentrations of trade receivables as of 31 December is as follows: 2005 2004 USD’000 USD’000 % %

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Middle East and North Africa 83.59 83.33 Europe 7.37 6.29 North America 2.07 1.50 Asia 6.97 8.88 ==== ==== Management believes that all receivables, net of related provisions, will be collected in

due course. Movements in the provision for doubtful accounts are as follows: 2005 2004 USD’000 USD’000 Opening balance 6,581 6,283 Balance acquired as acquisition of subsidiaries (refer note 2) 165 - Provision made during the year 651 1,893 Write-off during the year (2,853) (1,595) ------- -------- Closing balance 4,544 6,581 ====== ====== 16 Other current assets 2005 2004 USD’000 USD’000 Prepaid expenses 2,128 1,736 Refundable deposits 1,696 1,157 Advances 248 170 Withholding tax 1,152 1,089 Supplies and stationery 868 823 Others 1,784 1,694 --------- --------- 7,876 6,669 ====== ===== 17 Share capital

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 Group is also authorized to issue 5,000,000 shares of preferred stock with a par value of USD 0.01 per share, none of which have been issued or are outstanding. The number of common shares outstanding as of 31 December 2005 are 5,181,068 shares held by Arab International (the parent Company of AIL).

Aramex International Limited and subsidiaries Notes (continued) 18 Contribution to surplus

During 2003, the Board of Directors in their meeting held on 15 July 2003, decided that the proceeds from the reduction of share premium account of the Company be approved and accepted as a contribution to the surplus of the Group.

19 Accumulated other comprehensive (loss)/income

19

This represents the translation reserve on translation of foreign subsidiaries from the functional currency of these subsidiaries into the reporting currency of the parent Company.

20 Statutory reserve This represents earnings restricted from distribution in accordance with the local laws of

the domiciles of certain subsidiaries. 21 Long term debt 2005 2004 USD’000 USD’000 Long term loan (a) 1,367 - Long term notes payables (b) 113 111 Capital lease obligations (c) 1,307 1,536 Less: Current maturities (1,499) (941) ------- ----- Long term portion 1,288 706 ==== ===

(a) Long term loan This represents the balances outstanding from:

1. A term loan facility taken by Arab American Express company Ltd (Amman Station) (a 100% owned subsidiary of the Company) from Jordan Kuwait Bank on 5 October 2005 for an amount of USD 2.8 million (JD 2 million) at an annual interest rate of 7%. Of the total facility, Arab American Express Company Ltd has made a drawdown of USD 1.3 million (JD 901K) as at 31 December 2005. This loan is repayable over 60 monthly installments of USD 46.5K each commencing from October 2005. This loan has been obtained by the Company for the construction of a logistics facility in Amman. This loan is secured by a pledge of the land on which the facility is being constructed.

2. Term loan taken by Aramex International Courier Palestine (a 60% owned subsidiary of the

Group) from HSBC Bank on 26 March 2005 for an amount of USD 150K at an annual interest rate of 7%. This loan is repayable over 23 monthly installments of USD 6.5K commencing from May 2005.

(b) Long term notes payable

This represents various notes payable for the purpose of financing the purchase of vehicles and

equipment repaid by monthly installments with original average maturities of three years, at interest rates ranging from 6% to 25%.

20

Aramex International Limited and subsidiaries Notes (continued) 21 Long term debt (continued)

The aggregate amount of annual principal maturities of notes payable is as follows: 2005 2004 USD’000 USD’000 Total notes payables 113 111 Less: current maturities (70) (64)

----- ----- Long term portion 43 47

=== ==

(c) Future minimum annual payments under all non-cancelable capital leases are as follows:

2005 2004 USD’000 USD’000 Less than one year 864 967 Between one and five years 540 690 ------ ----- Total minimum lease payments 1,404 1,657 Less: Interest component (97) (121) ------- ------- Present value of minimum lease payments 1,307 1,536 ==== ==== 22 Employee end of service benefits 2005 2004 USD’000 USD’000 Opening balance 5,236 4,420 Balance acquired on acquisition of other subsidiaries (refer note 2) 60 - Provision made during the year 1,859 1,203 Payments made during the year (591) (340) Currency translation reserve (25) (47) ------- ------- Closing balance 6,539 5,236 ==== ==== 23 Due to banks The Group maintains lines of credit with various banks. The Group had utilised USD 1K

of these lines of credit as at 31 December 2005. AIL has provided corporate guarantee of USD 500K to Audi Bank in Lebanon to secure the bank facilities given for the Aramex subsidiary in Lebanon, none of which was utilised by Aramex Lebanon as of 31 December 2005. Also refer note 27.


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Notes (continued) 24 Other current liabilities 2005 2004 USD’000 USD’000 Accrued expenses 13,007 9,021 Deferred revenue 1,176 687 Income taxes payable 1,692 1,007 Social security and taxes payable 194 161 Sales and other taxes 1,215 876 Customers’ deposits 83 153 Others 292 234 -------- -------- 17,659 12,139 ===== ===== 25 Related party transactions

AIL leases the premises currently occupied by the Group’s London operations from Mr. Ali Ghandour, the father of Mr. Fadi Ghandour (CEO), at an annual rental of USD 138K (GBP 75K). The lease is open-ended and is renewed annually. Management believes that the terms of the lease are at least as favourable to AIL as those available from unaffiliated third parties. During 1996, AIL leased the premises currently occupied by the AIL’s corporate office in Amman, Jordan, from ARAM, an investment company controlled by the CEO’s family. The rent expense for period ended 31 December 2005 equals USD 165K (JD 117K). The lease is open-ended and is renewed annually. Management believes that the terms of the lease are at least as favourable to the Company as those available from unaffiliated third parties.

AIL entered into a new alliance called Global Distribution Alliance (“GDA”) in December 2003. GDA is a global alliance among thirty two leading independent express companies that functions as a worldwide delivery network for its members in which AIL is one of the founding members. AIL and the alliance maintains normal business relations. At 31 December 2005, USD 236K was due from AIL to the network and has been included under other current liabilities. Aramex Beirut premises are rented from the station manager and her relatives at an annual rental equivalent to USD 36 K. Management believes that the terms of the rental are at least as favourable to the Company as those available from unaffiliated third parties.

During the ordinary course of its operations, the Group carries out transactions, which are

within the principal activities of the Group, with other entities that fall within the definition of a related party as per International Accounting Standard (“IAS”) 24. The terms of these transactions are not significantly different from those with other third parties. On account of the small value and the high volume of such individual transactions, the Group does not have a process in place to separately record and disclose such transactions. Management believes that such non disclosure does not affect the assessment of the Group’s operations by the users of the financial statements.


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Notes (continued) 25 Related party transactions (continued) Related party transactions Details of other significant related party transactions is as under: Compensation paid/payable to key management personnel 2005 2004

USD’000 USD’000

for the period -Short term benefits 2,575 1,963

-End of service benefits 52 44 ====== ===== Due to Arab International Logistics (“ARAMEX”) Co. (PJSC) 21,060 - ===== ==== 26 Operating leases The Group leases office space and transportation equipment under various operating leases,

some of which are renewable annually. Rent expense related to these leases amounted to USD 4.24 million and USD 3.1K for the years ended 31 December 2005 and 2004, respectively. The Group believes that most operating leases will be renewed at comparable rates to the expiring leases.

The approximate minimum annual rental commitments of the Group under the existing lease

agreements are as follows: 2005 2004 USD’000 USD’000 Less than one year 1,137 2,461 Between one and five years 1,244 3,416 ==== ===== 27 Contingent liabilities and commitments 2005 2004 USD’000 USD’000 Letter of guarantee 6,039 4,802 ==== ==== As at 31 December, there were no outstanding capital commitments. Also refer note 23. Aramex International Limited and subsidiaries

23

Notes (continued)

28 Information about business segments The Group operates predominantly in a single industry as a courier and cargo freight

forwarder. The following is a summary of financial data by business segment consistent with the way senior management organizes operations within the Group for decision making purposes and performance assessment.

(in USD ‘000) International

ExpressFreight

ForwardingDomestic

Express Publications

& Distributions

Other Elimi-nation

Conso-lidated

2005 revenue External sales 95,616 77,053 32,913 9,101 17,809 - 232,492Inter-segment sales*

45,017 20,537 38 277 5,180 (71,049)

Segment sales 140,633 97,590 32,951 9,378 22,989 (71,049) Gross profit 49,984 20,932 25,944 1,410 12,425 110,6932004 revenue External sales 77,809 66,794 25,348 8,134 10,651 188,736Inter-segment sales*

35,335 21,398 12 147 3,048 (59,940)

Segment sales 113,144 88,192 25,360 8,280 13,700 (59,940) 188,736Gross profit 38,867 18,566 20,441 1,093 6,949 85,916

AIL does not segregate assets and liabilities by business segment and accordingly such

information is not available. The following table shows AIL’s consolidated revenues, assets and liabilities by geographical area:

2005 2004 USD’000 USD’000

Revenues Middle East and North Africa 194,976 157,077 Europe 11,049 8,485 North America 4,672 3,847 Asia 21,795 19,327 ---------- ---------- 232,492 188,736 ====== ======

2005 2004 USD’000 USD’000 Assets

Middle East and North Africa 106,305 65,979 Europe 5,428 3,731 North America 1,874 1,446 Asia 5,962 5,581 --------- --------- 119,569 76,737 ====== =====


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28 Information about business segments (continued)

2005 2004 USD’000 USD’000 Long lived assets *

Middle East and North Africa 19,251 10,636 Europe 765 554 North America 338 188 Asia 914 744 -------- --------- 21,268 12,122 ===== =====

* Long lived assets comprises property, plant and equipment.

2005 2004 USD’000 USD’000 Liabilities

Middle East and North Africa 59,333 30,563 Europe 3,637 3,081 North America 1,912 1,107 Asia 2,603 2,290 -------- -------- 67,485 37,041 ===== =====

29 Financial instruments Financial assets of the Group include cash at bank and in hand, trade and other receivables

and other current assets. Financial liabilities include trade and other payables, short-term and long-term borrowings from banks and other current liabilities. Accounting policies for financial assets and liabilities are set out in note 4.

a) Fair value

The fair value of the Group’s financial assets and liabilities approximate their carrying amounts.

b) Interest rate risks

The Group’s deposits with banks carry interest at agreed rates. Furthermore the interest rates and terms of repayment of loans of the Group are described in note 21 of these financial statements.

c) Credit risks The Group has no concentration of credit risk with any single counterparty or

group of counterparties having similar characteristics. The Group has procedures in place to ensure that sales are made to customers with an appropriate credit history and do not exceed an acceptable credit exposure limit.


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29 Financial instruments (continued) d) Currency risks

Most of the Group’s transactions are in US Dollars. However, a substantial amount of the Group’s business is conducted in currencies other than the US Dollar. As a result, the Group’s operations are subject to various risks associated with currency fluctuation. There can be no assurance that such risks will not have an adverse effect on the Group. Exchange gains or losses resulting from these currencies has been accounted for in the income statement.

30 Accounting estimates and judgments Key sources of estimation uncertainty

Goodwill impairment The impairment test is based on the “value in use” calculation. These calculations have

used cash flow projections based on actual operating results and future expected performance. Cash flow projections beyond five years have been extrapolated using a four percent growth rate. This growth rate is considered appropriate considering the nature of the industry and the general growth in economic activity being witnessed in the location/region where these entities operate. Also refer note 11.

Provision for bad and doubtful receivables

Provision for bad and doubtful receivables is calculated on the basis of a Group provisioning policy which requires for provision to be created for overdue outstanding balances. Provision is also made for receivable balances, which based on the information available with management, are considered to be uncollectible. The above provisioning policy is based on historical experience and is believed to be reasonable under the circumstances

Provision for tax The Group reviews the provision for tax on a regular basis. In determining the provision

for tax, laws of particular jurisdictions (where applicable entity is registered) are taken into account. The management considers the provision for tax to be a reasonable estimate of potential tax liability after considering the applicable laws and past experience.

Identifiable assets and liabilities taken over on acquisition of subsidiaries The Group separately recognizes assets and liabilities on the acquisition of a subsidiary

when it is probable that the associated economic benefits will flow to the acquirer or when, in the case of liability, it is probable that an outflow of economic resources will be required to settle the obligation and the fair value of the asset or liability can be measured reliably. Intangible assets and contingent liabilities are separately recognized when their fair values can be measured reliably. Intangible assets, acquired on acquisition, mainly represents lists of customers, bound by a contract, valued on the basis of discounted cash flows.


31 Subsequent events In January 2006, the Group has acquired a 100% shareholding in Freight Professionals, a

freight forwarder registered in Egypt for a cost of USD 8 million. In April 2006, the Group has acquired a 100 % shareholding in Two Way Freight and

Logistics Group (“Two Way”), a freight forwarder registered in Ireland, for a guaranteed consideration of approximately AED 108 million (Euro 24 million). The terms of the purchase also provides for the payment of a contingent consideration on the basis of future operating results of Two Way.

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Aramex International Limited and subsidiaries Consolidated financial statements 31 December 2005

Aramex International Limited and subsidiaries Consolidated financial statements 31 December 2005 Contents Page Report of the Auditors 1 Consolidated income statement 2 Consolidated balance sheet 3 Consolidated statement of cash flows 4 Consolidated statement of changes in equity 5 Notes 6-26

report of the auditors - aramex report of the auditors is set out on page 1. 6 aramex international...

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